Bankless - ROLLUP: Gary Gensler Grilled at Congress Committee Hearing

Episode Date: April 21, 2023

Bankless Weekly Rollup 2nd Week of April 2023  ------ 🚀 TOKEN HUB 🚀 https://www.bankless.com/join?utm_source=YouTube&utm_medium=Intro&utm_campaign=Intro_CTA1  ------ BANKLESS SPONSOR TOOLS:  📣 SAFE (Gnosis) | ACCOUNT ABSTRACTION https://bankless.cc/AA  ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum  🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://bankless.cc/kraken  🧠 AMBIRE | SMART CONTRACT WALLET https://bankless.cc/Ambire  👻 PHANTOM | FRIENDLY MULTICHAIN WALLET https://bankless.cc/phantom-waitlist  🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask  ------ Topics Covered 0:00 Intro 4:10 MARKETS 10:00 ETH Staking https://www.rated.network/overview  https://imgur.com/JyEFP6j  24:00 Gary Gensler https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408708  27:15 Patrick McHenry https://twitter.com/BanklessHQ/status/1648359230179782656  29:50 Tom Emmer https://twitter.com/TylerSCrypto/status/1648360838544203777?s=20  35:30 Warren Davidson  https://twitter.com/WarrenDavidson/status/1648379560122105882?s=20  37:20 Gary Fans https://twitter.com/BanklessHQ/status/1648365096413052928?s=20  42:20 Missing SBF https://twitter.com/sassal0x/status/1648135965456863236?s=46  43:50 ETH is Not a Security https://twitter.com/lay2000lbs/status/1648356295622422529?s=20  44:40 Republicans vs Democrats https://twitter.com/TrustlessState/status/1648365962100367361?s=20  46:30 Gensler vs Bittrex https://www.sec.gov/news/press-release/2023-78  https://twitter.com/MasonVersluis/status/1647987623670218752?s=20  50:50 SEC Crypto Regulations https://twitter.com/TrustlessState/status/1648234719081816064  51:40 Coinbase Bermuda https://fortune.com/crypto/2023/04/19/coinbase-gets-bermuda-license-plans-to-launch-offshore-exchange-in-coming-weeks/  53:30 SEC Decentralized Exchanges https://www.coindesk.com/layer2/2022/04/05/a-new-sec-definition-for-exchanges-has-big-implications-for-crypto/  55:30 Opaque Regulation https://www.coincenter.org/a-new-sec-proposal-has-a-serious-change-hidden-within-its-complex-language/  57:15 Hester Peirce  https://www.sec.gov/news/statement/peirce-rendering-inovation-2023-04-12  1:05:00 Rocket Pool Atlas https://twitter.com/Jasper_ETH/status/1647409214027972615?s=20  https://medium.com/rocket-pool/rocket-pool-atlas-upgrade-7c69e39a3d5f  https://twitter.com/drworm_eth/status/1648427406259294209?s=20  https://dune.com/drworm/rocketpool 1:09:40 Magi OP Stack Rollup https://twitter.com/NoahCitron/status/1648702968219471875?s=20  1:11:20 Uniswap Wallet https://www.youtube.com/watch?v=C74rHvKgnWU  1:12:20 Unknown Exploit https://twitter.com/tayvano_/status/1648187031468781568  1:16:45 Solana Phone https://twitter.com/solanamobile/status/1646580454768910344  1:18:35 Mattel Crypto https://corporate.mattel.com/news/mattel-creations-launches-digital-collectibles-marketplace  1:19:10 Trump NFTs https://collecttrumpcards.com/  1:20:30 1inch on zkSync https://twitter.com/1inch/status/1649050974751948800?s=46  1:20:45 Apple Savings Account https://www.apple.com/newsroom/2023/04/apple-cards-new-high-yield-savings-account-is-now-available-offering-a-4-point-15-percent-apy/  1:22:45 Permissionless II https://www.bankless.com/join?utm_source=YouTube&utm_medium=Intro&utm_campaign=Intro_CTA1  1:27:00 Questions from the Nation https://www.bankless.com/join?utm_source=YouTube&utm_medium=Intro&utm_campaign=Intro_CTA1  TAKES 1:36:30 Mocking Crypto https://twitter.com/_blakewest/status/1646181872194703360?s=46  1:39:00 Backed by the Army https://twitter.com/bendifrancesco/status/1648767224159559701?s=46  1:40:45 What David’s Bullish On 1:42:45 What Ryan’s Bullish On MEME of the Week https://twitter.com/BanklessHQ/status/1648442906301325314    ---- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures 

The grilling of Gary Gensler. That's what happened in front of Congress this week. Bankless Nation, it is the third Friday of April. Welcome to what, David. The Bankless Friday Weekly Roll-up, where we cover the entire weekly news in crypto, which is always an ambitious endeavor. Yet, we persevere nonetheless, no matter which regulator stands in our way. Here on the Friday, Winkless Weekly Roll-up. This week, we know who it is. Gary Gensler became the main character this week, all right? And he's been doing that ever since the beginning of the year. talk about the Gary Gensler grill sesh in front of Congress. That happened. We got a bunch of clips.

It's really like a Gary versus the people type thing, isn't it, David? Gary v. The people. Yeah. So if you want to get your catharsis on, we got some clips for you. Yeah. People just like yelling at Gary Gensler and Gary Gensar just taking it. It is cathartic, but it's also like, I was so frustrating. We'll see what you guys think when we get to that section. David, what else we're talking about today? Ethereum Chappellea one week later, we will look at all the stats and the metrics as to the withdrawals. How many people withdrew their ether from the beacon chain? How many people deposited? Is ether going, is security going to zero? We're going to talk all about that, as well as some other big announcements and releases of this week.

And Ethereum layer two gets its first second client. So that's pretty cool. Rocket Pool gets the biggest protocol upgrade of any LSD protocol ever in existence. So we'll talk about the details about that. thousands of wallets get their ether drained and no one really knows why which is concerning and I have stuck my head in the sand on that one all this and more so make sure you like and subscribe if you are listening to this on apple podcast go and rate and review so we can get bankless to the top of the iTunes charts if you're on YouTube hit that subscribe button and the like button and overall do things that help us like and subscribe yeah bring us up the charts

I mean crypto needs it right now right or do we I don't know are we in a bear market or bull market, I don't know, we're in this midpoint, we're in this in-between phase. I'm not really sure what to call that. We'll talk about that when we get to the markets. Before we get into the markets, though, we've got to tell you about our friends and sponsors over at SAFE. Formerly called NOSIS Safe, this is a multi-sig of multi-sigs. It is the multi-sig that everybody in crypto uses, secures many billions of dollars on Ethereum.

Bankless uses it. This is all our multi-sig of choice. It's a bankless wallet, okay? There's no bank in between it. You've also heard us talking about account abstraction. This is the future of wallets. This gives Ethereum wallets that fintech-like experience with very smooth user interface. So we've got the safe wallet.

We've got account abstraction. What does NOSIS want bankless listeners to know today, David? So NOSIS now safe is dropping safe core, which is an account abstraction toolkit of sorts to make it easier for you, builder, to build account. abstraction tools. So this makes it easier to hook in things like Fiat on and off ramps for gasless transactions. Like that means like paying for your transaction with stable coins and all the other things that really make account abstraction super powerful. So in addition to this dev toolkit to help make account abstraction, the status quo for all Ethereum wallets. There is also a hackathon,

a new kind of hackathon where they are calling an anything goes hackathon and anything, a anything A in front of anything starts on May 1st. So that's coming up very soon, 2023. There is a non-technical hackathon. So everyone's invited. You can make memes. You can make product ideas. MVP's, a lot more stuff is fair game.

So if you've never participated in a hackathon before, this is a great opportunity to get your foot in the door into the ecosystem to build something. You can also make a team and have team members if you are looking to find some friends in the space, which is always useful. So there is a link in the show notes for any of these announcements that might have interested you, whether it's the hackathon or the Safe Core Account Abstraction Dev package,

all of that stuff is just a click away in the show notes. That is safe.global slash core for more details. All right, let's get to the markets today with charts from our friends over at Cracken, our favorite exchange, the one we recommend for 2023. David, we're looking at the Bitcoin price now. What's it showing us on the week? It's shown us down, but only a little bit. Actually, a medium amount.

Started the week at $33,000, ending the week down 5% at $28,000. And so kind of top ticked it when we measured it last week. So 33 was like the local high. We are down now to the low low price of $28,000. Back down below $30,000. Sad noises. Below 30K, above 30K, I'm feeling good. I'm feeling bullish.

Below 30K, I'm like, oh, it's the bear zone. And we're oscillating between these two points. It's a little bear zone. It's a cute bear. Little bear zone. Okay. I feel the same way with Eath. What are we looking at the week?

Down 1.5% on the week, started the week at $2,000, ending the week. week at 1970. Although we had some pretty strong price action, both in Bitcoin and in Ether this week. Ether got all the way up to 1,000 or 2150, almost, I'd say. Yeah. And then, but now couldn't keep up the above 2000s. We are down. 1961, it looks like. So maybe down 2% in the week. What's up with these green candles on the 13th and 14th? Is that as a result of kind of staking? Is that what we're seeing? Sorry. Yeah, that was post-Chapella. Yeah, that was post-Chapella. Yeah, exactly.

Yeah, everyone realized that like people, that all the Chappellella withdrawal fud was just super fud. Yeah. And then people like, I'm not allocated anymore. I should probably buy. Have we retraced that? Have we retraced the... Most of it.

Yeah. The ratio's up, though, which is where we're going to go to next. Okay. So up 4% on the week. So 0.069. Nice. So 4% gain on the ratio. All right, 4% gain on the ratio.

And total crypto market cap, got to tell you is $1.27 trillion dollars filling with the T. So still in the bull zone above $1 trillion is bull zone for me. That's the first time you've ever given the number. What compelled you to do that this week? That's my job. Just because it hasn't really changed. You know, like one point.

It's just like, look at this. Look at this. The last 90 days or so. The total crypto market cap chart looks yummy. It looked good. It's a technical term, by the way. Oh, the big ones. looks yummy.

The big time. The max? Yeah. Zoom out to the max. Well, I mean, just like, it's just been, it's been clearly up into the right for a while now. Yeah, it really has. Like, we're going to start, we're coming in on like, we're starting to zero in. It's a little bit early to say this.

We're starting to zero in on 12 months of green, at least for ether. Because ether bottomed last May. Bitcoin, Bitcoin bottom in November. But ether's almost at 12 months of green. This is the point at which you're like, um, is this the, the early bull market and you kind of don't know yet. You're kind of left wondering or is this just more of kind of the crab and this is going to persist. Like what's your best guess for 2022? We, sorry, if we just, if we just totally extrapolate very rigidly from past bull markets,

it's, it was the 2016 and 2020 years that were the years of up only that no one knew were bull markets in that moment. And so like it was a modest increase of like a two X over a modest of two X over one year of time. It's like 2016. It was like a two X in prices. 2020, also a two X in prices. And I remember Ryan like in 2020, we were all like, is this over yet? And then COVID happens like, oh, we're still in the depths of it. And like from the Bitcoin and ether asset prices, it was a strong performance of a year yet no one knew. No one had realized that we were out of the bear market. So does it feel like those times? Does it feel like 2016 or does it feel like 2020 to you right now?

