Bankless - ROLLUP: Crypto Bill | OP Wintermute | Illuvium Land Sale | PayPal Crypto | ApeCoin Ethereum

Starting point is 00:00:00 I'll call it right now if that's what you want, Ryan. I want it. The people want you to call it. It's not going down anymore. It's not going down anymore. Hey, Bankless Nation. Happy first full week of June. David, what time is it?

Starting point is 00:00:15 Oh, Ryan, it's the Friday Bankless weekly roll-up time where we cover the entire weekly news in crypto, which is always an ambitious endeavor, yet we persevere. Nonetheless, what's going on this week? Oh, man, there's so much going on. You and I just had a debate as to whether this is the first first, week of June or the second week of June. No idea. But we compromise and call it the first full week of June, which I guess it is. That is one of the central debates on bankless today. But we would also have some, is it settled, David? Every single weekly roll-up, we always end up starting the week,

Starting point is 00:00:49 like, shit, is it the second week of this month or is it the first week of this month? Like, how do we square that? Sometimes there's five weeks in one month. So this whole like first, second, third week of the month thing. You think that it actually works well, but it doesn't work well at all. Yeah. I mean, David and I understand crypto very well. It's just calendars. Caledars are giving us. Caledars are hard. Anyway, topics of the week, guys. Number one question, I think, in everyone's mind is, is the bottom in? We're going to talk about that, David. First thing, we're going to talk about the takes, the data, the argument suggesting it, a hot take from Arthur Hayes as well. And try to answer the question, is the bottom in or not, at least as far as crypto. What else to be talking about, David?

Starting point is 00:01:28 Oh, of course, got to talk about the Ropsin TestNet, which is merged. The merge happened to Robson, the test net. We got two more test nets to go. And then the final actual merge happening to Ethereum, we'll probably talk about the timelines because as we get closer and closer with one test net behind us, you can actually start to see the merge on the horizon. We have all remaining steps left. So we're going to talk about the recap, the Robson merge, and also talk about the timeline

Starting point is 00:01:57 for the actual merge coming in the future. We're also going to talk about the 20 million. Optimism token fumble. Some of these tokens were apparently hacked, taken, and there's a whole story around that. And also, David, do you know PayPal is allowing users to go bankless for the first time? PayPal, recall, they have 400 million users. This was like one of those bare market headlines that just kind of dropped. I didn't see, talked about a lot, but this is a pretty big deal, so we're going to talk about that too. Of course, Friday morning, make sure you like and subscribe to this podcast. You're listening to it on YouTube.

Starting point is 00:02:31 do those two things. If you're listening to the podcast side of things, make sure you rate and review. As David says, that is how we get out of the bare market. It's getting bankless to the top of the charts. So make sure you do that while you're listening right now. David, also got to talk about our friends at MetaMask.

Starting point is 00:02:48 There's a handy little button in the Metamask app, either on mobile or the desktop version that some people probably haven't clicked yet. What is this button? And why should they click it? It's called the buy button, Ryan. And I frequently forget that MetaMask actually has this buy button. And yeah, the other cool thing I learned while doing this is the buy button

Starting point is 00:03:06 works for a lot of different chains. And so regardless of what chain you're on, Polygon, Avalanche, B&B, Phantom, Zello, you can buy crypto across all of the chains with MetaMask. It's the easiest way to get ether into your wallet or whatever gas token into your wallet so you can start doing some things. And I think, Ryan, we've been talking about the build market lately. It's not a bare market. It's also a buy market. But it's also, Ryan, a buy market. At least that's what I'm doing. This is not financial advice coming from David, but you want to be thinking about dollar cost averaging in, of course. As you always do, another buy button inside of your wallet is an easy way to do that. So if you want to check that out, of course, you've got to have MetaMask downloaded. So go to the link in the show notes. Get Metamask if you don't already have it. If you do have it, go take a look at that buy button and how quickly you can get crypto directly into your wallet without having to go through the five-step process of transferring from bank account to exchange, blah, blah, blah, blah. David, let's get to the market, man. What's the market telling us? We've got to start with our friend Bitcoin. It's a choppy, choppy week this week. Bitcoin is down. Point eight percent,

Starting point is 00:04:12 started the week at 30,400, ended the week at 30,100. I guess it went up to a couple hundred dollars since we last talked, but 30,300 is where it is it is right now. Choppy week, barred it up, bartered back up, bartered back up, bartered back down again, and overall, just kind of flat. Kind of flat. When you say Barts, people don't know what you mean when you say Barts. It's kind of like a technical trader type talk. What is a BART, David? Because I see it here.

Starting point is 00:04:40 I think it's very untechnical. But yeah, so, imagine BART's head, right? Bart's head is like this like column-shaped thing. And then it's got a bunch of jagged lines at the top. Bart Simpson. And Bart Simpson, yeah, right. And so like you can see the wall it makes on the upside. It chops around and then it goes down.

Starting point is 00:04:56 And then, of course, you also have the inverse part, which is the same thing where It breaks down really fast, and then it chops for a little bit, and then it goes back up. If you type in, like, Bart chart pattern into Google, you'll get, like, actual charts with Bart's face, like, superimposed on it. Yeah. And this works when you're zoomed in on the seven-day, but also when you're zoomed out, right, you see Bart's at all different timelines and all different levels, right? Bart fractals are everywhere, yeah.

Starting point is 00:05:21 So you can see them everywhere. Barty week. Yeah. Apologies for that, guys. Bart is now going to become part of your vocabulary. Are we seeing any Barts on the Eith chart? Tell us the price right now, David. Yeah, Ether took a little bit more of a hit.

Starting point is 00:05:33 That seems to be the theme of the last few weeks. Start of the week at 1830, and we are currently at 1805. So down about 2% on the week. So we talked about Bitcoin. We talked about Eith. Now let's put them all together. Let's talk about the Eith Bitcoin ratio. Up or down on the week?

Starting point is 00:05:47 Down on the week. 1.3% went from 0.602 to 0.0594. I mean, 1% in crypto. I'd call that flat, technically down. But yeah, flat plus some chop this week. David, are you ready to call a bottom on the ratio? At where is the bottom, do you think? Look at the bottom.

Starting point is 00:06:05 It's either right now or a lot lower. One of those two things. Thank you. It's either right now or a lot lower. Is there a third option even available to us? No, I think that makes the, I mean, we are testing the lowest that the ether BTC ratio has been since it really broke up out of the bare market trend, the 2018 bare market trend. And so, like, if it starts to go lower than this, like,

Starting point is 00:06:29 That's, to me, a signaling a long, brutal bear market, which I do not think is coming. You think if it goes a little bit lower. Okay, so remember, recall, it broke out of this back when we were full steam ahead in the bull run in April of 2021. That's where we broke above the ratio that we're in right now. But it's gotten as low in like 2020. It got as low as 018.017 even. Has it gotten lower? No, that's, that is the lowest. Well, I mean, it started lower than that, but that was the lowest that it got in between the 2017 to 2020.

Starting point is 00:07:07 So, I mean, could we fall back there, do you think? Absolutely not. Get that out of here. Where's your bottom then? No way. I mean, I always think the ETH BTC ratio is up into the right. Over the long time range, maybe so, but if we're in a bear market, it could be hard to tell. Okay, I won't make you call a bottom in this roll-up, but At some point, David, because, you know, I love when you call bottoms and then we can just mean that. I'll call it right now if that's what you want, Ryan. I want it. The people want you to call a bottom, Dave. It's not going down anymore.

Starting point is 00:07:41 It's not going down anymore. Come on. You got to, okay, give me a number. What's the number? 0.0963 is the number. 0.0963? Oh, excuse me. 0.05963 is the bottom.

Starting point is 00:07:55 That's the number right here? Yeah. You're not even going to be conservative and be like, 0.0.0.0.0.6.63. 0.05 or something like this? No, I'm also not a trader, so no one should be listening to me for trading advice ever. All right, well, now you know for sure it's going below 0.0596. Guys, so there's your alpha for today. But let's talk about the total crypto market cap.

Starting point is 00:08:16 What's the inverse of alpha? Total crypto market cap lost a little bit, lost $12 billion in the last week, $1.312 trillion down to $1.298 trillion, but mostly flat on the week. Chop, shop, shop. among friends. Who cares? Pretty much flat, eh? Okay, state of the markets. Let's talk about the Fed because, you know, people are wondering what the Fed is going to do next. And there is actually a new set of inflation numbers that are coming out today. So we don't have them because it's prior to when we recorded this. And those are going to be some numbers to watch. I think what's going to happen

Starting point is 00:08:51 here is there's going to be a lot of scrutiny with the newest CPI inflation numbers, right? And so is it going to be down or is it going to be up? The median forecast, apparently, is a year-over-year CPI increase of about 8.2 percent. So if so, that would be slightly below the April 2020, which was 8.3 percent. So we're hoping for, and I think the Fed is hoping for, and certainly the American public is hoping for a lower inflation. But even if it was 8.2, man, that's not a lot lower, just to like a tiny fraction lower, and we'll have to see. If CPI is higher than expected, though, David, I think you got to assume the Fed is going to continue to be hawkish on this market. And that means increasing yields, like in their forward guidance,

Starting point is 00:09:40 it means continuing the quantitative tightening that they're doing, all of its policy actions. And what that, of course, leads to is pretty predictable. Bond yields go up, stocks and crypto. Maybe they go down. Maybe they're on a downward trajectory. So be looking for those inflation numbers tomorrow. because they are kind of the North Star, I think, guiding the Fed. Any thoughts on this? Oh, got a ton of thoughts. Yeah. So inflation is a lagging indicator. So we are about to see the report for May in the early June. But May, like ultimately, inflation is still always lagging behind the markets. Like inflation is a reaction to the rest of the markets and not leading

Starting point is 00:10:18 the rest of the markets. But right now, the inflation report is kind of how the markets are interpreting the Fed's response. And so now, Ravel talked about this. when we had our podcast with him, where he kind of thinks inflation's already dead. We're just waiting for it to show up in the reports. And so, like, if you are assets heavy, if you are waiting for the risk for the bull markets to resume, if you are still into risk assets like crypto, you are just waiting for the CPI reports to come in and finally indicate that inflation has actually shown up, or the death of inflation has finally shown up in the metrics.

Starting point is 00:10:51 I mean, you kind of wonder how much of a lagging indicator that is. Right. Yeah, so it's a question of are we lagging it by like one month, two months, four months, like how long do we have to wait for the death of inflation to actually show up in the metrics? Because we already know that tech stocks got wrecked, right? Like, ARC, which had billions and billions of dollars on it, is like at a six-year low, right? And so all of the inflation, which came from asset price inflation, it's reasonable to assume that it's already dead because everyone's broke now.

Starting point is 00:11:19 And so like that is really the fight that's going on is the Fed is making all of the big gains that happened in 2020 to 2021, it's trying to eliminate those because the people that had all those gains are spending a bunch of money. And so now that the markets are dead, people have stopped spending a bunch of money, but we're waiting for the effect of people not spending a bunch of money to show up in inflation. And like all the people that are just gotten like whiplash by the market and like worked by the market, they're like, we know inflation's like done because we stop spending money. So like just like lower the interest rates so we can start spending money again. And the Fed's like, no, we got to wait for it to show up in the metrics.

Starting point is 00:11:56 Yeah. And I do think we're living with the Fed's decisions, you know, not just the Fed, but fiscal policy, too, of like 18 months ago, probably. Like, realistically, maybe stretch as far as 24 months ago. That's what's showing up now. Even the Fed was like, yo, we waited way too long to raise interest rates. And like, that's why. And so, like, the market's got way out of control, which makes it way worse on the downside.

Starting point is 00:12:17 Dude, it was just last summer. We're on bankless, on these weekly roll-ups. we were talking about the Fed, and Powell kept saying it's transitory. And we were sort of laughing at that, like transitory. Like, what are you even doing? Right. If we were smarter, we would have realized that that would be a top signal. If we're laughing about how it's not transitory and we're just waiting for the Fed to figure it out.

