Bankless - SotN#16 - EXPLORING w/ Dan Robinson (Mempool Monsters, Optimism Launch, MEV, ETH/BTC Correlation with legacy, KuCoin Hack, FEW, Spinalda)

Episode Date: September 30, 2020

Fill out the questionnaire! https://forms.gle/aiWfvAvePx5qGJkC9 ---- 🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/ ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI ❤️ JOIN PRIVATE DISCORD: https://bit.ly/2UVI10O 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/ ----- GO BANKLESS WITH THESE SPONSOR TOOLS: 🌐 UNSTOPPABLE DOMAINS - HUMAN READABLE ETHEREUM & CRYPTO ADDRESSES https://bankless.cc/unstoppable 🌈 ZAPPER - ULTIMATE HUB FOR DEFI - ZAP INTO DEFI http://bankless.cc/zapper 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 🌈AAVE - LEND & BORROW YOUR CRYPTO W/O A BANK https://bankless.cc/aave ------ State of the Nation is EXPLORING, special guest Dan Robinson of Paradigm. 1) ETHEREUM'S DARK FOREST Short article from Dan: https://medium.com/@danrobinson/ethereum-is-a-dark-forest-ecc5f0505dff Unofficial Part 2 From samczsun https://samczsun.com/escaping-the-dark-forest/ 2) OPTIMISTIC ROLLUPS LIVE! Launch post!https://medium.com/@optimismPBC/light-at-the-end-of-the-tunnel-c390a05bbcb8 3) LIGHTNING ROUND - Why isn't crypto uncorrelated w/ stocks? - KuCoin hack showed who's centralized - $FEW and $EMN - Spinalda Testnet ------ Don't stop at the video! 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 video 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.

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addresses to see the assets that you have in various D-Fi protocols. Not only does it tell you the assets that you own, but it also tells you if they are deposited into AVEA, into compound, what yield farm they're in, your predicted APY, and it'll even let you make investments into D-Fi protocols right through this. their zapper.FI.Fi portal, making it really easy to compare and contrast different places as to where you can deploy your capital. Check them out at zapper.fI. All right, everyone, welcome to episode 16. This is State of the Nation. We have a jam-packed episode for you today, guys. We have our special guest, Dan Robinson, who's a researcher at Paradigm. He's going to talk about the evil things

that lurk in Ethereum's dark forest. We're also going to talk a little bit about layer two. Optimism, big rollout last week on TestNet. And touch on the Q coin hack, few and EMN tokens, Spina TestNet. Really, the goal for Stay the Nation is to update you on what's happening in the DFI and crypto space and related to the big picture stuff that we talk about in the newsletter and on the podcast. And hopefully drop some insights.

and action items. So David and I do this every Tuesday. We stream it live on YouTube. That may be where you're catching it now. Also comes out on Wednesday in podcast format. If that is your preferred way of digesting all of this material. David, how you doing today, man? Just fantastic.

The Ethereum ecosystem continues to move at a mile a minute. So it's actually valuable for me to even do these things because it forces me to keep up with. it. Yeah, I know. It's like, it's like, it's like, it definitely takes two of us to try to keep tabs on, like, you know, the 10 to 20 percent of things that are going on that we see. All right, man, so I want to do some announcements really quick first and then ask you the question I always ask. First, let's talk about our NFT podcast. So that came out on Monday. Why should folks tune into that? You know, there's this really good line from, from Andrew. And then also I've heard it, you know,

express elsewhere where, you know, currencies and money are the units that we choose to denominate value, but its property are the things that we actually value, right? The whole reason behind a currency is to value property, right? And like, that's what the NFT side of the equation is, right? So Andrew Steinwald on the podcast had this great line where he said, you know, I think that, you know, the NFT market is going to be 100x the size of the defythe market, simply on the rule of thumb that like yeah it was totally insane but then but then it makes sense when you when you kind of think of like well an nfti can be anything other than money like everything else that's not money is is some sort of

could be some sort of nfti right and so like there he's very bullish on what he calls the metaverse which is just this world that exists that uh you know is everything else other than money right and so uh i think that's a pretty interesting take and i hope that the metaverse continues to grow in the way that Andrew sees it yeah if you're trying to get caught up up on NFTs, trying to figure out if it's the next big thing. Make sure you catch up or you catch that episode. It's like an intro on NFTs, but we also go pretty deep in that one too. It's also badge mint week at Bankless.

So every month we mint the new member badges from the previous month. And so that's happening on October 1st. David, you also put together a questionnaire, right? So we're trying to level up ourselves. And we're going to include that questionnaire in the show notes. But what's the purpose of that questionnaire? Why should folks check that out? Right, yeah.

So it's been like two weeks since I've gone bankless full time, and I want to make sure that I'm producing what the bankless nation wants, right? And so, like, it's a chance for you to give feedback on, like, how you value different parts of, like, the bankless, like, media, you know, arms, right? So we have the podcast, we have the newsletter. We have the YouTube. Like, which parts of these things do you value the most? What do you want to see expanded on?

this is your chance to give the bankless, the bankless team feedback as to what you guys want. And so that link will be posted everywhere in the bankless discord in the show notes after this episode is done in the podcast. So make sure that you take, it's just a very quick two to five minute questionnaire. And it's how you get the bankless media, bankless propaganda division to start to propagandize exactly what you want. So take the time and let's and fill that out, please. Absolutely, and thanks in advance for everyone who fills that out, fills that out and helps us level up.

David, I'm going to begin with the question I ask you every single week on state of the nation. What is the state of the nation today? The state of the nation is exploring. We are exploring, right? And this is kind of fundamental to what the bankless nation is. We are on the frontier, right? But it feels particularly relevant in the last couple weeks that we are kind of pushing the fold in many different ways.

And it's extremely relevant to our guests that we're going to bring on in a second, Dan Robinson, who kind of started off this, this illustration of, like, the mempool is like this really unexplored territory, right? And now there seems to be a bunch of effort in trying to illuminate the mempool.

Also, we are on our last dress rehearsal of the TestNet for Ethereum 2.0. And so that we're kind of pushing the fold in that domain. And then there's a lot of conversations on Twitter that are also exploring new social domain. as well. So lots of exploring lately, lots of expanding the reach. And so we are exploring. All right. Well, let's start with that. Let's bring on Dan Robinson, who is a researcher at Paradigm.

