Bankless - ROLLUP: Genesis, Grayscale, DCG Failure? | FTX Contagion Continues | Mango Solana Exploit

Starting point is 00:00:00 Is Genesis going to take the entire crypto industry down? Bankless Nation, happy third, not Friday, Thursday of November. Happy Thanksgiving to you if you are in the U.S. and enjoying the holiday. David, what time is it? Oh, Ryan, it's the Thursday? Bankless Weekly Roll-up? Where? We cover the entire, well, not the entire week. Four days in crypto, which is still an ambitious endeavor, even though we're missing a day.

Starting point is 00:00:28 So we persevere into the frontier nonetheless with... coffee, among other things. Great modifications, David. People are really going to appreciate that. I had to do that on the seat of my pants. Maybe turkey, too. I don't know. Look, do you think anyone's actually listening to this on Thanksgiving?

Starting point is 00:00:43 Maybe they're on their way to a Thanksgiving, like, a meal with their family, and they're wondering what the heck they're going to say when their friends and family ask them about that Sam Bankin-Fried, that complex, controversial Sam-Bakman-Fried character. Yeah. So how's it going in crypto these days? We know you love it. We know you're into it. What's happening?

Starting point is 00:01:08 I bet that's going to be a question. We're going to prepare you for that question, too. We are going to, I'm going to ask Ryan how he's going to prepare for that question, and I'm sure he's going to ask me the same. David, what are your Thanksgiving plans? You're going somewhere? I know you are, but tell me more. After we record this roll up, go take a long cab to Newark, fly home.

Starting point is 00:01:26 I get to see my one and a half-year-old nephew, see how much he's turned into a chatterbox, apparently. I keep on joking with my family. I'm going to turn them into a podcaster. Do you know what's awesome, though, is being able to spend some time with normal people for a while? It's rare. It's rare for me. Let me tell you.

Starting point is 00:01:41 I know. I know. I know you moved to New York to hang out with, like, crypto friends and such. And like I hang out with, I guess, virtually a lot of crypto people as well. It's just like crypto talk, blah, blah, blah, blah, blah, right? Just to talk about regular things for a while, especially after the month that was November so far, that's actually going to feel pretty refreshing. to me. Anyway, what do we got this week coming up? Oh my God. So we of course have to talk about

Starting point is 00:02:05 the Genesis contagion. Is Genesis going to take the entire crypto industry down? We'll talk about that. FTX, of course, there's still plenty to talk about FTX there. This news has of course gone onto Capitol Hill, where there is a bankruptcy hearing going on. And third, a Dex hack on Solona leads to an exploiter shorting curve using Ave, and then that exporter getting liquidated because of a short squeeze, leaving bad debt and affe, what the hell are we going to do about that? We'll get into that story and more. But first, please like, like we say, like the beginning of the show, persevere into the frontier nonetheless. And sometimes it really just helps to get those likes and reviews and those subscriptions. So if you are watching on YouTube,

Starting point is 00:02:50 please subscribe. If you are listening to the podcast, please give us a five-star review so we can get to the top of the charts and make it through this spare market. Absolutely. We're thankful for you, a bankless nation for tune in. We have a lot in store in 2020. We're not going anywhere. In fact, we are doubling down, tripling down on content. In fact, there will be a few ways to get involved with that, some alpha that will drop in the episode today, some deals coming up, coming out of bankless too. But before we get there, David, got to talk about our friends and sponsors over at Infura. Infura, of course. They run archival nodes for Ethereum, among other smart contract networks. If you've ever used something like Metamask, for example, they are

Starting point is 00:03:33 an RPC client. That means they provide some of the historical data node architecture that serves up your Metamask transactions and the cool things that you're doing in DFI. You probably, maybe you know about Infura, maybe you don't. What you might not know is they are taking steps moving forward to decentralize their infrastructure. Okay. Previously, this has been quite centralized, including a centralization vector, but if we're going to rebuild on the other side of this bear market, and during the bare market, we need to rebuild it on decentralized rails.

Starting point is 00:04:07 So how can folks get involved in what Infura is doing? And how should they tap in, David? Oh, I think they should just go ahead and click the link in the show notes, Ryan, where you can join the early access program for Infura's new decentralized infrastructure network. So how do we take the service and products that Infura has and turn them into a network? a protocol, a permissionless system that anyone can join. That is the frontier that Inferra is taking on.

Starting point is 00:04:33 And if you want to join in that journey into the frontier, man, I'm really milking this metaphor today. You can click the link in the show notes to sign up and get your expertise and your information for two inferra so they can coordinate. All right, David, speaking of coordination. I guess price markets, what is that? It's just a coordination game.

Starting point is 00:04:53 So let's get to the markets, all right? Let's talk about Bitcoin. the price and I was told by the way our editors might throw in some music here and it's going be sad music if we managed you do that it's going to be sad music this week because what david are we up or are we down we are down we are down well actually I would say bitcoin is on inside of the flat range down 1.3 percent so started at 16,500 ending at 16,300 like that's just like you're just kind of flatish at that point some green candles toward the end of this some recovery candles at the very end to make it not so bad how about I mean?

Starting point is 00:05:27 I mean, we're still like at the whole year-in-law. Yeah, look at this clip. Look at November. November is still a bad month. This is the FDX drop, right? Sam, Bankman, thank you very much for that one. Appreciate you. Okay, how about Eith?

Starting point is 00:05:42 Up or down? Down, actually down. Start of the week at $1,20. Currently at $1150, down about 4.8%. So, oof. Okay. So still above, still above in the four-digit mode. actually. In fact, like, fairly, fairly well.

Starting point is 00:06:00 So you haven't bought yet then, huh? I am planning some buys. But I'm tempted just a little bit, okay? But, like, I'm still also waiting for triple digit. I think triple digits is coming, David. I could be wrong, but. I mean, you said, last time you said it, I was like, get the hell out of here. And then you turned out to be right.

Starting point is 00:06:19 And this time, I'm like, get the hell out of here. I don't know. I think we're done with triple digits. I think it's over. You think we're done with triple digits? If it wasn't just, if it didn't happen just now, like yesterday with the DCG news, then I don't know how it's going to happen. talking local crypto though. All right.

Starting point is 00:06:35 We still got macro ahead. We haven't talked about macro. And I think we've got some tailwinds on the macro front that could send us down. Also, we're still getting attention. I mean, even though bad things are happening, we've got eyeballs on the space. Anytime you get eyeballs on the space, you get some price action. Sometimes it's negative. Sometimes it's positive.

Starting point is 00:06:54 But the worst possible time for markets is the doldrum period. No one cares. No one cares. So you can be waiting for triple digits at like, you know, a huge. Q3 or Q4, 2020. Triple digits is not a spike down. Triple digits is apathy, my friend. Yeah, that's...

Starting point is 00:07:09 And, yeah, look. The apathy liquidation candle. Yeah. But call us, all right? The David versus Ryan Bet. It's on. We headed to triple digits or not. How long can David last?

Starting point is 00:07:20 We will see. To be continued. David makes another bottom call. Great. Fantastic. The contra indicator. Add another one to the closet. We'll see.

Starting point is 00:07:31 You might be right on this one, though. But if I keep on calling them, eventually right. I, for one, am thankful for David Bottom calls because, you know, they give us some historical perspective here. What's this one? Eith Bitcoin ratio? Any bottoms want to call here? Yeah. Ignoring that, 3.5% down on the week to 0.0706. Down. So, yeah, down. Okay, total crypto market cap. Give us the numbers. We lost $10 billion. We were down to $850 billion in total crypto market cap. All right. Still, well, decently below a trillion.

Starting point is 00:08:03 You know what? Let's zoom out for a minute because there are some other people that are like my friend David here and they're calling the bottom right now. There are other bottom callers, not just me, yes. And by the way, I am calling a bottom-ish. See, David, I like to hedge.

Starting point is 00:08:21 I like to be in all camps at once. You're saying we're saying we're close to the bottom? I'm saying please also call me a bottom collar, but approximate bottom collar. I'm not going to put a number on it. I still think it's triple digits, but we're in the zone, my friends. Plus or minus 10%.

Starting point is 00:08:33 or something. That's what I think. And this is one of my favorite charts to look at. It's sad, but it's a chart that I was, like, it's not a chart. It's a percentage. It's a metric that I was glued to in, like, 2018, 2019, previous bear cycles. And this is percentage down from all time high. I really like this as a metric during the bear market. It's a painful metric, but you can also see, like, the precedent that we've set before. So just some context. I remember these numbers are burned into my brain. Bitcoin last bear market down. from all-time high about 83% something around this range. Ethereum down 94% into 95.

Starting point is 00:09:12 I think if you round it, it's like 95%. I thought we were stopping last cycle at 90%. And I'm like, there's no way. We're going to 95. And we did. Okay. And also, to drive that point home, the difference between going down 90% and 95%

Starting point is 00:09:26 is another 50% drop. It is not 5 more percent. It is 50 more percent. And boy, that last 50 hits you the heart. It really hurts. That one, that one is the knife of the heart, man. All right now. The percentage down from all-time high is a proxy for pain to me. How much pain are we in? Duration is another one, because that brings the apathy, but like raw pain that you're feeling in the pit of your stomach. Right now, Bitcoin is 76% down from all-time high. Compare that to 83% last time bottom. Ethereum, down 76% as well.

Starting point is 00:10:01 Yeah, that's unprecedented. Crazy. Crazy that these two assets are down. Because Bitcoin was supposed to be the king asset. When there's a bare market, there's a flight to safety. There's a flight to stable coins. It's a flight to Bitcoin. And we're seeing Ethereum hold up the same. And that is after, Ryan, the FTX exploiter hacker sells a bunch of ether for Bitcoin, which you know is a one-time sell event and not systemic. And so like this is... That's locally. That's true. Yes. Locally, yes. Uh-huh.

Starting point is 00:10:33 So, so, like, not a ton of pain in these two ecosystems, to be honest, compared to what we've seen. Certainly, Ethereum, we've had much worse. Only 76%. Like, whatever. That's just a flesh wound, my friend. Right. Why is tethered down 20% from that? That's kind of an anomaly.

Starting point is 00:10:48 Never mind. B&B, look how the CZ empire is holding up, 57% down from all-time high. And this is because of the buy-back and burn mechanism in BNB, which I will remind listeners, is the same similar mechanism as EIP-159 in Ethereum. It's also because the CZ Empire has held very steady during this so far. And he's just knocked out a few competitors. But other decentralized networks, let's talk about Cardano, for instance, 90% off. 90% off.

Starting point is 00:11:19 All right. Last time they went to like 98, 99% from all-time high. Dogecoin, 90%, Polygon, 71% layer 2 token hanging in there. That beat both Bitcoin and. Ethereum, didn't it? Pocod, 90%. This is also the proving ground of like, how many holders do you have?

Starting point is 00:11:36 You see this in the numbers. Like, people don't have faith in Pocod right now in comparison to Polygon. Lightcoin, 81%. God only knows what that means. Who's holding light coin? I don't know. Salana, David, look at this.

Starting point is 00:11:49 95%. And this is what I've been saying. The Salonah community, from what I've seen on Twitter, is still around. And they are still pretty bullish on their ecosystem. That's impressive. am not necessarily like interested in salana the technology but i am impressed that the community around salana is still holding out and they are down as bad as we were ryan back in 2018 uh and so that

Starting point is 00:12:13 interests me that is interesting if if a community can survive this that is an interesting thing like the cardano community survived this and regardless of we think of the network the community survived and that led to a more bullish return maybe the last one i'll read out is avalanche That's down 91% from all-time high. But Adams, on the other hand, I don't know where the Avalanche community is. I haven't heard a peep out of any AVAX person in my Twitter mentions in a while.

