The Breakdown - Reflections on the Crypto Market Cycle, With David Hoffman

Episode Date: November 1, 2022

This episode is sponsored by Nexo.io, Circle and FTX US.   On today’s episode, NLW speaks with David Hoffman, the co-founder of Bankless. They discuss how this bear market is alike and different from the previous one, as well as the state of Ethereum post-Merge.    Find our guest on Twitter: @TrustlessState   - Nexo Pro allows you to trade on the spot and futures markets with a 50% discount on fees. You always get the best possible prices from all the available liquidity sources and can earn interest or borrow funds as you wait for your next trade. Get started today on pro.nexo.io. - Circle, the sole issuer of the trusted and reliable stablecoin USDC, is our sponsor for today’s show. USDC is a fast, cost-effective solution for global payments at internet speeds. Learn how businesses are taking advantage of these opportunities at Circle’s USDC Hub for Businesses. - FTX US is the safe, regulated way to buy Bitcoin, ETH, SOL and other digital assets. Trade crypto with up to 85% lower fees than top competitors and trade ETH and SOL NFTs with no gas fees and subsidized gas on withdrawals. Sign up at FTX.US today. - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell and research by Scott Hill. Jared Schwartz is our executive producer and our theme music is “Countdown” by Neon Beach. Music behind our sponsors today is “War” by Enoch Yang. Image credit: DNY59/Getty Images, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8.

It's a wide thing. It's a very disparate things to connect is the wartime economies versus the Ethereum monetary policy. But when I see the juxtaposition of Ethereum securing, its global economic system for $1.4 million over 40 days versus the United States and Russia and Ukraine and Euro all going head to head over how to secure their own economies and it's costing them trillions and trillions of dollars a month or whatever, the juxtaposition here, I think, is insane. It's just a matter of time before people realize that. Back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world.

The breakdown is sponsored by nexo.io, Circle, and FtX, and produced and distributed by CoinDesk. What's going on, guys? It is Monday, October 31st, Halloween. For many of you, my guest today needs no introduction. David Hoffman is one of the co-founders and main voices of Bankless. Before we get into that, however, if you are a... enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Also a disclosure, as always, in addition to them being a sponsor of the show,

I also work with FTX. All right, friends, David Hoffman is one of the co-founders and main voices of Bankless, which is building a little mini-cryptomedia empire that may not be so many for long. bankless focuses primarily, although not exclusively on Ethereum. And in this conversation, we talk about reflections on the last bull market, the ethereal, and the future of NFTs. David, welcome to the breakdown. How you doing, man? NLW. It's going to be back, my man.

Yeah, I'm so glad to have you here. So we were just chatting about life and what we were going to chat about. And, you know, kind of what I thought would be fun to have you back on the show is just to got to to kind of get the um the david take on where we are in the cycle cycle narratives you know like you kind of have i think you share with me this sort of um interest in both the discreet and the specific but also these kind of big picture questions and so where i wanted to start i guess you know i'm i'm positive or i'm mostly positive that most of my audience will know you but for those who might not be familiar um just to give a give a super quick intro to bankless and then i also love uh you know

you describe yourself in your Twitter bio as a crypto-culture anthropologist. I'd love to hear just what that specifically means to you. Yeah, sure. So I'm David Hoffman, co-founder of bankless, bankless, big media organization, largely focusing on Ethereum, but also just crypto more broadly, trying to teach people how to live a life without banks. But banks are, of course, just the start of it. Banks are really just like the archetype for an intermediary. So what does a world look like when we have more individual power and individual control and individual influence over our own lives. And that kind of leads into the whole crypto culture anthropologist thing.

I think the thing that I specifically focus on the most, like my little niche in this broad crypto industry, is the relationship between culture and code in the way that if we design these systems to do this thing, downstream net effects of that or this kind of culture emerges out of the space. And so the very distant things, culture and code, are actually very much in the same spot, in the same place in this world of crypto. And so I try and unpack that the most and talk about the ways that culture impacts code, that code impacts culture.

