Unchained - How Coinbase Might Bring 1 Billion People Onchain Using Its Smart Wallet - Ep. 657

Starting point is 00:00:00 You can imagine how Coinbase is actually earning a lot of money from sequencer fees from all the transactions happening on base. A lot of that activity is actually bots and other people that are not going to have sponsored transactions. And so if you think about the economic cycle, like Coinbase could actually recycle those sequencer fees that are paid in Eath back to on chain apps like Moonwell. And that way they can continuously kind of fund and sponsor transactions on behalf of their users. So while I can't give specifics because they obviously can't promise anything, I do believe the gap. sponsorship will continue as long as your app is reputable and it's not like a scam or something. Hi, everyone. Welcome to Unchained. You're a no-hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started having crypto nine years ago and as the senior editor

Starting point is 00:00:47 at Forbes was the first Mainstream meter porter to cover cryptocurrency full-time. This is the June 7th, 2024 episode of Unchained. With I-Trust Capital, you can buy and sell crypto in a tax-advantage retirement account. Enjoy significant tax advantages, 24-7 access, and the industry's lowest fees. Pocod is the original and leading layer zero blockchain with over 2,000-plus developers, and the Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. Join the community at Pogo dot network slash ecosystem slash community. Deploy custom crypto strategies and boost your yield with perpetual options on VaultCraft,

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Starting point is 00:02:01 please go to conicsontera.ca. With Amex Platinum, almost every purchase made with your card can be covered with points, including new tastes, new fits, and virtually everything in between. That's the powerful backing of Amex. Conditions apply. Today's guest is Luke Youngblood, found a contributor to Moonwell. Welcome, Luke. Hi, Laura. It's great to be here.

Starting point is 00:02:25 Moonwell is one of the few apps that has access to Coinbase's smart wallet, which launched this week. Though we have covered smart wallets on the show before, let's give a refresher. How would you describe or define a smart wallet and how does it differ from crypto wallets that users have traditionally used historically? That's a great question. So first of all, Coinbase just launched publicly the smart wallet on Wednesday, June 5th, and we're proud to be a day one launch partner. What makes the smart wallet different from other crypto wallets like Metabask or Coinbase wallet is that there's no private key or seed phrase to back up. And a smart wallet is actually a smart contract on the Ethereum or a layer two Ethereum blockchain.

Starting point is 00:03:05 Now, what makes this so much better than some other wallets technologies that have attempted to solve this onboarding problem in the past, you may have used apps like Friend Tech and other types of apps that have an embedded wallet. those embedded wallets are typically secured by a Facebook or Google login, like a social login or an email login. And the private keys have to be stored by a third party. And those embedded wallets are also only connected to a single application typically. So they have some security issues and challenges, whereas a smart wallet is secured by a pass key, which is a new type of authentication technology developed by the Fido Alliance,

Starting point is 00:03:44 which includes Apple, Google, one pass wallet. and some of the best security companies in the space. And so that allows you to actually have this secure on-device private key that's in your secure enclave. You don't have to send it to a third party. You don't have to trust a third party. Even Coinbase doesn't have your private key. And then that pass key on your device actually allows you to generate a signature.

Starting point is 00:04:07 It can then be used by the smart contract to send transactions on chain. Okay. And so basically, for those of you who are familiar you, I'm sure this is like crypto lore, but if they're any newbies listening, there have been times when it's been quite well-publicized that somebody has lost their seat phrase. And for instance, there was a man in England who I think thought he had hundreds of millions of dollars worth of Bitcoin and was asking the town if he could basically comb through the landfill to look for. for things like that.

Starting point is 00:04:45 So this would resolve or prevent issues like that. So, you know, as we mentioned, though, smart wallets aren't, there may be not yet the industry norm, but they're not exactly brand new. So why are you especially excited to be working with Coinbase's smart wallet? The reason I'm so excited about being a launch partner for Coinbase of smart wallet is because, first of all,

Starting point is 00:05:06 if you think about all the friction that users face when they want to use an on-chain app, you know, maybe if you've ever had to help family members or friends, Try crypto for the first time is such a painful onboarding experience. We did some user research last year where we actually filmed people trying to use our app for the very first time. And we filmed people that were crypto natives and non-crypto people. What we found is that even crypto natives, people that might collect NFTs or something, they would load our app and then they would first hit these friction points where they would say,

Starting point is 00:05:36 I have ether in my wallet, but why can't I supply my eth? Well, it's because our app is on base and it's not on Ethereum Mainnet. Or other times, they just didn't know where to even download a wallet or how to get started. So, first of all, I'm with a smart wallet from Coinbase. You don't have to download any apps or extensions. And then the second thing that people really face with this onboarding experience, if you've ever had to walk someone through this is you get them to download Coinbase wallet or Metamask or some type of wallet. And then you immediately get stuck with this 12 or 24 word seed phrase.

