Bankless - SotN#11 - BUILDING w/ Raul Jordan (Eth2 Testnet Broke? L2 will Save Us! Pro-o-o-tocol Sink!)

Episode Date: August 26, 2020

STATE OF THE NATION #11 - Tuesday, August 18, 2020 Watch on the Bankless YouTube Channel The State of the Bankless Nation is....BUILDING! The bankless boys discuss why. ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⚔️ GODS UNCHAINED - TRADING CARD GAME - you own the cards - start a free account, play and trade! 🧙‍♀️ POLYMARKET - BET ON CRYPTO - bet your beliefs! - use it to bet on DeFi outcomes!  🌈 AAVE - LEND & BORROW YOUR CRYPTO W/O A BANK - earn some interest! 💸 AMPLFORTH - MONETARY EXPERIMENT FOR BASE MONEY - learn about this experiment! ----- TOPICS: 1) ETH2 TESTNET BROKE? 2) LAYER2 WILL SAVE US 3) PRO-O-O-O-O-TOCOL SINK We show:  Bankless Medalla Testnet Guide Official docs for prysmatic labs client Ethereum economic density article - Nic Carter  Loopring DeFi Dad video on Bankless YouTube OMG network taking Tether settlement dYdX scaling with layer2 starkware Near bridging to Ethereum Binance staking DAI using Compound/DSR Huobi launching Global DeFi Summit  --- Episode Actions: Catch SOTN LIVE on YouTube every Tuesday at 10am EST (2pm UTC) Join AMA with Antonio of dYdX live at 2pm EST this Thursday Subscribe to Bankless to get Medalla testnet guide then get involved Also...subscribe to Bankless YouTube to watch State of the Nation every Tuesday! ----- Don't stop at the show! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

Everyone, welcome to State of the Nation. This is episode for 11th, our 11th episode of State of the Nation. David, how are you doing today? I'm doing just fantastic. I stepped away for a whole four days, and it cost me in my ability to understand what the hell is going on. But, you know, four days is like probably four weeks, at least, like in the real world. Yeah, yeah.

It's an insane amount of time. But I've spent most of yesterday trying to get back on track. And I think I'm there. I don't think I'm there. Awesome, man. Well, I'm excited. We've got some great topics. We've got a very special guest, Raul Jordan.

He is from the Prismatic Labs team, and we are going to introduce him in just a minute. But if you're not familiar with State of the Nation, what we do every single episode is we broadcast this live on Tuesdays now. So Tuesdays at 10 a.m. Eastern time. We're pushing this live. You can ask questions in the comments, but we have some prepared content that we talk about. And what we really try to do is talk about what's happening, to all of the big picture stuff that is going on in cryptic, going on in the bankless nation.

We try to drop some insights and action items every single episode. So you are constantly leveling up, like using the events that have gone on the previous week to level up. So every Tuesday we drop this on YouTube. We also release it on our podcast stream on Wednesday. So if audio is more your jam, you want to catch this while you're going for, jog, whatever, catch it on Wednesdays that way as well. David, before we dive in, we should

talk about our fantastic sponsors. You want to start with gods and chained? Yeah, Goss and Chained. I love having Gauze and Chained as a sponsor. So for those of you guys that have played Magic the Gathering or Uyghur or Pokemon or Harstown, Gauze and Chain is a game just like that. It's a trading card game where you kind of duel with another person and hopefully your cards are better than theirs. But the interesting thing about Goss and Chain is that the cards are digital tokens on Ethereum. And so there's the magic the gathering game is great because you can play in real life with physical cards that you own yourself kind of in the same way that you own cash. And then you can play right across from another person. Harthstone from Blizzard is also great

because you can play on your computer and you can play anywhere in the world. And because it's on your computer, there are some extra cool mechanics that you just can't have in real life, except you don't own your cards. And so, like, Blizzard has complete control over your cards. If you lose your account, you lose all your cards. Gauzenchained is, like, the best of both worlds, where your cards are tokens on Ethereum. And so you actually own your assets, right? Like, no one can take your Gauze and chain cards away from you. But you can also play on a computer with these cool, like, awesome graphics and these cool, awesome game mechanics because of how it's a digital game. So you can check them out at Gauz Unchained. And you can

can also play against me every weekend or so. I usually play on the weekends. Play against you. Yeah. A mistake. Are you like really good at this? I could be better. All right. Well, then I might take advantage of that. Also want to tell you about sponsor number two. So AVE is a long-term supporter of bankless. Just a fantastic protocol. Ave is a lending and borrowing protocol deployed on Ethereum. Some weeks I feel like I can't even keep up with everything these guys are putting out and everything these guys are doing. They might be competing for it like the team that ships the most, the DeFi Protocol team that it's the most because they're just

crushing it. Last, yesterday actually, I saw Avey, not only last week or the week before they passed the $1 billion locked mark, but they actually became the number one DFI protocol in terms of total locked values. So I'm looking at the DFI pulse charts right now. And they are number one, 1.1.4.4. billion locked in Ave right now. I think the bankless nation might have a portion of that. And they're just ahead of Maker who's at $1.43 billion. So if you're new to Ave, what can you get it? You can deposit die in the protocol or other Ethereum-based assets that you have like ETH or other ERC20s. And it returns interest on top of that deposit. You can also borrow against it. And Avey has fixed rate loans.

They're also rolling out Avanomics. You can take a look at, go to AVE.com and see what Avanomics is all about. They also have uncollateralized lending that they are deploying and developing. We wrote an article about this in Bankless. And recently, actually, yesterday, they just rolled out a way to start onboarding Fiat, at least in the UK, directly into the ABE protocol. So this team's doing a lot. It's a protocol if you're if you're new defy.

It's very easy to use. You should definitely check it out. Go to AVE.com to do that. All right. Those are sponsors. David, we should get to our main topic today. Oh, actually, before that, just some quick announcements. Antonio from DYDX, he's doing AMA with us on Thursday at 2 p.m.

Eastern. So catch that here live on the bankless YouTube channel. We'll also be releasing a test net guide for the, We'll talk about how to say this in a minute, but the Medasha TestNet, which is the newest ETH2 testnet. So that's something else that you can check out. On the podcast, we had an episode with Haseeb yesterday, which was just absolutely incredible. And we've got an episode from Framework Ventures tomorrow that we're recording will come live on Monday. So always lots going on in the Bankless Nation Bankless community.

The way to keep up with that is subscribe to the newsletter at Bankrupt. list.substack.com. All right. Let's get to topic one. And this is all about the Midasha test net. And we're going to beam Raul Jordan in here, who is from the Prismatic Labs team. So Prismatic, if you're not familiar with them, they've developed an ETH2 client that is live on the test net called Prism. And Raul is going to help us understand what the test net is. And everything that's been going on because last week, as I understand, it was a pretty active week in ETH2.0 test net territory. Raul, if you can hear me, how are you doing today, sir? Hey, Ryan and David, doing great. Thank you. Invite and, yeah, excited to dive into this episode.

