On The Brink with Castle Island - Weekly Roundup 05/26/23 (The real Greenidge story, MEV on Bitcoin, Fed data on adoption) (EP.427)

Episode Date: May 26, 2023

Matt and Nic return for another week of news and deals. In this episode:  Validators sign up to stake ETH post merge Will there be MEV on Bitcoin?  What's the deal with Worldcoin?  Is the wash sale tax loophole stalling the debt ceiling negotiations?  Have ordinals changed Bitcoin culture?  The Fed releases new data on crypto adoption in the U.S.  Paradigm adds AI to their mandate  Whip Tom Emmer and Rep Darren Soto introduce the Securities Clarity Act The NYT reports that prosecutors have a mountain of evidence against SBF Greenidge is vindicated regarding activist claims  Ripple vs the SEC Content mentioned:  The Federal Reserve, Economic Well-Being of U.S. Households in 2022 Coindesk, The Bitcoin Mining Debate Is Ignoring the People Most Affected Sponsor notes:  Coin Metrics STATE OF THE NETWORK - A Claim in the Ether: Tracking the Soaring Demand for Ethereum Staking In this week's issue of State of the Network, we examine essential data and metrics highlighting the current state of the Ethereum staking ecosystem. The transition to Proof of Stake and the successful launch of the Shapella upgrade have bolstered confidence in the Ethereum ecosystem, but a variety of regulatory and technical risk factors still pose challenges.

Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of Concentive easing. You've printed a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called a Bitcoin. Bitcoin.

Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. In this episode is brought to you by Coin Metrics. And here is the Metrics Minute. For today's Metrics Minute, we're looking at the state of staking in Ethereum. Following the Chapella upgrade. I don't know what Chapella. Do you know what Chappellella is?

It's a combination of Shanghai and Acapella. Acapella. So it's the Chapella. I think that's what it is. Am I right? I mean as good as explanation as any. So there was a withdrawal of around 1 million ether from the beacon chain. The tide has since shifted dramatically with the exit queue clearing and a rush of new validators come in.

So the entry queue has reached the highest level since the genesis of the beacon chain in December 2020, with 64,000 validators eagerly waiting to participate. This pushed the validator count to a new high of 580,000. So since Chappella, 4.3 mil-eath has been staked. This outpaces the 2.Million-Eath withdrawn. The liquid staking provider, Lido, has been seriously stressed-tested with the bankrupt Celsius network, more to come on them later, requesting to withdraw 430,000 staked Eth.

Thanks to Lido's buffer mechanism, it successfully processed Celsius' exit, shoring up 450,000 stake to either in available liquidity. That's just state of the network. More on that in the show notes. A lot of smart things in that metrics minute. David Hoffman was definitely right about the impact of these validators post-merge, just more validators. So 64,000 validators are eagerly awaiting participation on the Ethereum chain.

So I get it, though, because it now means you can do the ETH carry trade successfully, right? So you can enter and you can exit. So as, say you're an institution, you want to capture the native yield on ETH, knowing that you can exit, I guess, would give you some comfort. So it kind of makes sense. It does make sense. Yeah. It's not the most intuitive thing, but when you hear it and hear someone describe it, it kind of does make sense. So we're recording this in person.

I'm in Boston. It's actually a lovely spring day here. so I'm normally a big hater of Boston, but you got to hand it to Boston during the springtime. It's nice. So there's just a lot of commercial real estate. We're sharks in the water here in the commercial real estate market. We've just been touring commercial real estate here.

Yeah. I think that it's about to totally nuke, actually, the market for a CRE. So we are in the market for an office, but we're just, we're not pulling the trigger. We're just going to keep the powder a little bit dry, a little bit while longer. Yeah. These offices are empty. They are. Yeah.

I mean, the remote work thing, bank lending, going to zero, basically, interest rates, all the trends are kind of apocalyptic in the series space. Yeah, I don't know how this is all going to get worked out, but people think crypto took a hit. I think commercial real estate is about to get smoked. Yeah. So good week of Castle Island content. You interviewed Michael Grano. of J-analysis at the SCB-10X conference. This is one of the largest banks in Thailand,

one of the oldest, I think the oldest bank in Thailand. I've been doing this conference every year for three years, I want to say. I interviewed Anton Katz last year. It's always a good conference. So really interesting conversation with Michael Groninger, just a juggernaut of a business over there, Chenalysis. SCB stands for Siam Commercial Bank. Yep.

