Unchained - The Chopping Block: Code, Chaos & Consequences — What the Balancer Hack and Rollback Debates Mean for Crypto’s Future - Ep. 941

Episode Date: November 6, 2025

Welcome to The Chopping Block — where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner chop it up about the latest in crypto. This week, the crew breaks down DeFi’s Black Friday: a brutal week that saw the $120 million Balancer v2 hack, the collapse of Stream Finance, and a market-wide panic that reminded everyone — nothing in crypto is risk-free. They dive into how one of DeFi’s oldest, most audited contracts failed, why smaller chains froze or rolled back transactions, and what it means for decentralization as Berachain, Sonic, and Polygon took emergency action. The panel debates whether the Balancer attacker used an AI “vibe-coded” exploit, how Ethereum might one day face its own rollback dilemma, and why privacy chains like Zcash may be the last true cypherpunk strongholds. In the second half, they unpack the off-chain losses behind Stream Finance’s XUSD blow-up, the contagion risk across Euler, Silo, and Morpho, and the hard lessons for “yield-chasing” DeFi vaults. The gang closes with advice for founders weathering the storm — from Tarun’s “cockroach mindset” to Haseeb’s reminder that crypto’s long-term fundamentals haven’t changed. Whether you’re building in DeFi, securing smart contracts, or surviving the next credit unwind, this episode lays bare the harsh truths — and enduring resilience — of crypto’s frontier markets. Show highlights 🔹 Market Meltdown Post-“10/10” — The crew dissects October 10’s liquidation shock, lingering rumors about blown-up market makers, and why confidence cratered despite steady fundamentals. 🔹 ADL & Forced Sellers — What auto-deleverage events signaled about thin liquidity and whale-driven order books across perps venues. 🔹 “Nothing Is Risk-Free” — Haseeb’s reminder that there is no crypto “risk-free rate”; even delta-neutral and staking carry hidden smart-contract and market risks. 🔹 Balancer v2 Hack, Explained — Why an OG, heavily-audited E-Pool contract still failed; $120M+ impact across chains and the psychological hit to DeFi’s “battle-tested” narrative. 🔹 AI “Vibe-Coded” Exploit? — The team debates whether attacker logs hint at LLM-assisted discovery vs. expert-guided coding—and why the doomsday “one-shot” scenario isn’t here yet. 🔹 Freeze/Rollback Firestorm — Berachain halted, Sonic froze the attacker, Polygon censored transfers; the panel weighs user protection vs. decentralization purity. 🔹 When Would Ethereum Roll Back? — A thought experiment: is there a loss threshold (e.g., LST or validator-level failure) where even ETH would contemplate extraordinary action? 🔹 Privacy Chains as Last Bastion — Why true no-rollback, censorship-resistant values may persist most credibly on privacy smart-contract chains. 🔹 Builder Mindset in a Doom Cycle — “Be a cockroach”: ignore price, conserve runway, keep shipping; sentiment flips in crypto faster than in any other industry. Hosts ⭐️Haseeb Qureshi, Managing Partner at Dragonfly ⭐️Robert Leshner, CEO & Co-founder of Superstate ⭐️Tarun Chitra, Managing Partner at Robot Ventures ⭐️Tom Schmidt, General Partner at Dragonfly  Timestamps 00:00 Intro  01:01 Market Carnage & Sentiment 04:42 Speculations & Rumors: Wintermute vs. Binance 08:34 Builders’ Advice: Survive & Ship 23:11 Balancer V2 Hack: Berachain & Sonic Labs 28:28 Defi Confidence Shaken Hard 33:26 AI “Vibe-Coded” Exploit Debate 36:18 Rollbacks, Freezes, & Chain Ethics 40:13 Future of Decentralization 48:55 Stream Finance & XUSD Collapse Disclosures Learn more about your ad choices. Visit megaphone.fm/adchoices

It does feel like the kind of one-to punch of reminding people that nothing in crypto is risk-free. Right. We've kind of gotten a little bit fast and loose with the idea of like, oh, it's like the quote-to-quote risk-free rate in crypto. It's like there's no risk-free rate in crypto because there's always risk. Not a dividend. It's a tale of two-fonds. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways.

I'm in the trading firms who are very involved. I like that eat is the ultimate policy. D-5 protocols are the antidote to this problem. Hello, everybody. Welcome to the Chopping Block. Every couple weeks, the four of us get together and give the industry insider's perspective on the crypto topics of the day. So quick intro is first you got Tom, the Defy Maven and Master of Memes. Hello, everyone. Next we got Robert, the Cryptoconassur, and Tsar of Super State. Good evening. Next to you got Tarun, the gigabrain, and Grand Puba and Gauntlet. Yo. And I am a Cive, the head hype man at Dragonfly. We're early-stage investment in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see Chopin Block. XYZ for more disclosures.

So boys, the people are hurting. It is a really rough market out there. It's been a few days in a row of just complete carnage in the markets. And Tarun, you were telling us that you hate doing these kinds of shows. Why do you hate doing these kinds of shows? The people need to hear from you, Tarun. Why do you not want to bring them your love and your energy? This is the show where Tarun is the expert on everything that's gone.

The most need to hear from us. I think I wish it was like recorded tomorrow, not today. I need the one day. I need the one day of a little less craziness. Give us, okay, give us just a sense of like what your day, because today we're recording this on Tuesday. Tuesday, massive market wipe out. So I have to imagine there's a lot of stuff going on for you at Gauntlet.

Give us a sense of like, what has today been like for you? Well, I think a lot of it was just the market kind of repricing risk very quickly when they realized certain things were like less solid than they thought. I think the main, you know, I think we're going to talk about both the balancer exploit and the stream finance exploit. And the interesting thing is they both had the same impact on users liquidity, but like for very opposite reasons. And I think the, the balancer one was like,

it kind of shattered people's long-term beliefs. And the stream one shattered people's short. short-term beliefs, but they both kind of have the same outcome. So I won't front run before you explain all of this. But I think the thing is they compounded, right? It's like people's near-term optimism and their long-term optimism both broke in a span of two days. That's like kind of how I would say that.

And that just means people were pulling money from the market aggressively. Now, I think the other thing is like, if you think about 2022, Luna was like April, May, three arrows was like around like a few weeks after at Celsius like a month after or whatever and then FTX was like three or four months after dominoes so it's kind of yeah i might be slightly off sorry long day but like something like that like that right so there there's a gap and of course you know a little under a month ago was the the big liquidation day and i think this is the repercussions of that yeah it was just yeah the repercussions of that in some sense So yeah, with that, I'll let you introduce some stories because I don't want to

because I'll save this for after as sequential. Yes, yes, yes. Before we get into the micro, I want to start with just the macro picture because I think it's important to just understand Bitcoin now has dropped below 100K. It's now sitting around 100K. It's holding onto that level, but it went below to 98K at one point during the day. Ether, of course, has drawn down, you know, just a month ago. It was barely touching 5K.

