Bankless - ROLLUP: Under Attack - Crypto, Freedom, & Privacy

Starting point is 00:00:00 Where does this stop, David? Are they going to arrest Tim Berners-Lee, you know, the creator of the internet protocols? How about Netscape, 1994, who designed HCTPS? Remember Mark Andreson talked about kind of Cryptoars 1.0 when he came on the podcast. He was talking about the battle there. I mean, are the developers of internet protocols responsible for how North Korea uses the internet in order to do nefarious things that Treasury doesn't want? It's absolutely ludicrous. And I think that if Treasury or ever any government regulator in the U.S. this type of stance towards communication, we would have no Silicon Valley, we would have no free and open internet based largely in the U.S. today, but we would have none of this innovation and economic GDP growth. It would have been completely squelched. Bankless Nation, it is the last Friday of August. David, what time is it? It's the Bankless Friday Weekly Rollup where we cover the entire weekly news in crypto, which is always an ambitious endeavor. Yet, we persevere nonetheless into the frontier. How you doing, Ryan? Doing okay. Just okay, though.

Starting point is 00:01:04 You know, this week felt like a gut punch. And we're going to talk about the bad thing that happened this week. And in the show, there's also some good stuff. But, I mean, getting the bad thing out of the way. Number one, the Department of Justice has arrested Roman Seminov. This is a U.S. developer of Tornado Cash, an open source privacy developer. This one hurt, David. It feels like crypto continues to be under attack.

Starting point is 00:01:30 privacy and freedom are under attack. It's a big freaking deal, and we're going to spend some time talking about it in the episode. That's the bad stuff, but we got some good stuff too. What else we're talking about? Plenty of good stuff. The arrival of EIP 4844 draws closer. This is, of course, the one that scales up layer twos

Starting point is 00:01:47 further than they already have. The friend.com debate continues. Is it good or bad? Ron and I did an entire show on that. We will recap it very quickly, but really talk about the big takeaways, which are that it's proof that we are ready to go mainstream. We got a main net debut as well.

Starting point is 00:02:03 We got an airdrop to talk about and an exploit as well, just a normal week in crypto. So make sure to like, subscribe, right, and review wherever you get your podcast. Ryan, I don't know if you've checked recently, but on Apple Podcasts, we are about to hit 1,000 five-star reviews. So this is a call to action for anyone listening to Bankless on Apple. Give us those five-star reviews so we can legitimize the bankless podcast and get that top of the iTunes investing in business categories. Guys, some of this will be edited out, but maybe stay tuned to the bloopers after the show

Starting point is 00:02:29 to see how many times it took David to say 1,000th. It is hard, though. Your boy's got a list to say. Oh, man. You know what? We got to start here, though. This is pretty cool from our friends and sponsors over at SAFE, a non-custodial bankless crypto wallet that the feds can't take from you.

Starting point is 00:02:49 It's called SAFE. And they've got some account abstraction magic that they want the devs to know about. So what are they talking about today? So you've heard us talk about account abstraction, of course, how it's going to 100x the crypto wallet experience and kind of build the bridge that we ultimately need to get everyone else onto the world of crypto. So SAFE is proposing their modular open source safe core protocol as the standard to move forward to transition all of our wallets to being smart contract wallets. And they want you to check it out, especially if you're a developer.

Starting point is 00:03:19 So SAFECore is unopinionated core standard vendor agnostic, high component reuse, aka SAFECode. and also allows to maintain interoperability and smart contract diversity. So there is also a hackathon as well dedicated to building on SafeCore happening in early September in Berlin, Germany if that is your neck of the woods so don't forget to register for that.

Starting point is 00:03:42 And if you just want to check out SafeCore and to start building in the world of smart contract wallets, there's a link in the show notes. Speaking of cool events, this one's not in Germany, David, but we're throwing a little party, a little shindig over at Permissionless.

Starting point is 00:03:53 This is going to happen Monday, September 11th, from 7 p.m. to 10 p.m. in Austin, Texas. David, what are we doing here? So every once a year, bankless manifests in real life. Could you imagine? That is the Permissionless Conference, of course. We've been talking about it endlessly on the weekly roll-up for bankless citizens who did not catch it last week or for whatever reason miss a roll-up. How dare you? We are thrown a party for you the citizens. And that is Monday, the 11th, at Permission List. So the one time of the year, the bankless shows up in real life. Ryan will be there. I will be there. The entire bankless team will be there so you guys can

Starting point is 00:04:26 meet all the magicians that make this show possible behind the scenes. Big shout out to the team. We're all going to hang out. Going to get some drinks. 500 people is our limit. We are not there yet. So if you are a citizen, make sure you show up in the Discord to click the link that is only for citizens, as well as all the other podcast guests that you guys have listened to, all the people, panelists that we've invited to permissionals. Anyone that's ever been on bank lists, that's also a permissionless will be there. I think Eric Forhey signed up today. So he'll be there at the party, along with everyone else, you know, all the fam. I'm going to buy that man a drink for that debate with SBF.

Starting point is 00:04:58 I will also buy. Well, you can get Aerofor-He's. I'll get Dancrat's drink. I'll get Dancrat's drink. Yeah. Do you know what? Actually, I got a surprise for you, David, because all the drinks are free. Oh, that's right.

Starting point is 00:05:07 We already were doing that. All the drinks are free. All the drinks are free. Cracken is actually buying Aerokee's a drink. Thanks, Cracken for some fine. Thanks, Crackens. Well, speaking of Cracken, let's pull up the Cracken price starts. Bitcoin price this week.

Starting point is 00:05:18 Start of the week. I think we're down from last week, but tell us the carnage here. Down 7%. Oof, Bitcoin has lost $2,000 off of its market cap, starting the week at $28,000, ending the week at $26,000. You know, last week, we were covering the prices during the dump. And I was like, oh, we almost never get to do this because it always usually dumps right afterwards. Oh, you're excited? Yeah, because we're excited about the dump because we actually were able to cover the market action.

Starting point is 00:05:44 Okay. And so, like I said, like, oh, yeah, so it's, we're buying them out right now. It's at 1740 or maybe 1640. I was like, okay, sweet, we're actually getting the market action. And then afterwards, there was a huge wick all the way down to like below 1600. That's the ether price I'm talking about. So no, we actually did not get the capture the market actions. But moving on to ETH price, 1740 is where it started last week, down five and a half percent to 1640.

Starting point is 00:06:14 Wicks down to $1,525. Whoa! That got real low. We're going to talk about that. We're going to talk about that in a bit. that WIC may have been. But before we do, let's talk about a few of the other metrics here. ETH Bitcoin ratio. Is that flat? Up 1.5%. Yeah. So this is a Bitcoin sell-off that dragged the rest of the market down. All right. And global crypto market cap, total market value of crypto. What's that sitting at, David?

Starting point is 00:06:41 Yeah, almost $1.1 trillion. We did drop below a trillion dollars. We did? Yeah, but we're back up. I do not like that. I don't like Bitcoin below $30k, eth below $2,000. We did. I don't like Bitcoin. Okay, and definitely market cap below a trillion. Hey, enough buyers kept us above, you know, above $1 trillion. So thank you to buyers. This is going to be one of those. Shout out to buyers out there. I was a buyer last week.

Starting point is 00:07:04 You were a buyer last week? You were a buyer? You were a buyer? I think by proxy. You know, one of the things that I do is buying. Total crypto market cap above a trillion, though, still. I think this is going to be one of those bad news, good news episodes. All right, so that was the bad news.

Starting point is 00:07:20 Prices are down a little bit. Let's get into some good news here. it's all on layer 2B. Look at the activity, David. What are we looking at here? We're looking at a growing area under the curve of the scaling factor, hitting new highs for the week

Starting point is 00:07:32 at 5.2x Ethereum's. So the aggregate scaling of all layer 2s on Ethereum are 5.2X, 1, the base Ethereum. Mainly thanks to ZK Sync Era, actually, interestingly enough, clocking in at 12.2 transactions per second, coming in at number one. Wow.

Starting point is 00:07:51 Followed up by, so this is earlier the week, followed by base coming in at 8.6 transactions per second, Arbitrum 7 transactions per second, and OP mainnet 5 transactions per second. So really, honestly, like, shout out to ZK.C. Inc. era. The transaction volume has been absolutely insane. There is a decent supply of that, that is bots, but also there's a decent supply that's not. What do you mean bot? AirDrop farmers. Oh, bots. Okay. Actual bots for this. Okay.

Starting point is 00:08:16 Passing money around. And so, like, yeah, like, many, many people think like, oh, well, it's bots. It's like illegitimate transaction volume. It's not real humans. It's real money. Like, there's a half a billion dollars being pushed around in ZKSink era. So that's real actual, like, stress testing of the protocol bots or not.

Starting point is 00:08:35 There are actual, like, new novel apps being built on ZKSink that real humans are actually using. So it's a mix between bots and humans, kind of a taste for the future. Well, that's what you're going to get when the transactions are so cheap than the robots can start affording it, right?

Starting point is 00:08:48 So all the cheap transactions are robot transactions. Base flipping arbitram and optimism by daily transaction count. Wow. Coming in number one at the optimistic roll-ups, yep. It's a big freaking deal. Look at this chart, just straight up. Have you been surprised by Bass's adoption, David?

Starting point is 00:09:05 I mean, as someone who's been playing on friends all week, no. I mean, from a month ago to now, would you have predicted this chart? Base in, like, a period of weeks outstripping Ethereum and then also, the two largest optimistic roll-up chains that have been live for like two years and bass beats it in two weeks. I have the benefit of hindsight right now, but I don't know,

Starting point is 00:09:32 it feels pretty obvious. That's why people have been excited about base all along. Like a lot of the L2 base contrarians have been like, why is everyone excited? It's just another like optimism fork. Like it's nothing new. And then the base, you know,

Starting point is 00:09:47 bulls are like, what do you mean? It's nothing new. It is the largest, exchange, the largest U.S. public company exchange with their own layer two. Of course, they're going to pump the hell out of it. And they have the marketing reach. And so we're saying, I think, the base bowls take a victory lap here. I would say it, you know, a lot of things in crypto do not live up to the hype. I would say, even among the people who are hyping it, base is kind of lived up to the height, at least to this point in time. This is a post from Will Sheehan.

Starting point is 00:10:15 one million trades on friend.tech in the last two weeks in less than two weeks that's uh that's incredible so would this be sort of basis first breakout app it's all friend dot tech yeah i would say so yeah these are the dune boards david what are we looking at here um this is fascinating roll up economics what uh what do you see in these charts yeah this is just some great bankless candy right here uh this is why we've been bullish on uh layer twos fundamentally is because their economics just check out. And so this is an economic dashboard from Nifty Table. Shout out to Difty Table. Thank you for putting this dashboard together. They've got a newsletter at zeroxtrendes.com if you want to sign up. So, okay, so on the top left, on-chain profit. This is how profitable these roll-ups are.

