Bankless - ROLLUP: The ETH Issuance War | $130M Coldcard Exploit | Saylor Sells Again | Uniswap Launchpad

Episode Date: August 7, 2026

Ethereum’s monetary policy is suddenly up for debate. Ryan and David unpack the issuance fight dividing researchers and DeFi builders, the Coldcard exploit that hit users who “did everything right,” Saylor’s latest Bitcoin sale, and markets ripping back to all-time highs. --- 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium --- BANKLESS SPONSOR TOOLS: 🔓NEAR | TRADE CONFIDENTIALLY, GET 20% BACK https://bankless.cc/near-pod 🔑BITKEY | GET 10% OFF USE CODE: BANKLESS | #bitkeypartner https://bankless.cc/bitkey ✈️COINBASE ONE CARD | EARN 5% BACK IN BITCOIN https://bankless.cc/coinbase-one-card 📊BITGET | TOKENIZED STOCKS 2.0 https://bankless.cc/bitget-stocks 🎯THE DEFI REPORT | ONCHAIN INSIGHTS https://thedefireport.io/bankless --- TIMESTAMPS 0:00 Intro 0:25 Markets, AI, and Bitcoin https://x.com/bulltheoryio/status/2084634593836372202 https://www.vanityfair.com/story/anthropic-situational-awareness-wedding 6:31 Saylor’s Bitcoin Selloff https://x.com/hedgeye/status/2084278278794117372 https://x.com/zerohedge/status/2084247862833971631 https://x.com/saylor/status/2084315637715763579 18:00 Ethereum Issuance Fight https://x.com/zoomerfied/status/2084641592615256254 https://x.com/jdetychey/status/2084638778677751889 https://issuance.wtf/ https://x.com/TrustlessState/status/2084685295484633349 https://x.com/StaniKulechov/status/2084925768711213105 https://x.com/StaniKulechov/status/2084667208668467574 https://x.com/DCinvestor/status/2084971858311438688 https://x.com/MikeSilagadze/status/2084703078909907000 39:59 Coldcard Wallet Drain https://x.com/itscoachgoodman/status/2083527082223563157 https://techcrunch.com/2026/08/04/hackers-steal-over-130-million-by-exploiting-bug-in-offline-hardware-wallets/ https://www.coindesk.com/tech/2026/08/05/coldcard-exploit-could-boost-demand-for-regulated-bitcoin-exposure-analysts-say https://thedefiant.io/news/hacks/i-did-everything-right-coldcard-victims-recount-losing-life-savings https://x.com/EpsilonTheory/status/2083642741075124680 https://x.com/lopp/status/2083575437599371321 https://x.com/AriDavidPaul/status/2083591462726361235 https://x.com/PeterMcCormack/status/2083631731052290261 52:00 Uniswap, Clarity, and Crypto Updates https://x.com/Uniswap/status/2084678603812274275 https://polymarket.com/event/clarity-act-signed-into-law-in-2026/clarity-act-signed-into-law-in-2026 https://www.coindesk.com/policy/2026/07/27/u-s-senate-puts-off-crypto-clarity-act-for-now-as-it-focuses-limited-bandwidth-elsewhere https://x.com/Cloudflare/status/2084648084131242402 https://x.com/NEARProtocol/status/2082879865385062520 https://x.com/zerohedge/status/2084614210118426971 https://x.com/arc/status/2084993791413678099 --- Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

Bankless Nation, it's the first week of August, and it's time for the bankless weekly roll up. We got some topics of the week coming your way. The ETH issuance war. We got another debate about an EIP in Ethereum lands. This one's different in the sense that it talks about ether as money. So everyone has an opinion on it, including me and Ryan. Maybe Ryan has an opinion on it.

Yeah, I want to find out your opinion because we haven't discussed this yet. But I know, I think it was like three weeks ago when we heard rumor that this was on the horizon. You said to me, you were excited for the drama. So, my friend, you got some drama, all right? You got some discussion about this, and I want to get your take. Yeah, it's basically the ETH researchers versus the app layer, which usually you don't get such a clean line dividing this drama, but that's what we got.

So we're going to talk about that. We're also going to talk about the cold card exploit, so over $100 million of Bitcoin drained from what? was thought to be very safe and secure Bitcoin cold storage. Everyone, the common line was that everyone did everything right. And yet the Bitcoin got yanked. We're going to talk about how that happened and what is happening as a result of that over in Bitcoin land. Talking about the stock market, S&P and Dow Jones and the indices hitting all-time highs when there was blood on the streets last week.

Dude, wild. Yeah, wild. of what? Apparently, you can have an all time high in the stock market at any time, no matter what happened the day or a week prior. Yeah, it was real. By the dip week. Also, we got to talk about Sailor.

He sold some Bitcoin again. And he explained himself this time. He said, I speak as one saver to another. What was he talking about? We'll discuss that as well. Let's start actually, David, with the stock market all time high. This is the S&P, so it's not the NASDAQ. S&P, what, had been off in?

July like 5, 6%, I know NASDAQ was down about 10%, something like this. And we got what looks to be in the first week of August, a V-shaped recovery out of that hole. And now S&P is all-time high. NASDAQ has not quite hit it, but like, can you explain that? What happened? I don't know, man. I'm sharing my screen and you can see the candle.

The candle's big. Like, we had that gargantuan rise out of the bottom of the Iran. on war with three massive candles that brought up the S&P up 11% across like 20 days. The candle looks like that. It is a, the weekly candle and the S&P is a 3% candle that brought it from 7,500, all the way up to the tippy top, almost 7,800. We're down a little bit at the time of recording. But just like a gargantuan like recovery out from like where the S&P was down 3.5% off of its

off of his highs, and then it rocketed up six or seven percent in a very short amount of time. And this was all on the backs of Leopold from situational awareness getting liquidated right at the bottom. So he must have been the absolute pico bottom because he had a pretty decent fund that had a lot of the assets that had just made incredible gains and forced seller at the bottom. And then I think maybe that gave the market the confidence it needed. to just hit the buy button because the game's not over and Citadel is stepping in.

