Bankless - SotN #1 - BULLISH; DeFi tokens, Internet-era growth, Fee v Issuance Debate

Episode Date: June 17, 2020

Welcome to the State of the Nation a new video podcast where RSA & David Hoffman weigh-in on topics relevant to the Bankless Nation every week. Watch the video here. New episodes on Tuesdays. SotN #1 - BULLISH Tuesday, June 16, 2020 The State of the Bankless Nation is....BULLISH! The Bankless boys discuss why. Covered: - Why DeFi tokens are the next pump narrative (but better than 2017) - How 100m ETH accounts is like the early internet - Do and David disagree on his Bitcoin tweet? We show you how: - To calculate returns on your COMP tokens ----- Tools from our sponsors to go bankless: Multis - bank your business without a bank (1 mon. trial!) Ramp - the fiat onramp for DeFi (mention Bankless!) Monolith - holy grail of bankless Visa cards Aave - money lego for lending & borrowing ----- RESOURCES: 1) Look up COMP returns (credit Mika Honkasalo @mhonkasalo)  2) DeFiMarketCap shows COMP market cap  3) InstaDapp maximizer for COMP mining   

All right, guys, welcome to Bankless. This is the first time David and I are trying something new. This is the State of the Nation video cast. We're going to be doing this every Tuesday, guys. David, it is great to see you on video, my friend. We usually, it's usually just your spoken voice, but this is the first time we're doing it live video on YouTube. Yeah, it turns out you're a real person and not just a voice.

voice in my headphones. So yeah, we've always wanted to kind of amp up our YouTube content and get people watching what we are also looking at while we talk about it. And so this video format is going to allow us to go a little bit more in depth about some subjects, share some images, and also just have like a more personal conversation. So I'm really excited about it. Yeah, it's going to be fun. I mean, we started doing this big picture type of stuff like the topical events that were happening in the bankless nation at the start of the at the start of our podcast. But it became like it was a lot, right? And it deserves its own dedicated airtime and its own dedicated show where we can do deep dives. So that's what we're going to be doing on the state

of the nation webcast. We're going to talk about what's happening. We're going to talk about how that relates to the big picture in the bankless nation. We're going to try to drop some insights and action items as we go, and we're going to be publishing this every Tuesday on YouTube. We'll also probably roll this into a podcast episode too. So you can catch it on YouTube and video. You can also catch it in the bankless podcast by subscribing. It'll be kind of the second episode of the week that we release. And I think it'll give us a really cool format for doing this sort of thing.

Yeah, the podcast that we were turning out were turning out to be like an hour. or 40 minutes long because they had like a 30 to 40 minute state of the nation and then an hour plus long interview or an hour plus long just you and me riffing on one set you like yeah breaking these things apart I think is definitely the way the way that they deserve to to be yeah all right so let's do it we get no breaks this I mean this is we can't edit anything so this is going to be raw this is going to be live but why did we call it state of the nation David what like why nation Because it is a nation. For those that read my recent article, a bankless nation, the thesis is that what we are building here is a new way of organizing ourselves across the world. And we as in humanity, we as in the

humans. We are building a new nation that works for all of us that has very strong correlates with the previous nations that we've known. And not just nation states, but the versions, the versions of nations that have come before it like religion. And the claim is that these digital nations, Bitcoin and Ethereum, are this new paradigm for organization, how humans organize around each other. And I also think that the reason why we're calling it the bankless nation is because Bitcoin and Ethereum are likely going to stitch themselves together

into one cohesive unit. I've always kind of considered Bitcoin and Ethereum as like this binary star system that is rotating around each other. They're brothers, right? Like older brother and younger brothers. Siblings, yeah. Yeah, the mother and the father, the archetypes of the universe, right? Yeah.

Like they require each other. Like there's no way that Bitcoin can have a fully sci-fi future without Ethereum. And so it needs Ethereum. And Bitcoin has a ton of liquidity and a ton of value, which is exactly what DeFi needs. So these things are going to become one cohesive nation, which we call the the bankless nation. Yeah, and it's bankless because that's the entire point of crypto, right? I mean, go all the way back to 2009, Satoshi's white paper where he talked about a peer-to-peer

digital cash. That word peer-to-peer, it's not peer-to-bank, it's not bank to peer, it's peer-to-peer. It's a bankless digital cash. So from the very inception, the entire point of this crypto movement has been to create a bankless financial money system, bankless nation. really for the world. And I know in your articles, David, you talked a lot about the Patriots and the uniforms of the bankless nation. I would consider both of us patriots and we're wearing our uniforms today, too. So I'm going to have to get some more of these shirts so that we always have them on Tuesday.

People want them. People want them. Yeah, I know. We've got to open up the storefront soon. So before we dig in, David, we've got to talk about two of our sponsors. So I'm going to talk about the first one. Maltis. So Maltis is a bankless way to run your business. It basically doesn't require a crypto exchange, doesn't require a bank account. We've written articles about Maltis on bankless. Actually, in the next week or so, we're going to be doing a video walkthrough live on this channel. It under the, behind the scenes, it uses the NOSIS multi-safe. So your funds are always secure. And it creates like a banking interface on top of a. smart contract system and allows you to run the entire thing without a bank.