Starting point is 00:11:03 And you can see like kind of like why I was pointing like, yeah, sure, there's a bunch of bots on ZKSink era. But they're paying ZKSink era a ton of money. That's real revenue into the org, bought or not, followed by base, this is for the month of August of 2022, followed by base profitability, and then OP, main net, and arbitram. And so this is the transaction fees that the roll-ups are charging minus the cost of publishing transaction data to the Ethereum layer one is the profit. And that is what you are seeing on the left in ether terms

Starting point is 00:11:32 and on the right in dollar terms. And then if you go scroll down, it'll kind of just walk you through the costs and also the revenue, just all the economics that make a roll-up a roll-up. And so this is the Dune dashboard, that basically articulates the economic case for layer twos. And as you can tell, they are extremely profitable. So in aggregate between arbitram, optimism, base, and ZKCIC era,

Starting point is 00:11:54 all of them combined together, profited 3,000 ether so far in August in the first three weeks of August. 3,000 ether in August. What would that translate to? 3,000 times. Almost $8 million. $8 million. Thank you to the U.S. dollar chart on the right here. What I love about this, David, is, you know, in so many, I guess, crypto economic models that are obfuscated or hand-waved away, this is like real tangible on-chain revenue.

Starting point is 00:12:23 And the business model for roll-ups for layer two's could not be more simple. What do they do? Ethereum is a wholesaler of ether block space, Ethereum block space. Roll-ups purchase that and they resell it for more. They are a value-added reseller, and then they make a profit on that resale. And that's how they generate 3,000 eth worth of value in one month. It's a really freaking simple business model. I mean, like a lot of technology here, a lot of work to get the kind of the network effect.

Starting point is 00:12:53 But what do roll-ups do? They take Layer 1 block space, Ethereum block space, and they resell it for a profit. That's what they do. So Ethereum layer 1 is Costco, and all of the options of roll-ups are your local grocery store that goes to Costco, buys the goods, restaurants, yeah, your local distribution center,

Starting point is 00:13:17 wherever that is. Yeah, Ethereum is called. The Costco of blockchains, wow. The new narrative watch, it's coming from bankless, no longer ultrasound money. This is a graphic that I saw going through crypto Twitter last week

Starting point is 00:13:30 that I thought was pretty cool. The current layer two landscape, I think this already needs updating because there's definitely some extra OP stack that aren't in here. But these are all the layer twos. that are deployed to Ethereum, and then also the ones that are scheduled

Starting point is 00:13:43 to be deployed, things like scroll, Tyco, some other ones I'm not familiar with. So you can see just like the StarkX ecosystem, the ZK Stack ecosystem, the OP stack ecosystem, and then like the ones that don't have shared code bases, like Arbitrom, Starknet, Aztec Connect, et cetera, linear. Where's Polygon? Oh, I see it. No shared code base up here, huh?

Starting point is 00:14:00 Yeah, that should be changing soon. So the scheduled, not live, immutable ZK EVM, I'm pretty sure that is a Polygon ZKEVM. So the Polygon will have its own ecosystem. I don't know about the no shared code base between Arbitrum Nova and Arbitrum 1. I thought that that was a shared code base. PPD on the accuracy of this whole thing, but this is like the spread of the layer 2s. And there's a lot of them is the point. There's a lot of them. And each of these, this is kind of a new thing to take a look at taking shape. Each of these,

Starting point is 00:14:29 I think, will become super chains in and of themselves. Networks of chains, I believe. So we'll talk about that a little bit more, maybe at the end of the show. David, some market news. here. Let's get back to why there was this massive down a candle right after we recorded the roll-up last week. Did we say something wrong? Bitcoin is at 26,000 at the time of recording, and it dumped down to 25,200. Ether dumped below 150. That happened last Thursday. We called this a WIC or a flash crash. Yeah, so it happened last Thursday, the 17th, I believe. Okay, so why? Why did this happen? So there were rumors that, Bitcoin was dumped by Elon Musk from SpaceX. So thanks Elon. Turns out that was unsubstantiated.

Starting point is 00:15:16 The actual reason was leverage. It was leverage. Oh, we did one of those things again? Yes. Yes. A bunch of apes loaded up on leverage. And then the buyers ran out and the sellers kept on selling. And then we dumped. And then there was a cascade of liquidations. So over a billion dollars was liquidated on Thursday, both shorts and longs, which just tells you exactly how degenerate some corners of this industry is. That's all it was? There's no conspiracy. There's no big event.

Starting point is 00:15:44 No news. It was just like when apes pile in in too much leverage, this is what we get. So 835 million dollars of longs were liquidated along with almost $200 million of shorts. So you can blame the apes for that one. Candles like that, I don't remember when I zoom out. Because I remember, we do these every week, David. So I remember this happening probably like five or six times.

Starting point is 00:16:07 candles like this. This is a regular celebration, just a cleansing of the apes. Yeah, it's like, oh, it is a cleansing. Yeah.

Starting point is 00:16:14 And I guess, they'll be back. Don't worry. The good news is, now you can buy lower if you're bullish on these assets. So thank you, Apes.

Starting point is 00:16:22 This was the largest liquidation event since FTCX. Really? So there's a fun thing for it. That's pretty freaking big. It's not, not small. Yeah.

Starting point is 00:16:31 Go back one tweet. You can, you can compare the candles. Half is big, I would say, as one, no, that you had the right tweet. Half as big as FTX. So FTCX had maybe a double. It's FTCX way back

Starting point is 00:16:42 here? That's the FTCX, yeah. Almost an FTCS worth. Huh, and it's just leverage. Apes being Apes. Yep. David, you know, I spent the morning reading a fantastic Arthur Hayes article. Oh, please download me. I did it. Yeah, I mean, you've got to read it yourself.

Starting point is 00:16:56 I can't like put this man's words into my own, but I will give you the punchline. Let me give you the punchline. All right, so he says this. The Fed wants to cool U.S. inflation, but the more they simultaneously raise rates and reduce their balance sheet, the more stimulus will be handed to rich asset holders. Okay?

Starting point is 00:17:15 Okay. So the more they do this thing, yes, the more they raise rates, the more they do the quantitative tightening thing, the key thing is, the more stimulus will be handed to rich asset holders. That's his thesis, and he justifies it through the rest of the article. One interesting stat here, David, remember we were talking about how high interest payments are for the government, for the U.S. government, because they've raised their rates, right? So the Fed has They have a bunch of debt and they raise rates. Yeah, the U.S. government has to pay interest on all of their debt and they have a lot of freaking debt. And so now they have to pay. They bongs themselves.

Starting point is 00:17:50 Right. Rather than like one or two percent interest, they now have to pay over five percent interests, all right? This amounts to a lot of money. So this is the federal current government expenditures interest payments, right? We talked about that in a previous, we talked about that in previous rollout. So as of the second quarter, 23, the U.S. Treasury will be handing out close to one trillion in interest payments to debt holders. One trillion. That's why rates are so high. And Arthur contends that this effectively becomes a rich person stimmy check, okay? Because who... An asset holder stemmy check, right? And who are the asset holders disproportionately? Obviously, people are wealthy.

Starting point is 00:18:33 People who... Probably listeners of this podcast. I mean, people who are not living paycheck to paycheck, people who have some spare assets to invest, right? I mean, this is we're talking about like top 10% types of individuals. And so effectively, this one trillion dollars per year, David, it goes to them. And what are they going to do with it? This is what Arthur is saying. They're going to buy, they're not going to buy more assets because what do they need most?

Starting point is 00:18:59 You know, maybe some services, maybe some kind of luxury vacations, that sort of thing. maybe some college tuition. I don't know, but the rest of that goes into assets. That's why property values are rising. That's why asset prices continue to increase in this higher interest rate environment. And he calls this kind of the rich person stimulus check. So what we end up getting here, David, is interest rates are up, but so our asset prices and so wealth inequality continues to increase. It just feels like the pot is getting closer and closer to that boiling point. And what is the next era the next phase of this. Well, actually, there was a Fed official from the St. Louis Fed who wrote a fantastic paper that I've skimmed, but I'm getting ready to read this weekend because, you know,

Starting point is 00:19:44 it looks fantastic. That's what Ryan does on weekends. Seriously, I mean, they're spelling it out, and he talks about this new era of fiscal dominance, okay? That is the key phrase here. And fiscal dominance occurs when the central bank must set up policies not to maintain stable prices, but to ensure the federal government can afford to fund itself in the debt market. What this means is the central bank is no longer in charge and the fiscal government spending is more in charge and they are going to have to print more money. This is following the trajectory of like Bank of Japan kind of thing. Anyway, the net of this is, as you could expect, more money printing, asset prices continue to rise. The Fed and the U.S. government really painting itself into a corner. This is not like

Starting point is 00:20:30 the 1980s when we raised interest rates there because our debt to GDP was something like 40%, and now it's 130%. So that is maybe a taste of the article, and as always, I found it tremendously insightful. Well, thank you for distilling that, brother. I feel bullish. On what, though? My takeaway is that I am bullish on assets. There you go. Spacificly risk on assets. There you go. In crypto assets that aren't tied to Fiat. David, what's this? What are we looking at here? Yeah, just something to add to the markets. Lido-staked ether, Mantle, formerly BitDow, which got funded out of this by-bit exchange.

Starting point is 00:21:11 So this by-bit exchange was just printing money throughout the bull market. They realized that, hey, eventually the best-case thing to do is to decentralize. So we're going to make Bit-Dow. And so we had the centralized exchange that slowly evolved over time to what we now know as the mantle ecosystem. Really cool story. Regardless, Xerox Mantle has staked. 40,000 ether from their treasury, the BitDAO treasury, to stake ether with Lido. So that is a big dub for Lido, 40,000 ether into the Lido,

Starting point is 00:21:39 Lido-staked ether supply. So congrats to Lido. This Dow as well, the Mantle Dow has a ton of ether on the ballot sheet. A lot of it. 40,000 is not all of it. It's like a few hundred thousand? A minority of it, yeah. Yeah, and they're investing a lot of this into the, into the Mantle ecosystem.

Starting point is 00:21:56 Mantle is a sponsor of bankless, disclaimer. David, what do we have coming up next? Coming up next, one of the tornado cash co-founders, developers was arrested, and the other sanctioned. Oof, so bad day. We're going to talk about these details and the significance of them and what they represent in the Crypto Wars 2.0, which does not seem to be ending anytime soon. Ethereum, about to launch a brand new test net.

Starting point is 00:22:17 This is the Denkun test net, so EIP 4844 is on the horizon. Layer 2's, a bunch of new upgrades in Layer 2 week. The Layer 2 summer continues to go on. There's an airdrop to talk about that you need to claim. There is a new exploit that we have to talk about. So all of this and more coming up as soon as we talk to some of these fantastic sponsors that make this show possible, especially Cracker and our preferred exchange for crypto in 2023.

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Starting point is 00:23:16 Visit pro.crakken.com to get started today. You know Uniswap. It's the world's largest decentralized exchange with over $1.4 trillion in trading volume. You know this because we talk about it endlessly on bank lists. It's Uniswap. But Uniswap is becoming so much more. Uniswap Labs just released the Uniswop mobile wallet for iOS.