Now it's at 3,300. so ether is just getting destroyed, the debts are doing terribly, massive sell-offs across all alts, so many alts are down 50, 60, 70% over the last month and a half. So it's been a bloodbath across the market. And what I'm seeing more than anything

is this just sense of confused capitulation is that I don't think people think that the environment has gotten that much worse than last month and a half. I don't people think that the fundamentals have gotten that much worse in the last month and a half. but just the confidence in this market

has seemingly totally eroded in the span of just a month and a half. And so many people are speculating, okay, why is this happening all of a sudden? To To Rune's point, some people are speculating that on October 10th, now deemed 1010, also called Black Friday, the single largest day of crypto liquidations in history,

we talked about it on the show, that perhaps there was some destruction that took place on that day that was not disclosed and that we're now finally seeing. Right? So whether it was loans that came do or people getting, you know, positions getting unwound or paid back or something.

One of the, one of the constant rumors that keeps circulating is that different market makers are dead. So people are claiming that winter mute's dead. People are claiming Salini's dead. People claim that all these people are like kind of zombies walking around, dead men walking. And there was one really bizarre drama that's been circulating or this rumor that's been circulating that, um, that winter mute is trying to sue Binance. I heard that one.

It started going super viral and freaking out tons of people in the market. later CZ and Evgini both publicly denied that this was happening but there's just like all this craziness going around people are very willing to believe anything maybe we should have had him as a guess

that would have been funny this week he's been very active in trying to dispel the drama that's been swirling around it maybe he's a good guess I'm obviously I'm open to having him back on he's a great he's always an interesting person

in chat about in markets like this but like people are people want a story I think that's what I'm seeing most of all people want an explanation of like what the fuck happened and if there's like okay this guy these two titans are fighting or they're with this guy exploded and the his guts and internals are flying everywhere but we don't really have a story yet right well I mean everyone sees the on chain and transparent things that occurred especially going back to the beginning of October which is prices crashed massively. Somebody was a massive four-seller.

Ugly things happened all at once. And we've been left wondering for basically a month now, who did those extremely ugly things happen to and where did it originate from? And so I think that's like the catalyst of a lot of these rumors, which is like everyone suspects a market maker had something horrific happen. It must have been a big market maker, right? It knocked down the price of pretty much all, all's like 90%. really bad things happen and there still has not been an explanation or somebody fessing up to it

or somebody taking blame or credit for it. So, you know, I think that's just why people are still scratching their heads and like playing parlor games of trying to figure out like, oh, is it Wintermute that got screwed by Binance and now they're suing Binance or is it, you know, Captain Mustard in the parlor with the candlestick, you know, like we're all just guessing. Yeah. The unfortunate thing is that the only market maker that CryptoTwe seems to know is Wintermute. So every story about marketmaker is always about winter mute, never anybody else.

And now we do know there are like, it's been disclosed actually that there were some big market makers on hyperliquid who definitely blew up, who definitely got ADLs or lost tons and tons of money. But these are not like the big market players, you know, sort of the people who are providing all the liquidity on finance and on, you know, OKX and buy it and so on. There we still don't know. Now, to be clear, it's pretty normal in a market blow up that you don't actually know who got hurt straight away, even in traditional. finance, it takes time for these things to become clear. And of course, everyone's incentive is to say, I'm fine. Nothing bad happened, especially as they're going and trying to unwind positions, they're trying to go get loans, or whatever it is, they need to paper over liquidity, or to try to, you know, make best of a bad situation. But I mean, the other side of this is the sentiment among

builders right now is really terrible. And I'm seeing it also extending to new token launches. So, huge amounts of bearishness about Monad, about Mega-Eath. I'm seeing it also starting to happen to some of the new perp-dexes, is that people are just like, why would anything new ever launch? Why would anything good ever happen again in crypto? Like, everything's cooked. All this was worthless. So I'm seeing that sentiment really starting to come back in again.

How are you guys talking to founders about this moment? Turun, as a founder, you were saying that a lot of people are approaching you, asking you about this. Well, I just think it's like, I just think it's like, I feel like in the last seven years, I've seen more than seven blowups. So I guess like, you know, that's that's kind of like a reason. I think like the main thing is, A, a lot of people are not used to the very fast nature of how sentiment flips in crypto. I think like especially in other fields, you know, when sentiment flips, it takes a long time, whereas in crypto it can like compound really quickly.

and I think this reminds me a little bit of like NFT people in 2022 right like they probably first ever use Ethereum or Solana in like April 21 or March 21 and then a year later they're just like oh the world is over right and I feel like this cycle's equivalent of that is like maybe the meme coin people maybe kind of like people who are kind of got in because of the Dats and stayed for the chain afterwards.

I don't know how many of those people really exist, but there's certainly people on, there's people on crypto Twitter who love pontificating about the impact of deaths on usage. But whoever they are, they're just kind of like, they mainly came out of a wealth effect and then just kind of like counted their eggs before they hatched

and then suddenly kind of gotten that. But in reality, like, you know, a lot of crypto companies that have succeeded because they've just kind of been cockroaches. And you know, I know Jamie Diamond used the word cockroach in the other way recently, which is kind of a duel

to the crypto thing where he said like and like a bunch of bank stocks went down on him saying this, but he was like oh yeah, you know, like regarding a bunch of private credit failures that happened recently. He was like, oh yeah and like, you know, when the cockroaches come out there's always more than one.

But I'm using cockroach in the other sense, which is, you know, surviving. We survived the holocaunched. Yeah, yeah, exactly. And I think the main thing to remember is like, survival always makes you stronger. Giving up at the bottom is always like the easiest thing to do. But oftentimes the most hindsight regret.

And so I think that's kind of why I just tell people is like, hey, it's bad, but like things encrypted, just as fast as things crash, things can go back. Like, you know, for instance, I could totally see the sentiment flipping by December. Like this this sort of feels a little bit weird like almost compressed cycle compared to compressed like doom cycle compared to last time. We're like last time I really.

Training advice. It's not trading advice. I'm just saying it. It feels more compressed. You know, we were having. I was bringing up the timelines of the, the FTCX kind of wipeout. And the weird thing is it feels like the wipeout this time was like less retail users who got locked in and more market makers.