Starting point is 00:12:39 Like we kind of could have connected the dots that like, all right, as soon as the Fed does realize that they're behind the curve by three months, they're going to come in hot and destroy the markets. So if we were smarter, we would have figured that out. Yeah. Well, I guess we should be central. bankers, David. Maybe in another life. Let's talk about this. The S&P trading

Starting point is 00:12:58 range, this looks pretty bardy too. This looks pretty choppy. What chart are we looking at here? Yeah, so this is the S&P since May 27th to where we are now, June 9th. How many days is that, like two weeks? And so you can just see, this is a 2.5% ban. From the top of the yellow box to the bottom of the yellow box, that's 2.5% band. And you can see it touches the bottom once, top once, bottom twice,

Starting point is 00:13:18 top once more, goes back to the middle, touch at the top again, touch at the bottom again, touch at the top again, touch at the top again, to where we are now. So, like, it's touched the band of this 2.5% range a bunch of times without going anywhere. And so, like, a very tight band of activity with a lot of chop. And to me, what this is, is just like the market is just confused and waiting for information. It's waiting for data. Generally, when you see, like, these tight trading bands, people kind of meme this is like, oh, it's a coiled spring.

Starting point is 00:13:46 It's going to explode. Don't really know which direction it's going to explode in. But, like, when we know. that May CPI reports are coming in in a couple days, like maybe that's the information that the market's waiting for, and it will make its decision as to be bullish or bearish on those numbers. Guys, this is chop season. We're seeing it in equities. We're seeing it in crypto as well. We're just chopping. Bitcoin and Eith, you saw it too. That's what those barts are. It's kind of the choppy action. But David, let's just zoom out for a minute and take a look at this

Starting point is 00:14:12 bear market. And this is relative to historic bear markets, at least from an equities perspective. the S&P 500 bear markets and their current downturn declines in duration. That's what we're looking at. And we're looking at all of the major bear markets from, I guess, you know, the turn of the 20th century up till now. And if you look at what we're doing here is we've been currently in a downtrend for about 96 trading days. Okay. And we're verging on negative 20% in the S&P. All right.

Starting point is 00:14:47 That's not quite historically. that's not quite bare market territory yet. I mean, historically, at least according to this chart, the line is drawn at below 20%. So if we are trending downwards into the bare market, like we probably have more to go. But what's interesting about this chart, David, is the slope of the line looks a lot like the 2007, 2007,

Starting point is 00:15:10 the 2008 crash. The slope of the line looks a lot less like COVID, which like hit us. And it was a very rapid. rapid descent down, but it was relatively fast and the recovery was fast. Some might say v-shape, at least in the assets and equities market. This looks a little bit more like 2007, 2008. So you wonder if it's going to be as prolonged. You know, 2007, 2008 was close to 300 days of downtrend before it started to turn around. What are some of your thoughts when you see this

Starting point is 00:15:43 market, when you see this chart? Yeah. When we talk about financial markets, timing is always tricky. It says current downtrend 96 trading days. Well, the S&P actually hit its peak really at the end of the year. Like the peak of the S&P was like January 2nd, December 31st. And then it went down like a lot. It went from 4,800 points down to 4200 points in March. And then in March, middle of March, it went from 4200 up, like rallied up from 42 to 46. But then it went from 4,600 points to where it is now down to like 4,160.

Starting point is 00:16:17 I got even a little bit lower. like the peak of 4,800 points of the S&P actually happened over six months ago. So this is, it depends on where you actually mark the top. And I think this current chart is marking the top in March, but we were actually way higher in December and January. And so you could actually, in theory, double that current downtrend of 96 trading days to be something like, I don't know, 365 divided by two. But yeah, that's my take there. It's actually been down for a longer amount of time. that wouldn't change the current downtrend. Actually, no, it would actually. So it would go from 4,800 points down to 4200 points. And so that would be more than more than 20%. So again, it depends on

Starting point is 00:16:57 where you count it. Yeah, this is all true. And I think we're going to this level of depth because we want to get here to this question. The question on everyone's mind is for crypto. Anyway, if you're a crypto investor, is the bottom in yet? That's the big question. Is it in yet, guys? I asked that question on Twitter. It put it the same way, is the bottom already in? Here's the sentiment, at least among people that follow me on Twitter, who are probably slightly in the bullish camp, like over-optimistic camp. And 27% said, yes, the bottom is already in.

Starting point is 00:17:33 And the remaining 73% said, no, the bottom is not already in. I do think that is the consensus take in general. most people do not believe the bottom is in, believe we still have a ways to drop from here. I'm probably more in that camp, but I'm not ready to trade on that at all. Like, it could go the other way as well. I would definitely say that Twitter polls about markets are inaccurate by their very definition. Like, there's been a ton of Twitter polls I've seen, like, hey, like, guess the top, guess the bottom. Like, Twitter polls don't get market predictions right.

Starting point is 00:18:10 Like, very, very infrequently. Oh, I don't think they get market predictions right, but I think they get market sentiment generally. Yeah. So the, the information here is like, this is sentiment, not accuracy. Of course. This is engagement of sentiment, not like, I don't think there's a 70. I don't think this means that there's a 73% change at the bottom is in or not. If I ask the same question, is the top in yet?

Starting point is 00:18:32 And I asked that question in, like, December of last year, I bet I would have gotten. Yeah. People would have said, no, the top's not in. We got to, it's, you're always, consensus is always biased towards whatever the momentum is at a given period of time. So when consensus is saying one thing, I think you have to look at what the contrarians are saying. And Arthur Hayes is certainly contrarians. Sometimes he's wrong. A lot of times he gets it right.

Starting point is 00:18:57 And this is his take in an article he published. His take is, in summary, that the bottom for crypto is already in. But let's lay out the case that he makes a little bit. And he starts this off. I'm going to read a quote to you. from the article. But the TLDR of this portion of the article is everyone is broke right now. Okay, everyone is feeling broke. Whether you don't have a lot of assets or you do have a lot of assets, people are kind of feeling broke. And he says this, the median yearly income for Americans is

Starting point is 00:19:27 approximately $50,000. You know you've printed too much money when the median house appreciated more than the median income. That means you made more money sitting in your Lulu jammies than going to work. Assuming you own a home, woe to the pleb that rents. Not going to make it. Now, that's kind of the tone of his take. And inside of that, he shows this graph from Bianco Research. What are we looking at here, David? Yeah, this is U.S. real average weekly earnings year over year. So real average weekly earnings, not nominal average weekly earnings. So this is growth. There has been wage growth in nominal terms, as in like people's number of dollars that they are making is going up, but the value of dollars is going down bigly.

Starting point is 00:20:09 And so this is a chart going all the way back to 2007. So it even has the 2008 financial crisis worked into it, where weekly earnings wage growth was down like 2.6% over time. And so people were making negative 2.6% in the bottom of the 08 crisis. We are down 3.4%. So in real terms, people's wage. have gone down 3.4% as of recently because of the loss of value of the U.S. dollar and how wages have, maybe they've gone up in dollar terms, but not in real terms. So, like, lending itself

Starting point is 00:20:45 that, like, people are losing money. Like, the state of the economy is people are losing money. People's savings are being depleted. People are making less money. They're having to spend more money. And so, like, people are broke. People are broke. You know what's crazy is in every I see of this sort of thing, you see this whiplash, right? So like prior to people losing money, like, you know, actual real wages decreasing like three to four percent. They were actually increasing from 2020 to 2021 at rates of like four to seven percent. So the whole story here about the, you know, like the Fed intervention and monetary policy is whiplash, right? Everyone was feeling rich, you know, 18 months ago. Now everyone's feeling poor. And that happened historically fast,

Starting point is 00:21:29 was historically volatile. It feels like a really sick ride. We would never be able to get this data, but it'd be nice to, like, the counterfactual universe that we would love to see is like, what if the Fed did nothing for COVID? Like, and it didn't jump to 7% wage growth in April of 2020, and then it didn't fall down to negative 3.4% wage growth in April 2022.

Starting point is 00:21:50 Like, if the Fed didn't do anything, what would that whiplash look like? And also, like, would we have been able to fight COVID just as well? Like, having that counterfactual universe to compare against would be awesome, but we don't. But the whole Austrian take on economies is that human manipulation over the monetary supply is just bad for markets.

Starting point is 00:22:11 And you can kind of see that here, like went up and then it went down and there's whiplash and whiplash is bad. Yeah, absolutely. We're definitely suffering from whiplash. But what does this mean for crypto? Back to the question is, have we bottomed yet? Arthur Hayes actually says we have.

Starting point is 00:22:26 And he gives a three-point checklist as to what he looks for at the bottom. Number one, and he says all of these things have been hit, by the way. Number one, Bitcoin and Ether move increasingly in a less correlated fashion versus the NASDAQ 100. That is starting to happen, David, crypto assets being less correlated. Number two, the current price levels are very close to the previous cycle's all-time highs. What's the all-time high for ETH from the previous cycle, David?

Starting point is 00:22:52 $1,400. Yeah, and what about Bitcoin? $20,000. We're about that, right? I mean, we're close. We're not quite that, but we're getting closer to that. And so that's close to being hit. We're like 20 to 30% higher than previous all-time highs.

Starting point is 00:23:07 Exactly. Number three, he says, the mainstream financial media gloats about how stupid and greedy plebs are who attain short-lived wealth investing in crypto. So the kind of articles like, yeah, ha-ha, jpegs, they were always a meme. We told you, stable coins would never work. Aren't you crypto investors really stupid? We're starting to see some of that sentiment in mainstream media. I don't pay much attention to it because it's just kind of noise to me,

Starting point is 00:23:33 but I think that is happening. So he says three strikes. All three of those criteria have been hit. You're out. And so he says that this is his bottom checklist, but he also says it doesn't mean prices will automatically resume a quick assent back to like 70K Bitcoin and 5K, ETH. The one thing he's looking for is some of the political and macroeconomic picture to coalesce,

Starting point is 00:24:02 to come together. And he thinks U.S. elections will be a big catalyst for that. So the question in my mind is if we're in this Bart season, if we're in this chop season, maybe the bottoms in or we've gotten really close. So is this actually an accumulation season? That's the question. Should people be accumulating here? or should they get ready and wait for the next leg down?

Starting point is 00:24:26 What are your thoughts here? Yeah, interestingly, this end of this article really is reminiscent of our conversation with Vance Spencer that we had, where Vance is like, yo, there's got to be like a big massive liquidation event in order for me to like really be confident on the bottom, right? Like the market trends toward peak drama and we haven't seen drama yet. But then you responded to V-HSA. Right. And you responded to Vance, like, well, wait a second.

Starting point is 00:24:48 Like there has been sectors of the crypto industry, maybe not the crypto industry, holistically that has puked, right? Like, a lot of NFTs are down bad. Like, Terra literally went to zero. Alt-Layer ones are down, like, 98%. We're about to see a thread that talks about how down bad parts of the crypto industry are. And the only things that really haven't puked are the blue chips, right? Like Bitcoin and Ether are, like, down, like, 60 and 65% respectively, which would be a historically not bad crypto bear market, but kind of what you would expect from a more crypto industry. And so this conversation as this like, do we need the big liquidation candle that we are used

Starting point is 00:25:28 to for crypto markets is still like kind of up in the air? And Arthur is saying, no, no, we don't need that big liquidation candle in the big blue chips because, you know, other, the drama has happened elsewhere. He's also saying if you want to be sure, he's predicting that central banks in monetary policy will loosen because, again, everyone feels broke. everyone's in pain. And so the Treasury and the Fed essentially become a one during times of huge economic stress. And so he thinks that there will be a massive quantitative easing.

Starting point is 00:26:05 And that Powell and the central banks of the world will start to project that signal that probably close to kind of election time or shortly thereafter. And so if you want to be certain, his advice is look for that signal because of It'll be loud and clear. I think it's a pretty good take, and I really enjoyed this article, so we'll include a link in it in the show notes. But, David, could you also give us a state of the bear market, the snapshot in crypto? This is a thread from Jason Choi that I think is pretty useful for us.

