Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - David Hoffman: Eth Is Money?

Episode Date: March 24, 2020

In this episode we are joined by David Hoffman, Chief of Operations at RealT, a company which tokenizes realestate assets into security tokens. He is also well known for numerous pieces he has written on Ethereum and DeFi and is co-host of the POV Crypto podcast. Hear us as we talk about his writings, how tokenizing real estate assets works, Bitcoin on Ethereum, the feedback loop problem and effects of the USD in DeFi, and a debate on whether Ether is an asset.Topics covered in this episode:What RealT is and how tokenizing real estate assets worksUsing the Uniswap protocol for tradingThe thesis behind David's “Defining Ether as an Asset” postThe crypto-economics economics of Bitcoin on Ethereum (tBTC, wBTC)The feedback loop problem in DeFiThe effects of the USD price on volatility in DeFiThe argument that Ether is a ”triple-point asset”The utility value of EthereumRebutting the argument the Ethereum will eat all of the world's valueEpisode links: RealTDefining Ether as an AssetEthereum is an Emergent StructureEther Is EquityEther: A New Model for MoneyPOV Crypto PodcastReset Everything EventRealT TwitterDavid Hoffman TwitterPOC Crypto Podcast TwitterSponsors: Nervos: If you’re a developer or project seeking funding for an innovative idea, check out the Nervos Grants Program today - https://www.nervos.org/grantsThis episode is hosted by Sebastien Couture & Sunny Aggarwal. Show notes and listening options: epicenter.tv/332

Hey there, Sebastian here. You know, the podcaster listener relationship is too unbalanced. You know us a lot better than we know you, and we want to narrow that gap. So please do me a favor and answer our audience survey. It takes four minutes, and it will help us to continue producing content that informs and inspires you. You can find the survey at epicenter.orgs slash survey, and at the end, I'll tell you how you can get a free, keep-key, hardware wallet, courtesy of ShapeShift, to thank you for your time. So thanks in advance and on with the show. This is Epicenter, episode 332 with guest David Hoffman. Hi, welcome to Epicenter. My name is Sebastian Gujar. Today our guest is David

Hoffman. David is the chief of operations at Realty, a company that tokenizes real estate assets. He's also a well-known figure in the Ethereum and DFI space as he's been writing about these topics for quite some time. Now, if you follow crypto at all, you're of course familiar with David's work. He wrote a piece in September of 2019 titled Defining Ether as an Asset. And in this piece, he makes the claim that ether is a triple point asset. This is a concept that's bored from thermodynamics where a substance can be a solid, a liquid, and a gas all at once. So David makes the argument that Ether is a capital asset, a consumable asset, and a store of value all at once. He's also a strong proponent of the idea that ETH is money. And more recently, he published another

great post titled Ether is Equity, so we'll link to all his writings in the show notes. He's also the host of the POV Crypto Podcast and the co-host of a brand new podcast called Bankless, which he hosts with Ryan Sean Adams, and Ryan will actually be on our show very soon. Sunny and I recorded this interview on February 28th. Of course, this was before global markets took a huge plunge and crypto markets as well, so you won't hear us talk about any of that. Now, the events that are unfolding are testing many assumptions around cryptocurrencies, and particularly this idea that cryptocurrencies are safe havens in the face of black swan events in the traditional finance markets.

But as most of Europe begins to lock down and we're faced with this looming crisis in the U.S., I think we're in for many, many more surprises that are going to continue to test our industry. So these are definitely exciting times in which we live, and they're about to get even more interesting. And this got me thinking about how the crypto community is coping with all this and what the world will look like after this crisis. And so I'd like to create a space where these issues can be discussed. So I'm thinking of organizing an event where we can all talk about this. So my goal with this is pretty simple. I want to create a space where people from different crypto communities can come together, leave their ideological differences at the door

and address these issues that are affecting all of us. And I think there's a number of things that we can all discuss at this venue. One is how crypto companies are dealing with confinement. I mean, remote work is pretty much standard practice in the crypto industry, but this is forcing teams to find new and innovative ways to collaborate. I think there's also a discussion to be had around, you know, these assumptions that I mentioned earlier and how some of these are being challenged. and also some of the more systemic effects that this crisis might have on our industry.

And also things like monetary policy, both in crypto but also in the broader economic context, governments and central banks all around the world are preparing for the worst and implementing massive stimulus measures that are going to have a lasting effect on our economy. And I think that we should all be thinking about how this will affect our industry. Anyway, we're still in the very early stages of thinking about this and planning it, but I did want to mention it here to gauge the interest. So I set up a website where you can leave your email address and stay informed as this comes together. The link to that website is in the show notes, but I'll also mention it here. It's epicenter.orgs slash reset everything.

Before I go to the interview, I'd like to tell you about our sponsor for today's episode, the Nervos Ecosystem Grants Program. So if you're a developer or a project and you're seeking funding for an innovative idea, or if you're just interested in making a significant contribution to building out the Nervos infrastructure, you should explore the Nervos Grants program because they have a total of $30 million in available funding. So Nervos is a proof-of-work blockchain, and it has a unique layered architecture. It combines the security and simplicity of Bitcoin at the base layer with the flexibility of Ethereum at layer two. So at the layer one, you have the common knowledge base, which is reserved for security and store value, and layer two

is used for computation and skillability. So I was just checking out the Nervos blog, and a couple days ago, they released a blog post about the store of value narrative in Bitcoin and how in the face of crisis, it still holds up. So it's an interesting read. You should check it out. But if you're interested in the grants program and including how you can apply and what kind of grants are available, please go to nervos.org slash grants. And with that, here's our interview with David Hoffman. We're here with David Hoffman. David is the chief operations officer at Realty. And he's the host of P.OV Crypto, which is a podcast about crypto. And he's written two pieces that I'm sure many of you have heard of, and one of which is, so the origin of the meme, Ether is money.

And so David joins us today to talk about realty, but also I think we'll get into the weeds a little bit about this idea that ether is money and that ether is equity. So thanks for joining us today, David. it. Hey, really excited to come on here. I've been a long fan of the show, so it's a huge honor to be here with you guys. Yeah, so we met in Tel Aviv and you were telling me, I think this is around the time that you released Ether's money or shortly after, and you were, you were like pitching me about this idea at the, I think it was like the Ethereum party or something like that. And back then, I think I was somewhat skeptical of this idea that ether is money. And I, I think I was somewhat skeptical

of this idea that ether is money. I still hold quite a bit of skepticism there, but yeah, we'll get into it and sort of hash it out here on the podcast. So tell us a bit about your background and what got you involved in crypto. Yeah, so middle of 2017, a bunch of the gaming subreddits were complaining

as to how high the prices for GPUs were. And so I was like, what's going on here? About a month later, I find myself mining ether on my one GPU, making like $4 a day, which is pretty good. And I'm on my way to physical therapy school and about to go into a bunch of debt. And so I'm really looking for some passive income. So I scale that mining operation up to like 24 GPU miners in my dad's bathroom.

And that was my plan to have some passive income while I'm going through graduate school. And I just find myself more and more like reading white papers, watching videos, watching Dan Finley's talk at DevCon Zero in Seattle, watching Vitalik Talk on wherever. And at some point I realized that all of my time I was supposed to be spending, like, working on my GRE and my applications. I was instead learning about crypto. In March of 2018, I went to East Denver just kind of on a whim. The plan was to go and hang out at East Denver and see the community there.