So if we go on the four-year cycles, we are still half a year away from that, which is not far off. And also, I'm not going to pretend that like why we rigidly project forward when things are different and change. So, I mean, we are within striking distance of that timing-ish. you know that argument of why would we rigidly project for but by the way just finish that thought so you know it could be 2019 rather than 2020 if we were rigidly projecting forward like right now but I'm also actually I'm kind of still a fan of rigidly projecting forward David it works last time it freaking works almost every time not just last time it worked the time before it and it worked

the time before that it seems well no but the time before that we were that was the first cycle I know, but it's just these four-year types of cycles seem about right and has nothing, in my mind, it has nothing to do with the Bitcoin happening. It just has to do with these boom-boss cycles that we see. It's investor appetite for tokens. And I remember people were like last time in 2021, late 2021, 2022, and the whole super cycle idea sort of took off. It's like, why does it have to be like last time? This time it's different. We have all of this.

We're not going down. We'll never see another, you know, above 50% drop from all-time highs. This is a different asset class. We've hit mainstream. Look at, we have Tom Brady. We have, you know, our names on sports arenas. We're here. We made it, right?

And what happened? The same exact pattern played out. It was the same. That's why I think the rigid projection is like my base case still, even though it is the same. Bractyl. Base case ought to be the same until proven otherwise, and it has not been proven otherwise. anywhere. All right.

Well, let's go on. Let's talk about Ethereum, okay? Because now we are one week, just over a week, past the Chappellea upgrade. So all, like, eth withdrawals are in. So tell us about the numbers, David. I want to know if how many people withdrew, or how much ETH withdrew,

how much ETH deposited, and are we net gain or net loss? And I'm expecting a net loss that we going to these charts. But tell us the story here. Okay, so I want all the listeners, including you, Ryan, to think of the number. So we'll start with the number of the number of ether

that was staked to Ethereum, the moment that Chappellella happened, which was $19.2,000 and one quarter. So $19,250,000. That was how much ether was staked when Chappellella went live. How much ether do you think is left in the beacon chain? How much ether we got left? How much did we go down by? Yes, how much did we go down by?

My guess is... Or up by. We could have gone up. We definitely went down. Up is wrong. Up is wrong. Okay. I knew that. My base guess would be about half a million ETH down. Because it didn't, I mean, yeah, I haven't looked, I haven't looked at all of the details here, but, you know, price has been up. My impression is there hasn't been a big flow for the exit, exit queue. And so down half a million. How'd that fair? You are pretty damn,

pretty damn close. A little bit shy. You guessed half a million. We were at like 0.6.6.5 million ether got withdrawn. So we were at 18,640,000 ether. There have been two large withdrawal events. It's been down into the right with some brief periods of more deposits, faster, faster deposits than withdrawals, but then very large withdrawers have come and just like nuked it, right? And so, and who are these people? That's these blue lines on the chart, right? These blue candles, rather. Exactly. And so, So these are the large entities. That first big withdrawal is Cracken.

And then the second big withdrawals on the further right on the April 20th, which was, is that today? Yeah, that is like within the last 24 hours are Coinbase and Binance, large other centralized service providers. We were at 19.5 million ether stake number 18,637,000 ether staked. Okay. So there we go. So the bleed is what, like 60, 70K, ETH per day? Yes, okay, but there's an interesting story here. First, Cracken, one of the biggest withdrawers, is legally compelled to withdraw thanks to our good friend, Gerber. We'll get to him.

We'll definitely get to him. Yeah, Coinbase and Binance. Okay, so like, why are the other big centralized exchange, exchanges withdrawing? And so here is a snapshot in the last 24 hours, so this was recorded Thursday. I'm on CEST at 5 p.m. So I'm six hours ahead of Eastern time. So it's, it's, it's, it's, it's, it's, it has withdrawn a 25% of the last, of the ether withdrawn the last 24 hours is Binance, 23% is Cracken, 18% is Coinbase, and then we have 10% others. And so like, why are all the centralized exchanges, uh, withdrawing their ether? What's going on? Well, now remember, this is Coinbase's CBE, and Binance is whatever liquid taking dirt if they have as well. And then also Cracken is legally compelled to

exchange to withdraw. What is happening is a reshuffling of people withdrawing their ether doing the thing we like Ryan, the bankless thing of withdrawing their ether from centralized exchanges. And also in addition to like while withdrawers are outpacing depositors, depositor rate prior to Chappella versus now is up bigly as well. And so there's ether going out of centralized exchanges and then also being redeposited into the beacon change via other mechanisms. The deposit queue is. The deposit queue is higher than it was previously to Shepaella as well. The rate of deposit is about 3x. Yeah.

Oh, wow. Okay, I didn't know that. So the net is still down just because the net is down bigly. Yeah. Deposits outweigh the deposit, sorry, the withdrawals outweigh the deposits, but the deposits are still up. So you're calling this a reshuffling. Remember when we talked about this event is being sort of a snow globe

where you just kind of shake the snow globe and then the steak deep is going to settle in different locations across the staking pools or solo stakers. You're saying that is a possible explanation of what's happening here because we're getting the withdraws, certainly, but we're still getting deposits inbound. And it's just settling in a different location, maybe solo staking, maybe a more decentralized staking pool, something like this. I would say it's more definitive than it's a possible explanation. We watch the largest

R.Eath mint ever happen. And so we'll get to that when we talk about the rocket pool Atlas upgrade, very big upgrade. Very excited about that. So we know, that Rocket Pool has absorbed a decent chunk of ether. And then also the supply of solo stakers is also up bigly. Really? This has, this is like one of the, this is like one of the coolest upgrades in a while,

because we are seeing liquidity leave these large centralized economies of scale exchanges and migrate towards decentralized solo stakers. The whole like, wait, wait a second. Thanks, Gary? Is it Gary? No, he only, because he only forced Cracken out.

He didn't do anything about Coinbase. But, like, I mean, Cracken, crack, yeah. I mean, people who had Ether and Cracken are able to go do stuff with it. And that could be, I mean, technically, yeah, on that particular point. I think it's just funny. We'll get to Gary. But like, it's just funny. The tighter he squeezes on, you know, centralization, the more it seeps out into decentralization. So we got them.

We got them either way. That's the whole case of crypto. That's not, that's not just like an accidental feature. That is the feature of crypto. It's like the harder people grab it, the faster it decentralizes. Yep. But okay, so go on. So we're seeing a reshuffling go on here.

There's some withdrawal. Where do you think the bottom is going to be in this withdrawal? Like, for instance, by the way, how long are the withdrawal cues at this point? It's like if I want to withdraw. If you want to go back a tab, yeah, we got the answer to that question. So there are, there is 23,000 validators looking to withdraw, which comes to 750,000 ether, which is currently in the withdrawal queue. If you, 750,000 ether is in the withdrawal to you.

Yes. So that is to be withdrawn. Now remember, that is not all principle. That is both rewards and principle as well. Sure. But the bulk is going to be principle. About 75% is, I think, principal versus with rewards. In the future, that will flip.

It will be largely with rewards being withdrawn once this whole like equilibrium. Once the snow is finally shuffled, it'll flip in terms of rewards will be the main withdrawers. And because rewards for your validated rewards are automatically withdrawn. Just FYS is a fun, fun fact. This withdrawal queue is now 17 days. If I start withdrawing right now, I have to wait 17 days until I get it because, you know, that is correct. The pipe is small and it's all trying to fit through.

But like at the end of this, if we have the, you know, 600,000 or whatever that we've withdrawn so far, plus another you said 700,000. So 1.5 million ETH supply approximately once this withdraw Q drains of outbound, like ETH going out and being redistributed, reshuffled, or actually not restaked, potentially. Yes. Yeah. And so if we have no large mass exodus from centralized or like centralized service providers or anything like this, it would bottom out maybe at 18 million. Maybe there's another wave. I bet you it does not go below 17 million.

I feel pretty safe about that. especially when the rate of solo staking, I think is going to continue to be healthy, at least in the short term. So you're predicting this doesn't drop any more than another 1.5, 1.6 million aeth down. I think that's right. Yeah, I think that's right.

I don't think we go below. I think it's safe to say we don't go below 17 million staked. We are currently at 18.6. It's very possible that we do not go below 18 million staked, and that would be bullish. That would be very bullish. That's the bullish outcome. is if we stay above 18 million.

And then bullish is not to say like a price bullish, I'm just saying just like, it's cool to see this. It would be cool to see that. Do you see some of these charts on the Duneboard too that we have from Heldabi? Shout out Hildabi. Are stakers in profits?

You know, you could see how many people below when E, well, what is this showing us? The amount of E's showing you the price of ether at the time of ether deposited into the beacon chain. It's not showing you the price that that ether was bought at, it was only showing you the price at when the ether was deposited. And this analysis says about 50% of the stakers are in, in the money, since they deposited, and 50% are down from their deposit time, which kind of makes sense, given the timeline of when

you could deposit, it was mostly depositing during the Bull Run, right? And then partially during the barriers. There's a healthy amount of deposits at the very beginning of the beacon chain, which was launched in December of 2020 when the price was $700. Yeah, that's incredible. That was a while ago now. Well, very good. So what are the takeaways from this, David? It's, you know, Ethereum's not dead.

Obviously, there was not a run on Ethereum. This is kind of to be expected. We'll see a bottom point pretty soon. Justin Drake had said after we get the bottom on, you know, the amount of ETH staked withdrawn, then we'll probably start to incrementally rise. Once again, I think we're seeing early signs of that. How much money?

And by the way, how much money you can't, like, what is the reward rate? What is the interest rate when you deposit ETH right now? Oh, the ETH stake rate? That is a solid. It's 6.7% because not only are people leaving, which increases the ETH stake rate, gas fees have been up lately. And so you are getting just under 4%.

You're getting 3.8% in terms of issuance for staking, protocol issuance. And you're also getting another 2.9% for execution layer rewards, which is like M.EV and transaction fees. See, this is attractive. 6.7%. 6.7% is big, bro. Yeah. That's more than, that's more than treasuries. I mean, that's why we're going to, I think, start to see Eith flood back in. It's because this is a very yummy, you know, APY to make.

6.7% is going to attract more Eith as capital. Where else are you going to park your Eith? You just said yummy. The risk free, I said, I said, yummy, yeah. The risk free, do you say dummy or yummy? Yummy. Well, I said it. Oh, yeah.

In the episode and now you said it. Okay. Yes. It is a yummy interest rate. And so, like, because this is the risk-free rate for Ethereum. Right. I mean, how long ago, David, did we write those first posts? 2019, 2020, when we talked about Ethereum as an Internet bond.

Yeah, the risk-free rate of the Internet? It's finally true. You got to love it when a plan comes together. And ETH denominated returns as well, right? This is not dollar-denominated. I'm sad to say, Ryan, I don't think you and I will ever make a more... A better prediction. A better prediction in our lives ever than that.

Yo, we peaked in 2020, guys. That was it. It's all marginal improvement from here, if any. Ryan, if you like yummy interest rates, would you like a strategy to increase that interest rate from 6.7% to, let me go down to my notes here, to an even yummier 9.7%. Are you starting a Celsius V2?

Are you starting a decentralized? I'm talking about a way to increase your yield in a non-custodial, decentralized way that also increases the health of the network. You can get up to 9%. How do I do this? The listener is going to have to wait because that is coming up in later on in the news. But if we can get there, we can move on. I definitely want to hear that, David.