Awesome. Okay. Well, let's do first things first. So how do you pronounce it? Is it the Madala test net? Is it the Medasha test net? Is it something else? How do we pronounce this thing, Raoul? You're the expert. Yeah, so this is going to be controversial, but in Argentina, they say medasha, but in the rest of the Spanish-speaking world, two Ls amount to a Y sound. So you call it Medaya. So to stick, you know, to stick to the origin story, I'm going to call it Medaja. And we'll just go from there. I've always learned that two Ls is a Y. And when I saw Mariano Conti pronounce it Medasha, I was like, is this not Spanish? Like I thought, I thought I knew what Spanish was.

And it turns out, it turns out my inclination was right. Yeah, turns out. All right. So can we start here, Raoul? So what is this test net, the Medasha test net? Like, why do we have it? Why, you know, how far are we? Is this like the last test net?

Can you give us some context for what it is? Sure. So people have been waiting, you know, obviously a super long time to prove of state. Everything that we've had to this point has mostly been either glorified web nets or like smaller experiments that people have. We have not yet created basically a large scale test net in which the public can participate at the same scale as main net. So, you know, we want to have everything the same as it would look with real money but using money, test net ether. So the Medellatia TestNet is basically a culmination of years of work and creating a public, you know, kind of large-scale multi-client test net. That means that there are multiple implementations of Ethereum 2.0, not just our teams, but also there are five teams that are currently on the test net.

So that's a really remarkable milestone. Most other blockchain projects typically have either one, you know, just one canonical implementation. And, you know, we'll chat more about why having five is important here, but that's kind of what the test net is. And it's had tremendous participation from the community. It's pretty much entirely by the community. So not the Deerun Foundation nor the client teams own a large stake in the test net. Gotcha. All right.

So some events went down last week, right? So this test net has been live for a couple of weeks, maybe, a few weeks maybe. But last week was a particularly active week. Can you tell us what happened? Yeah. So, you know, as it is, it has, you know, the goal of it is to find bugs before we go alive with real money. So we want to make sure that, you know, if something breaks, it breaks right now and not when real ether is at stake. So what happened was we had probably one of the worst case scenarios that could have happened.

And what occurred was most of our nodes went down, which were running a significant portion of the network. at all at the same time. So what that means is that most validators that were running those nodes stopped validating and the test net basically didn't have enough participation to basically what we call finalize, which means that a super majority of validators voted their eth and the chain is moving expected.

So what this means is people start losing and start basically bleeding money really quickly. There's a lot of stuff is happening in the network like nodes can't sync. All of this, you know, was distilled to a single, a single catalyst that discovered a series of other bugs that led us to the state in which it was. So, you know, to give a high level overview, what occurred was that, you know, people typically have, you know, this, like, essentially we, we want nodes to be synchronized with respect to their clock. So, you know, we want nodes across the world to have some sense of time that is somewhat consistent. So as long as your clock is within around, you know, a few seconds, then you should be able to participate just fine as a validator.

What we were doing, however, was we were using, we were basically adjusting the user's clock if it was off. Nice thing to do. So for example, like, hey, you know, if your clock is off, we're going to check with some cloud servers such as Cloudflare and others. And if your clock is off by a little bit, we're going to adjust it. So it's just a nice thing to do for people, you know, it's totally not necessary. However, this proved to be the downfall because, you know, when the time servers went crazy, one of the time servers was saying that people's clocks were off by four hours. So this means that people were creating blocks from the future and everyone else was rejecting those.

So, you know, and it's totally unnecessary. Like people always ask like, oh, that means E2 relies on a single point of failure, which, you know, it's not, that was our flawed assumption that we were making. So that wasn't it, you know, that wasn't the end of the problem. So what happened after that was, you know, the problem stopped. So the time servers fix themselves and everyone, everything was fine. But in the process, we were desperate to push how to fix that basically didn't force users to change their clock. And in doing this, we actually pushed out a critical bug.

So we made it worse. So what happened with that with that fix that we did, basically we told everyone, hey, restart your nodes and upgrade to the latest version. The latest version was broken. So nobody could sink. And then all of our nose were crazy. So what happens in this case is, you know, a big portion of the network is down. You know, nobody can really sink to the chain head. And when we actually fixed the problem, we told everyone, hey, the problem is ready.

The issue is fixed. Hey, restart. So what happens then, if you tell everyone, hey, restart your node, everyone is syncing with the chain at the same time. So it's really hard to find somebody that is already synced. So what this means is that, you know, you're like, you're basically like finding a needle in a haystack of really bad nodes. And like, hey, I want to sink the blockchain, but nobody, everyone else is trying to do the same thing. Wow. So it's a really hard that you're going to get out of because, you know, you need somebody to sync.

And those were really rare. So, you know, the whole incident lasted probably around three or four days. And throughout this entire time, it became, you know, people were losing a lot of money, people were upset. And that's not all. I think the biggest thing that happened from the incident was, remember how I told you guys that people's clocks were off like four hours? Yeah.

So they were creating blocks from the future. So here's what happened. So it was 4 p.m. central. And your node was saying it was 8 p.m. right? So if you do a double, if you do a double, if you do. do a double block proposal that is conflicting or you do a double vote. So basically that's something you're not supposed to do. It's it's counted as malicious. That's a no, that's a slash of it. That's a really bad thing. Yeah, it's called the slashing. So essentially, you know, at 4 p.m.,

you created a block at 8 p.m., which was invalid. And then by the time 8 p.m. was reached, you know, people saw that you already created a block at 8 p.m. So everyone was slashed. Like, literally everyone was attempted to be slashed. Like every single node that was participating during that bug, was going to get slashed. Fortunately, our client ships with slashing protection. So if you're running a node normally, you know, we keep track of the things that you've done before, so you won't get slashed.

So a lot of people got saved by this, but a lot of others didn't, such as those that, you know, we're running on like ephemeral cloud instances or stuff like that. So, yeah, it was like a mass slashing event. So all these things went down. Wow. It's a lot, right?

And in one way, it's good that all of these things went wrong that were in TestNet, you said, just a couple of clarifications. You said people were getting upset. They were losing lots of money. We're talking about losing monopoly money. Yeah, monopoly ethier. This is not real money. But still, it's disconcerting.

One other, I guess, point of clarification, you said, you said, Raoul, that, like, we went down and things went down. It was only the prism validator that had the original bug and the original issue, right? which was, you know, again, we have a multi, you know, client test net. But Prism was about how many in terms of total percentage of validators. It was a pretty large percentage, right? Yeah, I would say that it's probably around 60 or 70% at the time. Okay.

And it was those validators. And in terms of nodes, it was around 65% of the network, which is very, it's extremely imbalanced. Right. And I mean, to your credit, I think that's because you guys have made onboarding super easy, you know, maybe relative to some other approaches. and you guys put your name out there. But that is why we have multiple clients here, right?

So that if we have a fatal flaw in one, we have the others to fall back on. Another maybe misconception people have been hearing is that the Medasha TestNet died. Did it actually die? Like, did consensus stop? Did the chain stop going? No, totally not.

The only reason the chain will die are a few scenarios, right? It's like if every single node and validator goes down, for a very long time and literally nobody is synced to the chain head and you cannot find a single good peer. Everyone thinks different things and maybe yeah, the chain can die. If there's like a total takeover of the chain, so if someone takes over a huge amount of the ETH and basically turns into a glorified database, then you lose all reliance on the blockchain. So no, the chain didn't die.