Starting point is 00:23:35 The newest, easiest way to trade tokens on the go. With the Uniswap wallet, you can easily create or import a new wallet. Buy crypto on any available exchange with your debit card, with extremely low Fiat on ramp fees. And you can seamlessly swap on main net, polygon, arbitrium, and optimism. On the Uniswap mobile wallet, you can store and display your beautiful NFTs. And you can also explore Web 3 with the in-app, search features, market leaderboards, and price charts, or use wallet connect to connect to any

Starting point is 00:24:00 Web3 application. So you can now go directly to D5 with the Uniswop mobile wall, safe, simple custody from the most trusted team in Defy. Download the Uniswap wallet today on iOS. There's a link in the show notes. An open source developer of privacy technology was just arrested by the U.S. government. Name is Roman. There's another co-founder who has not been located but was also sanctioned. David, this is really bad news in the Tornado Cash case. Not the first time this has happened. Of course, we've talked about Alexei Perzsef, who was arrested, I believe, over a year ago by authorities in the Netherlands. But this is the first time the U.S. government is directly taking action.

Starting point is 00:24:41 What went on here? What are we looking at? So before we get confused, there are two Romans that we need to talk about. There is Roman Storm and Roman Seminov. Both are co-founders of Tornado Cash. It's coincidence that their names are both Roman. Roman Storm. resident of Auburn, Washington, not too far away from where I grew up, and then Roman Seminov of Russia,

Starting point is 00:25:02 both co-founders, creators of Tornado Cash, which is the privacy tool that I have previously used to achieve privacy in crypto before it was sanctioned by OFAC. The Department of Justice arrested Roman Storm, and OFAC has sanctioned Roman Seminov. They were both charged with U.S. federal money laundering upwards over over a billion dollars in sanctions violations. So a quote from U.S. Attorney Damian Williams says, while publicly claiming to offer a technically sophisticated privacy service, Storm and Seminoff, in fact, knew that they were helping hackers and fraudsters conceal the fruits of their crimes. The action taken against Seminov and Storm was part of the government disrupting the ability of North Korea to raise funds through illicit activity and was aimed

Starting point is 00:25:51 at protecting the integrity of our financial system, including the virtual currency ecosystem. So Brian Klein, who's a famous attorney, a pro-crypto attorney who has done some landmark cases in the crypto ecosystem, is the attorney for Roman Storm. His statement is, we are incredibly disappointed that the prosecutors chose to charge Mr. Storm because he helped develop software. And they did so based on the novel legal theory with dangerous implications for all software developers. Mr. Storm has been cooperating with the prosecutor's investigation since last year and disputes that he engaged in any criminal conduct. There's a lot more to the story that will come out in the trial. So basically, Roman Storm has been living inside the United States because a United States citizen being a United States developer, a cryptographer, an open source developer.

Starting point is 00:26:37 And so he's lived probably with this cloud of like the department addresses really didn't like this tornado cash thing. but nonetheless, date in the United States, as a patriot of freedom, I'd say, understanding that this day might come. And sadly, it sounds like this day has indeed come. Yeah, I guess a few, this is definitely a gut punch, as I said earlier for all of crypto. And we'll talk about kind of the reactions and implications. Just a few points. So what you were reading from was partially a press release from the U.S. Department of Treasury. They are the ones kind of authoring the full press behind this.

Starting point is 00:27:12 and those were some of the quotes that you mentioned here. And so the developers are being charged for creating and deploying the privacy mixing software called Tornado. And so if you've never used privacy software before on chain, you of course know on something like Ethereum, your address is completely public, right? And so if that address is kind of linked to your name, somehow, you have no way to, like, maintain your privacy. There's no SSL or HTTP or secure encrypted communication for crypto, right? all of that metadata is kind of leaked. So Tornado is akin to almost using encryption software for money.

Starting point is 00:27:49 Sort of like, I don't know, David, or any listeners have ever used the Signal app before, right? So Signal encrypts all of your communications. This did that for money. Failing doing that on chain, people use sort of exchanges as a mixing service. Of course, is not completely private, but you could bounce your money into Crackin and Coinbase and then bounce it to a new address to sort of kind of pseudo-protect your anonymity, but of course it's not pure privacy protection. It appears that these developers did not do anything more than the deploy the tornado cash code.

Starting point is 00:28:26 And importantly, they are not being charged for anything more than that. They're not being charged for like aiding and abetting. They weren't liaising with anyone. They are so far as far as we know, they are only being charged for being builders of tornado cash? Well, for deploying it. And then this is the other key point, not taking preventative measures to block North Korea from accessing. This is very clear that North Korea and this Lazarus group, they are unsafe reactors, they are stealing money from, you know, crypto hacks and bridges and that sort of thing. And they did use a tornado as a privacy technology. And the charge is that these developers did

Starting point is 00:29:03 nothing to block them. The question, though, is, like, how would it even be possible to block North Korea? Okay, remember, guys, you know crypto. This is code deployed to an immutable smart contract on Ethereum. You can't stop anybody from using it. Right. How would you even do that? You can't do that. This is the big missing thing from this charge from the Department of Justice is they said they

Starting point is 00:29:27 could have taken preventative measures without actually, they just are waving this idea around without actually providing any details. Right. And so, I mean, what a chilling effect, right, for American private. developers or privacy technology developers worldwide. And what a betrayal to me of American values. And where does this stop? I think that's part of the question that everyone is asking. So what if you run an Ethereum validator that processes one of those turning into cash transactions? What if you hold ETH, which is economic security, right? What if you tweet or do a show on

Starting point is 00:30:03 crypto privacy? What if you write a tactic in the bankless newsletter on how to maintain your privacy on crypto and it mentioned tornado cash. I mean, like, we did that. We did that. I mean, so like, where does this stop, David? Are they going to arrest Tim Berners-Lee, you know, the creator of the internet protocols? How about Netscape in 1994 who designed HCTPS? Remember Mark Andreessen talked about kind of Cryptoars 1.0 when he came on the podcast.

Starting point is 00:30:32 He was talking about the battle there. I mean, are the developers of internet protocols responsible for how, North Korea uses the internet in order to do nefarious things that Treasury doesn't want. It's absolutely ludicrous. And I think that if Treasury or ever any government regulator in the U.S. took this type of stance towards communication messaging, the type of stance they're talking about for like money over IP, if they took this stance for communications over internet protocol, we would have no Silicon Valley.

Starting point is 00:31:03 We would have no free and open internet based, you know, largely in the, the U.S. today, but we would have none of this innovation and economic GDP growth. It would have been completely squelched. And you know what? When I read this press release, you know, it was one of the most kind of almost disturbing parts of all of this. There's lots disturbing about this was how they ended it, David. Let me read to you how they freaking end this piece. I'm actually highlighted. What is the goal of all of these sanctions, these wrest and sanctions? Here it is. The ultimate goal of sanctions is not to punish, but to bring about a positive change. in behavior.

Starting point is 00:31:39 Get the fuck out of here. Not to punish, but bring about a positive change in behavior. You know what this reminds me of? Yeah. Freaking Dolores Umbridge, right? Like, that's what this feels like. It's just, it's for your own good. We're just trying to modify.

Starting point is 00:31:56 What behavior are trying to modify? Like, stripping American citizens, global citizens of their ability to access privacy, encrypt their money transactions in the same way we can encrypt our communication transactions. Incredibly disturbing. What are some takes from around crypto? Yeah, so Coin Center put out an article, which is something that they typically do whenever something bad happens as a result of government decision-making. And so they say the indictment claimed the defendant's unlicensed money transmission engaged in the business of transferring funds on behalf of the public and also did so without registering with FinCEN.

Starting point is 00:32:34 But also, they're pointing out, does the indictment state any facts that the defendants engaged in any activities that actually qualify as money transmission under the relevant law? That's probably what Brian Klein, the lawyer, is going to argue, is that they are, one side is saying, hey, you engaged in money transmission, and then the lawyer is going to be like, can you point to the time where either of these developers actually custodied or took control of any money because you can't. It was just code. It was just code.

Starting point is 00:33:03 The implementing regulations of the Bank Secrecy Act to define money transmission services as the acceptance of currency funds or other value that substitutes for currency from one person and the transmission of currency funds or other value substitutes for currency to another person or location by any means. That's a bunch of legal speak.

Starting point is 00:33:24 It's basically, was Tornado Cash ever a bank or was it code? Was there any transfer? trust in these individuals, did these two individuals have any authority or power over the direction of these funds, or was it just code? Interestingly, in 2019, FinCEN virtual currency guidance, a paper released by FinCEN, interpreted the regulations and said that an anonymizing software provider is not a money transmitter. Freaking, obviously, it's not. Yes, yes. So what are they doing now here? Here's Naraj on this. What's he saying from CoinCenter? Yeah, so Nourge is just,

Starting point is 00:33:58 also from Coin Center just basically says the obvious. Roman Storm and Roman Seminov did not accept nor transmit user funds. They never touched users funds. You know what's the other nefarious thing about this is that in the indictment, in the statement from the Department of Justice, they said that the majority of money going through tornado cash was illicit. But interestingly, they previously admitted that only 7% of money going through tornado cash is illicit. And that discrepancy between what they are saying in this document,

Starting point is 00:34:28 saying the majority of funds going through tornado cash is all bad and nefarious. You can tell that they are just trying to work up a case here because of the fact that they previously said that they know that only 7%. So they're clearly working up a case here. So that means, David, 93% was like presumably not illicit. It was just citizens looking for. Some of my money, some of other people's money. For privacy on chain, right?

Starting point is 00:34:53 Which is, again, we don't have an HTTP. There is no privacy solution on chain, right? now that can be accessible on Ethereum. And this was it. This was one of those. And there was not all scammers and tax evaders and terrorists and rogue states using this protocol. It's like regular people. They're stripping this functionality. I just want to reiterate, for those who aren't familiar, we talked about this, I know, months ago when it happened, any U.S. citizen is actually not permitted. It's illegal for you to go use tornado cash right now. You cannot do it. It's an OFAC sanctioned smart content.

Starting point is 00:35:28 contract address. Yes. And going down to the base principles of why this is important, is like the line, the classic line is like, why do you need privacy if you have nothing to hide? Of course, I think bankless listeners don't need to be, have these arguments reiterated. Like, when I use tornado cash, it's not because I have a skeleton to hide. Like, I just want to hide my bad trades and my stupid NFTs that I bought on one particular address. And when I send you money, I don't want you to be able to see any of my hidden stuff. I think if you, there's somehow this norm that we don't have around financial privacy, but you flip it around messaging.

Starting point is 00:36:02 Imagine if the government could open up every single email, every single message that you send to your friends or your wife or your family, and they had like read access to all of that. That's what you have without privacy on chain. I will note too this 7% of tornado cash's legal activity. I was looking at estimates for, do you know actual physical cash? What percent estimates, experts estimate, of that is kind of illegal or tax evading.

