Unchained - The Chopping Block: Institutional Memecoin Craze, BASE vs. Ethereum, and Legal Clamps on Rogue Exchanges! - Ep. 625

Episode Date: March 28, 2024

Welcome to The Chopping Block, where Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner dive into the crypto universe's hottest topics. In this episode, we're tackling pressing questions: "Are Memecoins a Good Bet for Institutional Investors?" and "Can BASE Catalyze a Shift in Ethereum's DeFi Dominance?" Amidst Ethereum's upgrades, we explore the impact on scalability and the Layer 2 landscape. The legal entanglements of KuCoin with the DOJ and Beba's lawsuit against the SEC prompt a discussion on "What Do These Legal Challenges Mean for Crypto's Regulatory Future?" Additionally, we analyze the Blast Layer 2 security breach, questioning its implications for decentralized finance's security. Plus, a hypothetical scenario with Mr. Beast airdropping his own token leads us to ponder, "Can Celebrity-Endorsed Cryptocurrencies Create Real Value?" Join us as we dissect these pivotal developments, offering insights into the strategic maneuvers and policy shifts shaping crypto's future. Tune in for a compelling narrative on innovation and speculation in the rapidly evolving world of blockchain technology. Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Pandora, Castbox, Google Podcasts, TuneIn, Amazon Music, or on your favorite podcast platform. Show Highlights 🔹 BASE's Growth and Challenges: Discussing BASE's explosive growth amidst Ethereum's upgrades, and how it's shaping the Layer 2 landscape amidst rising gas fees and scalability solutions. 🔹 Beba & DeFi Education Fund vs. SEC: Unpacking the lawsuit against the SEC for clearer airdrop regulations, highlighting its significance for future of airdrops. 🔹 KuCoin's Legal Battle: Insights into KuCoin's indictment by the DOJ, emphasizing the exchange's challenges and the broader implications for crypto regulations. 🔹 Blast L2 Security Incident: Analyzing the $62 million hack on Blast L2, exploring its impact on security perceptions and the debate over centralized control in DeFi. 🔹 Institutional Engagement with Memecoins: Exploring the surprising trend of reputable investment firms and family offices venturing into the volatile world of memecoins.  🔹 The Mr. Beast Coin Hypothesis: Exploring the theoretical impact of a Mr. Beast coin on the crypto economy, debating whether celebrity-backed coins can lead to genuine wealth creation. Hosts ⭐️Haseeb Qureshi, Managing Partner at Dragonfly  ⭐️Tom Schmidt, General Partner at Dragonfly  ⭐️Tarun Chitra, Managing Partner at Robot Ventures ⭐️Robert Leshner, Founder of Compound Disclosures Links BEBA LLC and DEFI EDUCATION FUND v. SEC - https://www.defieducationfund.org/_files/ugd/84ba66_3f7a8f2ca6614d7381122cb1beeed4a8.pdf  Prominent Global Cryptocurrency Exchange KuCoin And Two Of Its Founders Criminally Charged With Bank Secrecy Act And Unlicensed Money Transmission Offenses - https://www.justice.gov/usao-sdny/pr/prominent-global-cryptocurrency-exchange-kucoin-and-two-its-founders-criminally  Tweet “Learn about that touch and the intersection of AI and blockchain” - https://twitter.com/NEARProtocol/status/1772494712525426865  Learn more about your ad choices. Visit megaphone.fm/adchoices

Okay, so hypothetically, if Mr. Beast coin reaches a $10 billion market cap and everybody believes that it's permanently worth $10 billion because of Mr. Beast, right? And like, he's like personally out there like every day like Mr. Beast is the best coin, you know, whatever. If it actually reaches a $10 billion market cap in a perpetual way, would you not say that $10 billion of wealth has been created? No, I would not say that. Not a dividend. It's a tale of two pawn.

Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. Unnamed trading firms who are very involved. I like that eight of the ultimate puns. Defy 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 crucial topics of the day.

So quick intros. First you got Tom, the Defy Maven and Master of Memes. Hello. Next we've got Robert, the Cryptoenoconisor and Tsar of Super State. Good evening. And we've got Tarun, the Gigabrain, and Grand Puba and Conlet. Yo.

And finally, I'm Hesiv, the head hype man at Dragonfly. So we are early stage investors 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 at XYZ for more disclosures. So Uncle Robert, we had a lot of people yelling at us last week that your story about slurf was not completely accurate. You claimed that Slurf was listed on Binance. It was never listed on Binance.

And that was, I think, part of also your conspiracy about slurf is that it was like listed, that it was essentialized exchange. I might have gotten which exchange it was on incorrect. It was, I think it was phobie, right? Because Justin Sond was really shilling it. There was a couple of exchanges that announced that they were going to be donating their trading fees. Slurf is now actually one of the highest liquidity meme coins on Solana. It has really come into a force on its own. Yes, I was definitely incorrect when I said Binance.

I used the term Binance to colloquially refer to all offshore exchanges or many of them, and I used it as shorthand. So it was not listed on Binance in particular. I apologize to all of our list. We're losing a lot of credibility with the meme coin crowd right now. I know. Outing ourselves as meme coin boomers. Yeah, I should have said, Wobie.

All right. That's okay. I just pulled it up on deck screener. So Slurf is in fact the number one. the number one token on chain by liquidity that is trending in the last 24 hours. It's got 90 million in volume in the last day. So it's number three by volume. So slurf is really coming to its own.

It is now a force to be reckoned with. I guess, of course, a lot of that liquidity is because it's locked from the guy who burned a Lerloor. Is there a meme for like the opposite of stop trying to make fetch happen from mean girls? Like, hey, they made fetch happen because that's what this feels. Like, you know what I mean? It definitely, whatever it was, I don't know if it's a, I still doubt the conspiracy story, but if there was a conspiracy, it was an incredibly successful one because I feel like we are going to be seeing Slur for the next decade.

Like at this point, it's kind of etched into, what was that meme of like the the X could really change humanity. It's really amazing. You know, like the copy pasta meme that you sometimes see in Twitter of like, wow, this could really change humanity, blah, blah. Like, it's like a thing from like the 2021 era. I saw so many slurf versions of that. Right.