So really cool sponsor, great to have them. We'll include a link to them where you can sign up and get some special bank list perks. Just check the YouTube notes. Our other sponsor is AVE. You guys know all about AVE. It's a borrowing and lending platform, but it's also much more than that. It's a suite of services that started with borrowing and lending and it has spawned into many new things. There are A tokens, which are tokens that receive the supply rate of all the assets on AVE.

And what's more is AVEA allows for stable interest loans. This is a very crucial tool in the legacy financial world to be able to pull out a loan from somewhere without having that interest rate change under your feet. And so that's what Avey allows you to do. It allows you to plan out your financial future far in advance because you know those interest rates aren't ever going to change. You can check them out at AAVE.com. Is that right?

Dot com. Dot com, yeah. And Maltes, by the way, is M-U-I-L-T. God, what is Maltis? Just check the video notes. I think it's a dot-co, though. You check the video notes. All right, David, what is the state

of the bankless nation right now, my friend? The state of the bankless nation is bullish, dude. so much is happening. Is that going to be your answer every week? Well, I mean, am I allowed to? Every week it's bullish? Yeah.

The reason why it's bullish this week is because of the defy tokens, really, is defy tokens. Avey, our sponsor, has their own token, which I'm categorizing as a defy token that has gone like 300% in the last like six months. Maker just jumped up by like double on its. listing on Coinbase. Comp just got added to Uniswap. What's comp? Comp is the token, a governance token of compound. Now, comp, unlike Ave or a maker, doesn't give you access to cash flows, but like we all know that's coming, right? So it's a governance token. So, so like it's people are

governing over compound, which has cash flows. And eventually it's, I'm thinking everyone else is assuming that in the future they're just going to vote in cash flows for themselves. It seems inevitable that there'll be a convergence, right? Right? So we published something in bank lists called like voting in cash flows, which is basically what comp holders are incented to do. If you're a holder of comp, you want to turn that comp token into a higher value comp token. So what's one of the initial things that you're going to do is you're going to vote in

cash flows so that you take a cut, a percentage of all of the assets under management in compound and have that accrued to the token. That seems inevitable to me. And it also seems to be the case like that's where we ended up with stocks. So like stocks were invented in the 1600s and the 1700s by the Dutch, right? And they slowly converge into what they resemble today, where they are capital assets. So they can be essentially valued based on future cash flows. But they, but they combine that and they also combine a governance a piece as well. So they're both part of the governance and the cash flows are both part of the same thing. I definitely agree with you. It feels like there's

going to be convergence here too, which is cool because this means it's like the birth of a new asset class. I know Chris Brininski wrote that paper about Bitcoin back in 2015 or so, but this is a second asset class, right? That was sort of the Bitcoin is like a money, monetary asset class. This is a second asset class. It's a capital asset with everything, all of the cash flow settled on chain. So it's like completely transparent and brand new. Super exciting. Yeah, absolutely.

And harping on that, the point of voting in cash flows, like if you don't think this is going to happen, like the onus is on you to prove to why this isn't going to follow the same path as like as history. Right. I can't remember who said it. But they said something along the lines of like, the cryptocurrency industry is just re-learning the lessons of finance that the human species has learned throughout time, but in a sped up manner. And now it's the time for capital assets on Ethereum. Like now is the time for tokens that represent some sort of equity in these DeFi applications

on Ethereum to start producing cash flows, which some are already doing and compound has been doing. And now there's this governance token called comp that governs over the cash flows of compound. Like it's just it's just a direct line like this is going to happen. Yeah, totally. I mean, I feel like it feels like we're in the maybe the 18th or 19th century in terms of like traditional finance where we're just starting the joint stock company. It's like brand new. We're just starting with lending, but it's all collateral backed.

So there's no notion of reputation. Everything has to be backed by real collateral. But I think we're accelerating in a much faster pace. So it's going to be really exciting as we like reinvent this parallel bankless financial system. But I want to ask you something on that. We're going to get into comp in a bit more detail, I think. But some people have criticized this as like ICO mania 2.0, right? All right.

So I'm going to I'm going to show comp market cap in a few minutes we're going to go through it. But it has quickly risen just in like a day of trading just yesterday, started trading on Uniswap. $900 million market cap. It's almost a Silicon Valley unicorn, $1 billion company. This is a protocol, right? And it's worth $900 million. So people see that and they're like,

oh my God, I'm having flashbacks to 2017 ICA mania. For everything went off there. It's already above MKR in market cap. It is the highest token value on Ethereum other than it. Right. All right. So people see that and they're like, not again. So, like, what's your take?

What's going to happen here? This is why I'm saying I'm bullish, right? When all these tokens are accruing these insane evaluations, like right off the bat. And an important distinction is that compound and the next lowest value market cap token on Ethereum MKR, they totally deserve it or at least deserve something, right? At least in stark comparison to like the ICO mania, right? like where the ICO mania was total vapor and it was an actual bubble that just needed the smallest pinprick to pop. Like there are real cash flows behind these things.