Starting point is 00:06:06 And you're like, okay, write this thing down on a piece of paper, or in some secure place like a crypto steel, put it somewhere safe and never lose it, never show it to anyone. And then inevitably what happens is someone resets their phone, they lose their device, and they forgot where they put their seed praise and now all their money is gone. It's such a horrible and painful experience. And so if you think about that funnel of like users get to your app on the web, they want to try it out, they have to install something that's really painful.

Starting point is 00:06:35 They have to remember their seed praise. That's painful. They might lose it and have to search a landfill. I remember that story. And all these things are barriers to adoption. And what makes Coinbase so special is that they have 8 million monthly transacting users on the retail platform. And so they have just incredibly wide distribution. So they're uniquely equipped to make a smart wallet that can bring millions of people on chain

Starting point is 00:06:57 and actually do it in a way that's safe and secure and doesn't require friction when people are just wanting to try an on-chain app for the first time. And so just to understand the, you know, the technology behind these new pass keys. So, you know, as you mentioned, it's not something that Coinbase stores on its own servers, but it's something more just on your own device. So if I lose my device, then what happens to the assets that I have on this wallet? That's a great question. So with your device, you know, if you were to just have a single device, let's say you have a Windows PC, for example, and you just store it in the local pass key storage.

Starting point is 00:07:36 You know, Microsoft will ask you for a pin to access the storage. And if you broke that PC or lost it, you would lose your pass key. So that's obviously a bad experience. But what most people are using is something like an iPhone or an iPad or a Mac computer and or a Google Android device. And those things tend to be synchronized to ICloud. They have this thing called ICloud keychain. So what that means is when you create a pass key on your iPhone,

Starting point is 00:08:00 it's automatically syncing that pass key in a very secure way among all your Apple devices or in the same way with Google Cloud, it's automatically synchronized in a very secure way back to the Google Cloud. Now, Google Cloud and Apple cannot even decrypted themselves because it's also encrypted with your on-device key, like your biometrics, your fingerprint, or your face ID. And so that encrypted pass keys or synchronized all your devices.

Starting point is 00:08:24 So the experience for most people is that you're going to be backed up And hopefully you have at least two devices like a phone in a tablet or a phone in a computer. So it would be backed up automatically. And if you lost your phone, for example, you could just go into an Apple store, get a new phone from them. And then within minutes, your pass keys would be synchronized back from the cloud. That does introduce some trust assumptions just to be candid. For example, if someone can trick you into adding a new device to your iCloud, they would have to trick you with two-factor authentication and everything, then they could get your pass keys. Okay, yeah. And, you know, I'm not trying to give anybody any ideas, but I'm just trying to show sort of how difficult or, you know, you tell me if I'm wrong. But my thought is that let's say a hacker wanted to access those assets, they would need to basically physically force you to use your biometrics, whether it's your face or your fingerprint or whatever in order to open that wallet there. It's not like they can, or you tell me,

Starting point is 00:09:26 So what happens if they hack into your iCloud or Google Cloud? Since they don't have your face or your fingerprint, they still can't get in there, right? That's correct. Yeah. Okay. Yeah. Think about like if you've ever had to add a new iPhone or new to new MacOS computer to your

Starting point is 00:09:42 account, like what will happen is it'll send a push notification to all your other devices and you would have to like actually say, oh, I want to accept this. And maybe I want to, maybe I have to type in my I cloud password first before I can authorize that device to come on board. and they require you to have two-factor authentication with a biometric before you can even enable the syncing. So someone would have to trick you into either using your fingerprint or your face ID or typing in like your pin or your ICloud password to do that. Okay. So hopefully people understand why from a usability and security perspective, this is far superior to what has existed previously. And in a similar vein, you know, Coinbase's developer platform is actually sponsoring gas for apps like Moonwell, you know, for these launch partners.

