Unchained - The Chopping Block: Why Uniswap V4 Creates a Bigger Attack Surface Area - Ep. 506

Episode Date: June 15, 2023

Welcome to “The Chopping Block” – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner, chop it up about the latest news. In this episode, Robert stirs the debate over Hinman's 2018 speech and what it means for the debate at the SEC over whether BTC and ETH should be considered securities, the similarities between Ethereum and Solana, and how Binance.US is dealing with a move to freeze its assets. Moreover, the group kicks off with a brief history lesson on the infamous PEPE meme! Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Stitcher, Castbox, Google Podcasts, TuneIn, Amazon Music, or on your favorite podcast platform. Show highlights:  where the PEPE meme comes from whether Mark Zuckerberg and the project Libra played a role in the animosity toward crypto why Robert says that Hinman's speech in 2018 was crafted with broad inter-agency work, in contrast to what the SEC has been saying how the documents show that the SEC didn't believe there was enough clarity to classify ETH as a security whether these documents diminish Gary Gensler's claims that almost everything in crypto is a security the similarities between Ethereum in 2017 and Solana at the moment what the drama is in Solana around forking Alameda coins what the new features of the Uniswap V4 draft code are whether the 'hooks' in the new code facilitate rug pulls and introduce much more complexities how Binance.US has dealt with the SEC lawsuit and request to freeze its assets Robert's crazy idea to use Uniswap V4 and why Tarun killed it what extreme sports represent crypto more accurately Hosts Haseeb Qureshi, managing partner at Dragonfly  Robert Leshner, founder of Compound Tom Schmidt, general partner at Dragonfly  Tarun Chitra, managing partner at Robot Ventures Disclosures Links Unchained: SEC Anticipates Responding to Coinbase Petition in 120 Days Binance.US and SEC Work On Deal to Avoid Total Asset Freeze: Report Binance.US Says SEC’s Request to Freeze Assets Would End Crypto Exchange Binance, Coinbase and Binance.US Record $4 Billion in Weekly Outflows Uniswap Releases Draft Code for V4 The Block:  Ripple calls for investigation into former SEC official after document release Former SEC director Hinman's plan to call Vitalik Buterin revealed in Ripple lawsuit SEC comments on Hinman speech released in Ripple Labs filing Learn more about your ad choices. Visit megaphone.fm/adchoices

Not a dividend. It's a tale of two-quan. 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. D5.Eat is the ultimate pump. DFIPOTOC protocols are the antidote to this problem. Hello, everybody. Welcome to the chopping block. Every couple weeks, the four of us get together and give the industry insider's perspective

on the crypto topics of the day. Though quick intros, first we've got Tom, the DFIven and Master of Memes. Next, we've got Robert, the Cryptoanassur, and Captain of Compound. then we've got Tarun, the Gigabrain, and Grand Puba at Gauntlet. And then Amaseeb, the head hype man at Dragonfly. 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 Chopping Block that XYZ for more disclosures.

So it's been a pretty tough week. We've had a lot of tough weeks lately, but this one has been especially tough. So I was thinking, Robert, maybe we could open the show with a little bit of crypto-ASMR. What do you say? Is everybody ready? let's begin slowly flipping the pages of Boys Club, the comic, that introduced Pepe to the world. This is the original Pepe. Let me add a little bit of accompaniment.

Can we get something on your side? Wait, Robert, why do you have this, actually? I was actually walking through like a bookstore. in like upstate New York randomly. And I saw this in like this like old bookstore. And I was like, really? Like I'll take one copy, please. What is this?

It's where the Pepe character was introduced. Oh, I found a copy of Boys Club, which is the comic book by Matt Fury, which created Pepe. And I was like randomly in this old bookstore, New York and they just like had it on a shelf. So what is Boys Club? Like, have you actually read it?

Yeah, it's like a comic book. There's all these characters. They're like little cartoon guys and there's frogs and there's Pepe. And this is where Pepe came from. Is it, is it an alt-right conspiracy? No. Does Friends stand, what are you going to say, Friends stand for? Something ethno-national.

Yeah, exactly. Far-right ethno-nationalist. No, no, no, no. There's a journalist who claim that Friend stands for far-right ethno-nationalist. That's a hundred percent of backronym. They like back. Yeah, I love that. No, but actually,

actually Pepe did not start far right. There's actually a really good documentary about this. This is a total non-sequitur. But there's a documentary. It's called Feels Good Man, which is actually the line from the original comic book that I have that made Pepe famous. And it's a documentary all about how different communities

have taken Pepe and morphed it to themselves, which includes at one point like the alt-right, but how Pepe has evolved over the years. and the meme has evolved and the copyright has evolved and how it's all come together and how this random comic book character has turned into a symbol for like so many different communities.

Really good documentary. Feels good, man. Check it out. Okay. Interesting. Was the original comics a kind of cute little comic? I mean, it's basically a comic of like a bachelor pad where there's these four animals

that are like these 20-something dudes and they're gross and they live there and they like, you know, played pranks on each other. And that's where it came from. One day, Pepe was relaxing without his pants on and his roommates were making fun of him. And that's where the comic originated and how it catapulted into the mainstream. Relaxing without his pants on. I believe he was peeing and his pants were around his ankles like a child.

And he feels good man. And that's the origin. That's the origin. I have to say the other sort of media sciop that I before, like I did with Pepe, is definitely the Zuck, Zuck meme ones. Because, like, I mean, the fact that Zuck has, like, completely done a 180, where, like, he's now the open source hero is kind of, like, one of the most amazing turnarounds I've seen for a tech CEO in, like,

what's the open source heroism? Lama and just L. Like, the open source language. model world. Lama was leaked, right? They intentionally only made it available for researchers and non-commercial use. But now they're getting all the credit and open sourcing other things. So like, in the same way that like developers went from like hating Microsoft to being neutral

to Microsoft to like not really hitting Microsoft as much. Zuck has made a similar transition where a lot of people hated him for like 10 years. And all of a sudden, I've just observed a lot of people suddenly changing. very quickly to that. Anyway, I was just pointing, the reason the Pepe thing made me think about that was I was thinking about sciops, media sciops I fell for in the past, you know, media sciops I have known and loved, and the Zuck one was one of them, I think. Let me float a controversial contrarian perspective. Are you ready for this? I think part of the animosity towards crypto amongst certain segments of the political structure actually results from Zuck and the Libra hearings. I think if you go all the way