Like MKR has real income. Compound has real income. And so like, you know, it was easy to criticize the ICO tokens of 2017. And there is a lot of parallels between the defy tokens that have like gone up 300% over the last, you know, X number of months. But the point is, is that these things are real, right? things are generating real cash flows. And I remember Vitalik tweeted about this in 2017, 2018, after like the market cap of all, crypto hit like a trillion dollars. And then the bubble popped and it started to deflate. He said something along the lines of like the next,

the next bull market is going to be based off of real world fundamentals, like real, real things that are tangible. And that's what we are seeing here. Yeah, absolutely. And as you're talking, David, I put this up. This is the defy market cap, which is one of my favorite. It's better than coin market cap in some ways because it shows the actual like defy bankless a few times. All right. So I'll blow that up there.

So you can see compound market cap, 9.45 million dollars today. And there's maker, as you said. And you know, this might not last, right? It's like, you know, very limited liquidity. just on uniswap, it's entering this, this price discovery phase. But I absolutely think you're right. This is going to be, this is different than ICO mania, because in ICO mania, the tokens had no value accrual mechanism whatsoever.

It was kind of like, like buy my token. We haven't even shipped a product. Maybe we'll ship a product. Maybe we won't. If you buy my token. Right. And like, you know, how is the, how is the token value? The answer is like fat protocol thesis, bro.

It doesn't matter. It's just going to work itself out, right? And this time around, we might see some crazy valuations and we might see some mania enter. I don't think we're at that stage yet. But at least it will be based on things we can fairly value as capital assets, things that are real producing actual real world value and actual cash flows. So to me, it's a lot different.

The other thing is the distribution mechanism is a lot different. And I know we want to talk about that. But the ICOs, it was, you know, the early ICOs very much retail mania. You've got to, you know, buy the token. In this model of sort of the defy token area, you sort of, you have to earn them, right? So compound just released a mechanism for earning comp tokens yesterday. And we're going to talk about that. but do you see that as something different as well?

Is that important? Yes and also no, right? So part of the ICO mania was that like you would contribute work to the protocol and then you would receive tokens as a reward. And the only problem with that is that like it was inside the context of the mania, right? And so like it and we really hadn't figured out the distribution mechanism. But the main thesis of the distribution mechanism is that you use the token to align incentives with your users so that you can grow your ecosystem, right?

Like the token was a community management tool where like it would attract users, attract the community. But it happened inside of the context of this absolute mania with zero fundamentals. But like the token these days are doing the same role that ICO tokens earlier claimed to do. But this time they're actually doing it, right? So like if you want comp tokens, if you want balancer tokens, balancer token is like doing the same thing where like you can. get the token if you supply liquidity.

But like the work being done is the type of work being done is much more valid, right? Like for compound, you submit capital and there's zero way to fake that. You can't fake capital. Their previous ICO tokens were totally gamable. But like if you want to supply, if you want to get the comp token, you got to supply liquidity to the compound protocol, which makes the compound protocol better, which makes more people use the compound protocol, which, uh, which just, generates the whole the whole feedback loop, the flywheel, that these tokens were claimed to have

created in 2017. And so like, it's almost comical to me, like exactly the, how, how perfectly these new defy tokens are resonating with the original thesis of ICO tokens, but actually doing it correctly. Yeah, I totally agree. And maybe we should walk through sort of an example of what what comp actually looks like so folks can see how this works because what you said is exactly right David that this is essentially a growth hack for these defy protocols so what it's going to do is incent liquidity and juice liquidity inside of these money protocols these defy protocols and as we've talked about before liquidity that's the end game for everything there all of these protocols even Ethereum and the asset itself, they're just liquidity monsters.

The more liquidity you have, the more like a money system you become. So these things are chewing on liquidity. So can you see my screen, David? Okay. Okay. So this is the original comp medium post where they talk about distribution allocation of the comp tokens, how they're governance tokens. About let's see, is it 10 million or so?

of these tokens? Yeah, I think it's a total of 10 million of these tokens are going to be created. Close to half of those are going to be reserved for users of the protocol. So that's what they just launched on Monday, a way to issue these tokens for users of the protocol, and by that they need liquidity providers. But here's essentially what that means. It means that as you provide liquidity to the comp token, you get an increased return. And this is where it's kind of an action item or it's something interesting for the bankless community to look into.

