Unchained - The Chopping Block: The Dawn of the DeFi Civil War - Ethena, SBF, Blast & More - Ep. 628

Episode Date: April 4, 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, amidst the crypto bull market's fervor, the boys dissect the launch of Ethena and its repercussions, including a potential DeFi civil war spurred by integration disputes between MakerDAO and AAVE. The conversation then shifts to the broader implications of SBF's sentencing, exploring how this landmark legal decision could reshape the landscape of trust and regulation within the crypto community. Moreover, we tackle the ethical and operational dilemmas faced by Blast in response to a significant hack, debating the merits and risks of potential rollbacks and the preservation of user funds against the backdrop of decentralized ideals. As we navigate through these complex issues, we shed light on the dynamics between decentralization, regulation, and innovation, offering nuanced perspectives on the challenges and opportunities that lie ahead for crypto. Tune in for an insightful journey through the strategic battlegrounds and evolutions that are defining the future 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 🔹 Analysis of Ethena's token launch impact on the crypto bull market and the crypto ecosystem 🔹Insight into the ongoing DeFi civil war triggered by MakerDAO's integration of Ethena, extending into Aave's strategic response and the broader DeFi ecosystem. 🔹Examination of SBF's sentencing, exploring its repercussions for crypto regulation, investor trust, and the legal landscape of the crypto industry. 🔹Evaluation of Blast's response to a significant security breach, debating the implications of potential rollbacks for DeFi security and user trust. 🔹Exploration of the balance between DeFi innovation, regulatory challenges, and the need for a stable legal framework to support crypto growth. 🔹Analysis of the crypto community's response to the DeFi civil war, SBF's sentencing, and security issues in decentralized finance platforms. 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 MakerDAO Proposal: “Morpho Spark DAI Vault Update” - https://forum.makerdao.com/t/morpho-spark-dai-vault-update-1-april-2024/24006  AAVE’s Proposal: “Risk Parameters for DAI Update” https://governance.aave.com/t/arfc-risk-parameters-for-dai-update/17211  Barbara Fried’s SBF sentencing submission https://storage.courtlistener.com/recap/gov.uscourts.nysd.590939/gov.uscourts.nysd.590939.419.0_1.pdf  Learn more about your ad choices. Visit megaphone.fm/adchoices

We're just waiting for your second podcast. My second podcast? What does that mean? What's that? Yeah. The one focused on prison reform. A criminal justice reform. Oh.

Yeah, that's right. We'll do the after hours. If you stick around after the show, I'll do an extra segment on that. Anyway, all right. Call it the prison block. All right. The prison block? Oh.

Not a dividend. It's a tale of two clans. 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. D5.8 is the ultimate problem. DFI 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 perspective on the crypto topics of the day. So quick intros, first you got Tom, the DFI Maven and Master of Memes. Hello, everyone. Next, we've got Robert, the Cryptoconisurer and Tsar of Superstate.

Aloha. And we've got Tarun, the Gigabrain, and Grand Puba at Gauntlet. Yo, my intro was sniped. It was sniped. Oh, you're the Aloha guy? I usually say Aloha. Oh, damn.

Okay, all right. Nicely done. Nicely done. Well, I'm the head hype man at Dragonfly. No, good. Guys, no front running on the show. Come on, let's keep it clean. 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. That XYZ for more disclosures. So, boys, we got another week of the crypto bull market. Today it was notable, and we'll be talking about this a lot today. It was a launch of a token called Athena, which we've talked about on the show previously. I think we had a bit of a snip back and forth about it. So Dragonfly, we are big investors in Athena.

We led their seed round. We also invested a ton of their Series A. So we own a lot of this token. This token has come out at a crazy high price. But those of you who are not in the know, you may have seen Arthur Hayes going out, talking about how amazing Athena is. Athena has grown to, what are they sitting? like 1.5 billion of the token circulating, or sorry, of the stable coin that's circulating. The fully dilute evaluation.

The synthetic dollar. Not a staple coin. Synthetic dollar. Sorry. Yeah. You should know. I should know. I mean, of all things, of all things to mess up after that debate last time.

So I'm moving quick through the notes. I'm moving quick through the notes. Okay. So anyway, it's sitting right now at something like 12 billion, fully diluted evaluation. Billion dollars was airdrop today. I think Robert, you said you were a, a, recipient of the airdrop this morning for at least a couple hours. But there's been a lot of drama about Athena. So although its token has launched today, there's a big fight taking place in

Defi that is being called a Defi Civil War over Athena. So let's talk a little bit about what's going on. There's a lot of details here about what's exactly happening. So I thought, Robert, you might be the best person to kind of parse and explain the story. So it starts with MakerDAO integrating Athena. And we talked a little bit about this last time, and now it's extending into AVE having a response to what's happening at Maker. So, Robert, can you walk us through what happened exactly with Athena? Sure. So I'll try to take this from like a 90,000 foot for you, and you guys can all jump in with more

details and facts and your understanding of the situation. So one of the things that Athena has done successfully is... By the way, let's also start with a recap of what is Athena for The Uninformed? Sure. That's all on you. Okay. So Athena, the simplest way to understand Athena is that it's a tokenized cash and carry trade. The idea is you take ether, you hold ether on spot, and then you short the futures or the perpetual swaps.

This is known as a cash and carry trade basically means you're delta neutral. So you're in theory not taking price risk. You're only taking counterparty risk. And there's obviously a couple of other risks that are in the interim of where you find liquidity and how you balance across different markets. But more or less, that's the idea. It's a tokenized cash and carry trade. you can deposit, instead of holding ether, they hold stake ether. And so they give the cash and carry trade yield as well as the state ether yield.

And they, you know, some of this yield goes into an insurance pool. But that's more or less how it works. It's a token. You can buy it to essentially get the yield from that tokenized cash and carry trade. Okay. So given that there's a synthetic dollar, not a stable coin, as some would say, that Athena created. What they've done is they've been incentivizing people to mint, hold, and defy these U.S.TE tokens in various different defy protocols. So there have been a couple major early incentives that ran for the first air drop campaign, including curve, pendle, morpho, gearbox, things like this.

And it was incredibly successful. So what people did was they minted tons of USDA. They used it in these respective protocols, and they got, you know, points slash shards slash tokens, whatever you want to call them in a Thetus AirDrop. And they were heavily incentivized to use these, you know, friendly peer defy protocols because they like super juiced the incentives to use these protocols. So if you used curve, you got like 15 times as many tokens as if you just, you know, held USTE. So what's happened today is they air dropped the token everybody, you know, the internet celebrated.

And then they began, you know, season two, so to speak, of their air drop campaign. And MakerDAO as a part of this, you know, like all of the 36 hours ago or 24 hours ago at this point, announced that they were going to be massively increasing the use of USDA and C.E. staked USTE in Morpho to borrow dye. And I'll unpack the exact mechanics here for anyone who's already confused because there's like too many things like flying across. But Morpho allows different teams to create sort of like white-labeled single asset borrowing pools.

