On The Brink with Castle Island - David Hoffman (Bankless) on Everything About the Merge (EP.349)

Episode Date: September 14, 2022

Bankless' David Hoffman joins Matt and Nic for a special episode to cover Ethereum's highly-anticipated Merge. In this episode:  How David came to Ethereum and the Bankless origin story The story behind the Bankless DAO Whether David would ever consider focusing on other blockchains What could cause David to abandon Ethereum The Coinbase OFAC filtering debate Why proposer-builder separation might make validator-driven censorship harder Filtering transactions at the pool layer versus undertaking a 'Treasury Activated Soft Fork' Under what conditions would social slashing of major validators make sense? How embedded is the social slashing consensus into Ethereum's social fabric? The significance of the new supply dynamics stemming from the Merge Is the unlock something to worry about? Is there a 'crowding out' effect from staked Ether becoming a risk free rate? Does MEV pose a concentration risk post Merge? Are MEV-driven yields for stakers perverse? Is MEV an inescapable feature of richly stateful blockchains Why the notion of Certified-Toxic-MEV-free blocks might emerge How is Ethereum's roadmap determined? What's the deal with the Surge, the Verge, the Purge, and the Splurge? What are the strongest narratives coming out of the Merge? Probabilities of the Merge success Why the Merge may not be fully priced in Follow David on Twitter and learn more about Bankless. Intro and outro music: Daniel Allan's Collage #344 

Hello and welcome back to On the Brink. I'm Nick Carter. Today, Matt and I sit down with the one and only David Hoffman from Bankless. David, of course, has an encyclopedic knowledge of Ethereum. We bring him on for a special episode to cover Ethereum's highly anticipated merge, which is due to occur at the time of me recording this intro tomorrow evening. The merge is, of course, one of the biggest developments in Ethereum history and with David, we dive deep into its ramifications, its risks, and Ethereum's roadmap beyond the merge. Thanks to David for joining us. Let's dive right in. David Hoffman, it's good to have you on the brink. I feel like normally you interview me. So now we're, we've mixed it up. Tables have turned. Welcome to the show. I always love being on the other side of

the microphone just because I never really get that opportunity in comparison to how often I'm doing the interviewing. So Nick, it's nice to be interviewed by you by once. Yes, thank you for appearing on our show. Thanks for, you know, giving time for the little guy for the smaller podcasts out there. Even if you guys call yourselves the little guy, you guys have, your guys' podcast has had an undue influence on our podcast. I've mentioned it a couple times on the Friday weekly roll-up that we do, but your guys' weekly roundup was the direct influence to creating the Friday bankless weekly roll-up. And so there's a lot of stuff that I borrow from your guys' book.

I can see there's a lot of ones. That's how they call us the Steely Dan of Podcasts. We're the podcaster's podcast. So we're here to ask you really tough questions about the merge. Oh, really? So prepare yourself, yes. Fantastic. Questions I haven't yet to be asked before?

I don't, maybe, I hope so. Hopefully we have some original ones in there. I think first we're going to just talk about bankless. Yeah, I guess, you know, we've heard you on your podcast so many times. I've never actually heard what got you into Ethereum and how you guys came to start bankless. Yeah. So I discovered Ethereum in 2017, as one does during a hype cycle. And, you know, I can just skip through most of those details of that's basically the same story of everyone else getting.

and in the middle of a hype cycle. But just like I was supposed to be studying for the GRE to go off to grad school, but I over time felt myself like watching Vitalik YouTube videos more and more, reading white papers more and more. And like the progression to me getting into grad school just kind of came to a screeching halt. Went to Ethereum, Denver, 2018, February 2018, and just like talk to new people, had new conversations, met people from across the world that I hadn't really,

met before like a new kind of a new kind of person that goes to a crypto conference and just immediately felt like alignment with that kind of tribe. And so after going to that conference, I was like, all right, there's no way. I don't really know what this Ethereum thing is. This whole crypto thing is new to me, but there's no way that I'm going to watch it from the sidelines because that is just like too much of an opportunity to pass up. So found my way into the industry by just writing a bunch. Didn't really know what to do. Definitely not technical, majored in psychology, didn't major anything like more adjacent to crypto. And so like, what the hell do I do to like get into the space? Like what value can I bring to the table? And really kind of felt condemned to be learning

how to like code because I was really the only obvious answer to me. But then there was this one day that I saw something happen in the markets. There was like a particularly volatile day with ether and this was right after Maker Dow had launched. And I just noticed this like on-chain activity with the MKR burn and ether volatility and kind of, you know, using my own deductive reasoning came to a conclusion as to why this was happening. You know, when Ether is volatile, MKR gets burnt. And this was in the very early days of Defi, before Defi was even a thing. So I just put my observations into a Medium article and just, like, wrote out of my own

inspiration and then sent that out into the Ether. Kind of expected, like, 50 people to read it, maybe, if I was, like, optimistic. And then it turns out, like, 500 people wrote it and read it, and Evan Van Ness included it in the Weekend of an Ethereum newsletter. And that was, like, my first dopamine hit of, like, like content production. And then ever since then, I've been like chasing that high with bankless over and over and over again, trying to just get more and more content production, dopamine hits. And, you know, if you just fast forward through all of all of that snowball, we arrive at

bankless. I met Ryan on Twitter. And so him and I were just highly aligned with how we thought and what we thought about. He started the bankless newsletter and I had grown my medium following like pretty big. And so after just like, you know, chatting with him in Twitter DMs, we were like, all right, well, I've got my medium following. You have this brand new bankless newsletter. Like, let's just merge these things because we think alike anyways. And then after we started doing that, I was like pestering him in Twitter DMs. Like, Ryan, like, you should start the bankless podcast too.

Because I had my own podcast at the time before bankless, POB crypto. Nick was a guest on that one. Was I? Yeah, yeah, with me and Christian Corolla's. Yeah. Oh, yeah, yeah. Yeah, yeah. Yeah, yeah.