The chain worked exactly as it's supposed to work, which is great. So that's what we call liveness. So liveness is the property that, you know, even if there's a lot of issues going on, the change should still be able to go on and recover eventually. The problem with this is that, sorry, the problem with this is that, you know, we need around 66% of validers to be online and doing things correctly. And after all these issues happened, people grew frustrated, you know, people maybe turned down their notes.

Like, we didn't reach that number for a long time. So, but chain was still in a bad state. And we had to rally the troops and get everyone who was running validators to make sure they're online and doing their job. And that was a really great experiment. Yeah. So it didn't die. But to be clear, it wasn't finalizing.

Is that correct? It wasn't moving forward at all. Like, if it was live, it wouldn't die, but it would mean you couldn't, you know, get transgressions done. You couldn't deposit into Offner or something like that. Yeah, the chain was, blocks were still being produced. The chain was moving. Yeah, definitely. What it means, though, is that basically not enough validators were voting on the chain head correctly.

So people were losing money and were consistently losing money, but blocks were still being produced. Gotcha. So let's talk about like these, what if this had happened in like in a live environment? Because, you know, test nets are test nets and live main nets or live main nets. And these are different things, right? And so, you know, in this test net world, there's less incentive for people to like fix the problem, right? Because it's a test net. There's less at stake.

And so like in if this were a real scenario where with actually phase zero was up and running, like I think we would have seen some different dynamics, right? because Pete, you could have seen people like moving from one client to another. You could have seen people like maybe react sooner. So how did the fact that this was a test net play into how people responded to this incident? Yeah, I think speaking of that, there's a few key action items that came out of this that I think are really important and critical for the client team. So like you said, the main thing is being able to switch software implementations,

if there's a problem that is not easy at the moment and it's not well documented. whereas in Mainnet, that'll be one of the main things that is marketed and documented to people. And by that, you mean in an emergency situation, if I had to move from Prism to Lighthouse, I should have a very easy way to migrate and move quickly, right? That's right. That's right. It should be super easy. It should be easy to find how to do so. And that doesn't require downloading a whole entire new chain, right? You can use your old chain data to pour over into a new client. Is that correct? Yeah, good question. So I think that might be a little bit hard to do for us right now because the different client teams change data in different ways. But at the very least, you know, it shouldn't take too long to sync.

What's more important is that you can do it safely so that you can switch your validators and, you know, you won't get slashed or do anything. Nothing crazy will happen. So that's one action item that came out of this. The other action item that came out is basically, you know, having better responses and better external communications. That's something we can learn a lot from the E1 core developers. So a big mistake that we made was tell everyone, hey, your node when everyone is in the crisis mode. And what happens is nobody can sink to the chain head because everyone is syncing with each other. So that's another thing to do.

Overall, really a ton of things that happen. Moreover, we discovered a lot more issues and a lot of client teams discovered other issues and how they assume their assumptions that their code makes in times of the chain being crazy. So, for example, when there's a lot of forks going on, like CPU and RAM goes up like crazy, right? You're using like 8 gigabytes of RAM. Some teams were using like 12 gigabytes of RAM, and that's not reasonable, you know? It's like, because a lot of the software was written with the assumption that everything is great. But when the chain is in a really crazy state, you know, we need to fix those things.

And overall, we pushed out more improvements in that week than I think we've done in the last six months, which is excellent. Every team has done so as well. and I think they're a lot more robust from that situation. Yeah, it's been, it was a really great learning experience. So I think one question that everyone has, myself included, is how does this impact the rollout of phase zero? And there seems to be some ambiguity here because like the chain didn't, chain didn't die, chain still up and running, but there was also like a quote unquote critical bug. So has there been any sort of consensus among the client teams as to how this actually impacts the launch of phase zero? Sure. So there hasn't been like a particular discussion about the timeline. We we particularly recommend that the timeline should still be on track. The chain is actually better than before. It is it is it is now we have like 78% patient. So it's stronger than ever. And we managed to recover from this and do it in a really, in a really great way and fix a lot of problems. We recommend the timeline still remains the same. I believe there's basically like the ticker since the launch of the test net for three months. So that's.

like, you know, three months in which we should be lease. Yeah, there are likely discussions about, like, you know, we should do a lot more like Genesis tests, so do a lot more maybe private tests on the side, staging environments and such. But overall, no official statement. What's currently being worked on is having a timeline for a checklist for E2 launch. So basically, we have a list of big things that need to be done by everyone

before we can say, okay, let's launch. And that will help the community, lot to figure out how that's going to happen instead of speculating on dates. So if you see that, you know, we're filling out maybe two checkboxes every week and there's like, there's like 20 checkboxes and that can give you a good idea of what's going on. So that's going to happen and that's being worked on. I think people will receive it well. I tend to think that the probably the thought in most people's mind is there's a hope

maybe that we finish this in Q4, right? that's kind of the hope. And we get phase zero launch in Q4. But there's the expectation that it could bleed into next year as well, into the first quarter at least next year. But I don't think many people are thinking that, you know, this would ship as late as Q2. Is that about right in your mind,

like without giving specific dates? Does that feel about right? Yeah, absolutely. We're in a very different place and we were like a long time ago where shipping discussions were happening. Like, you said, there are like pretty much no, there are pretty much no outstanding features, like, from anyone at this point. A lot of things are just, like, make sure that standards are met, make sure that we can switch between clients, like, improving improvements and such user experience. So, yeah, definitely.

I think that unless something goes quickly wrong and, like, the test net dies and every test net afterward dies until Q2, then that would suck. But no, honestly, like, you know, there are a lot of last minute things. things that need to be finished for the users and the stakers to be safe. So that's kind of where we are right now. All right. Well, Raoul, it's been a pleasure. You know, one question for me, David might have another, but one question for me is, how can the Bankless Nation help?

We are incented to get the Madasha TestNet fully vetted and fully tested so that we can have phase zero and start, moving to proof of stake. How can the nation help here? Yeah, totally. We love for you guys to just join the test net. I mean, it's open, it's public, anyone can try it out. And basically by note or validator, you're contributing to helping us ship this thing

faster and safer. So, you know, if you run into any crazy issues or unexpected bugs, you can tell us. And, you know, you might have found something very important before we go live with real money. So you can go to our docs portal. So you can go to dox.prylab.network. You can go to the E2 launch pad. Maybe you guys can link that in the chat or, you know, for your listeners. You know, so you know what we're doing, Raoul.

So no one's seen this yet, but we're actually pushing out a bankless guide for getting on the Medasha test net that we think is super comprehensive. And that's actually happening today. I've got a document in front of me that is a guide to get started on the Medasha TestNet, written by some folks that you probably know, Raoul, at Consensus, who developed the launch pad. So walks you through it, I think in a pretty easy to way, easy to understand manner. At least, like, I would say this is probably intermediate to advanced technical proficiency. It's not going to be like as easy as getting a metamask while it working, but it's still doable. for someone like myself, for instance.

And it takes you through getting hardware set up to, let's see, choosing a client, like you were saying. Prism is one. There are some others. And installing the ETH one node, which I guess is a requirement, to getting some GORLY. Is GORLY the actual, what is that? Is that the Monopoly money? Yeah, that's like the ETH1 test. It's supposed to be similar to ETH1 main net.