Starting point is 00:26:34 Yeah, so he puts six tweets together that covers different sectors of the crypto industry, starting with defy. And so he says, defy has been the most painful trade in the past year, looking at the Dex vertical alone. We've had the most prolonged bear market out of all the verticals. 400 days since all-time highs for a lot of the Dex tokens, which includes Uniswap, sushi swap, balancer, BNT, average Joe, cake swap, CRV. Average time since all-time high is 400 days. That's been since D-Fi summer.

Starting point is 00:27:08 And like uni down 88.6%. Sushi swap down 93%. Balancer down 91%. cake swap down 90% curve down 92%. You know, these look like 2017 ICO numbers, Ryan, like where things like... They do. It's pretty high. 90% is a big number.

Starting point is 00:27:26 That is one-tenth of the previous market cap. It previously was. So that was a defy dex trading. And then he continues with DFI. He says, DFI 2.0 was hit the hardest relative to all-time high across virtually any category with a median drawdown of 98%. Ryan, don't let the numbers.

Starting point is 00:27:44 fool you, the difference between being down 90% and being down 98% is an 80% difference. Wait, no, it's a 90% difference. It's a 90% difference. And so if you are down 98%, down 98%, you are down 90% more than if you had would been, if you had just been down 90%. So like, Defi 2.0 is down 90% worse than Defi 1.0. That includes Alchemics, Om, Butterfly, Time, time is literally 1 to 0, curve, and and toke. Curves survived it like 85%, so that's pretty good. Toke down 95%. Alchemix down 98.5%. Again, these things are exponential. That is painful. I own three of these tokens, Ryan. Oh, cool. How much pain are you in? Oh, I'm fine. Again, most are ETH bags. So, you know, I'm used to going down big, big numbers in bear markets that feels like home.

Starting point is 00:28:38 Jason Finnis continues going interestingly long, centralized exchange, short decks might have been a good trade. sex tokens, sex, as in C, centralized exchange tokens, were amongst the most... You can do that as a hard C, David. You don't need to do the soft C on the CX. Moving on. It's up to you, though. These sex tokens were down not so bad. So FTT, down 69%. Nice. BNB down 56%, Hoobie down 74%, median down 71%. So not so bad if you are a sex token.

Starting point is 00:29:10 I'm going to keep on doing it. I'll continue to say CX. I'm just going to spell that one out. Out. On to Layer 1's fat protocol seemed to be a whole. The most weight still as L1s continue to be among the most liquid and defensive assets. No major layer 1 drew down more than 90%, 90%, except Mina. The average for the Layer 1 trade is down 85%. Ether's down 63% from all-time high. Avalanche down 84%. FTM down 90%, Salana down 85%. Algaran, down 89% near, only down 74%. And I think winning this whole entire trade is, other than Ether, of course, because it's got an extra cycle underspel.

Starting point is 00:29:47 Is Tron? Is a sadly Tron? But I don't count that. It's not legitimate. NIR and Adam seem to be the outperformers here. Outperformers as in not losing a lot. Yeah. Wow.

Starting point is 00:30:01 Yeah. You know, but I don't see Max Payne. That's what's interesting. I still don't see Max Payne among the layer ones. I wonder if we get there first. I mean, down 90% I would definitely. call Max Payne. Yeah, but you just said the difference between 90 and 98% is a whole hell of a lot, right? I'm ready to, as soon as I see like an median drawdown of 85%, I'm, like, you can start calling bottoms there,

Starting point is 00:30:28 in my opinion. You think so? Yeah. I wonder how far Eath goes down. That is the big question. How about the Solana ecosystem? Yeah, his last tweet just highlights the down badness of a lot of the tokens in the Solana ecosystem. The tokens of the Solano were a median drawdown of 94% from the top. This is likely because of just the illiquidity of many tokens in the Solana ecosystem. Now, this looks like the ICO market. This looks like the ICA market. Yeah. Wow. Yeah. Crazy. So a lot of pain. That's the sum up here, definitely. I think this, this meme sums it up fairly well, David. It's a contrast of 2020 versus 2022. What are we looking at here? Right. So this isn't just a meme, even though it is a

Starting point is 00:31:10 great meme. The top panel is a guy closing his eyes, throwing a dart at a dartboard, and he goes, me trading in 2020 and quadrupling my money, and then me trading in 2022 and declaring bankruptcy is the bottom panel. But like, again, this lends itself to the fact that the source of inflation was asset prices, and this is instantiated in this meme. This isn't just a meme. This is evidence, because so many people liked this meme, if you could just throw a dart at the dart and quadruple your money in 2020, guess where inflation came from? It's from the people who quadrupled their money by doing no work. And now people trading in 2022 and declaring bankruptcy, which is the second half of this meme, it's like, well, there's nothing you can do in the markets without you losing money. And so,

Starting point is 00:31:54 you know, this is a symptom of the money printer. And then this is a symptom of raising interest rates to correct for the overzealous money printer. So all those like money printer go bur memes, if you are somebody who is experiencing pain, you can blame the money printer go-bur era of monetary policy because that's why. Well, this is the thing. So in the first panel, the guy's just throwing a darted dartboard, right? And it's easy, easy money, right? The second panel is he's got like six computer screens open.

Starting point is 00:32:19 He's like freaking like typing on it. He's like in the zone trying to actually get some alpha and generate some upside. And instead he's declaring bankruptcy. To me, this is just a difference between easy money era. and kind of the tightening era, is all monetary policy effect. That's what's crazy about it. Meanwhile, though, David,

Starting point is 00:32:41 we are continuing to burn ETH. It's looking pretty bullish on that side of things, even though the market don't care about it. Read out this Anthony Sassano tweet here. Layer 2s on Ethereum have burned over 20,000 ETH since EIP-159 went live. Repeat after me, layer twos are not parasitic to the Ethereum or Eith.

Starting point is 00:33:01 And then here we have a snapshot from Ultrasound. money website. NFTs have almost burned 90,900,000-Eth, Defi, a quarter, 750,000-Eth. Layer 2's coming in forth after MEV at 22,000 ETH. A very long shot away from the amount of that defy or NFTs have burnt, but the idea is that NFTs and D-Fi move on to the layer twos. And so layer twos, I think, can definitely become number one. OpenC has burned over a billion dollars because of ETH transactions, because of how computationally intensive NFTs are. Eric Connor gave out this interesting tweet that kind of really puts this into perspective. Ethereum is currently burning 2.9 million ether per year. After the proof of stake merge hits

Starting point is 00:33:45 main net, ETH will become deflationary as the supply shrinks massively. At this current pace of 2.9 million ETH burn per year, we will hit one ether in all of existence, as in we will have burned every single ether in existence in 40 years. We are not getting to that point. That's not how it works. But it's illustrative of the crazy rate of eth-burning that we are currently doing. And so, like, it's much more accurate to say, like, ether is burning at 2% per year because then that establishes some sort of equilibrium over time. But, like, illustrating this as if at this current pace, we will burn literally all ether

Starting point is 00:34:18 in existence at 40 years is illustrative of how much ether we are burning in this current state of Ethereum. And also just, like, how quickly the supply is going to go down in the next five years, versus the next 50 years, right? And so you at this, in a person going through what is a bare market while ether is being burnt massively, is this is the early opportunity of Ethereum itself, where the Ethereum supply is going to get cut in half

Starting point is 00:34:45 over the next 50 to 80 years, and you get to buy it in a bare market, right? And so when there's this exorbitant burning right now going on, where the trajectory is so high of the burn rate that we delete all ether in existence, That is a buy signal in my mind. Yeah, deleting all. Someone once said, there is no supply floor that became a meme.

Starting point is 00:35:07 And that's definitely true of ETH. And what's crazy here is I actually, like in 2017, 2018 crash, basically we saw block space demand completely dry up. Like it kind of evaporated and went away. And we're not seeing that with Ethereum this time around. Like block space demand has definitely gone down, but it hasn't dropped to zero. In fact, block space demand. Like gas fees are still pretty high on Ethereum right now.

Starting point is 00:35:33 And, you know, so block space demand is still high. Where it's evaporated, it's very much in kind of the alternative layer one ecosystem. And to lesser extent, I guess, like, you know, layer twos and such, and, you know, the polygons of the world. So that, to me, is a bullish indicator. Guys, we have so much more to cover as usual. Coming up next, we're going to talk about the successful dress rehearsal for the merge. The Robson merge.

Starting point is 00:35:57 We'll give you some merge updates, including maybe. our greatest thoughts on a timeline for this thing. What else we cover in next, David? We got the 20 million tokens for the optimism fumble between the optimism team towards Wintermiel. We will cover all of those drama and details because the story unfolded in like three different phases, went three to different directions. It's kind of crazy. And then of course, the crypto bill. There's a big crypto bill that got put out. We got the details. We're going to run through and TLDR. All of the details from Senator Gillibrand and Llamis' long-awaited crypto bill. So all of that and more is coming right after we talk to some of these fantastic sponsors that make this show possible.

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Starting point is 00:38:03 go to across.tto, to bridge your assets between Ethereum, Optimism, Arbitrum, or Boba networks. And we're merged. Ryan, we're merged. At least the Robson test net has merged into proof-of-stake format. So there's a number of test nets

Starting point is 00:38:19 in the across the Ethereum ecosystem. There's three big ones, and Robson's pretty damn big. And it successfully merged. So this is the first dry run, the first dress rehearsal for the proof of stake activation merge on the Robson TestNet. Ropson used to be proof of work, and now it is proof of stake, Ryan. So here is a picture of just a bunch of the Ethereum developers taking screenshots of the Ropson

Starting point is 00:38:41 merge and all of the statuses around this. Here's the Nimbeth Twitter account, putting some cool art into the actual blockchain with the famous panda. The panda is now the meme for the Ethereum merge because there's this meme about one polar bear and one black bear touching fingertips, and they merge into a panda. bear. It's like the consensus layer and the execution layer. And so here is another meme kind of illustrating the trajectory of this. This is coming out of Preston Van Loon where we have private test net miners. The miners, those private test net miners are dead, even though it's a

Starting point is 00:39:09 test net's never really live in the first place. Robston miners, the proof of work behind Robston, those are now dead. And then we have the Grim Reaper going for what's next, which is the Cipolia miners. The testaments coming up next. Cipolia is also proof of work and will soon be proof of stake once Cipolia gets merged. And so we have all. all these test nets, and they're getting merged one by one by one. And Ryan, when we run out of test nets to merge with proof of sake, guess what happens next? Oh, I think it's the main event. I think it's the main event.

Starting point is 00:39:38 The real deal. Mainnet. This was from an article from CNBC. They said, Ethereum just completed a successful dress rehearsal, they called it, for the most important upgrade ever. Dress rehearsal. David, I feel like I put that somewhere. Very specific language.

Starting point is 00:39:54 Where's that from? Well, I think that's the metaphor. that you use with Tim Bako when we live streamed with him on Tuesday. That episode is already in your RSS feeds if you want more details on the merge. But there's no way that they also came up with the phrase dress rehearsal and published an article like 12 hours later. I think CNBC tunes into Bankless. It's got to be, right? So hey, CNBC, it's great to have you listening to Bankless. We'd love to be on CNBC to update you on the Crypto Roadmap sometime. But that's really, I think, a good metaphor for this. We've got three dress rehearsals.

Starting point is 00:40:27 and then we're going to have the actual performance that we're staging. And like there's two more left, two more dress rehearsals left. But how did this go? How did Robsden go? Was it a success? Was it a failure? Was it somewhere in between? Yeah.

Starting point is 00:40:39 So when we were talking to Tim Beko, we were like, okay, the reason why we don't have a merge date is because it's not a date. It's not a binary yes or no. It's more of a vibe. And so like as if the developers feel good, the client teams feel good, the community feels good. The surrounding infrastructure around the merge feels good. And everyone's vibing.