And why it's important to be considering culture in the first place when we talk about these crypto economic systems that we all operate by. Love it. Well, we're definitely going to get into some of that today. I have a few kind of choice little nuggets there. But where I want to start is almost like a really big piece. picture of the last bull market. And what I wanted to ask, because I haven't had a chance to ask you this, is sort of how did it, like, did it play out as you would have expected going into it? And if not, where did it diverge? Yeah. And I remember starting my content production career during the

bear market last time. And it was, the bear market last time was really the bitcoins and the Ethereum's just going at it. And that was what crypto was back then. There was no other system beyond Bitcoin and Ethereum that really made it through the 2018 bear market. And so, like, how did the cycle go according to plan? Did it go according to how I thought it would? In some respects, absolutely. And then in other respects, like, holy hell, absolutely not. Some of the things, a lot of the things that happened that I think went exactly how I kind

of thought it would, would it be Ethereum's maturation of starting to embody some of the best of Bitcoin while still keeping a lot of the best of what Ethereum is it is. And so the solidification of the Ethereum monetary policy, the more coherent vision of Ethereum as an ecosystem, I think like a lot of Ethereum gained a lot of ground versus Bitcoin in this cycle. And I think that victory really happened very early in the cycle. And you kind of saw that because during 2018 to 2020 bear market, it was Bitcoiners and Ethereum's yelling at each other on crypto Twitter. And then as soon as the bull market happened, like, the community is just diverged.

We just started paying attention to our own things. And we finally shipped proof of sake recently, EIP-1559, all of these things that really solidified ether as an asset. What blindsided me and many others in the Ethereum ecosystem was the rise of Altlayer ones. That came as much to the surprise of everyone here, did not really expect, we expected the fight to be against like, you know, Bitcoin or the Bitcoin versus Ethereum. turns out it was the fight was between Ethereum and Ethereum copycats that's just compromised on decentralization. And so that was the new thing that really threw me and a lot of people,

others for a surprise, that it wasn't actually like, is it D5 versus sound money? It's more like centralized DFI versus decentralized DFI. And that was a fight that we weren't really prepared for. But that was towards the end of the bull market. Now here we are once again in a bear market. taking a time to reflect upon how we got here. Yeah, I think it's super interesting. I agree entirely that there's a lot of time for bullshitting in the 2018, 2019 bear cycle where it's like the fuck else you have to do. There are some people that, you know, to be fair, there were some people sort of researching

harbid your taxes and like all these sort of, you know, like getting really deep. But then there are a lot of us on Twitter who are just, you know, being assholes. But I feel like the divergence almost started to happen. And I think one of the things we don't talk about that much is that I think it's pretty inarguable to me that the crypto bear markets or the crypto bull market specifically started to take shape with defy summer. Right. Like that was the kind of the reemergence, even though there wasn't enough of a kind of generalized

bull market for us to really consider that. It was very clear that that was a different kind of crypto-specific thing that was drawing a new energy and excitement. And then that sort of proceeded into obviously everything that happened. around the great monetary inflation thesis and sort of Bitcoin finding its own kind of narrative space and, you know, in the context of post-COVID policies. And then there was even more divergence, though, in terms of, you know, splitting off into kind of NFTs and things like that. It was really fascinating the extent to which this bare or bull market, rather, was one in which,

although, you know, you sort of do have this surface level perma conversation, there's a lot more time just spent within sort of these ecosystems on the things that people were really excited about building. Yeah, 100%. And the defy summer 2020 was one of the big reasons I take to people as evidence as to why you need to stick around during the bear market because the people that were playing in defy summer 2020 games knew that the 2021 bull market was inevitable. These people saw the incoming mania a year ahead of everyone else. And that was really their opportunity. to capitalize on because the defy Walmart, the defy summer shenanigans,

airdrop season, yield farming was like the show before the show. I think another thing that blindsided a lot of Ethereum people and just like the people that were stuck around during 2018 to 2020 was NFTs. We always thought that like, oh, this thing called Maker, oh, uniswap, compound and Avey, D-Y-D-X. This is clearly the future of finance. This is clearly a step order function improvement on money and finance.