Like I think we have very different feeds on Twitter because I, I'm not getting any slurf content, unfortunately. I do think it would, I think a very funny episode would be for us to one day go through have each person present their feed and we roast their feed. You don't want to see my feed. My feed is like 40% chess, 55% crass. 55% crypto, 5% East Asian street food. East Asian.

I did not think you were going to say street food. I thought you said. What type of street food? I don't know, like people cooking in large quantities. It's great. People cooking in large quantities. So not like the food itself, like the cooking process? Yeah, yeah, yeah.

Okay, like back scene at a restaurant, like just that's right. If you go to my Instagram, my Instagram is 100% East Asian street food, like, being cooked for some reason. Okay. Like I liked it once and like for whatever reason, the feed just kept on showing me stuff and I follow zero accounts. And if you follow zero accounts for you just becomes what the algorithm thinks you want.

So if you watch something once and keep clicking, that's all you get. Yeah. There is something weirdly intimate about seeing another man's feed. Yeah, I don't want to see anyone else. It shows you away. Exactly. You know what? I think now that you've described that to me, I think I'm okay in seeing your feed. Yeah.

But so the other thing that was interesting this week, I guess, in the world of what were once serious coins are now meme coins. So we talked before about how the founder of NIR protocol, Ilya, is going to be speaking at GTC, which is the big Nvidia developer conference. So he spoke on this panel with Jensen Huang, which of course was a catalyst for the NIR token pumping. after speaking on that panel with Jensen Huang, there's a photo of Jensen Huang, the CEO of NVIDIA's arm. And so, you know, some people took a picture of that, ha ha, okay.

So yesterday, NIR, what presumably is the social media intern at NIR, posted a tweet saying, last week, near co-founder was touched on the arm by Jensen Huang, founder of VINVIDIA. We got a show. We got a series. And yeah, pull this tweet out. I think the picture, you need to see the picture.

1.2 million views. Tom, can you describe this picture for those of who can't see? Jensen Wong looks like a loving father who is reconnected with his long-lost son, and he is hunched over slightly onto panel chairs touching Ilya, and he is smiling at him knowingly. And it's a beautiful moment, and it's a beautiful tweet. I mean, the replies and quote tweets are the best part about this one. Yeah. The copy finishes, learn about that touch at the intersection of AI blockchain, and then it gives a link. You know what photo it reminds me of?

Or you know what art reminds me of? You know that painting of like God reaching out and touching Adam? You know, like in the clouds? There were a few sub tweets that were showing that. Oh, were there? That's what that. Yeah. It kicked off a trend of people posting like other blockchain founders and famous people

they were touched by. So it's been a very, it's a very weird moment, I think. This was definitely a 2017 thing. People like tried to get photo. next to like Vitalik and be like partnership confirmed. And this feels like, we're gonna go like. I definitely feel like I remember there was definitely an era of that where there would just be like some random person coming up to Vatelic and there'd be like the stream

of people coming up to just take a quick selfie. And two seconds later, you would see it on a meme coin or like a, you know, like something like that. ICO. Sorry, the word you're looking for is ICO. We didn't have meme coins in 2017. We had ICO. You know, we had to file a lot of your father's meme coins.

Your father's meme coins. Yeah, exactly. Exactly. We were, we predated meme coin technology at that time. We didn't have no one invented a meme coin tech token yet. That's not true. Dogecoin was the original. Dogecoin, but it was not, well, when was Dogecoin created actually?

What is the history? 2013 or 14 or something. Yeah, yeah. Like, I'll quit Wikipedia this. No, I remember mining Dogecoin. Because you could just do it on your computer. No one was doing it as super cheap. December 2013.

So very close to what we predicted. Okay, fair enough, fair enough. Not so crazy. But I guess meme coin as a category didn't exist, right? Dogecoin was a funny coin, but it was not a meme coin. In the same way that compound originally was a lending protocol, but then it was defy when the term defy was invented. And so I feel like we have entered into a very different era where today,

a shit coin you would just call it the meme coin. That's true. If there's no project behind it besides the 30 seconds of effort that goes into finding a funny image as the token symbol and coming up with the name and the token symbol, then it's a meme coin. So I was thinking about this yesterday about the, you know, the rise of on-chain volumes on Solana from driven a while of the mean point activity. And there's a trope that, you know, so we've been we've been long-time investors into exchanges at Dragonfly. And every cycle, we sort of have this working theory that every cycle, there's the opportunity for some new meta, and that new meta allows a new exchange to fundamentally start to gain

some market share. And in the in the first, you know, in the ICO boom, it was first, you know, the rise of perps, and that allowed Bitmex to start to rise. Then Bitmex sort of fell, and then it was, you know, ICOs and Binance and all the crazy all coins that exploded. Well, I think Binance was one particular thing that's worth keeping in mind is that Bitmex was very maximalists about Bitcoin collateral as being part of the spec. And Binance was like, okay, you want to collateralize with Tron?

It's okay. We don't care. We'll let you do Tron purpose. Well, but remember, Binance is really late to do derivatives. Yes, but that's very late to do. That's true. But Tron, but Tron. They rose the top on spot.

Right. But yeah, you could only buy the Tron ICO in Binance, right? That was the opposite thing. Right, right. So they were the most aggressive enlisting tokens. And that was very much a catalyst for the rise of Bidance. And so the question is, okay, we're entering a new crypto cycle. Where's the new exchange?

Where's the new moment for an exchange to be able to be one step ahead on the meta or to be more aggressive? And it occurred to me that maybe that's Solana. Maybe Solana is that exchange. And you were thinking about it like this old meme of the, oh, it's a moment for a centralized exchange to be able to gain real market share. But Salon is the first thing that we've really really. seen in terms of a dex, quote unquote, you can think of more or less all of Solana as one decks. It's really the only thing we've seen that has anywhere near the scale of a centralized exchange in terms of the total amount of users, total amount of assets, total amount of volume

that's going through it. And so it occurred to me like that may be the best explanation of what's happening in this Solana meme coin frenzy is that Salana has basically become like this new emergent exchange because of the fact that they're the first to all have all the hot meme coins. Well, I wouldn't discount Ethereum and Unique to swap and all of the things that are corollaries to Solana. But I agree with you. At this moment of time, Solana is the exchange platform of choice for retail. So I guess you bring up a good point.