Starting point is 00:10:29 So Moonwell can now offer free transactions. And you sort of hinted at that. Can you explain, you know, what that means, why it's significant, what problem it solves for crypto developers and users? Absolutely. So first of all, there's two big Ethereum improvements that have come to fruition in the last few months that make this possible. First is ERC or EIP 4844, which was blob storage. You're probably familiar with that. That allowed transactions on Ethereum L2s to become incredibly cheap, whether it's only like one or two cents to send a payment now or transfer like USD coin. And so that was step one. And then step two was ERC 4337 account abstraction,

Starting point is 00:11:06 which allowed us to create these smart contract wallets. Because these smart contract wallets are smart contracts, they can be programmable in different ways. And so there are two unique features of, smart contract wallets. One is called a paymaster. And a paymaster is just another smart contract that an app like Moonwell can use to sponsor gas transactions, gas fees for our users. And we can say, whenever you use in the Moonwell app, we want to pay for your transaction. This means that people no longer need to acquire ETH before they can use our app on chain.

Starting point is 00:11:37 And also other apps on base can participate in this. It's called the base gasless campaign. So if you're a builder or a developer of any app on base, go to smartwollot. dev. You can can actually apply for the base gasless campaign, which is what we did. And you can get up to $15,000 of free transactions for your users. Again, this kind of eliminates this other friction and pain point where when you first downloaded a wallet and you wanted to use apps, all of a sudden, you have to buy eth to use apps. And it's especially painful for people that want to use a socialify app or a gameFi app.

Starting point is 00:12:11 So for example, like Farcaster, which is one of the social networks, I think I saw your interview with Dan Romero was really awesome. They have a few hundred thousand users on optimism and base now. And that was always a friction point for early SocialFi apps was that, okay, I have to pay like a few dollars on Ethereum just to post or maybe even on an L2, I have to pay a few cents just to like someone's post or to repost it, right? And so by sponsoring gas transactions for your users, now it opens up a whole new world of like Socialify and GameFi type of on-chain apps that people can use and makes it

Starting point is 00:12:42 much more like a Web2 experience, you know, where you don't have to pay fees just to use the app on a daily basis. In addition, Coinbase has this cool new feature called Magic Spand. And what it allows you to do is use your Coinbase balance to do on-chain actions. So, for example, if you have Ethereum on Coinbase and many users that are using on-chain finance for the first time, feel more secure having their balance on-coin base rather than sending it to an on-chain wallet. So if you have balanced on-chain in Ethereum, sorry, on Coinbase in Ethereum, you can now do something like buy an NFT on OpenC or trade on a debt. like Uniswap or Aerodrome, without actually having to send your ETH onto your Onchain wallet, your smart wallet first.

Starting point is 00:13:23 You could also supply it on Moonwell. So this is really a fascinating feature because I feel like it's going to unlock a whole new wave of user activity, where that was also a painful experience where you'd have to find your wallet address and copy and paste it in and withdraw from Coinbase. But that kind of reduces all that on-ramp friction that we used to have with on-chain apps. So I'm pretty excited about that. All right. So in a moment, we're going to talk a little bit more about that campaign and general usability advancements. But first, a quick word from the sponsors who make this show possible. Deploy custom crypto strategies and boost your yield with perpetual options on VaultCraft,

Starting point is 00:14:00 the universal defy adapter for supercharging your crypto. With version V1.5, users can now earn options on optimism and arbitrum while also rebalancing multi-strategy yield products all in one vault. MintValtron, Waltcraft's NFT reward optimizer, to earn even more in XP points. From institutional service providers to defy DGens, anyone can deposit any asset into Valkcraft's products to instantly start earning yield on their crypto. Learn more on Valkraft.io. Pocod is the original and largest layer zero blockchain with over 2,000-plus developers. The anticipated Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem.

Starting point is 00:14:39 Upgrading the infrastructure with 8 times higher transaction throughput and twice as fast block times, tailored court time for the needs of every protocol, trustless bridges to multiple chains, and revise tokenomics with a token burn to reduce inflation. Perfect for GameFi and Defi to build, grow, and scale. Get your Web3 ideas to market fast. Think big, build bigger with PocaDot. Join the community at pocadot.network slash ecosystem slash community. Back to my conversation with Luke. As we were discussing before the break, you mentioned that Coinbase is going to sponsor gas costs for, I guess, is the first $15,000 worth of them. And what happens at that point?