Like, that's my read. It does seem like confirmation that at least the market thinks the game is not over for AI and the AI trade continues. I mean, this is even more stark if you look at NASDAQ, right, kind of that V-shaped recovery. It almost looks like Ashenbrenner got margin called, he got carried out, he got liquidated here,

and then once his positions were liquidated, the market recovered. And so it almost looked like it was targeted to take him out. And then the market spins back on the other side of things. Now, last week, we weren't sure if he was like out, out, you know, Thero's capital style. Hedge fund is kind of like deleted there underwater. Apparently this was still a flesh wound.

Maybe it took a pretty large chunk out of his fund. So he is down 67% in July. But David, still up. big on the year, okay? This fund was outperforming, doing incredible work earlier this year. It's been an absolute superstar fund. It had a rough month,

but did not completely collapse under the weight of this liquidation. The fund went from $20 to $30 billion peak to about $8 to $10 billion remaining. Most of that in privates. A lot of the public positions were sold off and liquidated as a result of this. So he's still around.

He's still fighting. And it looks like the market is just recovered from this large liquidation. He was reportedly on 400% leverage. Okay. Yeah. Like, you get liquidated. You get liquidated at that number. Didn't you tell me he was at his wedding when this happened?

So he was, I think, I think it was the day. So there was a Vanity Fair article. There's a bunch of articles titled, How to Lude Billions and Gain a Wife. in two days. Whether or not he was, like, in his tuxedo, like, you know, like ready to walk up to the altar. I don't know the timing of that, but, like, it was inside of that window of opportunity where he was getting liquidated and had to get on the phone with Citadel's Ken Griffin to bail him out. Not bail him out, but just, like, buy his bags.

But, yes. Sorry for the grandkids. Sorry, not the best codedness of that memory, I think, for his future, but like, whatever. Ultimately, his fund is still up 80% on the year, so it's still one of the best performing funds in a while. But you'd have to be a little... Better than crypto assets. As an LP, you would have to at least be like, at best mixed feelings because you were previously up like 5x, 6x on your money, and now you're up 80%. And so you're still doing very well, but you were doing really well a second ago.

Yeah, but it's also just sort of the risk management wasn't there, right? I mean, this was quite a cascading collapse. So, I mean, LP's got to be a little shaken, little rattled. But the FOMO is back in. The AI trade continues. How about our friend Michael Saylor over at Strategy? He sold some Bitcoin on the week. What was that about?

Yeah, so we have like, I think three main instances of Sailor selling Bitcoin. The first one where he sold. sold 32 Bitcoin, collapsed for the Bitcoin price by like $18,000. The next sell of Bitcoin, I can't remember the numbers, but it was much more than 32. It was like in the hundreds, maybe a couple hundred Bitcoin. Yeah, that's right. And Bitcoin was like flat or like even marginally up on the week. This week, Micro Strategy, announced that it sold 1,638 Bitcoin worth 105 million.

and Bitcoin jumps from $62,000 to $63,500. So Bitcoin up on the week. Ryan, I'm bullish about this news. I'm bullish about this news. Wait, why? Michael Saylor, the number one holder of Bitcoin selling over a thousand and a half Bitcoin and Bitcoin goes up? The bull case for me is that Michael Saylor needs to be removed from the market

as a key man risk to Bitcoin price. And when he is selling $105 million of Bitcoin and the Bitcoin market doesn't care and actually goes up, it's like, oh, you, and the market no longer cares about you. You're free to, like, move to the background as, like, the main marginal pricer of Bitcoin.

Yeah, I think that's true. He's no longer the main character of Bitcoin price action, which is probably healthy. Because the market, I think when he sold the 32 Bitcoin priced all of these future sales, in basically. Totally. And now right now, the market outlook on what strategy is going to do is it's

going to be a graceful, unwind process of some of this leverage. It's not going to be chaos. It's not going to be cascades. We know what Sailor is going to do. If there's an MNAF premium, he'll mince some more MSTR shares. MSDR holders might feel differently about this. They might not feel great about what's happening. But he's going to sell Bitcoin in order to pay preferred share owners. I notice SDRC is back up above 90. SDRC is back up. SDRC looks good. So much, much healthier. It's up 30% from the June lows, which at $71, that was like a

good buy back then. Right now, SDRC, right now, Bitcoin is kind of an interesting place. Like what are we at the time of recording? 64K, something like that? $64.5,000. We have been. riding the 200 week moving average since the middle of June, basically. So like six weeks. We have been riding the 200 week moving average from $62,000 to where it is right now at like $64,000. So the 200 week is about $64,000. And we're just riding that. And we have been under that, what, like 40 days, like a few times briefly during this bare market, haven't we? But like not a long time.

40 days, no, I would say under a week we have been under. the 200 week moving average. That's lately, I guess. Historically, like, we were under the 200 week moving average. We're like, yeah, I think 40 to maybe a little bit longer. But that was, again, post-3-Ros capital, Luna, FTX, contagion, which, come on, you don't see any blood in the streets like that. Oh, that's interesting. So, Bitcoin has been highly correlated to NASDAQ. So part of the reason Bitcoin is up on the week is because NASDAQ is also up.

And the correlation has. I don't know if that's true. I don't know if that's true. The correlation has not been higher in recent terms. But the question is... If you look at the NASDAG chart and the Bitcoin chart, those are just different looking charts. I mean, yeah.

I guess like in recent times, over the last 30 days. But I guess I think the question is, has Bitcoin bottomed relative to that? It's always the question. It's always the question. And so like, how are you feeling about it personally? Are you prepared to sell your... AI stocks. Are you like fading this recovery, market recovery and buying crypto assets? Are you still

like, okay, AI trade back on? I guess we're in for like, I don't know, round three, round four, whatever round this is in terms of AI trade recovery here. What's your outlook right now? Yeah. Yeah. I've been asking and talking about this question a lot in the last week or so. And I think we've been talking and asking about this question a lot on the weekly rollup. as a vibe, the most non-technical, like, pseudo answer possible. If you just look at this chart, which is the Bitcoin chart with weekly candles, that goes all the way back to 2020, you see the cycles, right? You see the 2020 cycle.

You see the 2022 to 2023 and a half bare market. And then you see the current cycle where Bitcoin went up to 130. This, the tail end of the current cycle coming down from 130,000, it just doesn't look done yet. The chart doesn't look like it's done completing its cycle. So as a vibe. Like you can see it going down a little bit more. Yeah. And then having a big U-shaped bear market for like a year and a half.