Starting point is 00:12:39 It's been real quiet. Like, their equivalent ICO, you know, they're having kind of their ICO exit. You know, all the unlocked coins get, you know, all the locked coins get unlocked. All the three hours capital, locked AFA tokens. Yes. So that's where we are.

Starting point is 00:12:57 All right. Who's calling the bottom, though? Bottom caller number one, who's this, David? Kathy Wood goes on Coinbase and GBT buying spree. I'm not sure if you're calling the bottom with that, but it's just implied. Kathy Wood of Arc Invest, she buys, well, Arc, excuse me, buys 1.3 million shares of coin coming in at $56 million. And she also bought 315,000 shares of GBTC, basically the gray scale Bitcoin Trust at $2.5 million. So Kathy Wood, going to the market.

Starting point is 00:13:26 There you go. Not afraid to call the bottom. Kathy's also not afraid to buy the top as well as we see a night bake a little bit. Kathy says it's a buyer and that's why we like her. There you go. Dollar cost average in. Here's Kobe. Kobe is calling the bottom in fantastic Kobe fashion.

Starting point is 00:13:41 Kobe tweets out the way I see it. It's up to us now. Probs can't sit around on the benches anymore to the arena. This is for those that don't speak Kobe. This is Kobe calling the bottom. You think he's called the bottom? Yeah, he's called the bottom. I can't sit in the benches anymore to the arena.

Starting point is 00:13:57 You have to read a lot in. that to be like that's a bottom call but that's what you're reading yeah there yeah all right um so that's happening and of course we talked about chris brininski last time he's been calling the bottom that we put out a podcast on that um last week uh well let's talk about another thing that's happening in the markets and this is the journey towards people going bankless what uh i love that words uh we are looking at ryan people going bankless uh so this is a chart of the amount of assets AUM of all centralized exchanges. And so right at, right before the FTX demise, we were coming in at basically $130 billion

Starting point is 00:14:35 of money inside exchanges. Then the FTX happens and we are now clocking in at just above a hundred billion dollars. So we almost have $30 billion of people taking, well, we also lost some capital. So there's that. But also people have taken a lot of that money off of exchanges into self-custy. If it's not on centralized exchange, it's in self-custy. If it's not on centralized exchange, it's in self-custody. So we are watching people in real time take custody over their assets.

Starting point is 00:15:01 Cool. Is that okay, David? I mean, they're doing it out of fear rather than love. They're going bankless. That's fine. It doesn't matter. That's fine. We'll take them.

Starting point is 00:15:09 Fear or love, either whatever the motivation is, we'll take it. This is some interesting motivation, some metrics coming out of Polygon on Uniswap as well. What are we looking at? Yeah, Polygon, the Uniswop implementation on Polygon hit its all-time high in volume numbers with 10, days to go in November. So this is monthly volume, and November has already beaten all previous months in terms of all-time high. And at the time of this was tweeted, we still had 10 days ago.

Starting point is 00:15:35 So Polygon, Uniswop on Polygon, putting in some massive numbers. I think that's, wow, is that, yeah, $3.3 billion so far in the first 20 days of November. So congrats to the Uniswap implementation on Polygon. I never congratulated a specific implementation of a protocol before, but here we go. Congrats on the version update to iOS software to Apple. Fantastic. Well, it's cool. I mean, Uniswap on Main Chain hit all-time highs, too.

Starting point is 00:16:03 I mean, not all-time highs, excuse me, but we're just crushing it in terms of volume. Last week we were talking about that. This is, though, I think this is my favorite chart right now in all of crypto. It's the only chart that makes me bullish, I guess. What are we looking at here? This is a chart from Token Terminal, and it is, I think, something that I hope has been impressed upon regular bankless listeners, hence, a concept that we've been talking about from the very beginning, but why do you explain the chart, then we can

Starting point is 00:16:33 talk about the significance here. Okay, so on this chart, we see two things. We see the purple line, which is the Eith Price Chart. I'm sure no one really needed that because we all know what the chart looks like, probably. The green area, which largely corresponds with the actual price chart, when there's spikes in the price chart, there's definitely spikes in the green area. The green area, and there's two different axes here. You have, of course, the ETH price or the ETH market cap.

Starting point is 00:16:58 And then you also have revenue. And that is what the green thing is. The green thing is profit, I believe, actually. It's earnings. Oh, it's earnings. Excuse you. Okay, so net revenue, right? Net earnings.

Starting point is 00:17:09 Yes. And how do we calculate? So the way we calculate earnings is we take revenue minus costs effectively. Fees, transaction fees. Yes. minus block reward issuance. So how much people spend on a transaction aggregated into a block minus how much that block, how much ether that block issues.

Starting point is 00:17:32 Yes. And so as we've said, I hope this is nailed into people's heads. What do blockchain sell, David? What do they sell? Blockspace. They spell block space, Ryan. That's the only thing that they have. The only have blocks space.

Starting point is 00:17:42 All right? So blockchain sell blocks, blockchain sell blocks. This is the profit on the sale of blocks for Ethereum. You're seeing that in green. And by the way, this is an all-time history chart. Yes, it goes all the way back. And so what are we seeing in the green, David, from the early days up until now? Up until now, when the price of ether goes up, the loss of Ethereum, the negative earnings goes up.

Starting point is 00:18:06 And this is the fundamental problem with proof of work is that as ether goes up, the size of the block reward goes up. So ether started at like $10. And then in 2017, it got up to $1,400. dollars so the revenue that uh was coming the issuance coming out of ethereum for every single block did a 14x right uh that was just sold that wasn't captured that was just sold that's loss because that is what uh people the Ethereum is not collecting enough uh transaction fee revenue to offset the amount of ether that they are issuing basically selling its product at a loss right the higher the price goes and it's worse in bull market it's not better yes and so the higher

Starting point is 00:18:47 transaction fees under a proof of work paradigm, the higher the price of ether, the bit more the loss Ethereum has because the US dollar amount is sold. If you're controlled for ether, this would be a different story, but this is what we're looking at in dollars. At the very end of this chart, if you zoom all the way into the very end where there's the merge, you can see that all of the loss goes away. And there's little bits of profit. Little bits of profit. You can see small little spikes at the upside. But of course, if we went to ultrasound.commody, you would see how much we have been able to recapture via the combination of EFP-1559 and proof of sake. Anyways, the point is that Ethereum is now profitable. We are in the green.

Starting point is 00:19:29 For the first time ever. In all of crypto, the entire industry, the first profitable blockchain. That happened with the merge. And now we are seeing some data on this. It's happening in a bear market when people aren't looking. Do you know what this reminds me of a little bit is do you know Amazon during the dot-com bust? People that gets over, dot-coms are over, Amazon goes down 95%. During that time, it was absolutely crushing it, right? In terms of market, in terms of the core metrics for people who are looking, but no one noticed.

Starting point is 00:20:00 Why? Because websites were dead, like dot-coms were dead. Amazon was never coming back. These are the sorts of silent metrics we should be looking at here. And only people who are in the space and who haven't left, only the settlers, not the tourists are paying attention because this is, by the way, the first blockchain in history to ever go profitable. And it's not happening during a bowl run. When it's easy. When it's easy, it's happening during the bear run. And I think, David, you have some extrapolation on

Starting point is 00:20:32 these numbers because I was taking the agenda and you somehow slipped this in. I put in my research hat and my data analysis hat and I made an extrapolation for the next bull run. And I put that into this chart here. Explain to me how you extrapolated the profit in the next bull run. So what I did is you actually might notice that the shape of the green revenue chart on the right is the same shape as the green loss revenue in the 2017, and I flipped it, and I made it way bigger. And that is my projection.

Starting point is 00:21:05 David is roughly projecting that all of this loss turns to profit on the other side during the bull market. And we all know who are the recipients of that profit. Who gets that, the upside on this? That's a good question. Is it ether holders? I think it might be, David. I think it might be.

Starting point is 00:21:25 Anyway, look, that's happening in the background. It's a chart that makes both David and myself optimistic. Stupid bullish again. God, imagine Ryan if it was going in the opposite direction, if it was negative and all this bad news, we're like, sweet, there's literally nothing that's cool about crypto right now.

Starting point is 00:21:40 Guys, I just want to say, this is not the story for all chains. This is the other thing, right? It's like you have to decide if you're going to hold through this spare market. You have to decide what assets you're going to hold and what you have conviction on coming out of this. Perhaps the one that's generating revenue. You can't see this story in other chains. You won't see this. Nothing gets other communities and such.

Starting point is 00:22:00 Except for B&B, except for B&B, because that's what the buyback and burn chain. B&B chain has this similar mechanism. It's manual, but it's fine. Sure. Sure. In bottom line, what does this mean is the block space that we're selling, the product that we're selling, is profitable now. And it hasn't previously been until now. I think we've beaten that dead horse. Here's something cool, though. All right. So this is Thursday when this episode is released. But on Friday, Bankless is doing a Black Friday deal. Okay? And so we have this thing. If you've never gotten into kind of the newsletter side of things or the membership side of things, We have this thing we call a bankless premium membership. All sorts of great perks. The newsletter, you get the premium podcast feed.

Starting point is 00:22:46 You get all sorts of content. Yes. Yes. And you also get our Airdrop reports. You get all kind of our token ratings reports, all sorts of things. And this is actually, because it's been such a crazy bad month, and because it's Black Friday, this is the most discounted we've ever offered a bankless subscription. I'm looking at a draft.

Starting point is 00:23:09 email here, but it's set to go out tomorrow morning, Friday morning. So if you want to get the 25% discount, the way you do it is you go to newsletter.banklesshq.com and sign up, you will get this email delivered to you, and you have the opportunity to upgrade to bankless premium for 25% off. This will only be like a Black Friday thing. I think it expires. Have we ever done a discount before, Ryan? We have done discounts in the past, but never this high. This is a 25% discount. And, And when we do discounts, it's always a very time-limited window. And this is the biggest one, time-limited. So anyway, if you've been looking for an excuse to upgrade to bankless premium, see what the-

Starting point is 00:23:49 Oh, by the way, I didn't even- Yeah, there is a huge excuse to upgrade to bank this premium. Why? What are we doing next year? Because you might notice some interesting new branding, some new images going out into what we are calling bankless 2.0. We are migrating from Substack onto our own platform, got our own website, own design. It looks so good. And we now have Bankless's own self-sovereign hub for cooler and neater things.

Starting point is 00:24:18 And so Bankless, during the last bear market, went from zero to one, as in we didn't exist, and then we existed. And now we're going from 1 to 10, it feels like. Wait, you said this was 2.0, but it's a 10x improvement. It's always, yeah, it's about one order of magnitude of growth. And this is part of that story. bankless is going to look brand new. It's going to be great.

Starting point is 00:24:42 We're going to incorporate collectibles. We're going to incorporate the POAP badges. Anyway, that's not here yet. That's like January-ish, 20-20% off if when it comes. Yeah, you're not going to get 25% when everyone wants it. Yes, exactly. All right. That's the point.

