Bankless - ROLLUP: Steph Curry & Tom Brady FTX | Crypto Regulation & SEC | Solana & Arbitrum

Starting point is 00:00:07 Hey, Bankless Nation, it is the second week of September, and it's roll-up time. How are you doing, David? Pretty good, Ryan, ready to get into the weekly roll-up. Again, so much happened this last week. The crypto world only gets crazier and crazier. Got celebrities getting into crypto. We had a flash crash. NFTs, we've got to go ahead and get right into it and roll all of this up. David, did you get some gray hairs from that flash crash, man? It's like, it's like an instant, 25% down. Did that cause any pain? Nah. No, we were on a call while it happened. I was like, hey, Ryan, look at the, look at the ETH price. And you were like, what was it at? Is that? And I said, oh, it's at 3,000. Oh, wow, 3,000. Like, no, no, no, no, dude, not 4,000. I was like, oh, wow, whole crap. Yeah. And then we popped right back up. That was also not bothered by that. Anyway, this is crypto. This is what you come to expect. And this is definitely what you come to expect in the roll-ups. We get you the entire week that was crypto all packed into markets, news, some hot takes, meme of the week. We're about to get into it. But before we do, David, we got to tell them about so rare. Yeah, so rare. Fantasy football on

Starting point is 00:01:13 Ethereum, where you can actually pick out your team and create a fantasy sports, but using NFTs on Ethereum. So you can even create your lineups. You select a captain. You get points based on real-life performances as one does with fantasy sports. And you can even get weekly prizes by playing fantasy football with So Rare. It's super cool. These are all NFTs, right? And they're all layer two NFTs. So that means like bye-bye gas fees. No gas fees on this. So Rare just let us know too that La Liga, which is one of the top five world football leagues, just signed a major long-term NFT partnership with them. That just happened this week. If you are a soccer fan, if you're a football, football fan. You know that is absolutely massive news. That includes both of their leagues,

Starting point is 00:02:01 their first division, La Liga Santander and also La Liga Smart Bank. That's super cool. And I didn't know this, David, but So Rare already has half a million registered users. They've sold over $130 million worth of NFTs since January. So this is absolutely exploding. And it's no wonder, right? Like you could see it coming. We've got sports over here, fantasy sports. We've got NFTs over here, match made in heaven. You add some layer two, so low gas fees, and you've got a platform that is expanding and growing. So bankless nation, if you are interested in this, go check them out at SoRare.com. We'll include a link in the show notes. That's S-O-R-A-R-E.com. Go check it out. Just further proving that NFTs are how Ethereum markets itself to the rest

Starting point is 00:02:49 of the world. So thanks to So-R-R-R-R-R- for sponsoring this, Bankless Blitz. Totally true. Okay, David, We should get to the markets. What's happening in Bitcoin land? Yeah, Bitcoin started the week at $46,000, got down to the low of $45,250, got up to the high of 52,700, and then back down to where it is currently at $47,000. So overall, down 3.5% on the week. Yeah, look at that. Yeah, you're muted, Ryan. But yeah, that is a straight line down from 52,000 down to 47,000. and it all happened within like two hours, it looks like. Yeah, I was just saying it looks like an elevator all the way down. That happened on Tuesday, was it, right?

Starting point is 00:03:28 Correct. Yeah, morning. Okay. It's all a blur. Same thing happened with ETH price, right? We see that elevator down effect. So where did we start? Where do we end on the week?

Starting point is 00:03:37 Started at 3,760, hit a high of 3,975, and then found a low at 3,300. And we are currently clocking in at $3,520. overall down 6.5% on the week. Okay, what's our ratio looking like, the ETH to Bitcoin ratio, which we monitor on a weekly basis, is are we up or are we down?

Starting point is 00:03:59 We're a little bit down, but not by much. I believe we started the week at 0.7877, and now we are clocking in at 0.078, I think, is the high that we also started the week at. And then we are at 0.075. So down 3.4% on the week. Let's explore this flash crash a little bit. That's what they're calling it, a flash crash, of course.

Starting point is 00:04:21 This is Larry Sermak. He said more than 2.6 billion worth of positions were liquidated in the last hour. Looks like there was a lot of leverage clean out. And that was over $1.1 billion in Bitcoin leverage flushed down the toilet. $700 million worth of ETH. Larry says, if you ask me, perfectly healthy, leverage flush. Funding rates on altru spiking too much, he says. what's your take on this was just this just leverage getting flushed to the market do we need to detox

Starting point is 00:04:52 ourselves it's going like this leverage dude it's always leverage like everyone gets really scared when like sometimes the crypto market's just like cut off like you know 15% of the total market cap in like you know like five blocks right like 15 minutes right and like everyone like all my normie friends everyone asked like what caused the market crash was it a whale that dumped like no the answer is always leveraged it has been leveraged every single time it will continue to be leverage. When you see these extremely violent rapid moves and it looks like the whole entire industry is going to zero for a brief moment and everyone gets spooked, it's always leveraged. People got too levered up way too much. Then the market moved in a modest degree to the downside, which

Starting point is 00:05:34 caused some people to get liquidated. Cascading liquidations thing. Which caused liquidations, and then it bottoms out at some point in time. And overall, like as far as a like cascading liquidations event, this one was pretty modest. This one was pretty modest. This one is pretty modest. It's funny because so I tweeted out not long after this, David, quick, everybody go look for an unrelated news event to blame this flash crash on because I think that's what always happened. What was interesting about Tuesday was there was nothing really going on in the news.

Starting point is 00:06:01 So crypto media and like wider media couldn't attach any event to this thing. I think if it happened maybe like Wednesday or Thursday, they would have blamed it on the SEC news with Coinbase. But of course, this happened before that. Sometimes these things just happen, as David says. It's just leverage flushing its way out of the system. One take for you. I want to ask your question.

Starting point is 00:06:24 I saw a Reddit post. Somebody said, this is why crypto will never be mainstream. It's because you can get it like an instant 10, 15, 20% drop in terms of price. What's your take on that? Yeah. So the reason why crypto always gets like these leverage flushes is because people keep on leveraging up because people are so incredibly bullish. They're like, oh, I missed out.

Starting point is 00:06:47 I need to grab more. So I'm going to go on leverage. And so it's really just like there's an, everyone in crypto is bullish. So they're always leveraging up. And like if everyone in this industry is bullish, like that is a mainstreaming phenomenon. Like all people in the crypto markets are bullish. And that's why this whole entire industry is proponent towards leverage. And so when someone comes and says like, this is why crypto will never be mainstream,

Starting point is 00:07:10 the reason why these happens is because everyone in crypto understands that we are going mainstream, right? Like, that's why we're all leveraging up all the time. I also feel like what's going to happen is actually volatility is going to become normalized. Yes. Yes. I think people are just going to get used to it. Yeah. Right?

Starting point is 00:07:29 Just like, yeah, a 10, 20% day, whatever. As soon as we start creating tokens out of everything and then markets out of all of the tokens we just created, we're to have spikes in volatility like this and it will become just part of the daily thing that happens. This is not the S&P 500 folks. We don't have a Fed backing these assets and a plunge protection team that's going to come out and make sure everything's like super stabilized. We live in a real wild free market. So we're not, this volatility is not going away. I think people just get used to it.

Starting point is 00:08:01 Yeah. I mean, this is a different subject for maybe not for the weekly rollout. But I also think that like volatility is going towards the traditional markets as well. I think crypto is just a sign of things to come. And also volatility. if you can handle your volatility, you are anti-fragile. It's the markets that can't handle volatility are the ones that break. And so this is why crypto is a great foundation because we are born inside of volatility.

Starting point is 00:08:29 Like we are birthed inside of it. It's like that bane meme. Like we understand volatility to the nth degree. Yeah, absolutely. One last thing I'll say is don't take leverage folks. Be careful with margin. This can happen in a hurry. If this is your first cycle, be very wary of.

Starting point is 00:08:44 taking leverage, you could be the next one liquidated. All right, let's talk about this. Total locked value in Defi. Ah, man, we were skimming that $100 billion mark. We got to $98 billion, but now we're down, David. What are we looking at for total locked value in defy? Yeah, I think at the last weekly roll up, we had just breached the last all-time high. And even after of this liquidation, a flash crash, which again, didn't really set us back all that much. We are still like tied with the previous all-time high, right? So now the all-time high is $98 billion locked in DFI, we are clocking in currently at $90 billion locked in DFI. But the overall, definitely up on the week for sure.

Starting point is 00:09:23 Let's talk about DFI tokens themselves. Where are we on the week? It looks like we're down. Yeah, we're down a little bit with the DPI. I started the week at $425 and we went down to $366. Overall, down 14% on the week. So DPI, DFI got hit harder than BTC and ETH. Down 14% on the week.

Starting point is 00:09:42 Part of me wonders, David, if these defy tokens are starting to get attractive, at least these Ethereum defyed tokens. Like, they haven't seen a bull run in a while. And some of them, I mean, YFI is cranking out some serious cash. I think it's valuation, something like, you know, fairly low, billion dollars or something like that. Anyway, let's talk about- Are you just teeing this up about how low the DPI ratio is?

Starting point is 00:10:08 I was trying to help you out here, David. But why don't you tell me what the DPI to wet ratio is? Holding its head above water at 0.1, which is meaningfully below my 0.13 bottom call. About 30% lower than it. He said it, he said it meaningfully below. Yeah, no, this is, it did not hold. Hey, it held it for a while, put up a valiant effort. But overall, that downward slope from like the March high that DPI versus Eath painted at 0.25,

Starting point is 00:10:36 we are just continuing this downtrend, setting new lows with DPI versus ETH. Well, ETH is holding up fairly strong, and then DPI is kind of staying stagnant is sort of the reason for this. Heath is a really tough benchmark to be evaluated against, right? Like, this isn't DPI versus the dollar. This is DPI versus ETH. So, like, losing versus ETH is kind of expected. We've also seen some seasonal shifts, which we'll get to you in a little bit further as we

Starting point is 00:11:04 talk about markets. It very much seems like ETH killer season, alternative layer one season, which we'll discuss in just a minute. But before we do, let's talk about the bed index. Where are we on the week? This is, of course, Bitcoin, Eith and DPI 33, well, third, a third to third, a third split. What are we looking at? Yeah, this is the first week that the bet index had a meaningfully down week. It's had other down weeks before, but there's only like one or two percent. This week, the bet index is down 8 percent from 164 to $149. But if you zoom all the way out, the total all-time chart looks great. It is still pretty solid. And so we are, the, the bed index has some sort of floor that is painted right around like $145 to $150. And that's kind of what it's

Starting point is 00:11:50 been doing for the past like month or so, ranging between $175 and $145. So, you know, That's the bed index. Invest in bed, sleep comfy at night, folks. UMA Protocol is doing that. They just purchased a million dollars worth of the bed index for their treasury. It's pretty cool to see other DAOs dipping their toes in the water. A good way to diversify your treasury if you are a Dow. Let's talk about layer twos, David.