Starting point is 00:15:20 You know, after these campaigns are over, then is it back to the same issues where, you know, people have to access Eath? And, you know, what are the kind of long-term plans for that? I've been having a bunch of discussions with product managers on the Coinbase wallet side and also with product managers on the Coinbase developer platform side because, you know, Coinbase is a really large company. And there's many different teams making this happen. happen behind the scenes. And what they've told me is that for apps that have a good reputation

Starting point is 00:15:47 that are onboarding thousands of new users, they're going to continue sponsoring transactions beyond that initial 15,000. And the way they're able to do that, if you kind of read between the lines, is the sequencer fees on base. So you can imagine how Coinbase is actually earning a lot of money from sequencer fees from all the transactions happening on base. And a lot of that activity is actually bots and other people that are not going to have sponsored transactions. And so if you think about like the economic cycle, like Coinbase could actually recycle those sequence or fees that are paid in ETH back to on-chain apps like Moonwell. And that way they can continuously kind of fund and sponsor transactions on behalf of their

Starting point is 00:16:26 users. So while I can't give specifics because they obviously can't promise anything, I do believe the gas sponsorship will continue as long as your app is reputable and it's not like a scam or something. Oh, interesting. And like in perpetuity or you just mean for some foreseeable future? I think for some foreseeable future, I could actually see it happening in perpetuity because BAS is actually generating more sequencer fees in ETH and revenue

Starting point is 00:16:50 or Coinbase. And if you think about it, they could generate nine figures worth of sequencer fees in a calendar year. And so it's actually more strategic for them to recycle those and help grow the on-chain app ecosystem and economy for base rather than to just keep that as like profit

Starting point is 00:17:06 on their balance sheet, right? But I can't make any promises, and you can add a credit card to your Coinbase developer platform account. So for apps like Moonwell, we could obviously continue to pay those out of raised funds that VCs have paid to acquire our token or something like that. All right. And one other aspect I just have to ask about is, you know, when you go through the user flow, you actually are just accessing a web link. And the experience of it being a so-called app is simply that you bookmark it to your home screen. And I wondered why it is that you,

Starting point is 00:17:42 or that the Coinbase wallet has made that choice rather than having it be a downloadable app. But you'll still be able to download the Coinbase mobile app. And for users that want, like maybe power users that want a full like wallet experience, you can do that. And there are some benefits to the Coinbase Wallet mobile app in that it has like an in-app browser.

Starting point is 00:18:00 So you kind of know it's a secure browser environment. It's not like using Chrome where you might have some extension that tries to steal your passwords or something. So there are some benefits to having like a full app, but there is that onboarding friction where, like, for example, in app like Moonwell, we probably couldn't get into the app store or the Google Play Store simply because we're like an on-chain finance app, right?

Starting point is 00:18:21 And Apple and Google tend to not like those type of apps. Even Coinbase has had challenges in the past with a wallet app getting banned from the app store occasionally. You know, Apple tends to not like these apps that have a wallet tied to an ad-app browser. So it's sort of a way, like the progressive web apps, which is what allows you to install our website, like link on your home screen, it's sort of a workaround to like the overbearing app store monopolies that we kind of struggle with as developers today. All right. So now let's talk a little bit more about Moonwell, which is a borrowing and lending protocol. And obviously, crypto borrowing and lending has had a bad rap, obviously after the blowups of Celsius, Voyager, Genesis,

Starting point is 00:19:02 and even some of the big borrowers like 3A, Alameda, Gemini, Eurn, etc. So I was curious why it is that Moonwell decided to focus in this area. So there's a few things. First of all, our vision is really this new world where governance and finance are powered by Web3. And our mission is to create really accessible and easy to use financial on-chain products that can be used by anyone in the world, regardless of where you live or your ability level. But what makes Moonwell different than all of those centralized lenders that blew up is that everything is on chain. It's done through smart contracts in a peer-to-peer way.

Starting point is 00:19:36 So there's no intermediaries, and it's very opaque, or sorry, it's very transparent, not opaque, like these centralized finance lenders, right? You can see exactly how much liquidity there is in all the smart contracts on chain. You don't have to trust our front end. And our front end, it just makes it easier to access the contracts. And so really, if you're using Moonwell, you're either supplying an asset to a smart contract, or you're borrowing from that smart contract. And so you know exactly how much liquidity is there. You know if you'll be able to withdraw your assets from the smart contract in the future.

