Unchained - Unconfirmed: SOL Is Up 3,800% YTD. Could It Eventually Displace Ethereum? - Ep.265

Starting point is 00:00:03 Hi, everyone. Welcome to Unconfirmed. The show that reveals how the marketing names and are reacting to the week's top headlines and gets the insights given what they say on the horizon. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago and as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full-time. This is the August 20th, 2021 episode of Unconfirmed. The Unchained newsletter has switched from a weekly news recap to a daily email. Each morning you'll get four to five quick headlines, a crypto meme or two, and a few recommended reads. Head to Unchainedpodcast.com and the sign-up for the newsletter is right on the homepage.

Starting point is 00:00:42 The crypto.com app pays you up to 8.5% interest on your Bitcoin. Get $25 when you download the crypto.com app with code Laura. The link is in the description. Looking for NFTs that are useful and fun? Try So Rare. The largest NFT-based fantasy game. You can collect, trade, and compete with officially licensed digital cards of soccer players from over 160 clubs on So Rare. That's S-O-R-A-R-E dot com.

Starting point is 00:01:11 Polymarket is the leading information markets platform where you can trade on the most hotly debated topics, whether it's politics, coronavirus, current events, and more, all on the blockchain. For a limited time, sign up with referral code, unconfirmed, to get your first trade reimbursed up to $100. Today's guest is Kyle Samani, managing partner at Multi-coin Capital. Welcome, Kyle. Hey, Laura. Good to be back on the show. Nice to have you. So Salana has been on quite a terror this past week. It's now ranked 10th by market cap, and the price of the token is up to about $70 at the time of recording. And that's up from $1.50 at the start of the year, up from $23 a month ago, and up from $43 a week ago. So what happened? Yeah. I think this has been kind of a culmination of a lot of things happening. You know, this is a lot of ecosystem, as he's starting around the beginning of the year,

Starting point is 00:02:09 you really started to get together and take off. You had, in addition to serum, Mango launched, Sabre launched, Mercurial, marinade, a whole bunch of these other things at launch. So the only one I knew was Mango the Dex or serum, obviously. Yeah, why don't you just maybe describe what those are? Yeah, so these were all various kinds of DeFi Protocol. that I mentioned. Sabre is like a way to trade stable coins. It's kind of like her finance from Ethereum. Mercurial is a competitor. There's a whole bunch of borrow lend protocols now

Starting point is 00:02:41 like Solend and there's probably four or five more. And so what I think has happened in the last nine months or so has been that a lot of these teams started raising money starting about nine months ago and building and deploying. And then this past week, last week, two kind of I think really important milestones have. happened. I didn't foresee them happening next to each other, but Mango did their fundraise. So Mango is a margin trading and perpetual derivatives trading thing built on top of serum. And Mango was one of the very first things to launch on top of Solana. And they've been iterating in the product is actually very, very good.

Starting point is 00:03:21 And it's kind of like DUIDX, but actually I think it is already more functional than the IDX in terms of what it can do. and they did a token sale and they sold off 5% of the total Mango tokens. The team kept 5%. And then the remaining 90% were kept for the Dow. The really interesting structure, the Mango team has been very publicly anti-VC. We've known them and spoken to them for a while, but we had no allocation. They did an auction and over $500 million went into the contract and ultimately the auction cleared at $70 million. And so at 5% of the tokens, that's a $1.4 billion valuation.

Starting point is 00:04:00 And I think that really opened up a lot of people's eyes of, hey, you have a brand new contract. People are aping into this. Like, this is what Ethereum, I remember last summer, people were like, they throw a contract down, and then $100 billion would appear in the contract within a day or two. And that happened on Salana last week. And then this D-Gen Apes, NFT drop, you know, happened. I think it was Friday night or Saturday night. And it seems like $50, $100,000.

Starting point is 00:04:24 people tried to get onto this thing. The slot of blockchain actually kept running perfectly, but the front end to mince the apes kept going down. They couldn't keep the servers online. But they ended up, they did launch the apes and everything ultimately worked out. And I think kind of those two things happening, like three days apart, four days apart, has caused a lot of people to realize and say, okay, there's real defy happening here. The phantom wallet is amazing.