It's like that that's sort of the weird difference is like it seems like it, yes, retail took losses, but they took losses and dats and meme coins and stuff. And then somehow the like leverage traders really took the losses this time. So there's something kind of different qualitatively. And I just don't, I don't have it. I need to sleep for a night. And then I can probably have a more divine answer for you. I mean, I more or less agree with Turin, which is like,

I think this is like an excessive, unnecessary level of bearishness. Like, you know, historically, whenever there's been, you know, a market crash, it's, uh, was it like things, not the things that you know that hurt you. It's the things that you know that just ain't so. And like, there's always some built up leverage in the system. No one knew about. No one saw. And it's like, oh, all that, then all the cockroaches come out.

And like, that's ultimately what causes this, this kind of cascade across any sort of market failure through history. Like 1010 felt like it was very weird, like, wankish, idiosyncratic kind of event where it was like, oh, people explaining like why ADLs were happening and like, oh, it was like this specific asset on this specific exchange, but it wasn't like, oh, there was this thing that was all this hidden up leverage built up in the system that no one sort of knew about. And then again, if you, and obviously there are also like some macro headwitness like, you'll get gold's been

selling off and like, you know, people maybe are expecting, you know, more cuts or more devish fat. Like there are, you know, obviously like some minor headwinds. But when you zoom out, like, I think so many of the products and, and companies in the space that like don't just rely on pure reflexivity and sort of selling infrastructure to people in a gold rush or relying totally on volatility to sort of sell, you know, trading platforms and trading instruments. Like those products are doing really well. I mean, I think someone posted today on Dune, like the rain volume chart where investor in rain and like, it keeps going up into the right. People want to keep using stable coins and paying for stable coins. And like, great. Like that has

nothing to do with anything else going on in space. So I think you get like in many industries, people kind of get tracked and they think this is the playbook I'm going to follow. And if I follow this playbook, I am ordained to have success. And I think this is kind of a wake-up call that, like, you can't just sort of follow a particular playbook and be guaranteed success. I'd say the weird thing about this market. So if you remember 2022 when you had the sort of parade of terribles of terror collapsing, three arrows collapsing, and then eventually culminating in FTX collapsing.

In 2022, it really felt like a morality tale, right? It really felt like everything bad that happened, there was almost like some sort of human attributable sin that you could point to and say, okay, this is where we fall in. This is sort of the error of our ways. You can point out who did something wrong. Was the sin greed?

Because like terror was the origin of the dominoes in a big way. Right, right. Is the original sin people got too greedy with terror? And hubris. Like the cockiest people were the ones who blew up. Yeah, the hubris, hubris was. Exactly. Bill Clinton was at a crypto conference.

That's right. That's true. Bill Clinton was just bumping SPF. Yeah, exactly. It's like the meta narrative is that we got ahead of our skis. We believed in the impossible and like we allowed ourselves to play God and then, you know, like you can't just rebuild a dollar without any collateral in it. So everything sort of felt like it was our fault, right?

And there was some clear morality tale behind it. I don't see anybody in this market downturn being like, oh, Tut, Tut, I told you so. clearly you guys shouldn't have done this and this is the reason why everything went so wrong. It's like maybe you can say, okay, there was too much leverage or oh, there's so much looping. You know, there's there's too much unsuraciness about the risk of some of these assets. And people have talked about that. But the things that blew up are not really the things that were necessarily at the heart of these things. Right?

It's not like, oh, Athena blew up and that's, there's your hubris. We told you so, you know, you guys shouldn't have been relying on this. It was more like, oh, you know, this like random, you know, XU. I didn't even know what XUSD was before hearing that it blew up. Yeah. I heard about it. These are tiny. Yeah,

I heard about it like a month ago and I was like, it's not worth studying. Right, right, exactly. We'll talk about the microstructure of what exactly went down. But the same thing is like, you know, ADL. It's like we all learned a new term. Or, I mean, not all of us, but, you know, for many people, it's like, there's a new term that I just heard called auto-de-leveraging,

which is like, what is that? And we have to like explain this very complex micro, sort of market minutia. this is why things went so badly. It's a lot of it, it feels in character very different than what 2022 felt like. 22 felt much more like an indictment

of the industry, of risk practices, of like the unrealistic, like, sort of unrealistic expectations that we had on the industry. The thing that's so striking now is that fundamentals

are actually really strong. You know, on-chain metrics look really good. Stable-clan adoption continues to grow. That's like the big meta-narrative that is exciting everybody. it's continuing to happen. There's no inflation of narrative that's going on there.

Like, it's real, all of it's real. And people are using these chains. I mean, I'll give you an example. I went to a fintech conference last week, money 2020 in Vegas. And like literally every person there was saying the word stable coin. I'm pretty sure 90% of them had never even used one, nor totally knew what the word meant.

But there was so much hype that all fintechs are going to suddenly become cheaper cost-wise, because they're going to have to, they can get rid of their correspondent banks and, like, use stable coins instead. They all become stable coin. Yeah, yeah. I think, like, this is maybe an episode in the future of, like, do stable coin issuers and neo banks just become the same thing eventually? But, like, that's kind of, that's kind of the pitch that they're all making to you. And that stuff is so divorced from, I don't even think those people knew what a perpetual future was. But even if it's not divorced, right? Like, look at defy. DeFi volumes and, like, perpetual, like, they're working. It's huge. They're making tons of money. They're still making tons of money. Lesherner was shaking his head, but I didn't realize that fintech is more of a scam than a lot of other fucking industries.

I met payment providers that were vertical payment provided for some particular field. And most of it just turned out to be like there's some monopolist who charges you to send them a bill. And like you pay this payment provider to send the bill on your behalf instead of you sending yourself because there's some weird fee or regulatory thing. And I was like, this is just such a scam. Like if it was on chain, this would never happen. No, that's true. So, I mean, look, crypto is like actually better. We're like actually delivering the better experience now

relative to a lot of the stuff that we've been talking about for so many years. And now we can finally bring the receipts of like, oh, look. Yeah, I'm just saying like this conference was going somewhere where none of these people had ever really, maybe they had like a phantom wallet and bought a meme coin or used a stable coin once. But they like, perpetual future was like definitely not in the real. vocabulary. They were definitely very like, you know, didn't know anything about crypto, but we're like saying the word stablecoin 500 times in the sentence. Totally, totally. So the thing that strikes me and probably what I'd reflect to people who are listening who are feeling dejected or unmotivated

or who are worried about their prospects in the industry, like Turin said, this shit happens all the time. If you're in crypto long enough, you will see the vicissitudes of fast money in, fast money out. the long-term trend of crypto is obviously going the right way. Like, I've never felt more vindicated about my decision to be like, yo, I really think crypto is going to be a big deal when I got in this industry seven years ago. Like, it's so obvious now compared to what it was like when the four of us came into this industry. This industry was a joke when we first came into this industry. We were like the four of us were people who were derided by our friends.