Obviously, there's a lot of other stuff happening besides just Solana, which brings us to one of the big news stories this week has been a tremendous amount of growth on base. So base, you might recall, it was the layer two that was built by Coinbase. We had Jesse Pollock on the show previously, who's one of the progenitors of the project. So BASE doesn't have a token. It's more or less run, the infrastructure is run by the, what is, optimism super chain. So they're an OP stack chain. And they've had tremendous growth on the chain just in the last couple weeks.

So they were one of the first who adopt EIP 4844, which allowed gas fees to go really low on the chain. But gas fees have spiked tremendously to the point where now it kind of looks like greater than pre-4844-4-4 congestion, not because blob storage is getting congested, but because the total amount of gas in demand on the chain itself is higher than the gas block limit. So I think they do 5 million gas limit or something. I can't remember. There was something like that for base per block, and that block limit is just getting pushed to the max because of all the amount of, I think, mostly meme coin trading that's happening on top of base. So if you guys are you going to supposed to look at this and you know what's driving all this demand and what's your guys sense of what's

happening on base? So yeah, I think Tom and I were talking about this before. I will say it feels a little less organic in some ways than I think the Salana meme coin stuff was like, I mean, all these group chats that I was in suddenly lit up about like buying aerodrome and buying like particular meme coins like all at the same time. So it did feel a little more like coordinated of a move. I don't know exactly what sustained it, but you know, obviously having a bunch of tokens that went up quite significantly over that time period, probably created a bunch of demand.

I will say one interesting thing that, and this is more anecdotal evidence, but I do feel like a lot of the Salana meme coin traders were complaining about being unable to cross to base very easily, like the bridging situation isn't particularly good. between the two. And I think the user basis, because of that, might actually be somewhat disjoint. Like, I need to actually go do more analysis to confirm that, but at least the anecdotal evidence is that the Solana meme coin people are like, base sucks. It's too hard to get to from, and we have our assets on Seoul. So, Tom, you've just thrown up some charts. Talk us through what we're looking at. Yeah, I mean, it's all bit like what Drew was saying.

Keeps him in just that's easy. Yeah. I was going to scale well. So obviously, there's been a huge spike recently. I think the interesting thing is that like it has actually sustained. Normally when you see these huge spikes, they kind of taper off and revert back to the median in here,

at least for the past few days. It's been sustaining around 60,000 new users per day or 50,000 users per day. And that translates to like 2030K active. When you dig in that most active contracts, though, it's still like uniswap. Aerodrome and then on those, it's also trading meme coins. I mean, obviously, people are also trading bridged USDC and things like that.

So, yeah, I'm a little bit, I guess, confused as like why now versus all time. Obviously, there are some novel applications like a forecaster with Dgen and there's a lot of daps, including whatever port goes, Dracula that's building with Dgen as sort of their native currency. But yeah, it's not like, oh, there's like a step in or axi type of application that is like mass user attraction that's really driving people to the chain. Does that, is that good or is that bad? What would you prefer to have seen?

I'm just surprised because normally when you see like a big spike like this, I mean, especially here, it's like there's a particular thing that people are doing, whereas this just feels like, oh, generally speaking, this is, you know, very similar to kind of the meme coin trend that we've seen on Solana. It's happening on base in EVM land now. And so, okay, implicitly by saying that, you're saying that like the fact that it's meme coins that's driving people, that's bad. That's not what we want to see

if we're assuming that there's going to be some I'm not judging the meme coins either way. It's more just surprising in the sense that normally. You're just surprised. Yeah, like what is the catalyst? Right. It's not like, oh, this thing launched and therefore, you know, we see this huge spike. It's just meme coin season.

Well, the real question is, can base be the new Solana? I mean, not with not with fees getting as high as they've been. Yeah, my anecdotal evidence is that the So the Salana folks don't really want to move over. Like, again, this is not, I haven't actually indexed the Salana to base bridge routes that people have been using. But yeah, I just, I've in some group chats with a bunch of people who are very big Solana meme coin people. And they were like, we bridged over.

It was too slow, too expensive. And then they. Yeah, but you only have to bridge once. Well, I think the gas stuff, like, I think there's also. just like a cultural difference of like the Solana meme coin people know a particular set of assets and things that that are completely different from the base ones. Yeah. All the pop-ups and waiting for confirmations, like, ugh.

Yeah. Yeah. But it is it is kind of interesting to see some of the, you know, I think aerodrome is sort of like a alternative, a kind of newer decentralized exchange model that has sort of like a different sort of liquidity incentive. And I feel like we're actually seeing some of those things be tested live a lot further than they have. So seeing that stuff has been good. And yeah, I guess that explains also aerodrome going up a lot. Can you explain to me as if I don't know anything about aerodrome, how it differs from uniswap? The main difference, as far as I understand, is the liquidity incentives are sort of like paid out almost like a bond.

So the longer you lock up your liquidity, the better, you know, the better your rewards are. But they also have a sort of thing where, you know, I think there have been a lot of these bond-like mechanisms, but people kind of can't rebalance or like move across ticks very easily. And this, it facilitates doing that while not messing up this reward thing. It was originally called Solidly, which was made by Andre Cronier, and this was like a fork of it. And so Arodrome just is like more, it's like easier for liquidity providers to be passive liquidity price without doing too much extra effort. That, that's at a high level. That's the thing that's interesting about it.

But, you know, it wasn't clear that it would work when it needed the high enough scale, but it clearly has actually performed well. And that's also, I guess the token reflects that too to some extent. Because the token is tied to those incentives. Makes sense. All right. Well, jumping back into news, speaking of Defi, one interesting piece of news this week was that the Defi Education Fund, alongside the Beba collection, have decided to sue the SEC. So the SEC has claimed that Beba's airdrops were securities transactions and that Beba's tokens. So Beva's some kind of apparel company that I guess did anirdrop and did something related to the opposite. The SEC did not claim that Beba's AirDrop was an issue. Biba proactively sought a court order stating that it's not a security. And it's a proactive lawsuit looking for clarity. Oh, so they're demanding essentially a no action letter or the point of a no action letter from the SEC.