And then also go tour a PT school over in Boulder. And I just never left East Denver. And so on the plane ride home, I realized that basically my behaviors are not lining up with physical therapy school anymore. And it's time to get into crypto full time. So when I got back into Seattle, I didn't really know what to do. So I just started writing. And that was kind of the very beginnings of turning into somebody that produces a ton of writing for the community. And that's also where I kind of got my foot in the door in the crypto space at large.

really quick why in the bathroom uh yeah so it's not as scary as it sounds like uh they were very well protected uh it was it was the cool because it couldn't be in my room because it was really hot and loud so i needed it to be close to me but also separate and that was the that was the room next door but yeah no they were just kind of tucked away and the side it's also a funny meme so after east denver you decided okay you know what i'm done with physical therapy school and i want to kind of just like jump in. Is that when you started realty or were you kind of just more exploring the space and doing other stuff before that? Yeah. So, no, the first job I got was as a community manager at New Alchemy, which was an ICO advisory

firm. So when I say I got my foot in the door, I really got my foot in the door in a very interesting way. Going into the crypto space during the ICU boom, I kind of had a warped idea as to what this whole entire space is. But it was just me using my writing skills to write blog posts and to send it out into the cryptosphere and hopefully capture some people and bring them into the telegram. After, you know, four months of that, obviously that business model didn't work out. And so I got brought into this company called Bunker Capital, which is a security tokens agency. So instead of many small ICOs, Bunker Capital was focused on a few large clients who were interested in doing security token offerings. And one of those was Realty. So Realty is

basically a security token offering company, we just confine it to real estate. The way that the realty works is that you put a house into an LLC and tokenize the LLC. And so that's a security. And so realty contracted with Bunker. And I got assigned as like the project lead for realty. Also, like New Alchemy, the ICO industry didn't work out too well. The security tokens industry, not so hot, but for realty, for specific. security tokens, this worked out pretty well. And so I hopped on to the realty team there. And that was

in like roughly September of 2018, was when we first started to kick off Realty. And then I came onto the company full time and sometime in early 2019. So let's talk a little bit more about realty. Can you describe what is this platform, this security issuance platform, what it does. And And how come you went for the real estate market burst? What are some of the challenges there that you're trying to solve? Yeah. So the juxtaposition between an ERC20 token on Ethereum and a real estate property is stark. It's a stark contrast.

You know, a token is highly divisible. It's very easy to trade. It's very easy to send. And it's very low cost to produce. Real estate, on the other hand, is not divisible. They're extremely valuable, extremely illiquid, and you can't, you can't, they can't really send them anywhere. They're pretty much landlocked to wherever they are. And so when you combine these things, the marriage between these two things works out pretty well.

There's a lot of synergy there. Real estate as an industry is, in my opinion, kind of a backbone of the human species at large. Like if there is industry and if there is cities, if there is commerce, then real estate is valuable. and so you can't have a valuable productive society without having a valuable productive real estate. So it's really a staple, a backbone to industry and investment and finance at large. And so that makes it really, really valuable. Real estate is one of the most valuable industries in the whole entire world. And so as an investable opportunity, getting people that can't buy an entire house as an investment

or an entire piece of real estate as an investment, we need to be able to break these things. down so they can access these things. It's kind of unfortunate that such a backbone of human industry is only accessible to people that can pay cash for a very large property that produces cash or is in New York or whatever. And so fractionalizing these things and getting them into the hands of people that can only buy $200, $300, $300 worth of real estate and then also getting them their rental income on a daily basis is, in my opinion, pretty powerful. And so as a why we chose real estate versus any other security is specifically for that reason. Like everyone kind of thinks that real estate is coming to Ethereum. So we wanted to capture that

market first. But so today you do have like, you know, real estate trusts that kind of do allow you to invest partially in real estate. So what makes securitizing individual properties like this different than just investing in real estate trusts? Totally. And that's definitely a model that we thought of at the very beginning. But if you start with a trust, you haven't gone all the way down to the basement. It's not the base layer. And if we want to build out this tokenized world, if we want to, you know, tokenize everything, then we need to start with the individual assets. And, you know, part of a system that we're building out with realty that we're hoping to have, you know, fleshed out and launched by the end of 2020 is something like tokenized trust or tokenized

reits. We just wanted to start at the very beginning, which is the individual properties themselves. We think that that's kind of where the infrastructure, like I said, is the foundation, is the very deepest, the lowest level. And then you can go up from there. And so in this new model that we're building out, people will be able to take individual properties and bundle them up as they see fit and create their own trusts or create their own reits. And if we hadn't tokenized the individual properties, we wouldn't be able to create that system. So just to sort of take a step back here, basically what this platform does is it tokenizes an LLC which owns a property or a series of properties. One property.

One property. Okay. And then these properties are sold or issued as security tokens. There are regulated securities and they can be traded on, I guess, securities exchanges that, might accept crypto, not that those really exist, I think, but what's the kind of outlook there for how these things are going to be traded? Well, so they're on Uniswap. And so we put our tokens inside of Uniswap. And so we also ceded Uniswap with our own liquidity. And so people, if you buy a token, you can go to Unoswap and buy and sell it through the exchange. Uniswap is a really

awesome piece of infrastructure for us, because all Uniswap is is another. address. And so if you go down to the list of token holders, you'll see, you know, token holder A, token holder B, token holder C, uniswap. And it's just one of the addresses that we whitelist. So all we did is when the way that we remain compliant is that are these tokens operate on a white list. And so you can't send them to somebody else that isn't on the white list. All we had to do is white list uniswap. And that allows the uniswap piece of infrastructure to be a part of our offering. So recently we had Gabe Shapiro on the podcast. He's a lawyer and he's written extensively about sort of tokens as securities.

And from what I understand from that conversation is that in the U.S., there are such things as securities exchanges, and these exchanges are solely the only types of exchanges that can trade registered securities. Does UNISWOP fall outside of that category? Could these things be traded on Coinbase or would they have to be a registered security exchange? Yeah, registered security exchange. I think the term I'm familiar with is ATS, alternative trading system. And that's something like Open Finance or Templum or these other exchanges that specifically are dealing with tokenized securities.

There are other ones as well. Since Uniswap is a protocol, since it's an algorithm, there's no company behind the scenes to manage this. I mean, no one has talked or created legislation about this. So when we talked to with our lawyers, we told them like, hey, there's this thing. It exists on Ethereum. It'll exist without any human input. No one can stop it. It's just a protocol.