They thought we were making bad life choices. They thought we were throwing our careers in the trash. And now it's like, oh, okay. You know, Bitcoin's below 100K. Oh, my God. You know, it's like flat on the ear. Oh, no. I remember getting sent a lot of emojis of, of, of, like, clown faces on March 12th, 2020 when Bitcoin hit, like, 3K for, like, the one hour.

During COVID, you were getting clown emojis from your friends? For, like, for leaving, for leaving, for leaving. The S-T-500 was down, like, 30%. Yeah, yeah. I know, I know, I know. That's what people were doing is, like, bullying you when COVID was like, I'm sorry, man, the world economy. That's sad.

Well, because they were just kind of like, oh, you quit for this. Like, that's kind of the... I think whereas now it's like less of that. I mean, I also just feel like people's attention spans are also, like, lower. Now you laugh at them, though, because you've built multiple successful endeavors in the crypto ecosystem between godland and robot ventures. Yeah, I know. It's not that I care about the shot in Ford out or not.

in like the, no, no, no, but I, I do think there's kind of this thing where like, it is a lower risk thing in some weird ways to go into crypto full time than it used to be. And like, that seems to be marching up, like the risk level keeps marching down. That is true.

That is true. I think if you came into this industry and you were like, hey, crypto's really safe now. You've got all these big companies in the game. You know, it's like super prestigious and, you know, whatever. Maybe it's a very different experience for those people. because they didn't feel like they were taking a career risk, and now they're feeling a bit punched in the teeth, having this crazy volatility going on

and prices whipsawing and so on. And I feel that. Honestly, my number one advice would be, if you're working in a startup or yourself building a startup, you're a founder, just keep going. Like, ignore prices, check prices less often. It doesn't really matter. It doesn't really affect what you should be doing day to day,

unless you're, like, curating DFI volts, in which case, you know, you're competing with Teroon. for the most part, what's going on in week-to-week price action does not affect your decision-making. It probably does mean you should tighten your belt. Probably does mean you should be more cautious around spend because, you know, markets are going to equilibrate and, you know, venture financing and all that other stuff. It's going to come in line with public market prices because it always does. It takes some time, but it eventually does.

The main thing is just that, like, the fundamentals are there for pretty much everything. There's nothing I've changed my mind about in the last two months, about the trajectory of crypto. Still bullish on defy, still bullish on prediction markets, still bullish on stable coins. All the stuff that I believe before, I still believe all of it. So as an investor, my thesis has not changed one iota because of what happened the last couple months. I mean, actually, I think the prediction marketing is the funny thing because, like, I honestly

today didn't open the news all day to look at the mayoral election. I literally only looked at polymarket all day. Right, right. And like, I feel like, you know, I just think about like December, 2024, or whatever. It's like, oh, prediction markets are all dead. No one's going to use them again. And then I was like, I feel like, there's something also about this time versus 2022 where like you didn't feel like there was some moral bad that occurred, you know,

like, or like moral or ethical bad. It feels like people got drunk gambling more than like morality, if that makes it like. At least that's kind, that's kind, maybe that's like, maybe that's, you could view that a form of jadedness or a form of just like, well, this is like comparatively. It's not really that crazy. Right. Okay. So let's talk micro. So one of the big stories this week has been the hack of Balancer. So Balancer, it's a multi-dimensional automated market maker. So it's basically this automated way that you can trade different assets in one big combined pool on chain. Now, the thing that got exploited, the contract was Balancer V2. It's actually not the newest version of

the contract. It's quite an old contract. It's an OG. Very OG, very OG contract, but it's been very highly vetted for it to a cajillion times. One of these things that people did not assume that there were going to be any issues with it because of how many eyeballs have been on this contract. It's part of the reason why it has rattled so many people. So in total, over $120 million was stolen out of Balancer across multiple chains. So this is one of these contracts that's been forked and remixed and put onto multiple different assets, or so put on multiple different chains with many, many different assets. So on ETH, $70 million was hacked,

base 3.9 million, Polygon, $120,000, arbitramed 6 million, Sonic 3.4 million, OP, 300K, and Barra chain, which was, I think, the single largest outside of Ethereum, had $12.8 million. Now, different chains had different responses to this hack. So one of the things that we saw was that many chains, especially some of these smaller chains,

they ended up freezing the attacker in place in some way in order to prevent them from running off with the funds. So Barra Chain actually shut down the entire chain. So Barra Chain was relatively unique because Bear Chain has some of these Defi primitives baked into the chain itself as first-party primitives. One of those is a balancer fork.

And because of how deeply it was going to affect everything within the bear chain ecosystem, they shut down the chain, and within 24 hours, I believe they froze the attacker's account, moved the funds from the attacker into some protocol vault, and then, you know, whatever, they kind of turn everything back on, try to minimize user harm. So Barretain is now back up and running, but they completely shut down the chain.

You saw Sonic actually froze the attacker's account and zeroed out his balance. Polygon, it was reported that Polygon started censoring the attacker to prevent them for being able to move with the funds, but the chain continued operating as normal. So you had a lot of different things happening from these chains that people started discussing about, hey, what does this mean for decentralization? What does it mean for code is law? this idea that, you know, you should be following the code, you should not be having these abnormal state transitions just because something bad happened. And the big thing that scared

people was the size of the hack, but also how many people assumed that this is one of the most battle-tested contracts in defy. Now, you know, it's not Unitswap, obviously way, way, way smaller than something like Unoswap, which is the majority of how Spot trades on chain. But Balancer is an OG. And having a protocol like this gets hacked really shook a lot of people's confidence that is the core primitives that we have behind defy are they as battle tested and robust as we once thought that they were you know i want i want to caveat all of this was saying you know again bouncer v2 much much smaller than balancer v3 and a very old contract so this is not where the majority of value or the majority of work in balancer has gone but it's still a big blow

in defy to have an event like this of so much funds getting hacked and lost so over 70 million remains with these attackers and um tbd on whether or not there's going to be any recovery for the people who are LPing into a balancer v2. So reactions on the balancer hack. Yeah, this one, this one stings a bit, just because this is code that's been around a long time that has seen a lot of eyeballs, right? This is not untested. This is not something that people had expectations, that it was beta, that it was

like use at your own risk, that had 50,000 percent APYs because no one knew how it worked yet. This is an old system. And it just goes to show. how complicated solidity can be, how complicated the administration of different protocols can be. I think more than anything, this should be a wake-up call to the newbies, not the users, but the developers and the founders that haven't really gone through the scary times of protocol security as much as a lot of people used to.