Starting point is 00:20:06 And so it's a different level of, you know, sort of transparency than what you would get in the CFI lending world. And as you probably remember, during all the CFI lender blowups, the defy lenders like Avey and compound of the world, were actually remarkably stable and didn't blow up. And that's in part because of this on-chain transparency and like this lack of intermediaries. There's no like third party that can block. you from interacting with that smart contract, and it will live as long as Ethereum operates, which should be forever, a world computer, right? And when you were considering where to build Moonwell, I'm sure you're aware of that now

Starting point is 00:20:41 there's sort of a debate of raging in the cryptic community about Ethereum versus Salana. So when you were exploring your options, why did you decide to go with base? So part of the reason why I decided to go with base is because I worked at Coinbase for over three years before I left to launch Moonwell. And so I was really good friends with Jesse Pollock and the entire team there. And so there's a strong Coinbase alignment. I helped launch Ethereum staking rewards while I was at Coinbase. I was the lead engineer.

Starting point is 00:21:07 And also I just knew that Coinbase has better retail distribution than all of the other, like, layer ones and layer two is out there. And so when I heard that they were going to launch base, we were day one launch protocol on base on August 9th of last year. We were there day one. We actually redesigned our front end to make it much more. user-friendly because we wanted to make it easy for Coinbase users that have never used on-chain app before to figure it out and not use complex jargon like, you know, all these terms that you find in in Defi today. We wanted to just make it simple and have simple terms like Lend Barrow, Credit Limit, et cetera, like the things you would normally find in like a fintech

Starting point is 00:21:47 app that you might be familiar with on your phone today. And so it was sort of, you know, just the combination of the retail distribution from Coinbase, the strong Coinbase alignment, and I know so many people and good friends that have worked there. There's actually a lot of Coinbase alumni that are building on base now that we left because we wanted to build DOWs and other cool protocols on chain, and we just couldn't do it while we were at Coinbase because it's a regulated company. At the moment, Moonwell's total value locked is at about $130 million as of the time of recording. That's relatively small compared to other similar defy projects.

Starting point is 00:22:20 What are your plans for growing that? So we're actually, just to give a, by a little bit of a comparison, we're actually the largest lending protocol by TVL and by total users on base. And that's even compared to large players like Avey and compound and other base native players like seamless. But we actually intend to grow that pretty significantly. And the reason why is because we actually have this strong base alignment where we've listed the best collateral assets on base. In fact, we support all three liquid staking tokens like CBE, Lido Staked Eith, and Rocket whole ETH as collateral assets. And then we also support

Starting point is 00:22:55 Blue Shift native tokens to the base ecosystem like Arodrome. And we really have also invested really heavily over the last year in full feature parity on base. So for example, you can vote in governance on base. You can stake in a safety module on base.

Starting point is 00:23:12 And so we have the full features set on our base deployment. Whereas the other players like the obvious and compounds in our peers, they actually have limited functionality on base. It may just be a cookie cutter deployment on an L2. And then we're actually able to attract a lot more users and a lot more activity simply because we have that strong community on base and a lot of people that really love using

Starting point is 00:23:35 our app and appreciate that we have the full functionality and that we're not just a cookie cutter deployment that is like a low effort deployment, if you will. And so now that you have this access to the Coinbase Smart Wallet and to that user base, Does that change your target user at all, or does it change any of the messaging or how you think about the usability of Moonwell or just any of those aspects like the audience for, or, you know, your potential user? Good question. Yeah. So while most of our early users in 22 and 23 were desktop users, now most of our new users are going to be mobile users. And so our app functions really well on a mobile device. But we need to actually improve it and make it even better user experience for mobile. first users. And so we're going to be doing more and more of our testing, doing things like headless browser testing on all the different sizes of like mobile device screen, because we want to just make sure it's a really crisp user experience on mobile. And then just kind of leaning

Starting point is 00:24:35 into this like mobile first, realizing that most of our target audience are in places like South America, Africa, parts of Asia, where they don't have access to like a desktop computer. you know, defy has always kind of evolved around like wealthy people in America or Europe that had access to like a desktop computer and, you know, could afford to pay $50 for Ethereum gas fees, right? And now that we have sponsorship and we have we have a lot of like, for example, our app is translated into Spanish and Portuguese, also Chinese and Korean. And we really wanted to kind of lean into this idea because, for example, two of our developers are in Brazil. and they were able to do the Portuguese translation, but 40% of the Brazilian population doesn't have a bank account. And for them using stable coins like Tether and USD coin

Starting point is 00:25:24 is really enabling because they can make payments and do commerce in a stable currency that's not going to be inflated potentially like their local currency might be. And being able to do that with no fees is really a key enabler of this. And in many of those countries, people just have mobile phones. They do not have a home computer. And so we just really want to lean into mobile first because we think that's going to be the future. And that's really what's going to bring millions of people on chain is having really low-cost, like, payments, options,

Starting point is 00:25:55 and being able to, like, transact with their fellow citizens and they're in like a stable currency, like a stable coin. All right. Well, it sounds super exciting. Thank you so much for coming on unchained. Thank you, Laura. It's been great to be here. Don't forget. Next up is the weekly news recap.