Yeah. And so, meanwhile, so I had gotten good. at podcasting and I was telling Ryan, like, Ryan, you should start the bankless podcast. Like, I don't know why you haven't started the bankless podcast. And he's like, no, no, that's a terrible idea. I don't want to do that. That sounds like a lot of work. And so after like three, four months of, like me pestering him, I was like, all right,

like we will start the bankless podcast. We'll do it together. You just show up. I'll do all the editing because I know how to edit a podcast. And then we'll get that ball rolling. And then so then that got him in on that idea. And so our first episode came out February 2020. And then six months later, seven months, seven months,

in September. It had been working out great. The podcast grew pretty fast for being bootstrapped pretty early. And in September 2020, we made bankless LLC, the company. And that was that. That's incredible. And you guys have such a great community. Obviously, there's a, there's now like a bankless Dow and how is the community formed and, you know, do you have a lot of interaction with the folks in that community? How does that work? Yeah. So I kind of segment the community in a couple different ways. There's the, there's the Dow. And then there's our like bankless inner circle discord. So if you're like a paid member to bankless, you get access to this inner circle discord. And then a Dow, the Tao in the inner circle, before the Dow was a Dow, was largely the inner

circle. And during like the mania that was like DeFi summer in 2021, like our community kept on like saying, hey, like we'd like we'd like a Dow. Can we have a Dow guys? Can you guys make us a because there was so much insatiable demand from this community to help grow bankless. And we like neither Ryan or I want to be like big, massive media company CEOs. Like we kind of like the small scale, homey, like bottom up vibes of bankless. And so like, you know, we don't want to make a coin desk. We don't want to make a Bloomberg or anything like that. But also we had this community that just was like asking for ways to help.

help. And whether or not it was like, I want to help build out the LLC or I want to help grow the bankless movement, like everyone was kind of aligned under this banner of this like vision of going bankless, right? Going, going into the frontier of crypto. And that just meant a lot for a lot of the community members. And so they were pinging us saying, hey, can we like get a Dow? And so at some point we're just like, yeah, sure, we'll make you guys a Dow. So we just minted a token, figured out ways to fairly distributed across the aligned community members. And then they took that token and ran with it. And then they, you know, kind of self-organized into the Dow.

So it's actually kind of an interesting, like a typical story of how DAOs are formed. Like usually there's like a team, a startup with a centralized company. And then they slowly decentralized over time. But with the bankless Dow, it was always stated like, this guy, this is your guys' thing. Like the men and women of bankless, the community, the movement, this is your thing. You define what this thing is. Me and Ryan are going to continue doing the centralized bank list because that thing is working just fine. And there's no reason to like decentralize this thing.

So like that's your guys. So we call it like our, it's like our shadow. It's like our other half, our decentralized half. And they just do whatever they want over there. And so there's still a lot of like growth that needs to happen in the Dow. And the cool thing about it is that it's not one thing. There is no really the Dow. it's much more organized into like subunits.

So we have like bankless consulting. There's like bankless academy, which is like courses. There's the rug, which is the onion of crypto. There's the Cryptosapiens podcast. There's most like smaller units that each of them are doing their own thing. And so like the Dow's like there's like a leg forming over here. There's like an arm forming over there. There hasn't been like a brain yet or like a core like nervous system connecting these things.

but you can slowly see these appendages grow. What comes out of it? I have no idea, but it's in their hands. I think it's a really cool experiment. And it's, I mean, you guys are so culturally relevant within Ethereum. I'm curious just how you personally think about other chains that are being launched and whether or not you want to spend time looking at these things. Do you imagine that you'll be culturally relevant in other communities outside of Ethereum?

How do you think about that? Yeah, from the external perspective, like people like Hammer, on me and Ryan for being like EF Maxis, even though we don't necessarily subscribe to that maxi term. We, we understand the pain. Yeah, I'm very, very well aware. Yeah. I know that feel, bro. I know that feel.

It's like Ethereum is just the thing that makes sense to me and Ryan. And so we have a hard time like focusing on on other things for beyond just like, so we have after after the merge we have like Cosmos week coming up. Right. So we're going to do like Cosmos Monday episode, Cosmos live stream, maybe a third Cosmos episode. But any other ecosystem can't really retain our interest in the same way that Ethereum can. And Cosmos is a great example of something that actually is fundamentally aligned with Ethereum, and I don't really have any problems with that ecosystem. It's just a difference of how you get there.

One of the main differences between Cosmos and Ethereum is that Ethereum has Ether the asset as like an attention focal point. And that's kind of a big competitive advantage I say that Ethereum has over Cosmos. But other than that, the philosophical differences, between Ethereum and Cosmos are more like nuances. Then there are philosophical differences between Ethereum and something like Avalanche or Solana that, in our opinion, makes severe compromises on decentralization. And so, like, while those are, like, cool experiments, I have a hard time seeing those

things becoming, like, the epicenter or the base layer of crypto. And that also producing, like, positive net outcomes that don't instantiate a few key players as, like, permanent winners in the space. and so they're there like Ethereum tends to like just go deeper and be very very basal to crypto and that depth is something that really just keeps

me and Ryan just perpetually interested in it and so that from the external standpoint people just like oh yeah they talk about Ethereum 24-7 so therefore they're ethmaxis what would have to happen to Ethereum for you to like spend less time on it or lose faith in it? Yeah it all comes down to like

some vector of centralization, right? Like something gets captured by it. For the example that's come to mind recently is like if so many DFI apps just like bend over to some sort of those like censorship by some sort of nation state, if just like the culture of DFI is one of, censorship is okay, like that would start to, if like I seriously just can't do anything on DFI

that isn't some sort of like OFAC approved white list, then that would be a big, big bummer. If it's just a defy app layer, there's some sort of respite in that at least it's not at the protocol level, but then if we get into the protocol level and say like, oh, well, the biggest client on Ethereum prism is actually like building in like censorship resistance or it's sneaking in at that level, then like I'm going to start to look for alternatives that don't have that. And so like that's definitely one that's recently relevant that comes to mind. I think if we had something like a staking as a service provider like Coinbase or Lido,

both accrue an undue amount of stake and then also use that influence to dictate the future of Ethereum in ways that seem to be misaligned with the community. That would be a red flag for me. And I mean, the first step wouldn't be to capitulate against that and just like, oh, what's the next Ethereum that doesn't have this? It would be like, all right, how do we reverse this influence? How do we undo this control? But it all boils down to like, like instead of being eth maxi, I like to call myself a decentralization maxi in the sense that like Ethereum, if the base layer is decentralized, then you can build decentralized layers on top of it. But if some part of the Ethereum base layer becomes captured or corrupted, then it starts to imbue that corruption further upstream.

And if I see that happening that and I don't see a path forward to fixing that, that's when I will like slowly look elsewhere outside of Ethereum. That'll be interesting to see. I mean, how likely do you think it is that Coinbase would apply at least filtering towards block selection in the future here? Yeah, it depends on what time frame that we talk about because in regards to like the actual development of the Ethereum protocol, if Coinbase starts to do that post PBS, post-Proposer builder separation, it actually gets really hard for Coinbase to do that. And Proposer builder separation is a hard fork that will come in 18, 24 months. So I could see there's larger windows for Ethereum censorship in the near term than there are in the long term. So it's a little bit like a race of like, all right, which centralized entity is going to bend the knee to the nation state?

