Unchained - The Chopping Block: ColdCard's $100M RNG Hack, AI-Powered Security & Ethereum's Staking Yield Taper

Episode Date: August 6, 2026

This week we dissect ColdCard's ~$100M RNG exploit that Claude Code cracked in 8 minutes, debate whether AI just killed open-source security and Bitcoin maximalism, tear apart Ethereum's EIP-8361 staking-yield taper, and unpack Leopold Aschenbrenner's 67% Situational Awareness blowup and CLARITY Act's ethics fight. 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. No guest this week, just the four of them working through a week where AI quietly rewrote the economics of both security and human psychology, and crypto happened to be standing in the blast radius. This episode: ColdCard, NVK's Bitcoin-only hardware wallet, got drained of nearly $100M thanks to a random-number-generation bug that a one-word commit buried five years ago, and Claude Code sniffed it out in 8 minutes (an open model with no internet found it in 20, for about two bucks). The crew debates whether AI just killed open-source security, whether Nic Carter is right that this is 'the death of Bitcoin maximalism,' and why Tarun thinks maxi devs are 'the RFK of security practices.' Then they take a blowtorch to Ethereum's EIP-8361 staking-yield taper (Tarun: 'the proposal reads like shit'), unpack Leopold Aschenbrenner's 67% Situational Awareness blowup while 4x levered, and wade into the CLARITY Act's ethics fight where a single amendment is the whole ballgame. Listen to the episode on Apple Podcasts, Spotify, Pods, Fountain, Podcast Addict, Pocket Casts, Amazon Music, or on your favorite podcast platform. Show highlights 🔹 ColdCard's Bitcoin-only hardware wallet drained of nearly $100M after a five-year-old random-number-generation bug silently fell back to weak software RNG. 🔹 A single dev swapped C++ macros with a one-word commit message, seemingly just to get NVK's code to compile, and doomed years of keys. 🔹 Claude Code found the ColdCard bug in 8 minutes; open model GLM 5.2, no internet, found it in ~20 for about $2. 🔹 Tarun calls Bitcoin maxi devs 'the RFK of security practices' who 'don't do audits,' branding ColdCard's lack of hardening 'incredibly delinquent.' 🔹 Haseeb warns AIs 'are much less diverse than humans,' so security now scales with AUM while North Korea spends thousands in compute. 🔹 Nic Carter calls it 'the death of Bitcoin maximalism' as Haseeb reads posts from holders who scrimped for three Bitcoin and woke up wiped. 🔹 EIP-8361 from Pintail and Justin Drake tapers ETH staking yield toward zero above 50% staked; the community is 'vomiting all over' it. 🔹 Tarun torches EIP-8361 as 'a truly horrendous post,' arguing constantly changing policy means Ethereum is never credible hard money. 🔹 Leopold Aschenbrenner's Situational Awareness AI hedge fund blew up ~67% while 4x levered, with Robert drawing Archegos comparisons. Hosts ⭐️Haseeb Qureshi, Managing Partner at Dragonfly ⭐️Tom Schmidt, General Partner at Dragonfly ⭐️Tarun Chitra, Managing Partner at Robot Ventures ⭐️Robert Leshner, Founder & CEO of Superstate Disclosures Timestamps 00:00 Intro 01:03 ColdCard's $100M Exploit 05:46 AI, Audits & Bitcoin Maxi Security Failures 12:07 Open Source vs Closed Source in the AI Era 23:21 EIP-8361: Ethereum's Staking Yield Taper 30:34 Hard Money, Post-Quantum & Central Bank Chaos 35:54 Aschenbrenner's Situational Awareness Blowup 44:41 Robinhood Prediction Markets Boom as Hyperliquid RWAs Flip Crypto 51:54 Korea's Bloodbath & the Death of Retail Volatility 55:17 CLARITY Act: Ethics Provisions Are the Linchpin Learn more about your ad choices. Visit megaphone.fm/adchoices

The reason why volatility is so high in AI is that nobody can predict anything. People keep getting surprised. You see like half a trillion dollar deltas in the open and closes on these markets where like Amazon and Apple are getting repriced 15% on a date. Like these things are trading like shit coins. And why is that happening? It's happening because nobody can predict anything. Not a dividend.

It's a tale of two quang. Now your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. I'm named trading firms who are very involved. eat is the ultimate top. Defi 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. Quick intro is first you got Tom, the defy maven and master of memes. Hello, everyone. Thanks you got Tarun, the Gigabrain,

and Grand Puba at Gondlet. Yo. Thanks, we got Robert the Cryptoconisour and Tsar of Superstate. Good evening. And I am a C of the head hype man

at Dragonfly. We are early stage investors in crypto. I want to caveat that nothing we say here is investment advice, legal advice, or even life advice, please your chopping block that X, Y, Z for more disclosures. So, boys, it's good to have you all back together. We have an interesting docket this week, starting off with bad news, because that's how we always like to do the show. Always.

First bad news, first bad news of the week is a exploit in crypto of a wallet called Cold Card. Now, I have not heard of Cold Card up until this exploit. That means you don't follow enough. Bitcoin Maxis? Yeah, you're not a Bitcoin Maxi. It's a Bitcoin Maxi. Have you guys heard of it? Have you guys heard of it? Yeah, yeah, yeah. Yeah. You've heard of it this week. Oh, no, no. I heard of it. Okay. So Robert and I both first heard of it this week. Tom and Tarun have heard of it before. Do you remember this guy, NVK, like this Bitcoin Maxi account

from like 10 years ago, very popular? That's the person who made Cold Coal. Okay. Started the company. Well, yeah. So Cold Card, very unfortunately. So Cold Card is a very minority event. in the wallet space. They only do Bitcoin wallets. So most of the, you know, if you think of like Ledger or Trezer, usually these are like multi-chain wallets, cold card, Bitcoin only.

So it's really appealing to Bitcoin Maxis. Judging from the numbers that they have published, it's probably something like 1 to 2% market share of the Bitcoin wallet ecosystem. So it's a pretty minority vendor. Their whole thing is that they're open source and they're Bitcoin only. Now, they suffered, unfortunately, a very massive exploit. it looks like so far there's been almost $100 million in Bitcoin that's been drained from cold card wallets.

Now, these are cold wallets. Or sorry, not cold wallets. These are hardware wallets. So this means that the key should have been generated on device and only stored in the hardware. Therefore, the only time it should ever have access to the internet is when you plug it into a machine and do a transaction. So how are these machines all getting hacked?

Well, it was discovered that there's a vulnerability in the random number generation on these devices. Okay. Now, this vulnerability was introduced five years ago in a firmware change that some developer basically like just changed some random macros or definitions and some C++ code, seemingly to just like get some code to compile and they didn't really seem to understand what was going on. They wrote a one word commit on the code change that led to this massive bug. And basically it went from a hardware wallet that's normally using very robust on-device

RNG or random number generation, which is the entropy that's used to generate. generate the key and instead fell back to some very weak software-based random number generation, which is very easy to crack. So these insecure keys were getting generated for the last five years until this weekend. It was discovered that this vulnerability was getting exploited. Presumably somebody pointed their lasers of their AI agents looking at this code, trying to find out what could have been going wrong that caused all these keys from the same vendor to get hacked.