Starting point is 00:24:57 We might be reminding you once or twice as well about this. The course of the show, we really want you guys into this. I think it'd be cool to kind of grow the nation this. Anyway, all right, we got some stuff coming up next, David. What are we going to talk about? Is Genesis going to take down the industry, Ryan? That is what everyone is worried about. The FTX story continues all the way to Capitol Hill.

Starting point is 00:25:20 And like I said, Avey is left with bad debt after someone tries to short curve. And then curve, sucker punch that curve shorter by releasing a new stable coin product. Oh, I like the story. Yeah. Anyways, we're going to tell those stories and more right after we talk to some of these fantastic sponsors that help you go bankless. The Brave Wallet is your secure multi-chain on-ramp into Web3, and it's built directly into the Brave Privacy Browser. Gone are the days of managing multiple wallet extensions

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Starting point is 00:27:16 opportunities and portfolio tooling. Explore the diverse financial opportunities available on Truffi or launch your own portfolio at trufi.io. The question on everyone's mind going into this Thanksgiving, will Genesis fail? the Barry Silbert Empire, grayscale, Genesis, is this the next point of contagion? David, we've got some things

Starting point is 00:27:37 that are developing this week. Can you tell us the story of DCG Group, Genesis, gray scale, and what we need to know at this point in time? All the way back in June of 2021, right, almost a year and a half ago, Barry Silbert, who's the head guy

Starting point is 00:27:54 at Digital Currency Group, who's very informed, been in OG, been around, since like 2012, 2013. He tweets out, and if you remember, June is right after that big, big liquidation candle from like ether's all-time high at the time from $4,300 down to like $1,700. I barely remember that, but yes. Right.

Starting point is 00:28:14 It was the first big drawdown after the bull market started. And Barry Silbert says, he tweets out right after that happened, there's a daisy chain of borrowers and lenders in the crypto space, most well capitalized, but some are not. Lots of leverage still in the system, including some non-obvious places. important to understand counterparty risk and where the weak links are in the chain. Wow. Does that tweet hit different now? As it turns out, it would take a year for all of that daisy chain of liquidation events to show up.

Starting point is 00:28:43 And Ryan, that is the video that you and I made yesterday. So it was a hour and 50 minute long video. This was me. I was Charlie from All right, doing the whole like conspiracy thing. Starting with going all the way back to 2020 when the GBT trade. was on and how three hours capital leveled up on that. And then they went long on Bitcoin and Ether. And then they went long on Soluna Avax.

Starting point is 00:29:05 And then they got liquidated. And that got liquidated on Almeda. It's a riveting tale. It's pretty crazy, honestly, that people are going to, anyways, Genesis is the final, final piece of that puzzle. We're calling the final domino. We're calling the final domino. And that's, that is why this, everyone is like, so worried about Genesis is because it is

Starting point is 00:29:26 the foundation of everything. What is Genesis? It is probably the biggest lending desk in all of crypto. It is the only prime brokerage for all of crypto facilitated so much of the basal levels of yield across the space, the Gemini Earned program, et cetera. And so the fact that we have arrived here at Genesis is indicative of like this is the last domino. This is the last one. Appropriately named arrived at Genesis. Genesis. Right? I've been thinking about that. There's something biblical about that. Right. Okay, so just for people who don't know what a prime brokerage is, just think of it as like a regular brokerage except for big institutions. What I mean by regular brokerage, maybe you've dabbled in stocks and this sort of thing. So maybe you have an e-trade account or a Fidelity account or Charles Schwab account. It's like that only for mega institutions. And in Genesis's case, a mega institution would be like a large hedge fund, like a theorist capital, for instance. And it also has some advanced features that they don't generally. provide the retail, but you know, some brokerage accounts do like the ability to go margin long on

Starting point is 00:30:30 some sort of collateral. So I've got this stock here. I've got this crypto asset here, and it's worth $100,000, right? Can I borrow against that and go do something with that leverage or that borrow? And of course, the institution of brokerage can liquidate them, all sorts of things. Anyway, that's all it is. It's actually pretty simple. It's just not something that regular average show people in crypto can access. It was the big institutional bridge. Yeah. Anyways, people start to get worried about Genesis just because how related they are to every other lending desk in the space. And also on November 9th, they tweet out, we took a $7 million

Starting point is 00:31:08 haircut when we liquidated a bunch of collateral involving some of the contagion involving Alameda. Only $7 million. Tiny, not that bad, not that big of a deal. They're just saying, hey, we took a haircut. Oh, but the next day, they announced that, they actually had $175 million in locked funds on the FTCS trading account. But then they said this does not impact our market-making activities. Six days later, Genesis halts withdrawals in the wake of the FTCS collapse. Not going in a good direction. That's bad.

Starting point is 00:31:38 That's a bad trajectory. And then, of course, anyone that's plugged into Genesis, like Gemini Earn, also can no longer facilitate withdrawal. So Gemini Earn has to stop facilitating withdrawals. That does have retail exposure right there. And now people, this is Max Fear. Crypto Twitter was in a state of Max Fear all of this week to the point where Grayscale, which is part of digital currency group, part of the same subsidiary that Genesis is, although these are separate entities and of themselves, Gray Sale felt compelled to tweet

Starting point is 00:32:07 out in the wake of recent events. Our investors should know that the safety and security of the holdings underlying gray scale digital asset products are unaffected, saying, hey, we still have all the assets under the balance sheet just because Genesis is like has a hole in their wall. It doesn't mean that like our assets are affected. These are unrelated. And then on November 20th, it leaks that there was an undisclosed loan from Genesis to digital currency group.

Starting point is 00:32:32 Again, nothing to do with Grayscale. And I'll just plant this flag. Gray scale is totally fine. There is no further news. Gray scale is totally fine. This is just between Genesis and the larger digital currency group, the thing that owns Genesis. There was an undisclosed loan from Genesis to digital currency group. And that perked a bunch of people's ears.

Starting point is 00:32:49 It's like, all right, like, well, these are. are owned by the same umbrella. Why are they, like, loaning each other money? Anyways. And given recent events, people are probably harkening back to FTCS and Alameda. Exactly. Exactly. Yes.

Starting point is 00:33:02 Anyways, that was a very fast timeline. Just to recap. November 8th, no material net credit exposure. November 9th, we lost at a million dollars. Okay, November 10th, we lost $175 million. November 16th, sorry, no with new withdrawals. We don't have any money for you. November 17th, okay, we need.

Starting point is 00:33:21 $1 billion November 21st, which was two days ago, okay, we'll go bankrupt without the money, so we need to fundraise a billion dollars. And so then Frank Chaparro out of the block, he disclosed that he reveals that sources tell the block that Genesis has been struggling to raise emergency capital. They wanted to raise a billion dollars, but they are lowering that to $500 million because it faces potential bankruptcy without funding. Oof, not looking good. Everyone's PTSD from the week prior is getting.

Starting point is 00:33:51 triggered. Barry Silbert, the owner of digital currency group, the guy that owns everything, the guy that tweeted out the daisy chain of borrowers and lenders. Basically, the San Bankman, sorry, I shouldn't say that Sam Bankman-free, because that has negative connotations. Barry Silbert is not Sam Bank been freed from a kind of scammer perspective, but he is the leader. He's the leader, the godfather, the major owner behind digital currency group, which is Genesis and Great Scale and associated companies, right? Yes. Barry writes and says, sends out a letter to all digital currency group investors to clear up some of the details. And someone, this Twitter account, TradFi Whale, put in a nice summary thread, which we will go ahead and read here.

Starting point is 00:34:32 Starting with the tweet number one, Barry states that DCG has three loans, a $350 million revolver, a line of credit, to a $1.1 billion loan from Genesis, which is due on June of 23. 32. 23. That's a typo. Oh, is it, is it a 10 year? I think it's a 10 year. Okay, that's probably a 10 year. That's probably right.

Starting point is 00:34:55 And also another $5.75 million loan due May of 23. That's the 23 loan that I thought. So what does this mean? A revolver is a short-term credit facility that a company generally pays an upfront fee to have to help with cash flow issues. It usually has a high interest rate and restrictive covenants that need to be maintained. Generally, revolvers are used as stopgaps for work and capital or as a time in or as a last resort in times of stress. This is not a great sign that DCG has this revolver. but then again, that's why it is there.

Starting point is 00:35:22 The second loan, $1.1 billion due in June of 2032. This is where it gets very sketchy. Basically, when Three Arrow's Capital went under, Genesis had a large hole in its balance sheet. I think like Three Years Capital blew something like a $200 to $400 million hole in Genesis. June of this year. June of this year, yeah. They were insolvent and in order, Genesis was insolvent.

Starting point is 00:35:44 And in order to solve this, they did a little bit of magic accounting while also putting DCG, the parent company, at risk. So DCG took on the liability of Genesis, the hole in Genesis balance sheet, but they didn't have the cash to give Genesis for its hole in the balance sheet. So they took out a $1.1 billion 10-year loan from Genesis, and then they gave the money back to Genesis to fill the gap. But up in a whole totally plug, right, Ryan?

Starting point is 00:36:11 It's totally crazy how many people were just swimming with no pants back in June and we didn't know. And it was all because of the dough go on blow up. and eight three years capital blow up. And these were one of them. It was kind of tenuous at that time for DCG. So the $1.1 billion came from the lending book, Gemini Earn and other retail yield products that use Genesis.

Starting point is 00:36:33 Oof. So retail is paying for this. Essentially, Genesis borrowed from their own deposits to fill the whole but used digital currency group as the go-between to make it legal. Also, there's another $575 million loan due in May of 23. So, you know, that's not that far away. So this explains why investors are balking with DCG. This is clearly not fully above board.

Starting point is 00:36:56 What next? Genesis has a liquidity shortfall of $1.67 billion right now to the depositors of the lending book. It needs to file for bankruptcy. I suspect that they were trying to get someone to buy out DCG's 10-year bond at some discount to give liquidity to depositors, but no takers. DCG gray scale business, the gray scale business from DCG is extremely valuable. So here's what they did. Genesis was insolvent DCG bailed it out

Starting point is 00:37:23 and so the equity holders of DCG are now at stake the other thing that is in DCG is Greyscale and so since the it was basically the equity of of DCG that plugged the Genesis hole but the equity of DCG

Starting point is 00:37:39 is involved with Grayscale so this is gray scale is minting money by the I think you have a chart I think you have a chart early like later on that's like what gray scale and by the way the gray scale products are what eth e that you can buy in a trading accounts of trust and

Starting point is 00:37:54 gbDCs this is where you can kind of buy you know proxy trust type et fiatif products not ets but those types of products inside of your retirement account how much was that minting david like hundreds of millions of dollars okay and that's just like this year i think there's a chart we have about that later so that's a totally healthy very profitable business completely solvent right the problem is that's bundled up with this whole Genesis thing. I guess the problem for DCG is. And so they're using some of that funding to try to bail out DCG.

Starting point is 00:38:24 Right. Or excuse me, to bail out Genesis. Right. So the equity, the value of Grayscale, the company is backstopping the value of DCG, the equity.

Starting point is 00:38:35 And DCG's equity is basically what's plugging the hole in Genesis. Yikes. Yes. Contagion. Contagin. Yeah. And so, to resume,

Starting point is 00:38:45 DCG's gray scale company, extremely valuable. DCG does not want to fire sale this. So they will likely let Genesis go under DCG and DCG probably should have no problem raising 575 million by May of 2023 to pay back that loan. The question is whether they spin off Grayscale and sell some equity at a depressed valuation or they fire sell peri crypto tokens and raise equity or long-term debt at the DCG entity. It looks like to me that DCG will not file for bankruptcy. Grayscale is easily worth over a billion dollars. So, TLDR, Genesis borrowed from depositors to fill the hole in their balance sheet. Damn, I've heard that one before.