And is that going to happen faster than the Ethereum protocol can build in perfect censorship resistance at the protocol level? And so like the opportunity for some centralized entity to engage in censorship deep into the stack closes over time. and because we build in some cool cryptographic mechanisms to ensure centristive resistance at the protocol level. And so, yeah, it's really a function of just like how quickly is the nation state going to, you know, come into this industry and try to tinker with it is, I think, the bigger question. So this has been like the key piece of discourse on Twitter, I guess, in the last few weeks. And, you know, I think probably helpful to clarify the terms, the debate, because on the one hand, there's the notion of just like filtering transactions for OFAC at either the mining pool layer or the staking

provider you know so like we know that's happening actually on ether mine for instance and then sort of maybe likely to happen let's say if coinbase you know post merge of coinbase is staking for instance and then there's like the more deeper like you know more fundamental and potentially damaging approach which would be refusing to, you know, attest to blocks that had, you know, like the bad transactions in them. And I guess there's maybe other permutations, too. What of those do you think is sort of likely if, if either. The former doesn't seem unrecoverable. It seems like you can, that's sort of like not the end of the world. But yeah, what do you kind of expect to happen there? You guys had Matt Cutler on the podcast a while ago, which was a fantastic episode. I really like that

one and what block native is doing is and also what PBS is proposed or builder separation and all proposers is basically e-stakers they propose blocks builders build the blocks for the proposers to propose and what block native is doing is really just like making all of this transaction data for builders really transparent and open source and just accessible and so their narrative is that like if you're an eastaker or like anywhere infrastructure anywhere in like the supply chain of a block being built. You can actually kind of like pick and choose your flavor. Like would you like a block that has no toxic MEV in it? It's like this, the metaphor they use is like grass-fed, free range organic blocks that are like good for the earth, right? And the metaphor here is that like there's no

toxic MEV, there's no front running, there's no whatever. And like you can choose these blocks that are like, that don't really have any like anything nefarious built in them with like arbitrage and defy arbitrage and stuff like that. Or you can be like I'll take the evil block. I'll take the block that like has the maximum profit and like did all the front running possible. And so, or like you could also take like, well, I'll also take the OFAC compliant block and I'll propose that. And so like built into this native, this fact that this chain has this defy infrastructure comes with the possibility of like, I'll pick and choose what transactions I want to control. And so it's very different for than Bitcoin and proof of work where like, why would you pick and choose any

transaction one from the other because they're not really all that differentiated from each other. They're all kind of these like stupid simple transactions that are just like I send bitcoins here and so like why would you filter that? As soon as we get into defy you can start to like be opinionated on what transactions you want to include as a staker and so like I'll take the free range block or I'll take the OFAC compliant block or I'll take the malicious block or whatever you want and so like as a staker you actually do get to impose your political beliefs on that particular block into Ethereum, but the idea here is that, like, you don't get to propose your political beliefs on a systemic level beyond that one block.

Like, if you have 32-Eath, you have 32-Eath of say, but you don't have a say on what happens next in the next block. And so this is where, like, I think where you get into the conversation of just, like, if there is an O-FAC-compliant block embedded into the chain, will people build on that chain? And that is where actual social slashing will come into play. that like if you are if you are disregarding blocks that other people are accepting, then we actually get into something like a contentious zone of Ethereum. And this is where like my like I would be able to articulate this if I had like just come out of a podcast with Justin Drake.

But these are like the technical details of like how we actually choose when is a what's a user activated soft fork, what's going to be a hard fork, who are you going to penalize? those details I would defer to like Justin Drake on and on a podcast that we recently just did on bankless Yeah, so okay, so that's kind of the distinction is like within your sphere direct sphere of influence as a staker if you're engaging in filtering that's sort of like permissible like I can't force you as a staker to like include or exclude any kind of transaction. That's your remit. But then if you are imposing a treasury activated soft fork that's what I call it. where you are some large consortium of stakers as saying we refuse to build on blocks that have the bad transactions in them, even though I think that's extremely far-fetched personally. Because like, is the treasure even sophisticated enough to like, A, figure this out?

I don't know. Maybe they are. You know, who knows? Let's assume they are. but B, is that even like a valid thing you can request of like an industry? It's like, no, you have to specifically build the blocks that are, that's like quasi-nationalization. And you're saying is in that circumstance, which I actually consider very unlikely, then you explore user-activated soft forks, slashing, et cetera. Yeah, it's hard to say what we would do in that scenario because it really depends on the facts and circumstances, like who's doing what and by how much and by whose direction. But yes, if, like, there is systemic coordinated censorship by large industry players to be

compliant with OFAC, then we go into, like, what Justin Drake calls, we censor the censors. And so we just censor their censorship. And that's basically what a community-activated soft fork looks like in Ethereum. And just to touch on how far-fetched it is for that to happen, like, in order for that to happen, we would need, like, large industry players, like, Lido, Coinbase, and Crackin, to all coordinate on not only that we're going to be OFAC compliant, but what actual OFAC compliance actually looks like, like, okay, like, is this transaction OFFAC compliant, or is that transaction OFAC compliant? Like, is that one okay or is that one not okay?

And what are the rules for what that means to be okay, and who's setting these rules? And so if we're going to be OFAC compliant, it needs to not be up for interpretation. It needs to be objective. And the only way for that to become objective is if OFAC is actually writing an Ethereum client that says what's objective from the Ethereum protocol perspective. And so that means that if OFAC wants Ethereum to be OFAC compliant, OFAC needs to write an Ethereum client, and they deem that this Ethereum client is OFAC compliant. There's no way that OFAC has a technical capacity to write an Ethereum client.

Like that is just not going to happen. and then they have to convince people to run that client. And the only people that technically capable of writing Ethereum client are like the Ethereum devs. And the Ethereum devs are all people who are like, I would rather, I'd rather F off. I'd rather not do that. Yeah, it seems pretty far-fetched. On the slashing question, what I want to know is how embedded would you say this is into like Ethereum's constitutional values to the extent there's a constitution? It kind of like the British Constitution, like there's like a bunch of scattered documents.

here and there. There's no like one constitution. I mean, same for Bitcoin, frankly. How fundamental is that in the like Ethereum political fabric we would perpetrate a UASF or slash the large service providers? How committed is the Ethereum community to that? Oh, I think it's a core pillar of the Ethereum ethos. And one of the reasons why I think we've been having this big conversation on crypto Twitter and around is that a lot of people have come into the Ethereum crypto community in the last two years. And I mean, we all know what it was like to get into crypto in our first year of our life. Like we were learning here about everything. And we really just never had the conversation of censorship during the bull market.