This is clearly where the next bull market is going to be. And it kind of was for 2020, but the NFT bull market just put the defy bull market to absolute shame. And that's actually really where you saw kind of what you alluded to, like the schisms in crypto, where the defy crypto Twitter circles versus the NFT crypto Twitter circles, like those are non-overlapping Venn diagrams. Like the NFT side of things, first off, is way bigger. And there's just like two different communities here at this point in time. Yeah, I completely agree. I actually, I think it's for those who kind of traverse between the two, there's definitely something refreshing about it, like, about a lot of kids just kind of sitting around vibing, even if it was like, if it got maybe it. It's sin was instead of aggression, it replaced it with maybe like a little bit too much like early morning Twitter spaces expounding on like the secrets of the universe because your profile picture went up. But like by and large is sort of a, it is such a different thing. And I do think that there's, you know, we're recording this now.

as yet another moment of sort of a generated, like an NFT community generating, you know, almost upon itself kind of without warning that's separate from even the other NFT communities with the Reddit NFT stuff going on. It's fascinating that there's, there's clearly something here that people like if they are not kind of presented, depending on how they're presented it, right? 100%. Yeah. And I think this is also indicative of really where crypto is as a whole is that we have This has always been the promise of crypto, is to embed itself into different corners of the internet more or less invisibly. Like, it's not an NFT. It's a digital collectible.

Your wallet is an Ethereum wallet that you don't actually have to worry about. And this has always been the promise of crypto is to find its ways into consumers' lives, into different businesses, to enable them to do things that they weren't able to do prior. But without really having to force that person into being a crypto person or, like, manage your own private keys or do all these things. And so, like, crypto's just like, you know, like a virus, just feeding itself into the corners of the internet more and more these days. You know, it's funny. There's been a lot of tongue-in-cheek kind of lighthearted making fun of the digital collectible rebrand. But digital collectible is a much more accurate rebrand relative to what. Like, it's just a better marketing scheme for what they are. Now, NFT, obviously, like, once you get into it, what it can mean is obviously much broader than digital collectibles.

but they are actually, in fact, describing what they're offering, right? 100%. Yeah, like, NFT is going to be like the technical way to describe this that encompasses many more use cases. I think digital collectibles is going to be the way that we use to describe these things in ways that I think are just going to be far more relevant to use cases that we talk about. Like gaming, for example, we'll use digital collectibles there.

We won't use the word NFT. And just a lot of these, like, just broad consumer applications And things that generally don't violate securities laws will probably use digital collectibles. Yeah. That's an interesting distinction. It's fascinating. When you think about just hanging on NFTs for one more moment, when you think about kind of, you know, everything that's new goes through a hype cycle, tries a bunch of stuff. Some stuff looks ridiculous in retrospect.

And then there was something underlying it that was actually powerful. We don't like to talk about it, but I think you can make this argument even for ICOs, where there is clearly something powerful about the money coordination mechanism that it unleashed. And clearly there was something about the demand that it tapped into. What is your sense for, you know, looking back on kind of this particular wave, the first mainstream wave of NFTs, what sort of stands out as this is going to be a thing versus other things where you feel like they might kind of fade into new explorations, let's say? Yeah, I think actually have a ton of thoughts on this. I think we can use the history of the crypto industry as a guiding lesson here. The first wave of NFTs, the first one to really come back from where it existed in the first place, Cryptopunks, which were born in 2018. Cryptopunks were the first NFTs to come back. And that was like Bitcoin coming back on its second bubble, right? Like, you know, bubbles don't, bubbles don't come back. That's not what a bubble is. So Cryptopunks had their first second bubble in the NFT mania. And that's what really triggered the whole rest of these NFTs. And so we had this collectible NFT mania, these things that are just pictures, like monkey pictures, crypto punks, they're just things that you collect. And they're kind of like nonproductive

assets. They're nonproductive digital collectibles. And the same way that crypto industry started off with Bitcoin, this nonproductive bearer asset that is a store of value, I think the NFT industry is starting off there too. it will progress. And you can only have so much of those. There's only so much room for a non-productive store of value asset, kind of like the gold standard of the asset, right? This is why people call crypto punks like the Bitcoin of NFTs. I think all future NFTs are going to be much more productive, as in it's going to take a team or an organization to instill some sort of utility into these things. What do these NFTs do? What do they unlock for me? And this is really just

the promise of kind of NFTs at large as it relates to creators, whether you're like Justin Blow, the DJ, or you're some musician or some artist, you have NFTs and it's going to unlock some sort of community for you or it's going to give your community some sort of privilege. And I think this is something that is repeatable and replicatable for many companies, many organizations, very many communities to make NFTs that make a moat around the in-group or an out-group and give the in-group privileges and access just by rights of being a community member. And this is something that you could see repeated for any sort of community that exists, whether it's Web 2 or Web 3 or beyond.