Okay. And then heading to the launch pad and actually getting started. So hopefully this will be another one of the ways you can quickly get going on the Medasha TestNet. Ruel, is there anything else you'd leave us with? Yeah, yeah, definitely. Yeah, I sent you guys a link to our docs portal. So we recommend people to run on that. And your listeners can check that out. And maybe you can cross-check your instructions with that. So yeah, that will be good. very good well thanks so much for joining us and best of luck to and your team you guys have been putting i'm sure last week was probably a week without much sleep but um yeah thanks so much for putting all the time and we're that we're definitely supportive of everything that's going on and very excited cool thank you guys so much really appreciate it also take care Cheers. Great.

Take care, guys. Yeah, David, I think, I mean, it all sounds really promising. At what point in time are you going to spin up something, unless you have? I don't know if you have, but at what point in time are you going to spin up a node on the Madasha test net? Yeah. I'm thinking about getting an actual desktop computer. And when that happens, that's when I will start running nodes. And I think, like, you know, running a node has never really interested me because it seems like a big pain in the butt.

And I always had like a laptop. but also running, for some reason, running multiple clients sounds interesting to me, for some reason running two rather than running zero. And I think that's coming out of like an incentive to make sure to be like a gatekeeper of the network, right, to be a guard of the network because, you know, if you're running, you're running, you're running, you're running a node, you're doing a job. But if you're running, if everyone is running two nodes, then Ethereum will literally never, ever die because you have such strong redundancy.

And so I'm interested in that. yeah it's so for me it's not something necessarily that I would natively like geek out with like I geek out of things you know but um you know it's not something natively that I would be super excited about but I do feel like it's there's there's somewhat of like it's it's a patriotic duty there's some patriotism yep absolutely right it's just like like oh you know uh if you're if you're a citizen of the Ethereum nation like you run a node right like it's kind of like the the Bitcoiner challenge, like Pierre-Richard's challenge of like, shut up and like, show me the node you run.

And like run the numbers and it, right? Yeah, it's not going to be for everyone. But I think that this is an opportunity to, to start from scratch, right? And do that. So at some point, I will certainly start running a node as well in the test. Yeah. And I actually came into Ethereum via mining, right? And so I had like mining computers like scattered around my house.

house and it felt very cool to because it was a literal manifestation of the Ethereum blockchain like in my house like putting out yeah right and like that felt cool like I felt like I am part of this thing like I there's this there's this like surreal metaphysical like network nation community like blockchain existing just in the ether somewhere in the in the internet and like a piece of it is in my house and that felt cool that felt cool and what you're doing which is super cool like it's not not so much sure on the test net, but what you're doing with running your mining gears, you're actually like minting money for this new nation, right? Right.

Like how crazy is that? Yeah. So I will also certainly get much more excited when this is live ETH at stake. And like seeing a validator, seeing the node that you're running, actually minting some of the, the ETH that you've deposited, I anticipate that's going to be like a crazy cool feeling. So I'm very excited. So Bankless Nation, maybe it's within your patriotic duty to help with the Midasha TestNet. Run your node.

Get in early. Figure out how to do it. We'll publish the bankless guide. We'll also publish Frawl's link to the Prism Docs. You can just see how complex or easy it is. See if it's for you. David, we should talk about our second round of sponsors as well. Do you want to start with Ample 4th?

Ample 4th, king of the rebasing mechanism. We've heard a lot about rebasing from a bunch of different tokens that are now integrating it. And Ampleforth was the original rebasing token, right? And so Ampleforth is a rebasing monetary experiment. So it's very similar to Bitcoin in a sense that it's non-dilutive. But instead, when there's demand for Bitcoin, the price goes up because there's an extreme inflexibility of supply. Ampleforth is the opposite, where there is extreme flexibility. in supply, but in flexibility in the price, right? And so if you buy 1% of all ample tokens,

you are assured to have 1% of all ample fourth tokens in the future, but what you don't know is how many tokens that will be, because the token of supply goes up and down. And so every 24 hours, there is a rebasing mechanism that will add or remove ampals from your wallet in order to track $2019, right? So super interesting mechanism. We've, we've, seen a lot of new alternative projects also start to experiment with this rebasing mechanism. They have a liquidity mining incentive program where you can add ample and ether to the uniswap pool and then stake that token that you get when you do that to the geyser and you'll receive extra ampals for adding liquidity to the network. So you can check them out at ampleforth.org.

You know what else they've added? David, I don't know if you've looked at this, but they've actually added to their geyser muniswap, which is new automated. market maker from one inch. So there's some additional eligible pools that I saw them at recently. Also want to tell you about our second sponsor of the set, which is Polymarket. So Polymarket is a way to bet on your beliefs. It is a prediction market. So it's an information markets platform. And what Polymarket is doing is making it really easy to use your crypto assets to bet on things. If you've ever used prediction markets like Auger, instance, or like Omen, gas fees are high. It's difficult to use. The user interface isn't

amazing because it's all kind of on chain. What Polymarket does is it makes the user interface really easy, but still allows you to use your crypto to bet on events. You can bet on current events like who will win the 2020 U.S. presidential election. You can also bet on crypto comes as well. So we talked about phase zero launching. Will it launch before the end, before, um, the end of 2020 or will it bleed into 2021? Well, you can make a bet and see if that's true as well. Um, bet on your beliefs with Polymarket at poly.com market. Uh, and you'll find out all about that. Also, use the code bankless. Um, if you email them at hello at poly.com market with the code bank they will cover all of your early gas fees and give you their their newest features so early

access to their unreleased polymarket features so make sure you do that as well David I don't think there could be a better year to launch a prediction market right right 2020 there's so much uncertainty we need we need prediction markets so well perhaps it's also your patriotic duty to go and help and make prediction markets more accurate because the more people that use these things, the more accurate they become. At least that's the end of- They become oracles. They become oracles. Very cool. Yeah. All right, David, let's talk about our second topic today, which is layer two. So, ETH gas fees, man, it's been a running topic on bankless since really we started because gas

fees are not really going down. They've gone down a little bit recently. But like everyone's asking the question of like when scale, when scale. Have you read the article that Nick Carter put out this week. You just published it yesterday. So I'm not sure if you had a chance to read that yet. I have not not. No, that's one of the one of the things I've not yet caught up on. Okay. So put that in your cue because it's it's really good, really interesting. So we had Nick on the podcast a few weeks back. I'm not sure what episode that was, but we'll try to include it in the show notes. And one of the topics among many that we talked about was the topic of economic density, particularly transaction density.

You remember this, David, when Nick, we talked about this. So I feel like Nick kind of wrote an article with some of the ideas he presented in that bankless podcast that have been kind of germinating. And it's basically the idea that even on something like Ethereum, right, because block space is scarce, what's going to happen inevitably is that those that are willing to pay the highest price for the gas for the block space on Ethereum are going to be the highest economically dense transactions. So I'm willing to spend $20 on gas if I'm making $1,000. But I'm not willing to spend $20 on gas if I'm making $10.