And so this is a lot of people's first time having that conversation about censorship. And so there's a lot of people who like, you know, started. wearing the Ethereum flag just because of, you know, some base level principles of decentralization, being able to run your own nodes, take your own ether, et cetera. But we never really had that censorship conversation. So this is a first for a lot of people learning about actually like what are the long-term implications of allowing censorship and like kind of playing, playing that thought experiment out and going down that rabbit hole. But if you've been in Ethereum for more than a cycle, you've already come to this conclusion that there shall be no censorship because if you don't

have censorship resistance, then you don't have anything. So I think it's the newer community members are learning this for the first time, learning these lessons, and I'm participating in these debates. And I think a lot of the older community members are really, like, hopefully helping these newer community members understand, like, why censorship is so important. But the further back you go and, like, the deeper down, I give every single, like, crypto community, crypto L1, like a concentric circle models of communities. Like you have, like, the core, like, zealots at the very at the very center, right? The open source protocol dev maxis who don't care about price and just care about open source.

Then you have the people around them. Then you have the grifters around them. The deeper you go into that concentric circle, like the more you care about censorship resistance and the more you realize how fundamental it is to Ethereum. So to answer your question, Nick, like there, it is an equivalent pillar as the biggest the pillars in the Ethereum ethos. Who's going to write the latter-day Ethereum constitution? so we all know it's in it.

I think that's one of those things that's better left rough. Ethereum is definitely a rough consensus ecosystem for sure. Could use one for Bitcoin, too. I mean, there's a bunch of things that we'd like to see installed in Bitcoin over the years as well. Could you imagine the Bitcoin conversation around that? Pretty hostile, I think. Who appointed you, yeah, the founding father of Bitcoin. Yeah.

Right. How dare you? you. Switching gears a little bit just to the merge itself. I mean, this is obviously going to be a pretty powerful narrative from a few different perspectives. One is just if you think about the capital that is seeking to deploy into a store of value asset, I think that case gets a lot more interesting for certain categories of

by side participants. If you look at just the supply characteristics of the asset post-merge. So maybe talk a little bit about that in terms of what type of impact that you think see just from a capital allocator's point of view and how people should be thinking about the supply characteristics. Yeah. So the analogy that I love that really helps people understand this is that, Nick, you might actually be able to help me out on this one. Proof of work minors over time, like I think as a theoretical conversation, like proof of work minors ultimately approach 100% selling of their rewards. Like that's on a theoretical basis. I think in practice,

it's definitely like larger than 90, but like we can call it 90 to 90 to 95% in practice of proof of work issuance gets sold to pay for electricity costs. And the reason that that theoretically approaches 100 is because like as you play like proof of work out, like the margin slim. And so you always have to reinvest your capital. And so like in dollar terms, you can be up only. But in like native asset terms, you have to ultimately approach 100% of selling. And that's just the fundamental like property of how proof of work works. And so when, like, mining rewards right now on Ethereum are 13,000 ether a day. And so if you multiply that by our current price at 1,500, that's $20 million a day of cell pressure,

if we're accounting for a long term 100% selling pressure. $20 million a day of selling is like the equilibrium that we have discovered ourselves to be at 1,500 eth. I mean, this equilibrium has been this way since Genesis. Same thing with Bitcoin, since Genesis. And I mean, so like the dollar value of sell pressure has changed because like, you know, these asset prices change. But the, but the proportional value is the same because ultimately 100% always gets sold to pay for mining costs. And so like right now that's $20 million a day. And these are the flows that the ETH price has had to like resist in order to maintain a flat price.

So $20 million a day of sell pressure and Ethereum has found a price of $1,500. And so, you know, we can go back to the bull market and say, like, all right, well, let's, let's multiply everything by three when ether price was $4,500. Well, it found that price under $60 million a day of, like, daily cell pressure. And if you multiply that by, if you multiply the $20 million a day or where we find ourselves today at $1,500, ETH, that's $6.5 billion of yearly cell pressure that ether has to, like, swim upstream against in order to just stay flat in price. Off the top of your guys' head, you guys know how much money Michael Saylor has purchased Bitcoin with? Not how much his Bitcoin currently is worth, but how much like fiat dollars Michael Saylor has purchased Bitcoin. Like, I don't know, 1.5, if I had to guess. The answer is according to Bitcoin Treasuries.com or net or something, $4 billion.

Wow. Four billion. Which is a big number, right? And so when we go from the Ethereum merge where there are 13,000. thousand ether of mining issuance happening every single day and then we go down to 1600 ether that is a removal of about 7.1 billion dollars of annual cell pressure and so like you know on a relative basis that's like as if a 7.1 billion dollar buyer came in every single year now until the end of time and so like all the bickorneers are like Michael sailor Michael

Taylor he's like the biggest bowl ever he only bought four billion dollars worth of Bitcoin only. And he's kind of out of cash, right? Like, his latest buys are now in, like, the tens to 20s of millions of dollars. So, like, I mean, not out of cash, but out of cash and on relative basis of $4 billion. And so once the supply reduction of the merge happens, where we just kill all mining issuance and we go from 13,000 ether a day to 1,600 ether a day, that's like almost two Michael sailors per year on a regenerative basis now into the 4.000. into the future. And just one more point to drive this home. Bull markets end because of proof of work, because of the miners. Because as the ether price or Bitcoin price goes up, the mining rewards

proportionally also go up. And so as the price of an asset, of a proof of work asset goes up, the selling pressure, like think of like these miners as like the firemen with like a suit, like their hose, right? As the price goes up, the hose goes faster. And so the hose into the sell market is more powerful proportional to the price. And so the reason why bull markets end is because as new buyers come into the market, then crypto gains favor with the mainstream audience and like, oh, Bitcoin, it's cool again, ether, it's cool again. And like we have new buyers and like new people to buy our bags.

Eventually, because those new buyers also increase the flows of cell pressure from miners proportionally, the miners can always sell more faster. and more than new entrance can come into the market on the long-term basis. So, like, in the short-term basis, more people come into the market and faster than, like, the minor cell pressure flow. But eventually, the minor cell pressure flow catches up because we don't have that much utility. Like, we've exhausted this particular bull market, and the miners win again because their flows are literally never ending. And so bull markets always end because the miners are selling into the top over and over and over again, and we just exhaust our newcomers.

And so then we go into the bear market and then eventually flips and then we've resumed the bull market. But this is why the merge is such a big deal is because once and for all, at least with the Ethereum side of things, we end that dynamic where this this $7 billion of day headwind from Ethereum from Ether, which it's created in equilibrium against for the last seven years of his life goes to zero. And all of a sudden, like Ether, which has developed these muscles to fight against this $10 billion a year cell pressure can actually like progress forward.

word. And so, like, Hal Press from, he's this guy that's like bet his fund on the merge. He calls this trade, like, ether is trades lighter after this. And it's like somebody takes 90% of the gravity off of ether. They just turn the gravity off. And so any amount of buy pressure can, like, show up easier on the eth price because it actually means more, because we don't have like these minor headwind flow. So that's how I describe the significance of like the ether economics on this. Yeah, I think that's well explained. I guess there's a couple things that, from a, if you're putting yourself in the position of a buy side allocator that might want X percent of their portfolio allocated to cryptocurrencies and favors a sound money type of asset, you can see how this could be a powerful narrative. I guess how would you think about it in relation to the usability of the network?