back, there was very few people that were like anti-crypto. And then when Facebook wanted to launch a crypto asset, suddenly it was such like a stratifying extreme moment that I think it actually created like some of the first like outward hostility towards crypto because it was going to be a Facebook crypto. And, you know, I'm not a political historian, but like as a member of our industry, like I remember that as being one of these moments that was like, you know, really a catalyst for just outright anger from members of the political class. That's a very interesting question is, I remember at the time when we saw Libra go, launch their announcement that they were going to, you know, they launched a white paper and all

this collateral that they were marketing the Libra project. with and only then did they actually go and present this to lawmakers and regulators and Congress and all this. At the time, it felt like such a vindication of crypto. It's like, oh, this validates the industry. The shows that what we're working on is super legit. One of the largest companies in the world is building on this. In retrospect, I think it's a very open question of whether Libra was actually good or bad for crypto, despite the fact that it never actually launched, it certainly made a lot of people, especially internationally. I think outside the U.S., Libra was very good for crypto because it made a bunch of countries realize they need to

needed an answer to this thing, that this thing was really important and really powerful if given the right distribution engine. And I feel like in the U.S. it may have hurt crypto because it may have, like you said, galvanize a lot of people to think, ah, crypto is in some way. It's a tool of the powerful and the opaque and the, you know, the oppressors or whatever. I mean, obviously Facebook had a lot of other appropriate. That was also peak, peak, peak, Zuck is a villain era. Like that That time period was like 100% that narrative. Now it's like he did the MRF with the weight belt. You know, it's like the sci up like flipped.

I'm like, that's what I'm saying. It's like it's kind of funny how like this change. I guess the same thing was true with Bill Gates, right? Like he was like huge asshole. And then he worked really hard to like try to change that. And then I guess he undid it in the last three years. Epstein undid it. Tom, you were previously at Facebook.

What's your perspective on? this whole like post Libra retro. Yeah, I mean, it's actually a good point. I'm not really sort of considered that maybe being a turning point. So I guess I can't really like pinpoint kind of when sentiment changed. I, and yeah, I mean, I think overall in retrospect, maybe it drew too much, you know, negative attention. But I was going to going back to like, true your point, I think Facebook has always

always had like a pretty strong open source contribution culture. I mean, even like React, right? That's like Facebook. People don't give them credit for it though. Yeah, but my point is that that's. always been the case. And so it's like, yeah, maybe people don't like the product or Zuck, but, you know, I don't think that's independent from like the open source philosophy. But I think all of a sudden now, I've just observed people who would be like not giving them

credit, even giving Zuck credit for something that leaked, you know, like positively. Like, like it's kind of like Pepe where like I noticed that their, their face flipped at the same time, like Zuck and Pepe. They both kind of went from like persona non grata. politically to like I remember in 2015 I was giving I think was my first like tech talk at a local like tech meetup it was not crypto just like a general tech meetup and uh I had in my presentation I had a pepe meme and I didn't know what pepe was I didn't know that it was like this far right thing and that people like it was super politicized I just had seen it a lot in memes and I thought oh it's like a funny frog and you just put it when you're making a joke and so I put this thing

in there and it was it was a well-received talk But I had a bunch of people come up to me afterwards and be like, you know, I loved your talk except for the one thing you put the far right thing in there, the little frog. And like, I don't know if you know about the background of this. It's like very sensitive and far right people use it. And it wasn't until I got into crypto that like everybody was attuned to this like political. They're like, no, no, no. Yeah. Yeah, it's uses a far right symbol.

But fuck you. We're totally going to use it as like just a, we don't care that it's used as far right symbol. As we just learned, it comes. from a totally different place. Yeah. Right. I mean, obviously, like, you know, protesters in Hong Kong used it or like someone just, I just saw some picks.

There was like a Pepe store in Shanghai now. And they have like Pepe merch, which is obviously not official or licensed. But like it's kind of this, you know, like an internet youth culture kind of thing. So going back to feels good now, I guess. Yeah. Going back to, you know, talking about how the regulatory environment in the U.S. is shifting. This last week, it was been a, it was a pretty bombshell week. with the SEC filing lawsuits against both Coinbase and Binance and then implying in, or not implying,

but stating outright in its lawsuits that many of the top 10 crypto assets are securities. So today, it's talking today Tuesday, June 13th, and today we just got a drop from the old XRP lawsuit that is still going on and has still not found a resolution. Basically what XRP did is they sued the SEC demanding unlawful. unredacted access to the Hinman emails. Now, what are the Hinman emails? So in 2018, Bill Hinman, who was at the time a pretty senior person at the SEC in like the enforcement division or something, commercial division.

I don't remember. Something. Not a commissioner, but like a pretty important guy at the SEC, gave a speech in which he basically described Ether no longer being a security due to some of the facts and circumstances around how Ether is now, you know, sufficiently decentralized, quote unquote. So this term sufficiently decentralized came from this speech given by Bill Hinden at the SEC. Now, this speech kind of stands a bit in opposition to the SEC stance that they're taking

about Solana and about Algarand about these other tokens. Nowhere does the term sufficiently decentralized appear. It's just purely a question of how we test, these prongs, investment contract, blah, blah, blah. And so XRP was like, look, we want to get an understanding of where this speech came from, who signed off on it. And that is potentially integral to building their case that the SEC was acting unfairly or do not give them fair notice about its views on these things and perhaps there was even internal disagreement

about what the rules were and how they were going to be applied to digital assets. So those emails, which were basically the planning emails around the speech that was given in 2018, were released. And there's been a lot of anticipation around these emails because the belief is that maybe there's a smoking gun in here about what the SEC really thought in 2018,

especially with respect to its enforcement strategy toward different digital asset issuers. So there's a few, key quotes that have been focused on by a lot of the folks who have gone through these emails. There's not a ton of them. Basically, the big thing is this term regulatory gap, where the SEC, internal folks at the SEC basically acknowledge that there is a regulatory gap, meaning that there is not sufficient rules to make it really clear how it is that something like ether, which they clearly decided in the course of these emails and the course of planning this speech, there was

broad agreement that this is, that ether is not a security. But the understanding of why, and what are the rules why and how would the SEC actually give a framework to the industry, there was really nothing there. There was a regulatory gap, so to speak. So this term regulatory gap, I think, is going to come up again and again and again in all of these cases as the perfect kind of encapsulation of the problem today with the SEC's approach, the digital assets. And there was a couple other things about the meeting with Vitalik and asking him for perspective and taking his input when they were giving the speech.