Starting point is 00:12:18 One billion now locked in Ethereum layer twos. This does not include Polygon. This is just layer twos. We crossed that mark last week pretty massive. Yeah, up almost 13% on the week. I believe we might have dipped below $1 billion because this tweet is, I think, two days old. But we cross $1 billion and we're right around it right now. But overall, definitely a lovely adoption by the L2 ecosystem. Yeah, that's pretty impressive. And we'll continue to monitor L2s. But another way to look at L2s is this new metrics board that came out. This is L2 fees. info. You can check out Ethereum layer one is expensive, but how much does it cost to layer two to use? layer two. That's the question. And look at this. Loop ring clocks out at the cheapest. This is to transfer Eth, only 37 cents per ETH, whereas on Ethereum right now, if you're moving ETH round,

Starting point is 00:13:10 costs like $9 to $10. And then we see some other solutions here like Hermes, Polygons, Hermes is 40 cents to transfer ETH all the way up to optimism and Arbitrum cost about $3. Optimism, close to $6. What's your take? here. Yeah, there's a couple takes here. This A illustrates how more cheap ZK roll-ups are versus optimistic roll-ups. The ZKroll-ups are the extra super super cheap ones, clocking in it below a dollar. The optimistic roll-ups, which are optimism and arbitram, they have throttles on their L2s right now because they're kind of still in that rollout phase. So they haven't actually totally unlocked all the capacity that they have. And so like they just, they just don't want to like just

Starting point is 00:13:55 yeat into a fully just like open ecosystem. They want to have a more controlled rollout. So they've throttled their layer two capacity, which is why the eth transfers are still in the multiple dollars range. But like as they open up more capacity and as more people enter the L2, those numbers are actually going to come down and down and down over time. So while we're kind of watching the Ethereum L1 gas fees kind of be up only, I also kind of think the L2 fees are generally going to be like flat or down only

Starting point is 00:14:24 until it actually does hit some like inflection point where the actual capacity of these things do max out. But we are still pretty far away from maxing out the capacity of our both arbitram and optimism. We talked about the subject in length with the arbitram team on today's state of the nation. And so if you want to understand the gas markets on optimistic roll-ups, like to a pretty like expert level degree, definitely watch that show with them. Yeah, absolutely. It helps me really understand like gas fees on. on Arbitrum, in particular optimism or similarly, but as you were saying, David, as they get more users, they actually are able to spread some of the fixed fees that it costs to settle on main chain

Starting point is 00:15:05 across a wider set of users. So gas fees go down for everybody. And I think we will see a continued decrease in gas fees on layer two. But then it's super interesting. And we'll get to this maybe toward the end of that episode. Once we get data sharding in ETH2.0, That's just a massive unlock where we get like a 90% reduction in fees. Yeah. Yeah. Even like it's just going to be absolutely crazy. And that is a big unlock coming to E2 happening after the merge.

Starting point is 00:15:37 Sort of put that together after talking to Arbitum, talking about sort of Ethereum's roll up centric scalability path that is on. Anyway, some cool stuff there. But let's talk about this. They're also printing the revenue to these layer two. So optimism had a record trading volume date. yesterday. Uniswap, uniswop on optimism. Oh, excuse me, yes. So Uniswap traded almost $7 million on optimism yesterday. And so if you are frustrated by the gas prices on Ethereum and you're

Starting point is 00:16:09 using Uniswap on L1, consider moving over to optimism. That's what it's for. What's it like to move over, David? You've moved over. I assume a few times trying polypollong, trying optimism, that sort of thing. It just costs some fees to bridge across. And then it's fairly easy. that, right? You use the same tools you have. Right. No, that's exactly right. Like, you just point your metamass to a different RPC endpoint. It's as simple as like dragging and dropping on a drop-down menu. I think if you go to the optimism site, they actually even generate the prompt for you, so you just have to click accept. And then it's just one L-1 transaction from your wallet to the optimism contract. And then once you do that, the money

Starting point is 00:16:47 shows up in your wallet on the optimism chain. And then you can like, you know, swap freely for funsies as much as you want. It's great. Easy is that. All right. Let's talk about the eth burn, David. It's had a crazy week in terms of the amount of ETH being burnt. Of course, that's because gas fees are high. That's because Ethereum Blockspace demand is high. But what are we looking at on the week as far as ETH burned? Is this a record setting week? Yeah, we almost had seven days of deflationary issuance, right? So we had how much total issuance? 94,000 ether issued in the last seven days. And 87,000 of that ether was burnt due to EIP-1. So we had a net issuance of 7,300 Ether over the last seven days, which over proof of work,

Starting point is 00:17:31 or excuse me, over pre-EIP-1559, we actually reduced issuance. EIP-159 reduced issuance by 92%. And that is not even talking about proof of stake, which also like lowers issuance by another like 90%. So we are seeing, watching Ether become ultrasound in real time. Do you know, I saw this metric yesterday. We don't have it up, but, you know, all of the ETH that's been minted for ETH 2.0 and as a result of people's staking, right? That's kind of collecting on the steecing side.

Starting point is 00:18:03 Deposites into the deposit contract? Yes. And, but the issuance from the deposits in the deposit. So the staking reward essentially, you take that entire like reward and you subtract, well, if you take the entire amount of reward and you subtract. the burn, we've actually burnt more than everything we've issued in ETH 2.0. It's absolutely crazy. Over the first, like, it's been 30, 40 days now of ETH burnt. And we've already compensated for all of that additional issuance that has come from

Starting point is 00:18:39 the ETH2.0 staking contract. So pretty phenomenal there. What are we looking at this particular block? You wanted to highlight this, David? Yeah, this is the new highest burned block ever. so block number 13180434 congratulations to that block it burned 96 ether inside of one jeez 96 ether that's more ether than than is what is issued over the next uh 45 blocks i think that's the right math um so that is pretty crazy the base fee for this block clocked in at 3,200

Starting point is 00:19:15 gway so like that's going like imagine going into your madameask and you're saying like Okay, setting my gas price to 3,200, Gwe. Nope. It was definitely an NFT drop. Or no, maybe this actually could have been one of the liquidation blocks, right? So this could have been a lot of like arbitrage and people, like people actually liquidating people out of their positions in Ave compound or DYDX or any like leverage platform. And so like this is where a bunch of like MEV bots are competing to buy out people's

Starting point is 00:19:49 collateral because they were overclass. And so this is where we get into the meme of bullish selling, right? So like if there's a bunch of liquidations, it actually burns more ether because everyone's clamoring to buy block space. It's always a fun little meme when we see like, ETH price goes down it, but then it also burns a ton of ETH in the process. But that's what's funny about this, right? So we'd only see a block with gas prices, the gas fees this high if it was worth it for somebody to actually pay these to get the economic value out of that transaction. If it wasn't worth it, like we wouldn't see the gas fees bid up to this. So this is an economically valuable block, I suppose. It was worth

Starting point is 00:20:26 it to somebody. This block produced at least 96 ether worth of value for all the transactions inside of it. That's one way to put it. Absolutely. This is another graph of ETH's first deflationary day, David. So if you guys are watching on YouTube, you can see it depicted very well. What are we looking at here? Yeah, we're just seeing, so in the blue, we have the issuance and in the red, we have the burn. And I mean, this is almost implied. We said that we almost had our first week of deflation with Ether and its monetary policy. We had actually two days inside of this week where ether was actually more deflationary than it was inflationary. And we were just seeing these gas fees just go up and up and up. And it's largely because of NFTs. And there's actually

Starting point is 00:21:10 some fantastic data about this that we're going to show. Yeah, here is the second day. So the top two days number one was the 8th of September, which is yesterday at the time of recording. And then the number two day was the 9th of September, which is today. And that was 16,000 Heathburned and then 14,800-Eth burnt on those last two days. And then number three day was the fourth. So it's all in September. It's all in the last like two weeks or so. And this is correlated with NFTs.

Starting point is 00:21:40 You could see that in this graph. What are we looking at? Yeah. So NFTs are gas intensive. Since they are unique tokens, they are unique objects and require much more gas and computation to make a transaction. And so all these NFT activity is really over-consuming gas on Ethereum more than anything else, right? And so according to Takes theorem, this was a fantastic tweet. NFTs account for 42% of the variation in the base fee, as in like when you go and you look at like the base fee or the Gway cost to get your transaction in,

Starting point is 00:22:14 42% of the reason of why that number is whatever that number is when you look at it is because of NFTs, as in like NFTs are dictating the direction of the gas cost on Ethereum, 42% of it. Like there's 58% of unaccounted, like, generalized Ethereum activity that's not NFTs, and then 42% of that activity is NFTs. And so you can see, like, as NFT markets heat up, base fee prices also heat up. Well, this is an interesting, I think, like, segue into our, next conversation, which is this monster Solana run. And maybe even more broadly than this, like a monster layer one, alternative layer one non-Etherium, ETHKiller sort of run that we've seen.

Starting point is 00:22:56 Because here's the narrative, David. The Ethereum people are over here celebrating like fee burns, right? And yeah, we're celebrating high fees. We're celebrating high fees in a way, right, with this fee burn metric, which is good for the entire ecosystem. And certainly way better than than pre-EIP 1559. Meanwhile, it's costing $80 to do a uniswap transaction. If I want to mint an NFT, maybe that's going to cost $150. Like people are saying, we can't afford to use Ethereum. And then they're also starting to see some NFTs on other chains, like some defy on other chains.

Starting point is 00:23:33 So Solana is one. Avalanche is another. So let's talk about that in the context of what we have seen over the last 30 days. and even just this week, even despite the flash crash, an absolutely monster run that Solana has had. So this is kind of 90 days. 90 days ago, Solana was $37. Now we're above $200.