And that might be a good dovetail into 1559. And just how does the community think about the price of the asset in relation to just how easy is it to use the network and build things on it? Yeah, so as a user, as a transactor, nothing changes. I shouldn't even bring this up, but the very small thing that changes is that block times go from 13.6 seconds to 12 seconds. And so, like, maybe block times are a little bit faster, but like such an inconsequential amount that I shouldn't even bring it up. So, like, the whole thing has been designed so that it's uninterrupted. Ethereum is uninterrupted. One of the big reasons why the merge has taken so long is because of the Ethereum ethos of, like, we don't have downtime.

Ethereum doesn't go down. If we wanted to just take down the Ethereum blockchain, put it on pause, take apart the proof of work engine, put in the proof of stake engine, and then take off the plane again, we would have done the merge years ago. But because of the ethos of the Ethereum blockchain

doesn't go off, we've had to swap out these engines in mid-flight, and that's the reason why it's so complicated and it's taken so long. And so that uninterrupted uptime of Ethereum, that value has made it more complicated and why it's taken so long, but it's also why the users aren't going to notice a thing.

Like if you have your iPhone set to like update while you're asleep, it's a little bit like that. You just wake up one day and like Ethereum will be merged. And from the user standpoint, the transactor standpoint, nothing will be different. For the users who are also stakers, that will start to be a little bit different in that you'll actually get higher yields because you'll start to be collecting the transaction fees

will go to proof of stakers. And then later, withdrawals will be unlocked 12 months-ish later. And so, like, as a user staker, you'll be able to go, like, in and out of the validator queue freely, which is not something that will be happening right after the merge. But from the general user, defy your, NFT, or perspective, no change. And I guess you mentioned the unlocks. So that's another factor, obviously, just in terms of supply, that potentially would have a disfavorable impact there at some point downline. Yeah, I think that's overstated.

the early stakers staked in the beacon chain launched the current proof of stake chain that's being merged the thing that's being merged launched in December of 2020 and ether was 400 to 700 in that month it was on its way up to like in January I think it broke a thousand and so like yeah there's this worry that like all of these stakers will be unlocked and it'll be like a rush to the exit because of all this capital appreciation but like let's take a moment and like think about who is the person that staked their ether in the first month of the beacon chain with an unknown lockup time, which is still unknown to this day, because they wanted that like 7% yield on their ether, and they also want to just be on the beacon chain. Like these guys, the people who are doing this don't really

strike me as these people that are itching to take their profits, because ether, because ether price has gone up anywhere between at most five to at least two times that current price. Like, these aren't like private market 10 to 100 to 1,000 X gains. These are, in crypto terms, like a modest 2 to 5x for the earliest stakers. And those people, it's not like they staked 100% of their ether. These are probably like honestly Ethereum pre-sale investors who have been diamond-handing this since 25 cents. And so the difference between maybe the lowest price that they got in at $400 is

taking to where it is now at $1,500 is probably not that crazy. They probably didn't stake with all of their stack anyways. And so if they wanted to like find liquidity, they would have sold their non-stake stack that they put in. And also, if you're a person who is itching to dump your ether after because of the unlocks, you probably staked with Lido not directly solo staked into the merge. And Liso launched the same month as the beacon chain. And so if you're somebody who's not ready to take that full lockup period and you're itching to sell,

you probably didn't solo stake and get your ether locked up. You probably staked with Lido. And so I really think this supply overhang from the lock. period is really overstated. So on that front, actually, comparing stakers with minors, I guess like a key assumption you're relying on is that basically stakers wouldn't behave similarly to minors. They wouldn't necessarily be, you know, selling off their stake, their like yields or their returns.

I guess if like a carry trade emerges where like you borrow dollars, you buy eith, you stake to earn the interest rate. and because the eth interest rate is, say, you know, higher than the rate at which you can borrow dollars, and then you receive your returns, and then you sell your eth. Like that kind of industrial, like high finance approach to staking, like you can imagine that might be a source of sell pressure, right? So I guess the question is, like, what do you expect the makeup of these stakers to be post-merge? and do you expect them to be the kinds of entities that just recycle the ETH that they're earning back into their holdings,

or are they more mercenary types where they're just liquidating the yields and maybe going back into Fiat? Yeah, I think the answer to this is it goes back to this comparison to proof of work where, like, proof of work minors, no matter how much they believe in Bitcoin and are Bitcoin holders for the rest of their life, the structure of mining forces them to be mercenary because they have to sell to pay for costs and they have to protect their businesses and their business is inherently like an energy denominated business because they need to pay their costs

and so they're inherently aligned with actually selling the asset. In proof of stake, the thing is completely inverted where you are actually in a competition to be more bullish than your fellow stakers, the more total, ether becomes staked, the yield comes down on Ethereum, the net yield comes down. And so because there are no overhead costs to staking, like your overhead costs are you have your laptop. If you have a MacBook Pro, that's more than sufficient to run like a thousand validators

on. So that's 3,200Eth, which is a lot, obviously. Your other operational costs are your internet. So you got to pay for monthly internet payments. And then you have like whatever costs it charge it takes to like plug in your home computer. Like operational costs are basically zero, things that people already pay for. And so you don't have to sell any of your stake. And so what really happens, instead of miners becoming in a race to sell their proof of work rewards, stakers are in a race on like who's more bullish and who is willing to take a lower yield. So like right now, the ether on the beacon chain staking rate is like 4.1%. It's going to jump up post-merge to something 5% to 6% once we also get transaction fees. But as, as a

more stake comes in, that stake has that those rewards get spread out amongst a wider sea of participants and those yields start to come down. And so people will start to play chicken with each other as like, all right, who's going to accept the lower yield? Like 3.5% yield, are you going to unstake because of the yields too low? Well, I'm staking all the way down to 3% because I'm so bullish that I'm going to take a 3% yield. And then maybe it goes down to 2.5% and the yield's so low, but it doesn't matter because people are so fundamentally long on ether, that they'll take the lower and lower yields and not on stake. And the only reason, the only way to win in that game is if you never sell, and so you only keep your

stake compounding, because compound interest, right? And so the equilibrium, the game theoretic equilibrium is that stakers don't sell. And so not only is like the operational overhead of electricity costs eliminated, but like the incentives, the natural incentives of proof of proof of stake is that the more bullish you are, the more you're rewarded. And the way that you express that bullishness is that you don't sell the asset. Are you familiar with the issue government debt, like crowding out private sector debt? Like if government yields like rise dramatically, it like reduces the incentive for people to lend in like the private sector. So yeah, I mean, it's a pretty self-explanatory concept, basically. If like interest rates rise and you can lend to the

government, which has presumably a very low default risk, why would you lend to a corporation at a similar rate? So I kind of envision a similar thing happening in Ethereum. Like this isn't necessarily like a bad thing. I'm just curious to hear your take on it. Like if Ethereum itself is like paying five or six percent just for the, you know, by for the, you know, in exchange for you sort of lending the coins to the protocol, right? Um, would this not have. have like a crowding out effect on sort of like private sector lending, aka like defy lending. Um, is that something, do you expect it to like cannibalize yields elsewhere if Ethereum is paying a high rate?