A friend of mine put together a predictions exchange like basically a calculator. So you can see how much comp tokens you can earn. And so if you go through this exchange, we'll include this in the show notes. If you go through this calculator, rather, you could sort of see how much you can earn in comp tokens by supplying the various liquidity numbers. So if I supplied a thousand die and I press calculate my annual comp returns,

we can see right here by supplying die to the compound protocol, normally you'd earn a supply rate of 1.09% right? So die again is a stable coin. that's a bit better than what you might do in a traditional bank account for something that's like pegged to the U.S. dollar. But those returns are juiced by the comp token that you're receiving. So you get the 1.09%, but then you also earn about $10 per year. Well, let's see here. Yeah, you earn 1.21 comp on an annual basis in a additional basis in a additional. additional returns and at the comp valuation which again as we've talked about is you know it's just

one day of trading fleeting yeah it's it's trading but it's currently trading at um at you know nine nine hundred 19 million market cap with each token worth i can't believe that i'm saying that over over a hundred dollars um so anyway your net apy return is going to be 12 percent so in addition to that 1% that you're getting from the compound protocol? I think they may have totaled this. So it's the 1% plus the comp to give you a total annual return of 12.2%. I think they may have totaled it. But that's your total return.

So it's absolutely juicing your returns. And it's increasing the incentive to provide liquidity to this protocol. So it's an ultimate growth hack. And that's just with die. So let's check out, tether. And so each total. has its own interest rate that it gives you in comp tokens, right? Or are they the same for dollars of capital?

Different curves, different, different, drastically different amounts of comp tokens that you can earn. So if I put $1,000 in USDT, I click calculate. So USDT is regularly going to give me far more than die. 8.83%. But look at my APY. Right. And that's going down right now this morning. It was over 100%. So arbitrochers are getting in there,

like they're exchanging USC for tether and they're taking advantage of this opportunity. But that's a 99% return right now. So this is also a way to smooth out the differences in different pools, right? So like you are, I think you get more comp for supplying tether because there's more demand for tether. And so this is a way for the comp. compound governance system to like nudge capital to be supplied in a particular pair. Is that, is that correct? Yeah, exactly. And it's also a way to compete, I think, with the crypto banks. So the crypto banks have many different advantages, right, including, you know, better user interface. And in some cases, the ability to provide additional incentives.

In some cases, their own loyalty tokens. And this is Defi kind of, you know, striking back against that and put it. its own growth hacks in place to incent liquidity. And I think it's going to be absolutely, absolutely massive for all of defy. All the protocols are going to implement something like this. Yeah, totally, totally. Cryptobanks don't stand a chance. Yeah. I mean, there's other, there's other stuff you can get into too, which I'm, which I'm trying to figure out at the moment, which is, you know, Instadap is allowing you to actually take leverage on staple coins and further juice your returns. Wow. Instadap already

has a tool for this. That's crazy. They ship that fast. I know. So they just built it on top. So anyway, more stuff to figure out here. But we will include links to these interfaces in the show notes. So you can, you can see just how much APY, your annualized return can be by depositing some of these various assets into comp. And you could really see. I mean, I get why you're bullish, David. I understand it. It seems like this is a very bullish move. for defy and yeah could could be part of the next bull run for sure so not only that like defy tokens are bullish in their own right but also because of the way that market cycles work right if all these defy tokens have gone like 3x to 30x over the last six months like

that's going to rotate back into eth dude like if if the all the tokens on ethereum went like collectively 3x in price people are going to people are going to rotate That's how it worked in 2017 very much, right? And if you look at sort of what's the leading trading pair for comp right now on uniswap, which is the only exchange, which is basically selling comp tokens, it's all ETH, it's all an ETH pair.

Off the top of your head, do you know how much ETH is in that trading pair? I don't. We could look that up. I mean, I know the volume's about a million a day right now, so not a ton, but there's going to be more.

It's just going to suck up a ton of Eth. It's going to suck up a ton of ETH. Yes. And not quite like 2017. So right, with 2017, basically all of the ICA raises sucked up ETH

because you had to contribute in kind with ETH. But this has advantages in that it's still sucking up ETH as kind of a trading pair. It's growing the Ethereum economy, certainly. And these are real assets. Now, that's not to say, like if you do it,

net present value calculation of comp tokens right now, like if you work backwards to get to the 900 million number, it probably doesn't make sense, right? Like the, you know, the PE ratios, price earnings ratios have to be absolutely insane to pop up that valuation. So it's not to say that this won't get crazy and speculative,

but the difference, as we said, is compounds are real, like it's a real protocol, it's working, people are using it, and like potentially there's some real cash flows associated with this. Right. And we can actually calculate it, which did not happen in 2017. We actually have numbers to go off of. We have numbers to go off of.

We have models. I think we're starting to understand this more. So, yeah. I mean, that's huge, I think. And you know what? Here's the other thing is, stocks don't have any room to talk right now because they are like,

dude, it's the Fed. It's not the company anymore. It's like, are they going to print more money? Okay, so is that what's going on with like the Robin Hood is like the new Binance right it's just we buy all the all the the stock like shake lines I can right like so what what's happening are people like getting their their check

from the Fed their stimulus check from the Fed and they're just like oh nothing to do I'm going to robin hood may as well like buy some hurt stock buy some carnival game a side man it's no longer what it once was it no longer is a place to find and discover value. It's a place, it's turning into a casino, which is what finance was. Like it is turning into something that is separate from reality. Like the stock market couldn't be more separated

from reality right now. It's a decent amount of the stock market is at all-time highs, and 50% of the United States has not opened up for business. Like it's disconnect. It's a huge difference. I feel like, so I feel like, you know,

to the S&P is like, you're drunk, bro. Go home. Like, we sleep it off. Sleep it off because we, I feel like people in crypto have lived through this. We know what drunk looks like. Because we had 2017 where things were just stupid. It's just dumb.