Starting point is 00:23:57 I mean, I could look at that on the one year, too. That was even further, yeah. Yeah, it's like $3 to over $200. An absolutely monster run. What do you think is going on here? What's the narrative that's taken hold? Yeah, well, first and foremost, it's always, something moves this violently, especially to the upside, and especially when it didn't have that

Starting point is 00:24:17 much of like a history prior, it's always reflexivity. Like, people are seeing people pile into a trade and then they pile into a trade and then more people pile into the trade. The amount of reflexivity that this kicked into gear was like absolutely insane. I think this is one of the biggest, like, reflexivity price movements we've ever seen. But when something goes from like $50 to $200 in the course of like 30 days, like it's trade. traders are acknowledging that people are also acknowledging, like, how Salana might actually be the ETH killer that actually takes the ETH killer slot. But then you also see, like, there's other, other quote unquote, ETH killers that have also

Starting point is 00:24:56 performed, like, just as well as Salana in the last month, like Phantom comes to mind, even Binance Smart Chain, Pocodot. And this happens to every single bull run. And just like we were talking about with the high fees, like, Ethereum has a certain amount of block space, and it has, like, its population in people that's, willing to consume that block space. And as that population of people that is willing to consume that block space goes up, so does the cost of buying that block space, which also pushes out more and more people who outpriced them out of that block space. And so those people have to find

Starting point is 00:25:27 alternatives. We are proponents of layer two alternatives. But the other answer is that there's other blockchains that you can go do like crypto stuff on. And so the narrative, why these trades get reflexive is that everyone's like, all right, like, people are going to, like, get price out of Ethereum, where are they going to go? And I think a lot of people have included Solana as, like, the first and primary destination after Ethereum that people go once they get price out of that block space. And so this kind of, kind of created that reflexivity in the price action. So people, in my opinion, people are pricing in Solana as, like, the Heath Killer that, like, beat out all the other Heath Killers.

Starting point is 00:26:06 The Heath Killer that lived. The East Killer that lived, yeah. Yeah. So, I mean, that's an interesting narrative, right? It's like, and here's actually what this looks like on token terminal as well. So you can definitely see that as a function of the amount of transaction fees, the revenue that it's producing, it's still trading at a colossal multiple to ETH. So like as a function of transaction fee revenue, ETH is a price to sales ratio of about 40, whereas Solana is $3,800. So Salon is definitely pricing as if you take the of a capital asset. It's pricing in a tremendous amount of growth, right? In order to justify that fee revenue would have to increase by a hundred to match what Ethereum's doing. But it feels like it has sort of consolidated and taken the mantle from a bunch of the other ETH killers. Although I will also make the argument that maybe we're just in a season here, David, like Eith Killer Season, okay? We didn't get DFI season this summer, but maybe we got ETH killer season, at least over the past couple of months.

Starting point is 00:27:07 Because if you look at this, this is an assortment of all smart contract platforms. And I'm going to sort this by 30-day, David. So you see, like Phantom, you're talking about earlier, that's even up more than Solana over 30 days. It's up 509%. Salon is up 388%. But then you also have like near protocol, 250%. Kedna, 180%.

Starting point is 00:27:31 That's a blast from the past. Elgo Rand, 171%. avalanche 161% over the last 30 days. If you look at this year to date, it's absolutely even, like, it's even crazier. You have to scroll all the way down, I think, to like number 40 or something to see Ethereum in the 30 days. So it's also possible we're just in a season that we see every other cycle, that this is kind of a new narrative that's taken hold.

Starting point is 00:28:00 Do you think that's what's going on, or do you think that some of these alternative layer ones actually have some staying power. Yeah, I mean, we definitely saw this in 2017, 2018. Like when Ethereum was congested in 2017, we saw EOS pump right afterwards. But as soon as like the bear market came, all the activity on the actual Ethereum blockchain and the developer activity just died out. And then as went the EOS price. Do I think that that is, we're going to just see a repeat of that? Like perhaps not. I don't really think a bear market's going to come. And therefore like more and more activity can come on to these non-Etherium chains because people are going to continue to be priced out of the L1 and then also not migrate over to the L2

Starting point is 00:28:39 and just choose to migrate to a different L1. Also at the same time, like, Eos has not seen the level of just like brute force like marketing from like Sam Bankman Fried and FTCS, right? So this is going to be another thing we're going to talk about later on the show. But like, there's Tom Brady like shilling FTX on like global commercials, right? Along with Steph Curry who also just signed a deal with FtX. And FTCX. and FTCX is kind of just a proxy for Salana, right? Like FTCS is San Bankman-Fried, Solana is San Brankment-Fried.

Starting point is 00:29:09 So, like, if you're seeing FTX cast a wide net trying to capture new users, those new users might be going over to Salana because FTCS is like incentivized to like, you know, show Salana more than anything else. So what does this mean? Does this mean, do you think that the ETH killer value proposition is winning, is correct?

Starting point is 00:29:29 Or are we just in a cycle that a, assumes it is. What are we, what are we what's the market pricing in here, David? Yeah, I think the market is pricing in people not prioritizing decentralization as the current cohort of people that find themselves inside of crypto. I think the people that aren't yet in crypto, the people that are still not crypto people, but destined to become crypto people in the future, I think those people will care about decentralization less than the people that are already in crypto because if you're already in crypto, you probably cared about decentralization more. That's why you came here already. And so I think traders and like the Solana run are pricing in a new generation of crypto people who might not have the same like decentralization values as the old crypto people.

Starting point is 00:30:15 And so like that, which is something to be concerned about. I'm kind of concerned about the concept of like if you can be regulated, you will be regulated. It's an outstanding question as to whether or not Solana can be regulated. But when you have like a centralized company, FTX and a centralized person, Sam Bankman-Fried, like promoting. this thing. And also there are significant decentralization compromises to the Solana ecosystem, right? And so like that is going to be the thing that this industry has to like parse apart and come to terms with is like do if we want to onboard all the world, like can we, how significant can we sacrifice our decentralized values in order to onboard more and more people? And is that

Starting point is 00:30:57 going to be a net positive trade in the long term? Yeah. Two other things that that might indicate that this is kind of a cyclical narrative is, you know, one, I don't think we've seen layer two on Ethereum really hit its stride. And so once it does, this might sort of change things. The other thing I would say is like, it's really hard to get signal out of a market that prices Cardano at $80 billion. Okay? Like, Cardano does not really have defy. It has staking that you can do in Cardano. But like, there's not much there. as far as an ecosystem. I would contrast that to the Salana ecosystem

Starting point is 00:31:35 where there's actual apps, there's stuff you can do. Cardano, it's kind of like Tumbleweeds Ghost Town, and yet it's worth more. It's worth $80 billion. So I just have a hard time parsing the signal out of this, and we'll have to see how this plays out over the long term. I will say bankless is definitely biased

Starting point is 00:31:54 towards the most decentralized platforms ultimately winning, not to say that other layer ones don't have a place and other platforms won't have a place in this story. But I think the bankless thesis has been from day one, like, hey, in order to have a monetary system in a monetary unit and true defy, you need maximal decentralization. And the platforms with maximal decentralization,

Starting point is 00:32:18 the Bitcoins and the theorems of the world, will power law accrue most of the value. Now, we'll see how that thesis plays out and holds up over time. But hey, this has been an interesting three or four months to witness. All right, guys, we will be back with releases, but before we do, we want to thank the sponsors that made this episode possible. Bankless is proud to be supported by Uniswap. Uniswap is a new paradigm in asset exchange infrastructure. Instead of a cumbersome order book system where trades

Starting point is 00:32:47 are matched with other humans, Uniswap is an autonomous piece of software on Ethereum, which is what Ryan and I call a money robot. No human counterparties or centralized intermediaries, just autonomous code on Ethereum. Input the token you want to sell and receive the token you want to buy. Something brand new in the Uniswop ecosystem is the Uniswap Grants Program is now accepting applications for grants. We have been saying this for a while and we'll say it again. Dow's have money and they are in need of labor. If you think that you have something to contribute to the Uniswap Dow, apply for a grant to Uniswap. Just look at the size of the Uniswap treasury. It's almost $3 billion. This mountain of capital is looking for a

Starting point is 00:33:28 labor. Do you have something of value to contribute to the uniswap Dow? No matter how big or small your idea is, you can apply for a uni grant at unigrants.org and help steer Uniswap in the direction that you think it should go. That's exactly what we did to get Uniswap to be a sponsor for bankless, and you can do the same for your project. Thank you Uniswap for sponsoring bankless. The AVE protocol is a decentralized liquidity protocol on Ethereum, which allows users to supply and borrow certain crypto assets. AVE version 2 has a ton of cool features that makes using the AVE protocol even more powerful. With AVE, you can leverage the full power of defy money Legos, yield, and composability all in one application. On Avey, there are a ton of assets that you can supply

Starting point is 00:34:14 to the protocol in order to gain yield, and all of those same assets can also be borrowed from the protocol if you have supplied collateral. Here, you can see me borrowing 200 USDC against me, my portfolio of a number of different defy tokens in ETH. I'll choose a variable interest rate because it's a lower rate than the stable interest rate option, but I could choose the stable interest rate option if I wanted to lock in that interest rate in permanently. V2 also features the ability for users to swap collateral without having to withdraw their assets, trade them on uniswap, and then deposit them back into AVE. With AVEA, users can do this in one seamless transaction, saving you time and gas costs.

Starting point is 00:34:53 Check out the power of AVE at AVE.com. That's AAVEE.com. Hey, guys, we are back with the news of the week. David, we've got to start here with Merit Circle. Last time, I called these guys a ZK roll-up, and I was confusing them with another solution called Medis. In fact, I think I just called them a roll-up. Medis is a solution that is basically a fork of optimism.

Starting point is 00:35:18 They're doing some interesting things in the roll-up world. But Merit Circle is completely different. They tweeted me after the show. They said, I guess we're a ZK roll up now. Sorry, guys. Hey, we don't make mistakes often on bank lists. This is the first time we've had to actually do a correction on the last week. Actually, we edit those out.

Starting point is 00:35:38 Yeah, we do usually edit those out. Usually we find them before we publish it. So with that said, I think Merit Circle actually deserves some explanation. These guys are creating a Dow, which is kind of a play to earn Dow, which is a super cool idea. In my World of Warcraft Diablo days, I used to be. be like part of all of these different guilds and you'd like come together. You'd like win items as a group and you'd like succeed as a team. Basically they're kind of dowifying these play

Starting point is 00:36:03 to earn games. So it looks like what Merritt Circle is doing is one of their early initiatives is they've got 420 people on scholarships playing Axi for them essentially. So playing to earn in the Axi game and they're providing some sort of reward structure for them. I think that this concept of You launch a Dow in a play to earn like business model and you just kind of maximize profits and a portion maybe goes to the Dow is something that's super attractive. I wish I had this in my early gaming days. And I think it's going to be something that takes hold. Look, the metaverse market, the crypto gaming market is only $36 billion right now. So like we are just getting started on this.

Starting point is 00:36:49 I think it's going to be worth multiple hundreds of billions, even trillions, possibly into the future as things shift into the Metaverse. So really cool to see Merritt Circle getting started with that. Guys, I hope that was a better explanation of what you guys are up to. But yeah, really cool to see that progress. The combination of crypto asset powered gaming plus Dow's with treasuries plus players is insanely powerful, right? Like we already know people play games.