But other than that, I didn't really see anything that was that surprised. to me. I don't know, Robert, I know you're kind of closest to a lot of the folks who are looking at this. What was your take looking through the hymn emails? Well, the thing that struck me, and I only had a cursory read-through, mostly from, like, tweets from other people that surfaced to the top of my feed. But the thing that struck me was that there was actually, you know, a lot of way in from many different departments within the SEC, helping, you know, him into craft the speech. And, you know, it seemed incredibly obvious to me as a layman that this was not a speech of personal opinion. This was a speech that was crafted with broad, like, interagency work. And, you know, it didn't

seem like a personal view process because, you know, the output was created by so many different departments espousing their views and, you know, asking for changes and modifications and recommendations and providing input. And so my first read through of it was like, okay, this is a policy speech. And there's a lot of references within that process that this is going to create policy for the market to create clarity. And other people are commenting, oh, it's going to increase confusion, not create clarity, but it was designed as a market influencing and policy creating speech. Seemingly on par with like, you know, the Dow report or one of these other artifacts that were the few and far between, you know, mile posts that the SEC created for,

industry participants to understand how to think about this stuff. And so it was not a personal speech. This was policy, first and foremost. And that was my takeaway from everything that I've read so far. But again, I am not the expert. And to be clear, the reason why that matters is that it's been repeatedly stated by the SEC that this was just Bill Hinman stating his own personal views. This is not the position of the SEC. And so you can't take this as a policy indication. The process that was gone through here in all these drafts and all these like, hey, change this. do that, blah, blah, blah. This might not be good for our future goals, so don't say this,

shows that this is really part of the policy process. And the fact that I think what a lot of commentators are pointing to is that the way in which this was drafted shows that there was some consternation internally at the SEC about what exactly is the analysis, how exactly should how we be interpreted in light of the fact that, yes, we all kind of agree that ether should not be a security, but why is it not a security?

like what exactly are the important prongs of Howie that are not met? Is this kind of pushing forward the analysis of Howie in a way that is not met by, you know, currently existing rules or laws? And it's kind of showing that, look, Gensler's claim that the laws are clear and the rules are clear. And, you know, if you're pretending that they're not clear, you're just, you know, you're just intentionally,

you're being willfully ignorant of what the laws actually are. It kind of shows a little bit that we're being gasslet, that even the SEC agrees. internally in 2018 that the rules are not clear and that there is this fundamental cloud of uncertainty that the SEC is not stepping into and was very careful how they stepped into in 2018 when bill him and gave the speech and since then there's been no rulemaking and no legislation and nothing has fundamentally changed since then the only thing that's changed is just the interpretation you know at some level yeah it's a very funny timing on this uh release because if you

remember, you know, Coinbase was suing the SEC asking for guidelines on how to, you know, register different agreements if it's business or assets. And then a week ago, a judge said, you know, you're right. SEC, you need to come out with rules or more guidance or, you know, something within the next week. And so today was a week from that. And SEC just asked for more time. I think obviously they're not going to come up with, you know, a framework or set of guidelines within a week. They didn't ask for a tiny amount of time. They asked for like quite a bit of time. Yeah, but it is like, the whole thing is kind of goofy. It's like, so you need four months to make rules, but like, why did, you know, you had years and years to make them, but you didn't? And so

the whole thing is just kind of a very kind of circus, I guess. Well, the real question is, do you think the judge, you know, in some sense, shouldn't, shouldn't there have that have been done prior to filing? I kind of imagine the judge won't look at it as favorably. I mean, not a lawyer, but the way, the way it was worded seemed weird to me. Because like, okay, you asked for like 30 days or two weeks for that fine. But it seems like this was a trial that they're like purposely also trying to delay. It feels like political reasons or something. To be clear, you're talking about Coinbase and joining the SEC in order to the rule competition.

Yeah. Yeah. To be clear, my understanding from, again, reading crypto, Twitter lawyers, so I'm not a lawyer, so don't take this as direct legal advice. But my understanding is that the reason why they're doing that is not because they think the SEC is actually going to make a rule. The SEC doesn't have to do anything they don't want to. It's so that basically there is. you know, coin base can say,

we went and talked to the SEC 30 times and they said this and they said that or whatever, but there's nothing, you know, it's just basically he said, she said, right? The SEC could say,

well, you know, we did, you didn't really ask us for rules. You sort of said things in formal conversations or whatever. Like, this is how you formally ask for a rule. And it's a very kind of Byzantine

lawyerly process that doesn't, you know, we kind of know what the answer is, which is that the SEC is not going to make a rule. Then it was like, we already made the rules. You know, we don't need to make any new rules.

So everyone knows what the answer is, but this basically helps them build the legal case that like, look, the SEC is not responding. They're not being, you know, kind of good faith regulators of this industry, which you can see, boom. The fact that the lawsuit dropped, I mean, this process began before the lawsuit dropped. It happened to start after the Wells notice. But, you know, the fact that the lawsuit dropped at that point, I don't think it really matters what the order of operations was in this case, right? The point is that Coinbase tried to get some clarity. They didn't get it.

SEC is going to make the argument. We already gave you clarity. And Coinbase is going to say the clarity was never there. So these HINMAN emails, they're not dispositive of anything, really. We already kind of knew that the SEC did not see Ether as a security just from their actions, right? They're not doing anything about Ether. They allowed a CFTC registered futures product to go listed, which like if it was a security, then they would presumably say, hey, that's under our jurisdiction.