We're going to talk about the dark forest. You mentioned some concepts there, David, that we want to define for our watchers and our listeners like the Mempool. Dan, are you there? It's great to have you on State of the Nation, my friend. Yeah, thanks for having me. You guys have one of the you know, most interesting, I think, crypto-native funds in the space at Paradigm. And I know you're a researcher in the space. And you guys have been an ASTA to many of the protocol designs and, you know, many of the DeFi protocols that have come out. And I think the post that you put out called Ethereum is a dark forest was another way that you and Paradigm are giving back to the community. It starts with this line, which I love. It says,

This is a horror story. What you're about to write and describe in Ethereum being a dark forest is a little... So I was glad that it did where I think a lot of people were then just the Ethereum smart contract stated. So we're in Ethereum, but what the heck is the Ethereum Mempool? So the Mempool is the set of transactions that have been submitted to the network and propagated to miners and other full nodes on the network, but haven't yet been confirmed or included in a block. Okay, so if I'm like, I'll met a mask and I submit a transaction, I want to buy

something on uniswap, right? And I put my gas fee. There's this period of time where if I go an ether scan and look up that transaction, it just says, you know, transaction pending essentially. So when the transaction is pending, when a minor hasn't, you know, picked it up and actually validated it and committed it to a block, it's sitting in the men pool. Is that right? Yep. And this is a very dangerous time for your transaction because it's public. anybody can see it and people can submit transactions that come after it or that come before it, but there's no guarantee that it will be included, how it will execute. And so people can basically mess with your transaction while it's visible in this mempool,

but hasn't yet been confirmed. Wow. Okay, so who is looking at this mempool? So you said it's visible, but I don't see a place necessarily. I haven't seen it on Ether scan, for example. Well, there's no like aggregated place for me to see. So who's looking at the mempool and where is that visible? Yeah.

So if you're running an Ethereum full node, then your node has a mempool. If you're running a minor, then there's a mempool, which is basically the block template that you're trying to build. There are some tools that are being developed for mempool visibility that are more accessible for anyone's like block native as an example, which just came out with a mempool explorer. But I think usually this mempool is, you know, stuff happens very fast in the mempool. So it's mostly bots reading this. So basically someone's hooked into their Ethereum full node

is watching transactions come in and is creating transactions programmatically in response to that. Okay, so everyone that runs a node has their own version of the Mempool. And what the Mempool does is it broadcast transactions out to the rest of the world. And the reason why you called your article Ethereum is a dark forest is because, like, you know, in order to get your transaction into Ethereum, you need to broadcast, but then you are also broadcast what we are calling your minor extractable value, right? You're broadcasting, therefore, the

arbitrage opportunity that you're willing to commit to in so far that you are ready to commit to that transaction being included. First, can you elaborate on that? And if you wanted to just spin it in using different words, but then also I want to get to like, okay, who are these monsters that are listening to our broadcasting our arbitrage? Like, who are these people? So there's a certain kind of specialized arbitrage or front running that happens that is kind of analogous to the front running that's described in like the Flash Boys book and happens in traditional finance, which is whenever there's a trade, you're broadcasting your intention to buy it at up to some particular limit price, say a trade on Uniswap. Somebody can potentially buy ahead of you have your trade move the market and executed a bad price and then trade after. after that. So that's something that can happen. And there are a lot of bots that specialize in this kind of arbitrage. And that's almost, I think that's, it's fairly well known,

although I think a lot of people probably underestimate how sophisticated these bots can be and how intense the race can be that happens when one of these transactions goes in that pool. There was actually a post that came out sometime after this one. Someone just dug in on an example of this kind of arbitrage that happened, I think, in the pickle token when there was a big trade on on Pickle. There is a, the scarier kind of what I talk about in this post, at least scarier to me, although it's only applicable in a set of cases of which this was one, is this thing that we call generalized frontrunners. So the reason we were worried about generalized runners when we were writing this post is the context of this post is that I realized that there was some

money that somebody had accidentally sent into a new swap contract that could be retrieved by anybody. Anybody could just make a call to the union swap contract and get this money out and it's about $12,000 worth. And when you're in a scenario where anybody can pick up money, which is often the case, especially with hacks, where like the idea of a hack of a Ethereumspar contract hack is that like anybody can get it, not just the owner, they have to worry about these generalized frontrunners. So what the generalized frontrunners do is, you know, the specialized ones just like look for uniswop trades and then apply this particular formula to it. The generalized ones are are much simpler in some ways. They just run your transaction, see what it does, test programmatically

whether if they did that, if they did exactly what your transaction or one of its internal calls did, possibly mutating some of the arguments to replace an address with their own address, would that cause them to realize a profit? And they don't have to know anything on how the contracts work to just sort of basically run this. It's deterministic and just see what would happen if they did this. And if they see this, then they front run your transaction with something that makes that internal call.

So then all this happens within a block time, right? All this has to, yes, has to happen basically immediately before your transaction gets included. And yeah, and yeah, it does. So there's thousands of different ways that people can leverage arbitrage, right? And so like smart traders,

sophisticated investors, like they're they're they're incentivized to go out and find this arbitrage but then the minor when they hear the broadcast a transaction they just listen to the listen to the transaction and and they're like well did this person just find arbitrage let me buy let me find out by replacing all the receiving addresses and and and I'll before I broadcast or include my own transaction I'll just replace my address their address with mine and if I make money then I will broadcast that transaction with more gas right and so they're letting the laborers labor to find out where the arbitrage is on Ethereum, and then they're just swapping out their address into their place,

so they could access that arbitrage instead, right? That's right. Currently, it's not minors, or at least we're not aware of any miners that are actually doing this at a sophisticated level. It's mostly other participants in the mempool who are running basically bots that do this and submit transactions. And as a result of it not being minors, there is some competition. even for a particular piece of MUV,

there's often a bunch of bots that try to have to raise each other for it. But yeah, that's exactly right. And it's true that this is kind of generalized run-running vulnerable case happens with hacks. It also happens with arbitrage when it's like a pure arbitrage. It's just like, for example, something with a flash loan where you basically just make this call and you don't have to have any kind of permit

of permissions, you don't have to have any even assets starting out, you're just kind of like picking up this free money that's on the street. So what is the dark forest analogy, like kind of the, I guess the sci-fi analogy that you hear Dan? Yeah. So one of my favorite sci-fi book series, the three-body problem, which was translated from Chinese, is it's about, well, I think I don't want to spoil the books or the, um, or especially even the concept of the dark forest, which is, it's a fairly philosophical spoiler, um, to give, but it's a, the book is a philosophical mystery, so I don't want to, I don't want to spoil it too much. Um, but the book introduces this concept of a dark forest where, um, you're in an environment where there are extraordinarily

advanced predators. Um, and the only thing that's keeping you alive is that they can't see you. And so to publicly identify somebody else is as good as essentially destroying them. And so in this environment, basically, the only way to be secure is if nobody can see you. And the reason that this was a problem for us is that in order to pick up this free money that was sitting there on Ethereum in this uniswap contract, we would have to make it visible. We have to submit a transaction that alerted everybody to it. And then we just sort of knew that people would be watching and potentially would steal it.