Starting point is 00:36:30 Do you know what that number is? It's 30% David. Oh, whoa. Physical cash. Maybe we should outlaw, I don't want to give them ideas. They are trying to do that. They are also trying to do that. Okay, so Seth from privacy, another tweet from him says,

Starting point is 00:36:46 the logic, so that he's quoting, he's got the picture of the document and says, as discussed below, this is a statement from the government. The failure to implement AML KYC facilitated the ability of customers or the tornado cash service to transfer criminal proceeds between addresses on the Ethereum blockchain without being traced. And then importantly, Seth says, who's a lawyer, says, the logic that non-custodial services must implement KYC AML is without prior legal precedent. There has never been any statement or precedent ever that non-custodial financial services have to enforce KYC AML.

Starting point is 00:37:22 So it's one of those. How do you find out this is illegal? It's like we arrest you, you show up to your house and arrest you? Yes, exactly. There's not actually a law about this? Yeah, I will say, okay, so there's one new thing. We've, we've, as a industry of cryptographers who are we, we are downstream, the cryptocurrency industry is downstream of the cryptographers that have come before us in the 80s, 90s and early thousands. We've already fought cryptography wars 1.0. Why are we doing cryptography wars 2.0? Because, as David's saying, cryptography itself, like encryption technology itself, the thing that we take for granted every day, it used to be on the U.S. munitions. list. It could not be a technology that's export. It's illegal for citizens to use. We change that with the birth of the internet. That's what you mean by CryptoWars 1.0. Exactly. So we've done this before. Why are we

Starting point is 00:38:07 doing it again? Well, because now we have the addition of cryptocurrency. So now there's this new form factor and the government thinks that it gets to have a second attempt of making cryptography illegal, or at least this particular implementation. So the addition of financial assets is the

Starting point is 00:38:23 novel thing here. And this is where the torn token, the tornado cash token actually has a story to play here. So again, Seth from privacy focuses on one of the elements in the documents here and says that this is most assuredly where the court will focus on profit motives as there was a clear profit at stake for the founders indicted here. Without torn, I doubt that there will be any case at all made by the U.S. government. And so inside of the document, there's a section that says, in connection with the creation of tornado cash Dow, the tornado cash founders made a public announcement of the creation of a new token on the Ethereum

Starting point is 00:38:58 blockchain called the Torn token and created approximately 10 million torn tokens. Pursuant to a formula created by Roman Storm and Roman Seminov, the defendants, approximately 30% of Torn Token were distributed to the three founders and to certain investors in the Tornado Cash Service, including some venture capital firms. And so they were able to profit off of what the Department of Justice is saying is promoting illicit illegal activities that violate FinCEN. And so that profit motive is a new variable in what is now CryptoWR's 2.0. It's the strongest part of their case.

Starting point is 00:39:33 If there was no token, this case would be a whole lot weaker. Yes. And so this is why we are thinking that we're doubling down on this whole Torn thing. But what did Torn actually govern over Tornado Cash? Could it have removed money from the pools? Could it have directed any money? The answer is unequivocally, no, it could have not done that. There were some very small surface areas that tornado cash, the torn token governed over.

Starting point is 00:40:00 One of them was the relays. I think you could approve or unapproved relays. I think that was the big one. But really, there was no material control over tornado cash. In fact, tornado cash governance broke not too long ago from an exploit. I don't know if you remember that story, but basically, tornado cash governance is now completely corrupt because of an exploit that happened. couldn't do anything about it. They didn't have control. Yet the pools still live on. So it's actually proof that the tornado cash token is completely adjacent to the actual details of the protocol.

Starting point is 00:40:32 Well, and how far back do you kind of go around that too? Again, Ethereum stakers, Ethereum validators received some fractional proceed of a tornado cash transaction. So there's a profit there. I mean, so do you make Ethereum illegal and validating illegal? I don't know, where this road leads. This is Jake Trevinski. I'm struggling to think of something, anything useful to say about this tragic mistake that is the DOJ's decision to treat privacy and speech

Starting point is 00:40:59 as crimes. I'm blank. Wow. Yeah, when Jay Trevinsky is blank, oof, that doesn't make you feel good. When he runs out of words, the treatment of privacy and speech as crimes, let's remember what code is and why we won Crypto Wars 1.0

Starting point is 00:41:16 is because encryption technology code is speech. It's just math. It's speech. right? And we have protection of free speech, at least in our Western liberal democracies, or I guess so we believe. Jake continues, privacy is normal, Cota's speech, the right to anonymity is essential to a free society. These are fundamental principles embodied in the U.S. Constitution. He ends with this take. In time, I'm confident they will be confirmed by the

Starting point is 00:41:45 judiciary, even if today they were ignored by the executive. So he thinks we still have a case to make on the judiciary side. Do you remember when we first met with Jake? He said, I think all of this ends with U.S. versus crypto in some sort of Supreme Court case, right? And he thinks that's where we'll have to make our stand. And I mean, we're getting closer to that, I suppose. So a tweet that I put out in response to this is, cryptography is the language of truth. A stance against cryptography is a denial of reality. Arresting those who write cryptography is futile. It merely causes unnecessary harm while resisting the inevitable. And this is what I would say is emblematic of the friction between large-scale authority, coercive government, and I say coercive

Starting point is 00:42:32 relatively neutrally, because that's how a government works. And then also the rights and the power of the individual. Cryptography is just applied mathematics. And when you construct cryptography in many different ways, infinite different ways, one of those ways of construction, just like building blocks, just like adding some numbers together, you can get a system like tornado cash. Tornado cash is just math and is just deployed on a crypto-economic system called Ethereum. There's no politics about that. It is an expression of numbers, and you cannot make that illegal. And the reason why the government is trying to make that illegal is because it's looking at that thing, and it's so, cryptography is so powerful that it appears like magic to people.

Starting point is 00:43:12 And so that disconnect of understanding, it's seriously just misunderstanding that is, what allows them to have room to make this arrest. I think I want to add to that take, right? Because you said it's applied math and somebody might say, yeah, but, you know, like nuclear weapons are just applied physics. I think the difference with cryptography is that it is a defensive technology only. It is not an offensive, aggressive weapon. It is more like a wall that you build.

Starting point is 00:43:41 And it is a tool for the individual. A individual person can have a piece of communication. that cannot be decrypted by anybody. Like, not even the NSA, not even Mossad, right? The full brunt of government power and spending cannot break an individual's ability to encrypt some communication and keep that secret. It is a defensive technology for the people, essentially.

Starting point is 00:44:07 And that's what's at stake here, and that's what makes it even more insidious, I think. This is Amin Soleimani. Just so you get a picture of who this guy is. Which Roman is this, David? Who are we looking at? This is Roman Storm. at ETH Denver this most recent year.

Starting point is 00:44:20 Looks like a regular kind of crypto ETH DEF standing next to you. Like, I mean, I wouldn't be surprised if you've seen him around at conferences, David. Maybe without knowing it. Yeah, probably. It's a normal looking guy. Again, he's from Auburn, Washington.

Starting point is 00:44:35 That's like 30 minutes away from where I grew up. So what do we do about this? What do we do about this? This is Samin Soleimani. GM, I would like to talk to the manager. He thinks we should go full. Karen on this and we should raise a ruckus. I don't know exactly what that looks like. Well, no, that's the picture that he's showing. He's like how to file a petition removing

Starting point is 00:44:58 someone from the OFAC sanctions list. So, I mean, is asking you, I'll go do this after we conclude here today, Ryan, to file a petition. It's like, hey, let's get Roman Seminov off of the OFAC list. Roman Storm is in jail. Roman Seminov is on the OFAC list. Can you do that? So we can file competition, sure. What else can we do? I mean, we'll do that, but I just, that will go into, you know, I want to know, like, legal defense groups to fund. There's always a coin center and, you know, blockchain association doing great work. We've got to figure out some other calls to action here, but maybe this is related to this, David, because I know Coinbase has been working on this. Tell us about an update to this court case, because it's, it's definitely related. Yeah, it's related and also bad. Also, negative. So this is the lawsuits against tornado cash. So way back when, after tornado cash was added to the OFAC sanctions list, there was the mass dusting of people out of the tornado cash contract address, which if you are a U.S. citizen and you received any of this dust, that made you violate OFAC sanctions list because the law makes no effing sense. It doesn't account for the idea that a smart contract,

Starting point is 00:46:11 if deemed illegal, can go touch you if somebody else uses the logic of that smart contract, to send you money, which is exactly what happened. It's like if you got an envelope with something bad in it and somebody dropped that in your mailbox, you would be legally responsible for that. Yes. And so there are a handful of people suing the Department of Treasury over this. And so this Coinbase is sponsoring one of them. Coin Center is sponsoring me.

Starting point is 00:46:38 I'm the other one. And so this is not my case. This is the Coinbase sponsored case where I think the TLDR is that the United States is that United States Treasury has won one of these lawsuits. Coinbase is going to appeal this, but the tweet here is the district court in the Van Loon versus Department of the Treasury. That Van Loon name sounds familiar. That'll be Preston Van Loon, who is one of the co-founders of Prismatic Labs.

Starting point is 00:47:03 The related suit challenging the OFAC sanctions has held in favor of the U.S. governments on the merits, meaning that the Treasury wins and the sanctions designations are upheld. This tweet goes through the logic here. three main points. The tornado cash is an entity, so it can be designated under sanctions regulations. We, the crypto industry, want tornado cash to not be an entity. We want it to just be code because of how it is. Because that's what it is. That's what it is. In an association composed of its founders, developers, and the Dow, a body of persons who have combined to execute the common purpose of developing, promoting, and governing tornado cash. See, you can start to see where the torn token

Starting point is 00:47:44 and the tornado cash DAO start to be a relevant variable here. So that's the first of three reasons. OFAC's determination, here's the second, that smart contracts constitute property under the applicable regulations is not plainly wrong, so the court will defer to that determination. In particular, regular contracts are property under the regulations, and so therefore, smart contracts are just code-enabled species of unilateral contracts.

Starting point is 00:48:10 How many things can you get wrong? I mean, like, you can make a smart contract that is a property. So an NFT, for example, is a smart contract. And I own NFTs. And so that is my property. But I don't own a tornado cash, even though it is also a smart contract or a system of smart contracts. Because you need to take the thing in facts and circumstances. Like, calling something a smart contract doesn't tell you much about what that thing is.

Starting point is 00:48:35 An ERC20 token is a smart contract. An NFT is a smart contract. A Dow is a smart contract. Uniswap is a smart contract. literally everything on Ethereum other than externally owned accounts are smart contracts. So everything on Ethereum is a smart contract. Not everything on Ethereum is property. So we need to figure this one out, Treasury. So that's the second point. The third, no First Amendment conflict here has happened because the sanctions does not prohibit all

Starting point is 00:49:02 expression, just an expression using one service. So this is our freedom of speech. Yes. So they're saying that this is okay because Tourneardo Cash is not a public place. or forum. No problem here has been caused by a chilling effect on code developers because it only limits transactions, not writing or otherwise interacting with the code itself, saying that when you type in the numbers in your keyboard and those numbers happen to manifest into a valid transaction, that transaction is not speech, which we want it to be speech. It ought to be speech. It seems very simple. Treasury in the U.S. government does not want an HTTPPS for money. Yeah, they just do not want that, right?

Starting point is 00:49:43 That is not written anywhere in the Constitution that gives them the right. Just because something's digital, they think they can surveil it, they think they can access it. We don't think they should. We don't think they can. It seems incredibly obvious to me. But they are losing this case. And so where do we go from here? So the coin-based case is going to proceed.