Starting point is 00:37:18 we all already know that there's these concepts of, you know, treasuries, that's nothing new. And now we have DAOs. And like when you combine all these things, like, imagine how many zoomers and whatever comes after zoomers are going to be employed by like DAOs where they pay you to play video games and collect valuable in-game assets that can be sold on UNISwap for ether or stables or whatever to go into the DAO. Like that is just going to absolutely explode. This is going to happen quick, man.

Starting point is 00:37:45 Give it a few years. Like we're not talking like, you know, In 20 years, this will be this. This is happening right now under our very eyes. Three years, yeah. Ises. All right. Let's talk about DYDX.

Starting point is 00:37:57 So DYDX governance token dropped, at least for some people. I think if you are a U.S. citizen, maybe didn't capture that drop. But doing pretty well on the markets. Yeah. What do you want to say about this, David? Yeah, congratulations for DYDX for actually getting their token out the door. if you were paying attention to Antonio on our interviews with him, we would always ask him about win token.

Starting point is 00:38:21 And of course, he would never actually explicitly say we are going to do a token, but he would say that we will do whatever the community wants us to do. And obviously the community likes tokens. And so finally, that token is actually here. And doing pretty well on evaluation performance right out of the gate. So congratulations to DYDX for getting over this obstacle.

Starting point is 00:38:42 Yeah, these are some launch stats, but 32,000 D-YDX holders, fairly even distribution, so they incented it well. Yeah, a whole bunch of open interest in this. So really cool to see. Of course, U.S. investors did not get this. Make sure to thank your unelected officials for that. There was also a little bump along the road to something to do with the staking contract. What happened here?

Starting point is 00:39:06 Yeah, the staking contract was broken. When people came and staked to their D-Y-D-X token, they would receive zero staked wrapped, staked D-YDX tokens in return. I think something like 64 users got affected by this where they staked their tokens and then didn't get anything back. So effectively burning their own tokens,

Starting point is 00:39:25 whoopsies. But I believe this has already been fixed and those people are being able to be re-enumerated by the foundation. I think that's what's happening. Very cool. All right, David, the bankless Dow and Gitcoin

Starting point is 00:39:37 just put out the ultimate Dow report. So this is, I think, the biggest, Dow report of its kind where they actually surveyed about 400 people who are actively involved working in Dow's as Dow members. And a whole bunch of insights came from this report. So first of all, really cool that this is kind of a Dow to Dow research report. Not a lot of information has ever been like created about Dow's or research Dow's. And then there's just

Starting point is 00:40:04 some fantastic summaries here or key takeaways here. One of which is Dow fatigue is real. I felt Dow fatigue from time to time if you're involved in too many DAOs, but only for a minority of highly engaged participants. I found that interesting. Also interesting is the amount of intra-Dao coordination. So there's some findings on that. As of September 2021, many DAOs have ecosystems in the billions of dollars in capital and hundreds of creators working for them.

Starting point is 00:40:36 So some people might not even be aware of the level of activity that's going on already. A lot of the people surveyed were part-time members, but there are also some full-time members who all they do for their job is work for a Dow. So it sounds kind of cool. Sounds a little bit like living the dream maybe. Anyway, we will include a link in the show notes

Starting point is 00:40:57 to the full Dow report. So if you're interested in digging in further, make sure you check that out. This next, David, this is a promise of a release, long time coming from Rocket Pool. What's going on here? Yeah, Rocket Pool. finally announced their launch date, which is going to clock in at the 6th of October 2021, so under a month.

Starting point is 00:41:17 And so this has been a long time coming. Rocket Pool has been with Ethereum since 2017. One of the few ICOs that was, A, a good ICO, and then also B was building throughout the bear market, super committed to decentralizing staking for Ethereum. Yeah, so actually, if you don't know what Rocket Pool is, it is a decentralized staking as a service application on Ethereum for people that don't have. have 32 eth or people that just want to actually run nodes for the rocket pool application and then actually receive more ether rewards than they would if they had just stake solo. These products are for you. And so it's been a long time coming.

Starting point is 00:41:54 It's hard to do decentralized staking as a service. That's why they've had to like rewrite. Because as an eth-2 has been developed, Rocket Pool has had to develop around Heath-2. Heath-2 has like changed its course a number of times. Therefore, it made as a forcing function, Rocket Pool. changes course a number of times. But now we are finally here with a launch date, October 6th for Rocket Pool Staking as a Service app. So congratulations to the Rocket Pool team and community for

Starting point is 00:42:20 getting to this point. I think this is the second, like obviously the best way you can keep the Ethereum Network decentralized and, you know, stake your eth in a decentralized way is to be a validator yourself, run it at home, run it on a Raspberry Pi, you can do that. It's actually not that difficult. But this to me is probably the second best way, at least it promises to be. I should mention that October 6th date, it's going to be a phased rollout. So only a certain amount of stake will be allowed in the first phase of that rollout. And then they have a second phase where they're going to open it up to more ETH and a third phase and a fourth phase. So it will be sort of a scaled rollout over time.

Starting point is 00:42:57 But if you've been waiting to stake some of your ETH for a more decentralized solution, not wanting to run your own validators, you might want to check this one out. David, let's talk about Hop Protocol. it is growing in terms of integrations, who's Hop integrating with? And what is Hop for people who haven't listened to previous roll-ups? Hop is a protocol to protocol,

Starting point is 00:43:19 layer two to layer two to Ethereum, bridging protocol to allow assets to flow through layer two's without having to go back to the Ethereum main chain. And then if you do want to go back to the Ethereum main chain on optimistic roll-ups, you have to wait seven days. But Hop Protocol will ferry you across instantly for a small fee. So it's a layer, it's a layer bridging platform, similar to Connects as well. And they've already integrated like Polygon, X-D-D-D-D-S-D-C, Optimism. And they also have

Starting point is 00:43:47 USDT, USDC, Matic. And then they are working on their Arbitrum bridge with Ether and Di. And then something hidden as well. So Hot Protocol continues to build like a webbing of bridging between all of these different layers of Ethereum. So many people have been building this entire time and building with the plans to deploy on layer two. I feel like Argent is another one. So probably my favorite smart contract wallet, the most usable that I've seen. I think they've been stymied in terms of their growth because gas fees are so high on layer one. So there's been this persistent question. It's like, when is Argent coming to layer two? Looks like they're teasing us some more. Can't wait to share our

Starting point is 00:44:26 layer two wallet when in the next few weeks, this tweet from Argent with a screenshot and I think a post about their layer two plans. David, did you dig into this? What is Argent planning to do, do you think? What can we expect? I think that this is just execution on that same talk that we had with Vitalik about the combination of smart contract wallets on layer two. Like the quality of life is going to be orders of magnitude better when it comes to smart contract wallets on layer two. And so it's really going to be, it's really going to unlock so many integrations that would have been largely unfeasible on with a smart contract wallet on layer one. And so as defy gets built on layer two's, Argent wallet is going to come over and be accessible towards defy in layer two's.

Starting point is 00:45:13 And so I think it's really going to be a fantastic portal towards cheap and instant defy stuff in your mobile wallet, which is really a very powerful way to onboard so many more people. Yeah, the beauty of a smart contract wallet, of course, is it's normie friendly. I mean, you have social recovery. You don't have to memorize like 12 to 24 keys. And if you lose your keys, it doesn't matter because you have social recovery in place. This is a huge UX upgrade. And I'm pretty excited about Arjun's ability to execute on this because their original wallet has been absolutely fantastic, very easy to use. So, well, high expectations. I'm excited to see what they finally release. David, let's talk races for a second.

Starting point is 00:45:54 This is something that we thought would happen and now is happening. We've got NFT-specific. social networks that are getting funded and coming to market. This one is hype, and they are announcing a $1.5 million seed raise from electric capital. What's the story here? Yeah, we all know that NFTs are social phenomenon. And this kind of reminds me of like the loot structure for building an ecosystem around NFTs. If you guys didn't watch the last week's roll up, it was a new kind of NFT that doesn't actually have a JPEG or any sort of file embedded with it. It's just text in the token. And then now we have like a similar kind of model where we have this hype, new NFT like social media platform. But it's not specific towards NFTs.

Starting point is 00:46:39 It is just a wrapper around NFTs and allows you to embed your NFTs into this new social media platform. And a social media platform can wrap around the NFT ecosystem. And so I think we're going to see some pretty cool stuff coming out of the intersection of social media and NFTs. And hype seems to be building a platform to allow people to tell stories. or just do things with their NFTs that, you know, Twitter is like the best we got when it comes to, like, NFTs and social media. Like everyone's putting in their profile picture as their avatar. And so hype is taking this, which is clear demand, to have some sort of social environment with NFTs and building an open ecosystem around NFTs without actually dictating what those NFTs are.

Starting point is 00:47:21 Yeah, look, like somebody's going to build the Instagram for NFTs basically. It's like, you know, Facebook started as just a web platform, right? but they totally missed at first the mobile initiative where people are taking pictures and they just wanted, and Instagram totally captured that medium. Well, now we have a new medium shift. We have these things called NFTs that are all surrounding digital scarcity, social signaling, memetics, if you listen to that bankless episode. And I think new social media platforms have to be built that actually optimize and draw the

Starting point is 00:47:52 strengths out of this entirely new medium. So I don't know if it's hype or if it's going to be something else, David, but I think we're going to see an Instagram for NFTs being created here. And then, of course, the big social media companies, they'll be slower movers, but eventually they'll figure this space out too. Let's talk about this. tokenizing MEV. So Eden Network just got some funding from multi-coin, jump capital.