And so MakerDAO has these borrowing pools that they've created where users can use USTE as collateral where SUSD is collateral and borrow dye. And the MakerDAO ecosystem slash Dow slash protocol mince those die for users to borrow. So they're basically acting like a central bank or a commercial bank when they're doing lending, which increases the money supply. MakerDAO is minting new dye for people to borrow through Morpho. So it's collateralized by people's Athena assets. and MakerDow was letting people borrow die indirectly through Morpho.

And over the last couple of days, this was very successful. There was an upper bound of $100 million of die that could be borrowed. Because of the incentives that Athena laid out, this flew off the shelves. Everybody pumped as much Athena coins as they could into Morpho borrowed all the die out. And interest rates in Morpho have been like anywhere from like 30 to 80 percent to borrow die. If you're MakerDAO, this is a wonderful thing. People are literally paying MakerDAO 80% to borrow die, collateralized by a synthetic dollar, which is generally pretty stable.

And so for MakerDAO, this has been so far, it's a very short period of time. There's a lot of risks. It's hard to say whether it's sustainable, all these things, dot, dot, dot. MakerDAO has benefited tremendously from this. And it looks like an incredible new revenue stream for MakerDow. And so MakerDAO put out a proposal today to raise the limit to a billion dollars, starting with only $600 million of actual dye issuance, but allowing there to be a billion dollars of dye minted for people to borrow using Athena synthetic dollar collateral. And this immediately set off a lot of debate on the internet. There's a lot of folks who were pro-MakerDow on this.

They think it's like the greatest thing for Maker-Dow possible. If people are going to borrow a billion dollars from Maker-Dow at 30 to 80% interest rates, Maker-Dow is going to make a lot of money. And then there's a counter-reaction from other protocols that feel left out or feel, you know, neglected or it's hard to describe. But this immediately set off a chain reaction, specifically with the AVE protocol, that began the process to delist die, citing the fact that they believe that die because of this billion dollar mint was too risky for AVE to support as collateral, as well as they announced interest in delisting the asset entirely. And so this is a huge event to occur in the span of a day. Crypto Twitter has been a buzz talking about what this means, why it's happening, you know, where everyone goes from here.

And it's setting off fireworks. And so we'd love to hear from you all what do you think of these fireworks. Yeah. I mean, sure. I think there's a very frank discussion. And I think the meagerdow forums actually are a pretty good recap of like the risks involved. with Athena that had been, I think, discussed kind of ad nauseum at this point. I think the point that I think Mark Zeller from Ave was making, too, is more around kind

of the way in which this happened and the speed. You know, it's one thing to add a new collateral type that is maybe the different risk profile than, you know, other types of collateral, but it's the fact that it's happening so quickly. And also, I mean, this happened right after the huge, you know, Maker interest rate hike. And so it feels like Maker is moving very quickly. and I think AVE feels, hey, maybe there's more risk accruing here than we're comfortable underwriting. I do think there's also probably this additional subtext of, you know, AVE is obviously also, you know, trying to get Go, its own stable coin off the ground and bigger. And so, you know, effectively sort of subsidizing dye on Avey through the merit program is sort of, you know, counterproductive to the growth of Go.

And then obviously there's this other sort of subtext here, which is like, you know, Gauntlet obviously recently broke up with Avey, but then Gauntlet also has pools on Morpher Blue, a different product and sort of a different, you know, not exactly directly competitive, but like it feels like there's sort of different factions of the defy ecosystem right now, taking a different line and different sort of perspective on what's happening. The Turun, you were called out. You were also very critical of Athena in the previous show. What's your take on this whole drama?

I mean, I don't think I change any views I have on the risk. I generally think the insurance fund's still underfunded. But I do think that the, you know, now that I'm maybe, maybe can say somewhat more things on the office side. I would say that it's kind of irrational to be like we're going to remove all of die while also listing SUSD amongst other thing. Like there's a whole, they're S-U-C-E, sorry. It's so it's like, there's definitely a lot of beef between Avae and Morpho. I think it's the French defy community seems to have no ability to have any pleasantries with each other. They all just are like fucking have daggers out to stab each other, every single one of them.

That's my historical interactions with that entire French defy community somehow is there's a lot of beef. there's just a lot of, I don't know exactly why it is. It seems very unique to them. If I were to write an anthropology of defy, I think they would get a chapter. If it was like a Les Mis where there's like a chapter for like every little subculture involved, they definitely get their own. So there's a lot of beef there.

If you look at the merit program that was mentioned, it purposely singles out morpho and Spark, which is sort of a maker dow sub-dow, which was an Ave fork. There's been a lot of beef in the forums between Maker and Ave for a while. Obviously, Go has had tremendous problems with its peg. So, like, you know, there's always been some kind of people feeling bad about that. But I would say there's the beef aspect, the personal beef aspect is actually the thing shining through here,

not some rational risk-making procedure. And that personal... You think the riskiness of this is not a big deal. Well, no, no. I still think Athenusil has these risks, but I think the idea of suddenly listing SUSD and then saying Dye is going to LTV is going to zero. Obviously, the LTV liquidation threshold difference

is something worth keeping in mind, but not worth bringing up on the show. But the idea that it's somehow worth going to zero, you're listening the same thing and doing, you know, there's a lot of inconsistencies. It's certainly not coming from a rigorous sense. And, you know, I would not necessarily say the counterpart involved as being particularly rational in Zeller. But, you know, not that that's been historically true.

But I would say that, yeah, like, sure, there is definitely increased risk. If you're like, there's a systematically lowering LTV in some manner that's consistent with how much you're increasing it with SPSD. It would make much more sense than doing a zero. The removing it from merit. So merit is the thing, again, to kind of like ensure that no TVL goes to morpho. There's a bunch of extra protocol rewards that get paid to users who don't use other lending protocols. And I would say that, yeah, there's. Don't underestimate how much beef can be a driver of these things, regardless of how much people sugarcoat their public writings.

Yeah. I was like, Therun, you're being surprisingly subtle in your responses here. But I guess let me say a couple things of this whole situation has made me think. So one is that, like with respect to Maker-Dow, This is kind of what many people have always wanted MakerDow to start doing, which is, like, take advantage of the fact that you are the central bank of crypto, and that should afford you the right to monetize the fact that you're the central bank of crypto, especially in a bull market. And this is kind of what that looks like, which is, look, we have the ability to basically be the most trusted collateral anywhere in the world, and we can effectively transform low-quality collateral into high-quality collateral, right? Like, not everybody is ready to take, you know, a synthetic dollar as a form of payment or whatever, but if you can collateral, if you can basically put that down as collateral and borrow a die, amazing.