Starting point is 00:50:04 I think that's going to be appealed to a new court. You've got the coin. You also have the coin center. case, which you mentioned you were a plaintiff on. I am the plaintiff up. You are the plaintiff on. So it's like David Hoffman versus Janet Yellen in Treasury. That hasn't proceeded yet.

Starting point is 00:50:22 So that's going forward. So we're pushing back in the court system. But this court ruling was a pretty major setback. And the actual arrest of open source developers is, again, another major setback here. So not winning. Paul Graywell, the chief legal officer of Coinbase, just says, rights are rarely secured that is on a path that is always up into the right. We will continue to believe the plaintiff's challenge to OFACs for NATO cash action is correct.

Starting point is 00:50:48 So they're not back and down. They're just going to appeal this and we're going to have another rodeo. The instances in which I've talked to two people at Coin Center, both Peter and Niraj from Coin Center, they've both said very positive things about the progression of my case. They think that they kind of revealed that Treasury actually didn't really understand what they were getting into. I can't really say too much, but positive sentiments, but we don't really know until the day actually comes and the ruling is ruled upon. So plenty of reasons to be optimistic about it. Guys, we'll try to come back next week with some more substantial action items for you and places you can donate, things you can do. But definitely there'll be a place to contact your representatives if you live in the U.S. If you don't live in the U.S., look, I think the battle will be fought in your jurisdiction as well. And so look at the U.S. is kind of a bellwether for some of these things, because if it's not there, it's coming to a jurisdiction. near you. Wow. On to more jovial notes, friend.com

Starting point is 00:51:44 continues to shake with crypto Twitter. We, Ryan, put out a tweet saying, is friend tech good or bad? Because people have opinions on this. Friend tech is not universally loved by everyone. And so there's a bunch of division about whether the structure of friends is actually something that we want to promote. We did an entire episode on this because I thought it was a pretty good conversation. So a 45-minute episode, that episode came out yesterday, if you just want the update on friend tech. But I think the TLDR is that Friends has started to attract outside influencers, outside of crypto, phase banks, Gracie Hardy from OnlyFans, Grayson Allen, an NBA player, disclosure, the DJ duo is now on there. So now we are scaling some of our crypto platforms

Starting point is 00:52:26 to definitely break into mainstream society. Autism Capital put out a take that is basically saying that all of the soul and spirit of crypto is lost and a friend tech proves it. Just another Ponzi scheme. That's another Ponzi. Yep. So like I said, if you want to listen to our takes about that, we have a full-length discussion, both on YouTube and on the podcast. But I think aside from all of that, Eric Wall really sums this up best when he tweets out,

Starting point is 00:52:51 remember when one app CryptoKitties took down the entire theory in blockchain in 2018? We just handled an entire Ponzi speculation on our friends like an effing breeze. Absolute progress. And this is him showing Brian Arborstein tweet out that base hit 16 transactions per second yesterday and not a single hiccup, neither on base nor on the Ethereum layer one. So for those that have been here around since CryptoKitties, progress, progress. Definitely worth celebrating. We don't have time to get into this story today, but there's still some question as to whether Binance is in trouble or not. Here's the Wall Street

Starting point is 00:53:25 Journal, a headline. Binance, the biggest crypto player is facing legal risks over Russia. So the question, I think, is, you know, Binance is facing all of this investigative. by the U.S. government. This one in particular, that Binance was essentially serving O-FAC-sanctioned Russian oligarchs, not doing proper AML-KYC and abiding by U.S. regulation. And so Binance, of course, denied that claim. There's some other things in the works, though, too. I think Travis Kling signed that.

Starting point is 00:53:56 I think Travis Kling sums this up pretty well. There's some pretty wild action in the B&B token. The B&B token was down. Wild negative action. Yeah, wild. It's down bad. say this. This is B&B on the month. I don't know. What's this down? It's on 33%. 30%. Yeah. And Travis Kling says, not sure what's going on. Uh, Binance was sued by the SEC

Starting point is 00:54:18 on numerous charges, sued by the CFDC, had three senior executives quit, had a billion dollar collateral hole in Binance Peg BUSD, had Paxos, forced them to wind down BUSD, got kicked out of Canada, Germany, Netherlands, Belgium, about to be charged by the DOJ. Strong evidence of massive money laundering, terrorist financing. allegations under investigation in France for aggregated money laundering, had their order to quit, and remove attestation. I could go on, all right? And Travis does go on. So there's a lot that has surfaced. But I think the big question in my mind is like, who do you trust more? CZ, a crypto banker or the U.S. government? And I don't know. That's a

Starting point is 00:54:59 hard one right now. I can't tell whether. I can't tell whether this is like a mini SBF going on, because it's not quite like SBF, it can't be, or Binance would already be wiped out? Or is this Western government persecution of yet another crypto company? Like, I trust neither of them, David. Neither, both? I don't know.

Starting point is 00:55:17 You know what? I opt out to defy. I will stick my, continue sticking with the Ethereum layer one and perhaps some layer twos, you know? Oh my, what's going on? I opt into ignoring all of these things, and CZ can just deal with whatever hole he is in,

Starting point is 00:55:31 and if he's not in a hole, then congrats. Well, the rest of the seven, episode is all good news. Let me just say that. So David, what do we have coming up next? That is very, very true. The rest of this episode is absolutely awesome. Okay, so Farcaster on main net. You maybe didn't know that Farcaster wasn't on main net. We'll talk about what that means. No, not the Ethereum layer one.

Starting point is 00:55:51 Which layer two did they pick? Everyone place your bets. Moving on from that, a new air drop. Did you qualify? We'll find out some EIP 4844 updates. Circle and Coinbase strike a deal. and first squad staking block gets shipped to mainnet, gets verified, so much good stuff. So stick around for all the happy side of this weekly roll-up because we saved all the good stuff after the bad stuff, of course, because that's what you do. So let's go ahead and get into all that good stuff. But first, I want to talk about some of these fantastic sponsors that make this show possible, especially Metamask portfolio.

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Starting point is 00:58:35 banding together. Wow, that is a powerhouse. And for those of you guys that don't know, Circle and Coinbase, they had this project together called USDC. You know that old stable coin. Well, no, now that used to be just Circle's project. Now it is both of their projects. There you go. That's good. Yeah, yeah. So USC, it's on six different blockchains. Launching between September and October will be Base Cosmos, near, Optimism, Polygon, and Pocawold. All the chains. Doing all the chains.

Starting point is 00:59:03 All the chains. David, is this good news for EIP 4-844? And give me a quick refresher on what, like, why I know that EIP by number. EIP, 4844. First, we had 1-1-1559. That's in the rear-view mirror. That one's now called Ethereum. That was the burn.

Starting point is 00:59:20 That was the burn. Okay, 48444. We have the Ethereum layer one block space, which is what you know and love. But we are going to get blob space. What is blob space for? It is this first class, it is this place for roll-ups to submit their state-routes two. It is going to be extremely cheap for layer twos, for roll-ups, to leverage so that they can be the best versions of themselves. It is basically the cheapest version of block space that is dedicated for layer twos to submit their state-route two.

Starting point is 00:59:51 And so it's basically going to take off the brakes of all layer twos. And so layer twos are all about to get orders of magnitude cheaper. And this is protodankation. charting, EIP 4844, we have another order of magnitude beyond that called full dank sharding, but first you have to get to proto-dank charting. Why is it called proto-dank charting? Well, because there's Proto-Lamda and Dankrad created Proto-dank charting. Oh my God. This is so mainstream ready. Huge nerds. We don't need, well, eventually all of this stuff will just become Ethereum and we don't even need to talk about it. It's just all you need to know is it's cheap

Starting point is 01:00:23 block debate. Just like last EIP, that one 1559 that you mentioned, David, that was the burn. We're going to burn our eth this one roll-ups getting real cheap that's what's happening anyways the news so that was the background for 4844 what's the actual news yeah news is there's a test net so yay yeah yeah test net is live this is per getting to be one of the last steps before actual dangoon gets shipped um feels like this year my speculation my not anyone else's don't quote me because i'm not an authority here i'm no podcaster he knows nothing november ish of 2023 it's november yay no November is where I'm placing my bets. Yeah, so 4844-4-Den-Cun, that's what we're hoping for for November.

Starting point is 01:01:06 Okay. Okay. Moving on, eigen-layer. So, Igen-Layer increased their liquid staking cap. So every time Igen-Layer updates their staking cap for how much ether you can actually deposit into eigen-Layer, it immediately gets filled. They released a new cap. They raised their cap and to another 100,000 of ether to be staked with eigen-layer, and immediately gets filled.

Starting point is 01:01:27 So now total in EigenLayer, we have 100,000 staked ether from Lido, 20,000 steak to ether from Rocket Pool, 21,000 C-B-Ether. And then also 14,000 actual vanilla virgin, 14,000 ether from the beacon chain. So every time they move the cap up, it gets filled like almost instantly.

Starting point is 01:01:45 This is a restaking. We did an episode with Egan Lair they should absolutely check out. This is a very important, primitive, that we're creating. And this is like a vacuum cleaner for ether. Yeah. My God, it's just sucking it in.

Starting point is 01:01:56 Yeah. And the cool thing is, funny. Actually, maybe it's not that cool. What is this ether doing? Nothing. It's just waiting. It's just waiting to get restaked. Yeah. So this is just showing demand

Starting point is 01:02:09 for Eager restaking to get restaked somewhere. So all of this ether is just like waiting for some networks to spawn. This is the first step. This is like Eigerlanger loading up the engine so that it can actually point its economic security which is re-staking to any of the restaking networks that come online. I swear.

Starting point is 01:02:25 We will just put our ether into anything. You know what I mean? I mean, why are people doing this? Why are people aided them? AirDrop and yield. It's airdroft. It's an air drop, dude. What's this, David?

Starting point is 01:02:36 First squad block. What are we looking at? It's a tweet from you. So this is the squad staking, DVT, distributed validator technology out of Oble, something that me and Ryan and many others in the Ethereum

Starting point is 01:02:46 Staking world are very, very excited about, has been an idea for a long time. It's been on test net for a long time. But now we had the first ever squad block proposed from EtherFi So they use OBLE and DAPNode. So what is squad staking, distributed validator technology? Say you and your friends don't have 32 ETH,

Starting point is 01:03:05 but you want to stake your ETH together. So you guys all run your own node. You each put your ETHR on your own node. One of you guys has the leadership position and everyone else signs off on that. And so four nodes or five nodes or three nodes can come together and the one leader node can build a block and sign it

Starting point is 01:03:24 and then all the other ones can check it. It's basically a multi-sig for EFIG. validators. It's very, very cool. It opens up a ton of cool new use cases. Okay, moving on. Scroll. Scroll is entering its beta phase. So after launching its So Pauilia TestNet, this is the final stage before Scroll mainnet. So scroll also does not have too many steps before main net. And so there are some ZKEVM upgrades. There are some bridge upgrades. There are some infrastructure upgrades in this update. So over 100 projects have already integrated with Scroll to date. That's big. And they're in their final stages before releasing a main net.