And reportedly, somebody used quad code to look at this code and found the vulnerability in eight minutes. Now, this vulnerability that was found through cloud code, people were saying, oh, this might have been contamination because maybe he was searching the web. And so somebody else took GLM 5.2, an open model, gave it no internet access, and was able to find this bug in 20 minutes. Now, I was able to go back and do a little bit of math. 20 minutes of GLM 5.2 costs about $2. Meaning that this team, whoever they were, I obviously don't know them. It did not seem they did almost anything with respect to using AI to monitor their own code for vulnerabilities and kind of harden the code that they were writing, which kind of at this point, given where we

are in the ecosystem, seems incredibly delinquent. So obviously there's a tragedy, very unfortunate for the people whose money was stolen because it's very difficult to get Bitcoin back once it presumably it was hacked by sophisticated people. They did ship a firmware upgrade over the weekend. Obviously, too little too late. If you have a key that was generated one of these during this period of time, it doesn't really matter. You have to go and regenerate the key and go move to a new address if you want to keep your fund secure. But probably anybody who's vulnerable, very likely you've already been swept.

But my understanding is that there were three waves. First wave was big accounts. Second wave with smaller accounts. Oh, there's a fourth one now? there may be a fourth wave of people just gathering up dust or something. And obviously it's possible that these are not the same attacker. Once over the weekend, it was confirmed that this was going on. Anybody can do this.

This is very trivial to do if you have a weak R&G. So a lot of people were saying this is the death of self-custody. I think Nicardo was out there saying this is the death of Bitcoin maximalism. What are we calling the death? Obviously, it's probably the death of cold card. What is this the death of, if anything, responses? It's the death of two things. cold card, as they should, right? People ridicule them as being a five-person company, you know,

rolling their own, you know, security, all of these things, right? Building hardware is extremely tough, right? All sorts of things. How could anyone trust that again? I think, you know, cold card, this will be a learning experience for everybody. I hope that it's the death of open source projects not being audited by white hats first with all the tooling that's available, right? To your point, Haseeb, how could they not have pointed the candidate themselves? That's crazy. Any open source project at this point, whether it's a smart contract, you know, running a defy protocol, whether it's some other open source anything, it doesn't hurt to train the security budget on yourself or on a friend's project or

whatever. You know, it's hilarious that we got to this point where, you know, such a core bug that compromised randomness, basically based on the main thing. Your only job as a hardware wallet. The main job of a hardware wallet based on like a broken if state. It was like, if, you know, this, like, we're good. Otherwise, fall back to this horrible library. It's like, turns out we weren't making secure hardware wallets for five years, whatever. Hopefully it's the death of people not taking the time to audit open source things. Hopefully it's like inspires people, not the black hats,

but the white hats and people maintaining projects and building open source things. To your point, all of this is open source. There's incredible models now. Run everything you have open source through the models. The death of apathy. Tom, how do you react? That's the word.

Death of apathy. I mean, I assume they had this audited and whatnot. I mean, I agree. Assume. I mean, I would be shocked if they had zero. Yeah, but are humans going to find this issue? I actually think there is a thing about the Bitcoin Maxi developer community where they don't believe in a lot of, you know, it's like the seed oil thing.

It's like, they're like the RFK of security practices. You think they're getting seed oil. They don't get vaccinated. I remember there were a bunch of exchange hacks for bad entropy generation historically. And they were all like these like Bitcoin only exchanges. didn't have to do entropy generation for multiple different types of key pairs and different signatures and stuff. So, like, they weren't as careful as, like, someone who knows has shot themselves on the foot. And I think the Matsy is always, there's a sort of like this almost, they over-meamed themselves into this, you know, verified don't trust thing where they were like, we're like, well, we verified once.

You know, like, the idea that they have to do it again and it wasn't perpetual is like something. that I think is like a, especially the Bitcoin developers. Obviously, Bitcoin development basically is non-existent nowadays, but the people who kind of stopped a lot of the development, like the miners and large holders, in some sense are the part of the problem here. Because I feel like there were a lot of people trying to make upgrades, make changes. And it was like, nope, nope, Bitcoin doesn't need to be changed. We're done. We're allified forever.

and that like even applied to users, wallets, whatever. So I'm not as surprised because I remember, like, for instance, when a bunch of L-1s launched with BLS signatures where you need way more entropy than like a normal ECDSA or kind of stuff like that, there were like exchanges that were doing crazy-ass entropy ceremonies, right? Where they would have like five different laptops not connect to the internet, brand new generating entropy,

and then they would like smash them with a hammer and record the video of that as proof of like destruction or whatever. And I'm like, these guys have like, these guys have like the amount of entropy that my TIA-83 has. You know, it's like, all right, this is more an incompetence thing also a little bit, right? Because like there was a little bit of hubris in the Bitcoin maxi wallet community in my opinion.

Yeah, I mean, fair enough. I think it is where I mean to live like the vanity address generator bug in sort of Ethereum land from a couple years ago. Yeah, exactly. It's very similar to that. Before that you don't think about it, like when people think of sort of attack services. I mean, as you've even sort of seen recently, it's like, hey, does this transaction hash that I'm signing?

Actually, you end up on the device. And I can I see so the result of in state changes from what I'm signing? But like, thinking that, yeah, using the wrong R&G feels like so kind of kind of past it. But I am also kind of surprised by how small the hack is actually, like 100 mil and cold storage. Like these days, I mean, it is a lot of money obviously. It's a small player. Yeah. But I don't know, maybe that's just the way the industry is right now.

I mean, there were some heartbreaking messages that were getting shared on social media of, you know, people who are like, look, you know, I've been spending the last five years scrimping and scraping to get my three Bitcoin. And now they're gone. And I'm just like, I'm done. I can't do this again, you know, like, I thought I did all the right things. I was listening to what the high priests were telling you, self-custody, don't trust exchanges, don't buy the ETF.

and now my Bitcoin, like I wake up and my Bitcoin's gone. And that is brutal. That is absolutely brutal. Anytime we have a story like this where we're dunking on some company for doing stupid shit, the reality is that there's real people who are just have their lives destroyed by something like this. And it is heartbreaking. The reality, I think- Do the right thing by getting the niche Bitcoin maximalist hardware wallet, right?

That's like the best thing you can do as opposed to getting, you know, ledger or something that supports all the shitcoin chains. and blah, blah, blah. Like, people thought that that was the right moment. And they listened to people in the community. I think Nick Carter's point, actually, on that part resonated for me is that the idea that there's like this virtue coming from Bitcoin maximalists that if you follow them, you'll be okay. I feel like that's really gone away.