Fun fact. Very forward thinking on the crypto front. They have some awesome venture investments over there. So long list of really interesting and important companies. And they put on a great conference. It's really, really well run. So enjoyed doing that. And then I also enjoyed hearing you on bank lists.

So you were on talking about ordnals, inscriptions, Bitcoin culture with Udi and Eric. That was a fun one. Yeah, I did bankless and then what Bitcoin did, back to back. Oh. So it was about four hours of podcasts. you know that was a fun show that was with me and udi and eric they were fresh off their antics of the bitcoin conference the bitcoin fundamentalists um if you want to call them that they didn't like the antics yeah they didn't like uh udi and eric did the floss dance on stage at

the conference do you know this dance i've seen that dance before i didn't think that udi's floss was very good to be honest so udi had just learned the dance that day. I could tell. I could tell. It's a hard dance. I can't do it. It was an interesting thing.

It was a, it looked like it got a little bit aggressive there. Were they like booed? I don't know. People seemed to be, I wasn't there. I pulled out of the conference, believe it or not. I was not at the conference. So I didn't want to have fruit thrown at me. That's just not an experience that I wanted.

But it seems like nobody threw anything. at them. No violence. That's good. Yeah, even though there are many calls for violence on crypto Twitter, there was no actual violence, which is positive. I guess the crux of the disagreement the fundamentalists or the hardcore bitterners have with them is they feel that those guys shouldn't be on the main stage. But too bad, you know? I don't know. Too bad. I think ordnals and inscriptions is the biggest thing that's happened in the Bitcoin ecosystem for at least the past year. So why wouldn't you have that on the main stage? Yeah, I mean, from my perspective, it's added more vibrancy to Bitcoin than anything in the last five years, frankly.

It drives up fees, which is obviously good. So that improves long-term sustainability of Bitcoin. Even Michael Saylor has now acknowledged this. Sailor's into it. Sailor understands the importance of a fee market. It also makes it, it creates a pressure to create L2s on Bitcoin and make Bitcoin more efficient overall. all. So I think the net efficiency gain is positive, even if block space gets more congested. And it also introduces fresh blood and new liquidity into Bitcoin. We're seeing developers for the first time building on Bitcoin. That's what I said on the podcast. So I see it as an unquestioned positive across the board. So my question is along the lines of what Eric was getting at

is what happens to MBV on Bitcoin. So are we going to live in this world where Bitcoin MVP is just a huge category here. And I guess the question is, who will capitalize on that? There's already MAV on Bitcoin, especially around the BRC 20 tokenments. Right. I think the pools that are sophisticated are especially Luxor. I think they've been on top of it. They've been the prime beneficiaries. But yeah, as you see more semantically interesting types of transactions, not just regular old transfers, there absolutely will be MEV opportunities. And here's the interesting thing. Bitcoin block times are long, 10 minutes, as opposed to 15 seconds for ETH. So MEV searchers have a full 10 minutes to do the analysis and

determine how to prioritize transactions in order to maximize the value of the block and the ordering, which I believe means that they will be able to capture a large percentage of the total value available. So if anything, I think MEV will actually be more aggressive on Bitcoin because of the latency of the interblock time. I mean, that would logically make sense because you would think that if you have 10 minutes, not only are on-chain exchanges in play from an MV perspective, but you'd actually be able to do a lot of centralized exchange trading activity off-chain with that amount of time. Yeah. The saving grace right now is that there isn't a lot of defy stuff happening on Bitcoin, so the sort of total addressable market of M.A.V. is still very small, but I do expect it will

come to exist. So, and MVV, it tends to be a centralizing force, in my opinion, because being a searcher, being able to exploit MavV opportunities is very specialized activity. It's not like mining where basically anyone can do it. All you need is electricity and an ASIC. The set of people that are very good at extracting M.A.V. is very small. So that is a centralizing force, but there's nothing you can really do about that. As the blockchain gains a richness, you get MEP by definition. So that's something the Bitcoin community is just going to have to grapple with. Yeah, and it's going to be interesting to see. You mentioned Luxor. I guess the mining pools will capture a lot of this value. You'd also think that just trading firms will be very active in this

market. Yeah, I mean, I think that's what we're seeing in Eath as well. You have a small number of highly specialized firms that are very good at it, but they tend not to be very vocal about it because I guess you don't want to give up your alpha. Yeah, and it's pretty unclear, I'd say, from a regulatory perspective, how this is all going to shake out in terms of MEP. You know, is it front running? Is it, some of it's legal, obviously, but some of it's pretty questionable. Yeah, I mean, some of it is built into the design of these protocols. So, for instance, liquidating insolvent accounts on a decentralized lending protocol. The NAD that does that liquidation gets compensated for that.