Yes. Yeah. There's there's always going to be this big tug of war between ether and defy and ether in the proof of sake protocol. Uh, and like proof of sake being like this like risk free rate in the sense that there's no counterparty. Um, always there's true, it will always be like smart contract rates, protocol risk, whatever. But there's no counterparty, so we'll go with a risk-free rate. And so, like, defy has to compete with that. And so I always expect defy yields to be higher than protocol yields because they have to compete with that risk, right?

So you have to take on the risk, the extra risk of, like, more smart contract risk in defy. Where does the total equilibrium of ether end up? I think probably my gut take is, like, somewhere between a two-to-one to one-to-one equivalent ether in the protocol more heavily weighted towards the protocol than in defy but there's all they're like as this equilibrium you know balances out you know defy yields defy apps have their own like cards up their sleeve to incentivize ether deposits to be it like i don't know yield farming with governance tokens regardless of like how sustainable that is but like you know each defy app like uniswap the more

people that take their ether out of the us dc to ether pair in uniswap to go stake in the protocol, the higher the fees proportionally are to the people that remain. And that will be true for every single lending protocol and compound. So a new equilibrium will emerge where, like, yeah, and the protocol is going to take, it's going to be hard to compete with the Ethereum protocol in the sense that like it's kind of hard to compete when the Federal Reserve increases interest rates, right? And so the same kind of dynamic will play out. But eventually a new equilibrium will balance out.

I do expect there to be more ether in staking than in DFI. but I don't know, defy can get pretty big and they can also compete against the Ethereum protocols and like sheer numbers of defy apps that have like whatever Ponzi scheme

that they want to cook up with to pull back some ether from the protocol. Yeah, the way I think about that is just kind of a risk-free rate for a certain category of market participant that's going to be the risk-free rate and then going out the risk curve in defy or even just from a product innovation standpoint

you could imagine real-world assets in defy becoming more attractive from a participation standpoint for certain categories of market participants. So I wanted to ask you about MEV. So I've heard some takes that, so like kind of interesting takes that because of like MEV is such a specialized activity that, you know, block production is going to be the purview of like a, you know, a small handful of like highly specialized firms.

And, you know, effectively, you know, I don't know all the jobs. jargon here, but basically like it's perceived to be a potential centralization threat in terms of like who's actually arranging the blocks. What do you what do you make of this? I know like there's been some interesting stuff with flash bots like open sourcing their code and things like that. What do you sort of make of the risk here? Yeah. So this is where we go back to proposed or builder separation. There's this very specific like I call the watershed think of like a funnel of like an Ethereum transaction in like the blockchain supply chain process. So, yeah, it starts with, like, the user. They make a transaction in their metamask. It goes out into the sea of the mempool transactions, billions of little raindrops falling

down on Ethereum. Then it starts with MEV searchers, which are, like, highly optimized MEV bots. So they'll be like an AMM arbitrage searcher. So they'll scour uniswap, suci swap, balancer, like all the AMMs. And then they'll get out all, like, the microarbitrage between all these, like, distalienable. located pools across all of AMMs. And there will be MEV bots that are highly optimized for that. So if you make an Ethereum transaction that is to uniswap, an MEV searcher bot might

scoop that up, integrate that into a bundle, and they'll bundle all these transactions together to include your transaction, extract some sort of arbitrage, and bundle that up, and then send that over to a block builder. And then, you know, you can apply this to any type of like arbitrage opportunity across defy. There's like liquidator bots for things like compound, AVE, and Euler finance. like any sort of like money market, there'll be liquidator bots that are highly optimized, like any sort of MEV category will have its associated searcher bot to bundle up a bunch of

transactions, pass them along to the block builders. Block builders take all of these bundles from the MEV searchers and bundle them all together into a full block. So they fill up a block. So they take a bunch of bundles, fill up a block, take all the rest of the transactions in the mempool for whatever space is left, put the transactions into a block, and then pass that along to a block proposer. Now, every step of the process, MEV searchers, add a bid, just like how your transaction free

comes with a bid, your transaction fee bid goes to a searcher, the searcher fund bundles up all the bids, and then they submit their bid to a block builder. Builder bundles up all of the searcher bundles and collects all of their bids because they're being paid to the builders, and then the builder makes a bid to the proposer, and the proposer is an ETH staker who is ultimately going to propose that block. The concern here is that builders are going to compete on a number of different vectors. So one of these vectors is internet bandwidth, and so we're starting to like really emulate like the flash boys, right? Like high fiber optics cables going straight into the NASDAQ or whatever exchange that was.

And like they would like measure out to the millimeter who's got like the shorter fiber optics cable. So like now the same kind of vector. Like if you are a block builder and you have just better internet latency and you can just like have better vision over the mempool, you're going to be able to outcompete other block builders. If you have just a faster computer that can simulate all the transactions to find which which kind of permutation of MEV searchers will give you the most rewards. Like they're going to compete on that. They're also going to compete on deal order flow. And so if you can, if you as a block builder can sign a deal with Metamask saying, hey, Metamask only send me your transactions.

It's going to be extremely competitive. And so like the concern here is that we're going to like consolidate down onto just like at worst one. major block builder and this person will have the ability to have a lot of influence as to like what makes its way into a block so that that's the concern here yeah you said that a lot more eloquently than me well i took a lot more time to get there and so there's two may way there's probably more than this but there's two ways that that i can articulate right now to the way that we fix this first off the builder can never aggregate too much um ether or too much stake because because in the same way that like all of these,

the margins of an MEV searcher bot gets super compressed because that, that is super competitive. There's so many MEV searcher bots out there that the margins just go to zero because they're competing in such a high-paced environment. Like this battle happens every 12 seconds. They're super fast.

And that same compression happens in the block builders phase where all the block builders are competing with other block builders and they need to submit a bid to the block proposers and the block proposers are just gonna take the high builders. highest bid associated with them. So if you're a really, really good block builder, say you make a block that you can extract three eth of rewards out of. And so you make a 2.5-eath bid to the proposers so you can park at that half an eth arbitrage. Well, if you're somebody who can only build a

two-eath block out of reward, so you've gotten out-competed by 50%, like some other block builder beat you by 50%, huge margins. But you only ask for, a 1.4-eath reward, or no, you make a 1.4-Eth bid, you're actually bidding 0.1-Eth, 0.6-Ease versus 0.5Eath to the block proposer. And so they're just going to see, like, well, this person's offering me 0.6, the person's offering me 0.5, and so I'll take the 0.6 reward block. And so these margins also compress at the block builder level. And so ultimately, this gets paid to the most decentralized part of this whole stack, which is the E stakers.