They are demanding the equivalent of a no action letter through the court process. I see. Okay, interesting. So Biba wants to do an air drop, has not done so, and is suing the SEC. No, they did do an air drop. They want to do a second air drop. Wait, they did an airdrop. Also, the craziest thing to me.

How are you correcting me then? The craziest thing to me was like, I'd never heard of this thing. And I'm like, then I clicked their Twitter and it's like this Twitter with 95 users, 95 followers, SEC. That was like the first thought that went to my. Well, okay. So this is based on a single read through of the complaint. I am not a lawyer.

I am not an expert on this. Please read it for yourself and reach your own conclusions. But based on my read of the situation, Biba is a clothing company, and they're a clothing company that created a token, which is basically a discount token. And they have these duffel bags and they look pretty cool, to be honest. I kind of want a duffel bag from Biba. And they airdrop these tokens to all sorts of people, hoping to build attention for Biba and their new clothing company that they have a very small real world footprint. And I think they're innovative ideas, like, oh, well, air drop people discounts on our stuff.

And I forget how many tokens there were, but if you collected 250 tokens, you could, like, trade them in for, I think, like, 50% off a duffel bag. And so they gave the tokens away for free to, like, unsuspecting users. They did this. And after they did this, they said, hey, we're planning to do a second air drop. Before we do a second air drop, we want clarity from a court that we're not going to be the subject of an enforcement action because we believe that the SEC's views on what constitutes the security has been changing.

That change is a matter of policy and that policy has not been subject to the public comment period or any oversight and that they basically have affected by changing their opinion of what constitutes a security offering, a policy. And that policy is illegal because it didn't comply with the Administrative Procedures Act. And so Biba is suing the SEC in a Texas court, which I assume is more sympathetic to crypto-libertarian ideals. They are based in Texas, which is why that would be their court. And they're looking for a ruling to say, of course, your air drop of get a discount on Duffel

bag token is not a security. Go airdrop and have fun. Right. Makes sense. So the, there's the particulars of this case, which I think are probably very sympathetic to Biba as a defendant that like, okay, there's a clothing company like doesn't sound like this token could plausibly be a security, but it was also backed by the DFI Education Fund, which is joining in this complaint against the SEC, presumably because this, the overall thrust of the case is not just that, hey, the SEC, you are unfairly targeting Biba, but rather that you've been broadly, like your whole regulation by enforcement strategy is broadly in violation of the APA, right, of the Administrative Procedures Act. And so they're kind of using this as like the perfect case to go after the SEC for some of

this extra legal enforcement stuff that they have been doing. So it's a very interesting case, and I hope it represents a broader pushback against the SEC. It does seem like public attitude toward the SEC is shifting in favor of this being kind of overly aggressive. Kind of in parallel, there was also a case that dropped today in indictment against Ku Koi, which is like a top 10 exchange-ish, top 10, I think. It's up there. A couple of Chinese founders. Yeah, it's up there.

A couple of Chinese founders, kind of the standard, you know, money laundering, no KIC, targeting American user stuff, same stuff that Binance was gotten for. So more or less, you know, it was kind of a wild west exchange that anybody could get on, anyone can trade on. And in that, there was a dual indictments, or I guess dual complaints from both the DOJ and from SCFTC. And in the CFTC's charges, they claimed that Ether, Bitcoin, and Lycoin are all commodities, not securities, which is sort of, again, a shot across the bow at the SEC, which people have been speculating, is trying to paint Ether as a security as one of the strategies to try to deny the ether ETF.

So I'm curious, get you guys read on what implications this might have for the regulatory picture, given that we now have kind of multiple things in play right now. The SEC trying to fight back against the ether ETF and probably being unfriendly, broadly towards the industry. At the same time, we've got this new Biba lawsuit against the SEC, as well as the CFTC, kind of thumping their chest and saying, hey, back off. Well, I haven't read the Ku Korn. actual cases that have been filed.

But Ku-coin had this reputation for anyone who's been around the industry as being one of the exchanges that was pretty loose and would let people trade and they didn't really care. And you could sign up and trade all sorts of stuff. So it's not that much of a surprise if it's in the Binance mold, right? Like if the government was successful in negotiating a settlement with Binance, that everybody seemed to approve of that the government thought was a win, that Binance thought was a win, that investors thought was a win, that was just good for the health of Binance and the ecosystem, then it makes sense that they would basically be copy-pacing this as a template onto other exchanges that look

similar, right? Like, you know, we haven't yet seen like the exact resolution with like CZ, but like, you know, finance was up to no good. You know, they're trying to go clean. You know, they're putting the chapter behind them. If Ku-coin fits the same overall sort of picture. It makes sense to me that, like, you know, they would go through the same process, which is like, hey, there's clearly been some money laundering and bad activities here. Here's the lawsuit, you know, clean it up and they've reached a settlement. They make changes and everybody moves on. And that would be good for everybody. Yeah, there's definitely a spectrum where I think, you know, Binance and Ku-coin are definitely on the far end of that

spectrum of they had a huge amount of American users and they've been doing this for quite a while and they're only very, very recently starting to clean some of it up. And there are other people who were like, okay, they were doing this in 2017, 2018, 2019 maybe, but then like they sort of cleaned it up after that. And I think they're probably going to get less dramatic outcomes when they do inevitably settle. I agree with you though. Pretty much everybody who's big will have to settle with the US government for whatever kind of funny business they've been up to. But I do think most of the exchanges will ultimately move on because I don't think we're going to find a lot of stuff that's worse than basically what is what we've seen now from Binance and KuKoin, which is you were letting anyone

trade anything. I mean, does it get worse than offshore exchanges in like 2017, 2018? Like that's like really like the extreme end of potential. There is like, there is like FTX kind of stuff, right? Like so there are worse things than just, you know, sanctions and money laundering. There is like, okay, you were also defrauding people. And I suspect we're not likely to see that. But, you know, obviously it's possible that when the DOJ goes digging, they find something worse than just, okay, you were doing wild west shit.