I was lucky that when we encountered this scenario, that I'd actually heard about these generalized frontrunners from Paul Dian, who studied this and wrote the Five VoIPO paper. And I'd never actually, you know, I'd never seen one of these bots before, but we sort of knew they existed from the effects that they have had. So did you see them in practice when you're trying to claim that 12th K, right? So I remember Phil's Flashboy's paper and it very much seemed like, okay, in the distant

future, we're going to have to worry about that, right? But are you saying you saw it in practice here? Yeah. So when we encountered this scenario, basically, we wanted to be really careful because I'd heard about these things and we would only get one shot at this. So I called in some great smart contract security researchers like Samson and Scott Bigelow. who helped out with basically designing an obfuscation plan for this. And so, you know, I didn't want to just directly call the uniswold contract.

That would make it really obvious. So instead we created a contract. I actually created a system of two contracts, one of which had to be called by one transaction and would activate the other, and then we created another transaction to call the second one and would only work once it had been activated. And the idea of this was just to kind of make it somewhat more computationally difficult for the attackers to detect what was going on actually

and what was going to happen in the second transaction until it was too late. And while we were doing this, it feels kind of, you feel kind of silly because you're like sneaking around to hide from this kind of monster that you don't even, you've never seen it. I aren't really sure exists.

And so, whereas we were also on a time, under some time pressure because, because of the way the, the, the contract was set up, anyone could accidentally even pick up this money by just by just making a making up with a liquidity, a burn call to the unit swap pool. So we were on a tight time frame. Unfortunately, what happened was we actually, we did get front run. So our transaction, when we tried to do this obfuscated scheme, the second transaction got immediately front run. And this was money that had been on the chain for eight hours. But basically, a suitorial.

as we submitted this transaction, I was going to go pick it up. Somebody else sniped it. Wow. So one of the monsters in the dark forest basically identified the free money, went and front ran you and stole it before your transaction could get through. Yep. So this kind of reminds me of that story where maybe it was Darwin. Darwin like hypothesized the existence of a very particular kind of bird that had a very, very long beak because in order for that this one particular flower on this one particular, you know, place, place of land, in order for that flower to even be able to exist, it would need a bird to pollinate it that had a very long beak. And he didn't know that the bird existed, but because of the condition set

by the environment, he kind of just was able to assume that this bird would exist. And so, Dan, you were kind of doing that same thing. He's like, well, there's the set of conditions. And therefore, I'm hypothesizing that this monster is going to be there ready to snag it up, regardless of whether I know that that monster's there, right? That's right. And in this case, you know, we had some evidence. We'd heard about people who had encountered a monster like this before. But in theory, from first principles, you could figure out, like, this would be a risk.

And in fact, when trying to figure out what kind of obfuscation tactics would work on it, we had to basically reason about what could someone build or what would be profit, what would be worth the trouble to build. Yeah. So, Dan, so what? Like, why does this matter? Like, why do we need to pay attention to this? Why isn't this just like, okay, so like some people,

more sophisticated people can, like, have privileged positions that arbitrage versus others? Like, why is this a big deal? So I think the, you know, right now there's sort of a limited set of cases where this particular kind of generalized front running is dangerous. It's mostly bad for white hat hackers. That's like maybe the people who deal with it, with the most. But there was a general worry about MEV extraction, which is potentially the amount of minor

extractable value that could come from submitting, reordering, censoring, censoring transactions within a block or possibly across a number of blocks is potentially much greater than, especially in a complex chain like Ethereum, much greater than the amount that you can get from transaction fees or from block reward. And if you have a blockchain where there's there's that much of a prize in terms of minor extractable value, potentially miners are going to have to extract it or be out-competed by minors that do. And some of this, I mean, you know, honestly, what we saw here was wasn't quite benign,

but it wasn't even as dangerous of some of the others that you could imagine would be like sensory and cable channel closures, for example. There's all kinds of evil stuff that miners could get up to. They don't right now because it's kind of difficult to, and a lot of them are at least at some extent altruistic, but potentially they could be out-competed. by ones that do. Right.

So what that means basically is that we lose the credible neutrality of transactions on Ethereum, right? So it's no longer sort of a fair bidding process of kind of just simple gas fees. There's this whole class of monsters in the dark forest that can just front run you and outbid you. So it no longer becomes fair. There's a class system. It gets even more unfair once miners are the ones actually doing this, especially if they're

extracting some of the more malignant kinds of MEP. One interesting thing is miners being unfair was actually the solution that Samsung recently found to the dark forest problem, which happened when last week, when he, or a couple weeks ago when he found a $10 million vulnerability in a contract, I could potentially be called by anybody. Really up in the stakes. Yep. Yeah, I was about a thousand times as much at stake as when George,

just and I were dealing with it with our contract. And the solution that they found was to bring in a minor, a mining pool, Spark pool to basically include their transaction without propagating it to other miners. And so why, so the theory is though that, you know, Sparkpool should could do that just as like a service, but also Spark pool could then take that same transaction and do the same thing we've been talking about where they redirect the funds to their own pool, right? as rationally incentivized actors, that might be.

And maybe Sparkpool are a bunch of good guys, but like all the other mining pools in Ethereum don't have to be, right? That's right. And potentially, whichever mining pool is most malignant and most able to extract MEV will out-compete the others because it can afford to spend more on hash rate. Right, so this is a classic, classic Moloch dilemma, right?

Where like whoever defects is the one that wins more money. and so therefore everyone has to defect, right? And so like maybe this was like the one time where Sparkpool would do this. But as soon as all these other miners are seeing that's happened, like, well, Sparkpool can't afford to not do it, right? Or also go out of business. And so miners, the worry here is that miners are going to take a more active direct role in ordering transactions because it means the world to their bottom line. So in order to stay, you know, afloat as a company, they have to do this.

Yeah, that's right. And, you know, I think it may well, we may well be some ways away from that really unfortunate state where the miners are stuck in this, yeah, in this in this mollick scenario where they have to do this to compete. Generally, miners in both Bitcoin and Ethereum have acted like somewhat long term or sort of rationally altruistic parties. But I think it potentially could be only a matter of time before the barriers entry on this get lowered. So Dan, is it also the case that there's kind of an arms race going on here in the mempool, in the dark forest, between people who want their transactions to remain hidden and those, I guess, predators that are trying to seek out those transactions and front run them? So you mentioned Block Native, who just came out with and we're showing it here on the screen, a Mempool Explorer, which is the first time I've seen this, and it's a whole suite of API services

that allows you to just basically see transactions in the mempool and kind of program your own robots, right, in the mem pool. And so before this, we put in a uniswap contract address. This is a liquidity pool for an eithy pair, basically. And we can see all of the transactions that are in the men pool that are pending that are like just rolling through, right? So you can see this one. This is a tether U.S.D one.