That's a form of MEP. That's not contrary to the objectives of the protocol. That's actually part of the design that's intended. But then on the other hand, you have sandwich attacks where you're giving someone deliberately worse execution by inserting transactions before and after their transaction, that's super extractive. That just looks like the way things work in the non-crypto world. Yeah.

I don't know if there's anything you can do to outlaw that. I think there's, you know, it'll, we're years ahead of ourselves, but you'll eventually get into this best bid, best offer, like best execution type of world here for some of this trading. But in the defy context, I'm not sure you can actually do that. Well, you can't enforce that. can't enforce it, but maybe you could lean on some of the front end. So to the extent that you had like a Robin Hood as a gateway into a DFI protocol, this starts to get really challenging. You really

want to have people in seats that understand the industry, which, you know, maybe we don't really have that level of sophistication as an industry yet. I think what's likely to happen is the most extractive MAV strategies just end up being done by folks that are outside the U.S. Yeah. But if it's an open blockchain, you can't stop anyone. participating in consensus or inserting transactions. So I don't know what can ultimately be done about it. No, it's going to exist. The best thing you can do, I think, is build markets around it to have it be less extractive.

Yeah, and that's what the Ethereum folks have done to their credit. So this will be something that Bitcoin must deal with at some point. This will be one of those things. I don't know. I think a lot of the core developers on Bitcoin really have not even thought about it, So it'll be interesting to see how that evolves. I think some of the best minds in the world from just a game theory perspective

are all in the eth ecosystem. All right. Well, it's a very light news week. There's some bits and bobs here. Before that, shall we dive into some deals, some chunky deals right here? Let's do some deals. First one up's a big one.

So we got tools for humanity, which I guess this is the name of the company behind WorldCoin, WorldCoin the Protocol. So they raised $115 million. It was led by, blockchain capital, had participation from Bain crypto, and Druson Horowitz, distributed global, and others. So quite a deal here.

We talked about World Coin last week. We still don't know if you, do you get two world coins if you get LASIC? You're going to be the test case for that. You're going to get LASIC. I'm getting LASIC. Is booked? Yeah, in a couple weeks. All right.

So, you know what? I will, if I can secure an orb, I will. give this a shot. I will try and sibil the World Coin protocol with my LASIC. I think that's the move. I mean, it's so much better to try that versus, you know, extract a Cambodian eyeball or however people are getting these things. World coin, you can't use it, I believe, if you are in the U.S. I don't believe you can use the orb. Because you're not part of the world? What's the logic there? World coin. World XUS coin. Yeah. The American scale. can't collect their coin as of right now, I believe.

That's just got to be an SEC thing. I will be collecting my WorldC coin. I already have Clear. So what's, you know, what's the difference? They should go to market strategy. They should just have WorldCoin at the Clear portal. You just walk in. I found that at Logan, the Clear is very long lines.

I do not enjoy going through Clear. Sometimes the normal line is shorter. It's way too many people got clear. Yeah, they need to raise the price on Clear clearly, but Clear was the best purchase I made last year. I love Clear. NPS score was high on that? It's incredible.

I mean, you're saving me hours and hours every time I travel. You're not at this chapter of your life, but the best product, my highest NPS score, is on the Snoo Baby Bassinet. Are you familiar with this? I don't know any of those. I know the word baby, but I didn't know the first or the third word. So the snoo baby bassinet is a bassinet that you basically wrap up your child in and you zip them up into like a cocoon and it moves back and forth throughout the night and it rocks them to sleep and they stay asleep. It's the most magical device of all time.

Highly recommend it. So I maybe, you know what, maybe I will be learning about the snoo baby bassinet in the coming years and months. Do you have an announcement? No. announcement for an announcement. Okay. So Spencer Bogart at blockchain capital led the World Coin deal. He said, quote, I thought World Coin was a dystopian or Rwellian nightmare, which is how, I've never seen a fundraising announcement that starts with that kind of a sentence.

Yeah. And then he says it's actually not a dystopian orwellian nightmare. And in fact, they led the investment. I believe Spencer. Spencer is a very high signal investor. He says it's misunderstood. It's clearly misunderstood. We're talking about you can get LASIC and you can...