I think it's very hard to believe that these days that with everything changing in the world, that Bitcoin maximalists are going to be able to guide you in the direction of what you should do with your life. Aren't they still stuck in a volcano, El Salvador, like, do that, like... The other thing that you think connects to this is that, like, the economics of AI and of cybersecurity are making everything really change. And one of the obvious things that change is, is that, like, humans are not doing this

anymore. There's not humans on either side, right? Like, Robert, you said the word white hats. There are no white hats in the sense that, like, there's no humans who are going and looking at this and being good Samaritans anymore. The Good Samaritan is, like, a... a dev who looks at some code is like, hey, you know, let me chuck this into my opus and see what it thinks after looking for like three minutes.

And if it says it looks fine, then I'll use it, right? And so they're using a couple dollars of compute at most to just verify like, hey, does this look, sanity check this, right? And if there's an attack that requires $50 of compute or $100 of compute, they're not going to find it. Nobody's going to spend $100 of compute on some random, you know, open source thing that they're just taking a look at or that they're a vendor of. They expect the company to do that.

And then, of course, the attacker is going to spend $1,000 to compute, $500,000 to compute, you know, hundreds of $1,000 compute if they think the prize is potentially $100 million worth of Bitcoin. So the only party that's really able, like, it used to be the economics of open source was that, oh, well, with open source, you have all these humans looking at your code. And that means that your code is going to be more secure because of all the good people are looking at it are going to outweigh the bad people are looking at it. But in AI, I wrote a whole thread about this, is that in the world of AI, the AI, the AIs themselves are much less diverse than humans are.

AIs are very similar to each other, and people are mostly using the same models. So if everyone's using the same models, then every good person, every good Samaritan, quote, quote, who's going to point $10 a compute at your code is basically going to do the exact same thing. They're going to be duplicating the same work,

which means that they actually don't add any security. They're kind of just treading the exact same loop and going down the exact same investigative grooves. But North Korea, or whoever did this attack, is going to spend a lot more money, and the only way you're going to be able to counteract that is the company spending $1,000, $10,000, $50,000 of AI hardening on their software.

So it means that open source no longer is the protection that it once was. Open source, in a way, is protection against a nefarious developer, but it's not protection against a nefarious third party, which I think is once the way that we cognized open source. So it does kind of change things, right? Really, at this point, when it's AI, it's all about money.

It's just how much money are you spending on a frontier model trying to find a tax against this thing and fixing them all? And if you didn't do that, North Korea will. You know, it's as simple as that. I mean, I think agreed. I mean, obviously, there's other nice things about open source, too. But even like there's, I think like Solana, I kind of point to as being, you know, sort of this close source ecosystem. But like, obviously we've seen also how good AI is at decompiling. And then obviously making by code or code that it can read.

It doesn't even really need to be human readable, which is always the issue when you do decompleation. So it's like, I don't really know what, you know, the answer is here. And it sort of goes back to what was that opens up, and founder from a couple months ago saying get all your money out of D5. But it's like, you know, I think we're like reaching the precipice of like either the code is 100% airtight or, you know, the leaks are going to get found in the immediate future. Yeah, on some level it sort of doesn't matter whether it's open or closed.

right, because of your point, it can get disassembled very easily by an AI. So it just increases the fixed cost by $10, you know, or I don't know, whatever it costs to disassemble your code and, like, figure out what the original source code was. And then once it's there, it's just, you know, how motivated is the attacker. And the attacker's motivation is going to come from your AUM. It's not going to come from if there was an extra decompilation step. They're already spending way more than $10 trying to break these things. So, yeah, I really think that the norms that we've had historically about where security comes

from are just wrong now. And it feels like the world is not adapting. And it's going to take a few more of these before people do start to adapt. And ultimately what it means is consolidation. What it means is that minority little, okay, here's like this passion project, crypto wallet. Like it's just like those are going to just become impossible to trust. Because like how much money are they spending on securing this thing? I don't know. You know, how much, what are their quarterly sales? What could their budget be? How much did they raise from VCs? How much can they actually afford to spend on every release? Those are the questions you have to ask yourself. And it's very hard to ask that for Cold Card or one of these minority vendors.

It's a lot easier to ask that for Ledger or, you know, one of these venture-backed ones that have real meaningful capital. But I think you're going to see this everywhere, right? It's like with exchanges, with hardware wallets, with smart contracts. Like, it's the same thing happening with smart contracts is that last month we saw actually a very low number of total dollars hacked in Defi. Actually, over the last two months since April, total dollars hacked and defy has been very low. but the number of incidents in Defi, both two months in a row of all-time highs. So very low numbers of dollars hacked,

very high number of hacks, which means most of these hacks are happening on tiny protocols. There's basically like a bloodbath of like 5 million FTV protocol or 5 million TVL protocols that are just getting rated left and right across Defi.

And it's kind of the same thing with Colchard, right? Colchard is this tiny player, they have almost no market share. It's like this time thousand and you're going to see this everywhere. When we talked about this AI apocalypse, I think people assumed it was going to be the big guys we're getting hacked. But I think it's actually the opposite. I think you'll continue to see this over the next couple years.

I mean, nothing that we haven't already said. I mean, I think the only thing is, you know, I think open source will have a comeback, but it's going to take a couple of years, right? It's a little bit like everyone is going to get hacked. I actually think that the closed source people, though, are like way too overconfident that they've found. found all their bugs. Whereas I feel like in the open source, and I think the open source is going to take the bludgeoning first,

whether it's crypto, which is incentivized open source or pure open source. But I think the closed source stuff is actually going to end up having the bigger catastrophe is my bet. Is that like if I had to bet on like economic damage due to AI attacks between

open source first closed source in terms of the largest dollar amount lost, my bet in a five horizon as the closed source losses will be higher. You don't think to Tom's point, it just doesn't matter anymore because AI can just disassemble binary. Yeah, that's one. I think Truin's point is maybe like they've had some sort of immunity from a lot of

attacks so far because it's, you know, all is equal, obviously harder to sort of, you know, reverse engineer, yeah, close source. But we're saying open source is going to have more damage, right? No, no, no, no. I'm saying closed source has more damage. I'm saying open source takes it up front because it's like easy. Oh, I see what you're. Yeah.

But I think the longer term in five years, if you look at like, if I bucket of them in two and say like which had more damage, I think it will be closer. Got it. That's like, that's sort of my prediction is that there's a lot,

there's a lot more, you don't, you're like in a less adversarial environment in closed source. Obviously the Pareto Frontier changing means that like for open source, the notion of the adversary has changed a lot. So it's like much harder.