Starting point is 00:04:51 and you can already start to see NFT drops happening. And the user experience, as far as the blockchain goes, is really just magical. And so I think that kind of combination of things is really kind of what's causing this new wave of interest. Okay. I'm glad that you answered that question about the DHS and Ape Academy because I was trying to figure out if it was the blockchain or if it was the front end. I do think some people are still saying, like, oh, I spent a bunch of SOL and I didn't get an ape. but who knows how they'll resolve that? Do you disagree with that?

Starting point is 00:05:24 I don't know specifics. I do know that the chain has been fine. I call the validators and everyone. They didn't care. They didn't notice anything. There may have been some bugs in the contract for the ape specifically. I'm not familiar with any, but it's possible. Okay.

Starting point is 00:05:43 Multi-coin, obviously, is invested in Solana. And, you know, I think you guys also, you know, are supporters and investors in ETH. So what types of projects or users do you see being drawn to Slana over Ethereum? Or do you think, like, you know, there are specific types of categories that are especially suited to one blockchain or another? Or do you just think they're going to keep coexisting and competing directly? I mean, they're going to coexist for the foreseeable future. There's a tremendous amount of inertia around Ethereum. that, you know, and I'm saying it will be displaced,

Starting point is 00:06:17 but if it were to be displaced, that would take several years at least. So it's not going anywhere. I think right now on Solana, you're seeing a few different kinds of things happen. The one is you're seeing something from Ethereum are being cloned over. Serum was kind of the first,

Starting point is 00:06:31 so you need a way to trade tokens. Now serum is different than uniswap and kind of the structure, but obviously it's a way to trade tokens. You have people now doing stable coin AMMs, you have people doing regular AMMs, you have people doing options and derivatives and margin trading.

Starting point is 00:06:44 and borrow Lent protocols. All of these things exist on Ethereum BFI today, right? And these are just basic primitives that kind of everyone knows need to exist. And so those are all being rebuilt right now. In fact, most of what I just mentioned is already live. That's all good and well. But where I think Salon is really interesting is to try and unlock applications that weren't possible before.

Starting point is 00:07:05 And I think that that's going to start getting into things that are more complicated that you really can't do on Ethereum. So I think there's kind of a few areas of that that are somewhat obvious today. So the first is if you want to do a real defy-derivatives trading protocol, you can't do it on Eflare 1. Because of the risk of liquidations in the Cascades, you need to have kind of high-frequency, low-latency system, and you just can't do that on Ethereum.

Starting point is 00:07:33 Moreover, if you want to really make derivatives work, you need to make sure they all cross-margin against each other. And so you need to kind of have everything in a single venue work. And so, like, if you look at today, Mango, Bonfita, there's Drift, there's a few of these D5 derivative themes, SIE options. They're all making their systems composable so that, like, potentially you can have, you could have a position with Bonfita and you can have a cross margin with perpetual protocol or with drift or something.

Starting point is 00:08:00 They're not there yet, but, like, you can see how that's already coming together. And all those teams, although they're competing, are also recognizing they all need to play nicely. And so I think that's going to be, that's still a couple months away from being, you know, to the public, but if you look at how it's coming together, it's super, super cool to see that. I think the other really interesting area is just going to be anything that really faces a large number of retail users. And I think probably the first category, that's going to be some combination of NFTs and social tokens. Like, the ape thing happened, I think there was 10,000 apes.

Starting point is 00:08:33 The salon of blockchain was fine. Whenever the pudgy penguins launched a new thing, or there's some new cats or whatever, gas on Ethereum goes to 200 really quick or 300. it's really unusable. But now just imagine, what if you multiply that by 50? And you wanted to do 500,000 NFT drop. You know, like, you just can't even do that on Ethereum. Like, it's not even possible. I think those kinds of things are going to get unlocked on Solana.

Starting point is 00:08:55 It'll be really interesting. And especially if you have influencers, you know, people with TikTok, two million followers on TikTok starting to do all kinds of stuff with social tokens and NFTs. But I think that whole design space of creator monetization is going to get really unlocked on Solana. So I think we're really excited about that. And I think probably the first, just early glimpse of that is just now kind of coming online.