If it can happen, the balancer can happen to you. And so, please, everyone who writes code that, manages money and assets, please, please, please, please, please, please, please, please, please, please learn from Balancer and that this is a team that always was doing it right, and they still had a vulnerability that was exploited aggressively. So part of what was scary about this exploits are two things. One was that this is like, this is not like edge Casey code, right? This is like the ETH pool.

Yeah, this is the one that got exploited. The heart of Balancer. Exactly. It's like the heart of balancer. It's not like, oh, in this very, very weird situation. there was like an edge case that allowed it to get exploited. The second thing that's also that's kind of scary about this is the attacker, you can see in the smart contract in the transactions that there were transaction logs that the hack outputted that were like

starting attack, breaking invariant, invariant ended, now entering into second phase of attack, which really looks like vibe coding. It's like the kind of thing in AI would output. Like we've never seen an attack that has logs like this before, which implies to many people that they think this might have been the first vibe-coded defy hack. Possibly. Now, it's not, it's not, it could also. Okay, so there's two parts of this. I feel like there's one that's slightly more sensationalized, which is like the, there

was full discovery, like, of the exploit via, you know, just like querying a language model repeatedly. But then there's a question of, like, if I have an idea for an exploit, having it write the code and improve it. And the latter actually still requires the person who is asking it to be like an expert in the contract code and have enough of an understanding of like the behavior of the system. Whereas the former is like anyone could do it. Right. And it could be like, hey, find me an exploit balancer, right?

Like that's your query, right? That's sort of the doomsday case. And all I'm saying is I think everyone jumped to that. And I don't think it's like 100%. We don't know. We don't know. We don't know. We don't know.

We don't know. We don't know. We don't know. We don't know. 50 iterations of GPG5 Pro to see if it could find a bug and balancer. Yeah, well, I will say a lot of people since this have been trying to figure out if they could doomsday, one shot doomsday. And I think I have seen a lot of failed attempts at trying to replicate from that. So I think like there is a little bit of, not saying it won't happen in a year.

I just think like we're kind of a little before the horizon. Yeah. So overall thoughts on the hack to run. I mean, kind of crazy because it's such a highly looked. after contract, like, you know, had tons of audits, tons of people integrated it in their consensus, like the Barrechain case, right, where it's like basically touching the validator and set, kind of viewed as sort of a workhorse in the sense that like uniswop v2, like philosophically, I would say, balancer v2 went a direction that was like uniswop after v2, uniswap v2 was like,

hey, we're actually going to make LPs actively manage. And I think there was a while where people are really like, no, no, no, no, we really want to have full passive liquidity where like someone can LP and not have to constantly be adapting their strategy. Now, I think the world has obviously moved past that. But at that time, Balancer was like, we're going to keep supporting that. And Balancer V2 was like the workhorse contract for like tokens with a low float that people were launching.

And as an alternative to UNSOPV2, it would have. a few new features like better reward distribution and better curves for for pegged assets like or like approximate well not pegged is the wrong word but like assets that tend to trade close to a target like a staking derivative and so i think it was kind of this like workhorse contract that i think a lot of people have a lot of respect for because it survived and it did have billions of dollars in over time and I think a testament to how trusted it was was one of the largest losers of funds who lost around $42 million of the $70 million was a very famous address in Ethereum history, which is the seven sisters or seven siblings addresses.

And they're sort of like, you know, on-chain have these billion-dollar addresses or near-billion-dollar addresses and multiple of them. And they have survived every crash, right? Like when Maker was crashing on March 12th, 2020, they were the ones bidding in the MKR auction to make Maker solvent. They bought, like, they were the largest buyer, right? So since the ETH ICO, I think they have been kind of one of the largest liquidity providers in D5 period. And they even got hacked.

And they've avoided a lot, like a ton of stuff. Like, they've basically been untouched. And the fact that they got hit is a sign that, like, even the people who've been providing liquidity in Ethereum before Uniswap, like ETHO, EtherDeta era, even those people got hit on this, which is sort of a, that's where the psychological damage, I think, you know, to what Robert was saying, like, is true. It was, there were a lot of people who really did not think that this was possible. So I think what a lot of this market mayhem, in addition to this, the balancer hack, it does feel like the kind of one-time,

too punch of reminding people that nothing in crypto is risk-free, right? We've kind of gotten a little bit fast and loose to the idea of like, oh, it's like the quote-to-quote risk-free rate in crypto. It's like there's no risk-free rate in crypto because there's always risk. And whatever you're doing, you're touching a smart contract, you've got capital on chain, you're in some, you know, quote-to-quote delta-neutral position. We'll talk about the notion of being delta-neutral shortly. Like all this stuff, it does compound. Now, that's not to say that, okay, the right answer is, okay, you know, say fuck it to all of this and just like, oh, put your money into treasuries or even to just, you know, okay, hold, you know, pure eth, don't even stake it and

just, you know, lock it up in cold storage. But it does mean that like, hey, like this stuff is, this stuff is risky. It's still frontier technology. Now, that being said, I do want to contextualize it. This is not all a balancer. This is not even all a balancer v2. This is only the balancer v2 pools that had eth in it. So if you had three non-native assets in your balancer pool, it was fine, it was my understanding. So this was like an edge case within Balancer. Not an edge case, but one case within Balancer V2. Balancer V3, totally fine, doesn't have this bug.