But for close source, source, I just still feel like people's best practices kind of are not very good on this type of stuff. Even mission critical clothes, I just like still think about how the U.S. Federal Reserve almost wired $1 billion to North Korea off like very minimal like social engineering plus tiny exploit. It's like that was like a billion dollar wire that would have cleared and like Swift would not have done anything to prevent it. And they got very lucky on it. And I'm just like, you're telling me the Fed, you're telling me the Fed is not going to get hacked. I kind of believe some central bank is going to get hacked,

and that's going to be the bigger thing than kind of. Robert, did you want to jump in? Yeah, I mean, we're starting to beat a dead horse, but open source is going to be more vulnerable in the short term because it's more exposed. Close source, bigger projects. The Fed closed source, right? All of these things are huge systems that people are complacent

because they can't easily see the code. They've been running stuff for 30 years. It's been evolving with just garbage on ancient computers. I mean, it's a mess and it will get wrecked in a much more horrific fashion than the open source things. Eventually, I think open source in general is going to go full circle and feel like early defy again, which is like, oh, if it's open source, that's how you know it's safe, because every agent out there will analyze it in 0.01 seconds of it being created and prove that it's safe or prove that it's safe or prove that it's, it's unsafe. And if it exists at all, it's safe. Right. And it will become a badge of honor again, but not for a while, not until all code is just so thoroughly hearted through its development.

Yeah. I like to say don't trust any code before 2006, period. Or like hasn't had... That's an interesting way to put it. Yeah. Yeah. No, but I think that's actually well said, is that like, in the same way, like people, like the AI companies will not ingest any data after 23 because it's just all been polluted by LLMs. In the same way, it's kind of like, okay, maybe you shouldn't trust any code written before 2026 because it was all written in such a totally different environment. Yeah, we should be code Agest. I've thought that too.

I mean, you know, you see these like, you know, 18-year-old, you know, day zeros that are zero days that are like found and like, you know, the Linux kernel and stuff like that. But then I think just today it was like, there. There was some cloud-coded patch in R-Sync that, like, introduced some big bug, and instead of, like, roll it back. And then, like, there was some big supply chain attack and, like, EV. So that's, like, oh, if you're on the older versions, you're fine, but if it's it's 6.0, like, issue.

So, like, and then even, like, the open source, you know, repos are also just, like, locking out. They're, like, not accepting any new PRs because they're just getting overrun with, like, random slop. So I don't really know what the answer is, but it feels like, you know, the new code also obviously has issues. I mean, new code definitely will always have issues. That said, the fact that somebody immediately found, like, hey, this new, you know,

this new patch that you added introduces a bug, the kind of thing that used to take years for people to figure out. Now it's like, oh, somebody else figure that out in like this span of a day. So there is, I think that's probably a sign of progress because, like, of course bugs are getting introduced into new code. It's just really a question of how long it takes and what's the base rate of those bugs getting through. it's something that gets added and then removed very quickly, that's incredible.

That's not how it used to work. At least that's that's the perspective that I would take. And I do think also like the harnesses around secure coding are still pretty nascent. There's like a lot of different products out there. A lot of people who are using vanilla clod code, they're not really orienting it around secure coding. I think within a year you're going to see best practices change dramatically. Of course there's mythos. In project glasswing, there's daybreak.

from OpenAI, most people, even in commercial projects, don't have access to any of that stuff. So I think also when you see that disseminate more widely, if everything that they're doing in some very, very important open source repo is running through daybreak or project Glasswing,

I think you'll see practices change and like the quality of code significantly increase. So, like we know a lot of people who still are working on open source repos, they don't have access to anything. They're just using, you know, vanilla, just kind of cloud subscriptions. So, okay, so security stuff aside, another thing happening in crypto governance land is there's a proposal, a new EAP called EIP 8361, and it has people very mad.

So as is often the case when it comes to Ethereum governance, this new proposal proposes to taper the ETH staking yield to zero if more than 50% of ETH is staked. So this was an EIP issued by Pintail as well as Justin Drake and a number of other kind of crypto Ethereum governance thinkers. Basically, the long story short is that they believe that too much ether is getting staked, the yield is too high, and they want to create some kind of pressure function within the protocol to prevent too much ETH getting staked. Because of too much ETH is staked, it leads to some centralization, it leads to validators, kind of whatever, getting too much ownership, it also leads to tax leakage.

And it means that solo stakers will likely get pushed out in favor of professionals. So there's all these reasons why you kind of don't want to just keep spewing out tons and tons of ETH. So they make this very rational economic argument that, hey, it's like optimal to only spend this amount and there's too much demand for staking. And so it's kind of like this central bank kind of wonkish perspective that we should make the yield go down as the amount of stake goes up. Okay. Proposal makes sense on paper. Everybody is vomiting all over this proposal. and why are they vomiting all over the proposal?

Answer largely, one, nominal yields matter. People really like nominal yield. Tarun, given that you run a business based on nominal yield, what is your perspective on the CIP? I mean, I guess like from a philosophical perspective, there's kind of this argument that there's Justin and others have had forever, which is like, ETH needs to be harder money, like Bitcoin. But there's kind of this inherent thing of like if you constantly change your policy, no matter what, even if you end up at like, hey, I'm like making the supply go down, you're still fucking are not hard money.

Because no one, no one believe, there's no confidence that in the future this won't change again, right? So I kind of think like this stuff is like very weird. It also like feels like the type of thing that's like not going to get past like much more gradual, right? where it's like they are, like doubling the disinflation, right? And they had one in like, at the end of last year, too. Right, right. That also, and they tapered it.

And so, like, it's interesting they're both happening at the same time. It does feel like it's also like a very bear market thing for your asset whenever anyone has to talk about this. I think the interesting thing, though, is like the nominal yield from staking, like no one gives a shit about levered staking anymore, right? Like, it's like everything's moved to stable coin yield. arguably the staking yield complex is like really collapsed but that's why you saw a ton of M&A from staking providers

over the last six months. Isn't the TVL and like Lido and Eigenlayer still enormous? Yeah, but like people are not looping, right? Everyone's too afraid of that after all the hacks. People are not like and they came down a lot, right? So the leverage exposure to staking has gone down, which has actually just overall tamped demand. And I think the stable coin yield complex is like much stronger, to be honest, right now, just in general, probably partially because of RWA demand, partially because just like people feel safer doing that.

And arguably all the new users who are coming from neobanks are like not touching ether soul, right? They're pretty much only touching civil coin. So I think like it's sort of a weird thing. There's also a very, an interesting argument that I think a lot of the kind of the irony is like this type of thing has like. divided the what I would call the Raspberry Pi Eath Consortium. Because there's the one side, which is like the we want hard money, but also raspberry pies. And there's the other side that's like, raspberry pies will be uneconomical if we do this. And so I think that's like the two sides I've been watching fighting about this.

Because like they used to both believe in the same kumbaya drink out of the same fruit punch bowl. But like now it's like one of them views the other one as having poisoned it. It's kind of an interesting, like watching the schisms, the micro-skisms of Ethereum are kind of funny to me, as just like over time inevitable. I think the Solana one is more, honestly, a lot more well-founded. Like, if you read the Salana proposals, I think like they did actually put a lot more effort. This one feels like they drew a curve and are like, all right, well, this seems good. Like, great, like hard money. It's very thoughtless kind of comparative.