Starting point is 00:48:21 Who else? Wintermute, Defiance Capital, a few others as well. And what is Eden Network, David? what are they trying to do here? Yeah, this seems to be a way to manage and control M-E-V in the same way that FlashBots has. And so it is a system or a protocol that is parallel to Ethereum that if you are proposing an Ethereum block,

Starting point is 00:48:43 you can propose it under the Eden network, and it'll be an Eden block, and the M-E-V inside of this block will be managed according to the rules of the Eden network. Same kind of just as FlashBots, but they are doing it in a different way. and my technical knowledge is going to be limiting how these differences actually are,

Starting point is 00:49:01 but it's basically there is a world of MEV out there and there are different systems for managing MEV, and these different systems point the captured value of that MEV into different spots based on how the system is constructed, and this Eden network is doing it differently than FlashBots. Yeah, and the MEV problem is really a thorny problem. We've done podcasts on this in the past with Flashbots

Starting point is 00:49:22 and the paradigm folks. What's really interesting is this post from two shows, And I think the approach that Eden has had on this, or maybe the marketing surround it, has really stirred up some controversy in the MEV space. So I think these two paragraphs in particular, where Tushar from Multicoin is talking about flashbots and also Blox Route, two other MEV solutions, and says this, other MEV projects such as flashbots and blocks route, attempt to create efficient markets between mining pools and bot operators to extract as much value from average network participants. These systems do not attempt to mitigate malicious MEV. Instead, they make it easier to

Starting point is 00:50:01 extract. Their systems are closed with centralized integration processes that exclude some block producers and leverage opaque reputation scores that favor certain addresses over others, whereas Eden is focused on reducing malicious MEV and creating positive externalities for Ethereum as a whole. That's really interesting that they say they are trying to reduce, creating positive externalities for Ethereum as a whole and reduce malicious MEP. Well, Robert Miller from FlashBots had a thing or two to say about this post. David, do you want to get into it?

Starting point is 00:50:35 Yeah, again, the details. The MEVs are really hard subjects. So I'm not like an MEV expert as to how this works. But like you said, this has stirred up a ton of controversy from the Ethereum community, especially from the FlashBots team. Robert Miller says, contrary to multi-coins claims, minimizing MEV is a core component of FlashBots mission and products. That shows from our funding of fairness and ethics research, work on MEV-aware,

Starting point is 00:51:00 D-Apps, and hundreds of users that have used the FlashBots to skip the Mempool and protect themselves from front running. So there's some jabs being thrown back and forth between Tushar and Robert Miller and overall like the FlashBots team and ecosystem. FlashBots has like a pretty insane amount of alignment with the health of Ethereum and therefore also like the deep Ethereum community

Starting point is 00:51:25 and so the deep Ethereum community did not like the way that this Eden network was messaged by the multi-coin boys who have also done a decent amount of like marketing damage. They don't mind trash-talking Ethereum. They've been they like to trash talk Ethereum

Starting point is 00:51:40 quite a lot. I mean Robert Miller says explicitly, Multi-coin is lying about Eden. It's super interesting. It's not permissionless or transparent. Anyway, you guys can get up to speed on some of this drama. But I think we have a to do probably on our side, David, at some point in the future, we've got to sort through these different M-E-V solutions and roll this into a podcast, into a panel to help educate folks get our arms wrapped

Starting point is 00:52:07 or ourselves. Yes, that's mainly why we do panels to understand ourselves. Guys, we should talk about the jobs that are available to you in the crypto space as well. For the best jobs, you can go to the bankless job board. We have three posts today that we want to profile. The first is a senior software programmer at popcorn. Second is a community lead at popcorn. Popcorn is a decentralized yield generating protocol. It looks super cool.

Starting point is 00:52:39 You check them out at popcorn.network. But if you're not a programmer, this community lead position might be sort of interesting to you. I put those communication skills to work. We also have a senior front-end web developer at Tracer Dow. All of those are featured. There are dozens of jobs that you can find on the bankless job board. So make sure you check that out. All right, David, you want to get to the news?

Starting point is 00:53:01 Oh, boy, here we go. This is going to be a long one. Regulatory. You ready? Let's talk about our shadowy super regulators, David. That is the subject, I think, this week and everything that they are doing. We've got to start with maybe the few events that happen, starting with Uniswap. So on Friday, just after we recorded our last weekly roll-up,

Starting point is 00:53:23 it appeared that there were some investigations going on at Uniswap and from the SEC. Tell us about that, David. Yeah, so Uniswap got a letter from an investigative letter from the SEC asking, just for more information about the business. I mean, so in theory, these letters are totally just peaceful and just casuals. I was like, hey, we would like to know more about you. but also like the context, the subcontext is that like we are looking to like figure out what to do with you guys. And so like while it doesn't indicate that they, that Uniswap has done anything wrong or is being charged with anything, the SEC is just probing into Uniswop trying to like get more information is not a positive thing.

Starting point is 00:54:04 It's definitely a negative thing. This is not the kind of letter you can ignore, right? It's not the kind of thing. Oh, junk mail, just going to throw that out. As you see, I don't know them. I mean, it's going to recycle that one. You cannot ignore these letters. And also it's like, you know, perjury, some very bad things can happen.

Starting point is 00:54:20 If you falsify the letters or don't provide the necessary information, it just gets you in the bad books with the SEC as well. So I think investigation is maybe a bit more serious in some ways. It's not a formal charge, but this is not a small matter. Like, I don't know what questions are being asked from the SEC to Uniswamp, but you can bet that there's a lot and like very detailed, right? And so Uniswap is definitely, this is Uniswop Labs, of course. They're definitely going to need to put in the time to answer these questions as accurately as possible.

Starting point is 00:54:54 So that, that in and of itself is sort of a shot across the bow. Yeah, yeah. And that is just the first of the regulatory issues that came out this week. So, like, that story is currently being, like, told, like, we're going to be hearing more and more from this. I'm sure the SEC is not done with Uniswap or DFI. This is just the first of a very. long story. But that story took another turn this week when Coinbase was informed by the SEC that the SEC, if they release a product, which they have been in open communications with the SEC,

Starting point is 00:55:28 if Coinbase was told by the SEC that if they release a lending product, then the SEC is going to sue them. And that is extremely aggressive. And there's absolutely no dialogue going on between the SEC and Coinbase or anyone in the crypto space. And so this is, This has been a, this blew up the whole Twitter sphere and cryptosphere in the last two days. What do you mean by lending product for people who aren't familiar? What does that mean? Right. So people might remember BlockFi getting a cease and desist letter from the SEC because the SEC said that their lending products are securities, which has, you know, some debate about that. Again, I'm not a lawyer. Don't listen to me about any of this. But this is the same kind

Starting point is 00:56:10 of deal. Like so lending products are maybe securities and the SEC's trying to get CoinBases lend product, which is just the same that we've known like all these other centralized lending products, right? Like come and deposit your Bitcoin, your ether, your stables, and then we'll get a yield on them. The problem is that the SEC doesn't like is that like how they are, how yield is achieved on these things is opaque. And so investors don't have like good clarifications or clarity on how that yield is coming. And so like if like a black swan event happens, maybe depositors might actually lose their deposits, which is not enjoyable. And so that's what the SEC is claiming that they are trying to protect from. What's Coinbase claiming? Coinbase is claiming

Starting point is 00:56:49 that none of this qualifies as a security. It's like, you know, we're lending money. We take your ETH, we take your Bitcoin, we lend it, just like if you, you know, lend money to a bank and they generate interest on those returns, it's just a lending product. This is not a security and is therefore outside of their jurisdiction. But the SEC is coming to back and saying, Coinbase, if you release this, we will sue you. Right. Right. What they didn't do is provide explanation as to why the lend product is a security. They just said, if you release it, we're going to sue you, which is meaningfully different than providing any sort of guidance or indications as to their logic or analysis as to why this thing is a security at all.

Starting point is 00:57:32 apparently in the letter, in a letter to Coinbase, they said that they have done the analysis, but they didn't share what that analysis is, right? And so the threat is that, like, when we sue you and take you to court, we already have our analysis ready to go. Rather than broadcasting that to the entire industry and saying, like, here is our guidance, here is our analysis, and allowing the industry to work around that, they say, like, okay, we have our analysis, we're going to keep our cards close to our heart. And then if you, like, you know, do anything wrong, and if you break this analysis, we're going to sue you, which is just like infuriating. It's infuriating. It's what that is.

Starting point is 00:58:10 Yeah, it's absolutely infuriating. And I can understand the frustration. This is not a typical move, right, where a three-letter agency from the Fed comes and says, hey, we're going to sue you if you do this thing. And then the company that's being threatened like this comes out and tells everybody about it, right? Usually the legal advice that you get in a situation like this is like, don't talk about it. Right. Until we can reach settlement. until the investigation's over. But this is Coinbase now saying, okay, it's on. We're going to let everyone know what's going on.

Starting point is 00:58:41 And so the chief legal officer has written this blog post. That's clearly not meant, maybe it's partially meant for the SEC, but it's more meant for public support, wouldn't you say? The title of it, the SEC has told us it wants to sue us over lend. We don't know why. And then Brian Armstrong put out this Twitter, thread about, and it begins like this, some really sketchy behavior coming out of the SEC recently, and he goes into storytime where he talks about what the SEC is doing. He says millions of

Starting point is 00:59:14 crypto holders have been earning yield on their assets over the last few years. BlockFi is an example of that. David, as you said, it makes sense. If you want to lend out your funds, you can earn a return. Everyone seems happy with that. A bunch of great companies in crypto have been offering versions of this for years. So Coinbase came out recently and said they would be launching their own version. If you're a Coinbase customer, you might have seen the announcement. In fact, Gemini has a version of this, David, like BlockFi. Like, this isn't even the only exchange. Yes.

Starting point is 00:59:41 It's doing this. CELSIUS. We were planning to go live in a few weeks. So this is all built out. It was all ready. So we reached out to the SEC to give them a friendly heads up. And this is what they always recommend, by the way. The SEC always says, hey, come tell us.

Starting point is 00:59:54 Let us know first. Right. If you're doing something, well, in this case, it sounds like it kind of backfired. They responded by telling us this lend. feature is a security. Okay? Seems strange. Brian says. How can lending be a security? So we ask the SEC to help us understand and share their view. We always make an effort to work proactively with regulators and keep an open mind. They refuse to tell us why they think it's a security. Instead, they subpoena a bunch of our records. We comply. Demand testimony from our own, from our employees.

Starting point is 01:00:25 We comply. Then tell us they will be suing us if we proceed to launch with zero explanation as to why. Brian says, we're committed to following the law. Sometimes the law is unclear. If SEC wants to publish guidance, we are also happy to follow that. It's nice if you actually enforce it evenly across the industry, by the way, he says. But in this case, they're refusing to offer any opinion in writing to the industry on what should be allowed and why. No clarity. This is something Gary Gensler promised, David, clarity. We're not getting clarity. Instead, they're engaging in intimidation tactics behind closed doors. Whatever their theory is here, feels like a reach land grab versus other regulators.

Starting point is 01:01:05 He goes on with a few more tweets. I won't finish this out, but that gives kind of the tone for what's going on here. And here's the thing, like Coinbase from day one has always been their message, their branding,

Starting point is 01:01:16 their approach to all of this, has been, we're going to be by the book like US regulated, okay? Finance, like Bitmex, these companies will be more aggressive. They'll list other products earlier.