Starting point is 00:09:19 It's called Audius. They have about 5 million or so users, the audio streaming thing we invested in about a year and a half ago. And they've talked publicly that they're going to do NFT drops in the Audius app. I think we're going to kind of start to see the first versions of that where you're going to have, you know, well-known celebrities and DJs doing interesting kind of NFT drop things. And I'm excited to see all this play out. Well, there's so much to unpack in what you just said. But as for the three problems, the first one where you were talking about how certain things in defy just are not possible on Ethereum because of collateral and liquidations, are you talking there about what we did see kind of early in the pandemic, that Black Thursday, where there were like a bunch of liquidations. And the blockchain itself kind of like couldn't even keep up with the, you know, how quickly they, there were these liquidations happening? Is that what you're talking about? Yes. That problem is worse, is even more acute, specifically with like perpetual contracts.

Starting point is 00:10:22 Because people, like with people who are levering up on compound, Navay and Maker, are levering up 2x, maybe 3x. But if you're levered up 20x on FTX or finance, if you're going to do that in a decentralized setting, all of that stuff becomes just much more sensitive when the leverage ratio goes from 3x to 20x. And so, yeah, it's just paramount that the blockchain is humming, that price updates are fast, and that liquidations are happening in an orderly. They need to be happening in a quick way. Okay. So in a moment, I want to ask you about the cross-margining thing you mentioned, but first a quick word from the sponsors who make this show possible. With over 10 million users, crypto.com is the easiest place to buy and sell over 90 cryptocurrencies.

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Starting point is 00:12:20 Yeah. So, I mean, the problem, so I wrote a thread about this maybe three or four weeks ago. Pretty widely retweeted about defy derivatives. But basically, like, Ethler 1 is a venue, and then Arbitram is a venue, optimism is a venue. Star Wars of NU. Salon is a venue. In the same way that Binance and FTX are venues. That's where your assets are. You know, my theory is that if you're going to make, like, decentralized FTX get to that same level of functionality, you need to make sure these things all cross-margin.

Starting point is 00:12:54 The really big problem in Ethereum right now is that you have all of these protocols are being built on different technologies. So optimism is a different flavor of the EVM than Ethel Ler 1, which is different than Arbitrum, which is different than Starkware. And so these things literally, they don't even technically compose with each other. And then they also, on a liquidity basis, don't compose because they're separate venues. And so you're seeing the system get further fragmented. And that means, you know, developers could try and rebuild all the pieces and functions of their competitors and compliments.

Starting point is 00:13:22 But it just makes everything harder, more complicated and more slow. What's really nice about Solana is it's a single venue and you can support all of the users and all of the liquidity in one place. And so all of the teams building the derivatives protocols also understand that they need to cross margin with other protocols to make their own protocols better. If you're building an option system, you want to be able to have a perpetual contract as collateral in the option. They're all designing their systems with that kind of core understanding in mind. And like you're seeing, you're going to see something that looks like a decentralized FTX emerge over the next probably three, four months as all those guys launches. and tweak the bugs and stuff. And that's really just not possible in Ethereum.

Starting point is 00:14:08 Yeah, I was also surprised when you, for the third category, you said social tokens because I don't, you know, I don't feel that's like truly taken off on Ethereum. So is that simply because of what you were saying about how there are just certain things that are just not possible on Ethereum, but you feel like if the capability were there, then we would see that phenomenon. And so that's where Solana comes in. Yeah, that's correct.

Starting point is 00:14:31 I mean, BitCloud here is instructive. You know, they could have built on Ethereum and they chose not to. You have to ask yourself, why do they go through all this extra headache? And the answer is scalability. Like, they just, you know, they were like, okay, if we're going to get Justin Bieber to talk about this thing and get 20 million people to slam the system, you know, like it's just, it's not going to work. From that vantage point, I think Bit Cloud, you know, was thinking correctly. I think it was wrong to build their own chain that is UTXO base and has some other problems. We've invested in one team that's not yet announced

Starting point is 00:15:01 that's building social tokens on Solana. And the great thing is, is stable coins are already there. They are USDAC, USDAT already there and some other ones. And then Coinbase and FTX and finance, all the major exchanges are on ramps. Those are all available now. You have all of the stable coin swaps,