Like the amount of research I went into it compared to the Salana proposal. which is weird to say, because like a theorem used to be the place you would see way more thought going to the proposals like this. But the salon proposals are just fundamentally better research, better studied. And I feel like the discussion there,

the ETH one is just like people getting angry and no one arguing with the content of the proposal. And the Salana ones kind of. It's like kind of an interesting change of guard. That's like the thing I would say. I did see a lot of criticism of this EIP, was this idea that I think the timeline for this IP voting is in like four days or something. And so I think a lot of people were like, oh, why was this rushed?

It kind of seems like this was decided by some cabal and like everyone in the community hates this and doesn't want this to happen. Tom, what was your reaction to this? Yeah, I mean, agreed. I think one, yes, like even already like 1559 and staking was like a huge change in, in ETH monetary policy. And so, you can again,

just like removes credibility. And more functionally, it's like, it's such a marginal difference, right? We're talking about a reduction of 1% a year in terms of inflation. Like,

that is not really what's moving the market around Eth. It's moving the market around Eth is developer activity, stable coin activity, excitement about things that are happening on the chain. So the overall feels like a big distraction. Like, I mean, I empathize with sort of the high,

you know, staking rate, but like, that seems you're foreseeable. that's happening on basically every chain. I think every chain now is also realizing their way of repaying for security, which is why you see chains cutting issuance to zero

or near zero. But I don't know, this feels like the wrong problem to be solving. And also it's a very sort of minor tweak in the grand scheme of things. I think fundamentally, if I were, you know, like, if we're treating it, if we're doing the quaint old memes of like,

if I were the CEO of Ethereum, I would just fucking not touch the inflation curve and only focus on this post-quantum stuff, you're going to get a better valuation as hard money if you're the first real scalable post-quandum chain. The Bitcoin people can't say that. They're getting their fucking wall attack left and right. Instead, you want to do something like that.

It doesn't like, you know what I mean? It's like true like shit posting, navel gazing. And also the proposal reads like shit. It's like a truly horrendous post compared to like some of the earlier inflation post for Ethereum were much better research. They spent a lot more. This one is like a meme post. I don't even know why the fuck you put this out.

It's like a little embarrassing, to be honest. To me, personally. I just like, I think the content quality was like not good. Yeah. It does seem philosophically like they're just knee jerking and trying to like do the right thing. In the absence of having a more specific vision. But the quantum one, the crops thing, right? Yeah, yeah, yeah.

That's a good target to go to. Like it's real problem. Yeah. I know. This is like rearranging deck. shares on the Titanic. I'm sympathetic to the argument that, like, look, you know, having a high staking rate is like nominal yield.

You've got tax leakage, it's creating all these weird kind of games. I think all those things are correct. And I think if you were designing Ethereum today, maybe you should have had the staking rate be lower and kind of disincentivized very high. Now that we've seen how it all played out. Like, yeah, you can look at that and say, oh, wow, that's really weird. That's what we created as a emergent phenomenon on top of, you know, the staking curve that we created.

But I think, like, look, if you are thinking of this as a central bank, you kind of can't just like, great, let's jack up rates to 11 because, like, my model says that we should. Because you would just, like, you would create so much chaos and you would lose a lot of confidence. And, like, that's the other part of being a central bank that I feel like is being ignored here. The reality is that. That was what I mean.

The changing your policy, like, look at the reaction to the current Fed governor. It's like, this feels a little bit like that. Yes, yes. So like the reality is that there's so much that's been built on the assumption that this is how staking works. And if you rug that, it breaks a lot of stuff. It's going to cause a huge unwinded defy. It's going to cause all of this shit that is very foreseeable that like your job as a central bank is to maintain stability. And like that is suddenly saying like, guess what?

Rates are basically zero now. No one's going to do anything. Everyone's going to unwind. A bunch of people are going to unstake. It's going to be massive unstake. Q, a lot of protocols are going to go to zero because basically they have no business model anymore. A lot of Dats are going to be like, well, I have no value add over just, you know, holding an ETF because now, you know, my nominal seeking yield is zero. So I got to do some weird

structured product. I got to start taking risk. There's all these flow through effects in the economy in the same way that like, look, if you jack a race to 11, a lot of stuff breaks, you know, a lot of people default in their homes, a lot of businesses explode, a lot of financing breaks, You know, a lot of debt is something, like lots of things depend on relative continuity in an economy that are, you know, just doing this very gross high level model of, oh, well, you know, what's our, what's, you know, our star is this. So therefore, let's move the rate there. Like, yeah, you, that's not, you don't do that.

So I think that's what they're perceiving. It's not being explained in those terms. But I think that's what they're perceiving when everyone is throwing up on this. Because everyone has exposure to something that would explode if suddenly rate. we're going to go to zero in defy. It's not even just defy, right? It's like the C-Fi complex also kind of rely, like, people keeping their assets in crypto relies on some of this, right?

Like a lot of people are like, well, I have a bunch of unrealized gains. I don't want to get tax on them, but I do want to get some yield to keep it in Coinbase or keep it in wherever, right? And like, now they might look at this and be like, well, actually, I might just take the and go up to AI. Right, like that's like, right, yeah, exactly, exactly. There's so much, like, so much stupid stuff where I'm like,

but that my point is, Robert's point, rearranging deck chairs on Titanic, exactly the correct metaphor. Like, focus on something that actually gives the thing value, not like picking winners and losers in a different way slightly. It's like, right, right. Like, that's what the post doesn't get. The post, like, it reads like it was like a few years.

It's like it's kind of nonsensical to me that you write this in 2026. Right, right, right. Trude doesn't like the post. For those of you, if you didn't know, Taron thinks the post was not written well. Okay. I think we can move on.

I feel like people... It's like in a world of slop. It's a world of slop. You want something better than... Give us one more. One more, Teroon. One more. Yeah, I don't know. That's just my...

It was a little sad. It's like Ethereum, you know, I feel like brought a lot of people into the world on like good research content and quality. And this just makes me want to shoot myself. How far are they done falling? Okay. Well, speaking of wanting to shoot yourself, one of the big stories is a collapse of a fund, a very high-flying fund, not in crypto, but in AI, called situational awareness.

Of course, this is founded by Leopold Ashenbrenner. the young Wunderkind, who wrote this very famous post called Situational Awareness, calling this AI super cycle. He was able to raise a fund that went all the way from, I don't know how much he raised, like $5,000, I think, totally raised. The first was a large way to $45 billion. He started small, right, right, but total capital raised, total capital raised. I read it was somewhere in some number of billions that he raised of total capital,

ran it up all the way to $45 billion at peak, thinking him one of the largest U.S. funds. And then over the course of a few days, was forced to run a fire sale, went down all the way minus 67% in July, after gaining almost 400% plus in June, was up over 1,500 since inception, but was levered 4x when, of course, there was this huge wipeout in a lot of AI names and a huge wipeout in the Korean stock market. A lot of his long, short book just totally blew out. And basically, he was forced to sell his entire liquid book. to Citadel. So Citadel bought the whole thing at a significant discount. He's still alive. 10 billion a UM. I think a large portion of that

is just his private anthropic exposure, but he still has some public book that he's continuing to trade. Legendary wipeout of a fund that we have seen few times. We have seen it in crypto before. Very reminiscent of Three Eros Capital in many ways, although unlike Three Aeros Capital,

Ashen Brenner survived, where, and of course, there was somebody to buy his book That for three arrows, of course, not so much. So thoughts on this event? It's a big event. Luckily, it has nothing to with crypto. It's fun to talk about a topic that shows that there's financial disasters in traditional

financial markets consistently, too. This one reminds me more of like Archegos or like one of those like people that just like flew way too close to the sun, way too aggressively, right? it was a hedge fund, flew way too close to the sun, way too much. Still is a hedge fund. Still is a hedge fund. But my liquidity cost just went up because the only thing left is a liquid position. Correct.