Right. Like I would be losing money in that transaction. So the idea is that this all, because block space is scarce, this all consolidates so that even something like Ethereum, you know, the main chain consolidates only the most economically dense transactions. And those tend, by the way, to be money types of transactions or in a speculative fervor. It's something like farming yams, right? And we talked about this with Haseeb on our last podcast, right? Where he gave us the model of like defy. There might, likely will be the defy shard, which will be like the Manhattan of crypto, which it's expensive

to live in Manhattan. It's costly. Rent is high. Food is high. And that's because that there's just a lot of reward for living there. And it pushes a lot of people out. And that's why not everyone lives in Manhattan. And so he makes this statement, David, I want to see if you agree with this. I've got to highlight it. So he says, all of this, everything we just talked about, is sobering for some of Ethereum because it's punctured some of the more expansive visions

of what Ethereum could be, like the world computer, other things, at least in its present form. With high fees, the most economically dense transactions come to occupy block space, to the exclusion of all else. So do you agree with that statement, David? Like, what's your take? Yeah, I agree with this because like the Ethereum is the values that have kind of been baked into Ethereum is trying to be like as equitable and inclusive at as possible, right?

But at the end of the day, there are things that get included in the blockchain and things that don't get, that things get excluded. And unfortunately, if you don't have the capital to pay your way into the blockchain, you get excluded. And so at some point, like, we can all, like, love our kitties and rainbows and unicorns, but some people aren't going to be able to play. And that's just a fact of life, right? People with more capital tend to be able to play longer than others.

And so I think, like, it's, we are starting to now realize that, like, you know, the main L1 chain of Ethereum might be closer to a whale chain that we need than we originally thought, which is sad, but we also have solutions for this. So it's okay. Well, that's what I want to talk about because I agree with probably the central thrust of Nick's article that, hey, Ethereum's have to come to accept and maybe this is sobering of them that higher economically dense transactions are going to reign supreme on the main chain. We also said this, which I probably agree with a little bit less. Vitalik Beteran once states reference to Bitcoin that the internet of money should not cost five cents a transaction. It's safe to say his attitude to fees and that of Ethereum's more broadly has moderated with time.

I'm not so sure that that is true because, and here's the reason why, that might be true of Bitcoin. I think it kind of is true. But Ethereum has a slew of, you know, apart from eth-2.0 scalability, a slew of layer 2 solutions that are coming in market right now and that are fixing this kind of problem. So it's basically the internet of money more broadly. It's not just Ethereum main chain. It's also something that you can do in a layer two, like a loop ring, for instance, or an OMG network or something like that. So I'm not sure that he, yeah, so I'm not sure I agree with that statement because I don't think Vitalik, the reason, the reason Ethereum is embarking on this entire scalability thing is because the internet of money shouldn't cost five cents of transaction. Bitcoin might be more limited in that.

It's got lightning and kind of nothing else. It scales with crypto banks, really, right now. But Ethereum has never been okay with that. And that's why scalability exists. Yeah, I think Nick Carter's Bitcorner, a hat came out when he wrote that sentence. Because I think he's missing the nuance of the optionality that Ethereum has with how to scale that Bitcoin does not have. Like, Bitcoin has the ability to scale with lightning. And that has not worked out at all.

and that and that's about it that's about as as many options as bitcoin has and and then the other option is to scale with crypto banks what what nick may be missing here is the fact that you know Ethereum if you if you are a person who has you know $30 on Ethereum you're a very low capital individual that doesn't have you don't have much capital on Ethereum and you are at point A and you're trying to get to point B if that if getting from A to B costs you five cents and it didn't end up touching the L1 blockchain like that's cool we're cool with this like you got your goals achieved and like it didn't happen on the L1 but you still got your goals achieved like that's that's where like I think Vatallic and Nick Carter are differing here where Nick Carter thinks or is baking into

that sentence a commitment to use the L1 and things like ZK rollups or like side chains like Omise go or Starkware like you don't touch the L1 but you still achieve your goal and importantly you still get all the insurances of the L1 present. Like the L1 security is still present in these types of transactions. Absolutely. Yeah. And you made there that Lightning Network is not working, right? It's not to say technically it doesn't work.

It's just it hasn't hit product market fit at all yet. And like there's evidence of that. I feel like, you know, God bless Bitcoiners, but they've been trying to mean the year of lightning since like, you know, 2016. Yeah, right? It's like next year is the year of lightning. Next year's the, so this year was going to be the year of lightning. It is number 22 in terms of like if you compare it to some of the DFI protocols, another layer two is on Ethereum. We've got loop ring that's ahead of it now, right? Which is just one isolated Ethereum layer two solution right in

terms of usage, which you can really like usage capital, amount capital is positive. That's, that's the true usage of an application. So it hasn't hit product market fit. It hasn't worked. And to be fair, a slew of Ethereum layer two experiments haven't worked either, right? They've been hyped and then dormant. Raiden comes to mind, for instance. But the beauty of Ethereum is it's like optionality.

It's like a science lab. You can run hundreds of different experiments concurrently, whereas Bitcoin has kind of put all of its eggs in the lightning basket. Like, there's really not much else. Well, no, it put all of its eggs in the L1 basket. And it locked down an L1 expressivity to reduce, reduce, reduce, and then all of a sudden, like, that reduces any, all of your optionality. And so, like, they basically have now two options.

One's Lightning Network. And the other one is Cryptobanks, which, I mean, if that's what you want, okay, that's fine. Yes. I think it has been interesting to note, like, if we were having this conversation with, like, a bitconer, they would, like, a year ago. They would say, like, you know, no one can actually know the supply of Lightning Network because it's private. And that was like their deniability.

It's like, you don't know how much, like, DefiPulse, Lightning Network. Like, DefiPulse doesn't know how much Bitcoin is in the Lightning Network because the channels are private. I don't hear those arguments anymore because everyone knows. Like, like, it doesn't matter. Like, no one's still, no one's using it. And so by proxy, we know there's not that much there. Absolutely. Yeah.

So let's talk about, I guess, the positive of this because, to be fair, Ethereum has been saying layer two is coming forever. right i remember do you remember the omg hype you're your child of 2017 you remember the omg hype of 2017 i was part of the ohmg hype yeah were you yeah i was you had the skateboard yeah i didn't have the skateboard but i definitely had the tokens that's for sure okay all right so you had the tokens right and i'll assume that you bought some too they weren't just a gift air drop to you i was not there that actually i came around right after that air drop okay so it's but but layer two is actually starting to happen right it's not like this utopia of everything works in layer two yet, but it's starting to happen.

So loop ring, like we mentioned, is an exchange. Here it is. It's fully built on ZK rollups in layer two. So it's secured essentially by the Ethereum blockchain. You can use it today. So this is a fully fledged exchange. In fact, Defi Dad just published a fantastic three reasons you should be trailing Dex video to bankless YouTube yesterday.

So check that out and go through it. that's a flavor of you what layer two is basically one transaction to kind of deposit your to set up your account it's about $12 in gas right now right but once you get past that you can do trades basically secured by Ethereum for like a couple of cents a transaction you can even send things from one loopering wallet to another again secured Ethereum for a couple of cents not five cents the internet of money it's like less than a cent for many of these transactions on loopering so that's one example of it already being here.