Starting point is 00:15:19 all of the serum, all of AMM primitives. Like all this stuff is all already there. And so it's just really, really easy to make it all play together in a very cool way. NFTs are all already there. And so I think that the opportunity set for developers to build on top of these kind of core tools

Starting point is 00:15:40 and then for creators to experiment with different AMM curves, with different NFTs, with different social tokens and different risk sharing and whatever, right? Like, we're only a couple months away from all of that just kind of like magically working. Again, you can't do that in Ethereum because everyone knows if you have a million people slam the system, it's just not going to work.

Starting point is 00:15:59 Ethereum tends to get clogged when 10 or 20 or 30,000 people slam it at the same time. Like, if you have a million people slam it, you know, it's just a different scale. Wow. This is so interesting because I almost feel like what you're saying is so like if the last crypto bubble was driven by the ICA craze on Ethereum, then this, I mean, right now we're basically in a bull market, but, you know, it's kind of in a, a, somewhat of a holding pattern, I guess, now. I mean, we're starting to see it tick back up now,

Starting point is 00:16:31 but it's almost like you're saying, like it could be that Solana is the basis for it. I think so. I think in about six months' time, like today I can say all these things and, like, I'm talking to all the developers and I can, like, see the beta versions of what, and it's all still theoretical in the sense that, like,

Starting point is 00:16:50 retail can't play with it yet. But, like, I think in six months time, it'll be very, very obvious to kind of everyone in the space, like, hey, like, this is what we've been all waiting for. Cheap transactions, it's scalable, it's all composes. You don't have to worry about the layer two stuff. Everything just magically works. You have D5.

Starting point is 00:17:08 You have all the on ramps, you know, like Salon is probably three, four months away from just, you know, all of that stuff magically, magically working together. But you can see most of the pieces are there now. And if you have the fortune, a privilege that I do of being able to just talk to the developers working on the early stage stuff, you can see, you know, kind of where those last pieces are. What about the fact that Ethereum 2 is going to have its merge, you know, probably roughly, I don't know, six months from now, like in Q1, how do you see that affecting kind of any competition between Ethereum and Solana?

Starting point is 00:17:41 So, you know, Ethereum is supposed to move to proof of stake at some point. You know, timelines are challenging with Ethereum people. They tend to miss them by a pretty large margin. Even when it does move to proof of stake, it doesn't really change the throughput of the system in a meaningful way. There may be a 10% boost or 20% boost you're there, but it's not a 10x boost or 100x or 1,000x. And so I don't think that meaningfully kind of changes anything that we just talked about.

Starting point is 00:18:10 So in general, then, how do you see the competition between the two playing out? Because, I mean, Ethereum at the moment has such a strong community. So how do you see that affecting kind of like the development of, you know, I guess both of the chains? So I think communities are essential to make any open source things succeed, but they're not all that you need. And actually beyond a certain point, they kind of stop mattering. Like, how many people are actually building like core Ethereum tooling, like Core Ethereum, client code? It's like 100, like not even like 50 maybe. I don't know.

Starting point is 00:18:48 But it's not 10,000. If you look at, you know, how many smart contracts on Ethereum today are really, really used, it's like 10 or 20. again, it's not 5,000. The number of core things that really matter here is actually a lot smaller. I realize there are a lot of people who are learning solidity, and I agree there's a lot of people who hold Eath. What if you look at like the really, really important things, there's actually not that many of them.

Starting point is 00:19:12 And I think more or less all of those are either replicated or will be pretty close to being replicated on the next few months. And once those pieces are in place, then what that does is it just opens up the world for people to go on and experiment from there. I think there's a ton of people who looked at crypto, 2017, 2018, and they looked at Ethereum,

Starting point is 00:19:34 and they said, we can't use this for what we want to do. I think the two most obvious examples are BitClout in helium, which, like, they tried and they couldn't make it work until they had to go do their own thing. And flow is another dapper in flow.