Starting point is 00:39:21 By using DCG as a go-between entity, Genesis likely filing for bankruptcy. I think creditors will eventually get most of their money back, and DCG will survive with a black eye and a marred reputation. And that is the story. Wow. You know what this looks like, David, is not quite SBF-level shenanigans. No, there's no fraudulence here, I don't think, at all. question mark. This kind of thing is

Starting point is 00:39:47 sketchy. Borrowing, filling holes, go between to make it legal from DCG gray scale. This is some questionable things, some sketchiness here. Okay, it's questionable in contrast to FTX, which was just an absolute fraud show. There's no question.

Starting point is 00:40:03 Could there be a bigger fraud? This is all like, you could probably take them to court, but you could definitely argue that this is above board. Maybe, yes. So, but what's going to happen from this is like this this person predicts that DC DCG will survive with the black eye and a marred reputation and Genesis will probably get some of uh it's money back in some way so people aren't

Starting point is 00:40:28 like creditors to Genesis aren't completely sunk I don't know how all of this resolves but what comes out the market liked it so the market with this is when this news came out this is not as bad as ftX not even close ether went up $100 Bitcoin went up like almost $1,000 so when this news came out, the market was like, okay, this isn't so bad. This is a huge black eye to the Barry Silbert Empire, though. One of the OGs was just taking down a whole bunch of notches after this. For those I don't know, DCG also owns Coindex. So that is also part of the DCG group.

Starting point is 00:40:59 A fire sale of Coin Desk, maybe. No, I know. I don't think so. It's all part of the same. You could sell anything if you have to. Okay. So that's what's happening. Do you have any update for people?

Starting point is 00:41:11 Like retail has money stuck in? in Gemini. For me, David, do you have any updates for me? Any good news, please? Well, I'm happy to let you know, Ryan, that Gemini put out a tweet thread updating their Earn customers with what's going on, and they said that there is no update.

Starting point is 00:41:27 Okay. Sorry. I have heard through back channels that maybe some people are getting their GUSD out. Not quite sure about this, but just the GUSD. Oh, just GUSD? I don't know if that hasn't been totally confirmed, but so I don't know about that. All I know is any crypto that I had and Gemini Earn is still stuck.

Starting point is 00:41:49 I do know this and they're not really updating. Do you issue POAPs for every instance of Ryan lost money in his crypto pay this year? Only if we issue a POAP for David's bottom calls. Ben, we'll call it even. A big secondary market for bankless bad call POAPs here. What's this take on the SEC? So I thought this was useful. A lot of the contagion of 2022 is underpinned by the GBT negative premium.

Starting point is 00:42:19 So in theory, one GPTC is backed by one Bitcoin, yet there's a discount. There's a discount of 42% as in the GPTC asset is actually priced 42% below what is the net asset value of all Bitcoin in Grayscale. And that is because they can't turn the damn thing into an ETF because the SEC won't look. Let them. I'm going to look at a chart real quick where you're talking, just explaining that. That's bad. If you want to see the chart, it is basically, if you buy GBDC in your brokerage account, buy this GDPDC trust, you're getting it at a 43% discount.

Starting point is 00:42:54 Right. It's cheap Bitcoin. It is cheap Bitcoin, but there's no assurances that that discount is going to go back to zero. Yes. And it's also, yeah, that's why it's Bitcoin, like, you know, Bitcoin TM. To remember, like Ben Hunt, our friends said Bitcoin. It's very much Bitcoin TM.

Starting point is 00:43:10 It's some Bitcoin covered it wrapped in a trust, wrapped in a like proxy price thing. It's not a real Bitcoin spot ETF, is it? Yes. Okay, so back to the tweet. I just thought this tweet was great. By failing to create an ETF for Bitcoin, the SEC allowed the gray scale to GBT trade to rip retail for five plus years. That's the reason why the discount is there is because like other people are able to milk retail out of their holdings because they're diluting retail. something selling it into the market. Also the reason...

Starting point is 00:43:40 Also charging 2% for just holding Bitcoin. That's why Grayscale so profitable. That's why Grayscale so profitable. The net value of all assets under Grayscale, Grayscale charges 2%. That is an absurd fee if compared to an ETF, but we can't have that ETF because Gary Gensler doesn't let us. Anyways, it also, the SEC also forced most trading outside of U.S. jurisdiction, which allowed for the contagion to go rampant, and also let FTX's fraud hit millions of Americans. It couldn't.

Starting point is 00:44:08 Ah, anyways, I just thought that was a good tweet. Yeah. Protecting retail, question mark? That discount, by the way, is the record discount, 43%. Yes, I somewhat wonder if this is kind of a bottom call. It's like, yes. I mean, are you bullish GBDC? I think this is not necessarily bullish GBC.

Starting point is 00:44:27 Well, that would cause you to be bullish Bitcoin. How about? I am bullish Bitcoin. Just I'm bullish on Ethermore. Okay. The point, this bull market, Ryan, the 2020 bull market, at the start of 2020, it was indicated by a premium in GBT as in people were buying Bitcoin more than people were supplying Bitcoin to the trust. So people were buying Bitcoin at a premium because they wanted demand for Bitcoin.

Starting point is 00:44:50 And so the coming 2020 and 2021 bull market was marked by external outside demand for GBTC. It's been negative ever since. And so we are so low. We have 42.7% off of the premium. and that is a new low. And to me, that is just indicative of kind of another bottom signal, a bunch of C of other bottom signals. And you could solve this very easily if you're the SEC

Starting point is 00:45:16 by just converting this sucker into an ETF. And then it basically trades for something that is much more proximate to spot price of Bitcoin. So it would unlock, there's something like 800,000 Bitcoins in Grayscale. It would unlock 42% of the capital of, all of that assets that's available. And the reason it's going down is what? People are fire selling?

Starting point is 00:45:40 People are fires. Yeah, they need liquidity. So they're saying, I'm not going to wait for it to turn into one Bitcoin. I'm just going to sell out a 42% loss. Oh, this was the chart. Read this. This is a chart from Shank Chaparro. Grayscale brought in 477 million in estimated revenue since the beginning of this year.

Starting point is 00:45:58 Wow. Combined GPDC and E.ETH products. Wow. Almost half a billion a year. For doing what? $500 million. Producing that product for retail. And what is the product?

Starting point is 00:46:10 You hold custody in Coinbase custody. Coinbase custody gets a cut. What does the product be on this? I don't know how many people that have a gray scale, but like, that's a lot, that's a very healthy margin. It's a lot of money. It's a lot of money. It's a lot of money.

Starting point is 00:46:23 And $500 million. Yeah. The last Twitter thread said that this thing was worth a billion dollars. That is way underplaying it. Just do a revenue multiple on $500 million. You know what? Like a 5X revenue. or 10x, something like that, you're already like $5 billion, $2.5 billion.

Starting point is 00:46:41 This thing's worth a lot because of this stupid arbitrage. That's how, another way to say this. Retail spent, in addition to getting destroyed in all sorts of other ways in crypto, retail spent a $500 million in fees on these subpar products this year. Sick. And it's not Grayscale's fault. They're trying to get an ETF. I mean, this piece of it wasn't.

Starting point is 00:47:08 But yeah, it's waste. Okay, so why do you think this is the last domino to fall? David is just, we'll get this out of our system, contagion, Genesis is the last piece, and then it's over? So the contagion of 2022 started with three errors capital. Where did three hours capital get all their money? They got all their money by milking the GBTC premium. Retail and like, you know, traditional people would buy GPDC on the stock market

Starting point is 00:47:34 that would create the premium. what would Three O's Capital do? They would take Bitcoins, which, by the way, they borrowed from Genesis. And then they would get that into the Grayscale Trust so they could park at that arbitrage. And that was Three Roos Capital's first big, like, profit. And then they just levered up all the way and through and through and through. And so many people followed them into this trade. They borrowed more with Genesis.

Starting point is 00:47:58 They went long Bitcoin and Ether, which worked well for them. Then they went along Saluna Avax, which went well for them. Then the Fed raise interest rates. Terra collapsed. All the illiquid alt coins went down 80%. Bitcoin and Ether went down 50%. Three hours capital gets liquidated. Alameda gets liquidated.

Starting point is 00:48:17 Then Alameda plugs the hole with their fake FTT funny money from FTCs and also a bunch of customer deposits. That plugs the hole for like four or five months, six months. But that hole finally opens up again. FTX is collapsed. That's gone. And now we are at the final place where it all started. which is GBT and Grayscale.

Starting point is 00:48:37 So we've come full circle. So there's no, that that's the whole thing. And so we are the bull market started with the GPTC premium. And it will end with the GBT discount. That just makes sense to me. And also Grayscale going under. There was a pile of dominoes, but it was just in a circle, not a straight line.

Starting point is 00:48:54 And last one to collapse. I think, by the way, you just gave the explanation of what just happened over the last two years in about 90 seconds. And we were calling this the, you know, everything from 2021 onwards at some level has kind of been Ponzi, funny money economics and crypto, right? Yeah, I hate to see it. No surprise then that we are resetting the clock and going back to 2021 January prices, which is about where we are.

Starting point is 00:49:22 So in a way, not surprising given what's happened. All right, let's go check in on FDX and Sam. Some stuff happened this week. Let's burn through this quick. FDX bankruptcy hearing. What are the takeaways from this? Yeah, so I got some notes here. So there was a bankruptcy hearing. You could have been into the Zoom to watch. But basically the TLDR is that FTCS is being investigated by state and federal regulators. It's still unclear what exactly FTX has in terms of assets and liabilities because they didn't do accounting. So they're trying to figure that out. The lawyers representing FTCS told a judge, you have witnessed probably one of the most abrupt and difficult collapses in the history of corporate. America calling the FTX worldwide organization Sam Bankman's Freed's personal fiefdom and alleged gross mismanagement. Kind of like the Celsius bankruptcy issue, customer privacy is also going to be a big

Starting point is 00:50:13 question. The parties are going to try and find a way to balance publishing the names, addresses, and email addresses of all creditors, including FTX's customers and not doing that. So like how do we do this? I don't know. They're going to try to do that out. Also, the jurisdiction. There's a jurisdictional fight between the U.S. and the Bahamas who has the assets, right?

Starting point is 00:50:36 That is at a ceasefire, at least for now. A Bahama appointed judge, joint provisional liquidators have agreed to allow for the FTX's digital markets chapter 15 bankruptcy bankruptcy in the southern district of New York to be transferred to Delaware to join the other 101 Chapter 11 bankruptcy cases. Chapter 11, baby. Sweet. So that was the TLDR of the FTC's bankruptcy hearing. Meanwhile, Sam Bankman. It'll take years.

Starting point is 00:51:00 Nail take years. Sam Bankman Free sends an email to employees. Did you read this, Ryan? No, I'm reading it now. Well, he would like to tell the employees that he's really sorry and that none of this was their fault. He said that like five times. And I'm sure as an employee being like, I never thought it was my fault, bro. This is your fault.