Starting point is 01:01:31 But we're going to play it by the book because we think that's the better long-term strategy for a company and for a U.S. based company at the cost of growth. And they could have done things the Binance way and gone into kind of hypergrowth. But they decided to play it by the book. And it feels like they're getting punished from that. And like, I'm going to say, if you're a regulator, you can't get along with Coinbase, I mean, who can you get along with? Yeah. They're like the goody two shoes, you know, teachers' pet of the crypto industry. They do everything. Right. And like, just like you said, if the teacher's pet is getting in trouble by the teacher,

Starting point is 01:02:08 then there's obviously biased towards the whole entire classroom, right? Yeah. Something wrong with the teachers. What's going on? This is hitting the front page of the Wall Street Journal, by the way. SEC Investates, Coinbase over crypto lending plan on the front page of the Wall Street Journal. So they are getting the press. I wonder what kind of public support they're getting. they certainly have the crypto industry support. Here's a take from Naraj, David. You want to go into this? Yeah, so this is something we haven't covered about this yet.

Starting point is 01:02:37 The SEC wants Coinbase to turn over the name and contact information of anyone who has said that they are interested in their lending platform. Wow. So, like, think about this. If this is a security, the people who have expressed interest in purchasing said security doesn't change whether that's a security or not. And so Niroz says, why would that be relevant to the security? their investigation into whether the program is compliant or not.

Starting point is 01:03:04 Wow. And so the SEC is targeting people that have expressed interest in lending their crypto assets on Coinbase. They want your name. They want your address. They want your phone number. For why, I have no clue. To prosecute them in the future.

Starting point is 01:03:19 I have no clue. I mean, I do have a conspiracy, actually. So I'm on this list because when I saw the Coinbase email, like, I love to try things in crypto. So I put my hand up and I was like, yeah, I'd love to tell you. I'd like to test this. I need to get a new co-host sometime soon. I'm on the SEC's list for this, but why would they want that?

Starting point is 01:03:38 What's, like, what are some of the ideas floating around? Okay, so the conspiracy, which, again, I'm on board with, is that when we, again, when we zoom out and view the nation state as a holistic concept, we have the Treasury who's frustrated about people who aren't reporting their crypto taxes, which is legitimate, and they have tried and found, tried to find, ways to find the same information. Like, who are all the people that, like, own crypto or have interest in crypto? And then we at, now we have the SEC coming from the other side who's making this claim

Starting point is 01:04:11 that this lending product is a security when everyone's like, why the hell is this a security? While they are making that claim, they're asking for everyone's, you know, name, birthday, address, their, their nation's say identity. And so, like, the conspiracy is that, like, the SEC and the Treasury are like Pinser attacking crypto people by trying to figure out who they are, right? And that is, in my opinion, an infringement on personal privacy and personal sovereignty. That's my take. Look, I don't know if that conspiracy theory, like, holds, but you have to, I don't know about our explanation, right? Like, what is the explanation for why they are asking for all of these details? Here's kind of a take

Starting point is 01:04:52 I meant to say when we were talking about uniswap. This is the complete backwards way of how a regulator should approach a uniswap or a coinbase. I mean, Coinbase has built a phenomenal company, like a company that the U.S. as an economy should be proud to host within its borders, right? Like part of the next Silicon Valley, but Uiswap, too. Uniswap is even more amazing. One of the most innovative and empowering tech projects to come out of an American team

Starting point is 01:05:22 in the last decade. That's what I think uniswap is, David. And I feel like the U.S. should be giving Hayden Adams and the Uniswop team a medal, right? Like, thank you for doing this. Instead, those guys are getting an investigation. This is like a financial prison type stuff. This is completely backwards from the way they should be handling it. Yeah, what's going on to me is like we have found ways out of this financial prison using defy.

Starting point is 01:05:48 That's what defy is. It breaks you free from your banks. This is the lines we've been using. And then we have the treasury and the SEC is like, no, no, no, no, get back in your cage. I don't know how did you get out of your cage? Get back in your cage. It's basically what they're doing. Yeah, and I do feel like that. Let's do some other takes from around the crypto industry. This is from Jake Chavinsky. I think this is interesting. David, why don't you read it? Yeah, Jake says, if the SEC thinks that all non-bank interest products are securities that require the offer to become a public reporting company, then they're not just picking a fight with crypto. They're going after the entire fintech space. So this, to me, this take lends itself towards head lens. itself towards the whole concept of protecting incumbents, right? Like protecting the banking incumbents. You know, the banking side of the world, all the bankers,

Starting point is 01:06:34 they were probably okay with fintech because they were built on banks. But now that there's crypto, fintechs don't need to be built on banks anymore. They can now be built on crypto rails, which is, again, breaking free from your bank. So to me, this illustrates how this might be incumbent protection rather than just like, you know, investor protection. get back in your cage. Get back in your cage. Yeah.

Starting point is 01:06:57 Look at this. Adam Cochran, part of me wonders if the SEC's unwillingness to provide coin-based guidance on why they are blocking their lend program is because they can't. Right. Like maybe they've realized that things they think are a security may not at all be accounted for in an act from 1933. They don't like it. They have concerns.

Starting point is 01:07:16 Feels to them as if it should be a security. But under the Howie Test and Exchange Act, they know it won't really stand up in court. and they don't want to set a precedence that would make this industry harder on them. So Adam's basically saying maybe they're doing this backroom threatening because they don't actually have a case, right? It's a bluff card. It's a bluff. And Coinbase is being like, no, sorry, we're calling your bluff.

Starting point is 01:07:38 Maybe they've finally overreached and like played their hand, extended their hand too far. And maybe now is the time we're Coinbase. And why shouldn't it be Coinbase, David? They're so well-resourced. like they have the reputation, they have the prestige, they have the leadership to actually stand and fight this. Maybe now is the time. Maybe this could flip into a good thing. Hey, SEC, get back in your cage. Get back in your cage. So some of these crypto natives, what does Chainlink God think about?

Starting point is 01:08:07 Here he is responding from Brian Armstrong. Right. So Chainlink God says, so the SEC is pushing people through a minefield without telling anyone where the mines are, yet at the same time telling to not step on any of the mines or else you will die. This makes zero logical sense. Right. Yeah, this is just the approach that we have been asking. As long as I've been in crypto, we've been asking for more regulation clarity.

Starting point is 01:08:31 And instead of giving it to us, they're just taking us to court, which is absolutely insane and absolutely irresponsible and against the American principles. Get back in your cage. Get back in your cage. Mark Cuban.

Starting point is 01:08:44 He had a response to this, too. Good to have more allies. And Mark Cuban is definitely an ally. He responds to Brian, Armstrong, he said, Brian, this is regulation by litigation. They aren't capable of working through this themselves, and they're afraid of making mistakes in doing so. So they just leave it to the lawyers. Just the people you don't want impacting the new technologies, this is the key line. You have to go on the offensive. This is Mark Cuban saying, hey, they're trying to do regulation by litigation.

Starting point is 01:09:12 So, like, they better arm up because we need to go on the offensive as a crypto industry and settle this in other ways. I settle this in the court of public opinion, settle this in the actual court system as well. We need to get offensive because they are clearly being aggressive. It's no longer like live and let live. This is actually some aggressive impact. Like, I want the ability to lend through my Coinbase account. I like Coinbase. I use it.

Starting point is 01:09:38 Why shouldn't we have this ability? These are all great questions. Jerry Brito, what's he say? Jerry Brito says, if true, this is pretty underhanded. I know it's easy for me to say, but Coinbase should go ahead and launch its product. Let the SEC sue it and go to court. Let the SEC make its case and let a judge decide what the law is. Jerry Brito basically saying, Coinbase, take the offensive.

Starting point is 01:10:04 Coinbase, don't ask for permission. Coinbase, we need you guys to break free out of this financial prison and lead the charge out of it, right? and to push the SEC back. This is government overreach, and we need people to draw a line in the sand and saying, like, no, no, no, like back off. That's how this can get resolved, though. Right, right.

Starting point is 01:10:25 And if they're not going to, if the SEC is not going to give us regulation willingly, we will force them to give us regulation by beating them in court. Well, then you have, like, then you have court case, like rule rulings, and you have precedent established. I just wonder how long this process is going to take.

Starting point is 01:10:42 So like, I do think this is, the SEC's not going to give this clarity. So we have to get clarity by the courts. It just takes so much longer to do it. It'd be so much easier if you had a regulator that was just like armed across the aisle. Hey, crypto's doing some great things. We have these concerns. Let's address these concerns over time. We're not getting that from the SEC.

Starting point is 01:11:02 Maybe we're getting it from other government agencies. I'm not sure. But it doesn't feel like we're getting that from the SEC right now. So I guess we have to go to court. But what does Coinbase do? Do they just release this process? in the meanwhile. Yep.

Starting point is 01:11:14 And then fight the court battle alongside. I wonder if they'll do that. I hope they do. I hope they do. Here's the big take here. I just have one question to SEC. Who are you trying to protect? Their mandate is to protect investors, David.

Starting point is 01:11:31 Are they protecting us? Yeah. This is not national. They're investors in banks. No, investors in banks, Ryan. Bank investors. That's who their job is to protect. It feels like I don't actually know

Starting point is 01:11:42 who they're trying to protect. I know it's not the average retail investor, right? Is it, is it banks? Is it the treasury? Is it their own regulatory control? Is it some other shadowy figure in, like in the nation state government? I'm not sure. I don't know, but it's not us. I do know that. But that would be the question I think we would have to Gary Gensler. It's like, who are you guys trying to protect? I'm not feeling protected by this. I didn't get my, the plot. Yeah. Did you get your D-Y-D-Xird?

Starting point is 01:12:14 Absolutely not. Do you feel protected because you didn't make... Lost out on a significant amount of money. Let me tell you that. Okay, so this came from Eric Connor who talks about Anthony, Anthony Sizzano. Anthony and I talked about this on a recent podcast episode, but I think the elected officials are extremely underestimating the influence coming from the crypto community. There's a gigantic power, culture, and wealth shift happening that most are...

Starting point is 01:12:41 are ignoring. And I think the SEC is making this mistake as well. Like the, the, the crypto news ecosystem, like what you guys are listening to right now, is vibrant. We got Mark Cuban. We got like all of crypto Twitter who, like, there's a lot of wealth in crypto. And so like all of these people have interest in like rallying their support behind Coinbase and against the SEC. We have Reith, Reith Witherspoon now. Yeah. We got, we got Reith. Inside joke. Okay. But like that all the nation state regulators don't understand how vibrant and engaged the crypto community is and how willing we are to like die for what we believe in. Like we will take this all the way to the very end. And I'm not sure the regulators will do the same for whatever the hell they believe in.