That is a basically transforming less liquid, less accepted collateral into more liquid, more accepted collateral, and you should get paid for that. And that's what Maker is doing. They're saying, how much can I get paid? Oh, wow, I can get paid 60% annualized

and get points and get this and get that. Awesome. I'm going to go do that. So I think that's part of the reason why on a day when the market is actually down across the board, Maker's up, despite the fact that today is the day

that this silver war, quote unquote has begun, and Avi is talking about delisting Maker, it's not the principal reason why Maker is Maker. So that's one thing is I think it's a step in the right direction for Maker. Now, we talked last time about the whole endgame plan and all the other stuff that they're doing, which, you know, whatever, the market seems to enjoy the direction that Maker's taking on that side, but just from the pure fundamentals of being more aggressive on interest rates and being more opportunistic, right?

The idea for MakerDAO is that the only reason why you should be taking more risk is if there's commensurate reward. And in this case, like you said, Robert, making 60% annualized, that's a pretty great reward. That sounds like worth taking some instrumental or some incremental idiosyncratic risk through, yes, holding a tokenized cash and carry trade. The other thing, I think that crypto Twitter clearly didn't bother reading, you know, the maker doubt posts was it's not like they're just like putting everything all at once, right? They're doing it kind of incrementally and like everyone treated it as if it was this. No, no, I agree that it's like it's a 10x step, right?

So it's like kind of large. Well, they're starting with 600, right? They do have the ability to go up to it. Yeah. Yeah, yeah. But they have like thresholds. They're being much more rational than like we're just going to delist, right? I think like one side is at least reading numbers.

The other side is reading their social media or something. Well, I think Ifgeny from Wintermute had a good take where he, like you were saying, Tarun, so in his timeline right above was Stani celebrating like, oh yeah, we finally integrated USDE and that's great, you know,

let's have this go through. And the next line, it's like, okay, we're going to do this, die, dies trash. So it is a bit of an overreaction, I think, to say the least, but I guess what it also underscores for me, you know, I remember back. Don't forget one other thing that's, The historical thing I remember is the MakerDAO lending facility, the D3M, it initially was really used, the majority of it was really used in AVE for a long time.

And there was disputes over that historically of how that allocation happened. And I think the, you know, DFI protocols may be memoryless yield emitting objects. but people in DFI governance do not have, unfortunately are not memoryless Markov. They are very not memoryless. That's right. That's right. No, it's a little bit of an... The D3M stuff was very, you know, back when DFI was much smaller, it was very, very contentious.

Everyone was trying to get some allocation to their protocol. I don't know if you remember all the YouTube videos of people going into the Maker chats trying to pitch getting an allocation. So there's a lot of stuff hidden in this, probably not even that interesting in some ways because it's, again, just people who have personal beef with each other. Don't underestimate that. The interesting dynamic here is that I remember we were talking before about sushi, I think a previous show.

And one of the things that sushi did that a lot of other protocols didn't do was they kind of went horizontal. Or you could say they verticalize. I don't know how you want to call it, but let's say verticalized, right? They basically launched many different applications within the same brand. And everyone was kind of wondering, I remember we were talking about at that time of like, oh, why isn't Unswap doing this? Why aren't, why aren't other people, you know, launching a bunch of stuff? Eventually they did, but many, many years later.

And I think the, in the early days of DeFi, there was this kind of kumbaya energy that people kind of assume like, oh, you know, we're all part of the same movement. Everything's open source. Like, we're all going to be friends. And we're now seeing, like, look, when you do verticalize, and you decide like, hey, you know what, Facebook's going to have an identity solution, but Google's also going to have one,

and we're going to have a marketplace, but you're also going to have a marketplace, and we're going to have a mapping service, but so is Apple. And you start realizing that, like, actually, we are now competing in more and more dimensions, and this sort of patina of, oh, we're all friends and everyone, we're all in it for the love and, you know, whatever.

You know, it's all positive sum. It starts to go away at a certain scale and at a certain kind of breadth of different, functions that you're doing. And a certain amount of yield at size. A certain amount of yield, yes. Niceties go away. A certain intensity of the bull market.

This is true in all finance, though. This is not just true in crypto. Yeah. I think like a lot of early finance things, like always have this like, it's a club. And then once someone starts making money, it turns into a nice fight. Yeah, I think that is that is a large part of it, right? Like, is that there's only so much, you know, morpho is obviously growing and getting a lot of attention and that's that's causing knives to come out. U.S. DE is growing, causing knives to come out.

And not everybody can win to the same amount in a bull market like this. And I think that my guess would be that's driving a lot of it. No one will ever admit that that's what's driving it. Right. And maybe no one even feels like that's what's driving it. Maybe their lived experience is like, no, no, no, it's this. This slight is the thing that's causing me to do this. And they just lost my trust and blah, blah, blah. And I don't doubt it. But I think the under the Shakespeare, drama of it, I think it really does just come down to incentives. And the fact that, you know, we're not in DeFi summer anymore. And there's not just this like, well, every time the defy meme gets bigger, all tokens are worth more. I think the market is really being much more

discriminating. And there have been very few people who have successfully gone horizontal in multiple categories while also maintaining the same market share across categories, right? And I think the problem is the expectation when you're successful in one category and have market share X is that, oh, like, obviously, you know, as a founder, you have to have the delusion, which is a fair delusion, right? Otherwise, you wouldn't even try doing it. They're like, oh, it's going to be easy to just expand to this and create the same market share, create the same effect. And like, that's just not, these things are all, they have microstructure nuances, that have market participant nuances. They have, you know, math nuances.

And I think if you maybe didn't, you got market share for all the reasons that weren't the subset, and then you move to another thing where all the market share comes from exactly the reasons you're bad at or the things you're not good at, you know, you may set yourself up expectation-wise in a way that doesn't work. You know, like I feel like it does remind me a little bit about the early social. No, no, I'm just giving a general, I gave you a general statement about arbitrary sector, growth, not necessarily any particular products that are being named. I just am pointing out that there's this kind of like expectation mismatch that happens. And like it reminds me a little bit, although maybe the stakes are a lot lower,

not a lot lower, but definitely lower, of like the early social network days when it was like everyone on their mom who had a random tech company would like either quit and start a social network or it was like Google tried to make, you remember that abhorrent circles? thing they made that like social network like no one used. There was kind of this like same Google Plus. Google Plus. Google Plus. I just remember the circles. Google Plus.

But like there was this whole thing whereas like all these people were like, oh, Facebook had this success. We're going to try to get into it. And then like all of them like none of them were able to meet their expectations. And I will say one of the things that you have to give Zocke a lot of credit for, is he's one of the few people who can actually say he expanded into new verticals within social and kept his market share at the same amount, which is astonishing. That's extremely hard to do it. And I think in crypto, that's even way harder to do because the barriers to entry are so much lower

in terms of building a network effect or losing a network effect. Yeah, very true. I mean, that's one of the things I think that MakerDAO has done right, which is staying pretty compact and just being really, really good. at the thing that they do, and that builds trust. And ultimately for a defy central bank, that's the number one thing that matters is that people trust you. And I think, look, I do agree directionally with some of the concerns of, you know, saying, hey, this is kind of a big growth in the total exposure to Athena.