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I can't remember it was the other day or weeks ago at this point, but you had mentioned that you'd finally gotten music NFT-pilled. And it's interesting because this is, when I first kind of started talking about NFTs on the show last year, this is the context of, you know, if we're in the heuristic of big picture power shifts, it's basically exactly kind of the way that you had framed it, which is that the music industry is so ruthlessly exploitative that it doesn't necessarily take that much for this to be massively disruptive. And I think for me that the big thing, why it sort of makes such sense to me is almost from just a pure market

perspective where if you are a creator of some kind, you're, you know, God bless Patreon for existing and at least introducing the idea of sort of fan supported things. But there's no way in the Patreon model really to express extreme preference, specifically of the type that someone like a super fan of a musician is, right? If you are both wealthy and the biggest fan of DJX or DJY in the world, it's not easy to pay as much as you would for the experiences you would like, right? Sure, you could follow them on tour, but if you're rich, you're probably busy, and, you know, maybe you can, there's some kind of elite experience one-off. Whereas, you know, having this sort of uncapped thing, really, that sort of trades on the market that can be as valuable as the fans make it. It just makes sense.

It's like, there's been a market gap for that, you know? I mean, even before Patriot is even worse, it was just literally a concert ticket, you know, maybe a backstage. meet and greet and a CD is all you had to do. So, you know, I think it's a, it's definitely an area where, again, at various points, I wouldn't be surprised if now and in the future the hype runs ahead of itself, but I don't think at the end of the day that it diminishes what is likely to happen, kind of even on a smaller scale. The word fidelity definitely comes to mind, as in these NFTs, these tokens, tokens allow for a more high fidelity relationship between fans and, you artists, you know, consumers and creators. The reason why is because, you know, tokens are little

vehicles, little places to insert code into. And if you can imagine something, then you can put that into a token. And you can make different supplies of tokens. You can make different form factors of tokens. But it really gives creators the tools to create something that is exactly what their fans want. And it gives their fans the voice and the expression to return back to the creators and say, hey, we like that. Give us more of that. And so whether that is like 10 tokens for 10 fans or 100 tokens or 100 fans or, you know, it gives you as an artist or a creator so many different like levers to pull on

that they never had access to before, so many different tools of power to be able to do things that Spotify will never let you do. It will give you direct access to who values you the most. You can be much more surgical about it. And so this is kind of why I've always considered like, the relationship between NFTs and creators and their fan base as some sort of spark that can create some revolution in specifically digital culture, some new renaissance in digital culture. Because it's specifically the digital artists that are really uniquely enabled by NFTs. And so this is why I wrote this article called the digital culture revolution, which actually, I think that you read one time on the breakdown.

Yeah, I think I did actually. Yep. Let's talk about the merge for a minute. how has it gone relative to both your and the community's expectations? And I think that can be from a technical level, from a monetary kind of structural level, or it can be from a narrative level. Sure. Well, the merge went completely flawlessly.

I think I was expecting a few hiccups, but even the biggest hiccups that I kind of was expecting were not ever going to be that big. And the merge executed even more beautifully than that. It happened during a bear market, which is always like, coming out of a massive bull market, it's always a little bittersweet. It's like, damn, could you imagine if the merge had happened during the bull market?

But it is better for the foundations of everything that the merge happened during the bare market when we can be quiet and just like let this thing run for a little bit. We have this fantastic new website that almost everyone in Ethereum is looking at called Ultrasound.money, which is just the analytics platform for ether, the asset. And while we started issuing ether post-merge, because the demand for Ethereum block space wasn't

sufficiently high to burn ether, we are actually almost back down to the place where we were when we merged. So since the merge, 41 days ago, Ethereum has issued a net 1,000 ether. So that is about $1.4 million. So Ethereum has paid $1.4 million in costs to secure itself over 41 days, making it by far the most efficient blockchain that exists. And I don't think really the industry understands the magnitude of this metric. The security efficiency ratio is the most important metric in crypto. How much does it cost for you to secure your blockchain? And if you can get that as close as zero as possible,

you have an efficient blockchain. And this is in stark contrast. While we are watching these wartime fiat economies of the United States, the European Union, Japan, Russia throw their currencies at each other in a race to who can devalue their currency the most. Sometimes with actual straight-up warfare, we have this wartime economy where our economies are devaluing because of just the warring nature of nation states. Meanwhile, we have this Ethereum system that goes to no wars and secures itself with minimal costs. And so, well, one category of money, fiat currencies is losing value. We have this different category of money, which is crypto assets, which don't have to deal with any of this stuff. So the contrast here,