Starting point is 00:51:22 But what do you say? I don't know what you say. I just would stop talking at this point. but Sam feels the seems unable to do that. I don't know if there's anything you could say. I read this whole thing. There was nothing. The only thing that really stuck out to me,

Starting point is 00:51:37 this slide was kind of interesting where he just did some back of the napkin math about like what happened. And he's, this guy has no clue what assets or liabilities they have. He's just like, okay, so number one, a crash in the market led,

Starting point is 00:51:52 this last spring led to a 50% reduction in value of the collateral in FTX. 50 billion in collateral with only 2 billion in liabilities turns into 30 billion of collateral and 2 billion of liabilities. He's just doing a napkin math. Also, he's just like aggregating all assets in collateral. Be like, yeah, this is our balance sheet. You got this information on Twitter. Never mind how this is customer deposits and should not be considered like collateral.

Starting point is 00:52:21 Anyways, if you are interested in reading Sam's letter to employees, there's a link in the show notes. Yeah, why not? Make an NFT out of it. I don't know. sad. What are we looking at here? This is a really cool chart. Yeah, it's really good chart. Yeah, so this just shows the FTX SBF empire between Alameda research, FTX US, FTX and FTCX ventures and all of the things that they have invested in, that they're owners of. There's a lot of investments. There's a lot of investment. I can't believe Sam did all of this in four short years, David. Yeah. All of this.

Starting point is 00:52:51 Yeah. Like, the guy came on the scene in 2018. You know what? You know what's kind of weird to me is like, we should have probably popped our heads out and been like, how does somebody go from like nothing to $30 billion in crypto in one cycle? Isn't that the story of crypto? Isn't that why people come here though? Like that is the story. Not in one cycle. I think like the Vorheises of the, like the people who've been here, you have to do, if you're doing this the right way, you have to do it over multiple cycles. Like the Brian Armstrong. And so I was saying it's like not really crazy to make a bunch of wealth. That level of magnitude was unheard of. but like I don't know I think it's I think that's a hindsight 2020 kind of thing probably but my antennas are going to be forever up about this kind of thing is like we probably like how did that happen how you go from zero to 30 billion it's your first cycle well everyone that's made a made a ton of money too quickly also lost it really quickly in 2022 so that definitely tracks meanwhile in unrelated news Elizabeth Holmes just got sentenced for 11 and a quarter years in prison completely unrelated just all she did was scamming

Starting point is 00:53:57 investors. She didn't steal deposit her money. Yeah, right. Okay, but then the hacker, the FTX exploiter, has converted millions of ether into ren Bitcoin tokens. Well, that's a background story. There's a hacker who's managed to get FTCs, some FTCs funds while their security was down, I guess, right? Yes, right. And we're tracking this hacker on chain. And this was what I was alluding to earlier in the market section about why the ether Bitcoin ratio is down this week. The hacker is selling ether for Bitcoin, which is actually confusing a lot of people in crypto Twitter because ether is generally the more censorship resistant capable asset out of the two because you can do things with ether.

Starting point is 00:54:33 So on Sunday, Hacker moved over 5,000 ether of the stolen funds to a new wallet. And then later, an additional 35,000 ether was also moved over that wallet into three separate transactions. That new wallet started to convert ether to ren Bitcoin using one inch. If you aren't familiar with what ren Bitcoin is, ren is like this inter-blockchain protocol network. So if you have ren Bitcoin on Ethereum, you can transfer that Bitcoin over to the Bitcoin network. First, transactions had 4,000 ether being converted to wrapped BTC and then traded

Starting point is 00:55:02 into RenBTC. And the Renbridge has also previously been used to launder stolen funds at least $540 million of it in other instances. And so maybe that's what's going on here. I don't really know. David, the hacker is a Bitcoin maximalist. I think that explains it. Good luck with that. Yeah. Right. Okay. And so there's moving on. into different stories in the SBF verse. Forrest put out this article that says, really the SBF, he wasn't really as lucrative as he was made out to be.

Starting point is 00:55:34 His 2021 tax return shows a net operating loss of $3.7 billion. They lost $3.7 billion in 2021. Oh, that would have been nice to know a year ago. Yeah, I would have loved to have known that. How did you lose $3.7 billion in 2021? That was the most lucrative, of all time.

Starting point is 00:55:57 No, how would you do that? I mean, leverage, leverage. I don't even know how you do that. Leverage margin? I don't know. Yeah, that's really, that takes skill. It takes skill. It takes skill.

Starting point is 00:56:06 It takes skill. To lose in 2021. Anyways, there's a regulator response in Capitol Hill. I thought that was a really useful thread, but I'm going to try and speed run this as much as possible. So Ron Hammond says, this week in Congress and Crypto, last week, the Blockchain Association hosted our first annual policy summit with industry leaders and regulators, members of Congress and staff.

Starting point is 00:56:24 The timing couldn't have been better with the FST. FDX fiasco playing out in real time. Here is what D.C. is saying. Number one, they are shell-shocked. That is the word mainly used by policymakers when describing the FTC's fallout. Many of them met with SBF personally, asked questions of various hearings, or at least knew how often he was in D.C. meeting with colleagues. As more reports about FTX came in, the anger in D.C. rose.

Starting point is 00:56:48 Number two, the Hill is still largely, in fact, finding mode in that is important. Congress tends to have a knee-jerk reaction to a crisis, but bipartisan calls from from Maxine Waters and Patrick McKenry for a hearing in 2022, show the desire to learn, hear from various parties, and then engage. The Senate Housing and Financial Services Committee, light hearing, which is going to happen, likely won't be the only one this year. The Senate banking, House and Senate Agricultural Committees have hosted SPF several times in hearings and meetings, and likely will want to host a meeting to hear what happened and what can be done to prevent this. Number four, what could have been done?

Starting point is 00:57:25 What were the regulators? Why did FTCS domicile in the Bahamas? And many other questions are top of mind. These are some great questions. And many other questions are top of mind in the Hill. Many still don't know, and thus a large reason to suspect both FTCX execs and the regulators will be called in for these hearings. Number five, the episode will easily bleed over into 2023 when the Republicans have the

Starting point is 00:57:49 House and the Democrats have the Senate. The fact finding will still continue. continue and both chambers will likely find a bar bipartisan regulatory solution could be bills introduced previously or brand new. Stable coin bill still in play. Maybe. Looks like DCCPA is dead. That's what he says.

Starting point is 00:58:09 It's largely dead, but it could reappear in a different form. This is interesting. And by the way, I think this is the Ron Hammondt Twitter account. I don't know who this is, but I think he was the one that tweeted out about, you know, after SBF for his debate. Like everyone in D.C. was talking about this? Yes. Yeah. So it's interesting that that still happened like 11 days before. People in D.C., that was the conversation. And then the next week, the weeks that follow, it's this. I wonder how that changed things. Damn, bankless is on their radar. That's great. Yeah. In a good way? In a good way?

Starting point is 00:58:43 Come on, guys. Right. We're doing the right thing here. SEC facing rising scrutiny after FTX's explicit implosion. I don't know how they're going to respond to all of this. Yeah. So Bob Menendez, a senior Democrat on the Senate Banking Committee was asked if the SEC could have been more aggressive in investigating FTCs prior to bankruptcy. Guess what his answer was, Ryan? Whose answer?

Starting point is 00:59:06 Bob Menendez, the senior Democrat on the Senate banking committee. Oh, he was asked, could the SEC have been more aggressive in FTX and investigating FTCX prior to the bankruptcy? I bet he said a hell yeah on that one. He said, the article says, he replied simply. yes and ask if he planned to question SEC Gary Gensler about that Menendez replied I am great I wonder what the the tone of that that speech pattern was yes I will be doing that yeah all right what's this finance this is this is unrelated but related unrelated US steps into national politics with new

Starting point is 00:59:46 campaign pack so binance filling the void of FDX lobbying I wonder how that's going to sit with Capitol Hill. Oh, boy. More crypto bankers. Woo. Yeah. Very excited. This one from a different part of our economy. Just fight for our values, guys. Please don't make the same mistakes. All right. Tell us about this crazy story. Here's the context for the next story. Can I just say this? So in the midst of this chaos, almost like you know the little finger chaos is a ladder thing. It's like the Joker from Batman. It's just, I mean, he's like chaos. In the midst of this, a defy attacker starts attacking defy. And he had been previously, but now it's like, there's in the industry, I'm going to go attack it.

Starting point is 01:00:24 So give us the context here. It involves a few different exchanges, a few different chains, but try to tell us the story and then like, let's get to what happened. Okay, so back in October, the end of October, there is this mango market on Solana was exploited for $114 million. It's a dex, right? It's a dex, yeah. It was not a hack.

Starting point is 01:00:44 It was an economic exploit. It was like an Oracle attack. It was basically market manipulation. So he used the exchange as intended. he was, they were just able to manipulate the markets in a way that extracted $114 million in an economic exploit. That person is Avraham Eisenberg and he declared that he thought that this was just a simply a profitable trading strategy and that everything was legal in open market operations. Technically true, good luck defending that in court. Anyways, he returned $67 million

Starting point is 01:01:18 dollars defended his actions. And then later, fast forward a few weeks, also now on the Ethereum chain instead of Salana, Eisenberg would put 40 million of USC inside of Avey to borrow $20 million of curve, the CRV token from the curve, curve exchange. He then sent that 40 million curve tokens, $20 million to OKX with his short position on Ave. And the idea was that he was just going to dump the curve to short it and then buy back the curve later at a cheaper price and be able to park it the arbitrage. Same thing. Economic

Starting point is 01:01:51 exploit market manipulation trying to, trying to like, you know, eke out some money, right? This time with a, on a bigger network, with some bigger players, like curve is much bigger than the last target. Exactly. It just so happens that while this individual had his curve short open, Curve releases the white paper and the code for their stable coin, which was very hyped, which caused the Curve price to stop going down and to instead go up, and he got short squeezed and liquidated. And so you can actually see the liquidations on chain because this is defy. And we are all, crypto Twitter is watching this all happen in real time. And so we are watching the liquidations roll in in ways that we could not have seen the liquidations.

Starting point is 01:02:38 From Ave? Avey is liquidating this guy, Eisenberg, because of his short position. So we are watching this in real time, in start contrast to what was going to. on with FTX and Alameda. And so that is always nice to see. You live by the sword, you die by the sword. That's what happens playing this game. That's exactly right.

Starting point is 01:02:55 So Ave tweets out about some bad debt. So as a result of the illiquidity of CRV, actually Avey was left with a whopping $1.6 million of that debt. Million? With an M? Yes. After this fierce attack? After this fierce, fierce attack, which represents Ryan a whopping less than 0.1% of total

Starting point is 01:03:16 volume on Ave. I can't remember the, I can't remember the, I saw, I saw, it's less than 0.1%. Excuse me. Much less than 1%. Yes, that's what I meant. That's what I meant. 0.1%, yes. I can't remember where the numbers were. I saw a tweet, but it was something like, I don't know, eight weeks of Avey revenue,

Starting point is 01:03:35 I think at worst. And so, yeah, defy, even on its worst, it's still okay. Robust, right? Robust, right? All of this happened transparently. All of this happened on change. People were watching this happening. People liquidated.

Starting point is 01:03:47 Again, Genesis had a hole in its balance sheet last May, and we didn't find out until November. We watched Ave grow a $1.6 million, teeny little hole in its pocket, which is totally going to plug up. And anyways, so that's that story. But also, curve, the other big nose is that curve release to their table coin. Good time, boys. Wow. And so this stable coin is kind of like Maker Dow, but more governance. minimize with an algorithmic liquidation engine.