Sure. So as just speaking as to the visual aesthetics of the chart, it doesn't look done yet, which is not a good answer, but it kind of correlates with like the whole, the cycles are intact. And if we believe the cycle's intact, the visual shape of the chart looks 85% complete, but not 100%. I'll give you another vibe that I feel,

which is kind of sort of similar to this, which is we don't fully bottom until the AI trade is over. And the market acknowledges that. Because I think what's happening, even as I'm looking at you, you're not prepared to sell your AI tech stocks and your QQQ, whatever else you have in your Tradfifide portfolio

and buy crypto right now. Because you don't quite think it's over yet. And that's what I think the rest of the market also sees. They're still disproportionately in AI. They're still in NASDAQ. And they haven't yet come back to crypto. And I don't think we get that full recovery until that happens until the AI. Like the AI trade might have to die in order for crypto to live.

I think that's from a vibe perspective, how this can all play out. I've been thinking about that more and more, more. I was listening to your episode with Michael Nadeau this last week, and the word time-based capitulation came up a bunch. Yeah. Where, like, I don't have any reasons for why there's any more forced sellers or sellers at all in Bitcoin. Like, who, like, Sailor is selling a thousand and a half Bitcoin.

And the price is going up. Like, no one is a for-seller. There's not that much leverage in the system. Plenty of leverage in perps in the downmarket coins, but whatever. So, like, who's going to be the, the four-seller. The answer is like no one. But there could be opportunity cost sellers where the QQQ and like a micron and like SK Hynix is just doubles in price. And you're like, what am I doing with this stupid

fucking Bitcoin that's still at $64,000. And I want to get into the AI trade so I'm selling so I can buy the top of the AI trade. And like you can kind of see, you can kind of see that. And that could take the rest of when I just said, the aesthetic completion of the AI of the Bitcoin cycle could need six more months. And you could see the AI trade running for six more months, nine more months. And then the time-based capitulation of Bitcoin holders being like, fuck these stupid Bitcoins. Let me buy some more memory stocks, even though memory stocks have gone up 5,000 percent. I kind of think you can see that happening.

I could see it too. I can see it too. That might be what is playing out right now and what has to play out before we see the bottom and before we see the bear market conclude. David, we got more to discuss. I want to talk to you about the ETH issuance war. What is going on?

What is the proposal that rocked the Ethereum world this week? Also, the cold card exploit. Victims did everything right. What happened? Could this happen to other self-custodial holders? You said it seemed like no one did anything wrong, but somebody did, okay? There was a problem in this. We'll unpack what that is, all this and more.

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On August 4th, 6 Ethereum researchers, Jerome De Cheshay, Justin Drake, Daplein, and a few others, proposed a change to ETH's monetary policy, mainly how ETH staking rewards work. This is being called the tapered issuance burn. The idea is that Ethereum pays people, pays stakers, for staking their ETH, but there's no cap on how much Ethereum pay. for aith stakers, no matter how much of the total eth

supply gets staked, even if all of the total eth's supply gets staked, stakers will still earn a positive yield, which means that there is always an incentive to stake more eth forever.

And so people are worried that, yeah. Can I stop you? So there's no cap, but there is a curve to issuance, right? Issuance does go down the more stakers that come into the intersection. That's not true.

Always issuance always goes up the more ETH gets staked, the rate of new issuance goes down. Yeah, but proportionate, like a smaller proportionate amount, the rate of new issuance, right? That's the way to say it. Yes, yes. So right now we have a third of all ETH staked, but there's been a perpetual march upwards. And this proposal, like, proposes the idea that we don't want that number to, you know, approach 100%.

We don't want 100% of ETH staked. But there's nothing to stop that from happening. because there's always an incentive to stake more because more ETH will be minted to pay for the security of the ETH being staked. And so what this proposal does is that Ethereum starts destroying burning a slice of the rewards before stakers receive them.

The more of the supply, the stake that stakes, the bigger the slice that is burned. So this is called ETH targeting. This previously was called ETH targeting, or excuse me, steak targeting. So once staking, ETH staking, hits about half, 50% of all ETH, and we're about 33% of all ETH right now, the entire reward gets burned,

meaning staking pays essentially nothing beyond 50% stake, and the incentive to stake more ETH basically shuts off. And so this caps the incentive for staking ETH beyond 50%. So at like 45%, the staking rewards is almost nothing. You only have like 5% of these otherwise issued staking rewards being paid to stakers, and then at 50% is zero. So for people's taking today, if this proposal would to go through, the practical effect would be that their base staking yield drops roughly in half from about 2.6% yield to 1.2% yield if this change were to go in right now. Who is pushing this and who is against this? the EF and EF researchers like this proposal.

One of the... Is that generally true, or is it just the subset of EF and research types who have their names on this proposal? By the way, Justin Drake is one of them. So I don't think he said anything public in support about this, but he is named on the proposal. He's authoring the proposal, yeah. But you're not saying it's like all of the ETH researchers

and all of the ETH. Yeah, definitely. I mean, there's no consensus inside of the EF. Yes, you're right. So the people who have proposed this are all EF researchers and like the researcher type. The people who are against this are interestingly all the DAP layer people.

So DFI founders like Stani from Avey, Mike Silagodzzi from Etherfi. Lido is against this. DC investor as a community member. He is very anti this. And so it's basically a handful of EF researchers. and then basically

everybody else. Sounds like a great proposal. Let me try and just like run through the arguments for both sides. Because here's the thing. Here's the thing. As you're running through that, I think I really want to understand, right?

Because the proposal takes as a given that there is some problem right now and some problem with this. And it takes a given that we were on this march towards 100%, and the closer we get to 100%, the more problems that we'll see. I think that assumption really needs to be reinforced.