We don't understand it, so definitely it's misunderstood by us. Yeah. I guess TBD, I guess, you know, open mind. Open eyes and open mind on WorldCoin. We'll see. Definitely open eyes. All right. So next up, Myax, the exchange group, they completed the acquisition of Ledrex from FDX.

Yeah, these guys. has had a stake in Ledger X before it was sold to FTX and now they own it again. So interesting development there. Next one up is Labdow, a group that is focused on open source drug discovery. They raised 3.6 million. They raised it from inflection, North Island Ventures, Seed Club, Road Capital and others. This kind of drug discovery side of crypto is kind of interesting. I'm seeing more and more activity on this decentralized science category.

I don't fully see the crypto angle here. I guess it has Dow in the name. So maybe that's it. But yeah, apparently it allows scientists to issue NFTs to prove ownership of their data. So Swiss non-profit. Next up we have sort a Web 3 development platform. They raised $3.5 million from Lemnus Cap and the general partnership. That's the name of the firm.

That's a pretty good name. I've never heard of that. The general partner. I'm surprised that name was still available. Yeah, that's a good fun name. I like that. Next one up is a fund. It's called dispersion capital.

It's a new crypto fund. They raised $40 million for their debut fund. Very challenging time to raise. So congrats to the team over there. Then we have NUM finance, NUM finance, their DFI protocol. they raise 1.5 million from Reserve and others. Then we have FastLay, and speaking of MEV, this is an MEV platform. They raised 2.3 million from multi-coin, Shima, Polygon, Delphi, and others.

I think this one looks like it's an MEV platform on Polygon, if I'm not mistaken. Then we have Azteco, which is a Bitcoin voucher company. I believe it's a no KYC way to buy Bitcoin at brick and mortar stores. They raise $6 million from Jack Dorsey, Lightning Ventures, and hive mind. Pretty busy deal week. I was just going through some of the old newsletters we used to do

when we started Castle Island. I have all of them saved and we didn't even used to have a deal section. In 2018, there were just weeks on end where there just weren't deals and so you'd just start with the news. And the news half the time would be private blockchain, POC, I don't know, or something.

It was a different time. So we haven't talked about this but it's been five years of Castle Island. I didn't even realize that. We were on the Zoom today and you told someone else that it had been five years. So congrats on the five years. I don't know how we have managed to do this for five years. It's sometimes it feels like it's been a year.

Sometimes it feels like it's been 15 years. So we let me see if I remember this correctly. We started raising in May 2018, right? Yeah. Yeah, that's right. So yeah, hopefully another five. Another five. It's been a fun ride.

Yeah. A couple curveballs in the past year. Yeah. Yep. So where do we start here? Should we start with the bad boys, the crime family? Yeah, let's fire up the bad boys. We haven't done the bad boys in a while. Okay, we'll play it. Play it. All right. So the New York Times has a piece this week that it is just crazy. So the title is emails, chat logs, code, and a notebook, the mountain of FTX evidence. And it just goes on about all of the stuff that the federal government has on Sam Bankman Free. I mean, they've got a notebook from Caroline Ellison.

That thing's got to be a house of horrors. They've got just every email, private message, signal. They've got Ryan Salami's phone. They've got Michelle Bond's phone. I mean, what on earth is Sam Bankman Free's defense going to be here? I mean, it's got to be, as a defense attorney, having the on and again, off again, girlfriend of the, of Sam, the main defendant, have a detailed, diary slash notebook is probably a bad

situation for you. That can't be good. I can't wait to see what's in that. The black notebook. So presumably a lot of this stuff will become public, right? It'll get introduced in court. People will get a chance to read all of these messages and chat logs. This is going to be crazy. I mean, I feel like it implicates

so many more people than have actually been thus far interrogated or subpoenaed, I mean, Sam's tentacles went deep. They were all across the industry. Yeah. I believe that there's a bunch of people out there walking amongst us who have immunity at this point. Really? That's what I think. Waring wires, perhaps? I don't know about that, but I think, you know, willing to testify against Sam Bankman Fried. But I can think of no other reason why some of these people that were clearly involved in this have just not been arrested. Well, I don't think they should be getting immunity, though, because it's not like the case against Sam is going to be that difficult to make.