You can see the exact amount of gas. that is being proposed here. The whole dark forest is visible to us in a block explorer. So does this just create this entire arms race? Well, I think arguably any technology that is available to like ordinary users or makes it easier to basically see in the dark forest is potentially just leveling the playing field for this. So that could be positive.

On the other hand, it's also, to some extent, accelerating this inevitable future where everybody has the tools to do this. And so basically, I mean, I don't know, overfarmed, I guess would be the term, or potentially captured by miners. Okay. So the end state of this, what we're worried about is that, you know, people that are, the bots that are front running these arbitrage opportunities, eventually that software and that logic gets integrated into miners, right?

And what this really illustrates is like, while Bitcoin and Ethereum are trying to push control from the center out to the edges, at any one particular block, there's actually just one person that controls what a block looks like, right? So while the whole entire system over many, many, many blocks is completely leaderless. Every single individual block has one single individual leader, right? They're the ones that mines the block and gets to propose it. And proof of stake actually doesn't even fix this, right? It actually just kind of formalizes it and it just like allows people to take turns formalizing blocks, right? And so what we're really starting to worry about is that the minor experience.

extractable value for other blocks can be really significant, which contributes to chain insecurity. Can you comment on that? I'm sorry. Could you be the question? So, yeah. So since each individual block, there's one specific person that is able to order transactions based on, you know, the activity for it that's included in one specific block, that can make one block more valuable than the next block, right?

And so the minor extractable value, all the value that, you know, all the arbitrage block, could have happened goes to the miner for one block. And that could be a lot of money if there's a lot of arbitrage in just this one block, right? And that makes the security of Ethereum for the next few blocks up in the air, right? Because there's a lot of opportunity to go back and mine that one particular block. Can you kind of talk about like what this problem looks like at maturity when it comes to chain consensus? Yep. So there's actually a paper that I think may even predate Ethereum called on the invisibility of Bitcoin and the actions of the block reward. And that talks about this problem in Bitcoin, where the only minor extractable value, at least the only one that's talked about

is just the transaction fees. And the issue is that if you have transactions with really big fees, potentially it's worth it for the next minor to reorg your block instead of letting you get. And that causes a lot of rollbacks in an unstable chain. On Ethereum, potentially, the problem is worse because there's so much MEV that you can get. And when you can do it across multiple blocks, you have what's called a time-banned tax, which could potentially be even more. serious. So one, it's not exactly a solution to this problem. I do think the IP 1559 potentially

improves this situation by basically socializing some of the, some of the transaction costs, and in effect spreading them out over a lot of blocks by saying, like, we're going to keep the block reward. We're just going to burn some of the transaction fees. So ultimately, like, the value of those transaction fees end up in the block report, basically. Yeah. So this is kind of a grim picture. I guess we've painted a little bit like there is this whole kind of arms race in the dark forest. And, you know, there could be a future state where transactions, there's multiple parties and some parties have privilege over transactions versus versus others, particularly those with capital,

those with wealth. Is it all grim, Dan, or like, is there some light at the end of the tunnel here? How do we, how do we solve this? So I think there are a few possible solutions. So one is you could imagine technologically just figuring out the way to blind transactions. And this would either have to be done at the layer one level or potentially within a particular layer two system. Which would have some way that transactions get ordered before the minor knows what is. actually included in them.

I think there's a lot of potential questions about that kind of solution, a lot of arms race that could happen there. But there's at least potentially some promise in just like a technical solution that kind of removes this problem. And you can imagine an ecosystem that implements this kind of solution

out-competing one that doesn't. Because ultimately, this really predatory environment and it's actually going to want to use it. And as a result, you know, like the predators won't have anything, they won't be any prey. So they'll just like overfish the environment. I think another possibility, and this is one where optimism, which Volus-Gosier paradigm is invested in optimism,

has been thinking about, which is some MEV is inevitable. You could call up a nine MEV, and that's like the first trade on uniswap in a block, for example. And then some other kinds potentially more controversial. But you could imagine a system where, a DAO basically captures all the MEV. This actually is also proposed by Keeper Dow. We have basically a benevolent cartel that effectively captures the MVV can redirect it to what other users can give it back to users

can potentially prevent some of the worst kinds of MEV from being extracted. And this is sort of the escape from Molek where you have, if you have like a single Leviathan, that's powerful enough not to be subject to the same and setters. Very cool. Dan, we've got to pause for a quick sponsor break to tell folks about our sponsors, but do you have a few minutes to talk a little bit more about that, specifically later to you in optimism when we come back?

Yeah, we have to be. Awesome. Thanks so much. All right. We want to tell you a bit more about our fantastic sponsors. Make sure you support these sponsors, guys. They make bankless and state of the nation possible. The bankless state and the nations are also brought to you by

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They even allow you to set up uncensurable websites that are always accessible, even if the Chinese nation state doesn't want them to be. Check them out at unstoppable domains.com. All right. Dan Robinson is still here, and we're going to be talking about, we want to talk about something else that is exciting that is happening in the Ethereum and Defi landscape. So if that first segment got you a little bit down, here's some optimism for you. And optimism published posts this week, they are a layer two scaling solution that kind of contrast the, you know, this is a whole story. Ethereum is dark forest. It's called light at the end of the tunnel. All right.

And so for a very long time, the context here is, of course, Ethereum has had a scaling challenge and not just Ethereum, other blockchains have as well. And for a very long time, the holy grail to that challenge has been. some form of a layer to Ethereum environment where you can run the Ethereum virtual machine and all of the smart contracts, Metamask, and infrastructure that you're running on the Ethereum main net can run in this layer to more scalable solution. And it feels like, finally, we might be making some breakthroughs here. Dan, can you tell us a little bit about optimism what it is and what they just launched? Yeah, so again, just to repeat the disclosure,

paradigm's invested in optimism. And generally here, I'm speaking about my own views and not that we're not representing the fund or the company optimism. But what optimism has built in is continuing to build is a layer two scaling solution for Ethereum that combines two sort of innovations. One of them is this optimistic roll-up,

which reduces the execution costs of running smart contracts on chain within this, within the whole evening environment, by optimistically saying, let's assume that this, that this worked and that when this was submitted, the state was, the state that they submitted was valid until challenged. And then there's a basically a challenge response protocol for actually saying, no, this was an invalid state transition. Otherwise, you just have to show the blocks on the Ethereum chain and you just say what they do, what the resulting state from them is. And after some period of time, that state is finalized and it's possible to, for example, exit back onto the onto light one. So that reduces, you know, right now the most serious

scaling challenges and costs on Ethereum are involved in state storage opcodes. Actually just having data and the block is relatively cheap. And that scales maybe bandwidth, potentially scales a little better than this sequential computation and state accesses. So that's a way to leave some of the burden of these complex calculations on layer one by saying layer one just has to see the blob of data that represents the block and what someone asserts to be the state that results from it. The other innovation that optimism is including in this is having a sequence And this is the one that's that most directly relates to MEV.