Yeah. I mean, I thought, I thought Eith was going to 20,000 like in six months. But, you know, it turns out I was drunk. Turns out I was drunk at that time. Right. I mean, and it happens with all markets. But, I mean, how does this end, do you think, for Robin Hood traders? Does the Fed just keep bailing them out?

So this is what I was talking about with Christian on POV Cryptopod. If we were to witness a dollar inflation event or perhaps, dare I say, hyperinflation event, we would see exactly what we have seen so far. Like inflation shows up in the stock market first. And if they keep on printing money because another Hertz went, bankrupt. It's just going to blow up confidence in the whole rest of the system while these particular stocks just moon because stocks are now a savings technology, not a way to invest in a company. It's just a way to preserve wealth. But can't the Fed just continue to print the money

like forever infinite quantitative easing? I mean, does that ever run out? Yeah, yeah, after it blows up, sure. Yeah, but not before it blows up. Yeah, they can keep on printing money as long as people are buying the dollar. That's the thing is like they also have this interesting position where like there is a global deflation of dollars, right? Like the world wants dollars. And so the dollars is going up in value. And so when they print dollars, it actually means more.

But like it's not going to go up. The demand for dollars isn't going to go up forever, especially when they're flooding the market. Like the amount of new dollars in the world is staggering. Yeah, I mean, it feels like that's the last thing that's, that's, you know, we talk about kind of debt and, you know, the 20 trillion in debt that the U.S. is in all of that. But the bigger debt and the debt that we are taking out right now is debt against the U.S.'s future status as a reserve currency for the world, right? I feel like, you know, baby boomers.

I love you. parents, they're great. But like, it feels like that's the last thing that the baby boomers are taking is like on their way out. It's like, well, this is the last honeypot. We're going to, you know, it's the reserve currency status of the US dollar. Now, I guess the saving grace. And I want to retire in luxury, right? At least not in poverty. Right, right. I guess the saving grace is that, you know, all of the other Fiat central banks are doing it due. So maybe. like everyone's playing the same game and so it matters less that the U.S. is doing this right now. But I think all of the economic theories, like if you look at modern monetary theory and the

idea that we can just continue to print money as long as we keep inflation in check, it all seems based on this assumption, they all make this core assumption that people, the population, the citizens of the world don't have another alternative. like they don't have another non-fayette alternative. Right. And what if they do? And what if they do? Yeah.

No, I've heard this from Bitcoin is over and over and over again. Bitcoin isn't the bubble. It's the needle. It's the thing that pops the bubble. And there's no better way to inflate a bubble than money printer go burr. Yeah, absolutely. All right. Bullish.

You know what? David, we should talk about our second round of sponsors. So I want to talk about Ramp. So Ramp is a fantastic way to do Fiat on Ramp. So if you are a DFI app developer, one of the biggest pain points you probably have is when the user goes and tries to do a transaction in Ethereum and doesn't have funds, doesn't have any ETH to pay for the gas. So Ramp solves that in like five minutes. One of your users can get access to Fiat right in their account connects directly to their bank account. So it's super easy. It's a magic experience and it's one of the biggest pain points that

Defi needs to solve. So check them out in the YouTube notes. Go to ramp.network for more info on ramp. The coolest thing about the bankless nation is that it knows no borders. And so if you want to store your money and your wealth in the bankless nation on Ethereum, you should absolutely get an account set up with Monolith because Monolith will spin you up a smart contract wallet. And then they will also give you a defy visa card. And visa is basically accepted all over the world. But instead of using dollars in your bank account, it uses die in your smart contract wallet. So you can go from country to country when coronavirus is over and we're all doing that. You can go from country to country, place to place, hop on a plane and swipe your visa card. And it will still use the same

die smart contract wallet on Ethereum because the bankless nation knows no borders. So go to monolith. XYZ and sign up and get your Defi card today. Great cool. All right, man. So that was topic one. Second topic we want to talk about. Yeah, big topic. Big topic too.

Let's move. So second one we want to talk about is crypto and the internet. So I know recently, David, we've been comparing crypto to nation states a lot. And you've got your second article coming out shortly on that, which has kind of a similar table. as this, like with nation states. But there's another comparison we can make,

and that's comparing crypto to the internet protocol, the communication protocol. It was really interesting to me. So just last week, Ethereum hit 100 million bank accounts. I say bank accounts, but what I'm talking about is eth addresses, right? So 100 million eth addresses created on this new protocol,

this new value protocol, this new settlement layer. It took the internet until about from 1991 to 2006 to get to 100 million websites. Now, I know those apples in oranges, they're kind of different, but those numbers like feel significant anyway, right? Like you can see sort of the network effect and the saturation of that. And so I was thinking a lot about the comparison of the internet

as a communication protocol, and that's really what it is, versus what crypto is bringing. And crypto is really, it's part of the internet, right? So crypto and the internet, they're not different things. What crypto is basically is adding another layer to the internet. So the internet was all about communication. Another realm, right? Another, like, property that the internet previously didn't have.