Starting point is 01:04:19 So you can put your collateral into curve. You can mint their curve stable coin. If you get liquidated, it will liquidate you in the most modest amount of increments possible. And then as the price goes back up, it will recapitalize you. And so it's kind of like MakerDAO. You're still taking leverage.

Starting point is 01:04:35 You're still like minting this new stable coin. But it is a new decentralized, perhaps more decentralized, curve deposits, whatever's in curve. Whatever's in curve. And what kind of thing? are in Curve right now. Like kind assets. So stable coins are the big one, but like you have

Starting point is 01:04:50 R-Eath. That's cool. Staked Eth. I wonder, I don't know, I don't think that you can make the stable coin out of the Eth pairs, but you can imagine that Curve makes the meta-staking token.

Starting point is 01:04:59 Well, this is the kind of thing I want to have some more time to dig into, to be honest. Get us back to our old, like kind of D-Fi building cool stuff rather than talking about FTX all at time. This is, yeah, white paper.

Starting point is 01:05:09 It's been a while since I've read a good white paper. Good old-fashioned white paper. They're coming back. Yeah. Gauntlet Network put out a tweet, and Gontland, for those you don't know, that is Turin Chitra's organization that they do these economic simulations. They made, as they did the analysis, and they made some recommendations. They said, the attempt to squeeze curve on Ave has been unsuccessful and unprofitable. Despite this, Avey has accrued a much smaller insolvent position.

Starting point is 01:05:35 Our immediate recommendation is to freeze a number of tail assets on V2 to mitigate the risk of smaller, likely unprofitable squeezes. Defi, all of this, these attacks happen in the open. the learnings happen in the open as well the defense all happens in the open this is how defy levels up and this is why i think what we can build at the end of the day here is a much more resilient financial system right we get the attacks and we adapt right we get stronger the shield increases for every attack reharnessing the the energy of the attack i love that that's your take ryan because the next tweet is exactly this oh really this poor dart twitter account says i think Avi, the liquidator, the curve

Starting point is 01:06:16 shortseller, the guy who's trying to economically exploit all the protocols, he goes, I think Avi is good for Defi. We need people to stress... That's Avi the guy, not AVEA, right? Avi, yes, Avi the guy. It's good for DeFi. We need people to stress test these protocols, as in, if they can be exploited, then they should be exploited.

Starting point is 01:06:32 If they can't be exploited, then they're robust. And as a result, like, unlike FTCs, which is now gone and destroyed, unlike Genesis, which might file for bankruptcy, unlike Alameda, which is gone, when all of those things fail, they don't come back. Ave failed, lost $1.6 million, has to pay that.

Starting point is 01:06:47 That's fine. But we can learn in real time, and now we are going to build back better. I build back back. David's running for office. We're not going to cut it. Editor, do not cut that. Dave wants to build back better. Read this follow-up tweet, though. I'm also

Starting point is 01:07:04 really glad the dipshit lost a lot of money. All right, I kind of feel good about that too. Guys, we got more to cover, as always, but before we get sponsors. We want to remind you that tomorrow is 25% off bankless premium. 25% Black Friday sale. It's going to be amazing. For bankless 2.0, which is not yet released, but it's totally coming. It's going to be sick. Totally not a rug. Totally not a scam. We do not take in customer deposits.

Starting point is 01:07:29 Seriously, you guys love this. We got a lot in store for the community. So now is your opportunity. Don't say we didn't warn you. What do we got coming up next though, David? Coming up next, we got questions of the nation. And I know everyone is going to be asking, how the hell do I talk to my family at Thanksgiving about crypto? We're going to try to simulate that conversation between me and Ryan. I'll be grandpa. Exactly. But then also, of course, the takes of the week, which of course were some good ones.

Starting point is 01:07:54 And also what Ryan and I are grateful for. So all of that and more right after some of these fantastic sponsors to help you go bank lists. But if you're on the premium feed, I'll see you on the other side. The reality today is that five corporations control the entire world of social media. They own our names. They restrict our content. they monitor our every move. And their time is up, thanks to our sponsor, DeSoe.

Starting point is 01:08:15 DeSoe is a layer one blockchain built from the ground up to decentralized and scale social networks. With DeSo, you can own your own identity, content, and social graph, and take it with you across hundreds of applications already built on the censorship-resistant DeSo blockchain. DeSo's storage advantages make it finally possible to build infinite state applications that can efficiently store and index large amounts of content and data fully on-chain.

Starting point is 01:08:40 Diso also offers multiple crypto-native monetization primitives for developers and creators, including social NFTs, social dows, social tokens, and social tipping. So in order to experience the social layer of Web3, go to Diso.com and claim your username. That's D-E-S-O.com. Sequence is the all-in-one developer platform you need to build Web3 games and applications. For your users, Sequence is a smart wallet, and it's the easiest, most intuitive onboarding your users will ever experience, and comes with all the features users need to feel empowered in the Web3 world. Multi-chain support, NFT display, and users can buy SFTs, NFTs, and crypto directly with a credit or debit card.

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Starting point is 01:09:46 So go to Sequence. com, to start building or speak with the Sequence team today. We're going to get to what we're thankful for a little bit later. There's actually another sponsor cut before we do that, David. Yeah, I got to get a gun on that one. Got to get through a few things. Withdrawals are coming soon.

Starting point is 01:10:01 So if you are staking Heath, you have your ETH as a one-way ticket. We all know this. Withdrawals. there's some updates on that. There's a lot of fun out there saying withdraws will never happen, that the Ethereum Foundation, like deleted it from the roadmap, blah, blah, blah, blah, blah. They're happening in 2023.

Starting point is 01:10:17 But what's the update here? So in order to unlock withdrawals, we need all of the clients to have that enabled. And so there is a new devnet with all the clients, Lodestar, Teku, Lighthouse, nethermind, Geth, that is up and running. So there's a successful devnet with withdrawals up and running. It's basically what you need to be able to test this thing. and then next step main net.

Starting point is 01:10:39 Rumors that it will be in the next hard fork, we do not know. We do not know. I just don't listen to the Twitter accounts. Look at what the devs are doing. Look at the GitHub repose and progress is being made. Okay, speaking of devs, flashbots, they've just open source their block builder, which was big in and of itself, so that brings more competition in the space. And also, they have a new short-term censorship-resistance strategy.

Starting point is 01:10:59 So here's Vitalik saying there is a new short-term censorship-resistant strategy dropping, courtesy of flashbots, and he recommends that any... staker using MEV boost, which many are, take advantage of this new option. David, what does this new option give us? What problem does it solve for the Ethereum protocol? Yeah, the problem that solves is that block building is a pretty damn specialized expert level activity. And also block building, whoever can be the best block builder will build the most profitable block. What we're worried about is that activity becoming highly centralized. So with Vitalik and this new flashbots blog post and this new thing that you can now plug into, we are trying to do a best of both worlds thing.

Starting point is 01:11:40 You always want to choose the most profitable block, but we also want to be resilient, not have centralization, and also be able to construct our own blocks. So this is really this new update that allows for an optimization function. So when a block builder produces an extremely lucrative block that passes some level that you set in your node, you can accept that block builder's block. And if it doesn't cross a certain threshold of profitability, you, as the node operator can just build your own block from home. And if you do that, if you build your own block from home when there's not an extremely

Starting point is 01:12:12 profitable block when they're just like normal defy things, not crazy defy things, if you just build it at home, you're going to get 99.9% of the value that you otherwise would have gotten if you had to use a block builder. If a block builder see some crazy MEV and they capture that and they build you a block and your block was going to earn you two eth and that block builder's block is going to earn you five eth because of this optimization function, which is what this release is, you can opt in to the occasional high value block when it is produced by a centralized block builder.

Starting point is 01:12:39 And that, Ryan, is how you get the best of both worlds. That's cool. Yeah, my TLDR in this, because my brain was kind of full this week when reading this, is like, they're trying to make doing the right thing for the network more profitable. Yes. And decreasing the costs or doing the right thing.

Starting point is 01:12:54 So basically you opt into this and you still get 90% of the, maybe 99% of the profit, and you're doing the right thing for the network, which is you're decreasing. centralization. You can still run, you know, staking from home, your own validators, and you don't have to centralize. And that is a good thing for decreasing the centralization of Ethereum and increasing decentralization. Of course, increasing the censorship resistance of the network.

Starting point is 01:13:20 David, this is cool too. Maddoch, Magic Eden, Match Made in Heaven. Magic Eden is a Solana NFT ecosystem, and they are moving to Maddoch, not exclusively, but they're deploying now on Maddoch. What's the update here? Yeah, that's basically the update. They deployed on Ethereum not too long ago, and now they are also on an Ethereum layer two. Is this the layer two thesis playing out? I will leave that up to the footed listener to decide. Tantilizing, tantalizing.

Starting point is 01:13:45 How about this? Oh, I love this one. Our eth adds collateral in MakerDAO. Our Eth out of Rocket Pool, the state ETH token out of Rocket Pool, the friendly neighborhood decentralized, staking out of service protocol, is now collateral inside of Maker Dow.

Starting point is 01:13:59 This is huge for REth liquidity. This is one of the big things that Rocket Pool really needed to be competitive with Lido. There is a $5 million die debt ceiling, but that's just like the first rodeo once. It's where it starts. Yeah. Very good, very good on that.

Starting point is 01:14:13 Okay. Also, Arbitrum is updated. New Arbitrum feature. This is actually really sick. And it's interesting that Arbitrum didn't actually really like be like loud about this. So basically, we all know that our layer twos are more centralized than we would like them to be. becoming a validator for a layer two for optimism arbitram is a permission thing.

Starting point is 01:14:34 You can't just go do that. But Arbitrum recently did this upgrade where if the centralized Arbitrum run validator sequencer goes down for a sufficiently long a period of time, the network becomes permissionless and anyone can spin up a new Arbitrum validator and join the network to start processing withdrawals. That is crazy. And that is something that is implemented today. that is neat. This is good. This is very good. This is like that. We like this.

Starting point is 01:15:01 This is decentralizing our layer two, which was always going to come, but it's happening faster than I thought. So great job in Arbitrum. This is from Bartak, too, who really keeps track of this stuff. Yes. So if you want to read the whole tweet thread and what they're doing, you can do that. And you're right. They didn't get loud on this. It's because so much going on. Speaking of getting loud, we talked about collectibles last week. Bankless launch's first NFT collectible project. At a high level is, I didn't. know that a thousand a hundred were going to sell and they I didn't get one David and I also did not get one because I sold out in the first minute and I spent $50 or something on on eth gas fees and I was there I was clicking refresh I was doing the thing that you told me to do with NFTs which is get there first right and I still didn't get one yeah um so I did not expect there to be this level of demand I guess the good news around that is more are coming uh including I think not not Not tomorrow, so don't worry about it. Take off the holidays, but the Friday after.

Starting point is 01:16:02 And so you can get the next in a series of Genesis Collectibles. The first one is... Really quick back up, though. What the hell did we drop? It was the SBF, Eric Voorhees. We are now turning our podcast into collectibles. That's what's going on. So we turned the SBF versus Eric Voorhees into a one of 100 collectible,

Starting point is 01:16:21 which we sold for 0.05 ether. All revenue went to Coin Center, also all royalties. also go to coin center. 100% is going to coin center. And we sold a 0.05Eth. The floor is now 1.9 ether. That is insane. I did not see that coming.