Starting point is 00:40:56 then we can come up with a date. And so Danny Ryan, who coordinates these things, says the Robson merge was a major, in all caps, success. If this were main net, I would be jumping for joy. I don't see Danny Ryan using emojis often, and he uses the celebration emoji saying, congratulations to everyone involved. And then he highlights some of the actual issues

Starting point is 00:41:17 that did show up so we can speed run through these. 14% of validators had a downtime at the time of transition. 9% is a nimbus team, config issue fixed with a CLI change and redeploy. Basically, as soon as you start and stop your mine, your node, it works again. 1.8% is a known concurrency bug in Nethermind, required a reboot for some nodes, and then 2.5 to 3%. Nimbus Baysu web socket problems swapped to use HTTP. These are all developer talks, but of the percentage of nodes that did not successfully merge, it was all very trivial and they were able to restart themselves and get up to merge. So the issues that were discovered

Starting point is 00:41:57 in this dress rehearsal were all trivial, which is exactly what we want. There's no way that zero issues happen. We're trying to figure out what issues are going to happen. And the more trivial they are, the better they are. And what Danny's saying is like all the issues that were discovered were super trivial and would not prevent an actual live merge happening if this were a real merge, it would have been a success. So, guys, the dress rehearsal went well. That's fantastic. I never get two more. Good performance. Good performance.

Starting point is 00:42:24 Yep. And so we'll talk, let's talk about the merge odds, though. This is a polling market, which is a prediction market in crypto and defy. And they're estimating the odds. So people are actually betting on this. By September 1st, the odds of a success, ETH merger, 28%. By October 1st, 65%, by end of year, 90%. To me, David, this feels about right, although I am a bit more bullish than I was

Starting point is 00:42:52 This feels like it's leaning bearish. I think these numbers are... It's probably leaning bearish. I think they are taking in... These are... We found a bug numbers in my mind. Well, give me your take then. What do you think the actual number is going to be?

Starting point is 00:43:08 I think you... It says by end of year 90%, by October 1st, 65%. I think by October 1st, 90%. And then by September 1st, 65%. Interesting. And you both those numbers. for you guys on a weekly basis as things happen. But this is the overall schedule for the merge.

Starting point is 00:43:28 I think this is important for people to understand. What would you highlight from this? Of course, we have an entire episode on this that came out on Tuesday of this week. So if you're looking to get all of the details, listen to that episode. But what's the highlight on the next steps to happen to get the merge to completion, David? Yeah, so this is a fantastic infographic illustrating what comes next. First, we have the client releases on the very far left, the blue with the blues like the off-chain layer. Soporlia and Gorely, we're already down on one of those. And so each one of those things gets merged.

Starting point is 00:43:58 And then once all those things gets merged and we're all happy about it on the all-core devs call, a TTD will be selected, a total, terminal total difficulty. It's like a block height. It's like a block number, but it's something else. But basically, for all intensive purposes, it's the same. Once a TTD is selected by the all-core devs, that is basically picking a date for the merge.

Starting point is 00:44:20 So when the TTD is selected, it's like picking a date. So we will actually have a date where we'll say, hey, the merge is going to happen at this particular date. And then some client software gets releases for the consensus layer and execution layer clients called Belatrix and Paris. And then eventually those get activated on the beacon chain, on the proof of stake chain. And once those get activated, then when the TTD number gets hit, these new activated execution layer and consensus layer clients start listening to this. And then once the TTD gets hit, that is when we merge. And 12.8 minutes after that point, we will have successfully finalized the first merge blocks and made us a proof of stake network.

Starting point is 00:45:00 My favorite part about this is, like, once you deploy the, you know, the Bellatrix and Paris client releases for both the consensus layer and the execution layer, so basically the proof of stake and proof of work networks, then it's just a shot clock. Like, then there's just a timer. It's a countdown. And everything is automatic after that. So like you push it out there. And then within like a week, maybe two weeks,

Starting point is 00:45:23 we're just counting down the time. Drum roll for the merge to actually happen. It's crazy. It's going to be a lot of fun though. Guys, we're going to have a lot of fun this summer. It's early fall sometime soon. Halloween. Halloween, I'm going to drive.

Starting point is 00:45:37 Every, oh my God. I'm calling it. Everyone for everyone in the Ethereum community during Halloween is going to dress up like a panda. And I had, I just had that idea right now. And I bet you that's coming. So I'm calling that. guys want to get all of the details from the merge and the remaining steps between now and the merge. We did the live stream with Tim Bako, who's privy to all these information and all these details.

Starting point is 00:45:58 And so that, again, that podcast is already out on the RSS feed. It's also up on the YouTube. And that, I believe, will conclude the merge section. Last thing on that is one of the downstream effects after the merge effects is going to be an absolute monster decrease in electricity used by Ethereum. So, like, it's basically all of it is going to go away, going to evaporate. And that is crazy to think about because right now Ethereum consumes somewhere between 0.1% to 0.3% of all of the world's electricity right now. Let me repeat that. This is less than Bitcoin. You know, not a lot less than Bitcoin, but a little bit less than Bitcoin. Right now, Ethereum Proof of Work consumes 0.1% to 0.0.0.5% to 0.0.4.000.

Starting point is 00:46:48 3% of all of the world's electricity output. That's a lot. And that is going to go away after proof of work, almost like a light switch. It's no longer going to be needed because you'll no longer make any money consuming that electricity in the form of Ethereum block rewards. So you kind of wonder what effect that's going to have maybe to the power grid or maybe to kind of like mainstream news. Will anyone notice that decrease? But it sort of means that Bitcoin will now have to sort of stand alone as the sole proof of work chain, the sole juggernaut proof of work chain. I do think a lot of scrutiny will come Bitcoin's way as a result of that. Whether you agree with that scrutiny or not, certainly the narrative is coming. And in fact, we're going to be

Starting point is 00:47:35 talking about some New York legislation that dampens what New York can do with proof of work a little bit later. But any thoughts on this, David? Yeah, I mean, it does indeed start. It does indeed start to make news that like Ethereum turned off all of its miners and like redirected all of that electricity consumption back to the grid. And for then there are some fallout as a result of that for better or for worse. Like maybe there's like a grid surge and that happens or like electricity prices get really, really cheap in some corners of the world where Ethereum miners are hooked in. Like it just highlights the fact that Bitcoin is the last chain standing that is consuming energy. And I do not envy the Bitcoin ecosystem to having to fight that fight as like justifying.

Starting point is 00:48:18 their, like, I mean, you, if you've, 1.1 to 0.3% of electricity consumption by Ethereum is, like, high. Bitcoin is, like, 0.5% and higher, like, TBD, like, how to calculate these numbers a little bit up in the air. So fighting that fight, the political fight, the fight for hearts and minds, while your blockchain is consuming a ton of electricity, not exactly the best place to be. Yeah, I'd rather not be doing that,'s for sure. But let's talk about this. So a 20 million item number two. Yeah, 20 million in OP tokens hacked, stole it? What happened here, David? What's the story? Yeah, so optimism and the Wintermule team made a deal where the Wintermule team would liquidity provide for optimism tokens. And so to carry out this engagement, optimism gave a temporary

Starting point is 00:49:05 grant of 20 million OP tokens to send to Wintermule as part of the foundation's partner fund. Wintermule provided an address to receive these tokens, and this was their multi-sigabre address on the Ethereum layer one. However, the accident, the whoopsies that happened here was that Wintermule's multi-sig address, the Nosis Multisig, they use one of the very, very old versions of the NOSIS multi-sig that has since been updated. And as a result of that quirk, the address on the Ethereum layer one is not the same as the address on the Ethereum layer two. So if you use a, if you make a Nosis multi-sig now, it would be, it will be the same address. But Wintermule was using a very old multi-sig.

Starting point is 00:49:45 contract. And so they made an assumption that it would be the same address and it wasn't. And that resulted in the OP tokens going to a multi-sick address that had not yet been initialized. And so there was an attacker that I think basically just like spammed the initialization of a multi-sick address until they got the right one, giving them control over the 20 million op tokens. As soon as the attacker got their hands on the 20 million op tokens, they sold one million of them. And I've also delegated another million of the tokens to a delegate, and then also sent Vitalik another one million tokens. And so this person, Yov.eith, said, the plot thickens, as I'm writing this explaining to me, the attacker delegated the one million op voting power

Starting point is 00:50:31 to me. Thank you for delegating. Hint, no, I'm not the attacker, and I don't know who it is. And then Bantag from Yern says the attacker just sent one million OP tokens to Vital. dot eith. Interesting, like, why one million? Why not all of them? Like, I can't, I don't actually know how many tokens the, the attacker has left presumably 19 or 18 million now. One quick note. I think, David, you kept saying winter, winter, it's a winter mute, I believe. Oh, excuse me. Sorry. What is winter mule? That sounds familiar to me though, but it's not these guys. And what is, who are winter mute? And like, what's going to happen as the outcome of this? Like, who's actually going to pay for the 20 million opi tokens. Who's going to suffer that loss?

Starting point is 00:51:13 Yeah, apologies. Winter Mute. Didn't make up the name. Yeah. Winter Mute is going to be buying tokens off of the secondary market to replace the losses. Right now, just 1 million tokens have been sold. And so since the OP token is still so young, there's not much issued that actually didn't impact the price. But Winter Mute, as a result of their trading profits, is committed to buying back the tokens that they admit that they lost. Kane, there's a lot of people like pointing at Wintermute saying, oh my God, this is amateur hour. Like you've got to check your addresses.

Starting point is 00:51:46 How could you do this? How could you do this? Kane put a thread together that I thought put things into perspective, which makes a lot of sense to me. Kane says, loving the reply guys in this thread saying, oh my God, how could you do this? Well, I'll tell you exactly how you do several thousands of things with correct assumptions, and then one of them is an incorrect assumption. Seeing the funds in your address is not sufficient as a test.

Starting point is 00:52:07 And then he continues. I can think of at least 50 different times something like this has happened within the synthetic community. The correct way to test a transaction is to ensure that you can move the received tokens, but like 0% of people do this. Almost anyone who's been in crypto long enough has a story of incorrect assumptions leading to the loss of funds. I have made this mistake. Just recently, I called a function named burn on one contract when it was supposed to be another contract. I had 20 tabs open, and the sequence of transactions was 20 transactions long resulted in 10 million die burned. What?

Starting point is 00:52:36 I didn't know that. Sorry, Kane. That sucks. Sorry, Kane. My conclusion, after years of watching this stuff, this stuff happened is that it's not possible to avoid every mistake, but communicating them transparently and quickly is the optimal approach. And that is what I will give a ton of credit forward towards the Wintermute team.

Starting point is 00:52:53 They didn't hide it. They immediately owned up to it. And they have also committed to rectifying their losses. And they committed to all of this stuff before, like, Crypto Twitter got, like, all up in arms about the drama about it. So I think this is. going to be just a very small hiccup in the very long story of both Wintermute and optimism. Well, speaking of long stories, David, we've got our big news item number three, which is the

Starting point is 00:53:18 bill, a long-awaited crypto bill led by Senator Gilderbrand and Senator Lummis is being put in front of Congress. And I think we've gotten our hands on it, at least a draft version of this, where they're calling it landmark legislation to create a regulatory framework for digital assets. And Lemus has been a long-term advocate for crypto. Of course, she's a Republican. Gilderbrand, I believe, is also a, you know, crypto advocate as well. And so this is a bipartisan bill.

Starting point is 00:53:51 I don't know what the chances of this going through are. In fact, I think we're going to have Senator Gilderbrand on bankless tomorrow to actually ask her about this. But let's talk about the meat of what actually is inside of this bill, because this is maybe, I think the crypto industry is hoping for some clarity. That's what we've been begging Congress to do. So even regulators like Hester Purse and, you know, the former CFTC chairs have been begging Congress to do. Just give us clarity. Just tell us like what, what you expect out of this space. Come up with some sensible regulation. What does this bill include? What are some of the

Starting point is 00:54:26 main provisions, David? Yeah, I've pulled out some of the most relevant parts of this very long bill. So I'm going to speed run through all of them. I'll also type this. type the section numbers, if you guys want to check them out yourself. Section 204, decentralized autonomous organizations specifies that certain decentralized autonomous organizations, DAOs are business entities for the purposes of the tax code. This requires that a DAO be properly incorporated or organized under the laws of a jurisdiction as a decentralized autonomous organization, which may include an LLC corporation, partnership, Foundation, cooperative, or other similar organization, basically telling DAO's that they need

Starting point is 00:54:59 to register somewhere. Kind of taking the D out of DAO's, so kind of don't really like that. Yeah, That's not awesome. It's not a fan of that. It's very cumbersome. It does also give them optionality and clarity in some respects, although it's not the most ideal form. Section 206. Internal Revenue Service IRS guidance.