Yeah, so what do the authors say about the problem here? Yeah, so the pro case, the pro argument for tapering slash targeting, is that Ethereum is overpaying for security. And as a broad strokes, Ethereum has been discussed that Ethereum is overpaying for security, so therefore we should reduce issuance. That has happened many times. When we were in the proof of work phase,

issuance went from five ether block down to three ether block, down to two ether block before we had the merge. And so there's a little bit of precedent of, hey, we're overpaying for security. Let's pay less for security. And that's just a matter of economic efficiency. And making ether goes along the social contract

of minimum viable issuance. Like if we like minimum viable issuance, this is that. So that's one pro argument. The next pro argument is that unbounded staking, so a capless, a constraintless amount of incentive to stake eth erodes vanilla eth's moneyness and centralizes the network on LSTs. And so with 100% eat staked, you're going to see like Lido's steak to Eth or like Rocket Pool R-Eath, those will be ether in the Ethereum economy

because vanilla ETH will all be staked. So you'll actually see a disappearance of vanilla ETH and it will be replaced by liquid staking derivative tokens. And so as far as the Ethereum economy is concerned, basically it's going to be Lido's Staked Eth or Rocket Pool's R-Eth, some sort of LST rather than vanilla ETH. And so essentially that captures the network could buy these liquid staking tokens, and Vanilla ETH kind of disappears.

And also, there's no argument there under that that ETH would, ETH would lose its moneyness relative to those other units, right? It'd be almost like rather than in the U.S. economy, rather than us using the dollar, we're using like treasuries or something like that, or not even treasuries. We're using like Bank of America money markets in order to pay for a star market tokens. Right. Yeah, exactly.

Yeah. Uh-huh. And yeah, and so like this also just kind of, if you are just trying to hold vanilla ether, this allows, if this proposal goes through, holding vanilla ether will just be much more palatable and you won't get diluted nearly as much by holding vanilla ether.

And so it's a pro-eth is money change is an argument. Is, yes. And then like, is an argument, yeah. And then lastly, it's like a minimal change. It's really not that complicated. They call it credible. It's just a permanent single constant that leaves most things intact.

Like, M.EV is not being changed. EIP-1559 is not being changed and is kind of being framed as like just completing the post-merge monetary architecture. It's a minimal, like, technical change. It's just like a few variables in the code we have to change

to make this happen. Like, saying it's a minimal change from a, like, anytime you do anything to monetary like policy and issuance, it ain't a minimal change. This is a pretty big social change, but they're saying it's minimal from a tech perspective.

It's not complicated. There's not going to be a bug in the system. It's pretty easy to implement. Yeah. Okay, the opposition argues that this actually just accelerates the centralization that it claims to fix. So compressing yield, reducing the amount of issuance for ETH stakers,

makes it more difficult for the marginal ETH staker. So solo stakers and home stakers are going to have a harder time because they are less efficient than the industrial commercial stakers, like Lido or figments. Well, you just cut their revenue in half, but they have the same fixed costs.

Exactly. And so people who really operationalize and minimize their fixed costs do better here, but the hobbyist staker, the people that carry their own hardware, pay for all the costs, those people are getting pushed out.

And that's going to be the home staker, the solo validator, which as a social contract and as like a system, you know, Ethereum has always preserved the sovereignty and power of the individual solo staker. That's like, that's who runs Ethereum. You know, Ethereum is not a product by corporations and institutions.

It's a product by the user for the user. And this makes that harder. The next argument is that staking yield is defy's base rate. So leveraged staking loops, LST collateral on AVE, you know, structured product, institutional and treasury allocations, all of the fact that staking yield is a thing is a pretty core primitive that holds up a lot of defy tapering it towards zero collapses so much of what defy

is built on and just reduces a lot of the ether in defy so if your vanilla ether isn't getting yield well you can get it in defy and taking the yield away from ether I think the argument is that a lot of ether would not have a reason to be in Defi and Defi would just be have less TVL and be overall less rich as like a sector. And then lastly, credibility and process, this is just like the issuance debate. There's like a 48 hour comment period and aggressive timeline from the researchers who are saying like, yo, let's push this through.

And then the community is like, yeah, it's too fast. And then also just like issuance in Ethereum is all already. extremely low. It's one of the lowest, if not the lowest chain with the lowest issuance. Why are we trying to lower it anymore? This is not a problem. It's as low as Bitcoin after like 12 years, you know, of Bitcoin doing this. So it's just, why are we trying to fix a problem that's not actually a problem? Right. Why the like perfect is the enemy of good. We're pretty good here. Why are we trying to be perfect? And then also modelers of saying that, this is just like we underestimate second order effects if this changes go through.

We don't really know the second order effects and that is dangerous. And so let's just not touch it. So I feel like those are the two sides. There's another sub argument here that I've seen, which I think is also good, which is like, hey, anytime you open the window to changing the dials on monetary and issuance, you kind of reset the clock. And now everyone knows your store of value asset can actually be tweaked and This is the ancient Bitcoin 21 million argument

and their core criticism of Ethereum is like, you guys move the dials. And so like anytime you move the dials, you prove that the dials can be moved and you prove that there's some sort of centralized cabal, you know, like doing this. And so like if you move the dial, you sully the experiment at all, right?

And the Ethereum position is, no, we'll move it a few times. And I think the- And we'll move it to being more restrictive and beneficial to ETH holders. That's right, that's right. Always in that direction. Like always in favor of less issuance, not more issuance.

I'm not into that argument. I think the version of that argument that I do agree with is, yo, Tom Lee just bought 5% of Eath and his whole entire idea is that he gets to stake it and get the yield and we're just rugging that from him. What the fuck? And so that as an adulteration of the social contract, I think is very valid. And Tom Lee is going to be like, what the fuck are you guys doing? What if this pisses off Tom Lee and he sells the ether? Not inherently because Tom Lee is like,

I'm worried about you guys like tinkering with the monetary policy, but because I'm worried about you guys destroying the value of my investment. I actually think that you might be underrating that, or at least I rate that much higher. I think that- The tinkering of the dials of monetary policy. Oh, yeah. I think there has to be absolute overwhelming consensus.

like it has to be like a bill going through Congress with 99 senators voting yes for any issuance change to happen. And especially when we're at this point of like, I agree with that. I agree with that. We already have like really good issuance. It's already fine. What problems are you solved?