So it's unfortunate. But it's one thing we see with software, right? It's like, you know, we saw this with Spectre and Meltdown. We keep seeing things like this. We saw this OpenSSL. Is that these things that we consider to be the backbones of technology, they do, we find bugs with them routinely. And so I think this is actually one of these things that I actually do increasingly

have confidence that AI is going to improve rather than make worse, is that, yeah, okay, it's possible that AI maybe, maybe somebody vibe code an attack, right? And this is, I think, a wake-up call to people is that, okay, let's, you know, get some money together and let's go get fucking GPT5 or Claude or whatever to run through every major contract and just throw money at the problem of trying to defend and make sure that there are no vulnerabilities that we can find. Because if an attacker can find these, then so can defenders. And defenders ultimately have money than attackers do. So if it really is just a function of everybody points their lasers at these contracts, they point their AIs and their AIs do the work, that it's purely a function of

who's spending more money. And if attackers have less money than defenders, which in general they do, then I think actually what that spells in the long run, these attacks are actually going to get less frequent. And that's what we've been seeing over time, is that over time the number of hacks and DFI have been going down, down, down with every passing year. More and more we see private key vulnerabilities of people getting spearfished, people getting, people get basically being tricked into leaking their private keys or something like that, as opposed to the smart contracts themselves getting attacked. That's why this was so surprising. But it's also in line with the trend, is that this, this happens less and less and less frequently with every

passing year. I mean, another thing that was interesting is the attacker was very diligent about and not about OPSEC on making sure they were very hard to identify. I think they spent many months dripping very tiny amounts of eth from tornado cache to do it. And that's not a very vibe coded thing. Exactly. Yeah, yeah. This is why I think like if they vibe coded to like check their code or whatever. That's why I'm not like I don't believe this like oh search break balancer was the

end of the old thing. Charvis, please write the code. I'm not saying that won't happen in like a year for the one. I'm just saying I think right now we're just like a little below. It is probably already happened. I would be my guess. I almost certainly has happened before. Yeah, but I think probably for something that's maybe like more, more obvious,

you know, versus like how having this like kind of like esoteric like rounding component or attack. I mean, I'm more or else agree with everything. I didn't really love the kind of like finger wagging from, you know, some of the Heath heads about like some of these new chains that froze accounts or, you know, did rollbacks. I'm like, dude, this is like, obviously, you know, did it. And I'm like, what, you know, what's the alternative for a lot of these chains that really

have no community. It's like just like let the kind of community get fucked, especially for something like bear chain. Like you said, that's like so integral to the chain itself. I do worry that like, you know, as always, it's like not so much a legal precedent, but more like opening themselves up to civil suits of like, hey, you froze this account, you recovered these funds. Why don't you do it for that? And I think it's always kind of thick the concern. You guys, you do remember after the wormhole hack, the oasis thing, right, where like the jump suit in Britain or something. And then. was able to recover from a multi-sig that was owned.

So, like, there is precedent that that can happen. Wait, what was this that I remember this? Yeah, this was like 20-22. There was like some, some upgrade. There's control by some multi-sig, and they basically, like, legally forced them to, I don't remember this, the specifics, but I do remember there was like some sort of like court order in the UK to, like, have, there was be some contract upgrade in order to, like,

get some of the funds. Do you remember this? It was from Oasis. which was like the original maker. Now it's ringing a bell. But what did they actually what did they actually force them to do to like unfreeze their funds or something?

To freeze the funds of the attacker, I think. I think it was the other way. The funds of the attack? Yeah, I thought it was the other way. They like, they basically... The attacker was just hanging out on Oasis? I have no clue why. They were just like posting liquidity.

It was a weird... It was a very weird thing and it definitely involved like monitoring the attacker 24-7 and then finding the time they slipped up. Like it definitely wasn't, this was like clearly active investment. This was like the crypto on-chain equivalent of like hiring a PI to tail someone

until you found them at their most vulnerable point. That was sort of how I viewed that. Somehow I know. Anyway, my point is there are these precedents that could happen. On the other hand, isn't the point of an L2 that like, I know people will say that it's not. And there will be,

I'm sure there will be some L2 that like maybe maybe one day has full sequencer has like full kind of avoidance of sensor really but like a lot of L2 sensor right they all have these kind of escape hatch things like base certainly does and you know like and it's very explicit in the documentation

right and so I don't know I think like the world can exist in two worlds the real question though is like do you need more than a handful of fully censorship resistant chains and then a lot of censoring ones that are like for users who don't really know like what they're getting and like it might be true that you have the rollbacks yeah it might just be that there's kind of this racemic thing where there's like the true censorship resistance and people with a lot of money maybe prefer that even if they have the risk

they're willing to tolerate that and then there's like kind of I want more censorship because like I don't really understand the thing and I would rather have the validators kind of do something for me right I think I could see the world going that. Like, I know philosophically seven years ago, I would have slapped myself for saying that. But like, I kind of can see the world going that way. Like, to Tom's point earlier, like, I just don't see. I don't think we're undoing that.

Yeah. It's a little good Winston Churchill quote is that if you're, what is it? Like, if you're young and you're not an idealist, you have no heart. And if you're old and you're not a conservative, you have no brain. Yes.

Yeah, I hate, I hate, I hate, I kind of hate, I hate it. There's truth to that scene. Yeah. Robert, what's your take on the freezing, rollbacks, all that stuff in response to a hack? Well, I don't put this in the Winston Churchill context. I feel like we've also talked about this on the show many times in the past, right?

I think there's a conflict that arises between decentralization and centralization. I think over time, the overall sentiment of communities is moving away from decentralization. is becoming much more tolerant of centralization and rollbacks in general. I think they, and I'm paraphrasing previous shows we've done here, but like the cypherpunk ethos that created cryptographic assets in the first place has mostly been forgotten by this generation of people that are trading meme coins, of people that are using applications without reading the code,

of people that, you know, are just diving in because it's fun, it's profitable, it's the place to be. And so I think in general, the pendulum is swinging away from relentless decentralization and towards pro rollback. And I just think that's a generational shift. And I think it's how most people have grown up in general with the traditional financial markets and traditional banking system and all of this where it's like, oh, if bad things happen, undo the bad things, right?

Like, why not undo the bad things without seeing the philosophy. that takes the other side of this, which is like, oh, you want completely censorship resistant things. They can't change. That if you can't undo a bad thing, you can't do a bad thing as well, right? And so I just think this is a generational shift that's happening and it's happening in favor of pro rollback more and more and more and more. And if you ask this question in like five years, I think the overwhelming consensus is

going to be rollback. Fix the problem. So I actually don't agree that the sense, because, like all these chains faced a ton of criticism yesterday when the hack came down. And so I think that sense that rollbacks are really bad and they're embarrassing and they're like violating some core spirit of crypto, I think that's all still there. The reality, I think, is that they're just way more small startup chains than there were five years ago. So this wasn't really an option where it's like five years ago, there was nothing anywhere to bother rolling back except on Ethereum,

right? Like there was just no TVL anywhere. There was nothing else going on. And on Ethereum, you just couldn't do a rollback, right? It was just not economically feasible. So, like, to my mind, I think it might be a little bit true that people have come to crypto in the last few years. Like, they're just less cyphor punky and they care less about those original ideals. I think people realize that rollbacks are really disruptive, right? So, like, turning off bear chain for a day, like, why is that bad?