Starting point is 01:03:57 another ZK EVM layer two, right? So would you say this is one of the big three? So we got ZK Sync, we've got Polygon, ZK environment, and then scroll would probably be the third. I mean, there's others. Scroll would be the third, and then Tyco, I would kind of put out as a distant fourth, but definitely mentionable. Definitely, you know, big four maybe. David, Farcaster. We've had Dan Romero on the podcast talking about Web3 social and Farcaster, decentralized Twitter.

Starting point is 01:04:25 decentralized Twitter? Can you imagine that? That's what Farcaster is. Yeah, without the bots, yeah. They deployed somewhere. You said to Mainnet. What mainnet did they deploy to? We'll get there. I'm going to tease this a little bit first. So Dan Romero tweets out, a step closer to 100% permissionless Farcaster, because he has retweeting a tweet talking about Farcaster hubs. So there's 30 Farcaster hubs. So this is like the different ways of viewing the Farcaster protocol. The warpcast runs four out of 30 of them. The rest are independently run and not subsidized, so economically sustainable. If warpcast, the main canonical app of Farcaster disappear tomorrow, the network would keep on running. Next up, Dan teases

Starting point is 01:05:06 Ethereum layer two mainnet migration and turning off the gating to signups. So moving on to the next tweet, what layer two did they choose? Optimism. They chose optimism. Optimism main net is now going to be the home of Farcaster. So you have the many different apps that make up the Farcaster ecosystem. That's Warpcast, that's Jam, that's Yap. All the other apps that look at the Farcaster Protocol. You have E&S as part of the stack, but then everything is ultimately going to settle down to an NFT on Optimism Mainnet as the base case for people's keys. And so that is the complete Farcaster stack built on Optimism Mainnet. Very cool. Oh, by the way, I have 30 invites to bankless citizens who want to come on Farcaster today. I've actually, I've replaced Ryan.

Starting point is 01:05:55 I replaced Twitter as the little spot on my home screen on my phone. Really? You know, flicked Twitter out of there, and I put Warpcaster there. And so I'm hanging out in Warpcaster a little bit more. And let me tell you, the absence of bots there is very refreshing. Nice conversations, too, the absence of, you know, toxicity. Is that, there's no Salon of people. Warpcast.

Starting point is 01:06:19 You should retract that, dude. You need to apologize for that one. That's too much. Do I? I don't know. The comments will tell you. Okay. What is this?

Starting point is 01:06:29 A shielded mempool on optimism. What does this mean? Yeah. So I wanted to really put this one in the agenda because of the era of privacy that is going around as a theme of this episode. So part of the explanation as to why fighting privacy is futile is because we have other technologies like an encrypted menpool that is now coming to the optimism main net and will also eventually be on the Ethereum layer one.

Starting point is 01:06:51 What does an encrypted men pool do? So if you don't want people to know what the contents of your transactions are before they get included as a transaction into the blockchain, you need something called a encrypted mempool. So Shutter has built a shielded menpool using threshold encryption for the modular OP stack. So this is what they are releasing into the while today. This is a grant recipient from Optimism's retroactive public goods funding efforts. So Optimism, like a shielded menpool, an encrypted menpool on its horizon, which is extremely cool. and very privacy first, very individual first. And so something that we definitely could need in this day and age.

Starting point is 01:07:27 Yeah, I don't know. It sounds highly illegal to me. It sounds like this should not be allowed. Okay, Mr. Fed. I mean, this is great, too. This is another example of, I think, layer two is kind of pioneering the frontier. So that Ethereum, yeah. Yeah, I can adopt it later.

Starting point is 01:07:42 And this certainly helps, you know, minimize MEV and increase privacy. Air drops, hey, it's air drop season, I guess, announcing the next air drop, a new chapter in cross-chain innovation. What is this? No, no, no, not announcing the next air drop, announcing next air drop. Well, they said the next. Okay, so this is next from Connected, which is one of the probably earliest and most sophisticated bridges, cross-chain roll-up bridges on Ethereum. So you can check out if you want to qualify for the Connects AirDrop here in the blog that we'll link in the show notes. There's a bunch of different criteria.

Starting point is 01:08:17 It's too long to read out. But if you can also, interestingly, what's cool is you can claim next on arbitram or optimism or polygon or nosis. Why do you have that ability? Well, because Connect's a cross-chain bridge, so it knows what chain you claimed it on. So it doesn't matter. It's part of the obfuscation and blurring the lines of all of the chains. This air drop begins on September 5th, 2023. If you don't want to mark that in your calendar, you know what you should go do is you should go to Earnify, okay?

Starting point is 01:08:46 So this is Earn.Fi. This is a bankless application that is provided for free. There's a premium subscription as well. When we say this is a bankless application, this is our application. This is our app. Yeah, it's, you know the AirDrop Hunter that we talked about last week, guys? This is the sequel to that. This essentially notifies you when you receive an AirDrop.

Starting point is 01:09:07 So if you type in your eth address here or connect your wallet, then you will know immediately if you have an opportunity for next tokens awaiting you. And not just the next air drop, Ryan, but I was checking my email for the, you know, once per month I check my email. And I actually was notified that one of my wallets, I have not claimed the Arbitrum Airdrop. And so this is a PSA for everyone out there.

Starting point is 01:09:32 Arbitrum expires in one month. So if you have not claimed your Arbitrum Airdrop, you need to claim it in the next one month. Now, like, some of you are like, arbitrage from airdrop happened forever ago, why are you bothering to tell me this on the roll-up? Well, because we know that there's $1.8 million of bankless citizens and or earnify users

Starting point is 01:09:54 who have not claimed their arbitrage from airdrop. Guys, what are you doing? Okay, and so now if you think that like, oh, no, that can't be me, I've already claimed my arbitraudem air drop. Have you checked all your wallets? Because you can qualify for the arbitrage from airdrop in like seven different ways.

Starting point is 01:10:10 And so the only only thing, way that you can actually like I didn't know that I had this AirDrop and then I checked my email and Earnify said like hey you have $8,000 you need a claim bro. I'm like oh thank you Ernify. They say bro I should say you idiot you idiot

Starting point is 01:10:25 claim up claim your harbitch of air drop. Oh man well those have gone up in value to be fair but yeah there's a lot of opportunity out there so we're just trying to keep you looped on this you know there's a there's a link in the show notes to Ernify but check that out I think it's going to continue to be air drop season

Starting point is 01:10:41 And now we're getting into later two air drops. Yes. I hinted at this in previous roll-ups until I'll just call that back. I said that, like, I know for a fact that one of our portfolio companies, Ryan, is withholding its air drop for more opportune parts in the market, more bullish sentiment in the market. That was connects. Oh. That was next.

Starting point is 01:11:01 So I think air drop appetite, therefore, if that is a signal to it will be back. I think it's a signal. Starkworth's got some tech here and it's open source. we like open source, what are they releasing? They are releasing their open source prover called Stone. So this is a very core component of decentralizing, a ZK roll-up, a layer two, is making the prover accessible

Starting point is 01:11:24 so that anyone can produce a proof. Everyone can be a prover. And so that is a very important, critical part of every single roll-up. This is what Arbitrum just did, right? No, that's fraud proofs. This would be correlated to ZK-Sinth's Bujum or Polygons Plonkey. this is Starkware's stone.

Starting point is 01:11:42 And so this is the, there's ZK stuff. Fraud proofs are specifically for optimistic roll-ups. Yeah, I know it's fraud proofs, but it's same niche. Similar idea, right? It's like, yeah, we're proving our ZK spooky math, aren't we? Yes, that's exactly right. For any of the people who are in the San Francisco area or who are going to the Starknet Summit on August 35th,

Starting point is 01:12:02 bankless citizens, we have a 50% discount to tickets for you. So if you want to go to the Starkware Summit, make sure you show up in the Discord and we'll get you the discount code for tickets. You know, all these projects, we just mentioned, Oble, Eganle, or Scroll, Starkware, they're all going to be at permissionless too. Some of them might be at the party that we mentioned at the outset.

Starting point is 01:12:20 Oh, they will be. Everyone will be at the party. Good time to catch them. Fire now has a wallet. Fire is a very useful extension that I now use. It basically checks a... It should be on your tool belt. It really should because so you pair it with MetaMask

Starting point is 01:12:32 and it checks a transaction to see if the transaction is kind of like a fishing attempt or a scam or not. and it tells you exactly what the transaction actually is before you click the button. Yeah, it's nice. Anyway, that's a useful extension. And now they also have a wallet. I've not tried this out, but if it's anything like their extension, I'm sure it's pretty good.

Starting point is 01:12:54 So there'll be a link in the show notes where you can go check that out and see if that's a wallet you can pair with Metamask and some of your other wallets. David, there was an exploit this week on Balancer, though. It wasn't that bad, but just give us the TLDR. So about 1.4% of Balancers T. VL was at risk. Only certain pools, boosted pools were affected. So some of these pools were paused to mitigate risk and they will remain so. So if you have been supplying liquidity to Balancer in boosted pools, you should remove your liquidity. And so it's probably too late for that, isn't it? It's a little bit too late. So the vulnerable, well, so, so this is also part of this

Starting point is 01:13:31 conversation. Shout out to Balancer in the way that they communicated this exploit. They identified the exploit, they took precautionary action, and then they broadcasted, hey, there's a vulnerability, you need to exit these vulnerable pools without saying what the vulnerability is. So it doesn't set any black hat hackers off on a, well, it did, but they didn't give them the, hey, they didn't give them the treasure map, huh? Exactly. They didn't give them the treasure map. So overall, this has been like one of the best handled exploits that I think we've seen. They even built a UI while they announced the exploit to go check if you were in an infected pool and a button to go with you.

Starting point is 01:14:10 Wow. So like, shout out to Balancer. Well done. Congrats on only having a 1.4 TVL vulnerable exploit. I guess that's worth. Congratulations for us. I don't think any money was affected. I haven't heard of anyone actually losing money.

Starting point is 01:14:26 So narrow escape from Balancer. Really good protocol. We love the Balancer team. Shout out Fernando. Yeah. They're OGs. They've been around for a while. Doing a great job.

Starting point is 01:14:37 Really quick in the NFT landscape. Congratulations to Milades for being number three out of the 10KPFP projects category, only behind punks and apes. Maladies. Wow. I do not own a milady. It's not really my vibe, but wow. Here they are.

Starting point is 01:14:53 Oh, those are them, huh? Okay, I've seen those. Those are the Milades. Yeah, like the weird corner of, I don't know even how to call it. This is weird. But I'm seeing the SEC in the good news section here, but the SEC is set to green light an ether future ETF. All right.

Starting point is 01:15:09 It looks like that's going to happen. We haven't had one of these before. We have the Bitcoin futures ETF. Now we get an ether futures ETF. This is Eric B from Twitter. He says, this is not surprising to us. We said they would approve an ether's future early on in the race. Nice to be validated.