So some yummy interest rates ahead. But in order to do that, we got to get to the rest of the news. David, what else we covering today? Coming up, we got to talk about how much of a main character, Gary, was that. this last week. So if you want to your catharsis, if you did not watch Gary Gensler's hearing, remember the whole Gary, Gary going to the principal's office thing,

well, that happened. And so we got to watch certain members of Congress absolutely grill Gary. So we are going to take those clips and play them for you in case you missed it. But there's other things to talk about as well. Coinbase moving offshore and damn it, I kind of just teased it, but Rocket Pool's Atlas upgrade changes the game with their economics.

And that's perhaps maybe the source of what I saw. That's where I get my 9%. That's where you perhaps, yeah, 9.7. But also in order to get all those things, we're going to talk to some of these fantastic sponsors that make the show possible. Learning about crypto is hard. Until now, introducing Metamask Learn,

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get onboarded into the world of Web 3. If you haven't yet experienced the superpowers that a smart contract wallet gives you, check out Ambire. Ambire works with all the EVM chains. The layer 2s like Arbitrum, Optimism, and Polygon, but also the non-Etherium ecosystems like Avalanche and Phantom. Ambire lets you pay for gas and stable coins, meaning you'll never have to spend your precious eth again.

And if you like self-custy, but you still want training wheels, you can recover a lost Ambire wallet with an email and password, but without giving the Ambire team control over your funds. The Ambire wallet is coming soon for both iOS. and Android. And if you want to be a beta tester, Ambyer is airdropping their wallet token for simply just using the wallet. You can sign up at ambire.com. And while you're there, sign up for the web app wallet experience as well. So thank you, Ambire, for pushing the frontier of smart contract wallets on Ethereum. The grilling of Gary Gensler, that's what happened in front of Congress this

week. It wasn't a full grilling, but I think we're going to talk about some of the Congress members, members of Congress who asked Gary the questions. I think we all wanted him to be asked. We've got some clips coming up. But give us the high level here. What happened this week, David? And what are we looking at on screen? And so there was a hearing for Gary Gensler so that Congress,

specifically the House Financial Services Committee, called Gary Gensler in so they could ask him questions about a handful of things, including some non-crypto things. but definitely some crypto things. And so interestingly, post the hearing, the committee Republicans out of the Financial Services Committee of the House

released this press release, and the press release is titled Committee of Republicans Grill SEC Chair, Gary Gensler, regarding his disastrous agenda, which, like, I agree with. Like, thank you for grilling him. It's also very political. Very political.

They are making a very public statement that they would like you to know, perhaps constituent, that the Republicans are grilling Gary Gensler. Like, first off, what's your take on that, Ryan? I'm surprised. This is the financial services.hows.gov. I don't read these often, these press releases, but it is incredibly political, right? Look at the sentence. Today, the Republicans on the House Financial Services Committee held Gary Gensler

accountable for his disastrous agenda that threatens the dominance of U.S. Capital Markets and our competitiveness. First of all, I wholeheartedly agree. Second of all, this is not a neutral kind of press release that you'd read, like, yeah, today we brought in SEC chair and we asked him some questions. This is like disastrous agenda threatening dominance of U.S. capital markets. So they're just saying it. They're just coming out and saying it in this press release. And certainly that was the tone of the questions that many Republicans specifically Congress members asked Gary.

Yeah, it's in this press release. the Republicans continue to force him to answer for his reckless rulemaking agenda, regulation by enforcement of the digital asset ecosystem, and disregard for the capital formation piece of the SEC's statutory mission. Digital assets, like, they're protecting digital assets in the first paragraph of this press release. Patrick McHenry, who I believe is like the chair of the House Finance Committee. He was the guy like doing the conducting between like, okay, you next House member, you have five minutes to talk. He was doing that job. Also grilled him on whether or not Ether is a

security. So we got all of these clips ready to go. So this is going to be called a highlight reel. I think there's four of them, McHenry, Tom Emmer, and Warren Davidson. And then another clip about when Gary is given just 30 seconds by another house member to talk about whatever he wants. And he chose to talk about something. And we will talk about all of these things. Are you ready to get into the clips run? Here we go. This is who, Patrick McHenry, we were just talking about, asking Gary Gensler, whether Ether is a commodity or a security. Let's play it. Ether is one of the most popular digital assets and powers of Ethereum blockchain. Back in 2018, then SEC Corporation Finance Director Bill Hennman stated that he believed Ether was not a security. Last month, CFTC Chair Benham expressed his view that Ether.

is a commodity. The state attorney general of New York asserted in a court filing last month that ether is a security, clearly an asset cannot be both a commodity and a security. Do you agree? Actually, all securities are commodity under the Commodian Exchange Act. It's that we are excluded commodities, but I would agree that a security cannot be also an excluded commodity and an included commodity. I'm sorry, Chair, just to talk about the Commodity Exchange Act, more precisely.

Okay, so do you recognize, how would you categorize Ether then? I think that the general sweep of what Congress did, not just in the 30s, but as amended. I'm asking you're sitting your chair now to make an assessment under the laws as exist, is ether a commodity or a security. Without speaking to anyone. I know, you've repeatedly said that you're not going to speak. to one, except you've spoken to one, Bitcoin. So I'm asking to speak to a second one, the second largest market cap here. And speaking to the tokens, there's 10 to 12,000. There's a group

of entrepreneurs in the middle. I'm asking about one. The public is anticipating a profit based on the... I'm asking a specific question, Chair Gensler. I said this in private. This should be no shock to you. I'm asking this question. Is it either a commodity or security? And again, it depends on the facts in the law. He's not going to say, so like he doesn't, he knows he's not going. I'm asking about the facts on the law sitting in your seat and the judgment you are making. And so, Mr. Chair, I think you would not want me to prejudge because I'm awesome. But you have prejudged on that. Thank you. Patrick McHenry, asking the question is ether security and Gensler refuses to answer.

That's what that was. Right. And that topic came up a number of times. And like the consensus of people are like he doesn't, he doesn't, he, think they're all securities. He thinks everything is a security. Except for some reason, Bitcoin, maybe why? We don't really know. Okay. So what is the next clip we're about to watch? This is Tom Emmer, who comes in with an absolute grilling. This is, this was like awesome to watch. I would not want to be in Gary's position. So here's Tom Emmer. Five minutes. Thank you. Chair Gensler, I have a lot of questions and a limited amount of time. So if you could keep your

answers to either a yes or a no, that will allow us to get through as many as possible, sir. He's not going to do that. From your perspective, is it more difficult now for the digital asset industry to access financial products and services in the United States than it was, say, two years ago? Sir, I'm not running one of those businesses if they came into compliance. I'm reclaiming my time. The answer, sir, is yes. Do you think you and the SEC have had a role to play in that?

I think we have a role to protect the American investor and the capital markets. Reclaiming my time, sir. You have played an obvious role in that. During your tenure at the SEC, how many rules has the SEC finalized that actually accommodate the existing regulatory framework and are specifically to the digital asset industry so the crypto market can come into compliance? It's their rule books that are on the books for years, so we have not finalized that a new role specifically with regard to. crypto. We've proposed some things in best execution. We've also, uh, sir, reclaiming my time. The answer is zero. And how many enforcement actions has the SEC levied against digital asset companies during your tenure, sir? I think it's probably 40 or 50. The answer, sir, is about 55.

My understanding is that the biggest crypto failure in history is probably FTX at $9 billion. Were you the chairman of the SEC when FTX collapsed? Yes. And how many times did you meet with FDX prior to their collapse? I think my public record shows, too. You met it with FTX at least twice. And arguably, the second biggest crypto failure in history was Teraluna. Who was the chairman of the SEC when Tera Luna collapsed, sir? We had brought...

You were, sir, reclaiming my time. You were. There are five members on the commission. Do you believe your speeches and interviews are to serve as the official position of the SEC? There, I can only speak for myself when I'm speaking. Again, sir, in a statement on the SEC website, you are quoted saying the Cracken staking as a service enforcement action should make clear to the marketplace that Saking as a service providers must register. But again, you haven't provided any rules for how that can be done. I must remind you, your public statements are not regulations.

It's not responsible to expect the American people to assume your state. are a substitute for rules. Do you agree with this statement regarding the digital asset industry? The SEC needs additional congressional authorities to prevent transactions, products, and platforms from falling between the regulatory cracks. I think that it's a largely non-compliant field. Sir, again, I asked you to comply with my questions, and I'm asking you if you agree with that quote.

And I'm going to tell you, I'm quoting you from an August 3rd. third 2021 article where you, and I believe you told Congressman Hill earlier that you need congressional authority to regulate stable coins. And stable coins happen to be a significant percentage of the crypto market. So the question is, when were you telling the truth to Mr. Hill or to me? You've got to start answering these questions in a more transparent manner, sir. Does it concern you, by the way, that your approach to the digital asset industry is actually driving this industry out of the United States? We're trying to drive it to compliance.

And if they're not complying with the laws, then they shouldn't be offering their products. Reclaiming my time. Madam Chair, I would like to enter into the record this Wall Street Journal article from April 14th, 2023, detailing China's ploy to open its banking system to crypto firms in an effort to seize an opportunity

created by our hostile regulatory environment, which, Mr. Chair, you're a big part of. Without objection. Chair, against us. FTX was domiciled abroad and so is Binance. Yet American consumers still had access to both. You can't really think that pushing this industry abroad is going to protect American consumers

when it hasn't several times in the past on your watch. You say the crypto market is rife with noncompliance. However, existing SEC rules make no sense for blockchain-based companies and following them but actually kill these businesses. Your regulatory style lacks flexibility and nuance and as a result, you've been an incompetent hop on the beat. doing nothing to protect everyday Americans and pushing American firms into the hands of the CCP.

Your intention to work against SEC mission and put American investors in harm's way has been made very apparent, sir. It's been a year and a half since you've appeared before this committee. You need to answer to Congress about the issues that you've had with the SEC staff union, the work environment you've cultivated the SEC that's led to hemorrhaging of senior staff, the intellectual inconsistency of your regulatory treatment towards Bitcoin, spot ETFs and your politicization of capital formation opportunities for your treatment of certain specs. And that's just a name of you wasted word. Every single word he just said was useful. Wow. This is very, this is very coordinated quite clearly. Like some of the Congress members were

just handing the ball off from one to another. Like you ask this question. I'll ask this question, that sort of thing. Here's the next ball pass to Warren Davidson who's calling to restructure the SEC and the removal of chair, Gary Gensler. Let's this. of this. Chairman Gensler, your record of failures to protect investors and abuses of power make it clear that we need to restructure the Securities and Exchange Commission. The failures are many, but let me cite some of the abuses. You average more than two rules proposals a month. You inappropriately provide inappropriately short comment periods. You have unworkable and unlawful ESG disclosure mandates on the market. You have essentially a Hotel California rule for

crypto where you can check in anytime you like, but you can never leave. You have endless discovery with no resolution and no clarity for the captives in the market. You have unworkable proposals for overhauling equity market structure, a de facto ban on crypto through proposed custody rule. You have high staff turnover, unhappy people leaving your office in unhappy companies and capital leaving our country. To correct a long series of abuses, I'm introducing legislation that removes the chairman of the Securities and Exchange Commission, and replaces the role with an executive director that reports to the board where all authority would reside. Former chairs of the SEC will be ineligible under my proposed bill, and this isn't just my take. It resonates across the political

spectrum. The American people want democratic access to capital, retail investor participation. You can't just exclude retail investors from markets and claim it's for their own good. our markets need to function and flourish and I yield back. Wow, there. Calling for his removal with him on the spot. This was definitely the grilling time that we saw. David, there are some other clips from others that we're not going to play today from the more supportive side of Gary Gensler.