And maybe they should have tempered it a little bit more, gone a little bit slower. Maybe even in absolute terms, I think if you read the governance thread, I think they make a good point that, like, look, the risk of loss is actually pretty low. and like, you know, if you model out how much you lose, like, this is not going to be a hundred percent wipeout situation. This is like, oh, maybe, you know, 20 percent, 15 percent. And so, you know, there's a lot of situations where actually the risk level for the reward you're getting is pretty reasonable. But I think the optics of it matter just as much as the reality of it matters. And so, you know, optically, I think maybe they should have been able to foresee that, hey, this would have

caused people to be a bit jumpy, especially after the sudden rake hike. So, but overall, I think I think regardless of how we got here, it seems like we probably would have ended in the same place, which is that it feels like battle lines have been drawn. And it sort of seems like the market is also reflecting, Maker doesn't need to be, or sorry, die, doesn't need to be an Ave for die to be die. Otherwise, of course, you'd see, you know, the market responding to it. Yeah, I mean, I'm going to be honest, if I was someone who was, like, personally very interested in ever making an algorithmic stablecoin, which I find scary. That's like the worst product to, to, to, it's the most legal risk.

You mean synthetic dollar. No, no, no, no. That's a head time. Let's be real. But, but, but, but, but the, the, the, I'm talking about real algorithmic stablecoin like maker. Oh, oh, okay. I, I, I, I, uh, I think, I don't know why you would want to fight in the maker

battlefield. I think you're better off trying to go to like SVM or move. or somewhere where there just isn't any, and there's a ton of collateral earning no yield. Like, why, why try to look like, I feel like that's the thing I don't understand about these expansion things is like everyone wants to expand in like the same field,

but there's all these fields with tons of collateral that is sitting there either stakes or like not doing anything. And like, yeah, this is like a good liquidity transformation type of story. And it's just like mind boggling to me. we haven't seen like maker and other ecosystems yet. Like I think what is the collateral ratio you would set for Geoboden? Who cares, but who cares on like sui or APDOS? On SWE or APDOS, at 2X people would still do it because they're sitting on a ton of

stake aptos or sui and the market caps are sufficiently high. Like it on the L1s, it actually does make sense. And yet, you know, instead we see like 500 clones on EVM chains instead of, I've never understood this dynamic of like the wanting to stay in the same ecosystem because I actually think you're you run into this problem we're talking about. Yeah. I think weirdly the sort of threat to deal as I also like underscores the strength of morpho in comparison and that you have these sort of one-time deploy no governance, um, isolated lending pools that can't be delisted. Once they're live, it's like a eatas well pool and you just use it forever to worry about, you know, someone coming in

and revoking your access to borrow. I think going back to what you were saying around, you know, these sort of vertical integrations, I think one thing I actually think that Maker has done well, which has kind of got underappreciated, is spitting out their products to sort of stand on their own merit and have their own brands in Summer and Spark. And, like, you know, they're largely pretty successful.

And they haven't tried to like make it all the maker ecosystem. And it's all sort of the same team doing the same things. it's these you have dedicated individual teams work on as individual products within individual brands, even though they're obviously all sort of tied back to make her and die in some way. Cool. All right. I think we've probably lost a lot of the audience with this very kind of deep dive into defy squabbles. I actually think this is going to be the type of audience episode. We get a lot of angry tweets or farcasters or casts. Actually, I've noticed engagement, by the way, something funny to know. I get way way more engaged.

on Farcaster about people casting about chopping block episodes. It's actually astonishing that the three of you have such low Farcaster followings. I don't have any idea to sign up. I'm not even on. That's what I'm saying. But there are a lot of listeners on Farcaster. Tom, are you live on Farcaster again? I am on Farcaster, although I'm consuming. I am not casting very frequently. Leaching. I'd like to call it being a leech. Leachers. Okay. That's like the old school, you know, like... Yeah, that's like the bit-twin. Yeah, exactly. Okay.

All right, well, speaking of being a leech, let's talk about the SPF case. So SPF was just sentenced. This is a great, kind of very, very magical moment where the... SPF's mother, who, those of you maybe read some of the books, you might recall, his mother is a philosopher who was, I guess, famous at Stanford for her endorsement of utilitarianism, which, you know, surprised right me, figures prominently in the story of SPF. So she wrote in a note to the judge, which was roundly criticized by many people, she wrote that SPF never intended to commit harm and that he was an awkward math nerd who loved video game

and animals. So tried to portray him as being a very... altruistic person talked about how the fact that he was still vegan in prison which shows his moral commitment and he lost 30 pounds and didn't even complain

to any of the prison guards about losing weight. So this didn't fly particularly well with the judge. The judge in sentencing said Sam never showed a word of remorse. He knew it was wrong. He knew it was criminal.

He regrets that he made a very bad bet about the likelihood of getting caught. There is a risk that this man will be in a position to do something really bad in the future and it's not a trivial risk. The judgment has to accurately reflect the seriousness of the crime, and this was a very serious crime.

So he says that the 105 years that were recommended by the probation department and by the prosecutor of 40-50 years was more than necessary. He says, the judge continued, I'm not diminishing the harm, the brazeness of his actions, his exceptional flexibility with the truth, his apparent lack of any remorse. I want to add one further thought. I did not think it a fruitful use of time to spell out every lie. When not lying, he was evasive, hair-splitting, trying to get the prosecutors to rephrase questions for him.

I've been doing this job for close to 30 years. I've never seen a performance like that. He ended up sentencing SPF to 25 years in prison. Because it is a federal sentence, the overwhelming likelihood, you'll serve at least 80% of that time, so almost certainly at least 20 years that he'll be serving in prison,

assuming that there's no appeal. So what are you guys' thoughts on the sentence? We're finally kind of at the end of the line. Just for a comparison for those sentences for white-collar crimes. So I believe shoot, who's the Ponzi-Skin guy? Bernie Madoff. Bernie Madoff got 140 years.

Jordan Belford served 22 months for he's the Wolf of Wall Street guy. Boski served three years for insider trading. Elizabeth Holmes' ascendance to 11 years for her fraud. What do you guys think? SPF 25 years. I would say in all, just on a relative basis, it seems generally correct when you frame it against like Jordan Belford and like these like

people that were committing like lots of scams and lots of fraud getting very light sentences going up to Bernie Madoff who vaporized $60 billion of money that didn't belong to him getting you know the rest of his life in prison Elizabeth Holmes did about what was it like $8 billion of fraud right depends on how you count I mean the company was worth $8 billion A billion. Yeah, fine. She made a fake $8 billion of market cap. SBF made a fake $35 billion of market cap of his company.