Starting point is 00:19:49 They literally launched Cryptocities, which was the most popular thing in 2017. You know, I think if you replayed 2017, you get this massive excitement. And if you assume that you have a scale of the platform that can support hundreds of millions of users, I think that there would be a ton of companies that would be excited to build on top of that, that have distribution. I think what's going to happen over the next six to 12 months is people are going to say,

Starting point is 00:20:13 okay, great, we have a blockchain that we all know how it works now, and we can actually see a path to support 50 million users on this thing. And those people are all going to start to tinker with and work on Solana. And I think that's just like incredibly excited. And then what about the fact that Solana is more centralized in terms of the number of validators? Do you feel like that will matter to people or do they not care? Yeah. So decentralization is a spectrum.

Starting point is 00:20:42 It's not binary. And so it's gray. I think it's not a question at all that Ethereum is meaningfully more decentralized as a whole than Solana is. I don't think that's really debatable. but the degree to which it is more decentralized is I don't think that much. Like, it's probably like three or four or six X, but it's not 500x. And so, yeah, I think the delta is actually not that large. If you look at probably the most important metric is who's controlling consensus.

Starting point is 00:21:15 Today on Ethereum, it's like three or four mining pools get you to 51%. And then if you look at the ETH2 staking distribution right now, I believe it's seven or eight entities. he's get you to a third, which is the control threshold for a proof of stake system. Solana, actually, if you go to Solana Beach.io, which is the main kind of like block explorer for Solana, they report openly in how many nodes does it take to get to 33%. And I think it's like 18 last time I looked or 17. So on that metric, which is I would argue is kind of the most important one for the basic consensus safety of the protocols, today Solana is more decentralized than each two.

Starting point is 00:21:52 Now I realize that's not a perfect comparison. there's problems with that. But the people who say it's 100x more decentralized broadly, I don't think that's a reasonable assertion. And so I think that's important to realize the relative magnitude. And then I think the other important thing to understand is, is the system as a whole becoming more decentralized, or is it becoming more centralized?

Starting point is 00:22:12 If you look at the history of Bitcoin and Ethereum, the answer is very obvious as they become much more decentralized over time. And the question is, is there something funnly different about the nature of Solana that would cause it to break that trend. And I have not been able to identify anything. And if I look at Solana 12 months ago versus today, it's obviously much more decentralized today because there's just so many more people building and doing stuff.

Starting point is 00:22:34 The Solana team doesn't know who people are building a lot of the stuff. And that's exactly what you would want to see, right? Is there's just tooling out there and people start hacking away and they never even call the core team. And so I feel pretty good that the vectors are generally getting more decentralized. And as long as that kind of generally continues to function, then like I'm not really worried about it. And I don't think most people in 12 months are going to care.

Starting point is 00:22:59 Yeah. I mean, it's interesting because you said at one point, like, oh, these two will coexist for a few years. So I am just curious, how do you think things will play out over the next few years in terms of competition between the two? Yeah. So, I mean, like there's some different examples in history where like, so one is like Facebook and MySpace.

Starting point is 00:23:17 Another one I think is probably a better comp. is probably Blackberry and an iPhone. And like, I remember I was in college when it was kind of iPhone versus Blackberry Wars. And Blackberry, I believe, if you go look at RIMS financials, it peaked in either 2010 or 2011. And then that was the peak. And, like, it was still relevant for, I don't know, three more years probably. Like, 2013 or 2014 is probably when Blackberry started to kind of, like, really become irrelevant.

Starting point is 00:23:46 if I were to ballpark these things. So, you know, inertia lasts at a minimum for several years. Even MySpace, too, right? Like, even as Facebook surpass MySpace, MySpace was still around and relevant for, I don't know, probably two or three years, right? So projecting up further than three years is pretty difficult. Like, it's just too hard to reason about that state of the world.

Starting point is 00:24:08 But what I'm just happening right now is they both coexist. They have different growth rates. I think Salana's growth rate will be sustainably higher than Ethereum's for the foreseeable future. like in the next 24 to 36 months. And if that is in fact generally true, then the relative divergence of, you know, user-based developers and market cap will converge. Over that period,

Starting point is 00:24:27 the dream is not going away. People are going to, there's too much inertia there for it to go away quickly. I do the usually you're going to see two things coexist. We have iOS, we have Android. And today is just, everyone knows you have to build an iPhone app and an Android app. Right.