I guess I'm sort of revealing my hand of like where I sit on this debate a little too much. But I guess I really do believe the Bitcoin. argument of like, you got to ossify that monetary policy and the faster that Ethereum gets to complete ossification of it and that no one touches it because it's like good enough, the better for the money-nosed use case and the story value use case. What I think is interesting about both sides. Then we could talk like about some of the takes that we've seen and what you think and maybe what I think is both sides are speaking on behalf of the solo stakers, you know, of decentralization. This is.

is about the solo stakers. Both sides are saying, hey, this is good for the moniness of Eith. So the side that's saying, hey, we've got to push this forward is saying, yeah, we're doing this because ETH is money. And the side that says, no, no, no, no, no, don't do this, because you'll kill ETH's ability to be money because you're dialing with a monetary policy and you lose credibility that way. And also, ETH is money in the DFI economy. You nuke the defy economy somehow because of staking yields going down, then you also lose money in us there, right? So it is, I guess, if you zoom out refreshing, that both sides really care about ETH as a monetary asset.

So me, that's a win I take from this episode. They're just divided in terms of how to actually do this. So what are some takes that you've seen from around the community that you've enjoyed or some points that we really didn't highlight yet? Most of the takes on crypto-twater, Ethereum Twitter, have really just been from the anti-camp because it's their position to react to this proposal. So Stani says,

Ethereum should not focus on gaming, staking, issuance, and cutting staking rewards. That is not the problem, Ethereum needs to solve, priorities, or privacy, scalability, and security. Yield becomes unpredictable, a negative factor for any institutional buyer, making ETH borrowing strategies, mostly unviable.

Ethereum should not be punished for its growth. DC investor says, issuance is already very low. Stake yield is now a key driver. Predictability matters. Solo stakers should not be priced out, focus on scaling. Mike from EtherFi says,

disappointing on every level. EIP, released with only 48 hours notice. Every builder on Ethereum opposes this. This reinforces the Ethereum critics position that the network is run by a small group of insiders. I think that has been interesting to me. It's like if you build a ETH product and the ETH deposit product like AVE or Ether,

If you don't like this. No one who's building an ETH-D-Fi product likes this. And I think that is very important signal. And I think this is something that like the Ethereum community has been like trying to elevate in the 2024 like EF crisis of like, please listen to the builders building on Ethereum and making Ethereum valuable and ether valuable. And that is Mike and Stani and Lido. And so like those people have, these people have skin in the game. and the people with skin in the game are saying no. And the Heath researchers, you can argue maybe they love the ivory tower,

like technical perfection, but they have less skin in the game than's Doni from Ave or Mike from Etherfi because they're researchers. They don't have businesses built on this ecosystem on top of this foundation. So what's your take on this? You think it's a good idea? You think it's a bad idea? If it was up to David, would you vote yay or nay?

I mean, like, you just, exactly what I just said. Like, I can't, I can't in good faith vote yay for this proposal when every single DeFi builder is saying no. Like, defy is how ETH became monetized as a monetary asset. And if they're not happy, then like, it's hard to in good conscience vote yes for this. I like this proposal from a technical purity standpoint. Like, in a vacuum, I think this is a good. proposal if we didn't have Defi and Tom Lee and all of the path dependency that we have,

but we do have that. So this would have been a great proposal to have introduced like years ago, six years ago, seven years ago, eight years ago, as soon as possible, basically. Maybe one improvement to the proposal is that let's not have this jump from 100% eth targeting to 50% ETH targeting, maybe we can implement it over a very long time like a decade. So like first it targets 100%, then it targets 99%, then it targets 98%.

And that takes 10 years to approach 50%, so it smoothed it out. But I don't think even Dief I would really like that at all. And so I also agree with your point is like it's the monetary asset. We need overwhelming consensus in order to change this. All right. And so I like the proposal.

I like the proposal. in a vacuum, but there's too much baggage to say yes. Yeah. I think that my position is I don't even like the proposal in a vacuum, probably. Oh, interesting. Like, it's interesting as like a hypothetical and a white paper, like, what if we did this? But I think you need overwhelmingly good reasons in order to actually change issuance. And I don't see those reasons.

Like the benefit does not seem worth the cost, as opposed to the merch, okay? Incredibly obvious, full community buy-in that we were going to take proof-of-work issuance to proof-of-stake issuance and change issuance policy accordingly. There was a technical reason for that. There was massive benefit.

There was overwhelming consensus. This doesn't even have anywhere near the mark. Like the benefits are sort of ethereal and vague and second order, and we don't like know. But the other thing I go to is like just kind of an Occam test of just, would this, if this got implemented, would this make me more bullish or more bearish on Heath? And the conclusion there is more bearish.

Like, I would not be more bullish if this proposal was actually pushed out and implemented. And on that basis alone, it's kind of, it's not a good idea from my perspective. Now, there's another question which is, what's the probability that this goes forward and actually gets pushed, gets moved through. And I think that probability is like quickly approaching zero percent. So I think we're like under five,

like we're just, I don't think this is going anywhere. I don't think this is going anywhere. Particularly given the reception that it received, if it had a completely different reception, if there was overwhelming positive sentiment, then maybe it would have a shot. But it is dead in the water at this point.

And I predict there will be, be no issuance changes. So at some level, some of the people saying, aha, look, over Ethereum, it's just like, it's changing issuance policy again. See, it's not decentralized, it's captured, all these things. No, this is what decentralization actually looks like. This is the messy process of decentralization taking place. There's a proposal. It's pushed out there. The rough consensus of all of the stakeholders and participants and investors and researchers and app builders weigh in on it, and it hasn't reached the threshold. And so, it doesn't happen.

It gets shot down and that's all healthy. So we just had a long conversation about it, but like I don't think it's going anywhere. And, you know, if this would make you bearish, you don't have to worry about that because it's just not going to happen. I would agree. Yeah.

Like I said, it's one thing to be frustrated about the EF for not being communicative to its app builders and its defy ecosystem. It's another thing to push a proposal where the defy builders are all saying this harms my business. Yeah.

And also my business is in the business of monetizing ETH and making it more valuable. So WTF. Yeah. Yeah. Are you going to host some debates on this, though? I was thinking about hosting a debate. But instead, I think I'm just going to talk to

some of the defy app builders about their opinions. Because I did this episode, actually, with Casper and Ansgar forever ago. Like, this is not a new proposal. This is, this proposal is like two years old now. It was some sort of targeting proposal. And particularly at a time where some assumptions didn't play out, remember? Like, people were thinking that Lido would sort of dominate everything and just like get all of the stake.

And like, I think some of the things that people assume just like haven't played out fully. But yeah, we have covered this train before, haven't we? Yeah, yeah. And so I've already technically done the pro side of it. And so now I'm going to do the anti side of it. And like, I can embody the pro argument well enough where like I can throw my interesting like angles at them and they can see what I can see what they do with it.