Starting point is 01:13:29 Yeah, I'm not sure there's that fervor either. And yeah, this is, I think this is actually going to turn into a good thing for crypto. So there you have it, guys. Are we at war with the regulators? I don't know. We didn't fire the first shot, though. It seems like they did. We'll see how this ends. Let's get to some other things really quick, David. Oh, this is actually related to regulatory. So Brian Quintes, when we had on the show on Monday, former CFTC chair, he just, commissioner, excuse me, he just joined A16Z to help advise their crypto fund. So that was something Brian hinted at. He was going to do something maybe next in crypto. Looks like the next thing he's doing is joining A16Z as. a regulatory crypto advisor, I would imagine. So good move, Brian, fantastic person, great values aligned ecosystem. I'm sad. He's no longer a regulator because we need people like that on the other side, but at least he's staying in the space and fighting for values this way.

Starting point is 01:14:27 Yeah, hopefully he joins the offensive fight rather than just the defensive fight of the crypto industry. Exactly. This is an interesting juxtaposition. So apparently in Panama, they're doing the complete opposite. They're trying to become competitive. with cryptocurrency and the digital economy that is coming. David, what's your take here on what's going on in Panama Congress? Yeah, so Panama is kind of doing a similar thing as El Salvador, but with a little bit more options. They are trying to, like you said, the gist of the bill is that they are trying to make their country crypto compatible. And so that is using crypto as payment rails, that includes Bitcoin and Ethereum, which I think implies all the stable coins on top of it,

Starting point is 01:15:09 but also goes even further. They talk about making their Dow's legal entities inside of Panama as well. So this is pretty, like, precise and well-versed crypto regulation coming out of Panama. I think there still needs time for this story to steep and really get digested by the broader community. But we are seeing, again, nation states have relationships with crypto and then choosing very intentfully what those relationships are. El Salvador and Panama choosing very positive stances towards crypto. United States, choosing very negative stance. I don't know that nation states get that they actually have to compete for their citizens

Starting point is 01:15:45 in the 21st century, right? Like that should be a global competition. And so what are the crypto-friendly nation-states? Maybe Panama's becoming one. Let's burn through some of these, David. MasterCard is acquiring cipher trace. What does this mean? Yeah, CipherTrace is a kind of a blockchain analytics company.

Starting point is 01:16:02 So like, you know, tracing transactions and addresses through the blockchain, making it more, you know, illuminating what's actually going on. And MasterCard, which is, again, a payments network has acquired them, which is a very intentful and with a very specific direction as to how MasterCard wants to enter the crypto space. So that is pretty interesting. It says, this article says, details of the acquisition were not disclosed. So we are going to hear more about this in the future, I suspect. Lido is also a staking company that provides a staking organization in Dow, really, that provides staking support for ETH. Now they are also including. staking support for Solana for their sole token. So we knew that was coming and it looks like it is here

Starting point is 01:16:43 now. Congratulations to Lightup. Steph Curry. This was big. Steph Curry is partnering with FTX crypto exchange. FtX is just making moves in celebrities, in sports and gaming and everything. They're trying to buy their way into mainstream legitimacy. And I think doing an okay job, Steph Curry is like definitely a good name to add to the roster. What's your take? Yeah, again, right after Tom Brady, right? So Tom Brady, probably the most famous football player out there. Steph Curry, probably the most famous basketball player out there. We do know that, like, sports players really like crypto for some reason.

Starting point is 01:17:20 There's resonance behind people that play professional sports and investing in crypto. And Steph Curry also recently tweeted out, like, yo, what's up with this crypto thing? Crypto Twitter, what's up? And FTX, again, doing a fantastic job, just like buying the support of, you know, public figures, I think I think it's going to do like extremely well for them. Those are the options that are available to you in Solana token pumps. A ridiculous percentage. They bought Tom Brady as well to have him as a sponsor and a commercial came out with

Starting point is 01:17:53 Tom Brady. High production, high value commercial, yeah. Yeah, pretty good. And this is like, so I'm kind of divided on this, right? I don't love that crypto banks are dominating all of the mine share because there's so much more to crypto than just what FTX provides. Yet at the same time, this is how we mainstream what crypto is doing. This is how we make it normal.

Starting point is 01:18:16 Now it's not just the SEC against all the weird people on Twitter doing shady crypto stuff. They also have to go against Tom Brady and Steph Murray and his entire fan base. That's a harder fight. I think we are breaking into mainstream consciousness at this point. Right. Now, going through sports is actually a really, really smart move. and I mean, I'm with you in that I don't like crypto banks, like being the representative face of crypto according to like the commercials that we see on television.

Starting point is 01:18:44 But also who else is going to do it, right? Like it's not going to be Uniswob. Uniswob's not going to run a commercial. It's got to be a crypto bank. So, I mean, somebody's going to buy out all the celebrities and turn them into crypto celebrities. And like by the very definition, it can't be the defy apps. It has to be the centralized companies because that's really where they get alignment the most. Ethereum stuff, Med-Mass just crushing it.

Starting point is 01:19:06 They just surpass 10 million monthly active users, largest non-custodial crypto wallet in the world. I've heard rumors that that's actually like 14 million now, so even since that this was posted. So they're just absolutely exploding in growth. I feel like it's healthy growth, too. It's not like 2017 growth. People are actually using these protocols. So there's a different feel and flavor there. David, let's go through some of this NFT stuff.

Starting point is 01:19:30 Did you know that Polygon is actually compatible with OpenC? This is something I did not know. And that's one tidbit, but the second is this. There's actually more OpenC NFT users on Polygon than Ethereum Slayer 1. What do you think this means? Yeah, I think people are finding ways to do all the things that they want to do on Defi, but without having to pay all the fees. And that has always meant L2s, or in this case, side chains.

Starting point is 01:19:56 and that's how you can mint your NFTs, because minting NFT costs over $100 on Ethereum. I think it costs under a dollar on Polygon. And that NFT that you minted can be sent back to the Ethereum main chain and have that sovereignty tied to Ethereum itself. And so congratulations to the Polygon team for getting so much NFT volume on Polygon because there's like a lot of people that have straight up been priced out

Starting point is 01:20:23 of NFTs on the main chain, and we definitely don't want to lose those people. to just either lack of interest or centralized chains. Immutable is doing the same thing. So now you can mint and trade on immutable X. Super cool. Of course, this is a ZK roll-up. It's fully secured by Ethereum.

Starting point is 01:20:41 So it's not a side chain, but that provides another avenue for cheap minting of NFTs and trading of NFTs. It's great to see. Also, Christie's is doing more in the NFT space. What's this, David? Yeah, they're selling off ArtBlock sets, Art Block curated sets one through three as part of their post-war to present auction in New York on the 1st of October.

Starting point is 01:21:04 So they have a chromy squiggle and a bunch of other art block sets from the first three sets out of art blocks. So art blocks making their way into mainstream culture. It's kind of cool. Prediction markets on Defi are a thing. This is Polymarket. They have just introduced an NFT floor pricing market. So you can long or short the floor price of something like. Cryptopunks or board apes or even loot. Really cool. We'll include a link in the show notes

Starting point is 01:21:31 where you can see that live on Polymarket and start getting price exposure to these NFTs in a less direct way, but maybe a more capital efficient way depending on what you're trying to do. Also, David Vitalik has been posting about NFTs, like big brain stuff about NFTs on layer two, getting them on layer two to cut fees. What's the TLDR of this ETH research post that he published. Right. So earlier in this episode, we talked about that post of the, that was the correlation between gas consumption and NFTs. As NFT activity heats up, it disproportionately makes the gas price move in the same direction. And so Vitalik has identified this as a huge problem. And he says that the NFT's ecosystem is growing rapidly and is a significant part of Ethereum's gas change consumption.

Starting point is 01:22:18 The youth and relative lack of entrenchment of the ecosystem, as well as the greater need to avoid high fees due to the non-financial nature of the large part of the NFT sector makes it a prime target for moving on to layer two. However, this opens the question of how to move, how a move to layer two could actually happen. One simple proposal is to socially coordinate a move to a single roll-up platform, as an optimism or arbitram, but this has some important downsides. All existing major EVM-capable roll-ups have backdoors, centralized sequencing, or other

Starting point is 01:22:48 training wheels, and it's risky to commit an entire ecosystem to a single role. up when there's uncertainty as to how that roll up will graduate beyond such features. And so what Vitalik's blog post is offering is a way to make NFTs move on to layer two without having to commit to any specific layer two. And so this is maybe a short-term stopgap as allowing you can have your NFT on layer one and then have it wrapped and then wrapped onto a layer two. So your NFT actually stays on layer one, but the wrapped version can hop around seamlessly around other layer 2s.

Starting point is 01:23:23 And then maybe as the layer 2 ecosystem gets more built out and more diverse and more solidified, then we can actually have native NFTs on layer 2s after some of those important design choices have been built out on the layer 2s. It's actually a really complicated post.

Starting point is 01:23:38 So if you want to learn more, you've got to go read the post yourself. That guy has some good ideas sometimes. Just sometimes. Usually valuable lists. What's going on? Oh, yeah, loot time, loot time. So Dom, Dom, Dhoff,

Starting point is 01:23:49 the guy behind the whole loot project that kickstarted that Hallmania, has submitted a proposal to burn the keys to the loot contract, which would just basically remove the option of minting any more loot bags that is up for debate as to whether the community wants it or not, but the proposal is out there. There you go. David, let's touch on Bitcoin stuff. El Salvador said they would purchase a bunch of Bitcoin when they legalized it as tender, and here they are. They just purchased 200 Bitcoin. This is really interesting. This is the president. tweeting this out, buying the dip, winky smiley emoji, 150 new coins added, just like a

Starting point is 01:24:28 bitcoiner. He is telling about buying the dip as he is purchasing the dip and broadcasting that on Twitter far and wide. Interesting to see for sure. Yeah, really like quacks like a bitcoiner, walks like a bitconer. You can also see this on the usage side. So of the top six finance apps in El Salvador, all of them are Bitcoin apps. PayPal is number seven. El Salvador's largest bank is number eight. So it appears making Bitcoin legal tender actually does increase adoption. Who would have guessed? El Salvador going bankless.