And I don't know the exact terms of how it's structured under the hood. There's been some conversation that certain private investments like Anthropic are sidepocketed. And so, you know, more recent investors are 100% wiped out. And if you do the math, you know, based on how much the fund declined, the only thing left was the private stake. Well, no, no, no, no, they still have publics. He said in the investor letter that they still have a public book. Yeah, but he's also been raising more money.

I mean, he sold. Based on what I read, he sold the entire. They must be down a lot. But they're up this year. So if private investors came in in January, they're up 80% year-to-date. However, if they're not in the side bucket. That's on the private. Right.

If they're not in the side pocket, then they may be down. Yeah. Yeah. So I don't know the exact math and accounting that they're using, but it sucks. Like he basically wiped out a lot of value on highly levered bets, right? He's extremely young. I feel like this is a mistake that everyone makes in their 20s, you know, at some point. I think we're going to be talking about him for a long time because, you know,

anyone who can reach this level of venture this early is not going away. Never remember John Meriwether raised multiple, maybe four hedge funds after LTCM. And they were bigger than LTCM. Absolutely, right? Absolutely. I feel like the bigger you're lost, the higher your chance of raising your next fund. That's like kind of the lesson I think finance has always taught you, which is like for some reason everyone unfortunately rewards the, not unfortunate.

Sometimes it's fortunate, but there are cases where it's unfortunate. They reward the SBF side of the law. log wealth debate. Yeah. But too much leverage, blew up, sucks. I do think it's funny,

you know, there's like so many crypto thing lineage to the story also, right? Like the fact that you worked in future fund and stuff. Right. So Ashen Brenner worked at FTX

on the future fund, which was like their charitable arm. He was part of the effective, or still is part of the effective altruism movement, and is marrying, actually married a two-day after his fund blew up married the chief of staff at Anthropic. So, which of course was invested in by FDX.

FDX led their series A, I think it was. So there is a weird kind of extended crypto universe element to the story, although Ashton Bender himself was never actually in crypto. Tom, did you have a reaction to the story? I don't really have any take other than what people have said so far, but it is, you know, there is still this, like, I don't know, era of Chadenfreude, still running around, like, fintech crypto, Twitter. If you're, like, mock him for, you know, collapsing,

but it's like, look, he's still alive, still up, and he's still better investor than, like, he's still, yeah, exactly, exactly. I do think that, like, the Chadenfreude is, like, a little misplaced, because, like, if history is a lesson to you, anyone who blew up this big has a future success, like, Like, it's just like inevitable. But I do think an interesting thing about this is like the idea that like, you know, this was a fund that like raised all of its capital like in SF basically.

And then like unsuccessful at raising money in New York. And so I think it's like kind of fitting that it ended up with a mainly private book. It's like it's kind of like almost like a fitting end, you know, like all right. Well, yeah, you should just stick it. I expect he's going to run it back on the public side. I think after the story, now everybody in the world knows this guy's name. I mean, also, it's kind of hard to, like, beat the index and the Cospi is down 50%. And he was, like, so correlated to it, right?

Like, I mean, he's crushing the index. No, no, no, no, no, no, no, he's crushing every index. No, no, sorry, but he was levered up on semi, you know? No, no, but his liquidation, yeah, yeah, the liquidation part, he had just was, you know the old phrase, it's like, do you have alpha or? or you just levered beta? And then if you have levered beta, well, then you're fucked. Because there will be,

there's always some probability to draw down big enough of liquidity. I know, but he wasn't just levered beta. He was levered most connected to the AI growth trade. Well, that's why I said Cosby. Because the Cosby index became a semi. I mean, sort of. Right.

But to be clear, that was relatively recent, right? Like the, this guy has been doing this for a while. He ran it up from a very small. He said, I'm going to buy stocks. I'm going to buy stocks that benefit from AI boom. Right. That was the thesis.

I mean, look, the problem with leverage is really that you can be right on all the, on the endpoints and the path can. Yeah, that's, sorry, that's what I'm trying to get out is the path dependency thing is like, clearly what. You can do the Anthropic A and still end up in prison. So. Correct. Tom, Tom, Tom, Tom, Tom, sometimes you got to have more of these zingers like that.

Like, I feel like you're holding them back from our audience. People want zingers. I'll give them more zingers. singers. More zingers. Tom, the zeest of Zen zing. What? I will. I'm trying to come up with a new title for him.

The zealot of zinc. The zealot of zinc. Okay, that's pretty good. That's not bad. That's not bad. All right. We'll definitely be hearing more of this kid. I think it's very clear. This guy is very, very good at what he does.

And obviously, it's a lesson. And anytime somebody blows up, they get chastened. And it's like one of those memories they keep with them forever. He is never going to forget what happened over the last couple weeks. But it's very clear, like, the amount of alpha inside of that office is probably more than any other hedge fund in America. So whatever it is they're doing with respect to the AI cycle, they are absolutely crushing it. I expect to continue doing so. So now, coming back a little bit to Cryptoland, one of the things that we've seen is that it's not just AI that's changing.

Cryptos changing too. one of the ways in which it's changing is what people are trading is changing pretty dramatically. Once upon a time, the most traded thing on Robin Hood was crypto and a huge amount of the revenue

was coming from crypto actually even more so than equities. That is no longer the case. But it's also no longer the case that it's not that crypto is pulling back, but actually prediction markets have now flipped both crypto and equities. Prediction markets on Robin Hood

as of their Q2 earnings are generating more revenue than equities, which is worth $129 million, crypto worth about 100 million. Event contracts hit $156 million. It's only trailing options. Options now is about a little bit over twice the size of event contracts.

But basically, events are an enormous business for Robin Hood. Of course, Robin Hood has been routing a lot of their volume to Kulshi, but increasingly they've been routing more and more to Rothera, which is their JV with Sasquahana. And we saw the same thing happening in DFI. So in DFI, of course, the big story has been trade XYZ. We've talked about it a lot. RWA volumes are increasing. we just saw two weeks in a row in July that trade XYZ did more volume than the rest of hyperliquid

of meaning trading crypto. So RWA are now flipping hyperliquid volume for almost the entire month of July. So we are decidedly in a new world. Coinbase seeing the same thing. Prediction market revenues are growing dramatically. And of course, both polymarket and Kulshi are seeing their revenues increase. How do you guys think about this with respect to the future of crypto trading, with respect to the future of exchanges.