Starting point is 00:24:42 And we may be in a world where you have to do something similar here. I don't think that analogy necessarily will hold, but it's like not, it's not unreasonable to expect that there will be multiple competing ecosystems. And we're at time, but do you have time for one more question? Yeah. Yeah. And so if we do end up with two of these platforms that, you know, basically kind of do the same thing, how would you expect to see them differentiate?

Starting point is 00:25:11 Like what projects would you expect to see gravitate more toward Ethereum versus Solana and vice versa? Yeah, I mean, I have a very strong belief that software needs to be free or as close to free as humanly possible. Humans are trained over the last 15 years of the internet to expect everything to be instant free and fast. Right. And so, you know, I think that that kind of core, core demonstrated preference really favors

Starting point is 00:25:39 Solana. And so I think you're just going to see an increasing percentage developers, you know, build there. And they're going to say, okay, I have a. It's just much more obvious how you can incredibly say this will be cheap and fast for a lot more users. And like that's what people, that's what I think developers are going to optimize for. Oh, so then it sounds like you're saying that actually you don't think they'll coexist that one of them will win out. And it's more likely that will be Solana. I mean, again, time matters here.

Starting point is 00:26:06 Like within 12 months, it's just, ETH has too much inertia, you know, but in 48 months, you know, like who knows. But yeah, I mean, it's, Ethereum's not going to. way, it could definitely lose relevance. MySpace is still around. There's like some music stuff on it or something. I don't actually know. Dig is still around. Like there's plenty of these things, but it could definitely lose relevance. Okay. Well, last question then, because I know I did see you tweet. Oh, and I don't have the exact quote, but I remember seeing it that Eos was, you know, one of multi-coin's biggest mistakes. And obviously that was a chain that was more centralized. So what do you feel is different this time around?

Starting point is 00:26:48 Yeah, so there's a few things. One is that EOS was much more centralized and that literally there was just 21 fixed block producers. Two, the gas model and the system was really broken. And so it caused all these kind of spam stuff to happen that was really problematic. And then three, the team just didn't, I mean, they raised a bunch of money

Starting point is 00:27:08 and they just didn't swing hard enough. They should have been more aggressive with the balance sheet than that they just weren't. And so I think some combination of those factors kind of is what prevented it from getting there. I think it's pretty short-sighted to say, oh, like, being as scalable and fast as possible and being a little bit less decentralized has no chance of working. That just feels like kind of an implausible claim. It's not obvious that, like, what degree of decentralization is the correct answer.

Starting point is 00:27:44 You can't reason about that in abstract and give a definitive answer, right? And a lot of Bitcoin and Ethereum people kind of really have prone to this idea that, like, it has to be maximally decentralized. And I just don't think that like that we don't actually know how to reason about that. And so I think it's okay to try other experiments that do make some tradeoffs, but give you something very, very important, which is the user experience is just infinitely better. And I think that's a tradeoff that's really worth exploring. All right. Well, this has been super fascinating. I kind of was like really shocked by all the salana activity. And yeah, it's really interesting to get an insight. Like I mean, there's so much else we could have covered because obviously you guys have your new $100 million fund. And I mean,

Starting point is 00:28:34 there's so much else. So I'm sure we'll cover a salana more in the coming months here on the show. But in the meantime, thank you so much for coming on Unconfirmed. Hey, Laura, thanks so much for having me on the show. And yeah, I hope there's going to be a lot more salon in the future. I'm sure you do. Don't forget. Next up is the weekly news recap. Stick around for this week in crypto after this short break. Today's sponsor is Polymarket, the world's leading information markets platform where you can trade on the most pressing global questions, all on the blockchain. Choose from a variety of markets. Will Cardano support smart contracts by October? Will the U.S. again have more than 200,000 new COVID cases per day before 2022? Will Trump run for president again?