So the SEC has kind of shown their hand they don't think Ether is security. But very clearly, they don't want to deal with this in court. Because if they do say, yes, correct, there is this possibility. that something can start as a security and become a non-security, which is this totally new legal concept, right? There's no precedent for exactly what is this process by which non-securities can become securities.

In fact, Hinman's email, the original draft title of the email, was called, it had the word morphing in it. It was like digital asset morphing or security morphing. And this morphing concept, now that we know that this was in the minds of the people at the SEC, and this was endorsed by other people,

people at the SEC, then the question is actually going to be, okay, well, did XRP morph? Did Solana morph, right? Are the secondary sales that are now happening in a decentralized system that is a, you know, live product that can be used for, for consumptive uses, has this now morphed into a non-security the way that Ether did? Because either, it's still true that Vitalik is walking around writing blog posts about the roadmap of Ethereum. It's still the case that there's an Ethereum Foundation.

It's still the case that news about the team and about their goals affects the ether price. and it's still the case that there are times when the Ethereum Foundation needs to rally together and do things that they know about and other people don't know about if there's a hack or if there's some whatever, some, you know, we had downtime on, or some blocks that failed to finalize

and there was some bug and they went and fixed it. It's still the case that there is some degree of asymmetry of information. But actually one thing. For Ethereum, we're actually at a point where it's quite different. Even for fixing these consensus bugs, whether it's like the

MEV consensus bug that have happened like two months ago or the missed prism stuff. It's actually done by independent teams that are not doing the Ethereum Foundation at this point. There's so many teams that work independently that they barely even do coordination. They literally only work on research, almost all the engineering side. So let me maybe modify the point. In 2018, in 2018, when the speech was given and Ether was sort of declared not to be a security, it was still the case of the Ethereum Foundation was very actively involved in the, basically,

the uptime security, all that stuff for Ethereum. So if it's a continuum, which is essentially what is being implied here, that there's a continuum between security and non-security, then where is the continuum? How do you draw the continuum? Where do things fall? And I think this is probably going to be the shape of the argument that is going to find its way into these cases that ultimately are going to get litigated. You know, an interesting kind of thought experiment about this type of thing, you know, when

you mentioned did Solana Morpher? not is the Solana community is kind of in a funny spot. They're a little bit like Ethereum in 2017, early 2017, where like they don't really have more than one team working on it. Like, they kind of have jumped doing a client, but Solana Labs funded part of it. So it's like, it's still not so separated yet. And people are fighting over whether out of the Alameda sole coins are like the Dow hack where they want to have a hard fork. They're having like community fight brawl. It might be the first ever fight I've ever seen in the Salana community versus like the five millionth one in Cosmos. But it's actually interesting to see that.

Like they are fighting over kind of having a hard fork to remove Alameda's coins. And I suspect these facts that there's only sort of one real main team, maybe 1.5, plus the idea that they want to fork out some coins is going to be extremely important to the security status of Salana based on all of these types of results. That's actually, Drew, can you share more about, I've read a little bit about it, but I don't really know the details,

about the drama in Solana, about forking out Alameda's coins? And how do the fault lines draw out? Who's on what side? Yeah, so I think there is, you know, I think the, it feels like the, as far as I can tell,

the foundation is on the side that property rights or property rights when, you know, don't fork. But there are a bunch of applications that are more on the side of Lee's Fork. And it sort of seems like apps versus baser. Basically, the entire Alameda supply is being dumped as soon as by the liquidators, like, every time it's unlocked.

And it is a large form of cell pressure. And so the applications are more angry about that. Yeah, but it's to pay back creditors. Like, that's their money. Yeah, that's ridiculous. And also if- Look, look, look, look. I'm just saying this is like, they're having a schism over this. I mean, it's crazy. I mean, if let's say Alameda wasn't a criminal organization, they would still own all of that asset. And when it unlocks, they would still probably be selling it and all these things. Like, the fact that they're bad guys and malicious and like screwed over a huge number of participants. doesn't make those tokens, bad tokens.

Look, look, look. I'm just trying to say this is, the fault lines are here. There's another thing where people were trying to argue that by getting rid of Alameda will have less SEC scrutiny. And I was like, I don't think that's true at all. Like, why would that happen? But the Solana app devs are a little bit, some of them are, you know, like I feel like it's like developers trying to grapple with the existence

of a legal system for the first time in their life. That's like kind of- Are the developers pro the fork or the anti-fork? So app developers are sort of, there's quite a few apps that are pro-the-fork. There are quite a few infrastructure providers and the Salon Foundation that are anti-the-fork. Who's pro-for?

Can you name some names? Like, it's mainly the NFT protocols. That makes sense. Like the NFT protocols are the ones that are basically seem to, to be want to get rid of this. I love this story because it's so human. This is so like blockchains are not magical escapes from human politics and human foibles.

This is very, it's very like all the Hillary Clinton locker up stuff of just like pure vengeance politics. That's what this feels like. In a way, it reminded me, I was listening to some history lectures that were talking about famous court cases. And one of them is this famous trial of a dead pope. in the Middle Ages, where literally they, like, they took this pope who's dead and they like, what's it called disinterred him or whatever,

took him out of his crypt and then put him in a trial and like had a whole, like whole criminal proceeding, accusing him of all these crimes. I feel like that's what's right now going on for Sam Bankman-Fried through this Alameda schism. It's like, we trusted you,

we believed in you, you betrayed us and now we're going to punish you indirectly, even though it doesn't really make sense because it's the creditor's money, it's not really Sam's money or whatever, but it's sort of like, You're the stand-in because humans demand blood. Some action.

Yeah. It definitely reads that way. And all I have to say is I think it is kind of interesting, given kind of the Ethereum classification stuff, that like such an action probably might actually do the opposite and make the SEC more in your face. I love the populism of it. It really, it just tickles me. It reminds the same thing happened before. James. Yes. The same thing happened before you remember was Steam It. I think there was like some. Justin's Sun's tokens, right? That's right. Justin's Sun did like a takeover or something. And then the Steaming community was really upset. And they said to fork out all of Justin's coins and fork away. Which there was a big hullabaloo because people had decide which fork to respect. And Justin was like, it's illegal for you to delete my coins.