There's no, no one is ever going to be able to file filings because it's just an application. And when we told them to that, they thought it was okay. I think one of the interesting things about tokenizing things like real estate, like tokenizing anything, is that you can easily then create derivatives. So are you already sort of? seeing, maybe not playing out yet, but what kind of derivatives could one build on top of realty, like maybe, I don't know, like a basket of real estate in a state or in a certain geographic area or that caters to a certain, like, you know, either high, high value rentals or

commercial rental, this sort of thing? Yeah, so this is all being kind of fleshed out and built in the background right now. And so this is the system for this is kind of the goal for 2020 with with Realty. It's a pretty ambitious system, but we have, there's another application, another team on Ethereum that is that we're working with to build this out. We're not really talking too much about it because we're just at the very beginning stages, but it basically does what you're describing. So there are individual properties on the Realty system, on the realty platform that all have their own tokens. And going through the system will allow you to deposit one token, pull out a different property. And then also simultaneously, if you want to,

you can take properties one, three, seven, and ten, and then create a basket out of them. And you can create these things. And anyone else can also buy into this creation that you've made. And really allowing the community to kind of package up and basketize all of these properties as they see fit. The first properties that we're that we are in are all Detroit properties. And that's simply because they are all low price tag, high rental producing income. Hopefully maybe by the time that this podcast comes out, our Chicago properties will have been announced. And so then people can basketize Chicago properties and put them into a basket. And we really want that to be a community-led endeavor. We really want to give the keys to that system over to our community

so they can build what they want. So what kind of legal jurisdiction is, are these based in? Like, so I'm imagining these have to have some sort of peg to the real world. Yeah, so there are, it's a Delaware LLC. So the way that this works is, I'll explain it, there's two companies. There's Real Token Inc., which is the for-profit company that I work for, and then there's Real Token LLC. And Real Token LLC is the LLC that all the properties are inside of.

and RealToken Inc is the managing member of RealToken LLC. So we're like the custodians, the fiduciary. And so we are the individuals that are managing all the properties. And so we coordinate the property management companies. If a house goes up in flames, we coordinate the insurance payouts to the token holders, stuff like that. And we also manage the rental income from the property to the token holders. And so the Real Token LLC is a Delaware LLC. So one of the questions I have about like fractional ownership of real estate in general is what does it even mean to own 10% of someone else's house?

Like am I in 10% of your house? It's your house. Right. There's no one else. Right. So I guess the question is, you know, the utility of a house. So, you know, maybe this might be eventually end up being a good segue into the ether as triple point asset kind of thing. But, you know, real estate, you know, one of, you know, it is sort of a store of value kind of thing.

But at the same time, it is a capital asset. You're usually trying to generate some sort of rental income from it. But let's say the house that I currently live in, that I own, I decide to securitize it and sell 25% of it. Now, when I sold the 25% of it, what rental, what does that 25% that someone else owns entitle them to? because do I have to now start charging myself rent to live in the house that I was previously living in? Right. Yeah. So a specific example like that is an unanswered question.

There's always going to be, you know, edge cases. But the main case, and this is why we send out rent on a daily basis. Because when we were first talking about how we were going to market and sell this product, well, it's just a token on Ethereum. Like, I can make a token and sell it to you and put it on a website and say that there's, it's a house behind there. So like when you buy this token and it shows up in your wallet, like what do you actually get? And the answer to that is the rental income. And this is why we send rent out on a 24 hour cycle. A, because it's cool to do that. But B, because it's tangible.

It makes you feel like there's actually a house there on the other side of the token. Now, obviously we provide every one of our investors with the documents to be able to link the token to the property. But it's really the rental income that is the tangible benefit that you get. Right now, it would be a lie to say that these tokens, prices on Uniswap and on the secondary market are actually reflecting the value of the property in the real world. But that's just a function of liquidity of how many market participants there are, information asymmetries and the difficulty of if you buy all the properties, then actually going to Detroit and then taking the keys to the house, which is all possible

if you have all the tokens. What if I have 51% of the tokens? Yeah, so we can code that into future properties, but right now we don't really want anyone to be able to buy every single one of the tokens or 51% of the tokens. We want them to stay as tokens on Ethereum. So we made the limit as 100% of all the tokens. But yeah, so people have asked us that question, because there is a governance process.

Token holders have a say on what they want to do with the property. and there is, you know, we, we as realty are, like I said, the custodians and fiduciaries of that. And so if there isn't consensus, we will take over. But if we're managed, like, if a tree fell on the house and the roof needs to be repaired, like some decisions need to be made. And in theory, like the governance of these properties is something that we need to enable. We're not really there yet. But I think I lost track of your question.

So, like, essentially at some point, let's say I have, I buy a 51% of, of the tokens of one of the properties. I can go ahead and take over that governance process, basically say, all right, I'm going to charge myself $0 a month for rent, and I will rent it out to myself for free. Right. So best only if we put governance rights over that particular LLC at 51%. Right now is 100%, which means that no one really gets total governing rights except for realty.

I mean, we're centralized company. We don't pretend to be centralized. It's not what we want. we intend to act in the best interests of every single one of the token holders and not just maybe one person that's trying to attack the governance. But yeah, it's an interesting thought experiment. So who sets rent to you guys or the token holders? So the property management company sets the rent at the market rate. So the realty offices are in Florida. Our properties are in Detroit. Future properties will be in Chicago. Future future properties will be all over America.

We can't be the property management for every single property. And so we just high local property management companies to do everything for us. And they understand the local markets and they set the rent. Yeah. So, you know, I think that talking about real estate as a capital asset is maybe a good segue into the piece of writing that you, you know, pretty well known for, which is your ether is the best model for money. Actually, that's the title that Camila Rousseau gave when I put it into sub-sac. That was her title, not mine, but I think it's true. Oh, what was your title? My title is Ether a new model for money.

Ether, a new model for money. Okay. Are you the one who started the ETH is money meme? No, so that was actually Ryan Sean Adams. He was the one that aggressively pushed it. And then we, like me, Eric Connor, Anthony, Sizzano, we all hopped right on board with him. Yeah.

You know, speaking of these guys, you know, you had this thing that you mentioned just a few days ago about like being Ethereum Influencer. Could you explain like what does that mean? And like in a serious way, like, you know, what does that really mean to you? Yeah, so that was actually mostly supposed to be a farce. This was in the context of the Prague pal debates where the Ethereum magicians and core devs getter were talking about how they were surprised that they were getting a lot of

pushback from Twitter. And so I think that the tweet that I made that was kind of in response to this was crypto and money are inherently social systems. and so these social systems need a public square to talk and communicate. And that social square has been Twitter. And so a Twitter influencer or a community leader is really just somebody that a lot of people listen to to get signal from what's going on. And I think it was kind of ironic that some of the resistance from the anti-Progpal movement

was coming from people that actually weren't on Twitter listening to the community. And there were some negative words, not too negative, not anything crazy, but just some displeasing words from the Core devs Gitter. I can't remember who. I don't even know. Even if I did, I wouldn't name names. That we were just talking about how like, you know, the Twitter moms are, you know, just, you know, branding the Gitter and making a bunch of noise.

And I thought that that was a misalignment with how these crypto systems work. Because these, like I said, crypto systems are social systems. And social systems need a place to communicate. and converse, and that is Twitter. Yeah, a lot of people do listen to you and have read your post, and I think it's been pretty influential to a lot of people. So, yeah, maybe could you start by giving us sort of a very brief, like, you know, summary of what your main thesis from that post is?

Right. Yeah, so the main thesis of that post is that the most important point, or perhaps the only point of the crypto, of the crypto revolution is to produce a decentralized finance ecosystem. And I include Bitcoin in that. Bitcoin is a component of defy. It is itself a single defy application. For the defy ecosystem, which are applications that can act on the spectrum of trustlessness, on the spectrum of decentralization, there are all these things that can be built. And in order to be a financial application, they need to have money. And the only truly trustless asset inside of the Ethereum's defy ecosystem is ether.