Starting point is 00:55:18 This requires the IRS to adopt guidance or clarification on longstanding issues in the digital asset industry, including disposition of forks and air drops, merchants, acceptance of digital assets, digital assets mining and staking charitable contributions, and legal characterizations of payment stable coin as indebtedness. So there is that. Section 208, digital asset mining and staking declares that digital assets obtained from mining or staking activities do not form part of a taxpayer's gross income until the disposition of these assets.

Starting point is 00:55:49 Wait, what? Staking yields not taxed until you sell them. That is awesome. We love that. Wait, wait, wait. All right, so both of those are very good things. So, number one, IRS giving us guidance. They haven't given us jack around guidance.

Starting point is 00:56:05 Like you have no idea how crypto assets are treated. Everyone's just kind of guessing. So that's good. It's something we needed. But this is crazy. So you're saying staking income is not ordinary income under this bill. You pay zero taxes on staking income until you sell it. Wow.

Starting point is 00:56:21 That is cool. This would be a congruent with other jurisdictions around the world. I believe Germany treats things this way. But that would be shocking to me. if the IRS took this sort of position, but it's not them. I guess it's Congress making them do it. Incredibly bullish. What else we got, David? Section 403, CFTC jurisdiction. The previous ones are all big deals, but this is also a very, very big deal. The CFTC shall have exclusive jurisdiction over any agreement contract or transaction involving a

Starting point is 00:56:50 contract of sale of a digital asset that is offered, solicited, traded, executed, or authorized dealt in interstate commerce. The Lummus Gillibrand grants the CFTC exclusive smart jurisdiction over all fungible digital assets which are not securities. Section 404, also very related, digital asset exchanges, creates a pathway for digital asset exchanges to register with the CFTC to conduct trading activities similar to the Digital Commodities Exchange Act. Awesome. So the CFTC is crypto. Crypto and CFTC, big handshake unless they are securities. So if it is not, if a cryptocurrency is not a security, it becomes under the jurisdiction of the CFTC, giving the CFTC prime control over regulation over the crypto industry.

Starting point is 00:57:33 We like that clarity. We like being able to pick one entity and say, you're responsible for regulating crypto, which definitely tells the SEC to back off regulating crypto and Gary Gensler to just cool your jets, bro. Yeah, I think that's, so it's very clear to me that under this bill and everything I've said that Ethan Bitcoin will be treated as commodities under these provisions. the still outstanding question is what else is a commodity and how does something that's a security become a commodity? Is there a path to that? I'm not sure that that's clarified, but seeing the CFTC take a more active role in this is a big win in my mind. Right. And then the last one I want to highlight, section 601, issuance of payment stable coins. The Lummis at Gillibrand requires a bill,

Starting point is 00:58:16 requires all issuers of payment stable coins to one, maintain high quality liquid assets value at 100% of the face value of all outstanding payment stable coins. Two, provide public disclosures on assets backing the stable coin and their value. And three, have the ability to redeem all outstanding payment stable coins at par in legal tender. Few have been paying attention to what Circle has been doing. They have been doing all of this stuff for the last six months, front running what is they expected to be these requirements. The last part of this section is really, really cool, Ryan.

Starting point is 00:58:45 Establishes a detailed optional process for depository institutions, banks and credit unions, to issue a payment stable coin. Banks can issue stable coins. Credit unions, small banks, big banks, have given by this bill the green light to issue a stable coin. That is really cool. That's really cool.

Starting point is 00:59:03 Yeah, that is really cool. Now, so if I take all of this in its totality, the last thing I'm worried about in the stable coins thing, I think it's really good for, you know, centralized stable coins like Tether or USDC or something new to follow these guidelines, I hope this does not preclude the dyes of the world or even the experiments like fracks.

Starting point is 00:59:26 That would be dangerous territory. So for me, that depends on the fine print. But if I'm zooming out, like the Dow thing is not great, but the tax implications are incredibly good. And the CFTC taking a more active role and rather than the SEC is also bullish. So this is more bullish than bearish to me to the crypto industry. The big question in my mind, though, is can they actually pass it with this Congress at this point in time when nothing actually gets passed? So we're seeing some movement, but I wonder, do we have to wait until 2024 to actually see this get passed?

Starting point is 01:00:01 We actually had Kevin O'Leary. You may know him as Mr. Wonderful, the shark from Shark Tank. He is going to be coming out. The podcast is coming out on Monday. He was actually in Washington talking to legislators, talking to people in D.C. About this very bill. His emphasis, David, was like, hey, if we're going to concentrate on. on one thing, get one thing right, let's get the stable coin piece right. This section 601, I believe,

Starting point is 01:00:26 would be his emphasis or focus. So it could be the case that maybe this entire bill doesn't get approved. You know, this entire bill doesn't go through, but a section of it does in a smaller version of this bill. And maybe that's the stable coin section. Maybe that's something we can all start with and actually get some clarity there before we get into the other areas. So overall, I think this is a good step. It's bullish. It's certainly not perfect. But I'm excited about it. Coming up next in the next part of the show, there's a ban on Bitcoin mining in New York. We've got to talk about that, as well as the fight over the apes. There was a fight over the apes. It's where the board ape ecosystem is going to go. So we got that answer now, as well as

Starting point is 01:01:07 PayPal, allowing 400 million users to go bankless. So all those details and more coming up right right after some of these fantastic sponsors that makes the show possible. Arbitrum is an Ethereum layer two scaling solution that's going to completely change. how we use defy and NFTs. Over 300 projects have already deployed to Arbitrum, and the defy and NFT ecosystems are growing rapidly. Some of the coolest and newest NFT collections have chosen Arbitrum as their home, all the while DeFi protocols continue to see increased usage and liquidity. Using Arbitrum has never been easier, especially with the ability to deposit directly into Arbitrum through all the exchanges, including Binance, FTX, Hwbe, and Crypto.com. Once inside, you'll notice

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Starting point is 01:02:51 Follow Maker on Twitter at MakerDAO and learn from the oldest and most resilient Dow in existence. Hey guys, we are back. Some bullish news. This is the kind of bullish news that happens to the bear market and the market does not react. But get this. PayPal is now allowing external transfers to non-custodial wallets or custodial wallets outside of the PayPal ecosystem.

Starting point is 01:03:14 That is huge. Realize how massive PayPal. is today, 400 million users. They have 30 million merchants, and this puts all of those users, all of those merchants, on the path to going bankless. Why? Because now you can withdraw your Bitcoin, Ethereum, Bitcoin Cash, and Lightcoin to other wallets and exchanges. Previously, you couldn't do this. A couple of weeks ago, we talked about how, the way Robin Hood was allowing this for their users. Now PayPal is allowing withdrawals for their users as well. And I got to imagine deposits. So this is super cool, David, and I think, you know, opens the door for many more millions

Starting point is 01:03:51 to go bankless when they are ready to take custody of their private keys or move it outside of the PayPal network. It's also cool to see a network like PayPal wouldn't do this unless they had to. And crypto is kind of forcing, you know, networks like PayPal to do this sort of thing because people want the ability to access their own private keys. We want to take custody of our assets. We want the ability to go bankless. So. I think this is super bullish. The table stakes for FinTech companies just always gets higher and higher and higher for getting involved in crypto. First, first you have to provide access to crypto assets. Then it has to be, well, now you have to withdraw crypto assets for you to even be considered.

Starting point is 01:04:29 And then soon it's going to be like, well, you have to be able to let me get yield, defy yield inside of your app. And soon it's going to be like, well, I need to be able to stake Eith inside of your app. And all of a sudden, all of these fintech front ends are just going to become front ends for DFI and growing out the DFI mull. So that is the story here. All right, moving on to the Battle of the Eighths. ApeCoin Dow officially favors remaining within the Ethereum ecosystem. Yay, yay, decentralization.

Starting point is 01:04:52 The final votes reveal that 53.6, not that much over a majority. That's barely. 53.6% of ape coin voting participants have agreed to stay within the Ethereum ecosystem. The immutable ZK roll-up layer two actually made a proposal for them to go on to that ZK roll-up two. This is not that. All that the apes have done is they have voted with a snapshot vote. using the ape coin that they decide,

Starting point is 01:05:17 that they want to stay within the Ethereum ecosystem. And so they don't know where to go. I still, I believe, want to migrate off of the Ethereum layer one. But as a, just a temperature check, the apes are staying inside the Ethereum ecosystem. And so I much agree with this choice. Nice choice, ape coin. You got to put yourself next to where the epicenter

Starting point is 01:05:39 of economic activity is, and that is, of course, on Ethereum. Look how tight this vote was, though. It's a tight vote. type boat. I would be surprised if they change their minds in a few months. We'll see what happens. That is not the only metaverse story of the week. Illuvium, the big game from Kieran Warwick, Kane Warwick's brother. The alluvium land sale got concluded all last week. All land plots apparently sold out. They sold 20% of the future Ethereum land. An absolute insane amount of money was collected from in a bare market sale. $72 million. $72 million.

Starting point is 01:06:15 for 20% of the alluvium land. That is nuts. That is an insane market cap on the total supply of all alluvium land, which the game isn't even out yet. This was done on immutable X, and so that got around all the gas wars. And so big success out of the alluvium ecosystem, $72 million.

Starting point is 01:06:35 Who is buying metaverse land in this bear market, Ryan? In this economy? In this economy, you're buying your virtual land? What are you doing, guys? DGens are still? still degenning, I guess. Or maybe, look, maybe this is going to be incredibly valuable. I've heard great things about alluvium in the ecosystem.

Starting point is 01:06:53 People may be bullish alluvium land, but they are not bullish Diablo Immortal, which is some sort of Diablo, I guess, game. You've told me, David, this is mobile first. So I know, like, both of us are former Diablo players. I think you got into Diablo 3 a bit more than I have. Oh, there's the game right now. You're showing on mobile. I was Diablo 2, aficionado, spent a lot of my,

Starting point is 01:07:15 youth inside of that game. Yield farming before it was yield farming? Yeah, exactly. But never made a cent on it. So a little bit different than the yield farming we do today. But I've just been seeing all of the spillover from the gaming community of hatred for this game. Right.

Starting point is 01:07:32 Like one of the lowest reviewed games in history, people are calling it predatory. What are some of the issues that have surfaced? And can NFTs fix this, David? Yeah. So in the Diablo subreddit, there is a post that is a, voted 20,000 upvotes saying, banned Diablo Immortal from this subreddit for predatory gaming monetization. So, like, the Diablo community is banning a Diablo product saying that this is ridiculous.

Starting point is 01:07:59 They hated that much. They hated that much for like, you know, micro transactions in freemium. And this guy at Ryan Todd Adams tweets, it costs $110,000 to fully gear up in Diablo Immortal, as in it's a freemium game. So if you want to buy all the goods, you've got to spend allegedly $110,000 is how much it takes. to like max out your stats. And you don't even own your stuff. We've turned video games into rich kid country clubs.

Starting point is 01:08:23 Wow, that's a great metaphor. Do NFTs fix this or do they make it worse? Now, NFTs, there's a take later on in the take section that this is going to be relevant to. But like, NFTs could make it worse or they can make it better. It's up to the technology. But at least it provides an option, right? And so this is like what's been going around in the NFT crypto Twitter world is like NFTs have the ability to fix this where,

Starting point is 01:08:45 you can allow people to buy and have the same sort of monetization, but at least they get to own their own assets. And maybe we like tamped down on the egregiousness of $110,000 to max out your character. Yeah. So there's a huge difference. $110,000. Like that is just revenue to, does Blizzard still own Diablo? That leaves your hands.