Like, just to name the obvious is that, well, the market moved a ton in the last day. Like, it just literally has been melting down in the last 24 hours. And so when you freeze all of those lending markets and those AMMs and all these other things, like that's really bad. It creates a lot of damage when you turn it back on and everything's misprice. And all of a sudden there's this huge spurt of MEV and a bunch of people get screwed. So I think people understand these are really bad things to do. And they're extremely disruptive and painful, especially when you do them in a kind of slip shot way.

And I was making this point as I was arguing with some people online. Like, obviously Ethereum did this back in the day with the Dow hack, right? And in the sense, it's like, okay, this is the original sin of Ethereum. Obviously, we'd never do that again. Now that, you know, everybody thinks that it was such a terrible thing, that Ethereum did this. There is a hack so big that Ethereum would do that again. Now, that hack would have to be enormously large, right?

How much? How much? How much? People talk about this with Eganlaym layer. Is that if I don't know, but how much do you do, I'm just like, I'm curious. I think if it was, because you wrote a blog post about this a long time ago. I'm curious how it's changed. I think that if a.

If even a medium single digit portion of the amount of ETH in existence got hacked all at once, that Ethereum would contemplate a rollback. Single digit. I think you had 5% of Eth. I think you had 5% of ETH hacked in one go. I think that probably Ethereum would contemplate a rollback. Hacked how and from who and why? Sorry, but like what?

How? I mean, like, how would 5% even be hacked at the first place? Does it have to be like root to the validation process somehow? Potentially, yeah. Let's say some big vulnerability. LST. I think the easiest person, LST, LST. LST contract compromised might be.

Yeah, LSTs your compromise, something like this. I don't know how much, I don't think UNISWP has that much TVL anymore, but you can imagine if there was enough TVL and UNISWP. I think Uniswap would be considered like sort of too big to fail within Ethereum. A dad address, a dad private key gets hacked. Actually, that is much more feasible. That's actually kind of not that crazy. But they all use custodians.

They're all using. Yeah, I'm just saying like maybe they do something, you know, I could kind of. I think there is a hack so large that it is. theory and we're contemplated rollback still today. Now, obviously, much harder for that to happen. Not that many places where that much ETH does sit. Whereas for Barrier Chain, it's like, you know, it's a new ecosystem. So it's pretty easy to find 5% of the TVL in one contract and to say, hey, we can't

allow this to cascade and, like, break everything. So there's less to lose when you're early on in ecosystem, right? So that threshold changes over time. To me, I think actually, like, it's in a way kind of timely in U.S. politics because there's all this talk about, what's it called, a positive? Comitatis, which is the rule that you're not allowed to use the military for civilian policing unless it's, you know, wartime, civil war type situation. But there's a threshold.

And that threshold changes over time. And it's up to the discretion of both the executive and the courts to decide what that threshold is of a degree of chaos or disruption or, quote, unquote, rebellion that rises to the level that actually it's okay for the president to go and call, you know, the armed forces into domestic policing or into domestic conflict. And we understand that there's a threshold, it's a threshold question. It's not a binary question. That threshold changes as you become more mature. But in the very early days of the American Republic, it was pretty, you know, there were rebellions, you know, Shea's rebellion popped up or this thing happened.

It's like, hey, go get the Minuteman and bring them out and let's like, you know, shut this thing down because they don't like the new constitution or whatever. So I think this is part of the equilibrium, part of the continuum of ecosystem maturing. What we're seeing is a lot of not that mature ecosystems, for whom it's a relatively low cost for them to freeze an address

and write a wrong for many people in that ecosystem and it's worth more to them than it is to the strength and the stability of that institution of, hey, we never do rollbacks, we never freeze accounts. So I think it's reasonable for each chain to make that determination

for themselves. If Ethereum did a rollback over 70 million getting hacked, I'd be like, what the fuck are you doing? That's insane. You absolutely should not do that, right? But I think it's a continuum, not a binary. So one thing I will say is like for those who are feeling dismayed if the Cypher punk stuff is gone,

I do feel like the privacy chains are the kind of last bastion of the no rollback world in the sense that like privacy chains with torn contracts are going to be very hard, if not impossible effectively, to ever do this on. And like I agree. I think like that is a thing. Do you remember the Zcash hard for it when they? No, no, for sure. because it was a validator bug.

But I mean, like, imagine the validator code is correct, but the application layer, it's going to be very hard to actually conceivably roll back on a hack there. And I think if you do really want to look forward like 10 years to what will persist Cypherpunk values, I don't think it's the current class of chains. It kind of has to be the privacy chains. You know the Ethereum is whole,

onto its cyberpunk values? No, I think it will, to some extent. I think, like, obviously, things like this MEV case... I think it was completely held on to cyberpunk values. It has, but I think it's... There's, like, a limit to what it can do, right? Like, there are some parts of its infrastructure that will always have some kind of issues effectively, right?

Like, the MEV thing is, like, effectively a form of, like, hey, we're going extra consensus, but we're able to kind of, like, concentrate some... some power in some ways, right? So there's a sense in which I do really think the privacy chains have the last bastion. And I think retrofitting privacy is very hard. You kind of have to, it has to be at Genesis because like adding at the end kind of, as we've seen with a lot of chains, I've tried to add privacy features and get them adopted.

It's kind of kind of not been as good as successful. Let's on turn. So we're running low on time and I want to make sure we cover this last story because I know it touches what you guys do. it. So there was one of the other stories that came out today was the collapse of a protocol called Stream Finance. So stream finance, I'm probably going to butcher this, but I'm trying my best to explain. So stream finance is one of these like on-chain strategy aggregator, curator-type protocols. And one of their strategies, or maybe the main strategy, was a protocol called XUSD, which basically did some kind of levered looping strategy that was off-chain, I guess.

It wasn't totally transparent what they were doing. But there's some firm, what's their name? I can't find the name. Whatever. There was some firm that was responsible for actually doing the off-chain strategy that XUSD was using to pay out yield on the quote-unquote stable coin. But it's really more like basically a tokenized hedge fund. And apparently they lost $93 million through a quote-unquote external fund manager.

This is not an on-chain exploit. This is more like they were doing something crazy. And that crazy thing they were doing blew up. And they lost a ton of money. and they only later told the people on chain that, hey, guess what, your money is not there. This is argument number one for the Genius Act. Like, I can't think of a better example than something that's like... I don't even know that you could call this a stable coin.

Agreed. This is the problem. You have people calling things stable coins where it's basically a hedge fund and you call it a stable coin. Yes. Now, that being said, there's no real-time redemptions or subscriptions into this thing. So it doesn't even feel like a stable coin. Like there's like a redemption queue, you know, and like you get like daily liquidity.