But could you tease those out? Because I know you watch this live. I'm thinking of people like Maxine Waters, who blew a kiss to SBF, I believe, at one point in time. And also Brad Sherman, yeah. Brad Sherman, big, big Gensler fans, it seems. So we're playing kind of the grill session side of things. We don't have time to play all of the clips. But what was the Maxine Waters-Scherman take and some of the Gary fans out there?

How did that sound? Yeah, it's worth noting that this hearing was like over two hours long. And while like this is what we are provided just now is a very concentrated amount of just all of the things that are related to the crypto world that are like the things that we like. like, right? There are, there was hours of stuff that was kind of just like irrelevant to crypto. There was some like SEG investing and environmental stuff that was just like not related to crypto. And then there were people like Maxine Waters who was just like throw in underhand pitches to Gary so he could just like knock them out of the park. And also Brad Sherman who like thanked Gary for reigning in the crypto industry, which we all know he didn't actually do. And so like

there is, this was not, this is not just like everyone just berating Gary Gensler. These are like four people, four people who are just absolutely grilling Gary Gensler. There was one moment, which we're going to play here, where one of the members of the committee said, hey Gary, I have 30 seconds of my time left. Do you want them? And so here is what Gary chose to do with those 30 seconds. I have about 35 seconds. Is there anything you'd like to? to share with us if I yield my last 30 seconds to you. Well, if I could just note something about you, you mentioned your hearing about the recent events

in the markets, and I would note there were three banks that failed in those handful of days, those last those four or five days. And two of those banks, the first and the third that failed, Soveregate and Signature, were engaged in the crypto business. I mean, some would say they were, you know, crypto banks. And the third, the biggest Silicon Valley Bank, actually when it failed,

you saw this country's, the world's second leading stable coin, had three billion dollars involved there, deep peg. So it's interesting. Because of the bank. That's some crypto narrative as well. And my time is up. Thank you, Mr. Chairman. David, you and I were watching this part live. And this kind of told me everything I needed to know because this, um, uh, Congress member. Her questions weren't related to crypto at all. Not at all. It was about some of the other things that you touched upon.

He pivoted the conversation. Yep. And then she just asked a question of, hey, you have 30 seconds. What do you want to say? What does Gary want to say? He wants to fud crypto. He wants to blame and associate the recent bank runs with crypto. Say Silicon Valley Bank was crypto.

Signature bank is crypto. It's crypto. Look at the staple coin. And of course, bankless listeners, you know the full story of the bank run. We've done many exhaust. episodes on why that happened. This is not a crypto-related incident. Crypto didn't cause this at all. Actually, the banking system itself, underwater treasury, it was the banks. It was a problem of the banks. But he is using his time to actually fight crypto, which tells me, David, everything I,

it was the conclusion for me on Gary Gensler. I was just kind of hoping, like, well, maybe there's a shred of neutrality in this individual as a regular in this person. There's not. There's not. He's really anti-crypto, and I don't know if it's just him. I have a sense, David, this is all part of, like, Gary is kind of front line for Operation Choke Point. I don't think it's just Gary inside of administration or inside of D.C. He has been enabled to go do this. At some point, he might be the fall guy for Operation Choke Point, or this might elevate his status. I'm not sure what kind of political games are going on, but it's very clear to me there is a contingent in D.C. that wants to choke out crypto. And, you know, Gary Gensler is a frontline operator in that contingent group. We didn't play this clip, but there was a moment. I can't remember who asked him. But the first questions that he asked this House member asked Gary was,

did you work with Senator Warren ahead of time to prepare your answers to these? Are you serious? They asked that? Did you? Yeah. They know what's up. And so, like, Gary said, of course, like, no, I'm here of my independence. thought. No, I did not do that.

I would never. What did that, what did that house rep? No. Like, why did he ask that question? Like, where did that? Where was the motivation for that question? Where did that one come from? What's up with that? I mean, just to emphasize, too, this was said in one of the questions to Chair Gensler, the SEC filed 1,500 enforcement actions, yet Gary still missed FTX SBF. And this is coming from Anthony Sazano, this is his tweet. He's retweeting Gary Gensler's most recent influencer video tweet, where he says, serving at the SEC for two years has been an honor. We filed 1,500 enforcement actions and overseen tens of thousands of registrants. His number one claim to frame the thing

that he's most proud of is the first thing he puts first on this tweet is the 1500 enforcement actions. And then Sazel reminds us that like, well, you missed the one that caused the harm, though. Like, what about those? You got Kim Kardashian, David. Remember that? Remember this the summer? You know? $200,000 fine.

Got that one. So that was also a topic in the hearing. One of the house reps was like, so you find Kim Kardashian for this Ether Max. Did you go after the issuers? And Gary starts responding like, yeah. So we find Kim Kardashian like $2 million. And the guy goes, no, no, no.

Did you go after the issuers? And Gary's like, no. We didn't do that. What issuers? They don't have them like, I'm trying to be an influencer here. Kim Kardashian, Gary Gensler. I'm trying to go like, have you seen how many followers she has on Twitter? Yeah.

This is a crypto Twitter dug this up to you. So remember that line of questioning from Patrick McKenry asking, Gary, is ethos security? Is ethos security? Is ethos security? This is a clip from 2018, not that long ago. At MIT, right? Yes, this is when he was a professor at MIT, before he was chair of the Securities and Exchange Committee. And he's talking, he's giving a lecture on cryptocurrency and Ethereum. Let's see what

he has to say. But that was in 2014. And in 2018, the Securities and Exchange Commission has said, regardless of what it might have been in 14, it's now sufficiently decentralized that will consider it not a security. But in essence, they raised $18 million. And We're off to the races. Hmm. Wow. Seems pretty chill with it back then. My how things change.

David, this is a take from you after observing the congressional session there. What's your take? Yeah, so Maxine Waters, again, we didn't play that clip, praised Gary Gensler, was teeing him up so he could hit Grand Slams. And then she's also the one that blew Sveficus. Brad Sherman, thanks Gary for reigning in crypto, both of these two people. people are Democrats, the person that gave Gary Gensler the 35 seconds to talk about whatever he wants, also a Democrat.

Patrick McHenry, a Republican, was the one that pressures Gary for clarity on ether. Tom Emmer, Republican, grills Gary about everything the crypto industry has been saying. And then there's the other clip that we played of the guy saying that the whole SEC is like leaving. They don't like you. You're incompetent. Also a Republican. And so like, yo, Democrats.

Come on. What are you guys doing? I mean, I think we want to get a Democrat on the podcast. Richie Torres, House rep out of New York, Democrat, pro-Crypto. That's one. We got one, maybe. We got one. We got one.

This is turning into a partisan issue, and it really shouldn't be a partisan issue. And it's very unfortunate. It's very disappointing. And, you know, bankless does not skew in one political, direction or another, it's not right or it's not left, but it is very much anti-authoritarianism. Right. And it's very much pro-crypto values. Definitely not top down.

Exactly. And so, I mean, I know this is a common part of the Democrat, democratic platform. We're not hearing from anyone yet. So it's unfortunate. I think that's what you're reacting to here, David. Yeah, exactly. While this was going on, all right, the same week, Gensler gets grilled. the SEC has charged crypto asset trading platform Bitrex and its former CEO for operating

unregistered securities exchange brokerage and clearing agency. And David, what are the details here? What sort of assets, crypto assets, is the SEC now alleging are actually securities? Yeah, so this was unique in that they actually named certain crypto assets, which they called securities. So Bitrex, if you haven't heard of that exchange, it was formerly. It was form. a United States exchange. It has been moving offshore, based in Seattle, actually. This was actually the first call it a shit coin exchange that I ever traded ICOs on back in 2017. This was my first crypto exchange. So I bought my first unregistered securities on BitTrex. Thank you, BitTex, I guess. It's been like losing in volume ever since 2017. Omisei Go, Algarand, dash, the monolith

token, IHT. I don't know what that is. And G.C. Also don't know what that is, are securities. And we say go. Like a 2017 ICO darling, one of those definitely a bunch of hype and hot air. Algarand is a more relevant crypto asset that apparently Gary has been a intellectual fan of at his times in MIT. Yeah. And so here is some clips of Gary talking about Algarand. One top of a blockchain technology today. Well, maybe in five years you could. It would be. have the performance. Sylvia McAlli's Algarand.

That was five years ago, by the way. Toring Award winner at MIT that I work with. Sylvia's got a great technology that has performance. You could create Uber on top of it. The question is then who would update the software? He is now a securities promoter by his own degree. And so that's not the only clip. There's like other clips of Gary like frequently using like Algarine as the example.

And like, sure, it was developed at MIT. he was a professor at MIT. No one's really thinking. He knew about it. But just like, it's funny. It's kind of gone full circle. It's funny. Okay, here's the thing, right?

It's just like this assortment of crypto assets, David, what does this have in common to you? Like, does this stick out in any way to you? Like, let me say go, Alground, dash. Like, there's no consistency. There's no clarity. The only theme is that these are, this struck, you know that. What years it mean?

Like, these are all 2017 ICO tokens. Is that it? Is that the consistency here? Yeah, but that's also when BitTrux the exchange was the biggest, that was when it was at its peak. But yeah, these are all like 2017 era tokens. There is no clarity in the U.S. If Gary Gensler can't even tell us if the second largest market cap crypto asset, Ether, is a security or not. And by the way, he doesn't get to decide. But he at least has to provide some clarity on what their future enforcement actions are.

If he can't tell us that about Ether, we have absolutely no clarity. That was so, that's what was so maddening about his testimony in front of Congress, David. He kept saying things like, there is clarity. Crypto just needs to come in and comply. They're the ones that aren't complying. And yet we clearly see we have no clarity. And this just looks like a grab bag of assets. Just to really drill down on like how there's no theme with these tokens,

Omisei Go was an ICO. It was a token, is still a token on Ethereum that raised $25 million in an ICO. It was like one of the biggest airdrops of all time because they air dropped, Tosue any and all Ethereum wallets that had at least 0.1 Ether in it, if I can remember. So that was an ERC20 token on Ethereum that did an ICO. Dash was a layer one proof of stake, proof of work hybrid token that also had privacy involved. It was a layer one. I don't know if it was a Minero code base.

It was something a minero adjacent. Something like that. Something like that. Yeah. But like layer one, not like semi like semi expressive contracts, but no tokens. I don't think if there were, maybe there was an ICO. Algarand, another layer one, TKN, another ERC20 token on Ethereum. So like no coherency.

It was across the board. Yeah, I mean, if these are tokens, then every, if these are securities, then everything's a security. Yeah, but that's the point. We just don't know. I guess. He does think that, yeah. This is your take on the Bitrex enforcement action.

Yeah, so I just tweet out, as this charge against Bitrex is too spineless to go after the major. exchanges who, by extension, are doing the same thing. Like, Omisei Go, I think it got delisted from Coinbase, but like once upon a time listed on Coinbase. So like this charge against Bitrex basically says that every single crypto exchange, probably your crypto exchange listener, is an unregistered securities exchange. Well, I mean, you're saying too spineless, and I agree with you, he's not like immediately driving Coinbase out. But this is certainly a chilling effect. And telling Cracken, they can no longer stake, you know,

there's a Wells notice out at Coinbase. Who knows what that says? He's definitely coming for some of the larger exchanges next, which brings us to Coinbase this week. Coinbase got a Bermuda license, and they plan to launch an offshore exchange in the coming weeks. This has got to be for redundancy purposes, a backup option for sure.