So this is, and this is orthogonal to, to the optimistic roll-up, you could have this on a ZK roll-up. You have this even without a roll-up at all. This, it's, it's, this gives priority in terms of transaction ordering to a particular entity. So by basically giving the sequencer a monopoly in the, in the short run, there's, I think, maybe a ten, minute period. On the ordering of transactions, you eliminate this arms race to get your

transaction included. So as long as that party is honest, they can potentially just confirm your transactions and this reduces latency, and they can just not front run your transactions and therefore mitigate front running. Does that mean, Dan, we're trusting that entity, though? So in the short run, yes. For particularly M.A.V. Extraction, although Arguably, what it falls back to, in the case of a dishonest sequencer, is not that different from the Ethereum Malwan assumptions, or at least possibly the inevitable result of them. In the long run, I think the, and this, you know, I can't speak that much to talk as long-term roadmap, but the idea is there should be, there should be a governance mechanism that ensures that the sequencer can't just extract all the, all the value on this. Now, even without that kind of governance, so you can always exit. It's always safe to exit the roll up and potentially go back to the main chain. So a rational

sequencer may not want to extract that NAB. And this is different from a rational miner who might have no other choice because they're in this in this mollick situation. The sequencer is somewhat more aligned with the long-term goal of keeping everybody on the roll-up and therefore not interfering with the way they use it. It always feels like with these coordination tools, we're like squeezing the balloon, right? Like a little bit, right, where we're trying to like get the MEV problems somewhere else. We come up with a solution to kind of solve it for a while, but we're squeezing the balloon and it starts to seat in in other places. So it just does feel like this perpetual arms race.

I want to talk, Dan, really quick. And we can come back to MEV in a second, but just about the benefits of optimism. And I think Hayden Adams, who is the founder of Uniswap, kind of put it well, how big this potentially could be to have an Ethereum native EVM running L2. So you get security from Ethereum, right? So this is not like a side chain. This is not like an exchange. You are actually imbueing the L2 with Ethereum security. You have the scalability benefits.

You don't have the data availability issues that are present in other layers. two solutions like plasma notoriously. You've got interoperability with other dapps on the layer two. So you preserve at least within layer two this composability, this money Lego type nature. And it works with Ethereum infrastructure. So people don't have to rewrite what they've already creative. So that means like Metamask can work more natively out of the box. Uniswap and synthetics are much easier to port. And it, he lists these other benefits as well. Do you think Hayden is kind of overblowing some of these

benefits, or do you think this is that big of a deal, Dan? I think in the long run, these are exactly what makes us so excited about optimism. I think, you know, there are costs of tradeoffs that come with using an optimistic role-up as a solution rather than something else. And those include there's a withdrawal to lay to the main chain to allow this fraud. proof process to happen. Along? So I'm not actually sure where they've landed. I believe it maybe one week, but don't quote me on that.

But it's configurable and it really depends on the security assumptions of the roll-up. The other one is you're limited ultimately by the data availability throughput of the main chain. But what is really exciting about this is that, you know, if there are EF2, there's been a lot of progress on it, but some parts are still really far off. But one thing they're pretty sure they know how to do is massive scaling of data availability through phase one shard chains. And so if you combine ETH2's ability to basically have a ton of data availability proves without having to worry about exhibition. and then the optimistic role-up approach of all you need to prove is data availability, and then execution is proved with this interactive process. There's a lot of great synergy there.

That's one of the reason I was really excited about, is we think the problems, like some of the challenges of optimism are exactly the ones that we think are, there's being serious progress being made at the salient layer. One thing I don't think that the average person is, quote unquote pricing in to like the future of Ethereum is like the compounding nature of all of these solutions, right? And so one solution, one domain can really complement another solution in another domain. And while maybe any one particular solution wouldn't have worked in silo, when you kind of combine all of them together, you get something like that that's greater than the sum of each individual parts.

So there seems to be a lot of, you know, optimism about optimism, which makes me optimistic. So I'm cool. And so thank you, Dan, for helping. I know the optimism team has been very complimentary, is that a word, about paradigms, support of them. And so, you know, thank you for being good stewards of the ecosystem. And I do want to bring this all the way back to MEV, right, which is kind of, we started this conversation on, you know,

Ethereum is this dark forest with these bunch of monsters that are coming to eat your arbitrage, right? And, you know, this, the worst case scenario for this is that, you know, this just is a re-centralization of power and control over these supposedly decentralized systems, right? And so you mentioned, like, the optimism has this sequencer that allows the what is so incredibly valuable, which is the role of sequencing transactions to be formalized, right? And I think in the social contract of optimism is that the formalization of these sequencers allows the users to have, say as to where they still get some amount of their value extracted because that's what sequencing does, but they at least now have some say in where this value goes. Can you talk about that component? I'll expand on that component of optimism a little bit more. Yeah, so I think it's really important

and part of what optimism is doing is to not build too much of a moat or barrier to people running their own optimisms, optimistic roll-ups or people are running other ones. There's some competition at the at basis of the roll-up level that will incentivize a sequencer to basically be a good sequencer. And so, you know, that's that I think that's very important because you don't want sort of capture of this by something that could either, yeah, censor transactions or extract malignant at MEB. But it can be valuable to have to basically delegate the ability to sequence your transactions. actions to this to this party in order to get all the benefits that we talked about of avoiding the MEV arms race. So one thing that concerns me is that like this while it's good that we are

able to harness the power of MEV and direct it, it kind of returns us to a very age old problem of governance, right? Like it seems to be that like with optimism in the sequencer, like they are creating this oil well, right? This oil spigot that's coming out of the ground. And also there's only one of these things, right? And so all of a sudden, like, the value of being able to capture and coordinate the value coming out of this oil well out of the ground is becomes politically very strong, right? It becomes a very, very powerful force. And, you know, humans, as, you know, as coordinated as we can be, we tend to be, we tend to succumb to thing like governance, right? Like, when there's a money printer, like there is a lot of incentive to try and capture it,