And so the whole, like, not very few people can write an MEV searcher bot that wins. Very, even fewer people can write a block proposer algorithm that makes really, or a block builder algorithm that makes a really good block. But a ton of people can stake their ETH inside of Rocket Pool or on their own solo node or with a future technology called like DVT from OBLE. They can buddy up with a group of four and then everyone can add eight ETH, something like this. that this part of that supply chain is the most decentralized and most accessible part of the stack and it's also the most profitable because all of the the mechanism design here funnels all of those

eth rewards to the eith staker and so so that's one way that this gets mitigated but so actually on the same MEV front um like there's a lot of mixed opinions on it I find it little perverse that like part of the yield from you know being your eith staker is coming from users being abused at the transactional level. I mean, maybe I'm putting that a little pejoratively. But like from my perspective, MEP researchers have no allegiance to ETH transactors, right? So there's sort of no limit to like the extraction that they'll perform. So I don't know, like some people say it's an in an escapable feature of blockchains, and it's just inherent to any richly stateful blockchain.

Other people like, no, this is like really perverse. We have to get rid of it. And now there's like maybe a new faction which is like, well, it's great. because I is a staker, I'm like profiting from it. What's your view on it's sort of been institutionalized into Ethereum, but should it be de-institutionalized? Should we be working on protocols to improve privacy at the transactional level so that we can actually do away with it? Is there now an incentive not try and pursue that because it's sort of profitable for

stakers? Like what's the current thinking there? Yeah. My attitude on it is that with this supply chain of transaction, ordering that I just described. Yes, the problem is still extremely present, extremely pernicious, and it goes from anywhere between

just like innocent and highly beneficial arbitrage to actual like straight up theft. Like that's the full scope of MEV. On one side, it's just like making Defi super efficient. On the other side, it's like stealing from users. When the convergence of all of that value ends up in the hands of Eastakers,

like I take a breath of relief in that at least it's that that toxicity isn't being injected into Ethereum at the protocol level. So the system itself is safe from long-term corruption, long-term centralization by MEV. So that's like the huge battle, huge breath of relief is like, yes, we still have this like toxic MEV problem, but at least it's contained and not escaping and not like corrupting the entire protocol. So like that's, that's because the bulk of the rewards from the existence of MEV are just getting

recycled back to regular old ETH stakers, what you're saying? Exactly. Yes. Yeah, that's exactly right. So, like, at least that part of the problem. Like, the minimum viable solution is here. Like, and that's like what I would call the minimum viable solution. Um, there's another phase in that transaction blockchain supply chain where, um,

wallets, uh, because they're giving your like order flow potentially to like a block producer, actually pay you money to transact with them. And so if you're a user who's getting fleece because of MEV, you might also get a kickback. in some denomination. And so like maybe we start to mitigate the problem there. But also ultimately at the end of the day, like a core pattern I see in Ethereum is that like, there's always user choice.

And so you as a transactor, you can actually route your transaction to a particular entity in this post-merge, Proposer builder separation world. And so like you can route your transaction to a, somebody who you trust to have responsible, like, order flow with your transactions. And so maybe there's this trusted party and they're like spin up this business and their business is like, we don't fleece you. And you trust us with your transactions.

And I think you do kind of have to trust that. It's going to be a black box. But I think there's also like in the same way that some block proposers are going to compete on a vector of we make the most profitable blocks. And we do that by fleecing customers. On the other side of things, there's going to be another vector of just like, we make the most honest blocks. you're going to give us all of your deal flow because we're not going to fleece you. And I find that extremely compelling as a user. Yeah, I mean, it's very analogous to like brokerage,

sort of specific brokerages being like we won't, whatever, like submit your orders to sit at all. Right. I'm actually, like I do see that. Like, I'm sure exchanges will incorporate that as part of their value prop. You know, we will process your defy transactions for you. through our wallet and commit to not extracting M.AV. Like, that sounds very plausible to me.

And you, we all see those, like, certified organic stamps, like, regardless of whether those are actually real or not. But you could imagine some sort of, like, certified toxic MavV-free blocks. In the same way, we were talking about, like, OFAC compliant blocks, maybe we have some sort of, like, rating service of, like, this block is, like, toxic M-A-V-free, and we can all be happy about it. It's interesting to me, though, that like the everyday user probably will never even know what MEV is. If you think about this inequity world, you know, Fidelity used to run these ads around how they don't sell order flow.

And it just struck me always that, you know, the average person just didn't really care. They just wanted the convenience. And, you know, it was perceived as a big competitive advantage. And I think it was a great thing to do to not sell the odor flow. But it's just still unclear that people even know about it. Yeah. The long-term equilibrium of this is going to be really interesting because you can totally see like a wallet that there's all there's already these like websites that compare defy yields. So you can go and go to your defy yields.

I can totally see a world where there's a website that compares all the wallets and say which wallets give you the most kickback. And like the sad thing is is that the wallet that gives you the most kickback is also going to be the same wallet that fleets you the most. And so like that's where they get all the money to pay you for. And so like there's going to be just a whole ecosystem around like fair. MEV extraction, like wallet, user relationships, all of the kind of stuff. Yeah. I mean, just wait until the guys in Chicago start trading this stuff. It's going to be crazy. Like a relative outsider to Ethereum, you know, even though I'm not in the Bitcoin hard, hardliner camper anymore, I'm not like necessarily an Ethereum insider for that matter either.

I feel like there's like a revision to the roadmap every six months. I don't know. That's just my subjective view. I don't know if it's like it's good or bad. But so like the newest thing that I've seen is like all these words that rhyme with merge, which is pretty amusing. So so apparently there's now the surge, the verge, the purge, and the splurge. Matt, have you come across this? I have. So I think I know what like one of those is. But like I guess my question is, is this actually an official new like roadmap item or is this just like a suggestion from Vitalik?