Starting point is 01:09:03 Yeah. Yeah. It's just like it's all revenue on Blizzard side, right? It's very different than somebody paying like $110,000 in a game, for example. I'm saying that that's an agree. amount of money, but they're buying it from another player. Right. Right.

Starting point is 01:09:18 So Blizzard doesn't generate that upside. It's some other player that got in earlier or did more within the game. It's the players that are actually receiving this economic return. That's a completely different model than what we're seeing in Diablo. Right. And like you can just imagine how much more adoption that would be where using the $110,000 number, one player pays another player $110,000 for their items, and then Blizzard just takes like a one, two, three percent.

Starting point is 01:09:45 on that. Yep. And because players are not feeling just like extracted from and they're actually able to make money because some player made $110,000, it onboards a ton of more players. And that's like one of the very basic ways to integrate NFTs into games. Van Spencer talked about this on our podcast with him. But it's like, you know, you can give out NFTs for free and have them be like valuable in the secondary markets. So NFTs do fix this once we figure out the form factor for NFTs. It's such a cool model that no one's tried. Like actually it was silly. Like you had to pay to mint, that sort of thing. But like, you know, Vance's concept is, no, all the minting should be free. And then the game publisher just makes money on the transaction fees. Why don't we try

Starting point is 01:10:23 that? I think we will see those experiments in the future. So we got a fix for you guys. Diablo immortal, you know, people who are enthusiastic about that game but found a predatory. I think NFTs are coming to fix some of that. What is Budweiser fixing here? I've seen some horses on screen, David. Dude, Budweiser is killing it in like the NFT world, the branding world. Budweiser is now the official beer of Zed Run. And Zedrun is a, like a metaverse horse racing ecosystem, right? So they rate you, the horses are NFTs and you can bet which horse is going to win, which like, you know, people love to gamble, right?

Starting point is 01:10:59 And I'm a big fan of, like, you know, those horses are like brutalized in real life, right? And so for just like animal rights, let's just make NFT horses in like the Metaverse and like, we'll race those things rather than like making actual horses race. Anyways, Budweiser is like sponsoring this whole virtual horse racing ecosystem. And so there's a bunch of horses that you can like purchase or bet on. And yeah, so Budweiser, like, sponsoring this now. I have never felt the need or the interest in betting on horses until now. Yeah.

Starting point is 01:11:31 Yeah. I mean, if we wanted to, Ryan, bankless, we could buy a horse if we wanted to. We could have the bankless horse. You want to buy a horse? A bankless horse? Yeah. Isn't there some, like, Vitalik bloodline? Yeah, there's Vitalik Bloodline, yeah, right.

Starting point is 01:11:45 Yeah, I don't know how to find it. I have not explored this website. Anyways. I think this Forge from Firehorse is Vitalik Beater and Bloodline. Oh, my God. Well, I guess that's drop bodwiser. Coming up next, I think you guys remember when I talked about how the SpongeBob Square Pants, NFTs were coming to Ethereum versus with this IP.

Starting point is 01:12:06 I remember this. Yeah, very excited. Yeah. So we're getting closer, Ryan. Nickelodeon NFTs. Nickelodeon underscore NFT Twitter account. So the 90s called, they want your attention back. If you're reading this, your early, hashtag Nickelodeon NFTs. And so like all the 90s kids who like have crypto money now, they're going to have some NFTs that they can purchase. And like I said, like, you're talking about yourself, aren't you? I might be buying the SpongeBob NFT. Like I might do that. Everyone hands off. I will out video. There's going to be a fork show. It's just a bankless SpongeBob edition where David Dishills' SpongeBob NFTs.

Starting point is 01:12:47 Yeah, that's exactly right. Anyways, so call to action for anyone that enjoys Nickelodeon and NFTs, plan on which NFTs that you want to buy so long as it's not SpongeBob. Save your money. Save your ETH, guys. It's going to be a big one. On the regulatory front a little bit, the New York mining ban, this has happened. This is the headline.

Starting point is 01:13:08 a bill cracking down on Bitcoin mining. Here's everything that's in it. We won't go through all of the details. But David, this is the first state to actually start to institute a ban on carbon-based power sources, Bitcoin mining being the primary one targeted. What do you make of this? Yeah, so the author of this is Mackenzie Sigelos. I actually met her at East Denver. So shout up to her. She's a fantastic, well-researched, high, good intent reporter. So I actually can actually trust her as good signal here. In the article, it says, following an early vote in Albany on Friday,

Starting point is 01:13:44 lawmakers in New York pass a bill to ban certain Bitcoin mining operations that run on carbon-based power sources. The measure now heads to the desk of Governor Cathy Hocel, who could sign it into law or veto it if Hocel signs the bill. It would make New York the first state in the country

Starting point is 01:13:58 to ban blockchain technology infrastructure, according to Perri-Anne Boring, founder and president of the Chamber of Digital Commerce. Industry insiders also tell CNBC it could have a domino effect across the U.S., which is currently at the forefront of the global Bitcoin mining industry, accounting for 38% of the world's total miners. If it passes, it would make the United States of the country to ban blockchain technology

Starting point is 01:14:19 infrastructure. I said that twice. Do you know what, though, David? Texas ain't doing this, man. It'll just move over. It'll move down south, right? I don't know why. There actually is a ton of energy in Pennsylvania.

Starting point is 01:14:31 There's a bunch of data centers in Pennsylvania. So it actually makes sense for Bitcoin miners to be there. But, like, Texas just makes a clean energy, though? It's not actually. I don't know. I don't know. A lot of coal energy and that sort of thing. But, yeah, other states will be happy to pick up this slack.

Starting point is 01:14:44 I don't think that this is a thing unless you get this instituted federally. And do you think that, like, Congress or, you know, through executive order, there's an appetite to do that? No, no, definitely not. There's so much, there's a decent amount of lobbying power. Like, no one really has it out for Bitcoin mining all that much. Just New York. New York has always proven itself to be, like, a very hard state for crypto companies to operate in. Anyways, I live in New York now.

Starting point is 01:15:10 All right, so maybe you can change a few things around there, or maybe not. I don't think you're going to come down on one side of the proof of work debate. But that is increasingly a debate that Bitcoiners will have to stand alone on, as we loan on, as we made that point earlier in the show. David, some raises this week. The first one, BlockFi gets a $1 billion valuation, and that sounds like a lot, but it's actually down from their previous range. So we're starting from their previous raise.

Starting point is 01:15:40 So we're starting to see the bubble, I guess, deflate a little bit from private markets. We've certainly seen that in public markets. Prices going down. And what's this? Euler Finance, they just raised as well. $32 million, I believe. What is Euler Finance? Oiler finance is a money market like compound and AVE, but also like Rari.

Starting point is 01:16:00 And it kind of combines the best of both worlds between compound and Avey slash Rari. Rari, where you have fuse pools, where you can make up any market on any parameters, but then Compound and Ave have the benefit of like a shared central liquidity source. Euler tries to do the best of both worlds, and they have raised $32 million. There is an article that I'm releasing. I'll talk about this more in the roll-up for what I'm bullish about. There's an article coming out on bank lists on Wednesday that features eight projects that I'm excited about, eight projects that I'm bullish on.

Starting point is 01:16:30 Euler is one of them. And so if you want to dive down the Euler Rabbit Hole, that article might be for you. Awesome. Also, some jobs that might be for you. Of course, we have the bankless jobs board. I'm going to read out a few of the jobs from this week. This is David's first time dancing in New York City. Maybe. Maybe we'll be about to see that. I got to talk about the Twitter specialist. Coming up first on the bankless jobs is the bankless Twitter specialist. If you understand and know how to work and manipulate the Twitter algorithm, we want you. And so if you're a good threador, if you're a good tweet or, and you know how to get a thousand likes, apply for that. drop. Now he's going to get to dancing. Also a research engineer at blockchain capital, a tech lead at Swell Network, a solidity developer at unlocked, a senior product designer at streams, a business development lead at Goldfinch, associate business operations chain link, developer evangelist at Argent. As you can see, guys, crypto industry is still hiring. If you want to check out those jobs, go to the bankless jobs board, bankless.com.com slash jobs or submit your resume to the talent

Starting point is 01:17:32 collective, go check that out. We want you to get a job in crypto. David, we're going to have to burn through these things because we've got to be quick. But did you know that Graysdale might be getting ready to sue the SEC? All right? So Grayscale has this product that we've talked about before. It's called GBT, GBT, which is basically a trust that holds Bitcoin. It's kind of like a pseudo-ETF, but it's way more expensive.

Starting point is 01:17:58 Like higher management fees, kind of trades off the actual price of Bitcoin. it's kind of a crappy product compared to what an ETF should be. To no fault of their own. To no fault of their own. They want to convert that to a fully fledged ETF. But guess who won't let them? The SEC won't let them. So, Grayscale, this time is tweeting out as we enter the final month before responses do.

Starting point is 01:18:21 So they just submitted another application to get the SEC to approve their ETF. They've retained Donald B. Valeri? That's how he says? Anyway, he's a former solicitor general of the United States, and apparently, according to people who are inside, he's a lawyer, a badass lawyer, okay? This is Jake Trevinsky. Strong move, great scale means business. The SEC's deadline to approve or deny the application to convert GDP to ETF is July 6th.

Starting point is 01:18:51 No doubt it should be approved. I don't see how the SEC survives a legal challenge, if not, especially one led by Dan Verilli. Marky calendar. Gearing up, gear and up. And so Crypto is taken to the courts. This was another tweet that I saw. SEC lawyers are starting to quit because Gensler wants to litigate cases not settle. Here is a former SEC lawyer who actually quit.

Starting point is 01:19:16 He says this, I like to try cases, but I also like to win. I was looking down the pipeline at the types of cases the SEC is going to bring and not seeing a path towards victory on the SEC side of things. Said a former SEC official. Yes. Wow. It could be that some in the SEC, maybe Gary Gensler, are overstepping their bounds, and this is going to be settled in court. So crypto is lawyering up, and I'm here for this fight. I think it's a good thing. I think we need to do this. I love it. I don't usually like to feel Chauden Freud, even though it's in the name that you do enjoy it. But like, I feel an insane amount of Chauden Freud over the demise of the SEC. Well, it's not to look, SEC should be doing things. The demise of the bad parts of, yes, yes. exactly. Yeah, I mean, obviously to clarify, and look, the truth is we should have had an ETF product for Bitcoin a long time ago. And it's hurting every week that goes by, every month that goes by, it's costing retail millions of dollars, the fact that we don't have this.

Starting point is 01:20:17 David, Jay-Z and Jack Dorsey teaming up? What are they up to? Yeah, Jay-Z and former Twitter CEO Jack Dorsey are teaming up to launch a financial literacy program titled of the Bitcoin Academy for residents of the Marcy House's Projects in Brooklyn, New York. York, where the rapper grew up. They're offering classes, Ryan, from June 22nd to September 7th, including classes titled such as, what is money, what is cryptocurrency, what is blockchain, and how to keep yourself safe from scammers. Jay-Z says everyone should be empowered to make informed financial decisions in order to take care of themselves and their families. Ryan, if I had a class that I was a part of in middle school or elementary school or high school titled, what is money,

Starting point is 01:20:57 I would be a lot smarter by now. And so, like, the conversation, the less, the class of what is money, sounds like the most fun class of all time. And so some underprivileged kids, and we're going to be able to hear about what is money and skip over at boomer finance. It goes straight into crypto finance. Nice job, Jay-Z.

Starting point is 01:21:16 If you want to bring equality of the world, you've got to start with financial literacy. And this is how you start education. So why we do what we do, and I'm glad, you know, Jay-Z and Jack Dorsey are teaming up on this one. David, did you know? Chipotle, you can now pay for a Chipotle burrito and get the guac if you want with ETH, all right, with Bitcoin, with 98 different digital currencies.