Didn't finance weigh in with like all the user tokens to vote for the pro Justin Fork? It was a circus. I really, I really, I think when prices go down, when prices go down, people suddenly find excuses to Fork like this. Absolutely. I want somebody to compile like a history of these kinds of political dramas where the, the Code is Law kind of matrix gets pierced through and like the humanness of human politics breaks in. I really enjoy those stories. But anyway, to be clear, I don't think there should be a fork. I think that's a bad idea and a very bad precedent.

Yeah, I was just pointing out that some of the things you were talking about, like these kind of factors, like who the development teams are, and, you know, whether they have, whether they're able to coordinate around forking particular assets or changing property rights seem to be quite important based on the ripple. Honestly, in this case, I mean, it's like you mentioned, it's sort of like the populist kind of NFT influencer types that are all like, yeah,

fork them out, fork them out. If the dev team demures and says, okay, fine, we'll fork them out because that's what the community wants. That's kind of a sign that they're not in control because they're against the fork. It's true. But like, you know,

I think if, but there's this cast 22 of not doing it allows you to be like you didn't listen to the minority. Hard to tell if it's the minority at this point. Cool. Okay, so there's another story that I wanted to get to this week, which was, there was just today, there was this drop of a new white paper from Uniswap. So Uniswap has launched Uniswap V4. There are, it's still kind of pre-launched so you can't actually use it today. They kind of did a draft of a draft, so this is not usable code. And they were very clear. Don't, don't try to use this yet. There's still probably a lot of bugs and a lot of weaknesses and vulnerabilities in the code. There are a few big improvements in Uniswap V4. So one is that it's massively more gas efficient.

It simplifies a lot of the, you know, deployment of pools, a lot of the accounting of assets to make it so there don't need to be as many allowances and transfers and all that stuff. So everything just becomes much more efficient when you're routing through pools and across pools. The other big thing is there are now hooks or callbacks that you can use in Uniswap so that when you deploy a pool, you can all specify before a trade, do this. After a trade, do this. Before, what else is there? There's about six hooks before initializing pool after initializing pool, before adding a position or removing a position before swaps, before and after swaps and before after donations. So these are basically callbacks you can use to make a more complex life cycle to your interactions with the uniswap pool. Before these types of things were generally done by third party protocols.

So something like gelato, which you could use to like manage your pool positions and do things automatically over uniswap v3. Now those things will all be doable within uniswap directly. and there are hooks for these things to also charge fees on top of the fees that Uniswap charges itself. So before and after hooks can also have different kinds of fees. And lastly, there's also a new, a brand new, everyone's favorite, a brand new license. And this new license is called a business source license.

And it is four years, basically, meaning that you cannot use Uniswap V3 or so V4 code for any commercial or, you know, deploy on a blockchain use cases for four years, but you can look at the code all you want. So until 2027, this baby is only allowed to be used by the Uniswap team. So thoughts, guesses, projections. What do you guys think of Unity V4? So should we just speculate on what you're going to do differently with Uniswap V4 versus V3 besides gas improvements and all this stuff?

What do you all think like the best use case for HookSard? Like, what do you think people are going to build? I mean, the snarky Twitter answer I read was like, oh, people are going to be able to rug pools way more easily now. But what do you think like the actual use cases are going to be for hooks? Like what gets built? Well, first we should say

the thing everyone on Twitter is saying, which is that the security surface area of hooks is way higher than it was before. That was one thing I was going to point out is that I think there's sort of this very weird thing about enthrining certain callbacks

of this form without making them private because at the end of the day someone still has to push the trend. There's still to be keepers who are maintaining the state of these things. And there's sort of a lot of MEV that comes out of this, right? Like, reordering how the hooks get executed, if there's multiple in the same block, could be much more of a loss to LPs potentially than reordering just raw swaps, right?

Like, it depends on what the callback is. And the space of that is huge. And so, yeah, that security type of stuff, I think, grows quite a bit. But maybe in the positive, I think a really interesting thing for a callback. back is, you know, a lot of bridges between chains have this, have a bunch of different liquidity problems, right? Like one side of a bridge, maybe, you know, when I go on Solana, there doesn't exist real eth, there exists a synthetic eth, like a wrapped eth equivalent. And I have to have some pool where I can like trade the synthetic eth for the real eighth or the soul for the synthetic

Keith. And a lot of bridges kind of only operated by like getting people to place a lot of liquidity on both sides at all times to like make the bridge function. But that's sort of very capital inefficient because you're just like leaving a bunch of capital there waiting for a bridge transaction. But the hooks could be used to be like before you have people who approve their capital being used, but it's only sort of used just in time for doing these bridge transactions. And so you can kind of have something that's like a better version of an RFQ system. It has some on-chain guarantees. Does that make sense? Like, like, I think that's... So, I'm going to say, zero-x... Your old employer had... I knew you were going to say back in a day.

I knew you were going to say it. I knew you were going to say it. I mean, yes, I, yes, you can do stuff like just in time wrapping liquidity provision and, like, cool things like that. I do wonder, though, like, the benefits of faking these into sort of core versus having these be, we call them, like, peripheral contracts, or like, like, wrapper contracts, because you could do any of these things before, right? Like, you're basically the one who said, hey, if a swap is going through my contract, do this before, do this after, whatever, and you have your own, you know, you're writing your own contract. So it's like a lot of those stuff that you guys are mentioning, it's like, well, if I'm a bridge and I want to provide, you know, just in time liquidity or wrapping for assets, I can say,

hey, if you want to swap, you need a swap, you know, do it through this contract or do it through this interface, and then you can sort of do the same thing. And so, yeah, maybe there's some benefits to having it be baked native. and have every single swap or every single pool creation called these hooks. But like, I don't know what that specifically is. I mean, they call it like, you know, on-chain limit orders, but like, you know, you could already, you know, do that effectively, you know, today if you're using an extra set of smart contracts versus you're doing it natively within the protocol. My guess also is that, I mean, one of the problems that this introduces, obviously, beyond

just the security stuff, is that now pools are not fungible, right? There are many more things you need to know about a pool than just its fee tier and the quote pair. So my suspicion is that what's going to happen is that you're going to see a bifurcation within uniswap is that there's going to be the vanilla pools that all you need to know is sort of these two pieces of information, which is, or, you know, not just two, but the liquidity, the, what the, what the, what the range liquidity looks like and then what, what's the quote pair and what's the tick size. And then these other ones that are like doing lots of fancy things that you need to look at the code or you need to look at who was involved in creating this and can sort of stamp it that like, yes,

this is not rug pulling your ass, this is not doing anything weird, this is not going to be charging you crazy fees on every single before and after callback. So it makes these things less easy to understand what they're doing. And it's certainly not going to be the case that you can automatically route through all of these,

unless they're standardized in some way, you're not going to be able to route through every single pool if it has before and after callbacks that are changing the mechanics of how the contract gets executed or how the swap gets executed. So I think it's going to result in basically two different kinds of pools. fancy pools and let's call them non-fancy pools.