Yeah. I mean, offshore exchanges from that era were just bad news. Yeah. I mean, my impression of KuKoin was definitely always, like, listed anything and everything, no matter how low the liquidity would be online. So, like, I feel like they were kind of asking for it. I'm surprised it took this long because I feel like they must have been the one that everyone was always like something is always fishy about Ku Kukkine. The other thing is the people are still at large. Are they not, is there whereabouts and not known or that was the one thing I saw?

I don't know enough about Ku Kuiang to, you know, you guys probably know more than you. I think they're both Chinese nationals, the people in the indictment. So I'm guessing they are somewhere in China or, you know, I don't know. not China. Well, sorry, Asia more broadly. But the point being, yeah, I mean, Ku-Koin was also pretty flagrant, like in the indictment. They didn't have mandatory KIC until this past July 2023. And they were like accepting funds that were coming out of, you know, tornado cash as of, you know, this past winter. And so it's like, they weren't even, I think you could have fled ignorance, you know, the Mn-Bex 2017 era that like, okay, we don't even, you know, know how these things

are going to sort of fit into existing laws. This just feels like they just didn't give a fuck. And they just were intentionally not complying. And so, yeah, I'm not at all sort of kind of surprised with some of the details. Yeah, there's always going to be like ratchet exchanges that are pretty far down, you know, like sort of the coup coins and the gates and the, you know, whatever that are just super aggressive. And like once those guys clean up, there's a new generation of even more ratchet exchanges that

no, the new generation is on, is just on chain, as you were saying. It's a lot. course, the new generation is which is extremely ratchet, to be clear. Like, if you go, there's been a big argument about this. It has a decentralized validator set. That's a different. That's a different game. Well, yes, but then you've got like all these weird racist meme coin stuff that's flying

around. So they're like, well, that's actually, that's a good point, right? Like that's something worth bringing up is the fact that, you know, in the, in the exchange is now a chain case, you do have these things where like the social community and the actual use of John Chain may disagree violently. Right, right. Okay, so let me give a bit of exposition. So there's been some drama over the last week and a half that for several days in a row,

the top meme coins on Solana all had weirdly racist or anti-Semitic names. And it seemed like it kind of entered into this spiral where, like, once people realize that racist named meme coins were starting to get popular, they tried to create even more racist meme coins just to like get through the noisy. It got really bad. It got really bad. Solana became 4chan. Yes, Salana became 4chan.

It got to the point where DexSreener, which is one of the places where people look for new emerging meme coins and see what their volumes are, Dextruder announced that they were going to start filtering the top meme coins to not show ones that were particularly egregious. Now, what particularly egregious means by the standards of Dex screener, I don't know. It got to the point where Anatoly at one point he tweeted, I think like, fuck the, what is it? Fuck the racist incels who are making the coin, something like that.

Yeah, I don't know. So it got to this weird point, which is, again, it kind of goes to this thing I was talking about before, about, okay, there's always going to be a more aggressive exchange in every cycle that does something

the other exchanges aren't willing to do. And on some level, like, part of what makes DFI powerful is that, yeah, you don't need to ask anybody to get listed. And it is this kind of Cambrian environment where just the raw, attention, the raw competition for attention is, is it. And if it happens to win through, like,

racist, in-sell meme-coins, then- Well, I thought, though, I thought one of the funnier one today, well, funnier ones today was the bridge coin about the collapse. Yeah. I feel bad saying it because, like, people are missing from the bridge, right? But it was like, the Solana meme coin thing is crazy. It's almost like a news. That's horrible. Yeah. It really is. It is fortune. It is forchant. It is just. It is. It is. It is. It's just 4chance. It's just 4 channel of money. It is just pure like this, this just, just, condensation of pure attention, right?

How can you just take the spotlight effect and turn into a fucking laser on whatever word or series of words most people will Keynesian beauty conscious their way to say, other people must also be thinking about that. Think about this way. This is a funny, funny mechanism design version of inverse of sort of like Facebook or Google, right? Facebook or Google, I bid on keywords so to try to match people, keywords or types, to try to match people with their, you know, with ads. But here I'm just cutting out the middleman of the matching of the ads. Instead, the attention economy is just directly onto the asset.

There's no, I don't need this like auction on the third party. I'm like, the asset itself is kind of like the ad. And I kind of feel like that's a cool aspect of mean coins. They're, they're They're sort of like advertisements. They really feel like advertising. It's very true. It's very true. The name is effectively the ad. And if the name is sufficiently metic,

like the Bodeon thing, right? The picture and the name. All these mean points are is a token name, a token symbol, and an icon. Maybe a metadata address to an image. Yes. No, actually not. There is like an economy and game around, you know,

tickers even for traditional. Like thinking about all the games people play around, you know, getting into filing to get like, I want the hodil ticker or like, you know, the biddle ticker. There's a defy ticker and has nothing to do with defy. Yes. There's also GPT3 ticker, which is an AI basket of companies in Europe. In Europe. Wait, can there be numbers on US listed?

I don't know about US. This is, that's why this is like somewhere in Europe. So. Because isn't like in Japan, like their tickers are just only numbers? It's like, yeah, the stock is like. That's smart. That's smart. But then there's lucky numbers.

So then you still have competition, you know. But I think it's like interesting the thing about meme coins as ads because like it is attention economy type of things, right? Like the attention to the thing and suddenly everyone's like making this culture around it. It's not so different to like influencers except it like kind of gets rid of the like detritus around it. Right. Like the users are directly.