and like how serious is this and also you know yeah basically how serious should be taking these like these kind of statements about the roadmap yeah yeah you started this question off like the Ethereum roadmap gets revised or there's a revision every now and then that implies that there was actually an ever an official roadmap to begin with which there never there never was and there never really is and there never probably will be and and that's just like the rough nature of Ethereum, like, there's rough consensus. If no one's pissed off, that's what consensus looks like, et cetera, et cetera. And so there's been kind of the general vibe. Like, this short-term roadmap of what goes into the next hard fork is pretty like canon. But after that, it's like all

super rough. Like, it's this thing that's being woven together. And so Vitalik, this is not an official roadmap, but this is philosophically accurate to the, Ethereum vision and then what the other core devs are also an agreement with talking about like all these urges things So the the merge the surge the verge the purge the splurge these actually mean things So the merge we know this like this is when the proof-of-sake beacon chain merges with the Ethereum chain So that's that phase the surge is relevant to transaction throughput and so this is like EIP 4844 so we're surging in transaction capacity data shards etc the verge is statelessness which is really stretching my capacity to understand but I think that's just like that's like the data layer and like node operators and being able to run more Ethereum like clients and nodes like this which definitely help with just like making the data of Ethereum more modular and accessible then you have the purge which is basically like technical debt removing technical debt and just making Ethereum actually actually

more simple rather than more complex, like taking features out rather than putting features in. And then we have the splurge, which is like extra credit, things that Vitalik and others don't really think are completely necessary. But if we did get them into Ethereum, it'd be nice to have. And so this is Vitalik, I actually was on like a Zoom call with him while he was like tinkering with this like illustration. And so like, yeah, it's like, it's actually is pretty emblematic of like kind of the Ethereum culture. Like these are all highly technical. Like the surge. has like short-term call data expansion. The verge has code chunking gas cost updates

and verical tree core introductions. Like these are all super technical stuff that I don't even understand. Meanwhile, we've named it merge, surge, verge, purge, splurge. It's actually perfectly emblematic of like ETH culture of being like, our devs are super technical, but they don't take themselves too seriously.

And so is this an official roadmap? A lot of people are citing this and like using it. And so like on the social layer, it's the biggest piece of canon that we have. But if the developers in their biweekly core dev call say like, hey, I think it's actually better if we go in this direction now, like that will become what canon is. So I think the only thing that's really canon is the biweekly Ethereum core devs call that happens every two weeks.

So like what is canon and Ethereum really progresses two weeks at a time? Yeah, I mean, I respect the commitment to the wordplay, first and foremost. powerful from a narrative perspective too right i think it's it's smart from a lot of different perspectives you know this is a podcast about the merge and uh i think we're going to release it two days prior to the merge itself i think that's the current plan the merge contains a lot of different pieces and like a lot of different um narrative uh like like positives i guess so there's like the fact that there's no more proof of work that's an obvious one There's the quote unquote triple happening, you know, certainly the monetary tightening, I guess you could say.

There are changes to the protocol design. There's the fact that ETH, the asset now contains a real sort of yield component. There's sort of a lot going on there. What is the most overrated of those and what's the most underrated of the changes in your opinion? Yeah, let's see. How to rate these things? because they're all so good, Nick. They're all so good.

I think one thing that you didn't mention that I think is definitely underrated by certain camps is a reduction in execution risk. And just Ethereum as a system and a community gets to say that, like, yeah, we actually delivered proof of stake. Sorry, it was seven years late. But we did it and it worked. Hopefully, you know, knock on wood that it worked. And so, like, it just like, the Ethereum community,

kind of teases the Bitcoin community for like moving the goalposts every single time. But like once Ethereum proof of stake is shipped, Ethereum actually has an extremely strong track record of shipping on its promises. I'll be extremely like late or slowly. But EIP 1559, 2.5 years in the making eventually shipped. Proof of stake, six plus years in the making eventually shipped. And so I really think the tailwinds of like Ethereum naysayers actually the proof of the burden of proof goes to the naysayers is like, well, now you have to prove that Ethereum is actually not going to execute on everything that it says that it will. And I think that's actually an underrated and under-talked-about

point that like the internal to crypto-twitter narrative really, really goes in Ethereum's favor if the merge goes well. And so that's definitely pretty strong. I think the Eric Wall did a poll recently that gave three options. A, the merge goes perfectly according to plan. B, something goes wrong. C, it never happens and gets postponed. And it was like, a 60% 40% said, 60% said the merge is going to happen totally fine. 40% said one of the other two options that is either going to get postponed or something bad happened. And the closer you get to the Ethereum core devs, they think there's like a 95% plus chance of like complete success. That's what I chalked this up to.

And sometimes 95% even percent feels kind of low. So the closer you get to the people that are informed about this, the more that they say it's more likely to work. And perhaps you can call that bias. But, I mean, I'm not going to ask the average, like, CyberHornet Bitcoiner about what they're likely heard of the merge is. It's just going to be uninformed because they don't pay attention to the Alcor dev calls. So I do think there is an under – people are not expecting the merge, or at least not enough of them. And so actually, like, the actual structural flows that happen as the merge and how much, like, sideline cash there is that has not yet bought ether, I think some people could be blindside. by the significance of that as well.

And I really don't think the energy thing will become relevant until the next bull market when like society once again deems crypto is cool again rather than cringe. So like the whole like ESG aligned regardless of whether your opinion on ESG is, Ethereum becomes ESG friendly. That won't become relevant until like another bull market when people are looking into crypto and trying to find reasons to hate it. And so like we can punt that one a couple years down the line. Any others that I missed?

No, I think that's a good digest. And that does actually really answer one of my key questions was like, why wouldn't this be fully priced in? And I guess your point is there still remains considerable uncertainty, at least in the market about the, like, flawless success of the merge. I also just don't think the everyday retail punter is very aware of the merge. We talk about it all the time, but I don't think, you know, you don't see it on the front page of the Wall Street Journal. Right. Right. But there are now like Wall Street sell side reports about it.

So like your informed capital is aware of it at this point. And I actually think that's going to be, you could argue that it's pressed in from the perspective of now you see banks that are building custody solutions that are explicitly building Ethereum into the solution. Whereas 18 months ago, it was we're going to build custody. We're just going to start with Bitcoin. Yeah. David, thank you for appearing on our eminent show for becoming part of Brink Nation.

we'll see about getting one of our commemorative digital trinkets over to you. We don't have anything quite as excited as the bankless community. I think I actually bought one of your hoodies, by the way. You guys released a hoodie, right? Yeah, yeah. Oh, so we have like our normal merge, but then we had like our... No, the Web 3 merch, right? Yeah, the one-time-only merch.

Yeah, that's a cool hoodie, the collegiate hoodie. Yeah, the one with the NFC chip in it. Yeah, very excited about it. I can't wait. All the possibilities are endless. Anyway, so thank you for educating us about this and spending some time with us. Now, I feel like our listeners don't need that much help locating you in your abundant internet presence, but where would you direct them to learn more about yourself and bankless?

Yeah, if this is the first time, you've heard about bankless, bankless.com will tell you everything that you need to know. It's a podcast that almost, I feel like, goes out once a day. newsletter also goes out once a day except on Sundays. And all of that stuff is at bankclos.com. We're also on YouTube and wherever you get your podcast. And you can follow me on Twitter at Trustless State. Love it.

Thanks for the time today. And we'll talk to you soon. Thanks, David. Likewise. Honor for you.