And for simple pools, okay, gas efficient, great. You know, you saved a bunch of accounting with a router and everything. For the fancy pools, there's so much more security surface area. That's a lot of the virtue of uniswap is that you don't need to think. Like, you can interact with uniswap and not have to worry about, do I need to know who deployed this, how they deployed it, where the fees are, blah, blah, blah, all this stuff is supposed to be super transparent. And it's much harder to make that transparent when every single pool can have a totally different set of

callbacks, and those callbacks can be mutable. They can be changed just in time if they're programmed in such a way. Right. Each pool can be as complex as a whole defy protocol, essentially. Yeah, that being said, you already had to do that if you used any vault type of thing, right? Like the vaults were managing these for you. Totally, totally. But vaults are very explicitly a non-uniswap product, right? So when you put your money into something that's not uniswap, you know, okay, I need to underwrite this thing and understand what it's doing. I do think the security thing, although it's the most obvious thing that everyone's pointing out, I do think it's really important.

I mean, Uniswap, one of the beautiful things about Uniswap that we can all point to is that Uniswap is so simple. It's completely decentralized. Nobody needs to ever touch it or change it. It's totally immutable. I think making those kinds of claims gets harder when there will eventually be a pool that gets rug pulled. There will be a pool that gets hacked.

It will be a pool that, like, bad things happen. And yes, well, this was a callback and this was not a default. pool, but it just muddies the story for everybody in the industry of being able to point to uniswap as this paragon of simplicity and minimalism and say, well, all you need is, you know, this little thing and the curve and the blah, blah, blah, and it's good. You know, the uniswop router just today, actually the same day that they announced uniswept before, the uniswap router just announced that there was a giant bug, a re-endency bug in the router that could have caused a massive funds drain that thankfully they patched because they, you know,

just deployed a new router and pointed the front end at that. But it goes to show that, like, yeah, this stuff is hard. And the more surface area you make on these things, the more bad things will happen. Yeah, at the same time, I think from more of the perspective of uniswap, the developers, you know, it is, it is in some ways a good way to have more control over the order flow that's going through uniswap for or through the routers themselves, if their particular pools out particular properties and that like your particular router does better on. So, like, from a competitive lens, I think it kind of makes sense, right? Because, like, otherwise, there is sort of a sense in which it does help.

It does help a lot of those types of applications. And I think cross-chain stuff has been quite, it's been quite hard to do liquidity management, whereas this, I think, is the type of thing that does help. You know, a lot of people doing cross-chain liquidity management, yeah, you have to basically be running infrastructure or paying someone running infrastructure free. And, like, you know, there's this trade-off between, like, purely simple on one chain, but really annoying on multi-chain, and you're kind of like balancing those two.

At least in my mind, to me, that's sort of the benefit. Yeah, I feel you, when I think about like V2 to V3, you know, the whole goal, right, is like improving turnover, right? Like, how do you get to as much volume as possible, and as little idle capital as possible?

And V3 was obviously a huge step forward there. I think V4 is definitely, I can see it being a step forward if people, as you sort of said, use this as sort of almost like an RFQ system where I can have my capital be, elsewhere earning yield doing something else with it and then someone when someone wants to swap pulling it in and you know uh not having it just being sit in the pool and hope someone

shows up to start trading but like it almost feels like you've like backed into like an rfq system you know or it's like actually that that's kind of what you want and we sort of you know jerry rig this thing but um maybe that's okay maybe there's other stuff that uh you can do with this that we're not really seeing right now well i think i think that idea of the assets sit somewhere else is really interesting because like they could sit in you know any format like Ether could be sitting as, you know, Lido-staked Ether or whatever. You know, there's a million things that you could do. Deposites in Compat, perhaps.

Or anything. Yeah, exactly. Anything. Could be anything. Could be in compound. Could be in compound. Lido. Yeah.

I mean, like, that's one use case, right? Like, you know, so we have a contest to come up with other use cases besides the really good ones? Well, actually, arguably, in some ways, this is bad for, potentially bad for AMMs that are trading like kind assets because instead of having to keep yes as an example, like you could just do the just in time conversion instead of having to route through them and they have to have a lot of liquidity to provide very low slippage so you don't feel like you're routing through them. Like I do think that part is interesting because like that's the

Lido piece you're talking about. If I look at the Steets-Eath pool and curve, it's like, hey, well, If I can just in time have ETH for something and then go back to Steeth and do the swap, it would be nice, right? I agree you can do that with an RFQ system, but right now the programmability of these things are not as easy. And so, like, again, I think there's always going to be this tradeoff between like efficiency and developer ease and user ease. And like you kind of like, it's sort of a trilemma. You get a bunch of points. You get like 10 coins and you have to distribute those 10 coins, those three things. and that's it, when you make something.