it's a wide thing, it's a very disparate things to connect is the wartime economies versus the Ethereum monetary policy. But when I see the juxtaposition of Ethereum securing, its global economic system for $1.4 million over 40 days versus the United States and Russia and Ukraine and Euro all going head to head over how to secure their own economies. And it's costing them trillions and trillions of dollars a day or month or whatever, the juxtaposition here, I think, is insane. It's just a matter of time before people realize that. Yeah, I think, I mean, maybe to try to bring those two things even a little bit closer just for the people who are, you know, skeptical in the audience or rolling their eyes. I, please help me here. I like big,

comparisons, too, so I'm totally down with it. I think, you know, so for me, part of the excitement about the crypto space in general has always been, you know, not these sort of overly simplistic narrative of Bitcoin or any of these, any sort of asset like this as inflation hedge per se. It's more the opt-out of the monetary system that you happen to have been born into. And that for the first time, there's these sort of things that operate natively in the internet net world that you can partially or fully opt into that get you out of, even if just in part that the sort of wherever you are, I think that what part of what you're pointing out is, or an implicit or an implication of part of what you're pointing out is that, you know,

we speak about that in the context of places like Argentina a lot of the times or, you know, Turkey experiencing, you know, kind of rampant inflation. But the reality of the sort of the broader system is that there are certain constraints and certain norms of how things are built. And I don't think you have to be sort of, you don't have to necessarily compare Ethereum as the example you used and the economy of Russia one to one to understand why having this thing that exists separately and outside of that world economy

or this world economy is incredibly valuable for individual citizens wherever they happen to be. Yeah, 100%. It's simply a matter of like the Ethereum priority is to secure a thing. Ethereum, and the United States priority is to be dominant. And the United States priorities will sacrifice the value of the U.S. dollar in order to make sure that it has supremacy. And that comes at a cost of holders. That comes at a cost of bondholders who have to bear the brunt of inflation. Where, in contrast, Ethereum, again, it's number one job. It's to secure Ethereum. And if it's doing

a good job, then holders of ether actually are rewarded. And we're seeing that in the 0.0.0. Oh, excuse me, 0.007% yearly inflation rate that Ethereum has had since the merge. And if this trend continues, this two and a half week trend continues, it'll actually start to be net deflationary soon enough. So one of the things that, you know, I end up reading a lot of analyst notes and stuff like that from Tradfi. And there's sort of two things that have rung out pretty clearly. One is surprise at how sort of without hitch the merge went.

And then second was a surprise that it didn't affect the price more. I thought that was such a crazy thing to be surprised about in the context that we're in. And also, you know, not to make a one-to-one comparison here either, but like the having is always like this as well. Anytime you have sort of these events that sort of change fundamentals kind of structures of the economics, it's not like they show up the next day, you know, as a trade. That's just not the nature of it. It's a waiting game, yeah. But anyways, I want to move to something else, though, because this is, obviously a big thing going on in your life.

Talk to us about the tornado cash suit that you're a part of now. Yeah. So, there's not too much I can talk about, but I can just talk about the white one down, right? You can abstract it and not do too much on your particular piece of the pie. Yeah. So I and many like me who have their Ethereum addresses on their Twitter handles got dusted, as in somebody sent 0.1 ether to me and many, many other people from the tornado cash address. according to the Department of the Treasury and the OFAC rules,

that makes me in violation of OFAC, which is a very serious offense. You don't violate OFAC. I was not in control of whether I violated OFAC. And I also fundamentally disagree with the concept that a smart contract on Ethereum can even be illegal in the first place. And so since someone has made me a criminal outside of my own control by interacting with a tornado cash address, the illegal tornado cash address,

As a result of that, I had to file a form about this illicit funds that I received and, like, detailing it all. I had to put it in a special wallet. Now it's like firewalls from the rest of my money and I had to file this form, send it to the Treasury. And now I have to do that process every single year for the rest of my life. So just to reaffirms, like, hey, treasury, still not a criminal. And the Treasury has said that they will deprioritize people. that got dusted in terms of going after them legally.