So on day one of Ethereum at the Genesis block, there was nothing except for the 60 or 72 million ether, whatever that number was, that was minted from day one. And so there's nothing except for ether. And so if any other assets want to come to Ethereum, like real tokens, for example, you would have to trust the company like Realty to actually honor the link between the token on Ethereum and the house in the real world. And that's not true for Ether. Ether is built into the system. And so if we want to have Defy applications and Defy protocols and this decentralized financial ecosystem, if we want to have a financial layer that envelops the world in a

trustless manner, you need a trustless asset to go into those trustless applications. If you can't have a trusted asset inside of a trustless application, you kind of get this hybrid thing that's not totally what we were looking for. And so if we want full trustlessness, you need to use ether as the money. And that's what we have seen happen in the last, in 2018, 2019. That was the story of the Ethereum bear market was ether being placed into these applications. Starting with Maker Dow, which launched in December of 2017 and really got kickstarted during the bear market of 2018, more and more ether was pouring into Maker Dow to be the collateral for Dai. And we all kind of, in a mental model for Maker Dow is kind of something like a central bank.

It kind of feels like that. I like to call it the Decentral Bank. I feel like it's more like a decentralized commercial bank where it takes it gives out loans and assetizes them into some stable asset. Yeah. Central banks usually don't. Yeah, I would agree with that. That's a more nuanced take for sure.

And I would say that that's more accurate. But when we were first, in 2018, when we were first really chewing around these things, MakerDAO is being put in that context. And banks need collateral. They need something in their vaults. Like all of these central banks in the world own all the gold. And so like what's really the money of the world? Is it the dollars that the Fed puts out or is it the goal that the Fed has in their banks? And so in the in the crypto application landscape, in the financial, the defy landscape, all of the collateral in defy is ether, like to a large degree, like 90, 95 plus percent. And if we want to have this trustless ecosystem of applications, it has to be that

way because it's the only trustless, ether is the only trustless asset on Ethereum. You know, there, there is some classes of assets that are sort of this peg to the real world, kind of like realty assets. But, you know, there are other trustless assets on Ethereum as well. Let's say, you know, something like the Auger Rep token, you know, that's a, that's an Ethereum native token or you can even have things sort of like TBTC, which are, you know, coming from another chain, but the way that they're designed is in a relatively pretty trustless way. Yeah. So I love that point.

So augured is awesome and also Maker in that same realm, MKR and REP. These are two assets that are that are trustless assets. But the difference is, is that rep is a token that earns you fees from the markets on auger, and those fees are denominated in ether today in v1, and then in v2, they'll be denominated in die. And die is just a claim on ether in MakerDAO. And so really, all roads go back to ether here. And so, like, sure, we got this trustless asset, but the only reason why rep has any value

is because at the end of the day, it pays you ether, which is money. And then the same thing is true with TBTC. If TBTC needs to come to Ethereum, it needs to have collateral. Like that's how everything in defy works and is trustless. Trustlessness comes from collateralization. And in order for TBTC to come to Ethereum, there needs to be ether collateralized on the Ethereum contract. And so for every one Bitcoin's worth of, one Bitcoin's worth of TBT on Ethereum, there's 150% of one Bitcoin's worth of ether as collateral. And so like in my head,

Ether versus Bitcoin, Ether won that thumb war because Ether is being used by Bitcoin as collateral, not the other way around. But that's only because of the current design of TBTC, right, where the keep holders are essentially having to run a multi-sig on the Bitcoin side. But if you get into a system sort of like the designs that we use more in Cosmos world, where like the equivalent design here would be as if Bitcoin was using a drive chain that was acting as the peg to Ethereum. In that case, then you don't need that sort of over collateralization.

And I think that's probably the end goal for TBTC because otherwise, yeah. So in that case, then you would still be able to get BTC over without requiring ethos collateral, right? Yeah. So that starts to get out of my realm of expertise with technical know-how. So I'll take your word for it. That's how it works. And then once TBT gets on Ethereum, it will be one. of the many other tokenized versions of Bitcoin on Ethereum, so WBT, TBTC, the W-BTC, the W-REN protocol

Bitcoin. And so all of these things are fighting against each other for their own liquidity. And so probably one will win. And then that will be the one kind of de facto tokenized Bitcoin on Ethereum. And then once that is in place, well, then that tokenized Bitcoin on Ethereum is then going to have to compete for Ether for liquidity. And we saw this problem with the BZX attack on the BZX exchange during ETH Denver, the reason why that worked was because of how illiquid WBT was. And so if WBTC or tokenized Bitcoin comes to Ethereum, it's going to need to fight for ether's liquidity inside of Ethereum in order to have any amount of meaningful displacement of ether as the main collateral for Ethereum. And that's a hard, that's a hard fight

to fight. This is the fight that Bitcoiners often, criticize Ethereum for saying like, well, why would anyone use Ether as money because Bitcoin has, you know, 100x of liquidity, like 10x the market cap. Well, now inside of Defi, the roles are reversed. When Bitcoin comes to DeFi to Ethereum, now Ethereum has way more than 100x of market cap versus tokenized Bitcoin in Ethereum and way more liquidity. And so like, all of the liquidity inside of Uniswap, that belongs to Ether, not to tokenize Bitcoin. And so once tokenized Bitcoin does actually consolidate into one protocol, that's just the first step. Now to compete for the collateral of the defy ecosystem, it has to compete with all of the same things that Bitcoiners say that Ether has to compete with Bitcoin on the outside.

This idea that the eth is money. So you talked about this at the beginning where you said that in order for all these things to have collateral, whether it's die or any collateralized asset, TBT, we need Ether as that collateral, and so Ether needs to be money. So it's sort of this descending statement where you get to the bottom and you have Ether. Where I've always taken issue with the idea that Ether's money is that to me, ETH is more of a representation of what people think Ethereum as a network is worth. And the value of Ethereum, to me, is derived from or should be derived, from the value that is created in the applications itself that are being built on Ethereum.

And so it really comes back to this idea of utility, that ether is, the value of ether represents the utility that people derive from the Ethereum platform. Now, if ether itself is used as liquidity to build all of the defy ecosystem and to give value to the defy ecosystem, and that is the value that is being created in Ethereum, there seems to be this recursivity there where essentially defy defy ends up being kind of worthless because if you're using ether as that collateral asset and you need ether to be the collateral asset to give value to the system and to give value to the system you need the collateral asset it loses all of its meaning

it loses all of its value and so I don't know if you've heard this argument before or how you would address that Yeah, I'm not sure I 100% followed, but I think it has something to do with the feedback loop nature of the Ethereum economy. Does that resonate? Yeah, I guess that's a good way. Yeah, there's some recursiveness there or a feedback loop, if you will, yeah. Right. So feedback loops are both really awesome and really dangerous.

There's this old meme, I think it was from Kevin Pham from Forever ago, where proof of stake is like a power strip, but the power. core coming out of the power strip is plugged back into itself, which is a funny joke. But where that joke is missing is that what's actually going on is that before it's plugged back into itself, there is this other component that's missing that is Defi, which is like the energy generation machine. And so it goes from just a power strip trying to get power from itself to a megaphone in front of a microphone that goes back into the megaphone. And so the combination of proof of stake, locking up ether, pulling it off of the secondary

market and paying rewards, and then also ether locked in defy, which is also ether being pulled off the secondary market to achieve the utility of all these defy protocols. And then there's also things like the fee burn from EIP 1559. Basically, all of these things end up ultimately contributing to the scarcity of ether. And that turns into a really big game. It turns into a scarcity game in the same way that Bitcoin's $21 million is a big scarcity game. It's a game of chicken as to who's going to move over to Bitcoin last. Ethereum is also this big scarcity game.