Starting point is 01:21:40 It's pretty crazy. You know what, Ryan? I just consider that adoption. So let's just like wrap this up. Like I think we're done here. This is what I came for. We made it. We made it to Chipotle.

Starting point is 01:21:50 So like here's the thing. It was never about buying the, you know, Starbucks coffee with Bitcoin. It was the burrito the whole time. Burritos. Now we made it. It's burritos. Every Chipotle. I actually want to try to do this and maybe I'll tweet it out when I do.

Starting point is 01:22:07 Just for fun. You're not going to spend your Eth on a burrito, bro. Dude, it's quack. Burritos are my thing. I don't know what your food is of choices, but like if there was one food item that I had to eat every day, it would definitely be kind of that text mix combo of like rice, beans, maybe some protein, maybe not, maybe some guack. I'm learning something about you today, Ryan.

Starting point is 01:22:31 Yeah, well, what's yours? Probably a skirt steak. Skirt steak, okay. Where can you get that at like fast casual though? Like, I'm talking like the fast casual, fast food level of food. You're not going to get steak at a... Yeah, I will not get fast food steak. That would be egregious.

Starting point is 01:22:49 I'll have to think about that. Maybe we'll talk about that later in the show. Anyways, coming up next. Sorry to disappoint you, Ryan. I'll have to think about that answer. Coming up next, questions from the nation, such as advice for job seekers. Somebody asked us some job advice, so we're going to answer that. Also, O.P. token value beyond governance.

Starting point is 01:23:06 And if we have time to get to it, how to convince friends and family to be bullish on ETH? Explain like I'm Normie, the bull case for ETH is a question there. And also followed up by hot takes from crypto Twitter. So that is what's coming up next. Don't go anywhere. But we have to get to some of these fantastic sponsors that make the show possible. The Brave Browzer is the user-first browser for the Web3 Internet, with over 50 million monthly active users.

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Starting point is 01:25:03 Hey, guys, we are back. I'm going to start with our new segment. Questions from the nation. Just a reminder, if you want to get in the weekly roll up, get your question in, make sure you respond to the tweet we have. We put that out on the bankless HQ, Twitter, every Wednesday. Here's the first question, David. I'm going to throw this at you.

Starting point is 01:25:19 This is from willy-billy-boo.eath. Nice.eath handle as well, willy-billy. What advice would you give to someone trying to get into the industry with minimal tech skills? For example, I'm an educational psychologist, but I'm trying to find a path forward in crypto, not sure where to start. So, from one psychologist to another psychologist, I guess you're not a psychologist, but you minored in psychology, David. What advice do you have for Willy-Billy-Boo?

Starting point is 01:25:45 Yeah, Willie-Billy-Boo. So, yeah, the way that I answer almost everything, if you don't have a tech background, can you write to you? well because if you can write well, you can do so much in crypto. So many people need good writers who can communicate well. Communicating crypto is hard. That's why bankless is what it is because Ryan and I have figured out how to communicate crypto with metaphors, with connections, with getting people to understand complex topics quickly. If you have those skills, write more. And so that's how I got my foot in the door. Somebody who's like tried to figure out how to get a job in psychology and was like,

Starting point is 01:26:21 well, crypto's way more interesting. I don't know what to do. I'm not a developer. maybe I'll have to learn how to code. I just started writing and that snowballed from there. So whether you can tweet very well or you can write a blog post very well or if you can be a technical writer, if you can communicate or just like be a good communicator of a project, that project will hire you. So learning to communicate in crypto-native mediums like on Twitter and articles, short-form articles, how can you collapse an insane amount of information into as short as short of a paragraph or a sentence as possible and still retain all of the alpha

Starting point is 01:26:57 is an insane skill that almost everywhere in this industry needs. So not sure where to start, start making content. Communication is a skill that crypto needs desperately for sure. David, here's another question. This is from Rick Latona.lens. That lens, nice handle, Rick. I hear from time to time that the OP token, that's the optimism token,

Starting point is 01:27:20 will have value beyond governance, when they start to decentralize sequencers, but I'd be lying if I said I understood that fully. Can you explain it? Explain why the OP token has value, aside from like responsibility token or governance a token. Why do you think it might have value in the future, David?

Starting point is 01:27:37 Yeah, so this system of OP token gaining value actually is also related to eventually the Ethereum Layer 1 because the Layer 2 for optimism plus the Ethereum Layer 1 are going to exhibit the same pattern. So this is a lesson that works beyond Optimus, optimism, and is generally part of optimism's vibe of how layer twos can provide a business model to open source. So, all layer twos, they have blocks-based sales. People pay transaction fees to get

Starting point is 01:28:03 into the block, and that transaction fee is eventually going to go towards the OP stakers, because optimism will be a proof-of-stake network where you are staking OP tokens to be a block validator, just like you are staking ether to be a block validator on the Ethereum layer one. What happens is that there is a system, kind of like a pyramid of transaction funneling that begins in these things called sequencers. And the job here is done by what are called searchers. Searchers go and they search through the mempool and they sequence a bundle of transactions. And so these are kind of like MEP bots. People, the searchers will look at all the different decks is on a particular blockchain and they will order transactions in a way that benefits them some MEV and they will put a bundle together.

Starting point is 01:28:46 And these bundles are generally going to be optimized for dexes or some other specialists will specialize for borrowing and lending protocols, and MEPV borrowing and lending protocols. There's going to be all these specialists that bundle up transactions in ways that they are very, very tuned to extract MEV from. And these specialists are going to bundle up transactions, and they're going to send them to the builders. And the builders are going to basically bundle up all the bundles. So the builders bundle the bundles. And then the builders accept a bids from the searchers to accept their bundles. to accept their bundle, and then the builders put a whole entire block together,

Starting point is 01:29:19 and then the builders send a bid over to the OP token stakers saying, hey, here is this block that I've constructed for you, using all of the bundles from the searchers, and then once this block comes with a bribe towards the OP token, it comes with a payment, like a tip, to bribe the op token stakers to accept their particular block because they want their block to be accepted because they get M.E.V. out of it, And so they pay a bribe to the OP token to accept their block.

Starting point is 01:29:47 So what this does, and this also, again, is the part of the future roadmap for the Ethereum Layer 1 is this basically takes the entire value of the economic activity on a layer 2 or the Layer 1, and it puts it into the proof of stake asset being the OP token. And so that is the path forward for not just the OP token, but for basically any layer 2 that wants to follow this path and also for Ether on the Layer 1. So, Rick, that is how the OP token will have value beyond governance. if the community gets it there to that point in time. That is, I don't think it's actually codified anywhere,

Starting point is 01:30:18 but that's kind of the vibe of optimism. Yeah, so the short answer to that is whether it's the optimism token or any other layer two token, the answer to the question is, what's the value? It's maximally extractable value. It's that thing David was saying called M-E-V. And the thesis is, assuming like high-market competition at the searcher level and at the builder level,

Starting point is 01:30:42 all of the value is going to flow up to the stakers of that asset, in this case, the OP token stakers. And of course, governance handles this. There's some public goods funding associated with the optimism ecosystem. But that basic principle follows to all layer twos and also follows to stakers on Ethereum. So if you're selling blocks and you're staking, this is essentially the way you're going to make money in the future. David, this last question here, how can I convince my wife to let us move more? of our savings into eth, smiley face. This is from N1X. N1X. But seriously, how would you explain the potential upsides of a larger eth allocation, especially premersed to someone with a very limited

Starting point is 01:31:23 knowledge of crypto? I'm going to take a counter take to this. I want to hear what you say, but here's my countertake. You can't. I don't actually think you can explain it. All right? So I think that and what can boil down to someone who hasn't had spent the time to actually understand why money exists, why it's valuable, why ether's valuable, all of the things you're learning on bankless, it often collapses to like, hey, this thing's going to be really valuable because I said so and because I, like, I think it's very difficult to distill your thesis into anything more than like, trust me, it's going to be valuable in, you know, a year's time, two years time, five years time. That's my take on it. I actually don't think you can tell

Starting point is 01:32:07 someone why it's valuable, they actually have to do the hard work and find the conviction themselves. But why do you take a stab at this answer, David? Yeah, explaining crypto to people that don't get it is certainly an art. And so it really depends on where this person is in their, like, crypto perception. Like, if they think crypto's a scam, you have to start the conversation at a different place. But let's go ahead and assume that this person doesn't think crypto's a scam. They do think it's real. They just don't know how or why or, like, the details around that. The way that I explain ether is that like in the traditional stock market and traditional equities market, a lot of people just like ignore all of like the trading of which to stock to buy and they just buy an index, right?

Starting point is 01:32:46 They buy the S&P. What you have to do is you have to explain how ether is basically an index for the entire Ethereum economy that is based on top of it, which is true. So transaction fees from NFTs, transaction fees from defy. When somebody mince a token that puts transaction fees on Ethereum, when they do anything on Ethereum, if you use Ethereum at all, you pay transaction fees in Ether, and then that ultimately becomes part of the Ether value proposition. And like, you actually don't even have to explain, like, oh, transaction fees leads to upside an ether this way. You can kind of just like explain that at the very high level. When people use Ethereum more, they need Ether the currency more. And Ether, as a currency, the more that Ethereum becomes

Starting point is 01:33:27 useful, a lot of that gets imbued into Ether, the asset. People accept that on face value. So I think all you have to do is say, like, Ether represents an index for the entire Ethereum economy. So you don't have to buy this token on Ethereum. You don't have to buy that token on Ethereum. You don't need to, like, diversify across, like, the whole entire ecosystem, because Ether itself is an index of the entire Ethereum economy, and the Ethereum DeFi economy is like 85, 90% of all of Defi. And so you can tell them, you can get exposure to so much by just buying Ether, because Ether is an index of the Ethereum economy and the Ethereum economy is massive. Yeah, I think that makes sense. And then you also have to explain why you think

Starting point is 01:34:07 the Ethereum economy is the one that's going to win kind of the power law above other alternative layer ones. Because then my next question would be like, oh, cool, so I should buy ether. But then I should also buy like Tron and Cardano and like Solana and Pocod and Bitcoin too. Is that what you're saying? So you also have to, you know, talk about that to you. Right. Yeah. I think that's actually a You can just say, you can just end it there. Trust me. The answer would be like Ethereum is the longest standing smart contract platform that's gone through multiple cycles.

Starting point is 01:34:41 So it has stronger. It's been around for longer. So you can have better assurances that it's going to be around longer than all the Alt layer ones. And so you can feel better about that position. I just think people are going to hear that and just like maybe, I don't know, you have to develop the conviction yourself is also my takeaway. So like, oh, I agree with you.

Starting point is 01:34:59 that's the best way to explain it. It's hard to get there just from hearing it once from one individual. So I don't know if this will work in your marriage, my friend. Good luck with your wife, N1X. Good luck with that. Anyway, David, let's get to some takes of the week. This is a take from Metallic. He says this is a great example of why I'm so proud of optimism for adding non-token governance,

Starting point is 01:35:24 the citizen house. Optimism explicitly has goals other than just to make OP price token go up. And the only way to do this long term is with explicit representation of non-token holder interests. He's talking about the ability or the citizen house, which is not based on the amount of tokens you have, but based on you as an individual identity inside of optimism. So can you explain what his take is here, David? Yeah, there was a proposal inside of optimist.

Starting point is 01:35:54 to use the OP token as the gas payment token on the optimism network. And like all the token holders are like, yes, this is good. We like this. This increases the OP value. And then the Citizens House was like, guys, this doesn't really make any sense. Like optimism, the token's not a currency. Like maybe it provides a short-term price increase, but doesn't do anything in the long-term. And so these long-term thinkers that aren't thinking in price token number go up short-term that the token house is are able to balance the incentives. And this has always been the idea of the dual house model, the short-term incentives of the token price, of the token holders, because they want the token price to go up, but the long-term people that understand the five, 10, 20-year

Starting point is 01:36:33 vision of optimism and making sure that the choices that we make, we can definitely lean into making the token price go up, so long as it doesn't get in the way of the long-term vision of optimism. And so the Citizens' House balances off like the short-term D-Gens of the OP house. So it's like the short-term house versus the long-term house, and Vitalik is just giving props to optimism and for having this long-term house balance off the short-term benefits of like the D-Gen token holders. That's really cool. I didn't realize that that's what was going on here. Here's a take. Do you want to read it out and explain it? Yeah, so somebody tweets, Bitcoin is digital gold. Ethereum is blank. And Jake Bruckman, we've had him on the podcast. He answers. Ethereum is analogy resistant. And I love that tweet. Ethereum and Ether breaks all previous models.