And Brian Armstrong said as much. The Coinbase CEO won't rule out relocating the company away from the United States. That's what he said in some statements at a conference in the UK. A few quotes from that. I think the U.S. has the potential to be an important market for crypto. But right now, we are not seeing that regulatory clarity that we need. I think in a number of years, if we don't see that regulatory clarity emerge in the U.S.,

we may have to consider investing more elsewhere in the world, talking about moving Coinbase outside of U.S. borders, the compliant exchange. That's what Coinbase has always tried to be. And from everything I've seen, like they have been sort of the, straight-A student, front of the classroom, always raising the hand, like the teacher's pet of exchanges, basically. An explicit BD strategy for them is to be compliant. Compare them to Binance, for instance, right?

We'll compare them to, you know, SBF and FTX and all of that. So if they can't make it in the U.S., who can is the question? So it's like, thanks a lot, Gary, you are now driving our compliant, honest, good exchanges outside of the borders of the United States. That is what is happening. To be clear, they're not shutting down their main. This isn't a new exchange. This is like, you know, finance,

finance, FTX, US to finance, FTX, US to FtX. It's sad that those are the two things that I have to compare Coinbase to make the point. I would expect the Coinbase International version would be just as compliant as the United States version, as again, as an explicit strategy. But this is just the context, that this is operating under.

And if some of you are thinking, well, that's just centralized exchanges and, you know, centralized exchanges will be regulated by regulators, guess what? Gary is not satisfied with that either. All right. Gary wants the definition of an exchange to encompass decentralized exchanges as well. This is actually another thing that happened this week. The SEC wants to redefine the definition of exchange to include decentralized, exchanges. And so that means if a decentralized exchange, if this rulemaking passes, fails to register

as a national securities exchange or a broker dealer in the U.S., there will be civil penalties. Basically, Gary and a team are saying that if you are opening up a uniswap or a sushi swap or any sort of decentralized exchange, you have to get permission in the SEC. Come in for office hours with Gary Gensler first. and then like maybe we'll let you have it. If what, like, the uniswop code has to delist all of the securities, which we don't even know which, like, this is, first of all, it's unenforceable because of smart contract code.

But like, secondly, this is quite the chilling effect for all U.S. entrepreneurs developing on DFI. What does that mean? If I'm, like, developing a DFI exchange, I have civil penalties. They're charged me with, like, $5 to $10 million. If I, like, release this code into the wild, This is open source code. This is exactly the point that Coin Center is making, of course,

our faithful crypto educators and lobbyists in a D.C. They put out a post on this. They filed a comment explaining why it's unconstitutional that the SEC is proposing to change the term exchange to mean decentralized exchange. And they say this. The effect of the definition on open source software developers is nonetheless clear. Anyone writing or distributing deck software would be violating the law

if they don't register, and they go on to say, this is a free speech violation. Gary Gensler, you don't have the authority to regulate free speech, open source code in the United States of America. Like, why are you reaching into this, too? It's absolutely crazy to me. There's some reactions we could talk about,

but I want to get yours first. What's your take on this? So when I was going through the agenda, I made a comment on this one. And it's like, I don't really get what this is. Let's flag for removal. And you were like, no, no, no, no, no. This is a really big deal.

And so I want to read the title of this piece, because the title is very intentional. The title is, a new SEC proposal has a serious change hidden within its complex language. And this didn't really get, there was a lot of fanfare about Gary in the SEC today. This didn't get much attention versus the clips of Gary on Twitter and also the Bitrex and the Bitrex thing, which led to Gary, the influencer promoting Al-Grand, which, he deemed a security. Perhaps this is actually the biggest news of the week.

The fact that the SEC is now saying that Dex's must come in and register, which is impossible, obviously. And like the whole hidden within its complex language thing, we can only assume is intentional. And they were successful in at least like slipping it under the cracks to hide it behind. I mean, even when we organize this roll up, we are talking about it third in the third thing because the other two things. We're more in people's brains.

Here's the thing, David, is the agenda to me is crystal clear. It's two things. Either I control it or I kill it. Those are the two options that this agenda is pursuing. So this is an effort to control Defi. And if I can't control it, I kill it. That's what's happening. Hester Purse, of course, dissented.

She's got some colorful comments here that maybe we'll read out just to refresh the palate, let you know that not everyone is crazy here. Let me read this. Today's commission aggressively expands its regulatory reach to solve problems that do not exist. Today's commission treats its basic approach to exchange regulation as something that must not, indeed cannot be altered, to allow any room for new technologies or for new ways of doing business. And I love this part. Today's commission tells entrepreneurs trying to do new things in our markets to come in and register. When entrepreneurs find they cannot, the commission dismisses the possibility of making practical adjustments to our regulation framework to help entrepreneurs register and instead

rewards their good faith with an enforcement action. Today's commission treats the notice and comment rulemaking process not as a conversation, but as a threat. A hundred percent, that is the posture of this SEC regulatory regime under Gary Gensler. That's why we're giving it so much time and attention is because I think this is the guy on the front lines of Operation Chokepoint. And it's getting the point, David, where we have to resist. or else what? We have to, like, leave the country? Like, what, like, this is getting,

it's, it's just absolutely crazy. Yeah, we need to move. I at some point move on, because I know we're like, we're, we're, damn, right, hour into the show.

This is a very big deal. All of this stuff is a very big deal. I think I'll just leave listeners with this. Remember, um, with Elizabeth Warren, like one or two weeks ago when she was the main character and she was like, I'm building an anti-crypto army. And then there was,

uh, oh, you weren't there. It was me and, it was me and Anthony, uh, for that week because you were out on vacation. One of the big, the news reported that, like, and this move by Elizabeth Warren has attracted some positive remarks from bank lobbyists and banks in general.

And so banks have made a big move. And now we have the whole choke point, 2.0 with Treasury and Janet Yellen. And then also we had that one House representative who said to Gary Gensler, did you prepare your questions in advance alongside Elizabeth Warren? So my question is, what Axis is operating behind the scenes to coordinate all of this stuff, to give Gary the confidence to be so audacious, to do all of these things when like, what backstop does he have? That's a general. He's a general in the Elizabeth Warren army, whatever that army consists of.

Well, I think the Elizabeth, I mean, Elizabeth Warren definitely like, you know, the commander Sherman of that army, right? That's a World War II reference, not Brad Sherman. But it fits. Yeah, but it fits. But then also just like, it's the banks. The banks are the last line of defense. We are seeing the Gary Gensler, to me, here's a take, is just a manifestation of the will of the banks.

Well, he's certainly funding it, whether it's the banks, the establishment, the institutions in general, as certainly what's behind this. And I guess, David, at some level, what did we? expect. We're in crypto. We're disrupting power structures. What did we expect? At some level, I'm surprised this didn't start to happen sooner, but now it's happening. We've got to fight on our hands. And so we've got to do our part. If it is true that there's like this power axis and Gary Gensler is the front and we have a few other people in the front, Janet Yellen, Elizabeth Warren, but there's like this

axis of power and it's like the last line of the people in the rear escalons or the banks, I'm the only thing I'm surprised is like I guess I'm not surprised fuck what were you going to say though that it's coordinated that they're able to do this they're getting into the SEC

they're like what did the banks like get together and sit down at their table and be like all right how do we do this and like Gary get him into the SEC get him to charge crypto it's like damn that took some forethought and some well here's the thing and it's not always the case that kind of the best value system wins or

the best thing for the people wins or anything else. It's only the coordinated survive. And so if they can out-coordinate us, they can win. But I am hopeful, Bankless Nation, that we can out-coordinate them. And we have an asset that they don't have on their side. I'm not talking about a financial asset here. I'm talking about the people. This is a decentralized technology.

Anyone should be able to own their own digital property. And we can build this from the ground up. And so that's why I think the crypto movement's all about. And also, why we've been talking about coordination the entire time on this podcast from the beginning of bankless because it's all coordination in the words of good old Kevin O'Waqi. It's all coordination all the way down. Can we out coordinate the banks? I hope so. And I think so. We got more to talk about. Let's stop with Gary. What's coming up next, David? Uniswap wallet gets out of jail. So you can all

go download the Uniswap wallet if you so choose. A new OP stack client just dropped. The first ever layer two, Ryan, that has a second client. That's pretty cool. The Salana phone is out and about. And also, we're going to start with this. As soon as we get back, Rocket Pool's Atlas upgrade is where you can get extra yield on your yield because yo dog, I heard you like yield. So we'll talk about all of that and more as soon as we get to some of these fantastic sponsors that make the show possible. Cracken has been a leader in the crypto industry for the last 12 years. Dedicated to accelerating the global adoption of crypto, Cracken puts an emphasis on security, transparency, and client support, over 9 million clients have come to love Cracken's products. Whether you're a beginner or a

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token hub. At Bankless, we've been studying the crypto markets ever since 2017 and all of our research has led us to this. The Token Hub. You're a one-stop for Alpha to help you navigate through the crypto markets. Have you ever wished for a trusted resource that would share their thoughts, ratings, and their opinions about tokens? Boy, do we have the product for you.

The Bankless Token Hub is where we provide bankless citizens with the Alpha on the hottest tokens in crypto. We do the research so you don't have to. The Bankless Token Hub includes the token ratings, where our team shares their research and outlook on the hottest tokens in crypto. Also, the Token Hub includes Bankless Bags, our own internal investment club. Bankless Bags is where we put out of our our money where our mouth is.

And for the bankless power user out there, you can access the analyst team 24-7 inside the Bankless Nation Discord. You can ask them questions and learn from a group of people deep in the weeds of crypto investing. The last feature of the token hub is the ability to upvote or downvote token ratings.

The Bankless Token Hub lets you learn from your fellow citizens to rate these tokens yourselves. The Bankless Token Hub is launching right now and it's already been beta tested by your fellow bankless citizens. So stay tuned in the Bankless Discord for updates. And if you're not a bankless citizen, well, you better sign up if you want access because this corner of bankless is available for citizens only.

I'll see you in the Discord. David, you promised us some yummy yields earlier in the show. Is this the part where we get to the yield? What's happening? Yeah, this is the third time we said the word yummy on the show. Okay, so the Rocket Pool Atlas upgrade. What is the Atlas upgrade? First off, how does Rocket Pool work?

Rocket Pool, your friendly neighborhood decentralized staking as a service provider. People who want to allow our ETH to be minted, they will come in. with 16 ether, half of what's usually required. They will spin up a validating node, and they will deposit their 16 ether, and they will allow 16 other ether to come in to their node to create one node of 32 ether, and then 16 R.Eath will be minted,

and that is the R.Eth that you would buy on balancer or uniswap. That's how rocket pool works. The Atlas upgrade reduces the collateral demand for rocket pool from 16 to 8. And so it doubles the capital efficiency because it allows for doubling of the supply of nodes. Also, what's the incentive to run a rocket pool node for people who want to actually deposit their 16 ether and allow for 16 other people to come in?

They, those people, get to charge the other half of their node 15%. So if the eath stake rate is 6.7%, which it is, you get that yield. But then you also charge 15% of that 6.7% of the people that backfill your node. Make sense so far? Yes. So you're saying to get that extra interest boost, I have to run a rocket pool node. Yes, correct. You run a rocket pool node.