There are some others, too. We should talk about, David. Yeah. Actually, before we talk about the others, I do want to talk about why this is so cool in a way that I don't hear many people talking about, right? And so one of the bearish things about all these different L2 solutions is that they break composability, right?

And so, like, now if you're on loopering, it's harder for you to interact with something that's on Starkware or even the main chain, for that matter. And maybe you, like, want to trade on loop ring, but your values on the main chain and like you when you buy your ether on Coinbase you have to go through the main chain

to get to loop ring. Now L2's like loopering or like DYDX we're about to talk about and they're L2 with Starkware they all have incentives to build onramps right into their L2 right and so instead of everyone going and getting an on ramp

right onto the main chain you can onramp right into the L2 and again you don't actually ever touch the L1 but you still get the settlement assurances of the L1. And now instead of just like all these capital on-ramps going into the main chain, we have all these additional capital on-ramps going into their respective L-2s, which can then also go right into the L-1 if necessary. But I think we're about to see not only an explosion of L-2s, but an explosion of on-ramps directly onto these L-2s because each individual, because of the

lack of composability, there's more incentive for all of these L-2s to actually build out their own on ramps. Now that's super cool. I didn't quite put that a Fiat on ramp together with that, but that is a missing part of the puzzle. So to I guess maybe connect some dots to what David is talking about. So this is DYDX. They are a, in exchange specializing in, you know, synthetics and options and that sort of thing, just sort of the bitmex of DFI, if you will, deployed on the main net now. What they're going to be moving to is their entire kind of trading engine, including perpetuels and options, are going to be moving to a StarkX layer two by the end of this year.

So again, like we're just talking a few months away. And what you're saying, David, is so DYDX, they started on main chain. Now they are migrating to a layer two that's secured by main chain. And all they essentially have to do to become as powerful as a bitmax or like a coin base or something like that is connect in Fiat. on-ramp, essentially. Somehow, somewhere, whether that's through wire or, I mean, wire would be a great choice. Like, now every L2 has their own incentive to make it easier for you to just go straight into

the L2. And then people can find out that they're using Ethereum without even knowing what Ethereum is. Like, that's where that line comes from. Right. And so they can own their own assets, essentially, that they don't have to give up custody to a bitmax. They own their own assets, and they can see the trading activity on a public chain. So it's not like a black box, right?

So it's a much more bank alternative. And I also read this. So DC investor put this out, which is super cool, is the idea of so Diversify, they've been a sponsor as well, but Diversify is another exchange that has built on layer two. DYDX are both running on separate.

They're going to be running on separate roll-ups, but they're going to create interoperability between them. So another incentive, in addition to adding Fiat gateways, to these layer twos. He's actually to start having the layer two, talk to one another themselves where it makes sense, right?

Absolutely. And I'm just so excited to get Antonio into the bankless AMA on Thursday because I have so many questions of this nature to talk to him about. That's going to be really, really enlightening as to some of the details going on here. Yeah, you know, another thing that came out.

So I do feel like, you know, maybe it's not the year of lightning. Maybe it's the year of Ethereum layer two. right it's all starting right this stuff you know that that that uh we're talking about omg didn't ship anything in 2017 to be honest i thought it was like i thought it was dead i thought it was dead i thought it's dead so i thought it was dead and it just came out this week with um a a really fascinating kind of use case that's live in production um this is their their PR about i think the tweet sums it up a little bit better. But basically, OMG is a layer two. It's built on plasma, so not optimistic roll-ups.

You don't know that that means, don't worry about it, but it is still secured by the theorem network in the same way that that loop ring was. Now, BitFinnix, so they are the originators of the most popular staple coin, by far, USDT, Tether, staple coin. They are now connecting directly directly to OMG networks layer two, right? where they can get, you know, transactions and settlement for like fractions of the penny. Whereas on Ethereum right now, wow, I should pull up the gas station here. It's bad. Right.

Yeah, this is what they've always been up there. The fact that actually Uniswap has trumped them is relatively new, but Tether has always been guzzling the most gas on Ethereum for years, for years now. And like a large, and that's just now starting to be like defy transactions, which means that like they some of some of that tether is going to have to remain on l1 but a lot of this is just simple erc 20 token transfers which are costing traders between five and 20 dollars depending on gas fees to send you know their tether just exchange arbitrage just exchange arbitrage and no reason why that needs to be on the l1 it's costing that it's costing uh bitfinex

the company that basically and like this is a 30 day period of time so tether bitfinnix tether traders, anyone who does settlement with tether on Ethereum, they're paying close to $6 million a month for that, right? So, I mean, you know, what is that? Almost 70 million annualized per year. Right. That's a pretty steep line item. Right. Yeah. And it's only going to go higher as DFI expands and expands. Right. So what I love about this is it's an example of like the market doesn't always fix things, but sometimes the market does fix things. If you're spending six million a month on tether gas fees. It doesn't make sense to spend that when you've got something like the OMG network. And it's the market working to remove lower economic density transactions,

Nick Carter is right, from the Ethereum main chain to the layer two's and it's starting to happen. And as that activity happens, the layer two has become more incentive to actually build. Not to build just to pump a coin like OMG coin, but to build because there's real value and real cash flows associated with becoming like the king of the layer two's right right and this is the perhaps the end of this conversation goes back to like the bankless vision right because this is how we retain banklessness right like if we can't scale on layer twos then you therefore scale on centralized exchanges and so every time we see a layer two a layer two crop up to solve an l1 problem that retains the trust minimization and settlement assurances of the Ethereum L1,

that is the bankless nation, like spreading into new fields, right? Like, that is the bankless thesis, like, growing. And so anytime we have this, like, L2 growth and adoption story, what I hear is a removal of the need of centralized intermediaries. That's what I see. Yeah, absolutely. And, you know, the other thing I see is it's sort of an interesting, I guess when we were talking to Haseeb, you asked them a really pointed question.

on the podcast earlier this week. You asked him, hey, if we have layer twos, why do we need ETH killer chains? Right, right? Other main nets, essentially. And he had an answer for it. I'm not necessarily persuaded by it because what I see is something like OMG

could be hugely bullish for the ETH killers, bearish, excuse me, and bullish for Ethereum because what it means is the ETH killers aren't really competing with Ethereum mainnet. They're competing with all of these layer twos. Yep. That are evolving super fast, number one.

They're already integrated natively with Ethereum, and they already have security figured out. Like, they don't even pay for it. Ethereum pays for it, essentially, right? So it's like outsource security. That's pretty hard to compete with. And what we're seeing is even chains, as he mentioned, like near what's near doing.