Right? So why, and the optimism team seems to be, again, optimistic that they have overcome this governance issues. Do you know why they're so optimistic about like this not being a problem? Well, I can only speak for myself, but I think part of it is what I was saying before about competition, which ultimately, at least in my view, markets are often, are often better coordination mechanism. Because it's the governance. And there's always this exit, right, from a roll-up if the C-Earrow. is malicious and that's that's independent of what the of what kind of the voice process is for for choosing the sequencer and who governs that. That's it again I think it partly may just may just depend on yeah on solving some of these

problems with Dow's and I think it is kind of cool how the Defi revolution has has I think really pushed Dow's forward because now there's something very valuable to govern. There's a lot at stake here with a lot of these defypike protocols and with something like optimism. And I think we're going to find that there's pressure now to basically, yeah, to try to develop better governance mechanisms. I don't think we're there yet. Right.

So the Gitcoin model is, you know, donations and funding from the market, right? And so, you know, no one, if you go to Gitcoin, you donate your money and then you get quadratically matched. And so according to the free market, only good grants get funded because the free market it tends to fund those. And that seems to be like the same kind of thought process with like sequencers. Maybe maybe there's a sequencer which is donating toward like towards like money laundering or human trafficking. And so people like opt out of that sequencer for something that, you know, is a sequencer that promises to send money towards, you know, COVID research or cancer

research or something like that. Is that kind of the idea? Yeah. Yeah. So I think that and or just, you know, know, if a roll-up is a bad user experience because there's a lot of them beyond that, then potentially people can switch off of that. Sure, sure. Dan, this has been fantastic. Thanks so much for telling us about optimism. So for folks that are just kind of prolifer, just viewing this from time to time,

optimism now is in test net. So synthetics has gone live with a test net version of it. There's going to be an incentivized test net. So we'll be monitoring how that progresses. One of the most exciting things I think about optimism is with layer two, you're not just solving a technology problem and a security problem. You're solving a coordination problem. And to see at least chain link, synthetics, uniswap sort of step up and say, hey, we're

going to do this together is very encouraging, I think, for the layer two and Ethereum scalability space. Dan, thanks so much for spending time with the bankless nation. We really appreciate it. We will be looking at your work in the future as well as you explore how to stymie and stifle the monsters in the dark forest. Thanks so much for having me on. Cheers. Thanks, Dan. All right, excellent.

All right, guys. Wow, there's a lot there, David. I mean, like, I am blown away when I think about optimism and when I think about kind of the dark forest and the MEV, all the implications there. We've got a podcast coming up that's going to get into some of this, right? Do you want to tease that a little bit? Yeah, absolutely. And I feel really, really strongly about this, too.

So, like, you know, I've been working my, quote unquote, well, let's go ahead and say, I've been working my ass off ever since, like, 2018, learning, learning how to produce content, like learning how to write, learning how to write in ways that people resonate with and then learning how to make podcasts, right? And so now I'm pretty good at it. And so now you and me, Ryan, created this platform that a lot of people listen to. And now we're going to try and do something a little bit more direct, a little bit more intentful, right? And that is injecting the thought of and process of Moloch into people's brains at the peak of the bull market rather than at the bottom of the bear market.

Right. And so we're bringing on Amin Soleimani and Kevin O'Waki to guys who are basically if you wanted to say some of their job, in a very simple sentence, it's they're each trying to slay Moloch in their own particular way, right? And so maybe you guys are kind of just tuning into what Moloch is. Well, that's, A, what the podcast is going to be about. And in order to prepare for that podcast, you can read a recent Market Monday that I wrote, but then also read the meditations on Moloch blog. Basically, Moloch is the god of human coordination failure, right? And it's basically the reason why we can't have nice things.

a really good example for this that maybe a lot of people can resonate with is like when we were delegating people when people were delegating yams in order to save yams right they were foregoing the opportunity of earning more yams from the yams staking system so other many many people withdrew their yams to delegate yams to save yams but then that made it more lucrative for other people to defect from that in order to earn more yams right and so there for every any Anytime there's a human coordination success, there's incentive to defect, right? And that's the god of Molok. And we're going to talk about this concept with Amin and Kevin.

And I truly believe that, like, Ethereum is this platform for learning how to slay Molok, right? Learning how to coordinate with each other. And anytime there's like a new yield farm, anytime there's a new project, like Ethereum 2.0 itself, these are all coordination mechanisms that are tools and infrastructure for humans to coordinate more effectively, which is like the grand problem of humanity, right? Like it's a big deal. And so now that we've, you and me, Ryan, have worked so hard to get this platform of bankless up and running, now we are going to like kind of, again, like carry the banner,

carry the flag. Like, this is what we're here to do. And I think this podcast is kind of going to be a great place to launch that effort off from. Absolutely. So guys, that podcast is getting recorded this week and will come out next Monday. So make sure you're subscribed both to this channel on YouTube and also in your podcast player as well to get that in audio version. David, we still have a number of topics to cover, man.

And we want to make sure we timebox this stuff too. So you know what we should do is do a lightning round and try to talk about some of these remaining. Yeah, roll-ups round, excuse me, yeah. And we'll try to talk about these remaining topics really quick. I've got to stopwatch here. So I'm going to try to keep us like to like, you know, two minutes each. topic. And let's try to knock these out. So the first is this. I don't know about you, David, but it seems to me that crypto is not holding up as an uncorrelated asset class these days.

It is mirroring everything that's going on in the S&P. What is up with that, man? Dude, and it's not just the S&P, right? So like I think the if you take the DXY, which is the dollar index chart and you flip it, it like lines up so perfectly with the ETH chart, right? And so what this means is that like when the dollar becomes more valuable, ether becomes less valuable, right? And Bitcoin is also doing this as well. And which is really frustrating for me who like totally signed up for an uncorrelated asset inside of an uncorrelated industry. And it's just like, it's just not happening. So for some reason, you know, there's a perfect storm of things happening in the world that's making our industry super correlated with

the rest of the world, which it's a little bit frustrating. So this is a, uh, a graph of a D5 perp matched with a NASDAQ and you can see how the lines just sort of matched together. And I think we're seeing a lot of that. So when does it end? I guess is the question. Right now, it seems like a lot of crypto is sort of responding to what's going on in what we call macro. So what is the Fed doing with respect to printing money? What is the dollar doing?