I agree with that. I think one sort of weird artifact with AMMs, too, is dealing with rebasing assets, where it's like you need to, you know, basically usually poke the contract unless it's sort of built ahead of time to accept rebasing contract assets, so you don't sort of bleed out value over time

or it doesn't get stolen from LPs. But the flip side is if you have like a non-rebasing asset, like a C token, you know, your price is going to go up over time. And so you to like constantly read adjust your bands. If it's supposed to be something one to one like, you know, CUSDC or like Coinbase, as their wrapped stick deep product, but it's not rebasing. And so it's like you bleed out if you try to market make it on Uniswap. Or as you can imagine, you know, you make like a CBEath,

eith pool that can sort of re-update itself and rebalance itself, you know, automatically as sort of the exchange rate adjust. And like that feels like maybe a nice UX improvement that, again, sort of goes back to the capital efficiency story. But, you know, TBD. Well, couldn't that also work with, you know, the rebasing token approach as well if you can call out after every trade and say rebase me, like update the balances at the LP level. Yeah, definitely makes those easier. It's more, hey, right now, if you want to LP rebasing tokens that are supposed to be pegged, there are pools that will make it, like, you sort of set it and forget it and it will just sort of do its thing. Whereas if you want to go LP, CBE, ETH, like, you have to keep readjusting your bands because CBEEth is going up in ETH terms over time. But like, it's not really present in the pool.

But yeah, I will agree that these are quite nuanced things. The average user of Uniswap who likes to hit one button is never going to know any of these benefits, I would bet. Like to them, it's not going to be, I don't know, what would the front end even show you? It is difficult to convey exactly what these callbacks are doing and how they should be understood by an end user. again, that's why I think they will probably be standardized kind of minimal callback pool and then like the more complex callback pool. And this is kind of for advanced users, buyer beware. Like, you know, this is running arbitrary code and you should check this yourself or see

who's signed off on it. It does seem like it's continuing the march of uniswap trying to eat everything in defy trading, right? Kind of from uni v2 to uni v3, univy3, univy-3, you know-swap basically eight kind of specialized pools where you can create specialized pools for just about anything using Uniswap B3 and specifying arbitrary curves. And now it's kind of like, okay, any advanced functionality that you're trying to superimpose over Uniswap v3, we're going to try to eat that too. So it's a smart strategy on Uniswop's part for sure. And I think it's likely to succeed in gobbling up more and more market

share for Uniswap. Okay. So last story, we're running up on time. So one of the big lawsuits last week, of course, was Binance. And it's centered around Binance US. Binance US. So for Coinbase, they were sued, but nothing really seems to have changed their Coinbase. They're not delisting any assets. They're just kind of continuing on business as usual, and that's been the consistent message that we're getting from the Coinbase team. Binance is a very different story. So Binance U.S., pretty much immediately after the SEC lawsuit dropped,

the SEC asked for an injunction, a temporary restraining order, asking for two things. One, for repatriation of all assets, which meant that anything that CZ had access to or that Binance Global, the offshore business had access to, that are supposed to be in the control of the U.S. entity, should be brought back into the U.S. slash under the control of U.S. persons and controlling people at Binance U.S.

And then second, that they wanted a full asset freeze. And a full asset freeze means no money moves, no bank accounts, no crypto, no nothing. And, of course, a full asset freeze also would implicate Binance Global because presumably some of their assets are intermingled. That was the claim that was made that there was a bunch of commingling of assets,

which means that Biden's global might also get liquidity issues or whatever because of this asset freeze. So they basically went to a judge and the SEC said, look, we want this restraining order. If not, there may be irreparable harm, whatever, blah, blah, blah. The judge did not grant this portion of the restraining order about the asset freeze. The asset freeze basically said, look, surely there's something else you can do without getting a full asset freeze. Why don't we just do repatriation of assets? They negotiated with the SEC, and so they're just going to repatriate the assets. No asset freeze it looks like for Biden's U.S.

that said, despite they're not being an asset freeze, Binance US immediately delisted a bunch of assets and announced that they were going to lose access to Fiat banking rails within a couple of weeks. So presumably this is because the banks themselves were like, oh shit, yeah, we don't want to work with you anymore, bye, bye, you have a week left until you have to go bank somewhere else. So I assume it's just the simple, the spotlight from the SEC

has caused their banking partners to probably just drop Binance U.S. I'm speculating that could be. something else, but I'm assuming that's the case. And we've also seen massive price discrepancies between Binance U.S. for Bitcoin, for all assets on Binance U.S. and other exchanges, implying that people are having trouble getting their money out, which is why nobody dares arbitrage the prices between Binance U.S. and other exchanges. Now, all that being said, the frenzy of people trying to pull their money out, or, you know, the thing that we would expect to see if this is all a house of cards waiting to collapse, when FTCX collapsed, there was a massive

amount of outflows coming from Binance Global, coming from all the exchanges of people pulling their money and no longer wanting to keep them in exchanges. I believe as of yesterday, Binance Global outflows have stopped. So Binance Global was now flat-ish yesterday. There was like, I think, slight positive, but roughly flat outflows from Binance Global. And it seems that now the market has roughly digested what's happening. It's like, cool, this is not at least immediately going to be a systemic event. But it looks like, like Binance US is in for a really rough ride, given what's going on here with the SEC.

So do you guys have any reflections, any perspectives on what's been happening with Binance and Binance US? One thing I would say is I considered, you know, FTX users, especially the ones who pull their money quickly, significantly brighter than the people who I think who use Binance US as their main exchange. I don't know exactly how to explain that in more direct terms,

but like there is a little bit like more sophistication amongst those users. First of all, none of them were in the U.S. or like, sorry, none of them were in the U.S. right, to use the main FTCs. And B, the sheer volume of transfers out was like unreal, right? They're just getting DDoS. Biden's US just certainly makes me think of users who like, during 2021,

like they saw Bitcoin price go up and they're like, where do I go? Let me Google, where to buy crypto. And I bought half of Bitcoin. and I forgot I had it there. Do any of you know anyone who uses Binance U.S or has used Binance U.S.? Do you want to know anybody? I'm sure she has used it.

I have not met anyone who's used Binance U.S. I mean, we've learned, obviously, that their market share was also fabricated because they did a bunch of wash trading, right? So they never had the market share they claimed to have. I just, yeah, it's just like somehow I found, you can't have like, Everyone's talking about how the liquidity on Binance U.S. went down like 80%. But the AUM didn't go down 80%, which is like, you know, I think it is really, they really, during the book, my suspicion, just my conjecture, obviously, I'm not totally sure. Because who knows? Because we don't, they're not a public defy protocol where I could see the balances.