You deposit half of a node, and then you get to charge the other half of the ether, 15% of their yield. With the rocket pool Atlas upgrade, I think you can see where this is going. The collateral requirement goes from 16 down to 8. So if you, let's say you have 32 ether, just because 32 is the numbers we've been thinking about. With rocket pool before, you would be able to, uh, create two rocket pool nodes, put 16 ether in each, and then you would charge 15% of the 6.7% of other people's 32 ether. So that would net you at a boost of 7.7% yield. So you would go from 6.7 to 7.7, an extra 1%. Great. Rocket pool now, it's an 8th requirement for one node,

so that 32th, instead of just being divided into two nodes, 16 and 16, actually creates four nodes, because that's how math works. And so you can get to spin up. four rocket pool nodes and you get to charge 15% on 96 ether and you are the remaining 32 to create four nodes. And so that juices the deal, the yield because you are charging 15% of the 6.7% yield that 96 ether that's not yours is getting, you would ultimately come to about 9.7% yield if you run for rocket pool nodes, which you need 32 eth to do. And so, So that's the rocket pool upgrade. Everyone's super stoked about it. It is, like I said, doubling the capital efficiency of rocket pool, as you will. And I mentioned this earlier in order to get that,

in order to get that boost, David, I have to not only run a rocket pool node, but I also have to have 32Eath. Is that right? Correct. Yes. That's right. Or 16 or 8, although it does cost some gas fees to mint one. So like doing it for 8, it's probably not viable at the last I checked. And so we've already seen some economics. So there are some charts that we're going to look at as well. the largest R-Eath mint. So here's the upgrade announcement. That's just a link in the show notes. So here is the graph of R-Eth being minted.

And you can see the absolutely whopping charts. It's going up. Big, two big mince. Yeah. So there was one mint of like 12,000 R-Eth in one day and then one at like 8,000. So R-Eth supply, which has always been the thing that's like constrained rocket pool the most

is the capital efficiency and the supply of R-Eth. Not as capital efficient as, you know, your centralized exchange staking, or even light of staking, is it? But that's the trade-off, not as capital-efficient, but more decentralized. Exactly, yeah.

So the most decentralized staking as a service provider on Ethereum has doubled its capital efficiency. So that's the news. There's some other cool upgrades to Rocketball Atlas if you want to learn more about those. There's a link in the show notes.

It's really cool, do not in links board. Yeah. And so where is the REEth supply these days? There are almost 11,000 minters and there's almost a quarter million our eth out on the market, but that supply has only gone up over time.

I really hope it goes up. I would love to see like rock pool decentralized staking to be like, you know, a third. A third back. I think they've self-capped themselves to below a third. They've self-capped themselves to 20%.

There's a ton of other more decentralized, you know, staking pool providers coming on the scene too. So hopefully as part of that snow level effect is. Very competitive. I'm glad. I'm very glad.

Okay. This is another competitive. space. This is layer two's introducing Magi. Is that how you say it? Magi. Our brand new O.P. Stack roll-up client written in Rust. What is this, David? What is Magi? Magi. Maggie is the second client for optimism for the O.P. Stack. Optimism Bedrock is using the O.P. Stack. Therefore, any O.P. Stack chain now has a client. And so this is really important infrastructure for, A, the decentralization of layer twos because having multiple clients is It's anti-fragility, it's resilience, it's uptime.

Only Ethereum has that, though, really. Solana has one in development, but it looks like a layer two beat Solana to the punch. Sorry. Solana has a phone, David. We'll get to that later. We'll get to the Salana phone in a second. Anyways, this is the idea of this, the net effect of this, is that A, optimism itself can become more decentralized, but we can also produce more OP stack chains.

And this has always been, and is the bull case for optimism, is a 10,000 OP stack chains bloom. This OP stack client is written in Rust for the developers that like Rust, which apparently there are a lot of them. This was also developed by A16Z, which is a investor in optimism. Kind of cool. I mean, a VC, an evil VC, but also giving back to public goods, giving back to the community. This is open source code. There's way more evil VCs out there than A6C.

Let's name them. Let's get the T right now. It's really cool. That's a different show. We'll save that for the premium feed day. This is Uniswop Labs. Of course, they had their wallet that was coming. That was locked in jail from Apple. This is a non-custodial wallet from Uniswap Labs. And it just went live. Actually, last week, late last week, after we recorded the last roll-up, it went live. And the Uniswap mobile wallet is now. out of Apple jail, live in most countries. A fantastic UX. We did an entire episode on this with the lead designer at Uniswap. We'll include a link to the show notes. I think the call to action is if you're on the bankless journey, go download the Uniswap wallet. Go check it out. It's a non-custodial wallet. Okay. This is one of those things we've been waiting for and very cool that Uniswap is developing tools for the ecosystem as well, not just a decentralized exchange.

I've got my hands on the U-Swater wallet in test flight. I will absolutely download it in the real world. It is very easy, very intuitive. We love it. Big fans. NFT support, wallet support. I have my crypto covens in there. Very cool.

All right, David, we've got this story as well, which is kind of concerning exploit, targeting like crypto-OGs of some sort. Wallets getting drained. We don't even know if it's an exploit. The thing is we don't know about this story, which is why it's really hard to report on. Like what's going on here is uncertain. And so here's Taylor Monaghan, formerly my crypto wallet.

She tweets out for the past 48 hours, and this is a few days ago, I've been unwinding a massive wallet draining operation, sad emojis. I don't know how big it is, but since December of 2022, it's drained over 5,000 eth and unknown amounts of tokens and NFTs and coins across 11 different chains. It's wrecked my friends and OGs who are all reasonably secure. No one knows how. And then here is like a graph of just like all of these transactions that she's mapped out.

So there is like this wallet draining thing. And no one knows how it's happening. And so it's happening across different chains. The people have come to consensus that it is a seed phrase exploit. So there is some. That's one guess, right? That's one guess. Yeah.

And so like if you've imported your seed phrase manually into Metamask, you might be at risk. We don't know. I have, I've checked a wallet in which I have done that and it is fine. There's not that much ether in it. It's like half an easy. Did you check? When's the last time you checked? You should check.

Yesterday. Yesterday or, but you're, I, people are perplexed by this. It's just weird, right? It's just weird. I mean, like all the circles who bring this up were like, hey, this is very weird. It looks like most of the people, most of the OGs who've been wrecked by this have been, you're very secure, not doing anything silly. sharing their seed phrase, you know, publicly or even though there was a theory that, oh,

could this be the last pass hack? Are people keeping seed phrases in last pass? And that got hacked recently. And maybe the hacker is just kind of like brute force attacking the last pass passwords and cracking them and then able to do these withdrawals. That's been a theory. But then I've heard that, well, this affected non-last pass users as well. So it's just right now, it's kind of at the rumor stage. And I've seen these rumors before in crypto, but usually they have explanations at the end of it. You'll get kind of a rumor of like there's some mysterious draining of wallets.

And then like a couple days later or a week later, do you remember the Hugh Carp hack where he got hacked for like, we did an episode on this, he got hacked for like, it was like $20 million. Yeah. He had no idea how. And it turned out it was a man in the middle attack from a Microsoft Word document that he downloaded.

that he got passed to him. Yeah, Doc X-File. And so ever since this story, whenever I've sent Ryan, a doc, I don't do this anymore, but like I sent Ryan at Doc X-File. He's like, get that fucking thing away from me. Get it away. Yeah, it's toxic.

I'm not clicking on that. Well, but like, because what it did was it somehow replaced his metamask with a man in the middle, metamask. Like a hawk version of his metamask. And so that was scary, but I haven't heard of that, you know, lately. So we don't know what's going on here. So if you bankless nation citizen are concerned, about this. The only thing I can really recommend is grab a ledger and spin up a new seed phrase,

a new hardware wallet and migrate your funds there, and then you can consider yourself fully protected. If you're already on a ledger and you haven't exposed your funds, you're probably fine. It's probably the same thing. That's where I have, that's where I keep my money and I haven't moved mine. But I am keeping my eyes on my wallet that I did import the C phrase manually into MetaMask, that one time. It's a honey pie. If I get, yeah, if I get my point

for something you snagged, then we'll know. Then we'll know. Unless the hackers listening and they choose not to, uh, not to, they're like, David,

tell them, tell them to, it's all safe. Tell them, it's safe. Speaking of that, Metamask wanted us to let you know as well, that the recent reporting

on this incident has incorrectly claimed that a massive wallet draining operation as a result of a metamask exploit. This is incorrect. This is not a metamask specific exploit. So some people, were saying, oh, it must be Meta Mask. And this is MetaMask saying, no, it's not a

metamask specific exploit. We're actually not sure what caused it. But like your Metamask should be safe by default. They have found wallets that have been exploited that are not metamask wallet. So deducing that it's not a metamask issue. There you go. Reminder to get a hardware wallet. Protect yourself. A good bankless advice here. David, the Solana phone is now live. Saga, the flagship, security conscious, Crypto First Android device from SolanaMobile is now available. Here it is. We did an episode with Anatolian on this.

And now it's out on the market. When are you getting your phone, David? When are you getting your Salana phone? I'm waiting at the door. Well, that's cool. I mean, look, the vision is very cool. The vision's very cool. I shouldn't belittle it.

It's a very big deal. You should. I really shouldn't. It's totally unfair of me, actually. Do you know why it's cool? is because we're just talking about uniswap being locked in jail. They couldn't actually, they had the app ready last year, and Apple wouldn't allow them to release a uniswap, non-custodial wallet in the marketplace.

And so crypto's going like, well, if Apple and Google kind of control our phone interfaces, we need a crypto-first alternative. And so this is Salana's attempt at doing that. And I think it's got a good vision. It's open source. There's a lot of good aspects to it. I think the thing that many of us are worried about is, well, it's really hard to be in the phone business. Like, it's a cutthroat business. You need large network effects. And can a, you're going to

compete with Apple and in Android. Oof, it's tough. But like, again, it's an extremely noble effort. Either Android haven't had more faith in Apple, but like either they come to us and serve us as a global or community or we have to do this. And so like tip of the hat to Solana Mobile for pioneering this effort. It's an extremely heavy lift. So yeah, there's that. Yeah, thanks for funding it. Mattel doing NFT stuff. It's a toy company. Do you know what Mattel is? Bankless listener, do you know what Mattel toy company is? Well, do you know what Barbies are? Do you know what Barbies, Hot Wheels, Fisher Price, American Girl, I don't know that one. Thomas and Friends, Thomas, a tank engine, Uno and Mega. So that company that owns all of those things has launched a digital

selectables marketplace on the flow blockchain. That's actually, I would say, the appropriate destination for this. I mean, eventually they should do a ZK. Evm on a layer two. But for now, flow makes sense. Yeah, there you go. How about these Trump NFT cards? He sold out the first batch. Now, they've been down only since he sold out, but time for Trump to release series two. And they've also sold up of the NFTs. So Trump, really bullish on NFTs, said this in the the tweet. My new Trump Digital Collection Trading Card Series 2 is the number one collection in the world. Must be that the people love the art. A great honor. You think the people love the art did? I don't know, man. I've seen some of this art. It's, I mean, I guess love is, you know,

some people might use. But, uh, beauty is in the eye by the holder, right? So the floor price of these NFTs went, they were previously at point four. They are now at point one three, because they just inflated that hell out of the supply. That's the problem with NFT issuance, right? There was 14,000 of them prior, and now there is going to be 47,000 more of these things. The fact that they are still at 0.13 is insane. It's impressive. I don't know who's buying it, but I think Trump will keep selling them as long as people will buy them.

Yeah, right. We can be sure of that. If you, the last person I would ever put in charge of the money printer is Donald Trump. Well, he kind of was, I guess, but he had a. No, no, no. Powell is a separate. Yeah, no, right. Yeah, that's Powell's job.