All right, let's move on to the cold card exploit. So this is an individual named Jonathan Goodman who tweeted out, $1.6 million in Bitcoin was drained from my account on July 29th in the cold card wallet hack. My Bitcoin was in cold storage. My keys were on a cold card device kept in a safety deposit box

that had never been connected to the internet. This part's nerdy, but here's what happened. Hackers discovered a vulnerability in the part of the hardware wallet code used to create seed phrases. This allowed them to use AI to brute force guessing seed phrases. I was at our cottage

and heard about the hack today. No way this affects me, I thought. I logged on to Wasabi, the software that lets me view my Bitcoin wallets online. Right away, I saw lines of red, transactions, withdrawals. And I knew from 936 to 9.43 p.m. on July 9th, every wallet I ever had had been emptied. 18.2 Bitcoin gone over $1.6 million Canadian.

Perhaps the hardest part about this is that I did everything right. I never shared my seed phrase with anyone. My devices never touched the internet. Everything was kept in multiple safes and safety deposit boxes. None of it mattered. Absolutely brutal. Absolutely brutal. So the cold card for those not familiar with it is sort of like a ledger wallet or a treasur, some more popular devices. I think optimized really for the Bitcoin community. So it was a smaller wallet in terms of footprint, but didn't support other coins. It was more the Bitcoin purist approach to it. And of course, this same story played out in, I don't know, maybe thousands of other cases. $130 million total in Bitcoin being exploited from offline hardware wallets.

And some of these are pretty like smaller holders, of course. These are retail investors. And they're doing the thing that Bitcoiners are supposed to do, going bankless, can do, which is like not your keys, not your crypto. Okay, not my keys, not my crypto. I will have custody of some keys. That's what they decide to do. And they use a hardware wallet, and still it gets drained.

Maybe let's talk about what went wrong here specifically. So the original poster said something to do with the way randomness that the seed phrase was generated. What went wrong in the cold car? Yeah. So with a seed phrase, a seed phrase has theoretical randomness, as in like there are so many different possible combinations that even with, with AI, there's no way to try all of them because there's more possible ways to create a seed phrase

or a private key than there are like atoms in the universe. Like that's a theoretical security of Bitcoin. Apparently, the way that Cold Card was generating seed phrases was imperfect in its randomness, as in it had like a kink or a flaw in its randomness generation that allowed for AI to like detect that pattern and reduce the scope of how much randomness it would need to do.

And this is actually just like, once upon a time, read a book on ciphers. You would actually like it. I should send it to you. And like the number one way to break a cipher is that there is an imperfect, imprecise way of generating randomness.

And there's like a flaw that gets exploited by some pattern analysis. Like some kind of weak entropy. So whenever you're generating a private key of some form, you have to have actual true randomness. Perfect randomness. Yeah, there are many ways to do this.

It's not like an unknown thing. It was just apparently a cold car wallet. It had a random number generator that was like much better, but it was not actually switched on. So it was using this much weaker form of randomness instead. And they didn't know about this. They, it wasn't in, I don't know, wasn't switched on. They were using the weaker method rather than stronger that they actually had.

And so that means. everyone who used a cold card, a cold card wallet from this time period from like, you know, 2000, uh, it, 21 and, and beyond actually generated private keys that could be guessed by some

attacker, some sort of, that was not impervious to a brute force attack. That's what's happening right now. And there have been waves of these attacks, right? Where, you know, hackers are just looking for cold card wallets,

finding that profile and then guessing at the seed phrase using AI to do that and then once they do they drain the wallet. Brutal. We don't really know who the hackers are. Obviously I think everyone's first reaction is North Korea.

We don't really have any evidence that it's North Korea. It could be anyone at this point, especially after this gets publicized and anyone who wants to go try to do this can then go do this. I think we should tie this off with a few other things.

one is this problem does not exist in the Treasurer ledger wallets and the more popular wallets they have since, you know, released and emphasized how their randomness is actually generated. So it's not a flaw that happens in some of these other hardware wallets. So should be like safe if you're using one of those. I guess the other thing though is does this pose an existential question as to like self-staking and self-custody, or sorry, not self-staking, self-custody in general. So if, like, you're still trusting the hardware wallet manufacturer with this type of thing to like generate private keys correctly

and to do things correctly. Like, I guess it's a wake-up call that you can do everything right from a self-custody perspective and still be vulnerable to this. some people are saying this will cause everyone to move their Bitcoin to ETFs or to put it on exchanges where these sorts of attacks aren't possible. Do you think this is the end of self-custody, David?

Do you think it's just like too hard? There's too many problems with it and people choose not to do this moving forward and it'll all go into custodial providers? I was getting lunch with a friend this week and she told me that she was working at a company and somebody connected her with a contact that they wanted her to talk to and they took a few meetings and built some trust,

got them to download Obsidian, which is a thing that you use and I use. But it was a borked version of Obsidian. So after three meetings, she downloaded it and it stole all of her money in her browser extension. Are you serious?

Yeah. And the reason why I bring this up is because they were using AI to fake themselves on the call and to run this exploit. And so like the common denominator here is AI. AI has been just like the big,

and that wasn't imperfect math. That was social engineering. Nonetheless, AI assisted. And, you know, AI is the reason why people are scared to have their money in defy at the moment. Like AI is shaking the foundations of self-custody. And that's,

That's scary. And like there's probably the fewest self-custody and the fewest bankless people since 2021, 2021, 2022 because of AI. And it's, there's seemingly more holes to find using AI maliciously than it is easier to like patch them using AI to be defensive. And so like, yeah, dude,

it's like the darkest days for self-custody ever. like no matter how you want to secure yourself, like AI can find a way there, whether it's like exploiting perfect randomness or your friends accidentally connect you to the wrong telegram account because like the name looks kind of similar and they weren't checking.

So right now the attack abilities are exceeding the defense abilities right now and just finding vulnerabilities. So whether that continues? I think it's a long time to recover from that because that is like losing all of your money you strike straight into the heart of your emotions. And like once it does that, then like no one wants to go doing self-custody.