And it's really about like, okay, where is all the scarcity going to come from and when's it going to come from? Or when is it going to come? And so this feedback loop, this FOMO cycle is the thing that powers the growth of ether as an asset. and then we'll also power the growth of defy because defy is a function of how valuable ether is. And this is a reference to Ryan Sean Adams economic bandwidth. Defy, when MakerDAO pulls out two and a half percent of all ether in circulating supply, well, by the laws of supply and demand, the ether price must go up. And so imagine if we have, you know, just like five or six more MakerDAOs over the next five years

pulling out two and a half more percent from the total supply of ether. Well, the scarcity game is on. And this is why proof of sake is so incredibly powerful. It's because it pulls so much ether off of the secondary market. There's such a strong incentive there that it is one of the big players in this massive scarcity game. And so this is the positive feedback loop that is created. And that's really the thing that generates the power, the internal power generation system of Ethereum. So in your post, you have this like diagram, the diagram is talking about this where it's like, you know, it's this triangle and it's like, you know, one direction pulling is like ethel locked in defy. Another is the staking return. And then the third one you said like USD price. And you said, quote, the only mechanism is that the US dollar has to generate its equal and opposite pull on the above forces is to increase in price. And I just don't quite understand what that mean. It seems a bit won't. Like, you know,

Yes, I agree that you're decreasing the amount of available eth on the market. But that's not necessarily increasing the price. That's just making it less liquid on the market and makes it more volatile. But yes, that means it can increase in price faster, but you can also decrease in price faster. Like, just because you're making something more scarce, isn't increasing the price by nature. It's just making it more volatile in general. I would disagree with that. And I think it's always easy to talk about Bitcoin here because Bitcoin is so simple that it illustrates this pretty well.

You know, Bitcoin prides itself on having an inelastic supply. And so whenever there's any more demand, because supply is not elastic, so like with a dollar, if there's more demands from the dollar, the supply of the dollars is elastic. So the federal reserve just prints more. And Bitcoiners are like, this is the opposite. Whenever there's demand for Bitcoin, no one's printing anymore, so price has to go up. And so Ethereum is all is the model for Ethereum is Bitcoin, but but more. Right. But then the problem is that is assuming that the demand for Bitcoin and also for

ether is going up. But what happens when the demand for those is not going up? Right. So when demand for ether is not going up, ether leaves Maker Dow. It leaves Uniswap. It leaves staking and it goes to the secondary market. And then the equal and opposite force of the US dollar that has to pull on those two things goes down.

And so the image that you're citing, I have like three ropes. And they're all going in three different directions. Proof of stake is competing for ether from the secondary market and from ether in defy. And defy is competing for ether from proof of stake and for the secondary market. And then the secondary market has to respond to any amount of ether that is leaving the secondary market and going to proof of stake or to defy. And you say that these things become more volatile and more illiquid. But I think liquidity is actually a function of price. And so when something goes 10x in price, that's actually going, it also going 10x in liquidity. And so when things leave the secondary market, I'm not saying that there's less supply on the secondary market. I'm saying the value, the price of the thing on the secondary market goes up. And so the total value, the total US dollar denominator value on the secondary markets stays

the same or goes up, even though ether is leaving. So that's kind of the value. generation, that's because value is generated, more ether can go to defy, more ether can go to prove the stake while keeping equal or more value of ether on the secondary markets. I'd like to address this point you made in one of the posts where you argue that ether is a triple point asset. But could you first sort of briefly remind us what is a triple point asset and why you think ether fits its subscription? Yeah, so a triple point asset is not a real thing. It's a metaphor. No, if you go out to the old finance world and say, hey, like, sell me on your triple point assets.

They're going to look at you weird. The triple point is a reference to chemistry where if you balance pressure and temperature and a particular substance well, it can be both or it can be all three of gas, liquid, and a solid. And so you can go to YouTube, type in triple point asset of water and you can see somebody with a cool chemistry set that's making water boil, freeze, and, you can, you can see somebody. and be a liquid all at the same time. And so when we talk about in the context of assets, and this was an attempt to define ether as an asset. So there are three main asset types. One is a capital asset. This type of asset is something that just produces cash for you.

This is like the rent you get from a property. It's the revenue that a business generates. It's like a taxi medallion, something that produces cash. And then there's a store value asset, which is something that's used as collateral. that's like gold in a vault that is like your house when you take out a loan against your house those are those are two great examples and then the third is a consumable asset and i call these things one-time use assets and that's like that's a commodity like wheat or coffee or oil or really

i think the most accurate comparison is energy energy is a great commodity asset it can only be used once and then it turns something that you have into something else that's better and so ether is really all of these things. It's the collateral inside of defy. It's the collateral inside of staking. It also produces fees for you inside of defy. It also produces fees for you from staking. And then it's also, it's also, like the OG narrative of ether was gas for Ethereum. And that's, that's talking about one of the three pillars of ether as an asset. And when you combine all these things, like ether can be all of these things inside of one single transaction. And that's why I call it a triple point asset because it can act as all three asset types at the same time.

Ether could have some of these properties, but it's a bit of a stretch to say that it's a store of value and that it's a capital asset and that it's consumable because these things traditionally have been very different from what is ether. And so I wonder if instead of calling it a capital asset of consumable and store of value, we don't need a totally different new type of nomenclature. Because, for instance, on the store of value side, the argument that you make in your post and in your Tel Aviv talk was ether is a store of value because you can lock it and die and you can use die as a store of value. Because I think we agree that the instability of ether of cryptocurrencies in general don't make them great stores of value. But to say that

ether is a store of value because you can make it a store of value by locking it and die sort of implies that, for instance, US dollars would only be a store of value if you were to lock into something, some other vehicle or, you know, sort of invest them in some vehicle or lock them away somewhere. The comparison doesn't really line up for me there. On the capital asset side, Ether can produce capital in the same way an investment does, perhaps, but not in the same way that a tractor produces something of value that you can then sell as a business or in the same way that, like, buying a computer allows me to produce a podcast that I can sell to advertise or something like that. And so the comparisons there kind of fall apart. And I wonder if,

It doesn't make more sense, and I don't know what that is, but to try to figure out what a new type of nomenclature is for these things. And this kind of goes back to my initial point, was that I tend to feel that ether is more of an investment who bought ether or hold ether expected to go up because they expect the value of Ethereum as a platform to grow, right? because of usage, because of sort of like people using Ethereum to build all kinds of things, much like you would invest in a startup or invest in a company and expect the value of your stock to grow because you've invested in it. When you say that people buy Ether because they expect the value of Ethereum to grow, I think what you're really saying is that the three pillars of what makes Ether a triple point asset are all growing.

And so like that the net sum of those three things growing is Ethereum becoming more valuable. When Ethereum becomes more valuable is because these three different ways that ether captures and accrues value are also growing. I think a lot of people would contest that being something being stable or not losing 95% of its value does not actually disqualify it as being a store of value. A store of value is something that is something that is something that no one will inflate away from you. And so like Bitcoin, even though Bitcoin goes from $20,000 down to $3,000, like you still have the same number of Bitcoins you had before. And it's really about what is your anchor? Like what's your reference point? And so gold is, I would think we would all say that gold is a store of value.