Separation of powers here. Releases today, one inch is being deployed on ZK Sync era. So the new ZK. Evm getting one inch, the defy exchange aggregator. Very cool. Welcome to the club. That's what they say in the message. And then this is some big news, actually. Apple card, Apple, now has savings accounts at 4.15% APY.

I use the Apple card. I use Apple Cash. So I guess I now have a 4.15% savings account, not as high as eth yield. I will note, but it's conveniently on your phone. And so this is an interesting pivot. Yeah, it goes to show that sort of, you know, big banks. So this is all powered by Goldman Sachs. That is the new defy yield pool. I remember we were messing with these high yield pools. And well, you know, bank accounts were giving yield of like 0.15%. Right. Well, now because. because Fed rate is so high, interest rate is so high, a Goldman Sachs can offer this, and they're distributing this 4.15% APY through Apple, which is kind of interesting. But it's on that theme of, remember we're talking about the bank run, this idea of a slow motion crash of like, well, a slow motion bank run of all of the yield, all of the savings,

and all of the money bleeds out of small, mid-sized regional banks and goes into the larger banks in search of higher yield, thus making the small regional banks insolvent. That's this, David. All right. Apple has 50% of the U.S. smartphone population. 45 million people are like you, and they have Apple pay on their new account. And that was 4.15%.

I'm getting my money out of my, you know, local credit union, and I'm putting it in this new yield pool. That's not going to be so good for the local credit union, is it? So, and there's another story here, which is like, this idea of like all tech companies eventually become a bank. Right. And this is not Apple going as far as becoming a bank, but it's certainly becoming a fintech front end.

And using Goldman Sachs as its banking layer. So interesting stuff, I think, in the world of TradFi this week with this announcement. I just checked my phone. I don't have access to this yet. So. Ah, okay. I will continue with my point zero one percent from Wells Farco.

Thank you. The permissionless conference, David. What is this announcement? Not Permissionless 2020, 3, Permissionless 2. So here is the teaser reel from Permissionless. It's 45 seconds. Here we go. 2022 was a meme.

The collapse of FTX has sent shockwaves across the cryptocurrency industry. Skeptics danced. Believers believed. Bitcoin is going to zero. It's just ridiculous that anybody would buy this stuff. Not for me. The tide is shifting, and it's time to rebuild. How are you like the vapor wave thought?

90s vapor wave? Yeah, this is great. So what is this, David? What is this conference about? This is permissionless number two. If you didn't go to permissionless one, it was held in West Palm Beach, Florida. This is going to be held in Austin, Texas. It'll be my first time in Texas.

And this is going to be the second permissionless. The first permissionless, I will say, it was like the unique point about permissionless is if it was a ton of crypto natives. Like bankless listeners, like bankless, the bankless nation showed up absolutely enforced. Bankless Dow was there. Like, all the people that we've had on the podcast were there. And so it was like a bunch of crypto natives in this like very well manicured and orchestrated venue managed, like just seamlessly operated by the Blockworks team. And so that unique, there was that unique vibe. of just like a ton of crypto natives,

which are usually associated with like coordination failures and indiness and just like clunkiness. But instead of that part, it was like this super smooth and operated conference because the blockwork team are absolute jazz at this. So permissionist too in Austin, Texas, is going to be about 10 to 20% bigger than last year, even though we are twice as more into the bear market

than we were at the last time. And I'm pretty stoked. So I'll see you all in September in Austin. This is the only conference I go to every year. This is the only time I ever see Ryan. This is the one to go to if you have to pick one. And by the way, bankless citizens get a 30% discount on the tickets, which more than pays for itself.

If you are a bankless citizen and you pay for bankless, the ticket discount that you get pays for your bankless citizenship automatically. There you go. Instant ROI. David, what do we have coming up next? Coming up next, we got questions from the nation. Two hot questions. and also two takes of the week,

and also two people on this podcast tell you what they're bullish on. So we're going to get to all of that and more as soon as we get to some of these fantastic sponsors that make the show possible. The Phantom wallet is coming to Ethereum. The number one wallet on Solana is bringing its millions of users and beloved UX to Ethereum and Polygon. If you haven't used Phantom before, you've been missing out.

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experience Web3 development the way it was meant to be. Secure, fast, cheap, and friction. We're back with some questions from the bankless nation. This one from Canis. Does Bitcoin really have to be sustainable? Is the question. What if Bitcoin becomes the store of value like gold and the big players have the incentive to keep it secure? Just like gold owners, the rich, government banks, etc. We're building fortresses, safes, paying guards, etc. Maybe this is the case for Bitcoiners as well. They preserve their wealth by keeping a network secure by buying mining rings and spending power at their own cost because this is their main store of value. I think the question is, David, does Bitcoin actually need to have a sustainable monetary policy? What do you think?

Yeah, so we're actually conflating a few things here. And I can see, I can see how that confusion set in, but it's really important to parse out some of this stuff. First, where does Bitcoin, or where does gold get security from? It's not from like the guns and the armies that protect the gold. This is kind of nuanced, but it's really important. Gold actually gets its security from atoms, from like energy. Like, gold was made. made in the explosion of stars. And so gold does not fall apart because it's extremely atomically stable. And also, it does not fall apart monetarily because the amount of energy it takes to create gold molecules is insane. Like, it's, it's cost you more of energy costs to produce

gold atoms than it does to, uh, then, then you would be able to net out of a result of that yield of gold. Yeah. I mean, that's where economic security comes from. That's why gold is valuable. This is why alchemy has never worked, right? You can't turn straw into gold. You can't turn anything into gold. It's another way to say that, David, is like gold already paid its proof of work, energy cost. Right. In the explosion of a star.

In the form of a supernova. Yeah, until we can blow up stars. We have that sort of energy possibility. We actually can't create gold in a cost-effective way. But go on. And then there's the incentive to protect your gold, right? Like the guns, the fortresses, all of that. stuff. And that would be like your cost of buying a ledger or the cost of like storing a seed phrase

somewhere, which by the way, cryptography makes extremely cheap and accessible to all. And so these are actually different things. Where it breaks down with Bitcoin is that the reason why this doesn't work with Bitcoin, why Bitcoin's not sustainable, is because proof of work in the Bitcoin blockchain, you as a gold holder, you don't actually care about protecting other people's gold. So there is a tragedy of the commons problem here where, like, you as a gold holder, you want other people to pay for security to protect your gold, but you don't want to pay for the protection of other people's gold. And so that is the transaction costs, right? It's the transactors that are paying the transaction fees in Bitcoin that pay for the security of everyone else. But in the gold model, like the, I need to keep my gold safe, you pay for the custody and care of your own gold.

But in the Bitcoin model, you are just hoping that. other people pay for your security, not you. And so that's where it falls apart. Yeah, I think sometimes the strong Bitcoin statement misses this hidden, I guess, hidden virtue about gold. And that is gold has already paid its security budget. Nature has paid it in the supernova of a star, whereas Bitcoin has to pay its security budget every single block. Every single year on an ongoing basis for now until... forever. If you want that unforgeable costliness, which is baked into gold at the periodic table level on Bitcoin, you actually have to issue more Bitcoin to pay for it or make up for it in

transaction fees. And the problem is if everyone's holding their Bitcoin and the transaction fees are low, and by the way, this is kind of timely. Did you see David Arbitrum layer two transaction fees, revenue? Actually, past Bitcoins? Past Bitcoins? Past Bitcoin's. Transactual. fee revenue past basically it's it's you know the more sustainable part of its way of paying for for security um anyway that that aside bitcoin has to keep paying this over and over and over and the only way it can pay for it is issuing new bitcoin which is going to run out it's going to go to zero in time or transaction fees you know that that's why this won't work that's why we have said for a very long time before i think this was more widely known and i think many maxed

maximalists still don't accept this, that Bitcoin has a major security budget problem in the future. The only way for Bitcoin to solve this is really to like, I mean, can migrate to proof of stake, we've talked about this. It can do a lot of things that are very untenable to the core of Bitcoin community. Exactly. So it's going to be a problem at some point and it's just a matter of how long they can kick the can down the road. And I think they will. They'll have another like good five years, 10 years.

No, five years. I'd say they got like four to five more happenings. So they got like 20 years. Before transactions start getting reversed, but it's already becoming embarrassing because we can see now a layer two has outstripped it. Like arbitram is more secure than Bitcoin? How is that? Like how is that possible from an economic security perspective?

Yeah. Bitcoin will say that was an overly like reductive way like arbitram versus Bitcoin. And there's like you could debate this. I'd be happy to debate any of them on that. Like it's just, this is what a lot of bank lists, I think modernly. listeners don't realize is that POV crypto, my first podcast before bankless. Hey, most bankless sisters don't realize I had that podcast. And it was me and a bitcoiner yelling at each other. It's my really good friend from college. Like, we've had all of

these conversations with ad nauseum. Adnauseum. Over and over. Like over and over and over again. Yeah. And this is why we like have moved on from it as like a community. It's like, we've done this before. We have. The archive is full of it. Let's get to take to the week. So it takes of the week. Here we go. Here's a take from Blake West. It's pretty frustrating to hear people mock crypto. Like, it's been 10 years and it's still just speculation. Where's the value? When in reality, it's basically illegal to use crypto for meaningful stuff. I want to yell at regulators. Let us try. And he goes through these examples. Are these examples worth reading, David? There's a lot of examples here. No, there's only six examples. It's definitely worth reading. Okay. Instant stock trade settlements plus eliminating clearinghouse fees, except it's illegal to list securities natively on chain. That's one. Two, liquid transparent exchanges that perfectly complied with regulations for alternative assets like loans, real estate, etc., with lower no fees, except creating exchanges of any kind is highly regulated in the United States and crypto exchanges can't register anywhere, see Coinbase versus SEC. Three, we could eliminate the possibility of exchange-taking users' funds if we've ran them non-custodially, but again, it's effectively legal to run an exchange on chain non-consodial with actual bonds and stocks. Next, we could have had instant 24-7 transactions among banks years ago instead of the two to five days with ACH, except it's illegal for banks to hold crypto or put deposits on chain. Next, we could use table coins to make payments

directly to merchants with no card fees, bank fees, or chargebacks. But remember, DM? Yep, declared illegal. Also transacting in crypto, even a stable coin is taxable event, making it operationally prohibitive. Last, regulatory reporting burden for funds and exchanges would be much cheaper if they were on chain because it's automated in public and regulators wouldn't have to subpoena records except there's no clear path for funds and exchanges to run on chain. Really, that's clear and concise use cases that would glow up the Tradfai world in a zero to one moment for all of these things and they're all illegal. Wow. Yeah, that's a great point. I do think the worst, the big user experience problem for crypto is actually government. Like one of the,

one of the worst, like one of the, like, one of the, biggest hassle things I have to do in crypto. I know I talk about it all the times. It's become a meme. It's taxes. It's freaking taxes. Every time you do anything, you pay some gas. Well, it's capital gains on that gas. Like from eth purchase. So you have to track that somewhere. Like, you make one transaction on Ethereum. You set off like a Rube Goldberg machine of compliance that like 17 people have to touch. Totally. And it doesn't have to be this way. Anyway, great take from Blake West. What's this one from Ben DeFrancisco?

So Ben DeFrancisco is retweeting a tweet of somebody saying, making fun of the line, the United States dollars backed by nothing. So, you know, the line of States dollars backed by nothing. And then the nothing. And we are watching a clip of like naval armada plus fighter jets flying overhead. And like it's the claim. It's like, no, if you violate the dollar, we're going to send this like massive army after you.