Well, there are literally financials who are associated with these meme coins. I mean, the thing about it, like, we can talk about it an abstract way, but in reality, it is no different than NFTs, where there's now a well-understood playbook for, okay, you've got the insiders, you know, you've got to talk to these groups first, you know, where all the big whales are who buy the meme coins early and then pump it to their groups. And there's people who basically are middlemen who will come in and say, oh, look, I'll show you how to get your meme coin into the right groups and market it for you so you can, you know, like at this point, the meme coin game, they've had so many reps of doing this that it's very well understood what the playbook is. And that is part of the reason why I was saying this a couple episodes ago that I don't think the meme coin game is fundamentally sustainable because I think the rake is just too high. Like I think insiders are just making too much money off of doing this over and over again with with a churn being this egregious. But it, I guess in some sense, like, I don't know. I could imagine a Mr. Beast meme coin, you know, when he like gives away money or gives

away an item. Like, you could kind of do the same type of things directly, right? Look, you can keep doing this if the numbers keep growing. If either the influencers who are launching meme coins get bigger and bigger, like someday a Mr. Beast wants a fucking meme coin, or if just more and more people are entering the fray and willing to buy the meme coins, right? But as long as the meme coin game keeps working and people feel like they're making money and there's enough positive sum expectation of profit that people keep doing it,

even despite the rake and despite all the middlemen and despite all this other shit that's going on in between, then I think, yeah, it continues on and it clearly continues on for some time. This is why two episodes ago when I said meme coins are not necessarily zero sum, and you guys all laughed at me. I tried to hold my ground. Thank you for coming around. Sorry, sorry, sorry. I miss you.

I didn't mean to say positive self. Yeah. I don't think it's positive sub. I think what I meant to say was that the net amount of buyers is growing over time, but that's not the same thing as positive sub, to be clear. I think you're making an argument that meme coins themselves, may not necessarily be zero sum. I think they're negative some.

I think the argument I'm making is that they are negative some on the whole. Yeah, without wealth creation, there is an inherent drag on the system, right? There's always energy being sucked out and like that that can only really sustain for so long. So like I don't, you're right that like maybe a Mr. Beast meme coin would do well. But like, yeah, I just don't know how much longevity does this whole cycle actually has. Right, but hypothetically, if there was a Mr. Beast meme coin, and this is not investment advice for Mr. Beast, so please do not make a Mr. Beast meme coin. Like, we will all quit the show. If there was a Mr. Beast, we'll all quit the show because Mr. Beast air dropped us.

Not kidding. That is probably good enough to retire on. Yeah, yeah. That'll just be the end of crypto and we'll just all have to. Yeah. If you're listening, which I'm sure you're not, but if you are listening, we will absolutely help you figure out what Telegram groups to go to for Mr. Beescoin. We know the playbook. Okay. So hypothetically, if Mr. Beast coin reaches a $10 billion market cap and everybody believes that it's permanently worth $10 billion

because of Mr. Beast, right? And like he's like personally out there like every day, like Mr. Bees is the best coin, you know, whatever. If it actually reaches a $10 billion market cap in a perpetual way, would you not say that $10 billion of wealth has been created? No, I would not say that. So, okay, a few things. One, obviously you don't know that it's going to be perpetually $10 billion. Right. Let's just say it's for a month. Let's just say for a one month, have we created $10 billion of wealth if it holds $10 billion for one month? Yeah, if it goes to all of the holders of Bist. No, no, no, forget about what it does in the future. If there's $10 billion of Beast coin and all of it goes, it goes to be a coin,

of the people on Solana who got airdrop Beastcoin are like, hey, I have $5,000 worth of Beast coin and they are that much on paper wealthier. Would you not say we've created $10 billion of wealth, even though it may be temporary, we have created $10 billion worth of wealth? I would say no. It depends on, has that capital been pulled from other meme coins where people are selling their Doge and selling their this and they're that to put it into Mr. Beascoin, which that sounds plausible to me that they would be a drag on a lot of other meme coins. But it doesn't take... The net amount of meme-court activity would basically be zero-sum. The net capital could be like $4, right? Because like if no one's willing to sell it and only a couple

purchases have gone in to get it to that market cap, it's not like $10 billion a capital has gone into B-Coyne. The fraction of a fraction of a fraction has gone into it to create the market cap. Okay. Let me give you a different, let me give you a different counter example. Okay, let's say you and I, we launch it, you and I, we launch a meme coin. Okay, we don't tell anybody about it. And I trade one unit of this meme coin for, you know, basically $10 billion market cap. You trade another one for $11 billion cap. Now between the two of us, we're five billionaires. Yeah, but forgetting the, like the- Have we created wealth? No, no, no, but if it's not. Why not? Because it's artificial.

But if there's an actual market for B-Squine, let's just say it's like actually trading for like a month or two. It's on finance metaphorically. Yeah. Let's just say it is legit trading a $10 billion market cap and it's on multiple exchanges that it's not like two people trading paper. I would argue that the answer is yes, there is an incremental $10 billion of wealth here on the planet Earth. And I think you can replace the word Mr. Beast coin with Bitcoin and you get the exact same analysis. Like would you say that Bitcoin, which is currently at a market cap of I don't know, close to $2 trillion, has created $2 trillion of wealth on planet Earth, or do you think it hasn't?

I think that's a complicated question. I think here's what I'd say. I would grant you that it's possible that if you, if basically Mr. Beast says, I'm creating Mr. Beast coin and a bunch of people put money in it, they don't put that much money in it, but let's say they put, there's $500 million of buying pressure, and it makes Mr. Beas coin go to $10 billion. Okay. And now everybody has $10 billion of what they presume is, you know, liquid capital. I would argue that this is more like an event of money creation. Like it's an expansion of the

money supply, but it's not actually a creation of wealth, right? We have, the economy has become no more productive. We have no more chickens. We have no more cows. We have no more roads. We have no more electronics. We have no more like TV shows. We have nothing more that anybody can consume than they could consume before. We just have more things that people are willing to accept in exchange for money. So if anything, like the creation of Mr. B's coin would effectively be a debasement of everyone else's money in all other forms of money. Is Bitcoin a debasement of all other money? In some sense, yes. Like you can't eat Bitcoin, right? You can't do anything productive with Bitcoin besides redenominate wealth. That is explicitly the goal of people who are Bitcoin maxis. They say,

look, fiat is worthless. Traditional gold is, you know, old and stayed, and it's, you know, it's not going to be around forever once we mine asteroids or, you know, whatever the fuck. So Bitcoin is the right way, like, you want to be early to the way in which we're all going to be re-denominating our wealth. But Bitcoin doesn't make us wealthier. Like, they might argue, look, the fiat system makes us less wealthier because it aggravates business cycles or crashes or bubbles or whatever. I think the thing about meme coins is like, there is a sense in which it's clear they don't, they don't have any like cash flows or expected future utility, But they may have, if it's say like an influencer, some type of like access to things, right?