Is everything in everything exchange now? Should we stop thinking about crypto trading as a meaningful light item? I think if you zoom way out and you say what attracted people to crypto generally, it's two things. One was a grounding philosophical belief in the transformative potential of Bitcoin and the ability to create something neutral and big and more valuable than all the other currencies on Earth, right? Number one attraction. Number two attraction is volatility, excitement, trading, speculation, all the fun ways that people are making money around that extremely core philosophy. And right now, I think a lot of the conversation in crypto, in our society,

has sort of muted a little bit towards the first thing. What is the transformative power here? And people are still a little bit focused on the exciting part. I think it's natural that all of the products will gravitate increasingly to the second part because they can't invent a new Bitcoin. They can't really latch onto that drive and gut and emotion. And so they can give the market one at once, which is trade the craziest products, trade every product, you know, wherever there's volatility, be able to jump on it, you know, in some way with as much leverage as you can. And that's what the people want fundamentally. And so, you know, I think it's a natural destination for every platform.

I think it surprises none of us. I mean, we were talking a few months ago about how the number of product on polymarket was, you know, starting to be these like extremely short duration markets, right? Because they're exciting. Every platform and every product will slowly gravitate towards the most exciting product that, you know, the people are clamoring for. And so it doesn't surprise me. I think it's a long-term evergreen trend.

I don't think it's going to go away. And I think people are going to continue to optimize and design around that product. Yeah, I, it's like, I think it's like Al Capone quote. It's like, you know, why do you rob the bank? That's where the money is. And it's like, why do you trade the XYZ? It's like, that's where the volatility is. And I think that's really just the answer.

People want to trade, people want to trade whatever is. Why do people want to trade Pokemon cards right now? Yeah, Pokemon cards got that ball. is amazing. I really, really care about Pokemon cards all of a sudden. No, it's, yeah, they have the vault. And, you know, in the early 2000, there was like FX, and people really trade FX was volatile. And, like, we've seen this kind of cyclical behavior in terms of what assets people want to trade. And it just happens to be right now that crypto is really boring. It's really flat. There's nothing really happening. And maybe one week, it's commodities.

Maybe one week it's particular equities or indices, whatever it might be. But, like, that's also just a much, much bigger market than just trading Bitcoin. And so I think this is kind of where the crypto's going. It's also like stablecoins kind of eating the use case of payments, right? Like, well, Bitcoin's big, but the U.S. dollar is bigger and in some ways kind of better. And so people want to use that to conduct payments instead of just only relying on crypto assets. So until, you know, someone brings volatility back to crypto or maybe more volatile assets on crypto, like I think this is the way it's going to go.

So you think this is a temporary regime or you think this is long term? Look, look, we've grown into it. we're mature now. There's not going to be the crazy volatility there once was. I think unless you really, I mean, I think volatility will return to crypto. This is like famous last words, you know, it's a, you know, you can sew all the way down. Yeah. This is like the New York Times articles are like the Bitcoin is dead, right?

Like that's like betting on crypto volatility. I saw one of those. Yeah. So we might be close to the bottom. But I don't know if it's going to be Bitcoin or something else or there's already some kind of interesting experiments around our tokenized RWAs on Robin Hood chain where people are doing sort of like mini Dow buyback thing, kind of like nouns almost. So I don't know what it's going to be, but I think volatility will return.

It will probably look different next time. I think like crypto maybe in some ways made a deal with the devil of like, hey, we're really always we're really going to be like kind of web 2.5. I don't know what I have to call it, where it's like, you know, we're focusing on the boring assets, focusing on the RWA's. stuff like that. But these are all things you kind of know how to price, right? And it's not like they're like some huge

margin, huge volatility thing. And so like there's a little bit of that as a mollifier for sure. Like it needs to be a completely new thing, right? Like that causes a bunch of volatility, right? It's like, think about like 2019 pre-COVID. That was just like painful

in some ways, right? It was like the only asset with volatility was like Tron. And so like I think like there, but then obviously DFI started taking off, pandemic happened,

like, and those two things kind of like fed off each other, right? And that created this huge vol event. And so I just think it's like we don't have a new technological thing. We haven't had like a new frontier thing and whether it's technological,

cultural, whatever in a little while. And I think like the moment there is some very clear sign of that. We're going, there will inevitably, the animal spirits will be back. Also, it's just like, people have taken, like, forget about Leopold, right? Like, he's, he's fine. You read some of the stories of these, like, the Korean stuff of, like, losses people took in, like, that stock market. It's like,

I sort of just think, like, there's also a sense of which, like, the equity, volatility may have, like, gone too high and, like, we're kind of, we're due for a rebalancing out. I just don't know how long, but... Well, you know what's striking. You know what's striking is that Despite the fact that there was such enormous bloodbath in the Korean market, right? Korea famously was one of the highest countries for crypto trading anywhere in the world. And in Korean retail, anytime something we get listed on upbit, you would see just massive spikes in the demand for any particular asset. Despite the fact that we saw the biggest bloodbath in the history of the Kaspi, the Korean stock market, couldn't see anything. Nothing in crypto.

Which tells you retail's gone. Like retail is genuinely not here. It's actually very surprising that people losing that much money does not show up on a crypto chart tells you we are in a different regime. For so many years we've been saying the institutions are coming, the institutions are coming, the institutions are coming. The institutions are here. They have dampened volatility across the sector. That's what we said we wanted. Now that we have it, it's a little bit like, oh, I kind of liked it before.

Grass is always greener. Exactly, grass is always greener, right? Like we thought we wanted volatility dampening. Actually, we hate volatility dampening. We loved the volatility. because that's why retail showed up. Retail showed up because they liked volatile assets. And so, yeah, you know, like, who's trading SKHonix on leverage?

It's not institutions. It's retail. Well, some institutions. Well, I don't know. Yeah. Historically, historically, once a part of time it was institutions. So, anyway, all that is to say, I do think, I agree with you. I think obviously this is all cyclical.

Crypto very famously has cycles. We're very clearly in the lull of one of those cycles. I suspect that long-term what we need is for AI, probably one, we need to see a couple of these IPOs get loose. We probably need to see the labs be public. We probably need to see at least a couple quarters of revenue so that we can start to predict a little bit better what's going on. The reason why volatility is so high in AI is that nobody can predict anything.

People keep getting surprised. You know, you see like half a trillion dollar, you know, deltas in the open and closes on these markets where, like, you know, Amazon and Apple are getting repriced 15% on a date. like these things are trading like shit coins. And why is that happening? It's happening because nobody can predict anything. It is very difficult to guess what's going to happen. These companies incinerated $100 billion of free cash flow in one quarter.