It's building a bridge. Like last week, it's building a bridge to Ethereum, because it has to, because it has to compete with the other layer two is to get some of that economic activity on its own chain or it fails. So we'll see how that evolves, but I think it's probably pretty bullish Ethereum. So I think there's going to be a very strong blurring of the lines between what is an Ethereum L2 and what is a ETH killer that then builds a bridge. Because they're starting to become like closer and closer.

are the same thing. And I can, I can, like, rattle off, like, five or six different ETH killers, right? And I think there's going to be this game theory between them is, like, who's going to defect first and start to rebrand and reorganize themselves as, like, an Ethereum bridge side chain, like, L2? Like, if near-billed the bridge to Ethereum, well, then it's, like, basically Ethereum's L-2, right? In a sense. And, like, perhaps if you use the near-prospect, you could call near the L-1 and Ethereum the L-2 on like just by reorienting how you perceive things because like if you want to take the near perspective well then near is the l1 and ethereum's the l2 but let's be real here like which one's

bigger like which one's the real l1 here but what but you're right there the game theory is what near is trying to do right um is they're trying to pull all of that economic activity from ethereum back to near and essentially um i guess leave sort of uh ethereum a skeleton chain essentially and become the main chain, right? So, like, the side chain wants to betray its master and, like, do a Sith Lord thing where it's just, like, it becomes the faster. Ultimately, like, the value of near,

I don't think will ever be able to be larger than, like, exactly how much value it produces for users. And, again, like, then we have to compare near to all the other L2s out there. And so, like, it's really just, like, it's Ethereum's game, dude. And it always has been. Like, we've always done this.

Yeah, well, yeah, maybe. I mean, I've just, I come away from that getting more bullish about Ethereum, but, you know, who knows? You know, could be wrong on that. We'll see. But let's talk about another thesis of the bankless nation. This is our third topic. And then we'll turn it over quickly for if anyone has any questions who's watching this live. And that is, David, the protocol sync thesis.

It feels like every week we see more evidence that the protocol sync thesis is just, directionally correct. And I feel like last week, like I couldn't even keep up with, we used to almost like a catalog like a back and forth of Twitter. You'd be like, hey, is this protocol sync thesis, Ryan? Like last week I couldn't even keep up with it because there's so many things that were happening. Maybe do you want to talk about the protocol sync thesis just a quick recap and then like talk about what's going on? Yeah, quick recap. The protocol sync thesis, when I say a sink, I want you to think of like a basin, right, where things tend to fall down to the bottom and in this base and are different protocols and there are according to the protocol sync

thesis there are different characteristics or qualities that make things fall down to the bottom of the protocol sync and those characteristics are the things that we are in crypto to begin with right like trust minimization censorship resistance you know decentralization you know sovereignty would be one and so these protocols that have more of these characteristics fall down to the bottom of the protocol sync, and that's because they act as really good infrastructure. Things that are dense that are dense because of their trust minimization, because of their credible neutrality, because of their decentralization, they become dense, and they become very stable foundations to build on top of. Like, Bitcoin is a great example of something that's really, really dense in the protocol

sink because you have assurances that Bitcoin's never going to change. You have assurances that it's always going to keep on producing blocks, and therefore, as a perhaps an entrepreneur, you feel stable in building your business on top of Bitcoin. And Ethereum is the same thing. And not only is Ethereum the same thing, but there are Ethereum protocols that are the same thing. Like everyone is basically built on top of Uniswap at this point, right? Like Uniswap is one of the, perhaps the densest protocol on top of Ethereum.

And now everyone's building on top of it, right? And we can also layer in like MakerDAO, compound, AVE. They have different, like, respective amounts of density in the protocol synch thesis. and then as people build on top of them, they become more dense. They literally become heavier and they fall down lower into the protocol sync. And so the concept of the protocol sync thesis, the main predictive quality of this thesis, is that centralized companies will never ever be able to have as much density

as a protocol on Ethereum, and they will ultimately come to build their own products on top of protocols that are dense. In the same way that like we are all like Google, Apple, Facebook, like whatever. Like, they all are all building on top of the internet. The internet is also really dense. The internet is at the bottom of the protocol sink.

And so, like, companies can build on top of this, like, stable, dependable infrastructure because of how, like, no one owns it. No one's rent-seeking. It's, like, it's going to exist into the future. And so, therefore, it becomes infrastructure for everybody else. It's the most credibly neutral. It says the most credibly neutral protocols will win, basically, right? And it's cool because it's kind of the thesis for why crypto can be successful, like Bitcoin and Ethereum,

the why DFi protocols are successful. And what I love about Critical Sync is, as he said, David, it does have these predictive qualities, basically. Like you can use the framework to round about make predictions. So this is a podcast that we put out in May 18th. And it was based on a post that I wrote in February, based on. some talks that you gave at Ethereum in like April, right, which just talked about the protocol sync. And it made this prediction. It made the prediction that crypto exchanges will start

adding D5 protocols to them. Again, because DFI protocols have more density. So they sink to the bottom of the protocol sync, right? They're more credibly neutral. And what we're seeing is every single week this happens more and more and more. So what we saw this week, for instance, is this was big. Binance, right? So like the actual question I think we made in the podcast, David, was this. A major exchange like a Coinbase or a Binance would incorporate the die savings rate by the end of 2020.

That's what Binance just did here. So what they're doing is they're launching defy staking with dye. So you can deposit your dye. You have to give custody to them, of course, because it's finance. It's a crypto bank. And what they're doing, if you read the, if you read, read the fine print. Let's see here.

What they're doing is they're actually depositing that die, or they have the ability to deposit that die into compound staking. Okay? Compound staking is backed by the die savings rate, right? So again, dye and maker has more density, so it sinks to the bottom. And then compound is built on top. And then exchanges are built on top of both of those. And all of it's built on top of Ethereum. Right.

The most dense protocol of them all essentially, right? So that's what they're doing here, which is essentially our prediction. Right. And what's really important here is like it's actually pretty cool that they just explicitly say where that die is going, which is important. But also, like, they could have just said, you know, you get 12 percent and like you just give it to us and then you get 12 percent. And in the background, they could submit it to compound. In the background, they could submit it to it to it. They don't have to tell anyone.

They don't have to tell anyone. And I hope that they take a cut because they're a business. They are. They totally are. They totally are. That's why they're able to give 12% right. Right. And the die savings rate is only like zero right now or something close to that.

Right. Well, so I don't think the die savings rate is actually integrated here. I think it's only compound. Like the die savings rate. Does it? Yes. Okay. Interesting.

Yep. Okay. Anyways. So Binance takes a cut as a profit-seeking, like venture, which is why they're doing this. And this is good for the users because then you get centralized exchange UI, Ux, if that's what you're into. And then you also get a shirt, like some amount of insurance, right? Because like if compound blows up, like, Binance is on the hook, right? And like, Binance has paid debts before for things that they've lost. And so like you,

maybe you enjoy like 12% in compound, but you don't like that contract risk, which is real. And so then you can go to Binance and give them a percentage cut of what the interest rate is because you know that if compound blows up, Binance will pay back the dye that it owes you. I'm a big fan of this. Like take it. What's cool. So some people, some people were upset at finance doing this. They basically said, look, it's another crypto bank like taking a, basically centralizing a, you know, something like like die, the die savings rate, right, right? I don't think that's true. And the reason is because of the protocol sink, essentially, dye and compound are below finance.

Anyone can tap into it, right? Finance is trying as hard as it can to add its value at, that additional like, whatever, 10% or so that it can give by doing other things within Binance. But Coinbase can add the same to its platform. And essentially what finance becomes is kind of like an onboarding layer to the world to defy. It is the thing that becomes commodity, not defy. It is putting more total locked value into compound and into Maker and into Ethereum, essentially,

not the other way around. So that layer becomes the commodity. And essentially, the fat defy protocol thesis or protocol sync, as we kind of call it, like, that becomes the thing that accrues value. At least that's the idea. That's the thesis. So I love this. I don't hate it.