You know, I view him as being roughly four times as bad as her. You know, maybe there's, yeah, you know. And so, you know, I think there are like diminishing marginal return. Well, what do you make of the fact that there now looks like there's going to be a full recovery of FTCS assets? Do you think that should change this? No, I think, you know, the prosecution actually phrased us incredibly well in some of the summary I read, which is, you know, if you steal a bunch of money from people, take it to Vegas and you happen to win and then pay them

back, you still stole their money and you still committed a crime. It doesn't matter, you know, what the outcome of the crime is. It matters the process that you went and you mug them. You took their money. And yes, you might have happened to get lucky. It wouldn't be worse of a crime necessarily if you went to Vegas, lost all the money. And they had to have been. less recovery. Like, the recovery amount doesn't really change the nature of the fact that he very purposefully stole billions of dollars for his uses. And, like, it's nice, it's good for the victims that they are getting a recovery, and I will make sure everyone hears this, a recovery of a very low value of crypto assets.

Yeah, that's the robbery. That's the robbery. That's the robbery. Like, Every time anyone says they're getting a full recovery, like you need to remind yourself, they're getting their 22 value of Bitcoin and Crypto back, which was at the low. They were at the lows and they were at the lows because of the collapse of SBA. Yes, exactly. So they are not feeling like they're made whole. Like anyone who lost a Bitcoin and FTCS is getting back like the equivalent of like 0.3 Bitcoin.

Like they don't feel whole. And everybody on FTCS was using crypto. So everyone is a loser. still. It doesn't matter that like you talk about it and dollarized like as of when FTCS failed. Like they get that amount of money back. Like no one feels happy getting back, you know, $17,000 per Bitcoin or whatever it was. So people aren't made whole. That's a yet another slight of hand from the defense and from SBF and his team. Like I think the sentence is generally fair. You know, I think he's one of the biggest criminals in the,

the history of finance. He's definitely the biggest criminal in the history of our industry. And, you know, we won't be seeing him for some time. I am afraid he's going to launch some shit coin in like 20 years. That would be very, I think if he did, he would probably deserve some reward for being that committed that 20 years later, he launches a meme coin. I would buy it. Tarun, what's your take on the sentence? I think an interesting thing is everyone I know who had money at FTX, significant amounts of money, save a million or more, 10 million or something like that. I think the trial was way too light and he should have gotten max sentence.

Everyone who I know who's like, works at Anthropic slash EA sympathizer thinks it was too harsh and should have been five years. And the funny thing is the average of the two, like if I average the two estimates and like comes out to the 25. So that's just my sort of statistical thing that says like, hey, it seems like it's fair. Like if you sample enough people, it seems as a bimodal distribution where the people who put 25 are the ones who just don't care that much. And the people who like care but think about all the defenses arguments think it's five and everyone else thinks it's like 45 or 50. I don't know. I found that kind of a weird idiosynchral. that I observed.

But, you know, I agree with the judge. I mean, I also think, like, how this is, like, the one of the most erratic court performances in history. I feel, I feel like we got some, we should all feel a little bit thankful that we got both performance art and a court judgment at the same time. You don't get that very often.

Because, yeah, Sam had no, literally no remorse. I remember reading the testimony during, sentencing. And he didn't say sorry once. He didn't even like really say like, oh, I lied. He was just kind of like, I made a bad bet. He kept saying that. I'm like the one time, you probably should learn how to just say sorry. You know, it's like, you know, it's like, I remember all those memes right after FTCX came out, which would like deepfakes of him saying I'm sorry. And it's like, yeah, they're all deepfakes. He would never have said that. Yeah, I think the general said, I thought he said something that was like, no, he said like, I was the CEO and

therefore I'm like responsible. Yeah. Yeah. And he'd just say fucking sorry. Right. He never said like, hey. To my victims, I I stole 10 billion dollars from you

and did wild stuff with him. Like he never said that. He never admitted what he was. But at sentencing, at least it's already done. You should like, even like game theoretically. I'm like,

this is like a stupid move to not do that. But you know, think he just has, he really does have no remorse. And like that sentencing testimony made me just feel like, this is a person who's bitter and has no remorse. Hold on. Okay, okay, okay. Look, I'm going to read, because I actually don't think this is true.

I'm going to read, this is from ABC News. These are just some quotes that it kind of peppers out this article. So he says, I've heard and seen the despair, frustration, and sense of betrayal from thousands of customers. They deserve to be paid in full at the current price. That could have happened, and it should happen today. It's exclusion to see them waiting day after day. he felt the pain from coworkers as he threw away

what they poured their lives into as their funding turned into nothing but reputational damage. I'm haunted every day by what was lost. I never intended to hurt anyone or take anyone's money. But I was a CEO. I was responsible for what happened to the company. And if you're responsible,

it doesn't matter why it goes bad. I give anything to go over health. But that's different than just saying, like, I'm really sorry. I'm sorry. That's so different emotionally than saying I'm sorry. Literally, that sounds like chat GPT

is like, how do I write a press release of like I fucked up? Like, it literally does not, it doesn't have any emotion in it whatsoever. And this is a sentencing hearing. Like, that's the only fucking time you're supposed to do that. Yeah. The judge also mentioned a sentencing that he, like, perjured himself several times while he was on the stand.

So, like, kind of goes back to the idea that just was never able to be straight and own up to it. And I think even, yeah, like, focusing on the loss of his colleagues' careers, you know, it's like a big distraction from kind of the core issue here. the letter that his mom wrote was also very telling in some ways of like how he was brought up and like his mom's sort of molding of him and it's all about like how good Sam is and the closing line is pretty clutch it's I hope for his sake and the sake of the world that he has given that chance to do something useful and so Not only are you, you know, saving Sam, but you're saving the world by giving a more, more, you know, lenient sentence. And so, yeah, I just kind of feels like, you know, his ego has been built up so much. I think not in a way that maybe comes out explicitly, but in terms of how he thinks about, you know, himself and his actions in the world and, you know, sort of acting

without regard for others around him, even if that isn't, you know, something that he would explicitly say. So I'm definitely the odd duck out here in that I kind of feel like I'll describe be a person here. So let's, let's be. But I mean, I didn't really have a relationship with Sam. But I guess what I would say is that like I think the punishment for Sam has kind of already happened. Like he's probably one of the most hated people in America. He has lost all his money. He's lost his entire reputation. He can never work. It can never be a company. go again, you know, like more or less, you know, obviously the civil charges against him by the SEC are also going to be, would otherwise be significant if they decide to go through with him,

which I assume they're not, given that he's going to be in prison. But it just feels like, on top of all of that, like locking somebody in a cage for 25 years and, like, you know, he'll be 50 when he gets out. I don't know. Like, I don't believe in retributive justice or punitive justice in that kind of way that, like, just kind of locking away somebody. and then feeding them through the state. And like, now we're, he's on all of our dime now because, you know, he can't do anything. He can't be productive.