And like this guy, this guy that lost $1.6 million of his, after doing everything, right? Yeah, like, do you think he's ever going to do self-custody ever again? Yeah, right. And like, I guess from one perspective, this could totally have been avoided if Cold Car did things the right way instead of doing it the wrong way. But at another level, like, what is an individual? what's enough. Like, am I,

am I supposed to, like, analyze exactly how the randomness was, like, you know, for the hardware wallet that I purchased how that was generated in order to feel safe that it's, like, actually working? Like, that's just not feasible for the average person.

So, yeah, it's, it's definitely a big pothole here. And hopefully, hopefully things turn around a little bit. But for now, do not, if you are using cold card, of course, the messages get off of that wallet. You could do something else.

Lose your assets. Do something else. And hopefully the attacks subside and people are able to migrate. All right, let's move on. We're going to talk about a few more things. We've got to talk about Clarity Act, not looking good on a lifeline in the teens,

probability on Polly Market. We're going to talk about that. We're going to talk about Unoswap pools. Pools. Pools. trade is, yes, pools. dot trade is their new product, or I'm going to tell Ryan exactly what he needs to know about Uniswop's new token launch pad. And then also, Cloudfair, make those listeners know this if they

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There's a new episode waiting for you now. Uniswap introduced a 24-hour countdown yesterday for Pools. Dot Trade. It took him like 27 hours. They had a little bit of a shaky start, but they introduced Pools. That trade, which is Uniswop's own native token launchpad. Like Pump Fun.

It's pump fun for Ethereum. Uniswap is doing Pump Fun now? Yeah. And like granted, there are so many token launch pads on Ethereum. This is not a new thing, but it is new that Uniswap is going verticalizing and going down to the actual token. creation mechanism.

And so they have a couple ways to launch a token, a couple of different mechanisms. Both end up in a Unitswap v4 pool with a fixed one billion supply of tokens. So there's the crowd launch token, so that's a four-hour T-Wop auction to help make, like, just bundle resistant because like a big problem in the meme coin token launch pad world

is that one person will bundle up a bunch of wall and own like 30% of the supply, then top on your head. So that kind of fixes that. and then it graduates at a $10,000 fully diluted valuation, or it refunds everyone if the $10,000 market cap doesn't get launched. Or there's instant launch, which is just like, no rules, wild west, like buy it your own risk.

It's live immediately, classic bonding curve style. And so, yeah, Uniswap has released a token launch pad. It looks pretty similar to all the other kind of like token launch pads out there. But it is kind of exciting that Uniswap is launching it. And so there is a, I think one of the interesting, things is that the fees collected by this go back into buying the token itself. And so it's like touted as like more volume. It's even more beneficial for the price of the token as opposed to that coming out of the

pool, of the liquidity pool. It goes back into the uniswap pool in the token itself. And so it was an incentive for people to use it. What's your reaction? What do you think just like Robin Hood Beamcoins kind of woke them up to this, possibility. I mean, that's one reaction. The other reaction is just, it does seem like Uniswap is shipping, like shipping harder again. And I'm wondering kind of why. I mean, I know they were always shipping, doing a lot in the background, but it feels like some regulatory malaise has maybe lifted,

and they are getting back to trying new products and experiments again. That's what you're saying. It kind of feels different in Uniswap. land these days? Yeah. Yeah, because I was talking to I was hanging out with some crypto friends last night and like we all said the same thing

is like Hayden's tweets for the last two months feel more like founder moody about uniswap and they're like shipping more things. Yeah, I would agree. I think maybe at some point just like the

safety nest of your treasury kind of like runs out and you realize that you need to like generate positive economics and uniswap as an org has been a pretty big organization in the past. And again, also to your point

with the launch of Robin Hood, if you go to the Robin Hood metrics, uniswap dominance in decks volume is massive. So the number one decks on Uniswap is on Robin Hood chain is Uniswap V3. The number two decks is Uniswap V2

and the number three decks is Uniswap V4. And that's combined 99% of Dex volume on Robin Hood chain. Wow, that's a big way for them. They are dominating on Robin Hood chain and that actually does go into the Uni token fee burn.

And so with the launch and success of Uniswop on Robin Hood chain, the amount of uni being bought back and burned by the protocol has doubled because of Robin Hood chain particularly because of meme coins. And so, because meme coin activity on Robin Hood is 50% of all meme coin activity in crypto as a total, and all that volume is on Uniswap.

And so Uniswap is burning Unitokens twice as fast versus all the other chains combined. And so you can see like, oh, Uniswap sees value here, like revenues coming in. This is working. The token hit like a like a 10 month high or an eight month high recently, the Unitokin. And so, yeah, like Robin Hood chain and Uniswap have like kind of seen some like new life. And I think it's good to see. Can they keep this motion going? Yeah, it's very, very.

good to see. Um, U-Swap in motion. Clarity seems to be completely stalled. Losing, losing motion. Losing motion. So two weeks ago, we were at 41% probability on polymarket, 28% last week. Now it's 15%. So the, there, there was no filing of cloture before recess. So that means it's not going in front of the Senate. Democrats are still holding out on the ethics issue. I guess the White House compromises weren't enough and also they have other concerns. I think it's not going to happen this year for sure. And we have to wait until the outcome of the elections to see if the new incoming Congress,

yeah, the midterms actually wants to pick this up or not. I don't think it passes. We may have lost our shot, may have lost our opportunity. I don't think that's the end of the world because we have a pro-crypto regulatory force and as long as we stack up enough wins and get enough momentum, there's no way future administrations can kind of unwind that.

Like once BlackRock has tokenized its assets, it's like Democrat administration, are they going to tell BlackRock Larry think, like, hey, sorry, you got to undo all of that. That's no illegal. No, that will already be in motion, it will be too late. So that's probably the move crypto needs to do to get ahead of this.

I think there's probably a big loss for young startups and future startups because of clarity. And so, yeah, Black Rock is protected, but there are probably a bunch of theoretical, hypothetical startups that won't exist because clarity is not a thing. I think that's probably true. David, good news on Cloudflarefront, though. We've been covering them for a while.

So what move did they make this week? They introduced Cloudflare Wallets, which is pretty simple, allow you to store stable coins, purchase services, and receive funds across the web. Wallets are not new, but Cloudflare using wallets is definitely new.