I suspect they really grew their assets from like 2021. And like people, they like did a ton of SEO or something and like just got. the first click on Google for like, how do I buy Dogecoin type of thing? And then after that, they have like no volume. Like even through the FTX thing, they were like quite low on the volume chart compared to other places. Okay. Are you guys ready for my crazy idea for Uniswap V4? Tarun just made me think about it when he said that Binance U.S. has no liquidity, but the AUM is the same.

I think I'm ready. An exchange, not finance US, but like some exchange, could keep its customer assets, but also utilize the liquidity of Uniswob v4 and have a pairing between the Uniswap V4. Don't laugh. This is actually a real idea. Have a pairing between the Uniswap V4 liquidity and the exchange's own off-chain order books. and come up with this hybrid model. Kind of like what bullish, the EOS pivot slash whatever exchange, had the idea of doing at some point,

but like melding an AMM and a traditional web to waterbook. I thought where you were going was re-hypothicating customer assets to provide liquidity on Uniswap to get extra yield. You were talking about creating an exchange through Uniswap, and showing the unisop liquidity on the exchange. Yes. On screen. Yes.

Okay. I mean, exchanges could not do that because they don't know who they're trading against, right? Like, you can't do AML KYC stuff when you're trading against Uniswap, per se. The exchange would have to figure all that stuff out. But the other thing hooks can do is hooks can actually check AML KYC. Yes, we can have KYC pools because you can check before and after a trade. You can have a KYC pool. Like an exchange actually.

could create a hybrid web two, web three architecture? Because you could easily just give like a KYC token to all the people who sign up for your exchange. Coinbase could for sure do this. This is how you know it was a reasonably good idea in that everyone on the show has come up with a random product or idea to use this. Right. Like that's like a good sign, right? In some ways. Mine might be the worst idea so far, but let's keep going. I'm just saying that it inspired an idea, which is a good, you know. Look, I mean, I remember there was some story a while back about Brian Armstrong wanting to have uniswop trading be accessible through Coinbase, and it was poo-poohed by compliance. Some way, un-surprisingly, it was pooped by compliance. It does seem like

the problem, of course, with doing that on, like having the uniswap liquidity on screen, is that as we've talked about many times on the show, the Uniswop on-screen liquidity is kind of fake because of the fact that there's so much adjust in time liquidity and so much MVV and so much other stuff that's going on that you can't really give very strong guarantees about what execution is going to look like and what liquidity looks like when you're looking at Uniswap,

especially when you're talking about not just random, you know, retail folks who are going on Uniswap.com and clicking buttons or clicking buttons through Metamask, but rather, you know, these giant market makers who are trading on, you know, these big exchanges, is they are just going to wreak havoc on uniswap liquidity if they were trading en masse with uniswap. Yeah, but given enough time, there's a lot of smart people who've listened to this show.

Someone's going to figure that out. Possibly, possibly. And maybe there is some benefit to an exchange sort of acting as a broker for all of those different traders. Like some of the flow is going to be toxic, some of the flow is going to be retail. And it sort of benefits the toxic flow. Exchange acting as a broker is not, I think, the legal. thing Coinbase would like to hear the judgment say.

All right, Robert, your proposal's dead in the water. Sorry about that. Thanks, Tarun. You killed it. Thank the lawyers. I just, I'm just stating what I hear. I don't understand. I leave it to the people listening to figure out how to do it correctly. Yes, there are lots of lawyers who listen to the show I've learned.

So someone out there. And people who are connected to Red Ball. Yes. Oh, wait. Karoon. You have to bring out your, do you end up getting the shipment? I haven't gotten it yet. Okay.

Next show, next show will be unofficially sort of quasi-sponsored by Red Bull. Yes. So there was somebody who listens to the show, who has a family member, who works somewhere in the corporate machinery of Red Bull and was able to get a case of Red Bull shipped to Turin free of charge. So next show, or whenever the thing gets there, that show is going to be informally sponsored by Red Bull. Tarun's going to drink four. Not this one. This is not sponsored by Redmond. I'll give a shout out to the person who did it, who was Paul from Cambrian Protocol,

who thank you for the hookup. Amazing. All right. Well, we are just about up on the end of time, but next time this is going to be, we're going to be like doing BMX tricks and skateboarding under the show. It's going to be Sirin Red Bull decked out. Yeah, Tarun is going to be doing bad ones and stuff. Okay.

Here's a question for each person on the show. So if, say, there was a crypto sport that was somehow sponsored by Red Bull, like an extreme sport, but it somehow had to do, there had to be some element of cryptocurrency involved. What do you think it would be? Base jumping. But does that involve crypto? It involves death. So I think that's why appropriate for crypto.

You could do base jumping while having a hardware wallet in your pocket and it doesn't fall out. And you're judged on both it not falling. out and the base jumping skill. I see. I feel like the the appetite for self-inflicted pain is what crypto and base jumping have in common. I'm going to go with NFT illustration. Is that a sport?

Like Bob Ross? Like Bob Ross? Like you've got to paint some NFTs in real time. You got to like, you know. Okay. Does that count? Does that count? It's on ESPN too.

It's a game. It is on ESPN. It is on ESPN. It's a game. I think that counts. I think that counts. Call of Duty. Yeah, I think I want to see sort of like a ZK version of like Magic the Gathering as like the replacement of Mount Gox, the Magic the Gathering online exchange with with the privacy preserving version.

I guess if poker is a sport, Magic the Gathering has to be a sport, but I still resist it very strongly. I don't want to admit it, but I guess it does follow by analogy. The International Olympic Committee can decide this. They have a list of all the sports that, includes things that you would maybe think are games but are also sports. What, what, what do they, what's the name of it? The International Olympic Committee. IOC. I should have said pickleball or paddle or whatever, but I kind of feel like that was the

Bahamahmian crypto sports. So it might, might have gone, gone with the wind, as they say. Bahamian pickleball. That might be. I remember during that salt conference, which I didn't. go to, but I saw these memes on Twitter of like people playing, like Su-Zoo playing pickleball. Anything Suezoo's doing, you don't want to do. All right, guys. I think we've got to wrap it up. But I appreciate you guys tuning in.

Until next week. Thanks, everybody.