Like Mr. Beast coin owners suddenly can like get content earlier with it. You know, like all the Web 3. Oh, please. No. Not that I'm a big fan of that. I'm not a fan of that. I'm not a fan of that stuff personally. Like I think like Defi is the only thing that really is honest to goodness thing in

crypto. But I, you could sort of imagine that like, maybe one or two of them could like have this kind of thing. You're cracking. You're cracking, man. I saw Chris Dixon last week and it must have just like, yeah, the like the emanate, his, his essence emanated and now my head is hurting. As soon as you try to add, you know, utility to your NFTs or revenue to your defypire protocol, you just nuke it, you know?

No, no, no, no, no, revenue to your defyreport protocol is different. If you, if there's risk that it's compensating for, right? Okay. No, adding, what is? Adding utility to a meme coin is like turning off. the lights at like a rave you know like it's just like no don't even why are you even talking about this let's see when's the last time you've gone to a rave i might actually guess the answer is never but i could be that's correct i've never he's the one who's turning on the lights yeah i'm the

one i'm the one staying in my lit bedroom that's what i'm doing yeah i mean i will say well some of the i saw some very cringe takes on twitter this week about how meme coins are are, you know, but by investors who are trying to like rationalize their meme coin purchases by about like, oh, they're this huge crazy go-to-market strategy. But I was like, I was reading these things and that was when I was like, okay, people are like drinking the Kool-Aid too much that like meme coins will turn into some type of thing. I went to a very professional dinner last week where it was a very institutional audience and And it was a lot of like very sophisticated market participants.

And obviously like the conversation was 100% about meme coins, right? In addition to like market structure and like, you know, liquidity and like all these like important topics. And there was a lot more stories than you would expect of institutions. And I say institutions, I mean like a crypto hedge fund or like, you know, a crypto trading type organization of some kind. or like a family office, there was a lot more stories than you would expect of extremely credible and extremely sophisticated market participants buying meme coins. And on their PAs or on their personal accounts. Well, no, no, no, no.

I think now it's moving beyond the personal. That's the thing that's crazy, right? Really. Then you're seeing this like faux intellectuals where it's like, oh, we have a junior analyst and he made a docs people for their bad decisions. Yeah, I'm not going to dox people. I mean, like, what kinds of these, like, family offices or these, like, hedge funds? Yeah, like, family offices type stuff.

Like, okay, well, that's, yeah, yeah. That doesn't surprise me that. No, no, no, no, but there are funds buying meme coin. I told you, Dgen had this public purchase, right? Like, like, on base. So we saw one confirmation, one confirmation bought some DGN. So, right. There are serious.

There's more than that. There's more than just them. There's, there's, there. And the best part about it is the mental gymnastics to distort the, like, I bought the meme coin. I have bags and I'm hoping they go up. to like, oh, like, this is the future of some type of, like, utility creating thing. And like the jump, that jump, those people are making as much larger than the tiny jump. I said that, like, maybe they could find something, you know, like Padji Penguins and Walmart.

Correct. There are analysts at firms writing memos right now about why their firms should buy fill in the blanks to the token. Yeah. And some of them are writing in public. It feels a little like 2021 NFTs where people are like coming up with some like over intellectualization of it. It feels more like ICOs to me. It feels like basically ICOs. I think ICOs had this, this pretense of like, we don't know what all could be done with smart contracts.

In 2024, you can't fucking say that anymore. We know the limitations on the things that work well. And it's kind of an ICO boom, like as much of a joke as Denta coin was, there's some sense in which, I don't know, maybe maybe like every doctor payment in the world somehow goes on a blockchain. And like, you know, this is pre-having like tons of stable coins that people, you know, whatever, right? So there's even a tiny bit of belief. Here, there's like literally nothing and people are like jumping over themselves to fucking construct some some insane mental gymnastics as to why the meme coin future is worth investing in. And I think it's because a lot of them lost money on shitty AI stuff. I made this claim to someone the other day, which is the 95th percentile of, this is just a conjecture that I think will be true when these funds return.

The 95th percentile of AI funds is going to do, like everyone 95th percentile below is going to be horrible because like everyone's so overly concentrated in like the top names and all of these like kind of mid-tier investment. just didn't work because they're so capital-intensive and, you know, those funds are going to do it horrible. But the 95th percentile CryptoX-AI meme coin is going to outperform all the 95th percentile AI funds, which is like even more ridiculous. But it's very likely true. I mean, we'll see what happens when you actually have to return capital out of these crypto AI coins. But, but yes, I do you take my bridge coin. Can I distribute in kind? Can I distribute bridge coin? Yeah, unfortunately, your LPs are not in Solana, so that's going to be tough. I don't know. That's not that. I feel like that that's going to change.

Maybe some of your LPs are on Salana. ROPs are not in Salana. I'm saying that's going to change, I bet you. Like I feel like Salonnas reached a certain threshold at this point that it's it's a wallet people are going to all have. Kind of, kind of, yes. Individuals have it, right? But it's a very different thing for an institution to be able to take custody of some It's a lot of meme coins. I think like CCTV launching on Solana today is a great example of like, I think the

institutions with themselves will also have MPC wallets on. I think we've passed the point. Like Solana definitely is solidified like Ethereum of that. That's inevitable for them. Yeah. No, I mean, I more or less agree. The interesting, yeah, this whole thing about hedge funds writing memos on on meme coin buying, It is true that even NFTs had at least some patina of a story about how they were going to

become this new cultural revolution and, you know, the crypto punks were going to become like these rare artifacts and- I still believe that. There was a story. I don't disagree with it. I think there's a story that you could tell about these things. Oh, you know, Bored apes are going to build a whole metaverse and there's going to be this entire, you know, this entire ecosystem built around these things.