They used the word deprioritize, but they did not say, oh, yeah, we're not going to go after the people that illegally engaged with a tornado cash address. We're just going to deprioritize them. It was wild. This is the IRS saying you're low on our audit list. Yes. But on our audit list. But still on the audit list.

Yeah, right. And so as a result of that, and with much support of CoinCenter, all of the support, basically, I've decided to sue the Department of Treasury and Janet Yellen for making a neutral piece of technology illegal and injuring me in my time that it takes me to do this form every single year for the rest of my life. And so rather than spending 30 minutes once a year for the rest of my life, I decided to sue the Department of Treasury. In no way is this for sure. But I do see a path where the overreach of this particular set of, of sanctions end up being seen as one of the best things that could have happened, A, because of getting crypto's guard up much faster than it might have otherwise been. I think there's been a

market shift in the tenor of the conversation subsequent to the tornado cash sanctions. Two, in terms of creating a context to go have the battle in courts, this is something that I feel like over the last year, crypto has really realized that it's just going to have to avail itself of the legal system and not in an antagonistic way, just in a like, this is where decisions are going to get made. And just waiting around for everything to be kind of regulatoryly determined is not likely to work. Again, not even contentiously. Like, weirdly the, you know, gray scale suit against the SEC, I think in, you know, it's antagonistic in the sense that, you know, gray scale feels like there's a significant problem there. But it's really just trying to get clarity.

Yep. That is not available to it currently, that will. But then I think third, also in terms of you know, the specific reckoning, not just the legal precedent as relates to whether OFAC can sanction a protocol or a smart contract, but also teaching the courts and this system how to handle a fundamentally new phenomenon, i.e., a public address where you can receive something without your will, right? These are all kind of new things that it has to grapple with. it, you know, again, like I said, nothing is predetermined. It's impossible. It could go very badly, but it seems sort of like so egregious in some ways, in correctable ways, even within the framework or the paradigm of OFAC as currently established that I think that there's, there's room for

optimism there. Yeah. And there's no way I would undergo this suing of the government without a very high degree of assurance that we would actually win this case. And I think a large part of, of the crypto industry, at least like the very talented legal minds are kind of just like chomping at the bit to have the opportunity to do something like this. Because we haven't had, we haven't had any other doors open up to get clarity or get good regulation other than suing people. Like Congress hasn't done anything. We haven't pushed, we haven't pushed some sort of formal crypto bill through Congress that

we actually like. And so really the only actual doors that have opened to us are through. lawsuits. But if that's what we need to do, like, we'll do that too. Crypto people are fighters. We're going to defend our territory, and no one cares about our territory better than we do. So we're very happy to take them to the courts, and we're very confident that we know our industry better than the government does because, you know, we live and breathe in it. Couldn't agree more. And I'm excited to see what plays out with that. I will, I will see, refrain from asking you more detailed questions, but excited that you're taking it on.

as we sort of sort of round the corner and start to wrap up here, as you look out across the rest of however long this bear market is, what do you think is sort of most important for Ethereum? And then maybe same question, but for kind of crypto writ large. Yeah. I think when we hit the merge and the merge went through completely successfully and everyone was super stoked and then Ether went from $1,800 down to $1,200 as a result, people all kind of realize like, oh, this bear market is not going to be short. this is going to be long. I think that was a collective realization in that moment that this is not something that we are just going to bounce right out of. And so I think minds immediately turn to,

all right, what do we need to do? What do we need to build? And, of course, I focus on the Ethereum ecosystem most of all, simply because I think it upholds the values of this industry the best. And there are certain teams out there that are building solutions that if Ethereum had these things at the start of, the bull market in 2020, 2021, the bull market would have looked completely differently. Ethereum was not ready to scale to support the last bull market that happened.

And as a result of that, many newer chains came up that were much, you know, shinier and spiffier. And now there's like this long tail of like Alt Layer 1s, like Aptos and Suey and Sway, just all trying to do the whole like, we are the super fast, shiny new blockchain game. If Ethereum had its layer two ecosystem with its app chain, ecosystem on top of that, ready to go, D-Y-D-X wouldn't have wanted to go off of Cosmos. And people who wanted to play in D-Fi games wouldn't be complaining about Ethereum gas fees.