Starting point is 01:15:24 What does this mean for Spot? Hard to say. Beyond it shows that things can change. It's nice. Things can change. Even Grinches can increase Increase the size of their hearts Wow, you just call Gary Gensler or Grinch

Starting point is 01:15:36 Yeah, that's the worst thing I've ever said about Gary There are 12 companies with applications For an ETH futures ETF Pro shares, volatility shares, bitwise, Roundhill among them The SEC is not supposed to play Kingmaker But I... They do, but they do.

Starting point is 01:15:52 I'm not the SEC. No, you're not. If you are going to partake in this game, I recommend Bitwise, they are crypto-natives. They are one of us. Who the hell knows? anyone from pro shares or volatility shares, that sounds like some boomer shit. So if you're going to buy some ETH futures, ETFs, do it through Bitwise. There are friends. Wow. We just criticized Gary

Starting point is 01:16:11 for being a Kingmaker, and here's David from Bankless. I know, I'm not, I'm not Gary. I do not play. I don't have, I'm not beholden to his rules. Speaking of not being beholden to the rules, you like that segue? Here's SBF. It's a picture of him. He's pleaded not guilty for fraud and money laundering charges because, of course he would. He's also, on bread and water. Do you know that? So he's a, he's a vegan in prison. They won't comply with his diet. So he has, um, what? I did not read this. I saw this in Normie mainstream news. I didn't even see this on crypto news. So there you go. The more you know. As a, uh, as a consumer of nutrition content, bread and water is not a recommended diet. David, he's in jail. All right,

Starting point is 01:16:53 that's a, uh, not a recommended place to be. Well, thanks were these pro tips from bankless. All right. What do we got next? Uh, coming up. next we got van spencer's smell we had an episode about s m ell the fang of defy synthetics maker ether link lido and we got a question from the nation david ryan what would you add what about the other tokens so we're going to add some letters to van spencer's smell uh keep it don't cut it uh and then of course what were bolish on and uh we did a very cool episode on super change which i think it's going to be related to what ryan and i are bullish on so all of that is coming up and more, but first a moment to talk about some of these fantastic sponsors that make this show possible.

Starting point is 01:17:33 Introducing ETHX from Stater. ETHX is a liquid staking token designed to maximize rewards, all while securing Ethereum. With Stater, you can run an Ethereum node with just 4Eath, which is 85% lower capital and 35% higher returns versus just solo staking. Stater has a multi-pool architecture with both permissionless and permission node operators to enable decentralization and scalability. Stater has extensive experience in building liquid staking solutions on six proof-of-stake block. chains and is trusted by over 70,000 stakers. Stater has partnered with over 40 leading protocols on these chains to bring defy utility to their liquid staking tokens.

Starting point is 01:18:09 Stater is actively building integrations and partnerships across Ethereum to bring the same great defy utility to the ETHX token. While smart contract bugs are always a risk in defy, the ETHX smart contract has received three independent audits and has a million dollar bug bounty with Immunify. Go to Staterlabs.com slash ETH slash stake to access the Stater staking protocol today. Mantle, formerly known as BitDAO, is the first Dow-led Web3 ecosystem, all built on top of Mantle's first core product, the Mantle network, a brand-new high-performance Ethereum Layer 2 built using the OP stack, but uses EGEN layer 2, but uses EGEN-Legener 2, built using the OPEs solution instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle network's gas fees by 80%, but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications. The Mantle treasury is one of the biggest Dow-owned treasuries, which is seeding an ecosystem of project.

Starting point is 01:18:58 from all around the Web3 space for Mantle. Mantle already has sub-communities from around Web3 onboarded, like Game 7 for Web Free Gaming, and Buy Bit for TVL and liquidity and onrance. So if you want to build on the Mantle network, Mantle is offering a grants program that provides milestone-based funding

Starting point is 01:19:13 to promising projects that help expand, secure, and decentralized Mantle. If you want to get started working with the first Dow-led layer-2 ecosystem, check out Mantle at mantle.xy-Z and follow them on Twitter at ZeroX Mantle. Questions from the nation this week, this one from Art Democrat, Bankless Citizen.

Starting point is 01:19:29 Art Democrat's going to be at the party. I'm pretty sure. Arts coming to the party. You met him in real life. Yeah, he was at our party in France. He's been to more bankless parties than you have, right? Good job, Art Democrat. And it's a great question here.

Starting point is 01:19:42 So we were talking about smell before the break. That actually stands for synthetics, maker, Ethereum, Lido, chain link. So Vance Spencer said that he was bullish on all of these tokens. We did an episode earlier this week on why the case for them. This is Art Democrats' question. What would you add to the smell cohort, David and Ryan, based on the current cryptospace outlook? And why?

Starting point is 01:20:05 Why would you add these letters, these acronyms? So, yeah, what's your answer to that? I think the two obvious low-hanging fruit ones that come to mind is Uniswap and Ave. We talked about Uniswap in the Van Spencer episode. He said that he's not convinced that liquidity inside of Uniswap is all that sticky. He doesn't see a large moat around Uniswap. and I take that point, Uniswap LPs are losing money, and everyone knows it, and they probably know it too,

Starting point is 01:20:32 unless they have just been ignoring reality. Yet, they are still keeping their money inside of Uniswap. And so maybe we don't understand the moat, but there does appear to be a moat, or at least no one is really leaving liquidity out of Uniswap. Uniswap has over 85% of all on-chain trading volumes going through Uniswap. It's pretty dominant.

Starting point is 01:20:54 And so maybe we can't explain the moat. I think there's a argument to be made that it does exist. And all that needs to happen is a few select innovations on Uniswop's own application layer in my mind. So you like really help with. I think it's an extremely valid contender to be considered part of the fang of Defi. Like, come on, it's Uniswap, bro.

Starting point is 01:21:15 You smell. You smell, then. You smell. What else you got? Give me another letter. Ave would be the other one. A. Compound is pretty stagnant.

Starting point is 01:21:22 Ave is updating. They did have that governance Fumble with the whole CRV but I mean they're really the only ones I would say that are progressing forward meaningfully and like there's of course there's a conversation of

Starting point is 01:21:38 Is governance going to work? Do we need more governance free primitives? But I mean between the market cap of AVE Is a blue chip. I mean everyone uses Aveh. And so smell plus U plus A You smella? You smell a.

Starting point is 01:21:53 You smell a. Do you know, I guess what I would add is, I think Vance is focused on DFI, which is cool, but there's another area of focus. The layer two tokens. Yeah. So I. O.P.R. Polly. Yep. Yeah.

Starting point is 01:22:11 All of these. Can we make an acronym for this? We probably can. I mean, all of them, like, you know, I'm more bullish on some than others based on kind of their fully diluted valuation where I see kind of their, you know, growth. I hazard to share that here, though, because we love all of our children equally. But maybe someday we'll do an episode kind of comparing these different ecosystems, very bullish in general on layer two. So there might be some other initials to come up with. And, you know, David, wants his competitor for Smell, so I can hear him click anyway. He's trying to figure out how you get

Starting point is 01:22:44 an A. What do you got? What do you got? Spaz. Scroll, Polygon, Arbid from ZKSink. I don't have the O for optimism. Spazo! Spazo! There might be something better there. I mean, that's basically all of the big ones, right? So, anyway, that's not what Vance's portfolio is, but definitely bullish on some L2 stuff these days for myself, and I know you are too. Another question. Nick, how worried should we be about banks gobbling up ETH and BTC through ETFs? Feels like a step backward if the majority of folks that own either of these assets actually own them through a bank instead of their own. I've got my answer to this.

Starting point is 01:23:26 You want to take it? Oh, really? Yeah, I'll start with my answer. So my answer is, you know what feels like? So great question, Nick. You know what it feels like a step backwards? Logging into your fidelity account. Logging into your E-Trade account, okay?

Starting point is 01:23:40 So, like, that's where you have to purchase these ETF assets. They're not programmable. You can't do anything with them. You could just look at them in, like, side the Fidelity price tracking app. So I would contend that it's net accretive to crypto because I don't think that the value is actually going to reside there because it's an inferior product. And it's an inferior set of rails. It's in Tradfai. It's in the old banking system.

Starting point is 01:24:08 And these are crypto-native assets, right? So you want their tokenized forms. So you can do things with them. You can restake them. Like you can, you know, stake them for the first time, you know. use them in Lido, use them as collateral for loans. Like, there's so much more you can do with them. I could send it to you.

Starting point is 01:24:28 If I wasn't an American, maybe I could get some privacy for my, you know, crypto-native assets. So I don't think TradFi will be competitive against any of that. And we'll just slurp all of their liquidity. And then we'll, now, I'll make one exception, though. I don't necessarily think that holds true for Bitcoin. I think it holds true for Ether. I don't think it holds true for Bitcoin. Why? Bitcoin does not have a fully developed set of

Starting point is 01:24:54 use cases in Defi inside of its ecosystem. It doesn't have any developed use cases. I think it is potentially more concerning for Bitcoin, although I'm still not overly concerned. I'm not concerned about that. Yeah, what's your take on that? Yeah, my take is that one of the lines that I liked about how just the wheels of history turn is that science progresses one grave at a time. It's a little bit dark. Some people are never going bankless. Some people are just... Some people need to die.

Starting point is 01:25:24 Some people are just always going to have their assets inside of their centralized brokerages. They are not... They don't care to become a crypto person. No. Maybe their financial advisor recommends them like, hey, let's allocate 1% of your savings to crypto just because you don't have any exposure there.

Starting point is 01:25:41 And because it's inside of your fidelity account, we can just buy ether or Bitcoin inside of your fidelity account. And then these people will... go and retire and they will go and be sipping margaritas on the island on an island for the rest of their life and they'll never become a crypto person. At least they're pumping our bags. And so for all the people that are going bankless that bought ether earlier than they did, fine, fine. I love the back half of this episode, by the way. The first half of this episode is all about crypto values and like we're fighting for privacy and all these meaningful things. And the back half

Starting point is 01:26:16 is like, we got it some bag pumping. We're excited about that, huh? Yeah, that's what Bankless does. We actually, never mind. All right, I take it the week. This one from me, although it's not my PFP. The SEC wants to make every crypto asset a security. FinC wants to make every crypto person a money transmitter.

Starting point is 01:26:35 The IRS wants to make every crypto transaction and tax event. America, please save yourselves from your regulators. I felt this one strongly this week. what I think that they don't understand, they refuse to understand, is because they're, I think these institutions organize, there's always a book you refer me to about kind of the nation state apparatus. Oh, yeah, seeing like a state. Seeing like a state. So each of these institutions are trying to garner more and more control and they become kind of their own like autonomous slime molds. They're just zombies that are just seeking that.

Starting point is 01:27:07 But the new thing they don't understand is that this is disintermediated. This is peer to peer, all right? So even when you look at kind of the treasury stance against these tornado cash developers, right? They keep thinking of them as custodians, as if they're institutions, and they're not. This is peer to peer. Peer to peer, digital money, it's a new thing,

Starting point is 01:27:29 but it's also a very old thing. Peer to peer to peer is how we used to do money. We would barter with gold, when we would have physical cash, and I would give it to you, or you would give it to me, and that record, that transaction did not have to be recorded by some nation state. It could be private, okay? So we're doing something new, but we're also going back to something old.