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Starting point is 00:29:49 OpenC, the Ethereum-based NFT marketplace, is shattering previous all-time highs in August. As of press time on Thursday, August 19th, OpenC has done $1.1 billion in volume in August alone, according to data from Dune Analytics. For context, the marketplace did just under $700 million total from January through July. accompanying the hockey stick-like growth in volume, as Frederick Haga put out on unchained earlier this week, user activity is also surging. Over the past 30 days, about 125,000 users interacted with the platform, a 172% increase over the previous 30-day chunk, and a rough equivalent to the number of users trading on uniswap. Transactions have also skyrocketed,

Starting point is 00:30:34 jumping to 1.41 million, good for a 160% increase month over month. In related to NFT news, Super Rare, also in NFT Marketplace, launched the Rare Curation token on Tuesday in an effort to decentralize the project. Through the new tokens, 15% of which were airdropped to past users of the platform, holders will be able to vote on the opening of additional spaces or art galleries, as well as obtain commissions from each sale on Super Rare. Next headline. Robin Hood, along with Mark Cuban and Vitalik Boudarin, are letting the doge out. According to Robin Hood's Q2 earnings report, crypto trading had a considerable impact on the company's bottom line with 41% of total revenue coming as the direct result of crypto trading. The company also reported that 60% of Robin Hood users traded crypto during Q2.

Starting point is 00:31:26 To put Robin Hood's growing reliance on crypto into perspective, in Q4 2020, crypto trading only accounted for 2% of the company's revenue. In Q1, 2021, only 17% of the app's total revenue was derived from crypto trading. Interestingly, the company's filing noted that Dogecoin was the crypto of choice for customers, saying 62% of our cryptocurrency transaction-based revenue was attributable to transactions in Dogecoin. Speaking of Dogecoin, the meme coin was involved in two headlines that can only be described as, well, headscratching. First, last Friday, Dallas Mavis.

Starting point is 00:32:06 Maverick's owner and Shark Tank Shark, Mark Cuban, told CNBC, quote, the community for Doge is the strongest when it comes to using it as a medium of exchange. This week, he doubled down on his Doge thoughts, tweeting, quote, The point about Doge that people miss is that Doge's imperfections and simplicity are its greatest strengths. You can only use it to do two things, spend it or hoddle it. Both are easy to understand, and it's cheap to buy, which makes it a community anyone can join and enjoy. Second, on Monday, it was announced that the Doge Coin Foundation has been reestablished after a six-year hiatus to support Doge development. Among the Doge OGs named as advisors to the foundation,

Starting point is 00:32:48 you can find Vitalik Bouturin, the creator of Ethereum, sitting as the blockchain and crypto advisor, and Jared Birchall, a developer hand-selected by Elon Musk to oversee legal and financial matters. Next headline. Facebook Financial's leader says Novi is ready to. to launch. On Wednesday, David Marcus, leader of Facebook Financial and Novi, published a blog post relaying his confidence in Facebook's stable coin wallet project, despite two years of regulatory hurdles. Marcus wrote, quote, Novi is ready to come to market. It's regulated and we're confident in our operational ability to exceed the high standards of compliance that will be demanded of us. He added, quote, in the U.S., we have secured licenses or approvals for Novi in nearly every

Starting point is 00:33:36 state, and we will not launch anywhere we have not yet received such clearances. The DM Association has become an independent entity. For those in need of a refresher, Novi initially launched back in 2019 under the name Calibra, as a wallet designed to host Facebook's Stable Coin Project Libra, which was started at roughly the same time. Since then, Libra, now known as DM, has famously struggled to get off the ground due to regulatory obstacles and key partners, such as Visa and PayPal dropping out. While DM struck a deal with a U.S.-based Silvergate Bank about four months ago, the project has yet to mint any tokens. According to a report from the block, sources are attributing the holdup to regulatory headwinds. The same report notes that Novi is ready to move on from DM and work with a new stablecoin.

Starting point is 00:34:24 Novi has already held discussions with several third-party stablecoin issuers, including Paxos and Circle. Next headline. DefyHack Roundup, including the hack. that never was. Just pulled off maybe the biggest white hat rescue ever, Paradigm Researcher's Sam Sun tweeted cryptically earlier this week before dropping a post titled Two Rights Might Make a wrong, outlining a crazy sequence of events that went into patching a vulnerability in Sushi Swaps fundraising platform Miso. According to Sun, the vulnerability centered on a flawed auction process and could have resulted in a loss of 109,000 Ethereum, worth 300,000.