But it goes up and down in price versus the U.S. dollar. And it's really all about relativity. And it's really all about what starts to be the thing that everyone uses as money or as a store of value. And so when I say ether is money or Ethereum is. the economy, ether is a money in commensurate way to how Ethereum represents the total share of the world's economy. Now, Ethereum is like less than 1% of the total's world's economy, and so therefore ether is less than 1% of the total world's money. But to the degree that everyone is using Ethereum as an economy, and therefore everyone is also using ether as money.

Is this in your mind sort of the current situation or like a hopeful future situation where people are using ether as payment? hopeful future situation in the same way that like the internet in 1995 everyone knew that the internet was going to take over the world i'm of the same opinion that in 2020 ethereum as a financial platform will blanket the earth and then everyone will be using ether as the store of value to operate inside of the financial fabric that is defy i think i want to try to like maybe discuss each of these three claims here that like you know it acts as all three of these asset type and maybe I think the best way to approach this is to break these down and discuss each of them

independently. I mean, I'll just start by saying I completely 100% agree with the capital asset classification. In Cosmos, that's how I define atoms that, like, I have a paper kind of describing this where I say that like atoms are digital A6. They entitle you to earn a portion of the fees that are paid on the Cosmos network and those fees can be paid in any token you want, but you just get to earn those fees. So let's focus on the other two. The first one is, okay, the store value one.

So I feel like in the post, you kind of started off with what I thought was a good, the right interesting definition of what a store value asset is. But then I think you then sort of generalize it to mean that store value to be like anything that has value. I'm not sure that was kind of what Chris Berniske's post or was a version trying to say. So I think maybe a better term you might be trying to go for something that is inherently valuable asset or, you know, I like to call these like shelling, point assets where I see gold today as a shelling point asset, where it's just the

shelling point that everyone has agreed. Look, when the rest of the market is tanking, we're all going to buy gold. And it has value just because of based off of common belief. And that's kind of what the meme coins are. Here's a question I have. I wrote in an old epicenter episode, Brian and I kind got into a debate. We're up about like coin. And I said that having a pure meme coin is great because it's a religion where if you have an asset that's both trying to be a utility and trying to be a meme coin at the same time, the problem is purpose as a utility gives you a rational way to price the asset. But for a meme coin, for religion, you don't want people to be rational. You want them to be utterly irrational. That's what's kind of interesting.

about Bitcoin, it's like, you know, screw it, we're going to sever all links from, like, actual utility and giving people a rational way to figure out what the value of this thing is supposed to be. It's going to just running off pure, like, religious fervor. And so don't you think that, like, actually separating out, and you can think of gold as being the same way today, right? There's, like, no rational way to calculate what the value of gold is. At this point, it is so severed from its, like, use in, like, electronics and whatnot. So isn't time, tying it to a utility kind of almost diminishing the meme, the religious fervor that could go into Ether's value. Yeah, I love this conversation.

I think instead of talking about like coin, we should just talk about Bitcoin because that's what that is. Like Bitcoin is one massive meme. I use like coin as an example because it's more shocking to people where like when has a silver has its own meme, which is like, oh, it's the silver to Bitcoin's gold. What does that mean? I don't know, but you know, we just keep saying it. It makes the price go up. But at the end of the day, like money is a meme, right? Like the dollar that I have in my wallet is a piece of paper that somebody else will give me

what is whatever's one dollar's worth of something that they have. And so money itself is built into a meme. And the meme also comes as a result of utility. And so like, you know, Bitcoin's a huge meme. Like it's a meme coin. It's going the whole going to the moon thing is part of the meme. But at the end of the day, you can't steal anyone's Bitcoin and you can't roll back the chain. And there is utility.

there at the bottom of the stack. And so you can't have zero utility. And it's also worth saying that like some of the meme comes from a positive feedback loop where liquidity begets liquidity and value begets value. And so what money is is when markets were born, somebody came to the market with apples and somebody came to the market with shoes and they needed something to go in between because the person that had apples didn't want shoes and the shoes, you know, etc. The utility of money is being saleable, being liquid, being universally able to be accessed and bought and sold. And so that is the utility. And so I don't think you can actually get away from utility. And what really Ether is doing is it's finding ways to both create utility inside of Defi,

create utility inside of staking, while also generating the liquidity premium, the monetary premium of the meme at the same time. And so when we talk about money as a meme, the money is valuable because it's universally bought and sold. Well, that's what Ether is inside of Ethereum. Like, Ether is universally used inside of Defi. It's the only thing that's used inside of staking. It's the only thing that EIP-1559 is buying back and burning. And so as a result, that it is the substrate asset, the go-between asset for all other things. That is the thing that gives its monetary premium. It's inherently useful for all purposes. And that's what money is. I don't know if I exactly agree with the claim that U.S. dollars are also based off a meme.

I think that U.S. dollars primarily get their value from their utility purpose, which is your ability to pay taxes. I'm talking about the papers, I mean. Okay. Maybe let's move on to the second point, though, then, which was about like the utility value, where I think one thing that makes Ethereum extremely different than U.S. dollars is that it's very easy for me to leave Ethereum. Like, you know, Ethereum is just a BFT computer. That's what it is. And if Ethereum becomes too expensive to use, I don't have to stay on Ethereum. I will just go switch to Ethereum Classic or Tezos or something, right?

Like, there's no reason. But I can't quite do that with the U.S. dollar. I still have, you know, the U.S. government is like, especially, they're like, you know, you can go anywhere in the world you want, but you still have to pay U.S. taxes. And they do that by force. any country in the world tries to help U.S. citizens evade their taxes, the U.S. government will sanction that country. And the problem is Ethereum, being a permissionless system, can't really sanction other blockchains. It can't enforce other blockchains be like, hey, you have to make

your users pay transaction fees in ETH. Otherwise, we're going to, you know, sanction your chain. And if you can't do that, then, like, if you don't have that enforcement capability that the U.S. government does. I don't know if you can actually, if it gets that same utility like that in ether, what do you think about that? It's the exact opposite. So Ethereum is an opt-in, opt-out system. And the reason why we all have to use dollars inside of the United States government is because of the authority of the government to say so. And there's one currency. There's one, you know, peso, dollar, yen, euro, depending on the region. And so for all the countries out there, there's hundreds of different currencies. And these are, instead of there being one,

money because everyone wants to just use one money. It would be dumb if I went into the shop down the road and be like, hey, do you accept money A? And the shop guy is like, no, I only accept money B. And that's what the world is. That is the whole entire globe. And so it's just more efficient if we just use one money. And Ethereum doesn't have any authority over the rest of the world. But when you go to the internet, there's just one jurisdiction. And that's why we only see really two monies these days. There's only Bitcoin and Ethereum. And I don't think the fact that Ethereum can't force other chains or other countries or other protocols or whatever to use their money as a detractor for why ether will be valuable. Because Ethereum is a permissionless platform, the U.S.

government can't stop you from using it. And so you can be inside of the U.S. government paying taxes and dollars to the government. But when you're on the internet on defy, you're paying taxes to the Ethereum protocol. And so is the rest of the world. And so Ethereum as an opt-in system is going to take over the internet as the internet's financial platform, because what other protocol is going to have the capability of doing that? Because anyone can opt into the system and leverage the value and utility of defy, they will. Long term, why will all defy and all open finance be staying on Ethereum? Like, my prediction is an open financial will just spread across as many chains as possible. Essentially, my claim is that BFT computers are a commodity, right?