I love it because they're building on top of it. and they're not able to usurp it. And everyone has access to it. Any bank in the world has access to these protocols. And so do you as a self-sovereign individual on the bankless journey. This is pretty exciting. That was the only thing, David. So, like, Quibi is a major...

Knocking him down. Exchange. Knocking him down. Right? What are they doing? They, this week, are launching a defy alliance to merge the East and the West, who's part of this alliance compound maker, D-Y-D-X. I don't know, man.

I didn't even look at it. That looks like a finger. They're playing Cat's Cradle. It's a metaphor, I guess, for the east and west, like, in playing with you, or whatever. Is that it? Okay. I can get it. I skip that.

All right. So that's what they're doing. I don't understand the image. But they're also incorporating AVEh directly into the Huobai wallet. So, again, Avey is kind of a DFI protocol more credibly neutral than these others, and they're just incorporating it. Right. And this is just the beginning, man. Like we're starting with like the crypto native companies, right?

We're starting with finance, Coinbase, who will be like, but you know, PayPal is going to integrate Bitcoin and Ethereum like in the next like 12 months probably. Like we know we know this is coming and then they're going to come to it. And then it's just your actual crypto banks are actually going to be doing this, right? Like we're starting with a low hanging fruit. But then it's just going to become like, you know, your Wells Fargo like deposit your cash into like DeFi with Wells Fargo. get 7% like that's that's coming yeah and pretty soon not this year not next year but like it's coming it's coming right it's i mean uh bitcoin is the original like sort of you know fat protocol that that's sunk to the bottom and now entire banks are built on top of it right jam like all of these banks are built

on top of it so it is coming and what's going to happen it seems like is there's going to be a gradual swapping out of the base layer the base settlement layer for fiat based traditional systems with crypto-based systems. And why is that good? Why do we care? Well, we're just replacing one with another. Well, this base system is internet native. It's programmable.

It's digital. And it belongs to the people. The rules can't be changed, right? But like, there's no, you know, you know, like people are so sick of politicians these days, David, because and those in power because they act like the rules don't apply to them, right? Like, they do something against the law. and they'll just get some attorney that gets them off the hook, or they'll bribe someone, or know someone in power, right?

This is Epstein. This is everything that's going on today. The laws always apply to everyone equally in crypto systems. If you're using Ethereum, if you're using Bitcoin, the laws apply to you equally. There's no subjectivity in cryptography. Exactly. There's no subjectivity.

There's no special person who gets to bend the rules or, like, skirt around them. And that's why it's a more credibly neutral money system for the world that belongs to the people. It's still like, I mean, it's not fair, right? Not everyone gets, you know, if you have more capital, there's advantages to that. But it is credibly neutral. The rules apply to everyone equally. There's no cantalian insiders as, you know, Nick Carter might use the phrase. So that's why this is important. That's why this is important. And like, yeah, and this is how cryptography sneaks in. and pulls the rug on, like, the whole world, right?

Yeah. Like, all of a sudden, like, everyone answers to cryptography equally. And turns out, like, oh, all the value has flowed away from, like, this pen and paper accounting system of the nation state into this, like, cryptographically secured, like, internet protocol that, like, is one single protocol. And it starts with the protocol synch thesis. Absolutely. Very cool. Man, we covered a lot.

We went through test nets, Medasha, layer two, into protocol. I'll sync. Anything else, David, we should cover? Yeah, you guys, in the YouTube comments, if you have any further last questions, any last topics you want to hear from, like, now is the time. I don't, I currently see some chatter. That's, that's pretty cool. Glad to see some chit-chat, but I do not yet see any questions. And so there's some in bankless discord, David. I just flipped to it. One is about Avey's new license. Did you see this yesterday? It's another thing. Yeah, I did see this announcement. Apparently it's a really big deal, but I didn't understand it too much. Yeah, it seems to me it's basically like you were saying earlier about the layer two and the

Fiat on ramp. So this gives AVEA away, AVEA, the entity, not the protocol, of course, the protocol is not owned by any individuals, but the entity, the AVE company has the ability now to onboard users directly to AVE using their own Fiat on ramp in the UK. They have the same sort of licenses that Coinbase or other exchanges have in the UK. So it's a big step, I think, for continuing to onboard folks into Defi. And it's interesting that Defy protocols themselves, or at least the teams behind them, are becoming big enough to actually that. They're all incentivized to get more people into Defi.

This is like the Defi flywheel effect. So it's exciting. I mean, some people are worried that. that this could introduce some sort of AML KYC, right, into kind of the mix. Is AVE going to like cozy up with regulators and banks? So that's an outstanding question. In general, it's an outstanding question to me if which of these D5 protocols become a bit more like banks over time and which preserve maximal credible neutrality,

like a UNISWR, for instance. But overall, I think it's good for the space. It's a good step in that direction. Absolutely. Leon on YouTube says asking about AVE moving over to L2, or excuse me, to Ethereum 2.0, is there an ETH one point, if there is an ETH 1.0 AVE loan, does that translate over to ETH 2.0 seamlessly, or does it have to be paid off on ETH one first? I'm pretty sure you're going to have to pay it off on ETH one first because the AVEA protocol on Ethereum 2.0 will be different than the AVEA protocol on Ethereum 2.0 or vice versa.

or so. I do think that's the case, right, if you want to transfer early. However, at some point in time, like after ETH, like 1.5, right, there's a couple of phases to this. On the roadmap, there's the plan to just forklift everything ETH one and just move it over to ETH too. I think as far as I understand. As an execution environment, but not account balances. Account balances have to move over, like manually, like through the bridge.

right um i don't think we're going to be able to carbon copy account balances we can carbon copy like the execution environment which means like people can use the ava protocol with the assets that they have migrated over that's that's how i understand it that would be a good follow-up the good news here is i guess well you're not the good news but um don't worry about that now yeah don't even worry about it so much there are much smarter people who are solving these problems don't worry about it And it's just a long time away. You know what I mean? It's like when ETH II comes out, it's going to come out in phase zero, right?

And it's going to be a long way from using Ophi II. So just, you know, stay tuned with things to bank lists and other channels and you'll figure it out before that. Those are all the questions. All right, man. It's been State of the Nation episode 11, David. It's been great. Thanks a lot, man. All right.

Let's wrap this up. Thanks, everyone for tuning in. Make sure you subscribe to the YouTube channel so that you guys get notifications as to when we go live. We do this every Tuesday morning, 7 a.m. Pacific time, 10 a.m. Eastern time, whatever that time is for you if you're in Europe and Asia. So make sure you stay tuned for this. And then again, it gets dropped as a podcast on the next day on Wednesday. But if you're watching the video, you get to look at the screenshots, look at the data, look at the graphs, look at our faces. So it's much more rewarding if you come to the YouTube. Yeah, much more rewarding. Absolutely. All right. So risk and disclaimers, guys. Everything we talk about, all the D5 protocols we talk about are risky, eth is risky, Bitcoin. You could lose what you put into these D5 protocols. But we're glad you're with us on the bankless journey.

Thanks so much for hanging in there. Sticking with the Bankless YouTube channel, State of Nation episode 11.