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Starting point is 01:27:50 at Gemini.com slash go bankless. All right, guys, we are back with the takes of the week. The first is from Jack Butcher. He talks about Web 3D. That's what we're in. Web 1D is all about just information, the space protocols. Web 2D is information plus people,

Starting point is 01:28:06 the social network layer of things. Web 3D, we have information, people, and money. I think that's a great take. I think that's exactly what's happening. Crypto is just the next the next revolution of the web. It's the next iteration of the web. It adds a money layer to the web. It adds digital scarcity layer to the web. I think he absolutely nails it. That's why I'm more comfortable calling this Web3. I feel like two years ago, David, Web3 was like this nebulous,

Starting point is 01:28:37 I don't know, are we going to decentralize Twitter? Are we going to decentralize Uber? I don't know. I called that Web 3. And I gravitated away from that term for what we're doing now. But now we understand it's all about digital scarcity. We understand it's all about capital assets. We understand it's all about money. And I like the framing of Web3. This is the third iteration of the web. Yeah. The only corollary I would add to this is that Web3 means that information people and money are going on to Web3 platforms, right? Like the whole people, that's the identity layer of Ethereum. We're not using Web 2 to establish people. We're using new identity tools to establish people. Yeah, that's a good take. What's Belashi talking about? He is talking about consent of the

Starting point is 01:29:16 govern and self-sovereignty? What's his take here? Yeah, he tweeted this out less than a day ago. So this is definitely coming after the SEC Coinbase uniswap news. Blasji says, decentralization restores the consent of the govern, right? And this is what we have been preaching about defy and being your own bank and controlling your own assets, right? Like the SEC, they can come knocking on Coinbase's door and tell them that if they do a offer a lending product, then they're going to sue them. But that doesn't mean that you can sue the AVE protocol or the compound protocol or the Uniswap protocol. So as users of these things, we don't have to ask the SEC permission to make a transaction that interacts with Uniswap.

Starting point is 01:29:56 And so it restores the consent of the governed, as in we don't have to ask permission to use these things. Elizabeth Warren had to take this week calling everything in crypto a shadow bank. Crypto is the new shadow bank, she said. Anthony Sassano had a counter to this. The traditional finance system is the actual shadow bank. It's the very reason we're building a new decentralized censorship, resistant, transparent, permissionless, and global financial system. Well said, Anthony. Elizabeth Warren either needs to get educated or get out of the way.

Starting point is 01:30:30 I feel like this with a lot of our members of Congress, David. They don't actually understand what they're talking about here. Sent a letter to my Congressman, Mark Warner, my Senator Mark Warner, about the infrastructure bill. He replied back and said, basically, nice hearing from you. I've taken this under consideration, but I'm super concerned because Bitcoin and cryptocurrency is used by criminals and terrorists, right? Classic. That's his 2014, 2015 mindset on what we're doing in crypto, right?

Starting point is 01:31:05 Meanwhile, we built a $2 trillion industry over here. The most open financial system that's accessible to everyone that's ever been built. and they're just not educated. We have a lot of work to do there. The question is, do they want to get educated? And I'm not sure they answer to that question. Yeah. Elizabeth Warren, you can't just call something you don't understand a shadow.

Starting point is 01:31:27 Like, just because you don't know what it is. Doesn't mean it's opaque. You just haven't learned about it yet. Yeah. She's sticking with that term shadow. I don't know. She must not know about the memes. Let's talk about celebrities.

Starting point is 01:31:39 Celebrities. This is a defense mechanism. So we got wreath with their spin. who just bought her first. That was last week. I think on Friday of last week. Pretty cool. She's getting into it.

Starting point is 01:31:52 Who's our next celebrity? Steph Curry, just getting started in the crypto game. Y'all got any advice, which almost got 100,000 likes, which is crazy. Mike Tyson, Solana or Ethereum? So Mike Tyson getting into the game, trying to learn the differences between Solana and Ethereum, of which there are many. I hope someone's underneath this, pointing them to a bankless episode. episode. Maybe, uh, yeah, no, we haven't. Oh, he's got a crypto cat as is a NFT profile. Yeah,

Starting point is 01:32:19 that's already in. I didn't even realize that. Wow. That's a pretty cool cat. So what does this mean? I think Chris Berninski summarized it for us. Yeah, Chris Berninski says, major celebrities getting started in crypto is the beginning of the end and the end of the beginning. And so I think what he is saying is that like the early days of crypto, they're over. Like the Wild West, it's not so wild anymore. Like these, the crazy days of like all this like crazy, like crazy rampant speculation. I mean, there's still going to be speculation. It's no longer a weird niche off the beaten trail. Exactly. Exactly. Like, no, crypto's mainstream is bringing on mainstream people with mainstream use cases. And the celebrities getting into that is indicating that the

Starting point is 01:32:58 end of the beginning is upon us. That's the right way to put, yes. We're no longer in the beginning stages of crypto. We're in the middle. We're in the middle of the story now. It's a part of you that's going to miss that, like kind of that hipster thing. Like, hey, it's a small group and we don't have to worry about Paris Hilton or Lindsay Lohan tweeting out some stupid, you know, NFT. Do you miss part of that? Yeah, but like it's also we are currently where we've always wanted to be. And while that now comes with way more baggage than we thought, such as like the SEC being dumb, I guess this is what we wish for. I do think actually some of these celebrities in the mainstream adoption per earlier conversation actually provides a heat shield to some

Starting point is 01:33:40 these regulatory agencies as well. So there is that side benefit. But yeah, Chris nailed it as usual. David, I'm going to ask you the question. We end with, which is what you're excited about. What are you excited about this week? Well, what I'm excited about this week is what's happening next week and the week after. MCon in Denver. I'm going to go to MCon, the Meta cartel convention. And that's going to be a ton of fun. I'm going to see all the homies there. And then right after that, I'm going to Missouri Mainnet in New York with Chief of Culture at Bankless Michael Wong, as well as Lucas, the chief editor of the Bankless newsletter, as well as a bunch of other just friends all hanging out in New York. The Pleaser Dowd-Doge party is happening.

Starting point is 01:34:22 And so there's going to be a party which is going to be Doge themed because Pleaser Dow owns the Doge NFT. So I'm excited to go and do a bunch of traveling and see all the people in the different cities. Yeah, that's awesome, man. It's like, you know, we couldn't do any of that in in 2020 right because of COVID now some that's coming out again so it's it's great to see and I'm glad you're going you know I don't I can I could just not go right it's fine it's one of us goes I'll see you can just live again you'll just live vicariously through me and I'll tell you all about it that's how it usually goes Ryan what are you excited about I'm actually super excited about layer twos this week right so layer twos are cool because I feel like this is um we don't have to take

Starting point is 01:35:03 shortcuts. I think that a lot of high transaction throughput chains are saying, hey, we're less decentralized. We're more centralized. But do we really need all that decentralization? It's kind of the question. And it's hard to answer that question and say, yes, there is a reason for you to pay $80 fees on uniswap, right? When somebody can pay almost nothing on a centralized layer one. But with layer two, we actually don't have to take shortcuts. And I think layer two on Ethereum is massively underrated because it's not just what we're seeing like today. This is in its infancy. It's very early years.

Starting point is 01:35:39 It's what we're going to see in the future. Somebody wrote a fantastic post on this, actually on Reddit. This is ETH Finance. Libero-Liberost? Liberosti? Liberosist. Yes. Thank you.

Starting point is 01:35:55 It's weird either way. He goes through and he talks about layer two. And he specifically talks about Z. ZK rollups. This is where I think things get really exciting. It's because with ZK. Rollups, you actually don't have to make these tradeoffs between centralization and decentralization to get the high throughput, specifically when we have data sharding in layer two, right? So this is like, do you remember that episode we did with Justin Drake about the magic of cryptography? It's like cryptography really is the magic that this entire space rests on, right? And that's

Starting point is 01:36:29 where we get like not just Moore's law increasing kind of every year, but like we get these massive leaps in terms of of capability. And we do things like have large supernodes and we centralized because we haven't created better cryptography. Well, ZK technology and ZK rollups, that is better cryptography. And we combine that with, you know, you know, the data sharding on Ethereum, we're going to be able to scale this out to like as much as we need to, So this guy talks about, you know, on Reddit, he talks about, speculatively, up to 15 million TPS by the end of the decade if you combine various ZK roll-up solutions on Ethereum. So 15 million transactions per second without the centralization trade-off. So I think now we're in the season of like, hey, gas fees are high.

Starting point is 01:37:23 We need, you know, centralized layer ones. Ethereum will never scale. but I'm really excited about this kind of dark horse that's coming up, which is ZK Roll Up Tech, Layer 2 ecosystem on Ethereum. So it's going to be exciting to see that develop, but it's also not going to happen overnight. It's going to take months and probably years for this to come to fruition, but I think it's worth waiting for.

Starting point is 01:37:47 This has always been Ethereum's commitments, right? We as a community, understand that there is like that scalability trilemma. There's security, decentralization, and scalability. and Ethereum doesn't at all want to sacrifice security or decentralization, so it chose to sacrifice scalability. But the whole gist is that we will figure out the scalability via improvements and innovation and research in cryptography. And if you find scalability on your L1 chain and you did it without cryptography,

Starting point is 01:38:19 you compromise on one of the other two things. It was either you either compromise on security or you compromise on decentralization. The only way to make your base layer one better is through innovations in cryptography. And that is why Ethereum has been a cryptographer's developmental playground. And that's why Ethereum has always been like, oh, developers, developers, developers, not just on the app layer, but also cryptographic researchers. The way to improve your system is through cryptography. And if you're not doing it with cryptography, you've done it in a way that shoots yourself in the foot

Starting point is 01:38:49 with one of these in very crucial dimensions of what makes a crypto system, a crypto system. The ability to run a note at home is super important. It's probably fundamental to these systems, and this preserves that. Our, David, meme of the week. What are we talking about? Meme of the week. Let's do it. Let me show you. Let me show you this one. Okay, so this is the rich bankers holding glasses of champagne laughing their asses off meme. In politicians. In politicians, yeah. Oh, God, that's Reagan. I had no idea Reagan was in this one. There's Reagan. There's also Bush. Bush Senior. Yeah. Okay. Okay. So these are politics. These aren't bankers. These are politicians. Maybe they're the same thing.

Starting point is 01:39:25 Same. Maybe, okay. We'll get to, we'll get to the actual text. And then so all these politicians are laughing their asses off. And it says, and then we would tell them that we are protecting investors. Exactly. I mean, like, this is, this is kind of how I feel about this is, man, they're pushing all this down our throats, but under the guise of protecting us.

Starting point is 01:39:48 And that's what feels, that's what feels so bad at all of us. because I didn't get the D-Y-D-X air trap. I'm not feeling very protected this week from all of the gains we could have made as U.S. citizens. There goes. Guys, that was the roll-up. Thanks for hanging with us. Of course, none of this has been financial advice.

Starting point is 01:40:06 Bitcoin, ETH are risky. So is D-Fi. You could lose what you put in. But we're headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.

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Bankless - ROLLUP: Steph Curry & Tom Brady FTX | Crypto Regulation & SEC | Solana & Arbitrum

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