Like, it will be very easy to spin up a BFT computer for your purposes. And so there's no point of paying taxes on someone else's BFD computer. The claim that defy is going to be spread across a bunch of different ecosystems, a bunch of different chains is not what we are seeing. And in the same way that liquidity begets liquidity and money begets money, composability begets more composability. And Ethereum's big moat. It's big value proposition.

Why defy is so cool is because if you are building on Ethereum, you are just one transaction away from everything else that is also being built on Ethereum. The big competitive advantage for realty is that our tokens are one transaction away from Uniswap, an exchange. It would have taken us millions of dollars to build out in exchange for our tokens, but Uniswap was there just next door. And so Composability is going to lock everyone in into one ecosystem because that particular ecosystem is a hundred times more useful and more valuable than any other chain elsewhere. Do you not think we can do composability across chains, though? That remains to be seen. And it's just not what we are saying today. And this is why the fight for scalability and reduce transaction fees on Ethereum is so important because it makes the incentive to build anywhere else just so much more or less.

Why would composability across chains be any different than composability across shards? They seem to be the same technical problem. Because of the complication. That's so much more complicated than just building on L1 Ethereum. All the current DeFi products will break on Ethereum 2.0 because they're all designed for like synchronous transactions. But my claim is that having composability across Ethereum shards is no different than having composability across Ethereum and Ethereum Classic. They're the same exact technical problem. We are now out of the technical realm of what I can keep up with. Your claim is that Ethereum will be the world's monetary platform. Tell me if I'm wrong.

value exchanges will happen on Ethereum in some form or fashion on using the tokens on the Ethereum ecosystem and Ethereum will basically eat the world of value. If that's the claim, I think, is sorely lacking in realizing just that that's not how the world works. There are many examples in which this falls apart. I mean, the fact that there are many sort of national currencies is a prime example. The fact that in all types of software, open source software, there have been multiple attempts to standardize and bring people onto one platform, but that's now how it works, because there's always people out there that think they can do it better some other way. So in the entire crypto space itself is a demonstration that this is not the direction in which

things are going, where there are a number of blockchain platforms and of sort of asset platforms that are increasing in value, that capture value in some specific niche use cases and things like that. I mean, name one thing that has been able to capture 100% of utility or use. I don't think there is one thing. Like, it doesn't exist in the real world. Wikipedia and the internet. The rules change when we are on the internet. But that's not true. I mean, Wikipedia is one place where you can get information. There are many places where you can get information. I can go to a whole bunch of other places. But when we talk about information at large, the collective information, Wikipedia has a

monopoly on that. It might have a monopoly, but it's not the only place. There are many other places where one can, I mean, YouTube, for example, as a place where I can get authoritative information, you know, one could argue that YouTube is a fine place to get authoritative information. But in terms of money, in terms of open source software, especially, that's just unheard of. And I don't think that it can go that way, also because of national and cultural interests. It's a misguided view, in my opinion. You started off by saying that we haven't seen this in the real world. You know, every government has their own currency. Well, there's no governments on the internet. And all the rules change when we talk about the internet and we talk about open source. There's one money per

jurisdiction in the legacy world. And there's only one jurisdiction on the internet, which is the internet itself. And so we have these network. network effects. There's only one Facebook. There's only one Wikipedia. There's only one internet. There's only one YouTube. There's only going to be one money system. And so there's only going to be one economy. Internet economy, excuse me. If you sort of compare things in their own categories, YouTube is not the only platform on which people download video. I can name five platforms where people download video, including blockchain platforms. And also in different countries, so like China doesn't have YouTube, for example. It has its own thing. That goes to the point that the internet is not jurisdictionless, right? Like the internet is subject to real world jurisdictions, just as I imagine blockchain systems will be as well. Yeah, so we also talk about the internet of money. Like there's network effects of the platform itself,

but then you have to also compound the network's effects of money itself too. And so liquidity begets liquidity. On the internet, data begets data. And Ethereum is the combination of data and money. And so I'm of the opinion that these two extremes extremely powerful network effects that we've seen exist in both worlds are going to be combined on Ethereum. And so it's actually going to be a compounding network effects. The incentive to just be on the same platform as everyone else is the same incentive to use the same money as everyone

else. And when you talk about like creating videos and creating content, like you go to YouTube. Like sure, there are other platforms to create and host and download videos, but like what has 90% of the traffic, if not more? You as a podcaster should understand this perfectly because podcasting is such a complex ecosystem of platforms. And like when you post something, you've got to post it at 17 different places. Same thing with social media. Like you have the community over on Telegram. You've got a community over on Twitter.

You've got another one of Facebook. Another over here. Like there's a contradiction in this that I think you should see, but you're just not seeing it. Nothing ever totally is replicated. Like all things are always different from previous examples. And so, you know, part of the division of. me and my co-host on POV crypto was to talk about historical examples

and how they can illustrate the crypto industry moving forward. I don't think we're ever going to have one perfect model that say, hey, we had this and now it's going to look like this. It's always going to be different. Podcasting is weird. I wish there was one single platform, but for all of the internet traffic,

it's kind of niche. And at the end of the day, like everyone kind of is locked in. The industry of podcast hosting is an industry of solving that problem for you because we all know it's a problem. And I would argue also that the internet is not one thing. I mean, the internet is a name that we give to a networks of networks.

So, you know, there's like this level three network and you've got other networks and like they all connect together in this mesh of networks because everyone thinks they can do it better than the other. I mean, if there was only one internet, essentially what you're saying is like all the traffic would go to one data center and like all our connections would just go there. So the internet analogy also falls apart from. me. Because Ethereum is on data center. It's a protocol. Right. You have that like the internet layered stack, right? The internet is everyone having standardized on the TCP IP layer while

allowing you to use different underlying like physical and link layers, right? You know, everyone's using the same layer one. And that means that everyone is using the same physical layer and same link layer, the better analogy to the internet would be something like Cosmos is IBC where it's like saying, okay, look, the upper layers are standardized. We have a way of allowing different blockchains

which are sort of like the physical link layers to communicate with each other using a standardized upper layer, but not requiring everyone to use the same bottom link layer. Do you see what I mean there? Yeah, does that mean that Cosmos is that bottom link layer? Is that the analogy? No, no, no.

I'm saying that, IBC is just the TCP IP. It's just a protocol. There's no physical blockchain at all. Like, it's just saying anyone can go build their own physical blockchain, which is like making your own version of Ethernet. As long as it speaks the common IBC protocol, that's all that matters. We're talking a lot about data and information transmission.