So the internet is all about global, distributed, permissionless, credibly neutral communication, right? So we saw that in everything that was built on top of it, email and social media and, you know, even like e-commerce, those sorts of things. But crypto is doing to value what the internet did to communication. It's a different protocol. And it's layering that on top of the internet. And there's a lot of different parallels. I mean, do you see this too?

Yeah. Yeah, absolutely. And it makes a ton of sense. And it fills a missing gap that the internet has always had, right? And there's even the Web 3 movement. The Web 3 movement is kind of nebulously defined. And I kind of, there's the Internet of value, which can be considered Web 3. But also the Web 3 movement is also about rebuilding the Web 2, which is like taking the

old Internet systems, the communication, digital media, attention economy. and rebuilding it in the crypto land, but using the crypto money systems at the bottom. And I'm really excited about that marriage. But what you're talking about, Ryan, is like the correlates between every single thing that has made up the Web 2 movement and how you can find an equal correlate

in the crypto world for what it does. When we had Itmar from Argent on the Bankless podcast, we talked about how, like, the Argent wallet is kind of, it could be like the net. Escape browser, but for crypto, where the Netscape browser, the internet before the browser came around was this very dense and difficult to navigate system, and the browser made it usable. It made it sexy to use. And that's really what we see like the Argent wallet doing with Ethereum and DeFi, right?

Like it makes the experience easy. It's a sexy U.I.U.X on top of DeFi, on top of cryptocurrency. dope. And then you can make all these same comparisons for all these different, you know, actions that you've made here. And I think they, they, we say it's an apples to oranges comparison because it has to be. But it's the best, it's the best apples to apples comparison that we can also come up with. Yeah. Yeah. Apples and oranges, you know, both are fruit. So you can't compare them. That's what we're doing. I mean, but one of the big things, I feel like folks in the crypto space or in the blockchain space, one of the big mistakes they made early on is looking

at the wrong metrics, right? They came at this thing from a internet world, from like a web one, web two world. And so even when they were like in the early phases measuring success in networks like Ethereum, they were measuring it still in like how many daily active users do you have? Right. Right. Like how many views do you have? Oh, I mean, there's only a thousand only 1,000 people using Maker, like that's a thousand addresses, that's nothing. It's just, but those 1,000 addresses, each of those addresses could be a bank account, essentially, that has millions, tens of millions in value in it. And like they were measuring the success of crypto by internet metrics when they should have been

measuring the successive crypto by crypto metrics. So like the metrics are value, liquidity, volume. That's the real currency. That's the real thing that you're seeking. You're not seeking attention anymore. It's not the attention economy. This is like the money economy, the value economy. So it's different.

So you have to look at everything in crypto with that orientation. You can't use the internet metrics in order to compare it. Now, we do need people, right? Like we do need daily active users to some degree. Like if crypto and Ethereum and the bankless world ends up being just like, you know, 50,000 people and that's it. Like that's not that great. Like we do need those numbers. It's not great.

But the way that we get daily active users is by getting, you know, volume, liquidity, money, total value. We get that first because those, getting, pumping those numbers up is what makes these systems operate better for a wider audience. And so it's got to be the volume, the liquidity, numbers that get up first because that's what attracts the daily active users. The daily active users doesn't bring the liquidity. The liquidity brings the daily active users. Yeah, for sure. And I do think that we are starting to realize this. Like two years ago, I was talking about this and it was maddening to me where people were talking about like maker being a failure because there are only a few thousand users on it. And, you know, those people are probably still saying makers of failure.

Right. So maybe. But like, it's crazy to me. Because what you should be looking at. What we're starting to look at now is like like defy pulse. So value locked in defy. That's huge, right? And then like loan originations. So the way to look at the success of maker is how much in loans did it originate? Oh, wow. You know, turns out it's already originated like $2.4 billion in loans. Right. It took lending tree like peer to peer lending product, like, you know, five years to reach $250 million, right? It's like, whoever, like, asks Wells Fargo, how many daily active users do you have? Like, that's just a nonsensical question.

It's a stupid. How many times do you open up your bank account? Like, hopefully not very often. Yeah. It's a very internet, like Silicon Valley, like, question. And we need to be starting to look at this through the lens of finance. So I think we're doing that more. but man two years ago it was a mess and hopefully people continue to look at this as a protocol for

value and not um yeah not a protocol for attention and communication it's totally different absolutely all right man anything to add to that or should we discuss topic three let's let's move on all right so we've we've not discussed this all right so i put out a tweet um last week a week and a half ago or so. I said, and this is a little snarky, you know, Twitter's fine. What's the security cap on your blockchain? I mean supply cap. Same thing. So what I was saying there is basically there is this relationship that bitcoinsers do not acknowledge between the fixed cap of their issuance policy of 21 million. And that also being a security cap. So if you fix the issuance of your monetary policy, right?