Don't believe that anymore. Right. With meme coins, there is no such thing. Maybe with Mr. B's coin, there would be something like that that you could that you could underwrite. But with most of these meme coins, they are really just pure attention economy. And it's like this ruthless battle every single day to see what people still pay attention to tomorrow. But I feel like the reason I brought up the social media thing is that does feel a little bit like engagement farming. Right. These meme coins do have a little bit of the like social network engagement farming. aspect to it. And I don't know. I feel like there's got to be some maybe it's not Farcaster or something, but there's some social network thing that may come out of meme coins that might actually like blend it to. And again, this is not me. I just railed against people writing these memos and now I sound like I'm one of it. But I think I think there is to me, this attention economy thing aspect of meme coins is crazy. Right. The fact that people are making

them in response to world events is like that I don't think that was. true before. It is it's funny because you're talking about what if Mr. Beast launches a meme coin right? If you remember NFTs, NFTs started as celebrities dropping NFT collections right. So it was like you know Snoop Dog and Grimes and all these people who are going to do these like artistic collections. That's how it started and then it ended with just any rando makes you know 10,000 monkeys and then we sell it on the blockchain and we print money. And with meme coins it started with randos on the blockchain, total anon's just dropping, you know, random stupid things. And it will be very funny

if it ends with like Mr. Beast drops like the one last meme coin and that's like the end of the meme coin cycle with, you know, kind of one big last hurrah before, you know, we decide that moon coins are not the thing anymore. Speaking of a big hurrah, we should talk about one for one last thing before we go of the, uh, the news that's actively happening right now, which is the, the blast hack of $62 million. So I have, I have not caught with going on here because someone want to give exposition? Yeah, so Blast, layer two, that for many months didn't allow withdrawals and there was all this controversy.

I think we talked about it on a show before. Blast did launch. They did have some issues upon Ethereum's 4844 upgrade, but other than that, it's like kind of, kind of working. But then they have this protocol in Blast called Munchable, I believe. Protocol was generous. Sorry, whatever. I mean, yeah, the hack was ridiculous.

It's like a lot and one drop. Yeah. Yeah, sorry. I was trying to be respectful of the munchable community. And basically, they got hacked. Apparently, supposedly, what people are saying online is they were infiltrated by North Korea. And this has happened a few times a couple of crypto companies where North Korean engineers will, like, work as contract employees. and then leave some breadcrumbs for later when they want to attack your protocol.

And some of the internet sleuths are claiming that this was like a North Korea inside thing. The interesting question is this is sort of like the Dow hack for blast. Wait, sorry, is the claim that Munchables is a legit protocol, but they were infiltrated by fake employees, or that it was a honeypot created by North Korea? The former. Well, actually, I think it's too early to know whether it's, but like the claims that people are writing right now are this is why it's an active situation. And I think the interesting thing about this thing is also we're going to see what happens. So a lot of layer two protocols have been doing this thing that they've been calling quote unquote native yield where, you know, instead of the bridged asset being Ethereum, they'll take the,

Ethereum, go earn yield and some other protocol, whether it's Athena, whether it's staked Heath, whether it's restaking. And the interesting thing is by doing that level of abstraction, they actually have control over the ETH that's locked in. And you have this kind of weird thing of like, hey, well, maybe they can be like the Dow hack and revert because they're not, their bridge is not holding raw Eath. Their bridge is holding this other thing that they're the multi-sig in their case, controls.

And so, you know, I think this is going to be the big test. This is going to be the Dow hack of layer two's, perhaps, where it becomes a question of, like, how centralized really are they? And will they use their centralized power in these kind of cases? Yeah. And to your point, in the exact next speech, he was doing some forensics work. It looks like there was a particular dev that deployed a malicious contract as part of the bunch of munchibles team.

basically just an upgradeable proxy that they were able to upgrade. So yeah, maybe an inside job in that respect. But I think it does, the point that you're bringing up is like, yeah, what does the blast team do? I think there's also this issue where as soon as you exercise control or you should you can exercise control, then you're liable for, you know, all other sort of hacks in the future. It's like happening to finance when people are trying to exit through the bridge

and BSC versus like, you know, maintaining new trout. and not having that obligation thrust on you, but maybe Blass isn't really in the position to sort of back out of it. Yeah, that's a really messy situation for a layer two. But I think layer twos are going to have to have this Dow hack type of thing become a real issue. Right?

Like it is going to be the thing of like, hey, they're kind of centralized in some weird ways that they could theoretically revert some of these types of transactions. And the question of whether they do it becomes a, you know, sociophilosophical problem. I mean, it's OP stack, right? Yeah.

Yes. So, yeah, if it's O.P.S.cac, then, you know, the fraud proofs, like, they're, I think they just landed fraud proofs in like a. No, no, no. But the other problem here is that these native, this native yield thing means that they're not holding ETH in the bridge. They're holding steeth, which the multi-sig can control. Right, right, right.

Don't you remember we had this argument about native view? I don't know if you remember, but the episode that we first talked about blast, You were like, I think every blockchain ever is going to do this. And this is the new. I think they're going to do it because it's so complicated. And there are so many moving parts that it's going to make shit like this so manual that it will be a nightmare. And people won't want to do it. That's what I said.

But my argument was not that. My argument was like, I agree with you on that. But my argument was that the financial incentive of like it becomes this like game theory thing of like once one does it. It's like the equilibrium is to defect and like everyone does it. Right. It's not the type of thing where it's like, oh, you. you know, some parties won't, some will. Like it feels like the type of thing where like eventually the yield wins.

All right. Sounds like we got to. All right. Yeah, we're up on time. So we got to we got to jump here. But well, I guess we'll continue the debates as always next time. We've, I think we've been talking about meme coins for four weeks in a row. And my guess is that it's not going to stop.

So that is just going to be the recurring topic of this cycle. It's just like when FTX was blowing up. We had like nine episodes in a row where all we could talk about was FTX. I feel like we're getting to the end of... No, no, no. I think it's more like ICOs where you will just be talking about them because it'll be just the thing for like the next two years. Like there will just be nothing else going on

that is as dynamic as what's happening with... Oh, Lord help us. Anyway, yeah, Lord help us. All right, cool. That's it. See you guys next week. Thanks, everybody.