And that does tend to converge to some degree. It doesn't converge all the way, as you guys are illustrating. But we also need to layer back on the monetary. conversions. People converge to the same money. And so these two things are being combined here. And so we haven't seen that before. And so this is uncharted waters. This is a new frontier. What happens when we create the incentive to generally confine yourselves or converge upon a low number of information transmission systems? And then also there's also the incentive to converge upon everyone using the same assets. We haven't seen those two things ever be combined before ever.

and on Ethereum, they are being combined. I wouldn't want to stand on the sidelines and say, like, hey, let's see what happens when those two things combined. I want to be in the middle of that. Another question I have, like, you know, continuing with the internet comparison is I think one of the things that made the internet so powerful was it was so neutral. Do you not think a tokenless platform, something that didn't like place one asset above all others would be probably more welcoming to build upon than something like Ethereum, which does

try to, it's trying to act like a neutral protocol, but at the same time is trying to instantiate a single asset above all others. That exactly is the point I'm making when we talk about money convergence on one money. And these applications or these systems like Bitcoin Ethereum would be useless without their one native token. And so what I think you're saying is that, well, IBC doesn't doesn't have that restriction, doesn't have that requirement. From what we've seen with the explosion of defy in the last six months, 18 months, that doesn't seem to be stopping anyone. Ethereum is doing its best to be completely agnostic,

but you can't rid ether or the native currency from that restraint, because that's how these things, and that's how it's integral to the operation of the platform. With that concession, it doesn't seem to have stopped all of these defy platforms all these applications on Ethereum from being built on Ethereum. Okay, I guess we'll just have to, you know, see as it goes on. Your whole triple point asset thing, you know, that's great. I think it's like, ETH could be a great asset.

The part that I take the most, like, issue with is calling, saying that something that's a good asset is now suddenly money. Money is something that, like, people want to use as a medium of exchange and thus you want it to be somewhat stable. And problem is ether is not stable. It's, on its own, it isn't good money. It could be a great asset. Real estate is often a great asset, but it's not money. No one would ever go around and say real estate is money. There's this huge fight in the crypto space, usually between Bitcoiners and others, is that

does something need to be stable in order to be money? And I want to separate what is the medium exchange between what is the store of value. And so the medium exchange on Ethereum is mostly Dai. And die is basically stabilized ether. And so if you want to send a value between two people, you can use dye. But if you want to have value in the back to collateralize for that die, you need ether. Doesn't Maker use multi-collateral now? Guess what is overwhelmingly the collateral inside of multi-collateral dye, ether?

That's like now, right? Right, now, yeah. And like, don't get me wrong, I want my real tokens inside of Maker Dow, and I'm on a mission to get them there. But I'm not ever going to pretend that ether isn't always going to be the optimal asset inside of Maker-Dou. Dow because it's always going to be the lowest risk asset because it's always going to have the liquidity guarantees that real tokens won't really ever get to have. The thing that is money is the thing that is most saleable, is the thing that is most liquid. That's what I define is money. And so if you have this thing that is in your pocket that you can't really sell to anyone and is stable, then it's

not money, even though it's stable. And so whatever is money is the thing that is most liquid across the world, the most saleable, and it doesn't matter what the price is. It's the fact that you can get some of your value for it at a moment's notice. And that's what money is. And so it's really generating a monetary premium. Whatever's money is the thing that has monetary premium. And to whatever the degree that ether has its monetary premium inside of Ethereum, then ether is money for Ethereum. And for whatever degree that Ethereum is the economy for the world at large, then Ether is money for the world at large. It doesn't matter that it's stable or not. I think ether will become a minority of the collateral in Maker over time.

I think things like Realty are going to eventually going to become the primary collateral in Maker, in fact. I think at least a lot of the Maker team sees it that way as well. From what we did our representative episode with Ruin, I think he at least sees it that way. But in the case that what you're saying is correct, like doesn't that turn into a really scary situation? Like, imagine this. Like, okay, let's see there's a recession.

And Ether is now the, it is the money for the global economy. there's a recession. The ether price starts to go down a little bit. When the ether price goes down, that means the supply of dye now contracts, which is usually the exact opposite of what you want to do in a recession. In a recession, you want the Fed to expand the money supply to counteract the recession, but the feedback loop here seems to make the recession worse and worse. And so I feel that like using this as the basis for a monetary system is like it doesn't have all the learnings of monetary theory that we've built up over the last 150 years and it just throws them all out the window to probably make something that's more fragile than what we currently have.

I don't pretend to be an Austrian economist, but or believe necessarily in a holy Austrian world. But I think what an Austrian would say is that the Fed or the manipulation and control of the supply of dollars on the secondary market in order to balance out recessions is actually something contributing to long-term fragility and risk. And I do understand your concern of, you know, ether price dropping, therefore less die, therefore less value, therefore less liquidity, therefore more recession. That's real. I am generally of the opinion that no one really should be managing the money supply. And so if that is something that is happening organically,

then so be it. But the difference is, is that with Maker Dow, it's fully collateralized, 150% minimum. And so at the end of the day, there is always assets there. So there isn't, while there is less and less liquidity, there's never ever going to be insufficient liquidity because of the rules of over collateralization inside of trustless applications. This over collateralization is the big thing that protects, you know, a doomsday scenario from happening on Ethereum because everybody's safe because of the collateral so long as

the risk parameters are set accordingly. I mean, I just don't see it as organic. I think it's engineered. Like, as in, like, the design of maker is not an organic thing. It's an engineered thing. And I feel that we should be spending more time engineering for better monetary policy design systems. I mean, that's how I see. I think that algorithmic monetary policy is something we should be trying to move to words, not push against.

With regards to what we were talking about earlier, there is something that we said about the anti-fragility, I think, of, like, having multiple, systems competing against each other, constantly improving. And this is where I think I take the most issue with this idea that there should be one money, one monetary system, one financial system is that it lacks that energy fragility aspect that exists today in the monetary system, right? Like if the U.S. falls tomorrow, then, you know, something else can pick up and take its place. David, thank you for joining us today. It was a fascinating conversation. It got a little heated, but it's cool. I like these kind of debates on the show. We don't have these very often. Episcenter is much more of a sort of interview style. And so this was,

it was fun to sort of experiment with this more conversational style. So thanks. Oh, that's funny. Because coming out of POV Cryptopod where we only have Bitcoins and Ethereum's yelling at each other, this was actually pretty tame. So where can people find you? Tell us about your podcast. Yeah, so POV Cryptopod, me and an old college friend of mine, CK, we riff on each other. Since we went to college together, it's okay that we yell at each other all the time. People find that pretty entertaining. It's POV Cryptopod point of view. He's the Bitcoins. I'm the Ethereum. We each bring our respective guests to give our viewpoints and debate. And it's pretty fun. It's a good time. So you can follow that. P.O.V. Cryptopod is P.O.V. Cryptopod on

Twitter. If you want to follow me and my writing, I'm at Trustless State on Twitter. All of my articles are in bankless. And so you can go to Bankless slash David Hoffman, I think. I'll probably need to put that in my Twitter bio. And then you can also check out Realty at www. www.realti.com. And if you are an accredited or international citizen, you can buy some cool real estate assets on Ethereum. All right, cool. Thanks, David. Thanks, guys. This is awesome. Thank you for joining us on this week's episode. We release new episodes every week. You can find and subscribe to the show on iTunes, Spotify, YouTube, SoundCloud, or wherever you listen to podcasts. And if you have a Google Home or Alexa device, you can tell it to listen to

to the latest episode of the Epicenter podcast. Go to epicenter.tv slash subscribe for a full list of places where you can watch and listen. And while you're there, be sure to sign up for the newsletter, so you get new episodes in your inbox as they're released. If you want to interact with us, guests or other podcast listeners, you can follow us on Twitter. And please leave us a review on iTunes. It helps people find the show, and we're always happy to read them. So thanks so much, and we look forward to being back next week.