So yes, this is what we say on bankless quite a lot. The United States is backed by the military. And so Ben's take, getting to the Ben's take is like, even if this is correct, it's pretty grim, morally speaking. Because what are these things? What is the dollar backed by? Bombs and guns and violence and oppression. Hmm.

Hmm. Thanks, Gary. I think that's an element of it. It's also, I would say, you know, economic competition is a big piece of this that might be missing. But yeah, it is somewhat disturbing when you kind of like peel back all of the settlement layers for humanity and even like civilization. And you find at the bottom settlement layer is can I bash my head?

Like can I bash this club on your head and take what you have? It's like violence as the final settlement layer. And that's just what nation states have mechanized. And we call them militaries. and we call it defense. I'm not saying that's a good or a bad thing. I'm just saying it's a thing. And I mean,

there's an element of truth to this. And yeah, I think Ben is also right. It is pretty grim, morally speaking. I don't know what to do about that, though. Yeah, it reminds me of that quote from Dahlia

is like, above the nation state is the rule of the jungle. Below the nation state order, you stop at stop signs, you pay your taxes, you don't steal. Above the nation state, you club people on heads.

Yeah. You just have to have the bigger club. David, what do you bullish on this week? Something completely different. Like I've said at Montenegro, there's this huge longevity and wellness cohort of people. And it's been like waking up this very dormant part of my brain, which is like the wellness part. And so like every morning, 7 a.m. go on a run. 8 a.m. cold plunge with like 20 other people who are like, cold. plunching in the Adriatic sea. Like, then I go to the gym and do some weightlifting. And then I go

eat like the most insane least large breakfast that you'll ever see. And it's just like waking up this like lifestyle that I had pre-crypto. And I'm sad to say actually that like I kind of like jettisoned it in the getting into crypto. But I'm getting it back. And I've been very thankful. And this is kind of what this whole like Zuzaloo experiment has been able to do for many people, not just me, is to see what your life could be like if you can figure out how to prioritize everything and have just maximum serendipity and be able to focus on what you want to focus on. And so I, Ryan, and also I'm producing content on longevity if you want to learn more about longevity and the intersection of crypto and longevity and like D-Sign all this

stuff. So Ryan, I am bullish on longevity and crypto people going down that rabbit hole. So that's what I'm bullish on. See, the foodless podcast was not an April Fool's joke. That's actually something David is pursuing. That's what it sounds like. That's cool, man. Yeah, it's a lot of great topics. And I do think it's important.

I think crypto people can get too plugged into the digital, too plugged into the metaverse. We've called it before like Crypto Brain or Ethereum Brain. And you're getting a taste of like grass and real life and health and things that are important, you know, away from screens. It's important stuff. I feel like I need more of that in my life. Yes. So, Ryan, speaking of the person who's back home, what are you both on?

Well, okay. So every week we ask this question and we're always bullish on something. We can always find something to be bullish on. And this is a very, I would say our tone at bankless is super optimistic. And it always has been. And I think it always will be. Yeah. Yeah. And don't get me wrong. I'm very bullish on crypto right now. Like I'm just, this technology is beyond where I ever thought it would be. And like the impacts it's had and like its success in the future is, you know, all but certain, all but guaranteed to me. Like it's tremendous. I'm so glad we're in this industry.

But I'm finding like this week in particular, I don't know, it's hard for me to be bullish on the rest of things. Like outside of crypto, David. So like maybe this is part of the Elyzer-Yudkowski existential crisis where I sort of like, you know, you dip in and out of these things. Like some weeks it's hard for me to be bullish on things. Like I've been listening to you a bit more of Nick Bolstrom, an old episode on Sam Harris. You ever hear his analogy of the urn?

Like humanity is pulling marbles balls out of an urn. Like every time it plucks a new technology up and like, oh, we just figured out the wheel. We just figured out, you know, the industrial revolution and like, oh, you know, atomic bombs. Most technologies are like white, right? In that like they, they don't have the capacity to destroy humanity and aren't widely distributed. But every once in a while we pull out something that is like a black ball. And we don't know what we're going to pull out because we're just so focused on getting as many things out as possible, right? And so we already have this with

nuclear proliferation. Thank God people can't build nukes. And like as Nick Baller, Alstrom says by baking sand in a microwave, by putting sand in a microwave, right? It's not, it takes a lot. It takes nation-state level ability to do a nuke. And even that, David, we've got the U.S., we've got Russia. I was just reading this morning that China is set to quadruple, its nuclear arsenal, by 2035, right? That's great. China's always been there, but like another new power, and they all have, like, guns at each other's heads. And then we've been talking so much about AI alignment.

And not just Ellis or Yukowski, but people like, I think bankless listeners will hear on Monday, Paul Cristiano, who are like very reason working AI safety, trying to make sure AI doesn't kill us. And yet he gives our odds like, I mean,

maybe 50-50, kind of a dice roll and whether we get this thing right or not. And there's a very real chance that we get it wrong. And it goes back to the Elyzer-Yukowski thing. And then we've got like the meta-crisis. And you know, the big enemy of Ethereum and Cryptos, and the big enemy of bankless is really like these molloc traps. You were talking about coordination earlier. It's like when we get in this discoordinated mode, when we have these game theoretical failures where we get in arms races and

we're all doing the thing that we don't want to do, but we have to because we're just on this this mollock trap, this treadmill that kind of makes us all invest in nuclear weapons, for example, nobody can stop. That's like, man, these are very thorny problems to solve. And they keep getting more and more thorny as we get increased power and higher technology. So I'm just like, I don't know, maybe I'm just in a mood, but I'm just like, I kind of like this whole humanity thing. Like I kind of, there's people in my life that I like, I love very much.

It's good here. like this whole modern life but we are living in this man modern life is so great in so many ways and yet we have this sort of Damocles over our heads like a madman can just end it end it all completely

with like not very much effort and that could happen at any time and it's just a bizarre existence so I think again I go in these like fits and starts with this where sometimes I'll be thinking about this and then I'll just be well whatever I'll get busy so this is I'm like

I'm almost like, okay, well, what do I do about this? So I know this information, but I've known this kind of information more generally before. So what do you do? You just distract yourself? Like just plug into work and not think about it. Do you like, are you aware of it in the background, but you just treasure the moments that you have? Is that the strategy for coping with this? Do you just like, you know, I think we're doing this on a debrief one time, just laugh at the absurdity?

Like it is so freaking ridiculous that we have to live like this, right? And yet that is the fact. So what do you do? just do the throw up your hands and just laugh about it. Exactly. So, but at the end of the day, all of these are coping mechanisms. I'm just like, why can't we just solve this? Wouldn't it be great if? And so I'm bullish on crypto, but it's everything else that I'm feeling not bullish about this week. Do you know what I mean? Yeah, I'm just, I guess I'm in a mood, but I couldn't find a thing where I was like, hey, I am so excited about this because that's what I've been thinking

about. I feel you. There's one line you said at the when we were talking about I think maybe it's at the end of the Paul Cristiano episode. I can't remember when it was something about like, hey, why is bank, why are we doing AI content?

And we jokingly, absurdly said, like, well, we need to solve the AI alignment thing so that crypto, so crypto goes up. So crypto goes up. So crypto goes up. Because like if AI's come, then we just hand over our blockchain technology to them and they take it from us. And so, like, it's one of these things where, like, you and I are just like these intrinsically curious people who find important things that we think that we are really important to

talk about and at very least educate and broadcast. And so, like, the only thing I have to tell you, dude, is, like, all we've got is this podcast and this newsletter and this company. And if this is concerning to you, humans derive purpose from solving problems. And I think we actually did a, we've solved a lot of the problems that we set out at Bankless to solve. There's still a lot more work that Crypto has to do, but it feels like it would get there anyways at this point in time. And crypto didn't feel like that when we first started Bankless. There's another problem out there, which you're labeling like AI alignment.

the democratization of destructive technologies that we is a new problem. And I don't think you and I, neither of us signed up to solve that problem when we started bank this. But it's intellectually simulating. It pays the bills. It's fun to talk about.

And so I suggest that we put one foot in front of another and make podcasts about it. Well, there's time left. We just make a podcast about it. I mean, look, I guess what you're saying is what more can we do, right? That's the thing. We just got our little slice. And I think that's maybe, I don't know if, look, I don't know if that was helpful,

bankless listener or if it brought you down. I didn't mean to bring you guys down. I didn't mean to, you know, kill the mood here. But like, I guess what I would say is what I was just hearing from you, David, is all you can do is your part. You're one small part to like making the world a better place, solving some of these problems, being there, you know, for the people you love in your life. that's the small part you could take.

And I think where I fall into a trap is when I think about all of the problems that need to be solved all at once, and then I get overwhelmed. And that's kind of a failure mode for me personally. But when I bring it down to like kind of the daily, okay, what are you going to do about this today? What are you going to do about all this stuff tomorrow? That's where I start to get out of that failing road cycle. There you go. Hey, bankless and therapy. Thank you, David, for that little session.

Let's talk about the meme of the week. This is a good one. Fantastic. What are we looking at right here? This is the first just mic-drop meme from our new designer. Crypto Wars, Bankless Edition. So you must be watching the YouTube for this to make sense. But this is, what is this? An Empire Strikes Back movie poster rendition, but now done instead with us.

It's so good. Elizabeth Warren is Darth Vader. Gary Gensler is the Sith Lord. Is that? Who's Vitalik? That's Vitalik. like up the top left. He's like, I think he's the Yoda character chair right here.

He's Yoda. Okay. Yeah. We got Brian Armstrong as Han Solo. We got me and Ryan as Obi-1 and who are. You got to be Quigod. You got to be Quigon because you're the beard, I think. Even though he dies and he's also the master and I'm the apprentice, but at least I get to

live. So that's great. And I don't know who this is. It's like a job of the hut. I don't know who that is. I don't know who his faith that is, actually. I don't know either. It's great.

And then there's this random bird. up here. I don't know what that's about. That's Twitter. I just love that I don't know who all of these characters actually are. Yeah, I think you might be the more Star Wars fan than I am, but you're still stumped. Anyway, so this is an open mint. This is coming, this is ending in 19 hours from the time of recording, which means it was probably already ended, but it's being priced at 0.0042ith. And so the secondary market, if you desire this new NFT, this is an NFT. If you desire this, I'm sure the price is extremely reasonable. Or you can just enjoy it as the meme. It's just right click save.

Yeah, just right click save. If you just want to enjoy it without click things. Put it as your phone wallpaper. That's fine. That's free. All right. Awesome. David, we got a hot moment of Zen. It is on theme for this episode. Yes, it's so good. Thank you, Jonathan, man. We appreciate it. Song a day man wrote a great song today. Here it is. Is Eith a security? We'll get to that. But first, gotta let you know, recent disclaimers. Of course,

crypto is risky. We definitely lose what you put in. But we are headed west. This is the frontier. It's not for every. but we're glad you're with us on the bankless journey. Thanks a lot. Chairman Gensler, is ETH a security? Is ETH a security? It's not a matter of lack of clarity. Ethereum started with a pre-sale whether that was really a securities offering in 2014. I said I think so.

2018, the securities and exchange said regardless of what it might have been in 14, it's now sufficiently decentralized. It's not a security. Not a security. Not a, ta, ta, ta, ta, ta, ta, ta, ta, ta, ta, security. Is E a security? A pair of lack of clarity.