Oh, it's a layup. So why would they need to make all these concessions to his lieutenants? I mean, an inner circle if the case is clearly going to be a winner for the prosecutors. Yeah, I mean, to your point, I guess you need to have a group of people that you think wins it for you. hands down, just locks it in. And then there's these peripheral people that maybe didn't cut a deal. And maybe they end up doing the time. So that case is in October. Is there any chance that actually starts in October? That seems like a lot of evidence to get through and organize. Is that going to get pushed? There are six million pages of emails,

Slack messages, and digital records, and a handwritten small notebook. That's too much to get through. handwritten small notebook oh my god do you think she has doodles in there too probably some art probably knowing her poetry as well knowing what we know about her personal life song lyrics there's going to be some stuff in there um so that rumbles on i feel like we don't really talk about ftx anymore which i'm generally happy about yeah i mean except for all these clawbacks and the bill of the hours and ftx 2.0 tell you what a lot of people just are completely to the crypto industry until this guy is just long forgotten. Yeah.

FTCS 2.0. It's still happening. Yeah. I'm interested in seeing it occur. I think it would be good for the creditors. The question is, what do we call it? What should be called? Because FTCs, probably we should deprecate the name.

Yeah, I don't think we need it. If you have any suggestions. My question is, how good is the actual tech? I mean, everyone used to talk about the cross-margining system at FTX and how it was world-class, and you could take this crappy coin and cross-margin against BTC or Eath. And I guess my question would be, was it, was it that great? Or was this just like Alameda moving around a bunch of omnibus stuff in the back and telling you that it was a good cross-margin system?

Yeah, I think it's easy to run an exchange if you have no compliance or internal controls whatsoever. and that may have been kind of a subsidy for the tech debt, such that it seemed great, even though it was running on glue and twine on the inside. Yeah, I mean, I've met people that run institutional grade exchanges and brokerages, and they didn't really look a lot like the people that were running the tech side of FDX. I'll tell you that. I would say it has two advantages.

One, there's a bunch of user accounts globally, so you're not starting from zero, you're starting from something, although, of course, a lot of those users feel hard done by. Two, the other offshore exchanges are under the kosh right now. So if you're starting it with a clean slate in a compliant way, maybe you have proof of reserves from day one, you regulated perhaps in one of these jurisdictions, maybe then you do have an advantage.

You get to kind of expunge your historical baggage and start fresh. Maybe you have an advantage against the other offshore exchanges. They're all kind of troubled. right now. Yeah, speaking of that, there was another Reuters article. I guess it came out on, was it Monday maybe, Reuters article about Binance saying that they commingled funds, I believe, in 2019, 2020. Binance denied it. So it didn't seem like they had a smoking gun on it, but who knows. I mean, it seems like someone is a source to Reuters, and Reuters has an article about finance every month at this point. Yeah, Reuters has been on the war path against finance. Yeah. So we didn't

cover it last week, but Warren's mentioning that House Majority with Tom Emmer and Democratic Representative Darren Soto of Florida have introduced the Securities Clarity Act. So I think that came out right after we recorded last week. So it would give regulatory clarity to digital assets, whether or not their securities or commodities, just a total common sense bill, bipartisan. Don't know how these things work from a, you know, the smoky room perspective, but I hope this gets some legs. Yeah. So congrats. on the teams there for pushing that forward, important bipartisan bill by all accounts.

So again, we've never had a favorable piece of crypto legislation ever. Maybe this will be the first. I'd like to see that. The Biden admin, speaking of crypto legislation, keeps on harping on the supposed tax breaks that crypto investors enjoy. And is this?

apparently now a sticking point in the debt ceiling negotiations? Is this actually a sticking point? So what I have not heard any, so you said you thought it was the wash sale thing, the fact that you can technically wash sale digital assets because it's unclear what they are from a classification standpoint. So yeah, if they want to close that loophole, I don't think you'd actually have a lot of Republicans saying, no, keep that loophole open. I don't, I don't think that's an issue actually. Yeah, I, first of all, I haven't, this hasn't. This hasn't. been a hot button issue at all. So I don't understand how it became a thing. Second of all, I don't even think it's fair to call a loophole because it applies for all kinds of commodities,

if I'm not mistaken. Right. So I think it's mainly securities. It doesn't apply to. But of course, Bitcoin is not a security. Right. So the substance of the tax break, I guess, is that if you have a realize loss on Bitcoin, you can sell, realize the loss for tax purposes, and then re-buy at the new lower cost basis. So the Biden admin is now repeatedly mentioning this as one of the tax breaks that Republicans want to keep, apparently. I mean, how ironic would it be if they default because they are focused on trying to close a tax break that the crypto industry enjoys. I mean, I don't know. I don't think that's the key issue here, but this is a mess.