Starting point is 01:37:17 What is Ethereum? Is it gas? Is it a store of value? Is it a money? Like, it's all of those things. And so in order to understand Etherium, like, it doesn't work as an analogy. You just have to under, it's like, it's a brand new thing. It's never been seen before. It doesn't fit into any preexisting models. People that try and place and bucket Ethereum into a model are really just like doing the whole blind men feeling an elephant thing, where they're just trying to measure one aspect of it. And so Ethereum is analogy resistant, I think is a great take. There you go.

Starting point is 01:37:47 And N1X, explain that one to your wife. Just tell her it's analogy resistant. That's why we're going all in. How about this tweet from Zora? NFT is the medium, not the message. Interesting. NFT is the medium, not the message. I have to think about this, but what do you think it means?

Starting point is 01:38:05 Yeah, I think we can continue this conversation off of the Diablo NFT conversation. NFTs, that NFT is a standard. It's a token standard. ERC 721 is a token standard. And so it is the medium of a message, not the message itself. So NFTs can be good or bad. They could be stupid, silly little JPEGs of like weird goblin things, or they could be actually like revolutionary and actually innovative. And so when the gaming world comes and says, get your NFTs out of our games.

Starting point is 01:38:33 They're not hating NFTs. They're hating on the container that the NFTs are. They're hating on the message that they're containing in this particular moment in 2021 crypto. The message that is being contained by NFTs, how these NFTs to express themselves and what they are, will develop over time. So the NFTs, the container will stay the same, but the message that it contains will develop and evolve and iterate and eventually win the hearts and minds of all of the world. That's cool. That's cool. Very cool. Ryan, this is yours. You want to read it out for us?

Starting point is 01:39:06 Yeah, this comes from a book. You know the Mark Andreessen podcast? He recommended a whole bunch of books and I've been Make My Way Through him. The first book that I started with was A Conflict of Vision by Thomas Sowell. And he really talks about these two kind of visions that, have classically been at play in all political philosophy, right, since like the 1700s onwards. And it was crazy to me, David, how I see these two conflicts of vision play out in crypto, and also between, like, crypto advocates and crypto-sceptics. And it really hinges on the question of what freedom means and what equality means. And the question of, like, does crypto bring equality?

Starting point is 01:39:45 Some people will say, yes, it does, like us, for example, and some people will say, no, it doesn't. And the reason why these disagreements occur is because we actually have a different vision in terms of what freedom and equality actually means. So I tweeted this at one person will say crypto gives us a fair and egalitarian system. Another person will disagree. They'll say that there's wealth inequality. Of course, it's not free and egalitarian. But that's just because we mean different things when we say free and equality.

Starting point is 01:40:17 So crypto people, we generally emphasize equality of process. right? So do I have the freedom to fork, to run a node, to get my transaction in at the market price? That is freedom. If I'm treated equally as all other participants, if there's no bias, if there's no special interest, it's why we emphasize algorithms rather than humans. We want ungovernable systems. We want equality of process. All right. So that's what we mean often on bankless when we say words like freedom or equality. But others are like, hold on, that's not actually equality. That's not actually freedom. That's kind of like some, like, crypto-speak garbage, because equality of outcome is what actually matters. And they'll point to things,

Starting point is 01:41:01 they'll say, look at the distribution, all right? Go look at the Ginny coefficient of Bitcoin. Who owns it? A whole bunch of whales. Same with Ethereum. Other networks are even worse. And who actually cares, David and Ryan, if anyone can transact on the network? Because it costs like $50 to transact on Ethereum at rush hour times. And knowing can afford that. The 99% can't afford that. So you know it's actually a better solution? Maybe something like China, what China has going on, which is a CDBC that's actually banking the unbanked, providing some value to them. Remember our podcast with Richard Turin, David, where we talked about all of the people in poverty in China that were getting access to banking services through a centralized

Starting point is 01:41:41 CBDC. And they'll say that's way better than your Ponzi games and your fake moralism around decentralization. But the reason that this debate happens is because there's a difference. We're talking about a quality of process, and some of the detractors and skeptors are talking about a quality of outcome. And this is a debate that I'm learning now, digging into this, that's gone on for centuries. People have had this debate between, like, you know, people like Adam Smith and Hobbs on one side of the debate, equality of process, and people like Godwin and Rousseau on equality of outcome opportunity, and I think it all hinges upon this debate. So really good, I think mental model for me to understand in this book of Conflict Divisions.

Starting point is 01:42:30 I'm curious your take over some of those things. You don't have to read the book to get those takes. I kind of summed it up, but what do you think about this? Yeah, it just reminds me that something like 90% of debates ultimately settle down to becoming a semantics debate where, like, most people agree. even though they're debating because they actually haven't agreed on the terms. And so, like, people that debate about certain things, they're actually debating just, like, difference in emphasis

Starting point is 01:42:54 or there's just, like, difference in what some words mean. And so it sounds like a lot of these things is, like, we could actually could agree if we were actually in agreement as to actually what our vision is for a particular thing. Yeah. That's the thought that came to mind. Yeah, I totally agree. And I also believe that, like, the blended systems

Starting point is 01:43:12 actually provide the most resilience because both of these visions do have some merits. And what you're really trying to do with a system like Ethereum is try to find the right mix, right? So you can't go extreme on one side or the other. Anyway, it's something to think about. What do you bullish on this week, David? Okay, Ryan, I'm super excited about this. Okay, so I've been writing this article. I know I've been teasing it to you. It's like, I don't know what the title is. I'm trying to think of a hotter title, but it's basically eight projects that I'm bullish on in the build market. And so there's like a bunch of different projects that are behind the scenes. Some of them have already gone to main net. Some of them are about to go to main net. But it's like projects that

Starting point is 01:43:48 most people, I don't think, have really heard of. And so I've written this article that is like a complete, like, concentrated download of all the things that I know about that I don't think the rest of the crypto industry has really, like, caught up to yet. It's all of my alpha. It's all of my alpha. It's all the alpha I got. It's eight projects, summarize and distilled. And the bowl case is explained. And so, like, there's a bunch of different ways to get value out of this article that's coming out on Wednesday. So, like, if you're a big, spiffy hedge fund in investor, you'll be able to get a pulse for the directions of the general crypto startups. The startups that I'm talking about are some are in the defy space, some are in the layer

Starting point is 01:44:24 two space, some are not even on chain at all, some are in the NFT space. And so like another way to get value out of this article is if you're on the hunt for air drops, probably almost every single one of these except for maybe an exception here or there is going to have a token. I've gone and for every single project, I've gone and found all the open job listings. So if you are looking for a job, there is a job in every single startup that they have available. And overall, if you're just like trying to look for new sectors of crypto to explore and just like get downloaded on information and get a better view of what crypto is, all of these things are in this Wednesday piece. Every single piece, every single project has additional resources that I've labeled

Starting point is 01:45:05 beginner intermediate or expert for diving deeper and going down the rabbit hole. So like I've said, This is just like the most concentrated amount of alpha that I can like can get into one single article. So Ryan, that's coming out on Wednesday and that is what I'm excited about. That's awesome, man. I think this is also a template for what people should be doing during the build market, right? The bear market is an opportunity to breathe, but it's an opportunity to go research some incredible projects that are still building. And there's opportunities whether you're, you know, it's your resource, your time capital working there or whether it's like your actual capital to kind of get in.

Starting point is 01:45:41 and invest or whether it's just messing around in the ecosystem. This is what everyone should be doing. So you can look at David's eight projects, but you can also come up with your own list of projects as well. Maybe some of these are on your list, but maybe some of these are new directions that you're able to explore. So it's a cool template there too. But David, where can people find this?

Starting point is 01:46:01 Because people are listening on the podcast and they're probably like, okay, where is this going to be? Is this going to be a podcast or where can I find this? Yes. This is not going to be a podcast. You are going to have to put on your research. reading glasses. This is coming out on the newsletter. It is a newsletter with links and stuff. And so that's coming out on the bankless newsletter. So there is, of course, a link to like and

Starting point is 01:46:20 or like him subscribe. Definitely like him subscribe, but also subscribe to the weekly newsletter that comes out at a bank list. And then this one's coming out on Wednesday. Awesome. Cool, man. Ryan, what do you bullish on? I have eight things I'm bullish on. What are you bullish on? Yeah, I'm just, I'm bullish on these dress rehearsals, man. I'm bullish on the merge, okay? So we just saw the dress rehearsal. it went well. Like we just, we went from proof of work

Starting point is 01:46:45 to proof of stake. Like we did that. The entire ecosystem did that. And it went well. And that to me feels like we are right on the cusp of this thing. It's feeling more real than other. We've got a second and third dress rehearsal

Starting point is 01:46:57 for the merge coming up. But what I'm seeing out of the core Ethereum community is I've never seen it so galvanized. Like there aren't any detractors about the merge. You know, remember with things like EIP 1559, some people are like, oh, this is terrible. Let's not, never do this. Let's not do this. There's some detractors in the past.

Starting point is 01:47:15 We've had other contentious issues inside of Ethereum. This is not contentious at all. And it's because it's part of the core social contract that we all signed up for when we first, you know, learned about Ethereum, which is this migration from proof of work to proof of stake. And all of the benefits that it accrues, including monetary system benefits, efficiency benefits, of removal of electricity usage, all of these different benefits, and they're all coming to a head. So what's crazy to me is I think we're actually going to be,

Starting point is 01:47:47 like this is, we talked to Tim Beko about it. We're like, Tim, are we really going to be changing engines mid-flight here? Is that the analogy you should use? He's like, that's exactly the analogy that you should use. So I can't believe we are about to change engines mid-flight, right? Picture 747. We're going into the engine. We're swapping that out.

Starting point is 01:48:05 We're putting another one. and we're in mid-air. We're not on the tarmac. We're not on the ground doing this. We're in freaking mid-air. And so that's crazy to me. But the crazier thing is, like, David, I think it's actually going to work.

Starting point is 01:48:16 I think it's great. I was going to say, like, damn, you're putting a really dangerous image in my brain right now. No, I think it's going to work. That's what's crazy about, and that's what I'm so excited about. So we're simulating doing that in mid-air right now.

Starting point is 01:48:27 And, yeah, after seeing the first dress rehearsal go live and work, it's made it all feel more real. Yeah. Tim Baker, an interesting perspective that we had out of that show is that, like, he said 50% of the complexity of the merge is because we don't want to turn Ethereum off to install the engine and then turn it back on again. Like, we don't want to land the plane, add the new engine, and then take off again. We want to do it in the air, so nothing gets disrupted. And, like, that level of commitment to Ethereum uptime is why the merge has been so complex. And I kind of forgot, like, that that's a perspective to have. Yeah, absolutely. All right, David. You ready? Let's get to the meme of the week, man. Meme of the week, yeah.

Starting point is 01:49:08 Mr. Depp, you're down 95%. Have you ever considered selling? No, I can't. That's a... No. Oh, I love it. Oh, my God, that's great. Johnny Depp from the trial.

Starting point is 01:49:25 I love, like, the moody music, and that's exactly how I feel. No, I can't sell your eat, David. Also, for the podcast listeners just missed. they miss like this like group smile that he says like when he's asked like why don't you sell he's like i don't know but he's like smiling about it like i can't sell yeah that is exactly the vibe exactly the the mood during the bear market i'm feeling all right guys that's it that's a wrap been the weekly roll-up for the first full week of june we hope you enjoyed it as always none of this has been financial advice of course eth is risky bitcoin is risky so is defy you could lose

Starting point is 01:50:00 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.

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