Is it going up or down relative to other currencies? What are stocks doing? When does that stop and when do we finally get our uncorrelated asset, David? Yeah. Well, at some point we do have to think that there is going to be correlation when these things mature, right? Like they are going to fit into the rest of the world. And when they fit into the rest of the world, then they're going to be have relationships with the rest of the world.

So like at some point, it's inevitable that these things become correlated. However, I'm not ready for that yet because like we still have Ethereum 2.0. We still have EIP 1-559. We still have staking. And all of these things are things that only Ethereum has. And so in the sense that these things are valuable, those things should be, that should make ether uncorrelated until maturity, right? Like, I don't consider ether as an asset mature in the slightest, right?

Like, that's why I'm bullish. Like, you're buying in before it's mature, right? You get to ride its maturity wave up. And so I'm hoping that, like, the phase zero test night gets up and running and we can start staking our ether. And some of these, like, novel investment thesis start to become. really, really salient, and that starts to decorulate us once again. All right, man, that's all the time we have for that.

We're just for two minutes. So we're doing okay on that. So let's talk about another thing that happened last week. And this is the Ku-coin hack. So Ku-coin is an exchange. I've never used it myself, but it is a fairly large exchange. And over 150 million was stolen from their hot wallets. A lot of these wallets contain Bitcoin, Ether, and also ERC-20s.

I felt like, wrote a post on this on Monday, so just yesterday, I felt like this served as almost an asset, an acid test on how decentralized these D5 protocols were. Because what we saw is a lot of the tokens and a lot of the assets and even some of the non-Etherian blockchains, just they press their freeze button on the tokens. And, you know, some people see that as a pro. But I think that is definitely fits into a protocol sync thesis on if an asset is not, in a protocol is not decentralized, right? It's not going to settle to the bottom. If an asset can be frozen or there's governance or there's a small party that can affect its credible neutrality, it's not going to be a good base layer for all sorts of things,

for property for the world or for money. What's your take on this, David? Yeah, no, I think you've got it exactly right. And really what this whole event was was like a big, a big test as to whether or not there's decentralization theater going on, right? And so, you know, when the time comes, when, you know, something happens that you didn't intend it to, are you able to do something about that or are you a completely trustless, decentralized, permissionless platform, right?

And so, and there's like a spectrum here, right? And so like, Kane from Synthetics wrote a blog post about, or a tweet threat about, you know, how he doesn't think it's worth his time to like put in a proposal to freeze funds, right? And so like what that's suggesting is that like synthetics may have the ability by vote to freeze funds, but he doesn't think it's worth it. And he also doesn't think that it's like it's a net positive in the long run. Other protocols just went straight for it, including Ampleforth, right? Like Ampleforth just said like press the freeze button, right?

Like top, which is kind of odd from a money that's trying to be fully decentralized and fully governed unless they just decided. they decided to govern instead of non-governing, which is kind of in their social contract. So that's kind of weird. And then there's also Bitcoin and Ether, like you said, that just no one has that ability whatsoever. So it's not even a conversation, right? It's a very interesting spectrum going on here. Yeah.

So, David, I don't know what podcast we talked about this. It might have been our Protocol Sync podcast. It might have been another state of the nation. But we've kind of speculated. We've probably talked about a lot. But we've kind of speculated, okay, what would happen if a criminal, stole money, what money would the criminal prefer? Chances are that the money the criminal prefers is the most credibly neutral money, the most decentralized, the most unstoppable money on the planet.

It was so fascinating to watch actually the liquidation process. So we can view all this in real time on chain. And the address of the hacker had all of these funds, including Ampleforth, which was frozen and SNX, and other assets. that couldn't be frozen. And what does the hacker do? Immediately tries to sell them for ETH on Uniswap. Tries to go to the most credibly neutral money that is available to him. So I do think that is maybe, I guess, some more credence, some more evidence of the protocol

sync thesis coming true. As if we need it anymore. Yeah. And I think, you know, there's obviously, there's obviously the counter to that. I think that that people would say. So you're saying Ryan and David that the only people who need crypto money or these base monies are criminals, right? Well, not quite.

I mean, dissidents fighting for their freedom also need credibly neutral money that their government can't stop. So do companies that compete with one another. If one company can influence the monetary policy or freeze a transaction, that's not good. So do countries at war. So again, we need a credibly neutral monetary. system and property rights system to essentially solve what we were talking about earlier, which is these molloch, these coordination problems across humanity. So it's not just for criminals,

but it is, I think, enlightening when you see an actual acid test of how decentralized these monetary systems are and these assets are. And you see what criminals effectively do with the assets. So super interesting. I think another take to have here is that, you know, once again, this is another centralized exchange that got hacked, right? And so when we think about like a defy protocols with rug poles that steal $10 million, $20 million, or there's a contract bug and people lose a few million dollars, like this was $150 million. And it could have been even more.

Like it's still up in the air as to how large this was. And so anytime a centralized exchange gets hacked, compare the size of that hack to like the most recent defy bug exploit, right? Because like every single time the centralized exchange hack is orders of magnitude bigger, right? And exchange hacks don't happen on D-Fi. Like they don't happen on you to swap. And so like it's a good reminder as to like why we want to live a bankless life is because if a bankless life is at all possible, it's because they're the systems that we're using to do to live this life are unhackable, right?

Absolutely. Now let's talk about our next topic because everything you just said doesn't mean there is not risk in going bankless. We emphasize this just about every time we talk about something or have a podcast or have some sort of conversation. There have been a number of a token debacles, let's call them, that have started to happen in DFI. So one was few, which we could talk about. Another is the EMN token, MN token, which happened just yesterday. It was a token that a whole bunch of people poured into. There was a flash loan hack and apparently money was stolen.

I don't know, $8 million, something to that effect. It's getting to the point where I can't keep up with it. It came into existence and then was hacked in the same day. Exactly. Like, what? Like this already happened? And that's also the story of Hugh, a few, excuse me. It was just like an hour and an hour and a half long sort of episode.

And we're still talking about it. So what's your takeaway from these token debacles like Few and like EMN, David? Right. Yeah. So with Few, I think, you know, so few, I think happened right after our last date of the nation, Ryan, where we were talking with Jordan Lyle, who created the meme token. And what meme token was, was like some people just minted a token called meme.