By definition, you're also fixing the amount of security budget that you're providing. So it was a little, you know, snarky. It's like, you know, I think I was maybe triggered by somebody who was celebrating fixed cap as like the best thing without looking at the tradeoffs of fixed cap. But then you jumped in, you were like, oh, bad take, Ryan. I said, I said, oof, don't like this one. Yeah, yeah, exactly. So tell me, why don't you like it? So what's, let's talk about it.

I think it's because maybe I'm taking it literally, and maybe you don't mean it's quite in such a literal sense. But like the security of a blockchain doesn't come from its issuance, right? Not just that. It can. However, if you take it literally, like when Bitcoin reaches maturity and has $21 million and it is capped and not issuing anymore, like it is still going to have people paying for its security. So like the security, where you get security doesn't come from only issuing the currency.

It also comes from transaction fees. Is that what you're saying? Yes, it also comes from transaction fees. And we also are going to see that dynamic play out in Ethereum as well. right and so in ethereum 2.0 when they're sharding when there's a bunch of uh total uh transactions per per time and those transactions are being burned in eip 1559 those transactions those that are paying the fees are going to burn ether which makes it more scarce which means that when we issue ether that that ether is more valuable which increases the security and so it's there's there's a yin and a yang here

There's like the issuance and then there's the fees. And you also get security from fees. And fees are really, really important in the long-term security because if you are only relying on issuance, then the value of your asset is going to go down, which means you have to issue more to make up that same security, which means you have to issue more,

which means you have to issue more, which then just totally ruins the whole value of your asset. And so the more you can actually get security, from your fees, the better because that means you actually have to issue less. All right. Well, that's a little disappointing because I thought we were going to like disagree on this or something. But yeah, I, you know, yeah. Yeah.

Yeah, so exactly. I mean, I think the tweet wasn't a complete thought on that, right? It wasn't, you know, didn't say. But if your network successfully transitions to receiving, you know, security budget from transaction fees, then everything's okay, which is like the addendum to that. I do, I don't, you know, I think you share this, but I don't know, like do you share the concern that, so what, what Bitcoin is doing, it's got to cross this chasm, right? In people like Hasu and the Bitcoin community have talked about this, by the way, we're having Hasu on the podcast.

Tomorrow, we're going to put that out next week. So catch that guys. We're going to talk about this issue. But, but so he, he writes, recognizes the issue here is Bitcoin, because of its monetary policy, has to move from a security budget that's paid for by issuance. So the memetic power of the Bitcoin is gold meme, right? That's like really strong for Bitcoin. So it's got to move from a security budget that's paid for by that, in all of its strengths, to a security budget that's paid for just pure demand for its block space. and what can you do with Bitcoin block space right now? The thing you can do with Bitcoin block space primarily is move Bitcoin.

That's it. And so if everybody's holding, no one wants to move a lot of Bitcoin, right? Or like I'm not saying that Bitcoin's economic, like its security budget will collapse to zero, just that it's very likely with that sort of a monetary policy and issuance policy that it will be exceeded by another network that doesn't make those tradeoffs, right? Because if you look at Ethereum right now, it feels like it's on a trajectory for a flippinging in terms of blocks-based demand. Like Ethereum blocks are more useful.

I mean, why? Because you can put stable coins on them. You can run compound transactions. You can vote on. You do tons of things with them. And it's block. space might be in higher demand than Bitcoin. So it's kind of, you know, playing to its strengths. Anyway, I just see that as a mostly unacknowledged tradeoff in the Bitcoin space when they're

talking about the virtues of fixed supply. So even the most avid Bitcoiners will say like either Bitcoin works completely or it doesn't. And there's no, there's no middle ground. And that's to say like either the transaction fees become enough or they don't. And what worries me is like the communicated narrative, the communicated value proposition is that you can buy and hold Bitcoin forever and just store it and that'll be enough for you. But it never ever talks about like and you need to like have block space to ban. Nowhere in the Bitcoin narrative is there room for that room for increasing the demand of the block space. Bitcoiners just kind of assume that the the block space will be in demand if the asset is valuable, which is like, it's an, it's an okay

assumption so long as we are aware that we are assuming it. And the difference between Bitcoin and Ethereum is like, Ethereum reprioritizes things. It says that we are going to put security first and we are going to do our best to make our block space in demand. And so that we are, don't matter what, there is no, you know, binariness in the success of Ethereum. it will rise or sink to the level of its success. And Bitcoin, it does this hard, it's hard, hard plant of the flag and say, 21 million hard cap. And people are going to love that 21 million hard cap so much that it is going to

ultimately make the system extremely successful to the point that it memed itself into existence by generating enough fees. And Ethereum is doing the opposite where it says, we are going to make our blockchain so incredibly secure that everyone will believe in its existence into the future no matter what. And then that will create value in the asset. And so we're doing these same things. But like for me, the existence of Ethereum into the long term distant future seems more secure because that is what the goal of Ethereum is. And I think that is the right priorities. Whereas Bitcoin, you kind of have to take it on faith and ingrained in the in the social

contract of Bitcoin is that you don't talk about how it couldn't fail. Because that also increases the likelihood of it working. So it's the responsibility to do that. If you doubt, you decrease the security of Bitcoin. If you doubt, don't be a doubter. You can't doubt. You can't doubt. Okay, so here's something interesting is, right?