Starting point is 01:27:54 And in this old system, in this peer-to-peer system, or now peer-to-contract type system, we don't need the institutions as much, because why were the institutions put in place? They were put in place so that they could protect the people from large intermediary, mediaries who had more power, who had the ability to manipulate, to information arbitrage, not be transparent. They were put in place to help the people. And now these institutions are getting in the way of peer-to-peer transactions because they think we still need them in these cases, and they're grasping at power.

Starting point is 01:28:32 And I think that has to change. That has to invert. The way we think about these crypto transactions has to be more like the old peer-to-peer model, right and less like everything is intermediate through a bank and can be controlled by a regulator and the regulators have to come back to their mission statement of like protect the people and how do you protect the people you give them access to privacy so third parties like facebook or meta or visa or google can't prey on us and steal all our data i mean google can scrape the blockchain and figure out what every transaction is right now do we need protection against that from our regulators yes

Starting point is 01:29:10 What are they doing? They're stripping that away. That's the thing that has to change. And yeah, that's why I tweeted this out. Yeah, that book that I frequently referencing like a state, it gave me this one very big aha moment that made me appreciate a lot more about like how the nation state approaches crypto. And that is, it explains why there's this always this antagonistic relationship between the nation state and Aboriginal societies. Because Aboriginal societies are nomadic. They don't have. They're decentralized? Yeah, they're decentralized, right? They don't have an address. They don't exist anywhere. They don't have a serial number. They don't have a social security number. And they're always on the move. So how do you tax them? How do you reason about them? How do they fit inside of like the rigid grid, your machine? And so what the nation state is, they're not, the nation state isn't inherently racist, but it is oppressive towards aboriginals. And then also there's probably some racist people that, you know, blah, blah, blah. And so, like, this, it just doesn't compute the relationship between aboriginals and nation states. Like, they're different languages. And this is the same thing that's happening with cryptographers and cryptosystems.

Starting point is 01:30:20 They don't understand us. They don't understand the systems. We don't speak the same languages. And so what do they do? They oppress. They silence. They coerce. And so this is, if the whole rule of law system works in our favor, we will be able to fight for that.

Starting point is 01:30:36 But by default, it is an oppressive system that we need to. fight against. Agreed. Yeah. And we need to spend a lot of time educating. And I think that's what that's what a big part of the bankless podcast and the movement is, right? It's why we get politicians on here, even though sometimes those episodes are, you know, it's like what is this person going to say? Not generally enjoyed. But they need, like, we need to engage. We need to talk to them. All right, David, what do you bullish on this week? So this will be yet another articulation as to why I'm bullish on the super chain. But this is a more narrow reason as to why I'm bullish on the super chain. And there's this growing axis over there between the Ethereum attestation service,

Starting point is 01:31:12 who we just did a podcast with. Optimism governance, this platform called Click, and also Farcaster is a part of this. Overall, there's this axis of infrastructure that's growing that is helping establish identity in a little bit more of a roundabout way than I think people are typically used to. Like WorldCoin, scan your eyeball, will give you an identity, right? like many, many identity platforms say like, hey, our platform gives you an identity. Whereas, like, optimism, governance, the whole OP stack system, Ethereum attestation service, and then those attestation providers, like, Click, they're actually providing you an identity

Starting point is 01:31:52 in a more roundabout way, more about like they're showing the contour, the outside of your identity, they're showing the contours of your identity without actually trying to ascribe you an identity the way WorldCoin is. And so I think people are trying to look at what the frontier of decentralized identity looks like. They would go look at this axis that's forming over in the OP stack. I think. I mean, the idea is that that scales out to every single OP stack chain. I think I agree with that.

Starting point is 01:32:15 There's some cool things that we're seeing. That episode we did recently with Ethereum attestation service. Okay, if you have no idea what that means, it's not out yet. But attestations are just, you know, a fact that you can claim about yourself or somebody can claim about you. And it turns out that attestations actually form the basis of this thing, this social construct we call identity and reputation. And so it's very cool to see different ecosystems. In particular, you're right, optimism is really pressing into this formation of an identity.

Starting point is 01:32:47 And what's different about that in WorldCoin is it's kind of like it's app-driven identity rather than identity first. So there's like the use case for, I think that's probably how identity happens. It has to sort of, it's an emergent phenomenon. It has to emerge. You can't say, here's identity. Now everyone come and get your identity. Step right up, ladies and gentlemen, here's your identity. The only platform that does that is the nation state, and that's because they have a gun pointed to your face.

Starting point is 01:33:13 Yeah, they got, they already built the economy of scale to sort of pull that out and make that happen. And so, yeah, I think there's some really cool identity experiments going on. So Ethereum attestation service, that episode is coming up soon. It's cool. It's public, non-tokin, it's public goodsy. and that's going to be a foundational basis. Not token. Tokenless.

Starting point is 01:33:34 So that actually will come out a week after next. Oh, yeah. On Monday. Oh, that's mine. Don't steal mine. Don't steal mine. Okay. Oh, ask me what I'm bullish on.

Starting point is 01:33:44 I'm bullish about this. I'm bullish about this idea of a super chain, this kind of structure that we're forming. And it was part of the back of the episode that we just recorded with Ben Jones and Jesse Pollack from the base team. that's coin base base team. And it put, like, implanted this kind of, you know, image in my mind that I think has

Starting point is 01:34:06 already been more present in yours, but I don't know. Something about that episode really clicked for me. I think what we're going to have is with all of these layer twos, we're going to have federations of chains. They'll call them United States of chains where each chain is kind of its own state, but they're all part of this confederation where they have kind of an economic zone together. and maybe a shared governance layer. So I think all of these layer twos are emerging along that path.

Starting point is 01:34:33 So we'll have like the United Chains of Polygon. We'll have the United Chains of Arbitrum. The United Chains of Optimism, right? And that's what they call the Super Chain. That's what they call the Super Chain. And there's two levels to this union that I, it wasn't quite broken apart for me until that episode. The first is like the social level and the social alliance.

Starting point is 01:34:54 And that's very much about governance and a shared tax system and a constant that all of the chain subscribe to. And to me, that starts to look like very nation-state-like or very, like, formation of the United States or the European Union-like, where you have all of these separate nations agreeing to a shared protocol constitution come together to create an economic zone. So that's like this. And they have representatives.

Starting point is 01:35:17 They have governance, right? That's where identity fits in, by the way. Anyway, that is starting to form the social alliance. And then there's also a technical alliance here where we have shared standards, right? And this looks very much like Internet, like Web 1.0, technical alliances, right? So DNS, domain name services. This is a government, sorry, a technical standards body. Basically, there's all sorts of technical standards bodies that form the internet.

Starting point is 01:35:43 But they're basically more committee-type driven, right? They don't have any kind of governance power. Anyway, what we're creating in these super chain structures is like almost like a little bit of nation state and a little bit of technical standards body. And we're combining that together in a new experiment. I think this is the next frontier of, you know, Bologi, talking about the digital nation states, I think this is that. It's what we're creating are these digital nation superstructures.

Starting point is 01:36:09 And what's really neat is... Hold on. I'm going to take some credit here. Bology takes the network state. He wants these things to go manifest in real life and buy land. The digital nation state, that's a bankless original. That's true. That is a bankless original.

Starting point is 01:36:23 That is us. Yes. This is what we've always... This is what we've said. And this is, and so what, what's interesting is it sort of positions Ethereum in a unique place, in that I used to think Ethereum was more of a digital nation state in itself. In fact, that was kind of the original episode we did about this. Ethereum, the digital nation state.

Starting point is 01:36:41 And that's true still. But also, it's kind of a fractal. And it's, it's more emerging as kind of a birthplace for new digital nation state structures. Well, everyone was on the layer one. Yeah. Because we didn't have layer two's. Yes. So Ethereum is a birthplace for networks of network states.

Starting point is 01:37:00 This is really a cool concept, I think. Anyway, that's what's exciting me this week. Oh, and lastly, I think that's the structure that's actually going to scale us to a billion on chain users. Like, I think we have it now. We didn't have it previously. I think we have the evidence because look at what BAS is doing, right? New people for the first time ever. Oh, we didn't even say.

Starting point is 01:37:18 You know, BAS is almost up to a million active addresses. Right. Yeah, yeah, yeah, yeah. That's crazy in like two, two, three weeks. Yep. Yeah. I mean, it's just like fractal scaling, right? How do you get to 10,000 or how do you get to 10 billion people as soon as we get

Starting point is 01:37:36 10 billion people on this planet? The only way you get there is fractal growth, geometric growth. And that is what is comprised inside of these like super chain phenomenons where we have permissionless forking of chains that all coalesce into an economic zone and share the spoils of each one's network effects. There you go. There you go. Meme of the week, David. What are we looking at?

Starting point is 01:37:56 Meme of the week. Shout out to the Boys Club, Twitter. They produced some of the best memes about crypto. So this is the meme of somebody pressing multiple fountain soda drinks at once going into the same cup. And so on the left, we have weird, unusable technology that's being mixed with volatile, confusing money. And, hey, that's us. That's crypto. That's what we are.

Starting point is 01:38:19 That's a great meme. Guys, stay tuned for The Moment of Zen as well. It's a song by Song of Day Man. you're going to really like. It got to end with this, of course. Have you, wait, have you listened to this song, Ryan? Yeah. Because you have a main feature in it.

Starting point is 01:38:33 Yeah. Do you want to give a parental advisory warning? It says the F word a few times. In between Ryan and Adams, there's an F word. And it's repeated a handful of times. Wow. Oh, wait, no, it goes Ryan S, F word. Of course.

Starting point is 01:38:52 You got to get the middle of there. Yeah, yeah, yeah, yeah. Guys, we're going to get to risks in just a second. But first, disclosures. David and I mentioned a few projects today. Full disclosure. We are angel investors to Obel, scroll, and Connects. We're also advisors to optimism, a few other layer twos as well.

Starting point is 01:39:06 Both David and I hold ETH. We're long-term investors. We're not journalists. We don't do paid content. There's always a link to all bankless disclosures in the show notes or at bankless. com slash disclosures. All right. Crypto is risky.

Starting point is 01:39:17 You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot. Ryan, I don't know if you've checked lately, but we are approaching our 1,000th, approaching it's 1,000th.

Starting point is 01:41:03 God, damn it, 1,000th. God, what is going on, bro? Thousands, thousand. 1,000th. South 1,000th. Jesus, dude. Okay. Ron, I don't know if you've checked recently,

Starting point is 01:41:16 but on Apple Podcast, bankless is about to hit it's 1,000th. Right, you got to do it. Ryan, I don't know if you've checked recently, but on Apple Podcasts, we are about to hit. 1,000 five-star reviews. So if any of the bankless nation wants to be that one-th thousandth, we are about to hit 1,000 five-star reviews. So this is a call to action for anyone listening to bankless on Apple. Give us those five-star reviews so we can hit 1,000 so we can legitimize the

Starting point is 01:41:47 bankless podcast and get that top of the iTunes investing in business categories.

Bankless - ROLLUP: Under Attack - Crypto, Freedom, & Privacy

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