So it really does feel like a hedge fund. But it ended up causing a lot of bad debt on other positions that were exposed to stream finance. So I think across Euler, silo, morpho, there was about 284 million of total debt that was connected to stream finance. So there were some vaults that were exposed. A bunch of people got mad at a lot of these curators

who had exposure to stream. Now, one of the big curators that had got a kudos who having no exposure to XUSD was Gondlet of Teroon. So you guys, good job on avoiding XUSD. But any reflections, Tarun, in the time that we have left on the learnings here from XUSD. And, you know, again, in absolute terms, not a huge thing relative to, you know, some of the other curations and vaults and things that are out there. There's a relatively small fry. But the fact that it blew up and kind of, you know, slinked into the market with like, hey, guess what? We lost a bunch of money.

and we're now telling you, presumably they probably lost this money in October. That's what everyone's guessing. We don't actually know yet. They entreated some law firm that's going to go in and investigate this protocol. But, yeah, reflections, Trun. So I think every credit cycle has this, like, start. It's like a bear market. You start a very higher quality credit.

And then it kind of grows. And then all of a sudden there's, like, new lenders or new collateral that's, like, slightly lower quality. And then, you know, that grows because there's overall market beta and then dot, dot, dot, and then at some point, you know, one of those goes bust. And I think the interesting thing is the parallels in the normal economy. So unlike when Celsius and BlockFi happened, we didn't see a lot of these blowups in traditional finance contemporaneously.

But in crypto right now, like this thing looks like a private credit fund in some sense, It's like lending to a trading strategy that's off-chain that turned out to not have like proof of reserves or proof of assets, right? So and so then that sort of is a little bit like this first brands blow up or this telecom thing that BlackRock and others kind of invested in recently. And sort of it feels like this is also correlated with like an end of a credit cycle for both crypto and non-crypto, but that's more a macro version of this. I think the interesting thing is like, VALT started as a very precise definition, right?

There was a notion of how do I unbundle protocols like AVE and Compound where like the supply side and borrow side could be separate so that you have more risk control over how they're matched, how like loans are priced and whether certain types of loans should be priced kind of higher. And I think over time, especially as the market got a little bit frothy, then we started to have points farming vaults where you would put money in and you would not really get any real yield. You would only get kind of synthetic yield that you would then be able to kind of trade on Pendle. And that's your kind of like, okay, now what's the real credit worthiness of this thing? Then the next thing you got, and then people would take leverage on that. So you're effectively, in some sense, barring against a synthetic yield that may or may not

come if the protocol doesn't launch a token. Okay, that's like a worsening of credit quality, but not so crazy in the sense that protocols like Pendle actually make it so that you do have a real price. It just might not have that much liquidity. And then you kind of moved into, okay, let's start having more of these RWA strategies, real world asset strategies that people take leverage on. And I think there's a wide spectrum of ways to do those, right? Some, you know, Robert can also talk about this. Like there's ways to. to do that safely and there's ways to do that unsafely, not so different from the, do you want a tokenized stock to only be a derivative or do you want a tokenized stock to actually

correspond to like a real stock, right? Like there's like a kind of similar thing. And I think then the RWA part of the spectrum started getting pushed out, right? People started being like, hey, like, let me take this tokenized thing that I don't really know the cash flows of, but like it's promising me X yield and barring it. And I think that sort of is like the direction that happened. In a lot of protocols that have, are lending against this, a lot of the leverage in the system in the system came from these lending vaults where people deposit a lending vault. The lending vault would buy this, well, technically they called it a stable coin, but it really was sort of tokenized hedge fund like XOC.

when they sort of created, they now that protocol had more money to go earn yield with. And I think that cycle crashed much more quickly than we saw last time with Celsius where people didn't really, really didn't know for many years, I guess, technically. But yeah, it was sort of weird to see the form factor it came in. It was almost like this like you hit a lot of opaque leverage in things that were called sort of RWA like out.

like tokenized funds off chain. And I think inevitably that does often happen. And I think there's sort of this interesting thing in that asset management on chain comes in a lot of shapes and forms and sizes. And I think if you don't understand where the yield comes from, you are likely lending to the yield. You are the yield. So do you think the credit cycle is over?

Is that what I'm interpreting you to say? not exactly. I actually think the interesting thing is like compared to last cycle. So if I look at defy lending sort of 2020, 2020, and you guys can obviously give addendums. But a lot of the borrowing behavior was for yield farming. Like I have a bunch of eth. I want to borrow whatever asset I need to go yield farm at a certain rate. There was less of like looping, like strategies that are like the market in traditional finance where I have a yield bearing asset, say it's earning 5% yield, and I can borrow against the asset for 1%. So maybe I could get 9% yield by borrowing against it 1x and getting to 2x leverage and

then paying a 1% borrow cost. So like the repo market and the bond market is exactly like this. And this, remember, 2020 and 2021 was pre-Etherium, the merge. And so being pre-merged, there was no natural yield on ETH. the only place where you kind of had yield was Seoul, and it was sort of a, at that time, more nascent market than it is now, where it's much more mature. And so there wasn't this demand to, like, get leverage on yield-bearing assets. And I think what changed between the 2021 cycle and this cycle is that there were way more yield-bearing assets. Like, they're just staking assets,

defy assets, hype. Like, there's tons of yield-bearing assets now. And people want leverage on that. And so the most... market is bifurcated between people just borrowing against their asset for a loan like they need to use on chain and people borrowing to just lever yield. And those two parts of the market sometimes split and sometimes merge. And I think right now we have them kind of split, but I inevitably kind of see a natural thing where their demand starts crossing again. And again, this doesn't feel like a blowup like the way after three arrows or after FTX where like everything in the world was depegging at the same time. Like, there's kind of a lot more stability than that time. Now, I'm not saying it's good. I'm just trying to say it. I don't think it's totally over. Because, like, in the same way you saw the perps market rebound pretty quickly,

I kind of expect the same thing here. On the looping side, especially. We're pulling up on time, but I don't want to end on such a sour note. Robert, give us reason to be optimistic about credit, lending, and everything going on in the on-chain economy. Yeah. I mean, usually we bounce back pretty fast after all these bad things, right? There's a lot of times when bad things have happened and everyone licks their wounds and they think a little bit more carefully and they get back at it.

And we return to growth and new building and fun. So don't get discouraged. Beautiful. Beautiful. Thank you, Robert, Daddy. Okay, that is it. Thank you, everybody. We'll be back next week.

Keep your spirits up. Until next time. Thank you.