Starting point is 01:16:37 There have been three sales at one ether. Turns out collectible podcasts are a real thing. Also, turns out I will never make money on this NFT thing, David, because I always miss the great opportunities. You can't even make money on your own NFT, bro. That's how bad it is. I would have had one on the back on this monitor here, and it's just dark. Oh, that would have been cool.

Starting point is 01:16:57 Would have been cool. I could have been cool. I could have been cool. A nFT for that monitor. Anyway, what else we got? Tornado cash. This is sad. Alexei Perzsef is detained still in Amsterdam for another three months.

Starting point is 01:17:09 That was a renewal. He was in there for 90 days. This, again, is the developer. One of the developers responsible for creating tornado cash, the privacy tool on Ethereum, that U.S. citizens can no longer use. And Alexei Perzaf finds himself in prison as a result of this. No charges have been. late. So another 90 days in prison, that's the reports that we're getting out.

Starting point is 01:17:33 Look, man, unfortunate. People like, I can't believe this. People like Alexi. Sam Bankment Fried is running around with his cargo shorts and backpack in the Bahamas right now. I'm sorry letters. Sending I'm sorry letters. Right? Like an out, Alexei Persef is in prison right now. And why? Because he put together a public open source privacy tool for the entire world. Okay. It's like coming up with SSL. or some kind of like, you know, encryption technology. Do you know why they cited this as like what they're doing, like not detaining him for another three months?

Starting point is 01:18:06 They cited it's the governance token. Because he was an owner of the governance token, he is like an operator of the business. This is so, this cannot stand. We've said this before. You guys have heard us talk about this. But it's just really sad that injustices like this go on, especially when you see actually who the threats are to crypto and to actual retail. He's still someone in building real code here.

Starting point is 01:18:28 So very unfortunate. We're doing what we can here, including one of my good friends and a co-hosts of this podcast is actually suing Secretary Yellen as we speak. So we're doing what we can. But just keep Alexei on your mind. As you hear about the scammers like SBF, remember, we've got some folks that need help. JP Morgan, a crypto wallet, now a registered trademark and the U.S. I saw this headline go forward.

Starting point is 01:18:57 Anything else that we should say about this? That's, I mean, patents are kind of a no-news kind of news kind of news. It's like an indication of like, okay, in three years we'll like see a J.P. Morgan like products. It's a trademark. It's a trademark. The J.P. Morgan wallet. I don't think I would ever put money in the J.P. Morgan wallet? I hope you wouldn't.

Starting point is 01:19:18 But actually, I kind of think you would. Can you put money on the other centralized exchange? No more. Never again. All right. I told you guys. it's an experiment. It's not something I was, man, issue the POAP, whatever. Anyways, okay, coming out of Coinbase and optimism, you can now transfer from Coinbase to optimism.

Starting point is 01:19:36 Hey, cool. Great. I mean, it was a long time coming. Glad it's finally here. We asked for this, and Brian, Brian Armstrong delivered. Great. We asked for it. David and I went to Brian, were like, yo, the one thing we need is this. And he just did it. We literally did that. It was on the podcast. Oh, yeah, we did. True story. Bitcoin, bad news. New York Governor, what's this? Yep. New York Governor signs first of its kind law cracking it down on Bitcoin mining.

Starting point is 01:20:00 Governor Kathy Huchel signed a law on Tuesday. That's my governor. Banning certain Bitcoin mining operations that run on carbon-based power sources. For the next two years, unless a proof-of-work mining company uses a 100% renewable energy will not be allowed to expand or renew permits

Starting point is 01:20:17 and new entrants will also not allow to become online. There's a quote from the Chamber of Digital Commerce here that says, says this approval will set a dangerous precedent in determining who may or may not use power in New York State. And that is a take that I 100% agree with. Let's not get political about what we think is good or not and who can have access to energy. That is bad. I totally agree because I like Christmas lights and I will continue to put Christmas lights up in my house. And Christmas lights and Bitcoin mining is probably the same amount of net global energy.

Starting point is 01:20:52 It's less, my friend. Bitcoin mining is less. Less than Christmas lights? Yeah. But, yeah. This is a thing. I mean, it doesn't affect Ethereum and other ecosystems who care about. And like we knew this political pressure was coming, but that doesn't necessarily make it right. Yes.

Starting point is 01:21:05 All right. Rases. So one big raise this week. Across protocol, they just raised $10 million to $200 million valuation. This is, of course, is a bridging protocol we've told you guys about a number of times. Maybe you're using it. Maybe it's on our air drop guide. Maybe you get that.

Starting point is 01:21:20 Maybe it's a sponsor. So a slender. Oh, are they? Yes, they are. The good news there is when companies are raising, and they still are, there's still some money in crypto, it means you can get a job in crypto. That's what we got to tell them about, the crypto jobs board. Developer Relations at Uniswap, a front-end engineer at Uniswap. Ernify.

Starting point is 01:21:41 Coming in high. Earnify. Looking for a full-stack engineer at Earnify. Looking for a senior backend TypeScript engineer. I like that Earnify company. Think they're doing big things. Uniswap Labs, NFT engineers. A lot of engineers on here.

Starting point is 01:21:54 You can tell us the bare market. Now we got no non-technical jobs. It's all technical, David. Because we're building. We got to build. Because we're building. Anyway, you want to access to those. Go to the bankless job boards,

Starting point is 01:22:04 bankless.pallet.com. And you can find that, of course. Black Friday shout out, 25% off. Coming to you tomorrow, get your bankless premium. And what do we have coming up next, David, after the break?

Starting point is 01:22:16 This time, we'll talk about how the hell do I talk to my family about crypto. Yeah, you rugged us last time. I did big rug. People just don't care about Ethereum withdrawal. How do I talk to my family about crypto, followed by the takes of the week, followed by what Ryan and I are thankful for. So stay tuned for all of that and more right after we talked to some of these fantastic sponsors to help you go bankless because you need it.

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Starting point is 01:24:22 Questions from the nation, David, I think in the U.S. is Thanksgiving morning. So the one thing that happens, tradition in the U.S. is you get together with friends and family. And these could be relatives you haven't seen for maybe an entire year. You haven't seen it a very long time. They probably know that you're in crypto, right? Because it's that weird thing that you do on the side.

Starting point is 01:24:43 And you can't stop talking about it? Yeah, maybe it's because you can't stop talking about it. Maybe, you know, they've asked you questions. they've texted you about like buys. Anyway, your family knows that you're in crypto. So what do you say to them when they ask you questions? How do you talk to your family about crypto this Thanksgiving? Some real practical advice here.

Starting point is 01:25:02 I think this is the question from the nation today. Actually, we're putting together a post on this from Michael Wong, who's one of our writers. And there's a number of questions here we could get to. But let me, before we get in here, David, just the high level. All right? what are you go do you have do you have family members like this who are kind of distant relations they know like oh david's got some podcast i think your family calls you dave right yeah some some of them yeah all right so it's like dave's got this podcast and he know he's in crypto what's going to be in the

Starting point is 01:25:34 top of mind what questions are you expecting to be asked uh so this year they're not going to be bothered to answer because they've i've been in crypto long enough so i'll go backwards to like 2018 Thanksgiving. Okay. What did I do back then? And so they were like, oh, like, David, like, are you going to, like, leave crypto now that everything's on fire and, like, the whole industry is, like, collapsing? There's two answers to this.

Starting point is 01:25:57 What are the words that you say? But also, I think that's less important than how you say it, because humans respond to emotion. So if you come into Thanksgiving and people are like, is your conviction shaking about crypto? Like, how is your job going? Like, he's still doing that crypto thing? you just got to come in hot.

Starting point is 01:26:16 Be like, damn straight, I'm still doing that crypto thing. Sam Bankman freed, a banker, showed all of the industry exactly why we need to not have banks. And now I'm fired the F up. And I'm doubling down. And you should totally buy ether right now because it's so cheap. Wow, that's what you'd say to them? Is this what you said in 2018? So, like, there was like, oh, the ICO mania is over.

Starting point is 01:26:42 I'm like, yeah, it turns out it's a bunch of hot air. turns out our DeFi yield farms were like not really all that sustainable. Yeah. But like it's still going to be the global like foundation of all future finance. And like NFTs are still going to unlock a ton of human culture. It's really just about like is your conviction shaking? Are your conviction shaking? And you just need to be a stoic individual because of how you understand that this is a 20.

Starting point is 01:27:06 You come at them hard though. You're not only being stoic. You're like and also grant, but you should buy you should have some eat. That part. That part you could be. excuse to say if you don't give your family members financial advice don't do that that's but it's it's about the conviction right because people because people are like going to be like oh like like some of them especially people people people some people love to be like ha ha crypto broke uh now i don't that one cousin

Starting point is 01:27:30 that you have right the people that don't want to have to deal with a cognitive dissonance of 2021 when they're like all the crypto people were making money yeah now it's on the flip side of this now they're going to be twisting the knife but hey remember when you you shot remember when you told me to buy four thousand dollar eth well so glad i didn't yeah Remember when you said it was going to 10K, you idiot? Yeah, and then you say, like, it's still going to 10K. Yeah. It's still happening.

Starting point is 01:27:51 So I'm buying more. Yeah, like, I, yes. Yes. It's about the conviction and it's about like, hey, like, there's a mission here. If you can show that you believe in this, that there's a mission, that's actually how, Ryan, my first company in 2017 that blew up, it's an ICO advisory company, destined to blow up. Yeah. I got a, like, a 130% person company. I think five or six or seven of those people got jobs in crypto after that.

Starting point is 01:28:17 I was one of them. One of the reasons why I survived through the 2018 to 2020 bear market. It's because you still had conviction. You still believe? Because I was enthusiastic and people saw it. Like I was very clearly about the tech. And that's what like kept me a very hireable person when there was literally no jobs left. So it's just like, is it kind of an answer of like, I don't look at price at times like this.

Starting point is 01:28:40 I look at the fundamentals. And you look at what went wrong. A banker blew up the... That's a great way to do it. A banker blew up the financial system. He's posing as something he wasn't. And we're glad we're detoxed. We're in come back stronger.

Starting point is 01:28:52 That's if you even want to engage in that conversation. Depends who you're with. I don't know. Family relationships are, you know... You also don't have to bring it up. You can also relax and not talk about crypto. Yeah, you can just smile and be like, yeah, it's been rough lately. And then change...

Starting point is 01:29:04 That's more like my mode is I just try to not talk about it, honestly. Because if they want to hear what I really think, I mean, oh my God, how many hours of content do we actually have, right? Like, it's almost like you can opt into it. But, okay, so here's grandpa saying, how are you doing job-wise, right? And you got an answer for that. Mom is asking, what happened in XO Celsius Voyager? My friends used it and lost it all.

Starting point is 01:29:30 Sorry, Mom. You got to have an answer for that. Ryan, here's a hard one. And this is one that's in the actual newsletter. Somebody says, hey, I have my money on Coinbase or Gemini. I'm worried about like Gemini Earn or something. I would just like to take self-custody of your assets. Like where do you start with that?