Starting point is 00:26:10 Today, presented by Wondercraft AI. Stick around for this week in Crypt. after this short break. Did you know Unchained is much more than a podcast? Last year, we unveiled a completely redesigned website enriching your experience for the latest news, insightful analysis, compelling op-eds, and comprehensive learning articles and guides for beginners. Explore all this and more at Unchained Crypto.com. Did you know you can buy and sell crypto with tax benefits in an individual retirement account? I Trust Capital makes this possible. But what does this mean? When you buy crypto outside an IRA, like on an exchange, you face taxes on gains. But in an IRA, like a Roth

Starting point is 00:26:47 IRA, gains can be tax-free. I-Trust Capital also has some of the lowest fees in the industry and 24-7 accessibility. Start now and maximize your retirement savings with I-Trust Capital. Local news is in decline across Canada, and this is bad news for all of us. With less local news, noise, rumors, and misinformation fill the void, and it gets harder to separate truth from fiction. That's why CBC News is putting more journalists in more places across Canada, reporting on the ground from where you live, telling the stories that matter to all of us, because local news is big news. Choose news, not noise. CBC News. When McDonald's partnered with Frank's Redhot, they said they could put that shit on everything. So that's exactly what McDonald's did.

Starting point is 00:27:38 They put it on your McChrispy. They put it in your hot honey McNuggets dip. They even put it in the creamy garlic sauce on your McMuffin. The McDonald's Frank's Red Hot menu. They put that shit on everything. Breakfast available until 11 a.m. At participating Canadian restaurants for a limited time. Franks Red Hot is a registered trademark of the French's food company LLC.

Starting point is 00:27:59 Welcome to this week's crypto recap. Today, we cover President Biden's veto of the SAB 121 repeal. FTX's tax settlement with the IRS, Chang Peng Zhao beginning his prison sentence, Robin Hood's plan to acquire Bit Stamp, Cracken's pre-IPO fundraising, Franklin Templeton's potential crypto fund, security-related block production halts on Linnea and Cosmos Hub, Vanek's bullish ether prediction, Matterlabs' withdrawal of ZK trademark applications, Salana's surge in token launches, Black Rock's Beatle Fund dividends, Galaxy Digital's tokenization of a Stradivarius violin, and Eric Wall's humorous take on meme coins.

Starting point is 00:28:39 Thanks for tuning in. Let's begin. President Biden vetoes SAB 121 repeal. Last Friday evening, President Joe Biden vetoed a resolution aimed at overturning the SEC's Staff Accounting Bulletin, 121, citing consumer and investor protection as his reasons. SAB 121 mandates that banks and financial institutions include customers' digital assets, on their balance sheets. Despite the Senate's 60 to 38 vote to repeal it, Biden upheld the SEC's guidance. In his letter to the House of Representatives, Biden stated, my administration will not support measures that jeopardize the well-being of consumers and investors. The decision drew criticism from the

Starting point is 00:29:26 crypto community and Wall Street, who argue it limits safe custody options for digital assets. FTX settles $24 billion tax claim with IRS for $885 million. Bankrupt Crypto Exchange FTCS reached a settlement with the Internal Revenue Service over a $24 billion tax claim. The agreement involves FTX paying $200 million as a priority claim within 60 days of the implementation of its restructuring plan. Additionally, the IRS will receive a $685. million dollars lower priority claim, payable only if funds are available. The settlement amount is significantly less than the IRS's initial claim, which was contested by FTX's bankruptcy estate last December. This resolution paves the way for FTX to proceed with its plans to distribute

Starting point is 00:30:19 recovered funds to creditors, who are expected to receive a substantial portion of their claims in cash. Speaking of taxes, Microstrategie and its founder Michael Saylor agreed to a $40 million settlement with the Attorney General for the District of Columbia over allegations of evading income taxes while living in the district. Officials say the agreement is the biggest ever income tax fraud recovery in the district. Chang Peng Zhao begins prison sentence. Chang Peng Zhao, the billionaire founder of Binance, started his four-month-long prison sentence at a low-security federal prison in Lumpok, California.