He can't make any rights wrong. I'm sorry, make any wrongs right. He's just kind of useless, but he still lives on in prison for the next 20 years. And I just kind of feel like I don't know that, you know, I don't know that it matters so much that the recovery, you know, whatever, Solano went up and Anthropic turned out to be a good bet

and blah, blah, blah, you know, whatever. I sort of don't take that in too much. consideration, although I think it matters somewhat, but it is a kind of moral luck, essentially, of whether or not your crazy, you know, Vegas bets turned out to win or lose. But it does seem like it should matter to some degree when you look at the comps, which is the most VC possible thing to say, but if you just look at, like, the examples of like Elizabeth Holmes or Boski or Jordan Belford, it's just like, you know, 25 years, like, yeah, the numbers are really big because, you know, obviously 25 billion or whatever,

sorry, not 20, but 10 billion of money that was ostensibly lost because of SPF. Stolen. But the reason why the numbers are big, sorry? Stolen. Money that is stolen. Not lost. Stolen. Yeah, yeah, yeah.

But see, again, again, this is where you're like, there's, you know. Yeah, to be clear. I mean, but that's true for all these people, right? All these people are. No, no, no, no. That's true for all these people is that they all committed some kind of crime against people who, you know, whose money to whom they had no right. But, like, the reason why the numbers are so big for SBAs.

SBF was because crypto is crazy. You know, like, crypto was just a crazy enough industry that it was willing to give $10 to a bunch of 25-year-olds hyped up on cocaine. I think if he had remorse and was an empathetic character in any way, shape, or form, and then also didn't just, like, lie all the time, he would have got a sentence that's much more commensurate with the others. I don't think he would have. He just did everything possible to shoot himself in the foot.

Yeah, look, I agree with you that he, He does not, he's not a sympathetic defendant in any way. He does not play well in front of a judge. But I think that probably would have changed 25 to 20. If there's no way given the severity. No, I think it would have been like closer at 10 to 15. I think 10 to 15 if he was a better. I think the numbers are too big.

I think like the sentencing guidelines for a crime this big, just making it almost impossible for a judge to give lower than 20 years. Like the people were, people projecting it might be like 50 years. It might be basically life in prison, which, You know, like, look, if you get out at 50, you know, imagine how much society has moved in, by the time it's fucking 2050, you know? I don't know. I mean, I just think, like, it's, there's no real winner in this.

Like, I think, like, it's not like the people in the recovery getting more money. I feel like your, your, your, your sort of criticisms are more the gent, the criticism of, like, the criminal justice system in the U.S. They're not necessarily, they feel like they're less criticism. It's not really specific to Sam. It's not really about, yeah. But conditional on being in that environment, in those environments and agreeing to those rules, it's very hard to say that he got the wrong end of the same.

Now, the rules he's playing by, you can dispute that's sort of more in the vein of the arguments you're making. But I don't think that conditional on accepting those rules that like this was so out of whack. Yeah. I think it's also, again, it's an optics thing, too. It's, you know, Elizabeth Holmes defrauded investors. They're professional investors. They should have done more diligence than they were supposed to. But, you know, that's on them.

Like, they fucked up. That was their job to do that. People had their life savings in FTX. Maybe they sure enough that they did. There are several suicides attributable to people who, you know, lost their money in FTX. And I think defrauding everyday mom and pop investors, people who are just trying to trade some crypto or buy a banana. like, you know, those are, I think it's just a very different case. And, you know, obviously, optically, that affects sentencing.

Yeah. No, I mean, you're right. I just don't know that putting somebody in a cage for 20 years does anything to remedy any of that. But that's a, that's a criticism of the system. That's not a criticism of this particular. I'm criticizing the system. Okay. Then you're saying that you criticize the system.

Okay, that's fine. But this is like one of the longest sentences for a white collar crime. I think, like ever. Well, Bernie Madoff was higher. Yes, I mean, Bernie Madoff is perhaps, you know, the outlier that we're comparing it to, which is also on a very different scale. And over many, many more years, Bernie Madoff was like, his entire life was running this Ponzi scheme. Arguably, the fact that he did so much in such a short time is worse.

SPF ruined so many people. But it's like it's a function of how crazy crypto is, right? Like, how many normal people, otherwise like sort of cyclone, psychologically normal people presented with that dilemma would have also done maybe not exactly what Sam did, but something also fucked up, right? Like, my point is that, anyway, whatever. Sam ruined. Sam ruined.

You have died on it. Okay. He did. He did. I agree. So many lives. Okay. And his sentence is less than like the average like drug dealer who gets picked up with like a bag of

yeah, exactly. Okay. Which is, which is its own kind of horrible and absolutely ridiculous. And like, in which the. U.S. is also an outlier. That's a system criticism. This is a system. Yes. These are all.

We can criticize the system. It's a podcast. Sure, sure. But conditional on that system, the question is, is it fair? Conditional on the system, conditional on the system, I think clearly, if you include in the system sentencing guidelines, then it's clearly fair, right? Sentencing guidelines are very strict around the total amount of economic harm. And this is something that, who is it?

Schrelli. Schrelli was talking about this about like how, you know, there's almost no way that he could get below 20 years just because of sentence and guidelines, which are more or less mandatory. Like if they give him less than that, like, I think he can get appeals or something. So, yeah, like it does seem like there's no way that Sam was going to get any better than at least 20 years. So 25 years seems like probably middle of the road for what you would expect for Sam to get. I just object in general to like these gigantic sentences because, you know, I don't know, like make him make him go work for. charity for the rest of his life and pay back the victims, right? Make him do something. But why would you say, why would you say instead all the American people will pay for his vegan meals for the next 25 years? Yeah, make him launch tokens on Solana until he can. Yeah, I just think, I just, I just think, look, look, if you want to have a podcast where we talk about, you know, prison abolition and or reforming the reforming the prison system, that's fine. I just don't think the rest of the crypto podcast is really mental. We're just,

trying to assess the conditional on the system we're in. And I think, you know, most people would agree that this was not an unfair sentencing. Yeah. Look, I would say if, you know, again, not conditional on the system when they were in, I would say 10 years probably feels like the right sentence. But I don't know how much a crypto podcast is going.

You know, we'd have to shift our narrative. We're going to start talking about that. And I say this as someone who who spends a lot of time donating to nonprofits that try to help people coming out of prison, help them with their parole type of stuff and for people who are underprivilege. I can, and I tell you like volunteering at that stuff. I agree with you philosophically,

but I don't think that this podcast is a place for it. Fine. Okay, I will just share two cents since you mentioned that. I used to volunteer at this thing called The Last Mile, NSF, which teaches inmates how to code. And like literally, if you are in San Quentin prison, you cannot get unfettered internet access. What we had to do is we had to download an offline version of GitHub

so that people could have access to actual code that they could interact with and search through in order to learn how to code. Prison is just like this horrific, stultifying environment for people that I just think like the way that US does prison is insane. And I think it's like horrible for people and we pay for it with tech, anyway, whatever. All right, I'm not going to rant.