Starting point is 01:29:47 Yeah, so there's a difference between like Gemini Earn and like crypto lending thing and like just having your assets on account. So first of all, you want to make sure it's a reputable account, right? Like a Coinbase, maybe a Cracken. I'd put there still Gemini, even though their Earned program is going through some struggles. And then you kind of have to weigh it, David, because you have to weigh the risk of one of these exchanges going under versus your relatives risk of losing their own keys if they if they mess up a setup and this is really important

Starting point is 01:30:17 it's just I kind of I actually don't love going through the process of teaching like friends and family about it too much unless they are kind of coming to the table with with their knowledge and their learning and they're asking me more specific questions right because if you kind of do the work for them then they weren't really ready to hold on to their own keys and self-custody you You kind of have to just like, hey, you can leave it on exchange until you're ready to move it off and then go figure out what you think are some of the best. And then I'm happy to give you some help or pointers or that sort of thing. But like making them do it themselves is kind of a key because that's like an acid test

Starting point is 01:30:59 of are you ready or not, right? That's what I generally do. But it's important. Are you going to be single forever? That's grandma asking. Wow, there's a lot of good questions that come up in Thanksgiving. And you have anything else to end it with? What else can people expect to be asked?

Starting point is 01:31:16 What else can people expect to be asked? Is price going down to zero? Is crypto dead? I feel like we've tackled that. I think really the main point is, is like Celsius, FTX, Three-Ros Capital, like there's all these buzzwords that people have heard. And I think all you really need,

Starting point is 01:31:34 if you are going to talk about this, all you really have to say is like, yes, this proves exactly what crypto is here. for and teach them the delineation between FTX and crypto. Like that's really the point to drive home. There you go. There you go. And then tell them to listen to Bankless if they're really curious.

Starting point is 01:31:50 Takes of the week. What do we got here? Yeah, this is a fantastic automated take from this guy, Ryan Sean Adams. He tweets out, the Tower of Babel is a story about mankind getting too full of themselves and trying to build a tower to reach up to the heavens and become gods. So God foiled them by confusing their language and scattering them all over the earth. Where is this written? Genesis chapter 11 wow dude that is no lie all right yeah i i looked this up because i was like

Starting point is 01:32:16 genesis huh that's in i wonder what's in chapter 11 of no way yeah wow no this is real okay genesis chapter 11 look this up i'm googling it now wow that's great this is the tower of babel this is the whole thing and it was really about mankind's hubris it's kind of like an icarus type story of like you're trying to be bigger than god uh and then what what happens david God foils their languages. They all start speaking different languages, and they scatter all over the earth so they can't complete the centralized project. They decentralized, David.

Starting point is 01:32:53 Wow. Centralization. That's crazy. Tower of Babel goes to decentralization afterwards, and this is all Genesis chapter 11. Let me tell you, the scripting in 2022 is just like off the charts, man. I just googled, why is it called chapter 11? and turns out it has nothing to do with the Bible. So that's just completely a coincidence.

Starting point is 01:33:11 No, that would be too much, all right? That would be too many hints in the simulation there. All right, what do we got? Arthur Hayes. No, this is... Takes in the week. Takes in the week. Yeah, what's this take?

Starting point is 01:33:22 Arthur Hayes is retweeting a Suzoo quote. Suzu founder of Furo's capital says FtX set crypto back years. Arthur Hayes says, the zoo per cycle in reverse. Where's my money, mofo? basically saying, oh, yeah, Three Ours Capital says FTCSet crypto back to yours. So did you, bro. Like, what?

Starting point is 01:33:46 I think Three Roas Capital is on a mission to be like, this one's worse than us. So can we come back now? No, you can't come back. Okay, this one was my take. I want to watch through. I'm going to read it, though. You want to read? Yeah, because you'll seem too self-aggrandizing if you read your tweets on this show.

Starting point is 01:34:02 People already think of that. I'm doing self-grantizing. All right. 2013, this is David. A proof-of-work fork and fair launch. We printed proof-of-work coins in 2013. 2017, I-Co-Mania. We minted I-Co tokens.

Starting point is 01:34:15 2021, yield-farming. We issued governance tokens. Every bull market is a Ponzi scheme under the guise of new token distribution models and the emoji of slapping hand on forehead. Yep. It concludes this tweet. Uh-huh.

Starting point is 01:34:29 The Bitcoiners really like this one because they're like, oh, David's finally figuring out that anything outside of Bitcoin is just a big Ponzi scheme. but then I would actually like to go to Exhibit A, my next tweet, which is a platform that is for finance is synonymous with a platform for Ponzi's. And so, like, we've talked about this before. Money is real. Finance is perceived. Ponzi's are just the extrapolation of that on steroids, right?

Starting point is 01:34:55 Perceived money, hot air money. And so this is really how bold markets and crypto starts. We create something cool in 2013. was like, oh, we can fork Bitcoin a bajillion times. Let's do it. And then in ICAO mania was like, oh, we can just mint a token. Let's do it. And then in defy yield farming, it's like, oh, we can just like have this governance

Starting point is 01:35:14 tokens and do yield farming to produce yield and attract investment. And then it just gets, you know, mutilated, right? So starts with a core primitive that adds a tool to the tool belt of this crypto economic future. And then we like eke out all possible hype and value out of it over the next year. And then that's when people get hurt. It's a little bit frustrating, but that's how this industry proceeds forward. It's frustrating, but like it collapses back down to like its true utility value.

Starting point is 01:35:41 And the cycle resets again. There was no super cycle. It was just always the human cycle of like, it's just basically the hype cycle, right? All the way you go up to the point of, I always said euthanasia, euphoria. And then you come back down and like the cycle resets every single time. I think that's what we're seeing here. What are you thankful for, David? This Thanksgiving.

Starting point is 01:36:03 November 2012, November 24th, people are listening to this. What is David Hoffman thankful for this year? There's a lot to be thankful for. I am excited.

Starting point is 01:36:17 It's going to be practiced for me to go home with my family. And for the first time, I actually don't really want to talk about crypto things. I just, like, you know, want to cook food and hang out with my

Starting point is 01:36:25 one and a half-year-old super adorable nephew. And so I'm definitely thankful for that. I know I'm, I'm also thankful that it appears to be that we're like at the basement. You said, you just said just now that like we are back to our like actual value of these networks.

Starting point is 01:36:42 Like nothing is hot air. These are now real. And so I know it's corny, but like we're going to build our way out of it. And now the amount of signal that we're going to have over what's being built over the next six to 18 months is going to be so high. It's not going to there's not going to be any fluff. And so all of the hot air is out of the industry, which just lets every, progress forward faster.

Starting point is 01:37:05 And I remember in 2021, I remember you and I talked about this is like, as soon as the bull market got frothy and manic, you and I were like, this is tiring. Like, we need to wash this stuff out. I didn't like it. Right. We got our wish. Everything's washed out. Too much, though. And a little bit too much.

Starting point is 01:37:23 I was talking with some friends giving. It's like, so we lost some of the baby, but the bathwater is definitely all got. Yes. And so, I mean, we're on the other side. And so, like, now there's only signal. And so I am thankful for that. Yeah, I think that's a great thing to be thankful for it. And, you know, look, David and I met during a bear market, right?

Starting point is 01:37:45 It's really a fantastic time to be in the industry, be a settler. You meet some of the best people. And I guess that goes to what I'm thankful for, David. I'm thankful that, makeless listener, that you're still here. If you're listening to this right now, it means you are a settler and not a tour. all right because the tourists the last few weeks the last six months the 2022 uh they left or they're in the process of leaving but you're still here um i tweeted this out earlier if you didn't make it this time make sure you make it next time crypto's not dead yeah this is a multi-year multi-cycle multi-decade

Starting point is 01:38:23 experience right and we've always said this it's long term it's not about overnight gains but you're still here. That means I'm confident you'll be here for the next cycle. You'll be maybe a veteran the next cycle. You know who responded to that tweet, David? Who? Our friend Anthony Sasano. He said this.

Starting point is 01:38:43 He said, I didn't make it in 2013, 2014. I didn't make it in 2017, 2018. I made it in 2020 and 2021. My overnight success was seven to eight years in the making. that is the opposite of SBF story of make it rich in one cycle, crash and burn. All right? This is actually all of the people that I've seen in crypto

Starting point is 01:39:10 who've quote unquote made it. And when Anthony says he made it, he clarified that he's talking about he's now financially independent and he can do what he wants and work on the projects he cares about, right? That is part of, you know, we say at bankless, like, in order to make you healthy, we have to make you wealthy, right? But like wealth doesn't come overnight. all right and so this is a multi-year multi-cycle thing and the bottom line is you're still here so

Starting point is 01:39:34 I'm optimistic about your future because you are still here and this is where everyone I know in crypto who's quote unquote made it to the other side has been here for multiple cycles and it goes back to like the quick shortcuts often just like crash and burn like you can't it's it's not about the things that are easy right you got to find the things that are hard but still worth doing and for for me that's what crypto is Like sometimes David, in the euphoric cycles, I felt like, oh my God, like, we don't deserve this. I don't deserve this. What did I do?

Starting point is 01:40:05 I just help. Here's where you earn it. Here's where you earn the upside in a way that you don't. You shouldn't feel bad about it. You shouldn't feel bad about a 10x or like a 50x on the last cycle because you were here during the bear market. And I know you resonate with this story too because, you know, like quote unquote. It's the same story. Yeah.

Starting point is 01:40:24 You may like it's Anthony's story, right? of like you made it because you persisted during the last bear market. Yeah. And just to drive that point home one more time, the people that stuck around after 2017 to 2018 and stuck around during the bear market of the very long, hard bear market of 2018 to 2020, everyone talks about the most lucrative time was defy summer.

Starting point is 01:40:49 That's when all of the money was made without much of the risk, which out much of the degeneracy. And people that were around for defy summer, saw the 2021 bull market coming a year ahead of time. And so if you want that level of front-running the opportunity, you've got to stick around. That's right. Stick around. And we're going to continue to be putting out content for you.

Starting point is 01:41:09 Look, 99% of everything that we do is completely 100% free. So I know we've been talking about the like the bankless Black Friday sale that's on through this podcast. That's if you want to take another step on the journey. that's if you want to get some extra type of thing. But if you can't afford that, okay, just know that there is a place for you in the bankless nation. By the way, it's only $13 a month.

Starting point is 01:41:35 But still, I know. Like, if you have to choose between Netflix or a bankless subscription, I'd still do bankless. But maybe there are some other choices you have to forsake. So we're still going to be putting out content. The vast majority is going to be free. And we hope you stick with us. Be a settler.

Starting point is 01:41:51 I think you'll appreciate it on the other side. 100%. All right, let's talk about meme of the week, David. I hope we got a Thanksgiving meme today. I think we do. This was a perchy out of bankless Dow. This is in classic perchy artistic fashion. And it's four people around a dinner table. One person's talking. One of them has a very furrowed look on his face. And the person that's talking says, I read an article about SPF. It sounds like he was a complicated and somewhat controversial figure. And clearly the crypto person is just angry because he's actually a fraudster. At that point, you have to choose whether you want to say something at the Thanksgiving dinner table or not. I think the response to that one is like, he had bank in his name, dad.

Starting point is 01:42:34 Come on. All right, guys. I hope you enjoy some time with your family. If you're in the U.S. If not, thanks for humoring us during this American Thanksgiving episode. Risk and disclaimers, got to tell you, of course. As always, crypto is risky. So is D-Fi.

Starting point is 01:42:50 So is E. So is Bitcoin. As we've seen this year, so many times. you could lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us

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Bankless - ROLLUP: Genesis, Grayscale, DCG Failure? | FTX Contagion Continues | Mango Solana Exploit

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