Starting point is 00:30:57 Zhao, commonly known as CZ, pleaded guilty to charges of enabling money laundering via his crypto exchange and was sentenced in April. Despite stepping down as CEO as part of a settlement with the U.S. government, CZ still holds an estimated 90% stake in Binance. The settlement also required Binance to pay $4.3 billion in fines and forfeitures, with CZ personally paying a $50 million fine. Robin Hood plans to acquire crypto exchange BitStamp while Crackenway's pre-IPO fundraise. On Thursday, investing app Robin Hood signaled its intention to acquire crypto exchange BitStamp in a move that would aid Robin Hood Crypto in its worldwide expansion. The $200 million cash deal is expected to close in the first half of 2025

Starting point is 00:31:43 and is still subject to regulatory approvals. Founded in 2011, BitStamp is the crypto industry's oldest running exchange and has secured over 50 licenses and registrations globally. Johann Kerbrat, Crypto General Manager at Robin Hood, told Unchained that this acquisition move introduces the first international business to Robin Hood and is a great move for the company. The same day, Bloomberg reported that Krakken is looking to do a fundraising round of over $100 million ahead of a possible IPO next year. Although the talk seemed to be in a preliminary verbal stage, sources told Bloomberg that

Starting point is 00:32:22 Cracken is searching for a marquee company to join its board and help lead it through the public offering. Franklin Templeton Ion Crypto Fund. The information reported Thursday that $1.6 trillion asset manager Franklin Templeton is weighing launching a crypto fund that would invest in digital assets beyond Bitcoin and ether and be aimed at institutional investors. The sources cited said the firm was considering a different structure, such as an actively managed fund or an index fund, and that it was also looking at potentially offering staking rewards. Franklin Templeton launched one of the so-called newborn nine Bitcoin ETF's EasyBC, which, at 19 basis points, offers the lowest fees. It is proposed offering the same low fee for its spot ether ETF, and also intends to waive fees on the first $10 billion

Starting point is 00:33:13 in assets. Blockchain networks Linnea and Cosmos Hub, both halt block production, due to security issues. Ethereum Layer 2, Network Linea briefly halted block production following a $6.8 million exploit on Velicor, a decentralized exchange operating on Linea. The exploit targeted vulnerabilities in Velikor's balancer-style CPMM pool contract, specifically affecting its volatile pools, while stable pools remain secure.

Starting point is 00:33:43 The Linea team, alerted by blockchain security firm Hexigate, paused block production for about an hour to prevent further funds from being bridged out by the exploiter. This decision was intended to protect ecosystem participants, despite criticism from decentralization advocates. During the pause, Linnea censored the hacker's wallet address and prevented the sale of large amounts of ether. Meanwhile, Cosmos Hub halted block production for four hours on Wednesday to address a security vulnerability discovered during an upgrade. The issue, which was found in the liquid staking module, could have allowed users to bypass slashing penalties.

Starting point is 00:34:18 validators quickly implemented a patch and block production restarted once the majority had applied the fix. The new upgrade was introducing a partial set security proposal, which aims to lower costs for smaller validators by allowing only a subset of the provider validator set to secure consumer chains. Vaneck predicts Ether to reach $22,000 by 2030. Investment firm Vaneck has projected that Ether will reach $22,000 by 2030, driven by by Ethereum's disruptive capabilities and substantial free cash flows. Vanek's report highlights Ethereum's potential to transform sectors like finance, banking, payments, marketing, and more. The firm also anticipates that the recent approval of Spot Ether ETFs will provide institutional investors and financial advisors secure access to this asset. Vanek estimates that free cash flows

Starting point is 00:35:13 from holding ether will hit $66 billion by 2030, contributing to the significant rise in its valuation. Matter Labs drops ZK trademark applications. Matter Labs, the team behind Ethereum Layer 2 scaling solution, Zc, has withdrawn its trademark applications for the term ZK following industry backlash. The company initially filed to trademark ZK in nine countries, aiming to claim the term associated with zero knowledge cryptographic proofs. However, after intense criticism from other ZK builders and industry leaders, Matter Labs reversed its decision. The controversy arose from concerns that trademarking ZK would undermine the open and collaborative ethos of the crypto community. Simultaneously, Matter Labs is preparing for the ZK Sync token generation event, expected to happen sometime this month,