Right. And some of them did it in a way the market likes and some of them did in a way the market doesn't like. Yeah. Right, which means that they can't predict what the market wants. Yeah. So like at the end of the day, when everything becomes more predictable is when volatility decreases. And once we can start to start to.

guess, ah, here's what the revenue ramps look like. Here's what enterprise spending looks like. Here's what supply chains look like. Here's what GPU prices look like. And we can start to just draw the lines out farther. That's when volatility will go down. Now, that doesn't mean that prices will go down. Prices may keep going up, but volatility will come down. And that on a relative basis is what will attract retail back to crypto. I think that probably takes like nine, 12, maybe 18 months before that happens, is my guess personally. But I think that's kind of what you need in order for people to care about crypto. again from a retail perspective. Institutions, they believe it. Right? Institution, yeah, I believe in

Bitcoin, believe in Stables. I think all this stuff is good, but they're not fomowing into this stuff and they're like, great, I will take my 1% exposure. Part of my diversified portfolio, that's exactly as much as I need. And that's what you get. You don't get explosive growth from that. So, all right, last story, just to wrap things up, of course, the big thing on everybody's mind in the crypto industry is the Clarity Act. We've talked about it. at length, but we are now going into the final hours of clarity. The August recess takes place, I think, where is it, August 9th? Or is it August 7th?

August 7th? It's basically August. End of this week. So that'd be August 7th, Saturday. So we basically have until the end of this week for there to be a vote on clarity. Otherwise, it is very likely there will be no vote. Now, possible that after the recess there's a vote, but people mostly think that that's not like that happened.

If you look at the market right now, polymarket is pricing 25% chance that clarity passes. It's now very unlikely from most people's perspective. Not impossible, but unlikely. Now, interestingly, there's another market on Kalshi that shows that there's a, I believe, 42% chance of a floor vote, meaning that if it goes to a vote, more likely than not that it is going to pass. But more likely than not that it will not go to a vote at all, and therefore it's going to get delayed, and we are not going to see any chance for clarity to pass. So right now, there's some last minute maneuvering. There's some conversation. You know, we've now seen Secretary Bessent start brabating some people. Supposedly there's some kind of 11th hour

compromise of the White House that will try to bring everything together and see if they can't get something that Democrats are willing to sign off on. But time is taking very low at this point. And most people think there's not enough time to get this thing passed. Robert, you are our DC whisperer. What is the feeling from your end about clarity at this point? Yeah, the feeling that I hear most often from Democrats, from Republicans, you know, from industry, from Hill staffers is that everything hinges on the ethics provisions. Should it? I don't know, right? But it does, right? I think it's because over the last year, the primary things that have gotten us to this point, the reason why it hasn't passed yet is frankly like the number one person who's

made the most money in crypto besides probably CZ and besides probably the Tether Guys. And robot ventures. Besides Haseeb, you know, has been, you know, Donald Trump. And it's a very visible thing, right? And so ethics has become the thing that all legislation has compromised. It's all politics. Both sides need a win, right? I think a lot of people perceive the clarity bill on its own as being, yeah, maybe bipartisan,

maybe a little bit more of Republican its basic nature, but that the Democrats are really looking to stick it to Trump in some way through ethics as the thing that they need. to sell it to their base and to grab their own win on the back of clarity. And so if there's an ethics compromise, I think clarity passes, right? No one really knows what the, you know, Tillis Gallego, you know, proposed bipartisan amendment looks like that was sent to the White House. All we know is as of Tuesday when we're recording this episode of the chopping block, the White House hasn't responded to this proposed compromise that was negotiated in a bipartisan

matter. It's like the Tillis-Ga-Ego one. They were responsible for figuring this out. It was sent to the White House. We don't know. I believe if there is language that the Senate, Republicans and Senate Democrats agree on that Trump won't veto. I'm sure it's not what he wants, but if it's not going to be vetoed and it's negotiated in a bipartisan way, I think if everyone agrees on ethics language, then I think the bill has a great point. possibility of passing. I think without that, it's just not going to pass. I don't know whether it's going to come back up for discussion, negotiation, whatever. After the recess, the pre-election months are incredibly hectic with everybody spending their time running for office, with the Senate

negotiating budgets and focused on not giving either side a win. Who knows what happens to it. Ethics is the linchpin. If they can get that done in the next two days, that's incredible. If not, there's always a chance to they get it done after the recess. I would not count clarity out, even if it doesn't get done in the next few days. Personally, I think everyone's focused on it, but there is a very clear

path to clarity passing. If during the recess, they figure out some negotiated ethics compromise, they just come back and pass it. They're at the one-yard line. The bill's basically ready. So the thing that you should constantly look for is just the word ethics. Search

Twitter, set Google alerts for it. If there's any movement there, that's going to be the deal. That's going to be the bill. Two points I would make. So one, I think it is very important that they try to actually just get a vote. And I think part of the reason why is that for Democrats that are in opposition to this bill, right, they actually don't want to be on record being against the bill because, of course, they don't want the big boogeyman, fair shake, to come after them. And if they don't actually vote, then nobody knows who the votes are. and like, you know, in principle, like, just holding it up in this big negotiation is kind of the

perfect outcome for the anticoctro-lobobacco lobby or the anti-crypto Democrats. If it goes to the floor, they actually do pay a cost because whether it's their constituents or whether it's fair shake, they're now, they're out there and they're going to get counted and there's going to be some kind of political accountability for what their vote was. Absolutely. But if they pay that cost, right, then they're going to say, well, there's no cost. for us to continue to drag our feet on it and not support it. And there's the potential that the probability is they pay that cost starting in August.

And then there's a lower incentive for them to reach a bipartisan compromise. That's the risk. No one knows what the best path is against me. So you'd rather have the stick and not use it, obviously. It's more effective as a threat than it is when you actually hit someone and see how they respond. I think the other element that's also worth keeping in mind is that. So actually, Kalshi has a market. that shows passage for clarity on different expiration dates.

The main market is just for this year, right? And very clear for this year, both Polymark and Kulshi agree 25%. Which basically means that if it doesn't, sir, if we go past the August recess, probably both markets have it at basically nil. But they have another market that also tracks into next year. And they put the odds at clarity passing in 2027 at 30%, which tells you that, look, this bill's not dead. Now, it will probably get renegotiated.

If there is a very different makeup of the House, probably there's going to be a different compromise that struck on a lot of the points. So the bill will not survive in its current form, almost certainly if it doesn't pass in August. But clarity's not dead. And I think even if we don't make it through this corridor, there's still a lot of room because at the end of the day, this is an important piece of legislation. So I just want to reiterate that, not all is lost, even if we don't end up getting it done this week. Yeah, it's too important to get it. dropped, right? There's been so much work from both sides to get to this point, right? Yes, like the contours of it will change significantly, potentially in the next 24 hours,

especially as people look towards an ethics compromise. Other pieces of it might change. There's still people nipping at the heels on, quote, illicit finance and the stable coin yield pieces. They seem pretty settled, you know, especially in comparison to ethics. But the draft text we saw a couple weeks ago will not be the final text that is signed into law. Right. Well, hopefully by the time you guys hear this, there is good news. But even if there's not, I'd say, look, it's a long game. There's a lot of game left to be played.

So with that, we will wrap. Thanks, everybody. And we'll be back next week.