So, I mean, we just talked about the digital nation analog, right? We compared crypto to, mostly we compared it to the nation state. Right. And you did. So what about a digital religion? They're both. It's definitely both. And there is a difference in balance, right? I would say Ethereum is closer to a nation state and Bitcoin's closer to a religion. That's interesting, right? Because you do have many aspects of a religion with these digital nations, as we've called them, maybe in particular Bitcoin, right? But you just used words like you've got to take it on faith, right? And there's definitely profits. So we were talking on Twitter just last week, Gavin Andresen, like, you know, Like he tweeted something about Ethereum.

He's clearly a fan. And we said, hey, Gavin, you know, and he, by the way, for folks you don't know, he's one of the OGs. He's like, he was like, the third guy, second. No, he was second. Right. It's like Satoshi handed off the Kings of the Kingdom to Gavin. Right. He was like, he was like, you're the number one, like, you know, continue this without me.

I've got other things to do. So, but, but we said, Gavin, you should come on the, like, podcast, come on bank lists. let's talk about bridging Bitcoin and Ethereum. The very first, you know, tweet after that, when they got the most likes from the Bitcoin community, somebody goes, no, Gavin's not a bitcoiner. He's not a Bitcoiner anymore. No, he failed the purity test, right?

Like, he's out. He's ostracized. It's like the church. It's like a religion saying, like you no longer believe the canon of acceptable beliefs. Therefore, you're out. You have to keep everything pure. You have to keep the faith pure. You have to keep it.

But, you know, that's both a, I think, a weakness, but also weirdly a strength of Bitcoin. Huge strength. Okay. So you're saying a limit on its scale, however, you cannot scale the Bitcoin community that way. Why? Because you need a whole bunch of people who are going to like be dogmatic enough to. Exactly.

Yeah. And then be the followers to believe in that. But I want to make a distinction because you don't need the Bitcoin blockchain. and the growth of the Bitcoin blockchain can be independent from the growth and scale of the Bitcoin community. So the Bitcoin chain can still grow and serve the needs of the world. It's just the Bitcoin can't scale because of how dogmatic it is. Yeah. If I, if I hold Bitcoin, I don't have to be a maximalist who believes all of these things, right? You don't have to be a day held. I don't have to be, I don't have to be a dick. I can like, but I can just hold it, right?

It's like, it's like independent of that. But so, but you think, that's interesting. Do you think Ethereum would be better off if it injected a bit more religion? Yeah, maybe, perhaps. I kind of like Ethereum where it is. But does that limit it's, you know, here's a counterpoint. But actually, does that limit Ethereum's scale? I don't think so because I think in the same way that nation states eventually

assumed religion that like the fundamentals of Ethereum will eventually take over the role of faith, right? And what you and I have been doing and all the people that have been like, eth is money, eth is money, eth value go up. We have been trying to get the fundamentals based side of Ethereum to like be a little bit more religious. But at the same time, I would rather lead with fundamentals because fundamentals are facts and facts you cannot just prove. And so I put facts about. of faith all the time. And I think the, the, the, the, the, the, the, the, the doing that in your crypto nation is also the right way to do things. Well, we'll see. I mean, I, I do think that these are

these, uh, these kind of different visions and different experiments that are, that are playing out. And, um, you know, Nassim Taleb has talked about the value of an intolerant minority. That's very much what I see in their ability, by the way, it just takes like one to three percent of the population to be an intolerant minority to like bring about major change. Right. And as long as they're allowed, right? Because they are allowed, they are steadfast and they are immutable. They will not change. And in some ways, oddly, though I can't get there like because it's just not how I'm wired. Oddly, that's a weird strength for Bitcoin. And, you know, it's something I'm just in the process of wrapping my head around. But I got to see how it plays out. David, I think we hit all

three subjects, man. This is been a good first state of the nation. First state of the nation. State of the nation is bullish. All right. So what are we doing? State of the nation is bullish. We're going to be releasing this every Tuesday, sometime during Tuesday. And then when's it going to come out on the podcast? Are we going to put it out Wednesday, Thursday, Thursday? Yeah. We can do it. Let's do it Wednesday. Wednesday mornings. That's great. That's it. That's it. State of the nation, guys. Your one action item, we went over that comp opportunity. We will include that. in the show notes.

So you can take a look at how much you can make in comp tokens right now by depositing some assets. This has been Ryan Sean Adams, David Hoffman, signing off State of the Nation, episode one. Fantastic. Thanks, guys. Thanks.