Let's move on. Last story, which I think is interesting, Speaking of prison, there was a hack that took place last week on Blast. And this hack was speculated perhaps to have been done by North Korea, which, of course, has been an active attack by protocols. Pretty good guess. There's some reason to think that perhaps what happened, there was this protocol called munchables. I don't know, maybe protocol is a strong word.

There was an application called munchables on blast. There were smart contracts. There were smart contracts. Okay, that's even better. Let's upgrade. that's, you could send your money to a place, to a multi-sig under the name of Munchables, and apparently they hired a developer who may have been a sleeper agent, sort of fake developer, who was actually a plan from North Korea. Now, this is speculation, we don't know whether or not

this is what happened, but Zach XPT, who's well-known, Onch-Slooth, was speculating this may have been what took place for this thing called Munchables. There's a $62 million that was basically hacked and that was floating around Blast, and it was kind of a code-red moment. Now, all ended well. The money was returned, and ultimately everybody presumably was made whole, and the attackers did not get away with it. And it's speculated this may be because Blass, of course, right now, their bridge is relatively centralized.

It's not fully automated quite yet, because, of course, if you remember, Blass has this native yield. You deposit ether. They put it into Lido, and there's all this fanciness that's going on in the back end. And so it was possible in principle for them to be able to be able to. to block withdrawals from the bridge or even do a rollback of the layer two in order to undo the hack. And there was a big debate taking place online,

which thankfully never actually got down to the wire. But there was this big debate on whether or not blast should in principle roll back the chain and or prevent withdrawals in order to stop this North Korean hacker from divesting their 62 million that they stole. And so this led to a big online mudslinging conversation. Didn't end up mattering or at least, ostensibly, we didn't end up having to have that conversation,

although maybe it was pulled as a negotiating card with the attacker we don't know. But I wanted to ask the question because the Twitter conversation stopped, but I don't think, I thought it was so fascinating that I wanted to hear your guy's take on this question. Let's say we rewind the clock back about a week in the middle of the hack should blast.

I think we've recorded in the middle of the hack. That's right, that's right. You brought it up right at the end of the show. Right at the end of the show, we talked about it. But we ended up missing the midst of the drama. So curious to get your take, Robert, what do you think? Should Blast have done a rollback and or block the attacker? Well, yeah, it's a great question.

I mean, the reality is, for the time being, Blast is completely 100% makes no illusions to the fact that it is centralized. It is not at all a decentralized L2 yet. One of the advantages of that is that while under a complete centralized control, they can make changes, especially changes that are in the best interest of the users. And I think it just starts with a very simple question. Would a rollback be in the best interest of the users? Or would blocking the attacker's funds and then redistributing back to the users be in the best interest of the users?

The answer is yes. Like, it seems very obvious to me. The only downside, the only argument against it is one in which the public at large would say, oh, but Blast is completely centralized. Like, yes, they are. Like, all the arguments I saw for why they shouldn't do that, it was like, you know, oh, this just proves that Blast is like not a true L2. Or like, it just proves that.

Like, it doesn't matter. Like, this isn't Ethereum back in the day when they had to make the hard decision to fork and move past the Dow, like the original like hard forked decision. Like, Ethereum and Blast are radically. different platforms and radically different systems and one was designed to be decentralized and one was not designed to be decentralized so why even try to map the analogy to historical patterns like the Dow and just try to embrace the features of like what it is all right so let me steal man let me steal man that side just so that you have a counterparty to play devil's advocate against so the steel

man of the don't fork is okay one um if you forked Now you are setting a precedent that we will fork when bad things happen on this chain, and it's going to be a long time before this thing is fully decentralized. And if we do this, right, like one, we are weighing in on something that we don't know the answer to of like who exactly is the attacker and blah, blah, blah, but second is that it's setting a, it's setting, it's also implicitly giving us liability. Because if we are blocking this attack, what about all the attacks that we don't block? What about all the little tiny hacks that people will then come and say, hey, you, you blocked

the North Korean attack, where you didn't block my hack of like a million dollars or $2 million, are you now liable to block every attack? And if not, like, is it wise

to be creating this precedent that, look, if your protocol gets hacked, like you as a user, you're responsible for making sure that you don't put your money into random devs who are, you know,

doing whatever random nonsense, if the protocol is intentionally going out, compromising its own, its own, not the values that currently are in the protocol yet because they're not, but that's the,

protocol that we're expiring to be is one that is fully decentralized and where we don't have this escape hatch that we can pull anytime we want to. I don't think blast is inspiring. There's a kind of moral hazard. All right, a couple points. One, I don't think blast is trying to be this radically decentralized platform. Two, we have a historical context for this. Binance and BSC, whenever there was issues they could block, whenever there was hacks,

they could unhack, whenever there was stolen funds they could unsteel, did it. Did they get it right 100% of the time? No, I'm sure there was all sorts of heinous crimes on Binus Smart Chain and hacks that they didn't fix. But whenever they had an opportunity to fix a large hack, they did it. And the user base on the whole was like incredibly happy that they did. And like legitimately Pinet Smart Chain is probably more decentralized and probably a more robust system than Blast is.

And they still did everything in their power to prevent users from being screwed over. right? And that was one of the biggest selling points for a very long time of Binance smart chain, which was the worst landmines they were able to fix the damage from it and prevent users from getting royally screwed in the name of like aspirational decentralization. And so I think it's a good model when done correctly. And I think if you set the expectations correctly, everybody's happy. I vaguely recall CZ being on Twitter being like, hey, we fix this one, like, good job, everyone.

we're not sure we can get them all, but when we can intervene to save users, we will. And like, that's a really good framework for people on a pretty centralized chain. And I think like if the attitude is we will do our best when we can and we won't get them all, but if we can fix users, that's a good thing. and there's nobody's in that too. Yeah, I'm trying to remember exactly which B&B chain hack that was that found. There's extremely nuanced threshold signature bug

that was common to a bunch of cosmos chains. And then they reverted it after. That one was the ultimate example. I think it was 2020. It was right before FTA... We talked about it on the show. I think it was right before FTCX, like September or October.

But, like, you know, I think the differences with B&B chain, BSD, you kind of have, say what you want about the legality of Binance, but arguably, Binance has so much hold over its users because it's actually like they like the platform and they trust it to do certain things. I just don't think you have the same level of trust here in the operator bridge kind of complex, right?

It's clearly not the same. Listen, the people that are using Blast and the people that are using Binance Spark Chain are not smart contracts code is law individual evangelists. They are retail that are clicking buttons on a website and they probably don't have any idea how it works under the hood. And they don't really care about philosophical arguments. Yeah, no, no, I'm just saying the blast team has to be able to provide the same level of customer support as Binance for this analogy to work.