Starting point is 00:36:08 which includes a substantial air drop. The ZK Sync token, ZK, will have to be a new time. It's a have a total supply of 21 billion tokens. What's interesting and somewhat worrisome is that at current pre-launch prices, a 10% air drop of the total supply could be valued at over $1.3 billion, almost double ZK Sinks's current total value locked of $883 million. Over 450,000 tokens were launched on Solana in May. In May, the Salana blockchain witnessed the highest number of new token launches ever recorded, with 455,000 tokens created. This figure more than doubles the 177,000 tokens launched on Ethereum layer 2 network base, and far surpasses the under 20,000 tokens launched on Ethereum and other popular layer 2 networks, such as optimism and Arbitrum. The surge in token

Starting point is 00:37:04 creation includes many meme coins. Celebrities such as Caitlin Jenner, Iggy Azalia, and Rich the kid join the trend, launching their own tokens on Solana, which have experienced plenty of volatility. On Tuesday, rapper Iggy Azalia's mother token hit a $108 million market cap. Meanwhile, Brett, a meme coin inspired by Matt Fury's Boys Club comic, became the first meme coin to reach a $1 billion market cap on the base network. Despite facing allegations of insider trading during its rollout, Brett saw its price jump nearly 130% in the past two weeks. On Wednesday, Ethereum co-founder Vitalik Boudarin expressed dissatisfaction with celebrity meme coins because of their financialization, and he cited the 2021 Stoner Katz NFT collection

Starting point is 00:37:52 as a better example of celebrity involvement in the crypto industry. Black Rock's Beetle Fund distributes $1.7 million in monthly dividends. Black Rock's USD Institutional Digital Liquidity Fund, also known by its Ticker Beetle, has distributed nearly $1.7 million in monthly dividends to fund its holders on Ethereum, marking a 38% increase from the previous month. The distribution saw 11 wallet addresses receive an average of 151,735 beetle tokens each. The largest recipient, Ondo Finances crypto wallet, labeled OUSD Instant Manager on Ether scan received 700,280 tokens representing roughly 42% of the total dividend.

Starting point is 00:38:39 The Beetle Fund, with a market cap of $462 million, constitutes nearly a third of the total $1.45 billion tokenized treasury products circulating in the crypto ecosystem. Galaxy Digital tokenizes an over 300-year-old Stradivarius violin. Michael Novagratt's Galaxy Digital has tokenized a 1708 Stratory. Badaverius violin owned by Anamoka Brand's co-founder, Yat Su, valued at around $9 million. The rare instrument once belonged to Russia's Catherine the Great and marks a significant advancement in using blockchain technology to unlock the value of unique real-world assets. According to Galaxy Digital, CU is using the tokenized violin as collateral for financing.

Starting point is 00:39:25 Novagrats highlighted that this move not only preserves the violin's legacy, but also sets a precedent for managing and trading high-value assets in the digital economy. Time for fun bits! Eric Wall's take on meme coins. In a hilarious post on X, Eric Wall shared his experience seeing Caitlin Jenner post a promotion for a pump and dump coin. After warning others about the scam, only to be dismissed as a boomer unfamiliar with Instagram filters,

Starting point is 00:39:53 he then spots Iggy Azalea's mother coin. Two years ago, I had predicted this, he says. Simp queens and memes. coins go hand in hand. Back then, he says, he knew that one day he would see a simp queen who understands Web 3. When Iggy speaks, I hear that it's her. The mother ticker is genius. When you read it, it says Smother. It's a reference to her twerking ass. It's brilliant. I am baffled. I am amazed. Unfortunately, our hero ends up sidelined in his attempts to purchase the coin, and he watches in frustration as mother skyrockets. And that's all. Thanks so much for joining us

Starting point is 00:40:29 today. If you enjoyed this recap, go to UnchainedCripto.substack.com, that is Unchained Crypto.com and sign up for our free newsletter so that you can stay up to date with the latest in crypto. Unchained is produced by Laura Shin, with help from Matt Pilchard, Juan Aronovich, Megan Gavis, Pam Majumdhar, and Margaret Korea. The weekly recap was written by Juan Aronovich and edited by Kari McMahon. Thanks for listening. Unchained is now a part of the Coin Desk Podcast Network. For the latest in digital assets, check out markets daily five days a week with host Noel Atchison. Follow the Coin Desk podcast network for some of the best shows in crypto.

Unchained - How Coinbase Might Bring 1 Billion People Onchain Using Its Smart Wallet - Ep. 657

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