And then they figured out something to do with it after the fact, right? And so, like, I think what happened with few was like kind of that same thing where, like, let's make a few token, and then we can figure out what to do with it after the fact. And so what a bunch of people did is they got a bunch of other people into a telegram to help bootstrap this thing, right? And so they wanted, they naturally wanted to pick the people that had like influence and, and had reach. And so they brought in people with a following into this telegram and say, hey, we're going to, we're going to top down this token. We're going to call it few. It's going to start off as a meme. And then we're going to figure out how to bootstrap it from

zero to one, right? And so a bunch of people just randomly got pulled in. Some people maybe were thinking like, yeah, I'm totally going to get rich off of this by dumping it because I'm part of the, the, you know, the privileged few in the telegram group. Others people just got added into telegram without even knowing what the hell is going on. So there's a masses spectrum of people who are involved in these things. And then there was that person that took a screenshot of like, you know, people saying like, yeah, we're going to, we're going to, you know, dump this token. And then others, and Anthony Sizzano got caught up in this.

And he said it was a joke. And me as somebody who, you know, talks to Anthony a lot, it was a fucking joke. like Anthony was joking. Maybe it was an irresponsible joke, but like he doesn't deserve to have gotten the backlash that he got in the slightest. But I think the through line here is like, things are hairy and especially on Twitter, especially when there's personalities and reputation at stake. Because like when you even mention a token itself, it's almost an endorsement, especially if you have like 20, 30, 40,000 followers, right? And so I'll let you hop in there. Yeah, I mean, it's funny because that came.

off our conversation with Jordan, right? Where we're talking about meme, and the whole meme for meme is don't buy a meme, right? And so, like, even when if you say, hey, this token has no value and, like, don't buy this token, it becomes like an endorsement in this weird, you know, defy subculture that we're in. Like, so what's striking to me is the whole few thing blew up. And there was, like, mass outrage. And I think part of it is, you know, part of it is justified, right? I think there are individuals.

We should be vigilant, I would say. I think there are individuals who would prey upon defy in the space. But what happened yesterday, I think, did we learn anything? I don't know, because yesterday a token comes out. A few DeFi Twitter accounts start talking about EMN. Andre's name from Wi-Fi gets associated with it. And people don't even know what they're buying. And they suddenly pile into this token.

There's no website. There's nothing. Don't even know what the hell it does. Yeah, people, it's like the token mempool. This is like the YFI men pool where people are trying to front run the next thing that Andre's built. They have no idea what's going on here, what they're purchasing, and they pile into it. What happens within the hour or something, within like two hours, it gets drained. I guess the takeaway here, guys, is at least, at least for me, if you choose to ape in to follow, into a token without knowing what the heck it is or why it's valuable and you lose money, you know who you have to blame. You got to blame yourself.

Right. Right. I understand that influencers and builders and creators also play a role. I'm not downplaying that at all. They totally do 100%. But you as somebody who's on the bankless journey also play a role. Right. If you're just chasing the next big thing and you're going, where your greed tells you, that's not a good way to build long-term wealth in this space.

But if you do it, only do it with a portion of your funds. And don't be surprised when this sort of thing happens. Right. So, like, we have to, as people on the journey, take some personal responsibility for the things that we're invest in. I mean, people who bought EMS token, nobody pushed the button on their ledger. They did it. Other than them. Yeah.

Right. Right. So, and I don't know. It's just, so there is, I guess there's, there's an interplay here. There's definitely an ecosystem of builders and, you know, people who are influencers and there's a ton of people who need to take some responsibility here. But you individually take responsibility for what you're doing, what you're buying as well, and make sure you know why you're buying it before you do it. You are always the final backstop to like your bags, right? Like you are the reason why your bags are what they are, right? And also at the end of the day, like, if you've been listening to the bankless podcast, if you've been listening to me and Ryan articulate why ether is valuable,

like you already have so much more information than anyone else in the world about the value proposition of ether. Like it's a triple point asset. Staking's coming. EIP 1559. And so if you understand these things, you are in like the 0.01% of the world that understands these things. You already have such a strong lead over the rest of the world with just owning ether that like you should be satisfied just about that right and so like if you're trying to like shoot for the moon like and get to the moon like this year and then you get rug pulled like that's kind of on you because you have ether that is like super safe and also the ROI is so insane to begin with right and so at the end of the day you you kind of need to compare everything to ether like

what is the what is the rugpole chance and like the the shitty uninformed influencer risk to like aping into some random token that's some random three letters versus the value of ether right like at the end of the day we should be satisfied with the value proposition of ether that's that that's the thing i think um ethereum community can continue to learn from bitcoins right which is this time preference idea of like not necessarily uh chasing the short term gains all the time and i felt like we had that in the theorem community even at the first half of uh 2020 and certainly in 2018 and 2019, but with the yield farming mania of the past three months,

it's starting to fade a little bit as it did in 2017 where everything went manic and bananas. So yeah, just keep these principles in mind. This is a marathon, it's not a sprint. If you're going to try to get rich overnight, just do it with a small portion of your funds that you can lose. Don't do it with, you know, like your main stack, that you're trying to hold for the long term.

David, I think we went overtime on that one. But let's talk about one last thing. And this is the, how do you pronounce it, the new Ethereum 2 test net? Spinalda. Spinalda. Okay, perfect.

It sounds like a fake sweetener. All right. All right. So it's like Splenda, Spinalda. Okay. All right. So this test net is, it's the last test net for ETH2

before the actual phase zero. Is that right? Yeah. It is the final dress rehearsal. So like full costumes, you know, I'll put the full effort into it. It is the last thing, right? And so that went live this morning. Apparently there's a little bit of a hiccup.

I think I'm going to, I think it was because there wasn't enough participation. There weren't enough people participating, which kind of makes sense because it was started at four in the morning, my time, Pacific time. So that's pretty early for America. And so I'm going to chalk it up to that as why it didn't go start off. so smoothly, but it is, it has started. It has started. And like, it's a three-day long test net, which is the last testing phase of the deposit contract, basically all the actions to spin up phase zero. And once these three-day, this three-day test net is over, like the only thing that needs

to happen between now and the start of phase zero is nothing, right? Like, everything needs to just continue according to plan. Like, nothing needs to change. So this, if this test net is successful and then nothing else happens, we got we have phase zero, like lock it in. Very cool. Very cool. Very exciting. I think a lot of people are going to be surprised. There's been a longstanding meme that ETH II is never going to happen when it does start

to happen. I wonder what the critics will say. I'm certainly going to be excited for that. And I think the entire Ethereum community is going to be excited to see this progress. So we could be months, maybe even weeks. away from the launch of the ETH too. Weeks, not months. Okay, that's it.

David, I think that's all we have time for, man. So this has been a fantastic roll-up around, my friend. Yeah. So, all right, guys, this has been State of the Nation. Number 16. Thank you for joining us. As always, risks and disclaimers. Everything we talk about, EF is risky.

The crypto is risky in general. So is D-5. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we are glad you are with us on the journey. Thanks a lot.