Cloudflare is basically the internet's firewall. And so if you go into a website that is protected by Cloudflare, they have a little gate. When we talked to Matthew Prince, the CEO of Cloudflare, he was very into the idea of protecting the content of the internet

from the Google AI cross Boller bots that extract your content and then don't pay you for it. And I think this is the first tool introducing a wall between user-generated content on the internet and the bots of the internet scraping that content. And so he's trying to protect users and make the bots pay for them. And so the idea is like, this is actually a wallet for bots. Maybe it's your bot. But you need to pay in order to scrape the internet and you need to pay the people who

produce the content. And so the first tool of like a big series of like mechanisms that need to be introduced for this vision to come into fruition, but it's pretty cool to see it in action. New this week out of the near ecosystem is staking for Near AI. So you can now stake near token and then you get

confidential inference. You just get free inference from the Near AI part of near. So you don't pay for it with your card. There's no like cloud account. You stake near. you get inference. Pretty comparable to what Venice is doing where you buy API API credits

and you get inference and also Venice uses Near AI and so NIR is kind of just building its own vertical of hey we have distributed GPU clusters all over the world that's the Near AI product. If you stake near you just

get inference. David that's a work token. Do you remember work tokens? Is it a utility token? Taxi Medallion. Yeah. Very cool. Yeah, you're doing a number of things from a utility perspective. That's, yeah, I think going to be accretive to the value of NIR. Yeah, I'm talking to Ilya today actually about like exactly how this works and why and how like what NIR really represents with all of this. I'll definitely be using the work token as a concept to talk to him about it.

Another, another news on the week, Polymarket seeking investment at more than $20 billion valuation. Ryan, what's your reaction to $20 billion? That sounds about right to me. I mean, they are, yeah, it does. I mean, prediction markets are markets. Polymarket is an exchange. Exchanges are product market fit, hugely profitable business. Prediction markets are going to increase in the future.

Polymarket gets a take rate. I don't know. I haven't looked at the math behind exactly how they're justifying this valuation. But what was it like $9 billion? Was it that earlier this year? was that a year ago during the ICE deal talks. And so 20 billion seems about right. I mean, it's the future.

I hope they IPO. Like, I hope, or like there's a token or something, I hope polymarket becomes investable to retail investor because that's been the only shame of this whole process. But yeah, $20 billion seems right. What do you think? Do you think it's maybe the prediction markets is overplayed? You see sports books coming back to take a chunk out of them?

Sports books are coming back trying to take a chunk out of them. Sports books are valued in the two-digit billion range. So like $10 to like $30 billion is the sports book like arena. And then like what they're, what prediction markets are going for is like the CME, which is in the three-digit billion range, like 100 to 200 billion. So it's still in the sports book range. I think everyone in crypto wants less of the sports book comp and more of the CME,

comp, but I don't, but they're nowhere near getting anywhere close to the CME. There's like a lot left to do on that story. A lot of competitors have entered, that's for sure. Yeah. Including, you know, Robin Hood, of course. I know they're a, their friend, but they could also do lots of things with their own prediction markets. Robin Hood's prediction market revenue is now two X's is crypto revenue.

And so prediction markets has a category, very lucrative, very monetizable. That's right. Last news on the week, Ark from Circle, Mainnet is coming September 16th. Ryan, are you holding your breath? I'm not super excited about it, but maybe it's a back-end infrastructure type of thing. I don't know. It's another chain.

Like, I probably won't see it. So not super interesting to me. What about you? No. No. Just before we close, David, like, zooming out, what do you think crypto is right now?

Like, are we lost in the wilderness? Is this another bear market where it's just like the tourists have left, the settlers stay? Does it feel different? Like, what's your state of crypto right now? Do you know that there's a meme of the girl watching the guy place like the square peg in the square hole and like the circle peg? But it always fits into the same hole.

Like that's the joke is like it doesn't matter what shape it is. It always goes into the same hole. And then you're like, the circle goes in the circle hole. And he goes like, that's right, in the square hole again. And it's like explaining this. It's like, oh, meme coins again. Like, oh, see in a shape. And like, oh, we're doing meme coins again.

And it's just like, shit, dude. Like, defy is not great. Like, self-custody not great. Like, it's just meme coins. And it's a bit frustrating. I've kind of capitulated it to just like, okay, well, like, they're at least fun and I'm having fun with my friends. But in terms of just like what we're doing on chain is like, sick,

we're doing meme coins again. That's the new thing. frustrating. Yeah, but like what about, I don't know, there's a lot that is working and has been set in motion and is kind of continuing to build, I suppose, right? So, Defi is actually working, it's growing, like at a much slower rate than I think we hoped. Store value, that's still a thing in Bitcoin and maybe Ether at some point takes more of that. Those are some use cases that are working. Yeah, yeah, maybe I'm being overly peasant. There are a bunch of things that feel like they're like kind of close, but not quite here yet.

Like we still don't have a very big ecosystem of tokenized stocks, tokenized real world assets. There's like 17 competing standards and not one of them has really taken the lead. We need that in order for like perp platforms to create a fully internalized perp spot basis trade and which unlocks so much opportunity in the perp platforms. But we don't quite have that yet. So like there's we feel like we're close, but making really slow progress on that front. And that I feel like is also constraining on like the creativity of what we can do here. Clarity was supposed to be really helpful with that, but doesn't seem like we're getting it. I don't know, you can, going back to like the market conversation, you can kind of see just like nine months, six, six months, nine months of boredom happening.

And then and then like there's capitulation. And then you'd be realized that I will actually wait some of these. is working in like the rubber is hitting the pavement and then it'll work. Yeah, it just feels like a little bit like a waiting game right now. And then in the midst of that waiting game, people are getting hacked. I think that's right. It's a waiting game. I think maybe we talked about it earlier in the episode.

People won't love crypto again, investors at least. They won't love crypto again until they start hating AI. So that probably needs to play itself out too. Yeah, yeah. All right. Well, Ryan, this is the first time we've recorded the roll-up and I'm home and you're elsewhere. So go and go enjoy your vacation wherever you are, my dude. I appreciate it.

Bankless Nation, that was a weekly roll-up. Thanks for being with us. Once again, crypto is risky. You can lose what you put in, but the institutions are here, so we're going even further west. This is a frontier. It's not for everyone.

And we're glad you're with us on the bankless journey. Thanks a lot.