I mean, what do we have? Another seven, eight days here? Yeah, the conversations are not going well. And also the concessions the Republicans are looking for, even if they get them, it doesn't actually really solve the debt situation. at all because it's only the discretionary spending that they're looking to cut. It would keep debt to GDP levels basically unchanged. So something has to give at a certain point.

Either interest rates need to come down. But the bigger problem is, of course, interest expense is non-discretionary. That's a huge portion now of the federal budget. Defense is generally non-discretionary. You can't not have defense. And then the other two huge line items are Social Security and Medicare. Those need to be addressed if you're going to do something about it. That's the elephant in the room.

No one's talking about neither party is willing to touch them. That is the third rail of politics. You can't touch Social Security and Medicare, even if those are colossal line items in the budget. So basically something's going to have to give. No one's actually proposing a real long-term solution to the debt problem of this country. It's, well, it looks like it's going to start to heat up from a political perspective. We had DeSantis announced last night over Twitter. We were at dinner.

We couldn't listen to that. But apparently he mentioned, David Sachs mentioned Operation Chokepoint. And DeSantis was very pro-crypto. So interesting to hear. Yeah, Mike Salana, of course, the editor of Pirate Wire, where I wrote those two articles said on Twitter that he thinks that DeSantis had read those articles, which is pretty cool. Wow.

At a minimum, David Sachs read those. So thank you for reading my articles. Yeah. That's cool. Very cool. All right. So what else do we have here? The Federal Reserve put out an economic report this week that talked a little bit about crypto.

Yeah, that's right. So this is a report entitled The Economic Wellbeing of U.S. households in 2022. Of course, part of your economic well-being is your crypto portfolio, which has not been conducive. Depends on when you bought if you're doing well there. What's the opposite of well-being? just harm economic harm economic hardship of U.S. households

so they had some survey data in here so they say that well they say that crypto usage actually declined from 2021 to 22 so they think 12% of U.S. adults had used it and then that fell

to 10% which is roughly 26 million adults I'm not mistaken in 2022 there were some interesting stats. So they collected data on what people use crypto for. So the number one use case was sending it because the person receiving the money asked for crypto. I've done that. I've done that. I've done been to Patriots games and told my friends, hey, you have to use. You have to pay me in Bitcoin. Oh, in Bitcoin. Okay. Pay me for the ticket in Bitcoin. So there's no,

you can't argue with that. They just have to do it. Get a wallet. Yeah. So that's one way to get adoption. Second most popular use case was to send the money faster, which is pretty valid. That's a great use case. Third was privacy. Interestingly, they found that the racial dynamics of crypto usage, so the white population was the least likely to use crypto, and black, Hispanic, and Asian adults were more likely to use cryptocurrency. Asians actually having the rate at 15%. So I thought that was pretty interesting. Men more likely to use it than women and wealthier households more likely to use it than poorer households. Very interesting. Well, 26 million people. That's not nothing. Yeah. It is interesting though because NIDID came out with

their study showing that they thought it was 46 million U.S. adults in 2021. So someone's wrong. I mean, different survey methodologies, I guess. I mean, does it factor in who owns things like micro strategy or the GBTC product? Yeah, that wasn't clear. But, yeah, 26 million Americans seems light, actually. I think it's probably more than that. It's incredible to think that people are so hostile towards crypto right now in a world where these gambling apps are just going to wreak havoc on the middle class.

It's just incredible how easy it is to just gamble under smartphone. these days. Yeah, the thing that strikes me reading this is it's still a relatively niche product. And so the political clamor around it seems wildly disproportionate to the actual crypto penetration in the U.S. It just doesn't, most people, it seems like, don't care one or the other. Yeah. So there was an article in Coin Desk this week, which was great, but also made my blood boil. Uh-oh. What was it? So this is, uh, the title. the Bitcoin mining debates ignoring the people most affected. It's an investigative piece of journalism.