Are you saying that they should, net net, are you saying yes, rollback, no rollback? I think the problem for them is they're in this muddled middle. If they were a centralized exchange who is sponsoring it, they do rollback. No one's even going to blink an eye, right? But the fact that they're not makes it in this, put it in this weird, and the fact that they're not, and Vitolic is constantly, like, dunking on them in his blog posts, and paradigm has to change these tweets that say, like, you know, backed and whatever. I don't know.

I forget what the meme is. And backed but not endorsed or whatever. But like, there is a, it's very different than Binance rolling back. And it's like a different, it's a different type of, you have to be a lot more, you know, you have to be more brand conscious. And I don't, I think they're kind of slash and burn and they kind of don't have the same user trust, let's say. That's, I'm not saying it's not possible.

I'm just saying that the facts that led up to where we are. It's the most, it's a big moment. Binary decision. Yeah, binary, yes or no. Yeah. You roll back or no. You roll back. Okay, God.

I think, I think especially when you're doxed enough and it and, and, and, and, you know, have a lot of people in the U.S. It's very hard. They're not docs, though, right? The Maltesig? I think the Maltesig is not docks. Yeah, but I feel like it's... Yeah, I think they got some criticism for that after the original announcement.

Yeah, I think it's not, they're not that, it's not that hard to find. Let's put that way. I think it in some ways, can I go back to like the AVE maker morpho kind of idea, and that's, you know, there is a school of thought, which I think I agree with sometimes that, you know, no governance is the best governance. And I think in, you know, Blaskets, like, they're going to have fraud proofs, right? Like it's slur just, they, you know, dump the call data on chain. And so, like, you know, if you don't want to have this onus on you, then you have to find a way

to throw away the keys and make sure there is no onus that you can't possibly do a rollback that, like, the whole thing just sort of functions without you. And I think until you're at that point, like, there is that obligation, right? Like, if you have the button, like, and, you know, people are screaming at you to press it, like, you can have to press it. And so I think maybe this also just underscores for all teams thinking about how to basically find a way to throw away that button and, you know, make sure the system is not relying on them. Yeah, I completely agree. I probably feel much less emotional about it than maybe most people. Yeah, I think in a way having, I think you described it well as like having the button.

The button is there. the reason why we have these abniquis is for bugs, for like, you know, some coding error that ends up actually affecting the protocol. Having $62 million stolen by North Korea is just as bad as any other bug that might get introduced at a protocol level. So if you want to save your ass

and also save, like, crypto, more or less, it's kind of on you to help do the good work of making sure that North Korea can't monetize these attacks. And so I think the answer just really, really easy is that, yes, it does open a can of worms and that can of worms is going to get open anyway because you don't have fraud groups and you're not got to fully decentralized yet.

And that's true for most of the optimistic roll-ups today is that they're not all the way, what is it? Level 2 or level 3 roll-ups, I forget what the level is. They're not all the way to the higher levels of roll-upness. In which case, like, yeah, you kind of have to accept that you're not there.

And, you know, there's no point in playing make-believe, like, just do the right thing. And that probably means, you know, block the bridge or, you know, in the worst-case, roll back the chain. I'm very against rollbacks. I think they're just incredibly messy. And Defi is so complicated now that like literally rolling back is just borderline impossible.

Impossible. Undo too many things. Yeah. But blocking the bridge, I mean, the fact that there's no privacy pools or anything on blast should make it, I think, relatively straightforward. And I assume that's why the hacker gave back all the money was that they were. Yeah, I'm just the reason that my only point was I think like if you have some credibility, with your users, it's much easier to just be like

rollback, no one cares. You don't have to second guess it. You don't have the army getting angry at you on the internet. How many people were actually angry at the BSC rollbacks? I'm willing to say zero. Yeah.

The Piotic isn't writing blog posts about how BSC is like a bad L2, right? But obviously there's every fucking blog post. If it's possible, there's a dig at Blast. And like I said, the blast investors are also kind of like shirking. So it's like, okay, well, that's a very different game, right? That's like a very great.

There was a day when people were firing a lot of pot shots at BSC. But I think at this point, BSC has kind of creamed everybody. They were just like, yeah, no, granted. But they didn't care about the rollback thing. They're like, Binance rolls back anytime, right? Yeah, this is part of the funds are Safu meme is that, yeah, finance protected its users. They didn't give a shit about like what led to the situation.

and we're like, if we can get our user's money back, we will. And everyone liked them for that. It's a good framework. This gets back to one thing you said, Haseeb before probably we have to end, which is every new cycle, there's like a new exchange modality that attracts, like, the new assets, right? Like the old exchanges are too slow or too regulated or too lazy or whatever the reason is. But in the same way that Solana is sort of the new exchange for meme coins or the exchange

for meme coins at this point, the L2s themselves are basically exchange custodian. in some weird way until they're actually decentralized, right? They are exchange custodians. Exchange slash custodian. They have some weird middle ground of those things. And I think they're going to learn this very hard lesson, which is like, well, they don't have the gravitas of Binance in this scenario. So it's a trickier situation.

Yeah, but I want to also grant that there's a continuum here, right? Not all L2s are in the same bucket. You know, you have like... For sure, for sure. I mean, like blast. Arbitrum being a great example. Arbitrum is Arbitrum farther along and then you've got the ZK. Rolls, which are even farther along, you know, having live validity proofs and having a lot of

stuff on chain that, you know, time locks and all this stuff. So there, I think there's a, there's a range, you know, and I think there's, I don't think it's quite, but I don't think roll up developers felt feel this thing that they're running in exchange, but like to your point, they are kind of running an exchange, right? Like, inevitably. In the early days, inevitably. In the early days, inevitably. And I think, like, part of, and to be fair to Blass,

Blass is brand new. You know, they just launched, like, less than a month ago. So it's no surprise that with all the changes they made, that they're still on training wheels and they still have, you know, like, this is only an interesting question because of the timing. If this was, you know, a year in the future and, you know, Blass integrates fraud proofs that they upstream from OPI stack, then, or pull downstream, I guess.

But it wouldn't be as interesting of a question. because the answer would be like, obviously, no, it would just be a complete nightmare to try to do that. But we're in this unique gestation period where the answer could be yes, and I think we're pretty much on agreement. The answer is probably yes. So, anyway, all right, we got a wrap. We'll be back next time with more contentious, me making apologetics for criminals. Until next time, see everybody.

We're just waiting for your second podcast. My second podcast? What does that mean? What's that? Yeah. The one focused on prison reform. A criminal criminal justice reform. Yeah, that's right.

We'll do the after hours. If you stick around after the show, we'll do an extra segment on that. Anyway, all right. The prison block. All right. The prison block? Oh. All right.

Wow.