And so they're like, Optimism's got this OP stack, Optimism's bedrock, where we can have modular layer twos in the same way Ethereum is creating modular layer one, we can now have modular layer twos. But this is more than just a layer two. This is like people are probably familiar with layer three, but it's really more like this like tree structure that all comes down to Ethereum

and that's built with this like primitive called Optimism's OP stack, Optimism's Bedrock. And all of a sudden we have this ability for people to make chains on chains on chains to the degree that they want. We also have ZK roll-ups coming up which again super technical but in a very simplified version

ZK roll-ups produce the U-X that we would expect crypto to have if we were coming from Web 2, just as long as we build out the applications and the things to do on top of them. And so in this bear market, I think the Ethereum community is just like ready to build out all of the structures, all of the platforms needed to host an entire bull market and not let that bull market go away because we lost the energy due to an unsustainable mania. And so that's definitely what the Ethereum community is focused on. That goes all the way from the protocol layer from EIP 4844, which allows rollups to turn on afterburners to actually allowing more rollups to occur so that building on Ethereum is the easiest place to build.

And that's kind of where I expect Ethereum to leave this coming bear market is that the barriers for building on Ethereum is so incredibly low. You just won't consider anywhere else. I definitely agree that we've had this sort of, it always happens. But there's a slow acceptance process of a bare market not turning around or not having sort of a specific catalyst. Particularly, I mean, the thing that obviously makes this one different is the extent to which it is driven by much larger forces. Macro, yeah. I think even within that, though, once you sort of accept that that's the game, you kind of keep an eye on maybe what's happening with those macro forces. But still, it's not like the Fed starts to pivot and everything just rips to new all-time highs.

I mean, I guess that's plausible or at least possible. But I do think that crypto is going to need its own narrative and real catalysts, even when the macro kind of realigns, like something to get people to come back in and get excited about other than just number going up. Because presumably the number for everything is going to be going up at that time. Yeah, yeah. I kind of expect if this Fed pivot does happen, then crypto might lag behind the stock market for a while, the traditional equities market. Maybe.

I'm definitely not an expert. But I mean, people just feel hurt by crypto. Like retail's exhausted. They need time to like recharge. And we need to build new things for them to get excited about. And regardless of macro, building new things takes time. However, it does seem to be like the golden age of building. Private markets are flush with cash.

Like no team that has an idea can't find funding. And so the application layer development that's kind of going on beneath the scenes is unprecedented levels in crypto's history. Yeah. I mean, that's one of the things that I find the most sort of optimism in as well is that, you know, coming off of the ICO boom, there was no money left. Nothing. For a variety of reasons. But not least of which was that everyone kept their own money in their own token, you know, so the treasuries were a war.

But there was nothing, right? It's such a different scenario here. And obviously, you know, the money that is being plowed into new projects and new things being developed is exactly what's sort of going to seed that next round. of exciting projects. 100%. Well, David, awesome to have you on the show. We should definitely do this more often. I love getting your thoughts on where things are, but, you know, thanks for coming by.

Oh, NLW, always happy to do it, my man. All right, guys, back to NLW here. There's a ton that we could discuss in this wrap up, but I do want to hone in on this question of what we expect versus what we don't expect in bull markets. and in particular how NFTs maybe demonstrated a model of how broader adoption might work, or what tradeoffs have to be made for that broader adoption to happen. It is notable, as we discussed, that NFT communities didn't necessarily pick up or willingly accept or engage with the biases of crypto people who had been here for a cycle before.

Instead, they developed their own moors, their own conversation points, and concentrated on what mattered to them. Now, as we've discussed, we have a situation where millions, of Reddit users have discovered digital collectibles without picking up any of the old norms or discussions of NFT Twitter. There are many in the crypto community who think that this obfuscation, this powered by crypto, this crypto inside, but not apparent kind of version of crypto, is problematic. That if people don't understand exactly how to use private keys and wallets right away, and if they're not self-sovereign, if they're not bankless, right away, that somehow they're doing it

wrong. I'll only point out that the guy who started bankless was here today talking about how these things provide on ramps for people to get in. And maybe it's all part of a path that we have to go through. Anyways, I think that this idea of cultural anthropology and how it fits with crypto and what it tells us about crypto is fascinating and going to be more and more relevant in the years to come. For now, I want to say thanks one more time to David for being on the show. For nexus.io, Circle & FtX for supporting the show. And of course, to you guys for listening. tomorrow, be safe and take care of each other. Peace.