Shout out to CoinDest for doing this into the Greenwich Bitcoin mining facility in Upstate New York. We've had them on the podcast. We've had them on the podcast. We had them on to explain themselves. It seems no one listened because Greenage has been probably the number one most criticized Bitcoin mining operation in the U.S. New York State passed their moratorium on. Bitcoin mining basically to target them. And the crux of the issue was it was a coal plant. They got converted to natural gas. And then that was paid for by mining Bitcoin and also,

you know, sending some of that energy to the grid. It wasn't just to mine Bitcoin. But people hated that. They thought, you know, the narrative was Bitcoin is causing these power plants to come back online. And so that was, you know, perceived to be really bad, you know, marginal net new emissions. The other narrative around it was that the plant was heating up the water in the finger lakes. I remember that. Yeah.

So the trout, there were questions about the trout. There was a notion of algae blooms. And there was an activist that said that it was like a hot tub in there, even though the temperature of the lake is like 58 degrees, which I don't, it's not any hot tub. It sounded like it was like boiling a frog in the lake. Yeah. So turns out, Coin desk went whether, I don't know if the journalist went in the lake, but they at least got close enough to Lake to know that it wasn't boiling.

Turns out all of those activists complaints were false. They just made them up. Basically all of them were fake. So it didn't meaningfully change the lake temperature. It didn't harm the fish. It wasn't actually the locals that were complaining about it. activists were bust in from elsewhere. Oh my gosh. The locals knew about the plant, obviously, because the plant's been there. Many of them work in the plant, so they weren't really

that concerned about it. It doesn't actually cause the noise pollution, plus it's a rural area. And it didn't really cause any extra algae blooms. All the lakes have been having algae blooms. So there was nothing special about lakes have algae. It's a thing. Great Seneca Lake. It wasn't anything about Bitcoin that caused the algae. And so basically, I don't know, I don't know how else but this. The activist lied. Okay. They lied. And so what was the damage to Greenwich here? I mean, enormous. New York passed an entire piece of legislation targeting them. The EPA withdrew one of their permits basically because of these claims. And what's crazy is that, you know, Greenwich provides natural gas powered electricity to the New York grid, which needs electricity. They turned off nuclear

plants in New York. So you can't really go without natural gas generation. Natural gas is the backbone of American power generation. So there's nothing really wrong with it. It's also much cleaner than coal. So you're converting from coal to natural gas. You're providing net new electricity to the grid. And you're mining some Bitcoin. I don't see any problem with that, to be honest. I don't see any problem with that. So they should have listened to me. I don't know. We had them on the podcast. They explained this whole thing two years ago. But basically the activist claims went unchallenged for this whole time until Coindex finally went there and they actually looked into it.

It turns out all the objections were made up. That's awful. Sounds like Greenwich really got a raw deal there. Yeah. I'm pretty heated about it, to be honest. I think it's a lot of the political narratives that were, created around Greenwich. And to be clear, these were narratives that were promulgated by the White House too.

They just weren't true, you know. So it's a big, big shame. And hopefully now that CoinDesk has done the work, we can actually have more of a truth-based discussion here. Good job, Coin Desk. Everyone go check that out. We'll put that in our show notes. Do you read Vitalik's blog post this week? Don't overload Ethereum's consensus?

I thought that was a pretty interesting one. Yeah, that was about restaking protocols like eigenlayer, right? Yeah, yeah, like basically encouraging folks to be really careful with what you layer on top of Ethereum. And you can imagine some of these situations that could occur around eigenlayer. And like, what if something goes wrong there? Will it encourage sort of like a social push to fork Ethereum in certain edge cases? That could be really dangerous. So Vitalik has apparently been posted up in a town in Montenegro for two months,

having an invite-only conference. Have you heard about this? Yeah, I have. So in Doquan's in Montenegro too. So that's right, but in kind of very different circumstances. Yeah, one is like behind bars. So I think the town is called Zuzaloo.

And people's, this conference is getting rave reviews. So hold on. It's a conference that goes on for two months. Is that the deal? Yeah, it's like a pop-up crypto city in Montenegro. And a conference in the sense that you just, There are presentations and things like that?

I think so. I look, invite only. I'm not there. Clearly wasn't invited. But it sounds cool. Antenegro, this time of year. Could be guys. Who knows?

Depends on your circumstances living. So Fred Wilson had a very short blog post this week called the Freedom to Innovate. And he basically said that the NYDFS subpoenaed Union Square Ventures over their web through investing in 2014. Yeah, I guess that was when all those bit license hearings ended up happening, right? So Fred was asked, will the regulatory pressure in the U.S. result in them cutting back on their Web 3 investing? And he said, when they want to shut it down, I say double down. That's a T-shirt. Good job, Fred. We agree.

I agree with that. That's a good answer. So speaking of crypto funds that are doubling down, apparently paradigm is pivoting to AI. No, what are you talking about? Yeah, so I mean, there was a news report this week. The paradigm is now at least diversifying their focus to include AI. Oh, I'm looking at this right now. So it says paradigm is broadening their crypto-only focus to include AI.

Yeah, the block has this. Well, that's interesting. Yeah. I mean, I think there's AI intersections with crypto. I mean, frankly, World Coin straddles the two. Yeah. For better, for worse. There will be ways to use public blockchains to deal with the loss of truth that AI gives us.

There may be interesting models that emerge around creating verifiability around AI models and their outputs. There may be decentralized rendering protocols. That might happen. So there definitely are intersections, but this looks like they're just going to be looking at AI deals with no crypto stuff involved. Interesting.

Well, we're not pivoting, but interesting to see folks pivot. Yeah, we're not leaving. We're not leaving. We're not leaving. This just came across. So Ripple has, it just came out that they recently acquired a stake in BitStamp. So last week, they acquired a stake in Mataco.

this week it's coming out that they're acquired a stick and bit stamp. Ripple is gobbling up a bunch of real businesses here. They're kind of behaving like they're going to win the case against the SEC. Yeah, I mean, you imagine Ripple all of a sudden has a token that has regulatory clarity. They own a custodian, they own a piece of an exchange. They got the payments play. Wow. So I went to the Ripple event during Bitcoin, Miami.

They had an event. Really? They had a colossal statue of the fidget spinner. The fidget spinner, yeah, of course. So I thought they deprecated the logo. That's actually not the case. That's the logo of Ripple Labs. They kept it.

I see. The XRP logo is the X. But they did keep the Fidit Spinner logo. Are you welcome in those type of events? Because historically, we haven't been the biggest fans of Ripple. Well, so that's a great question. So I showed up. I ran into Mr. Brad Garlinghouse, actually.

And he either didn't remember the things, the nasty things I said about Ripple on Twitter, or he just fairly gallantly chose to overlook that in our conversation. Maybe he didn't know who you were. No, I think he knew. So, but what he recognizes is that we have a common enemy. So now, you know, strange bedfellows. Strange bedfellows now. Well, we're rooting for you, Brad.

We are, actually. Yeah, we are. We are. Like a decision on that would be good. That would be key. Apparently, it's due in the next few weeks. That's what we've been saying. saying for the last three months. Yeah, highly anticipated court case here. All right, so I think

that's it. We got Memorial Day weekend here. Summer's about to start. We've been having summer in Miami, but I guess the rest of the U.S. is going to join us. Yeah, sometimes it starts Memorial Day up here, sometimes starts July 4th. It just depends on the year. It's quite chilled up here, I would say. I don't know. I'm feeling the chill. It's like 60, 60 degrees today. Yeah, it's a little chilly, but what are your plans for the long weekend? Uh, no real plans. Might go to the beach of the it's warm hang out how about you i was going to play peddell i've actually moved on from pickleball oh paddell what's the difference again so peddell is enclosed and it's kind of like racquetball and you can play off the back walls i see you know who i think is good at that is teddy frissarro is he

yeah well i think he plays a different game okay paddle tennis which is different from peddell i'm so confused. Yeah, there's three different sports that all have paddle in their name. Tom Shaughnessy, very good at Padill. Really? Yeah, Delphi. Strong wrists. There's going to be Olympic sports one day. Yeah, I think so. Wow. All right. Well, we're actually, we have a Castle Island game coming up. Yeah, I did. For our offside, I persuaded everyone to play. I've heard that some of us have been taking lessons to prepare for this. Not me, but some of us have been. You just have the natural talent. You don't need lessons. I have not, I have never played tennis.

I don't know if I have the natural talent. I mean, I can move around. You're more of a runner. Yeah, I can move around. I can run. I can throw a ball. I can, I can hit that paddle. I mean, I can, yeah, lefty swing.

I can probably knock it out of the court. Pickle's all about really delicate touches, actually. Yeah, I don't know if that's going to work. We'll see, though. We're going to settle which GP is the best of pickleball for good and for all. That's probably not going to be me. But we'll see. Well, that's it for the week.

All right, everyone, have a safe and healthy weekend. We will see you on Monday.