Starting point is 00:35:05 $150 million. Essentially, a hacker could have reused the same eth in a bid over and over again and, quote, bid in the auction for free, until the entire token sale, which in this case was Bit Dow's bit, was drained. Luckily, Sam and a group of colleagues were able to identify and patch the bug in the platform in less than five hours with the help of the sushi team. The BitDAO auction, therefore, went off without a hitch, raising over 112,000 eath. In related news, the Japanese exchange Liquid lost $74 million in a hack that saw its hot wallets exploited in a security breach. At publishing time, the exchange had suspended deposits and withdrawals and is moving all assets into cold storage. According to on-chain data, the attacker was able to get away with 106 Bitcoin and $69 million worth of ERC 20 tokens. The Poly Network hacker, who carried out the $600 million attack on the cross-blockchain project, two weeks ago, is now refusing to return the remaining funds.

Starting point is 00:36:10 The hacker appears frustrated that Polygon has not yet unfrozen $33 million in stable coins. Quote, your essays are becoming very convincing while your actions are showing your distrust. What a funny game. You don't even think to unlock my USDT account, the hacker wrote to the Polygon team before adding that they are, quote, not ready to publish the key in this week, which would return the funds. On Polygon's side, it seems they are trying their best to get the funds returned safely. The team has already offered a $500,000 bug bounty for discovering the exploit and was referring to the hacker as a white hat. The hacker will also be given the opportunity to join the team as an advisor.

Starting point is 00:36:50 Next headline. Polygon and Hermes complete the first blockchain merger. Polygon and Ethereum scaling project has acquired Hermes Network, a ZK Roll-Up Layer 2 solution for 250, million dollars. This, to the best of our knowledge, is the first ever full-blown merger of blockchain networks where one network will completely absorb the other, including its token, as Polygon co-founder Mahalo Bielic told the block. Hermes, or H-EZ, will now become Polygon Hermes, with the 26 members of its staff moving over to the Polygon team. As part of the merger, HEZ token holders can swap for amatic at a ratio of 3.5 Madic to one Hez.

Starting point is 00:37:30 Polygon has allocated roughly 12.5% of its treasury to pay for the acquisition. The Polygon Hermes merger is the first part of Polygon's new focus on ZK technology, which helps scale Ethereum by bundling transactions outside of the Ethereum main net, making for cheaper transactions. Yelik said, quote, we consider ZK cryptography the single most important strategic resource for blockchain scaling and infrastructure development, and we have a clear goal of becoming the leading force and contributor in this field in years to come. With the Hermes merger, Polygon has already allocated 25% of the $1 billion it

Starting point is 00:38:07 pledged to spend specifically on ZK infrastructure. Next headline, SEC Chair Gary Gensler thinks Defi can be regulated. In an interview with the Wall Street Journal on Wednesday, SEC Chair Gary Gensler said that defy projects that reward users with tokens or incentives could be regulated, no matter how decentralized they say they are. According to Gensler, DeFi, quote, is a bit of a misnomer, as many platforms are similar to the types of centralized entities the SEC overseas. There's still a core group of folks that are not only writing the software, like the open source software, but they often have governance and fees, said Gensler. There's some incentive structure for these promoters and sponsors in the middle of this.

Starting point is 00:38:49 Earlier this month, Gensler made similar comments, stating that in his view, quote, the legislative priority should center on crypto trading, lending, and DFI platforms. However, not all regulators feel that crypto should be treated with such a heavy hand. In an open letter to Gensler, representatives Patrick McCannery and Glenn Thompson professed their belief that increased crypto trading would be a, quote, concerning roadmap that will have long-term implications on the country. The two added, quote, rather than regulate innovation and job creation out of this country, we should promote an active dialogue between regulators and market participants. Additionally, representatives Tom Emmer and Darren Soto are working toward creating better crypto legislation in the U.S. by reintroducing the Blockchain Regulatory Certainty Act on August 17th. It aims to provide a safe harbor for blockchain firms that do not hold customer assets,

Starting point is 00:39:42 which would be very helpful in light of the infrastructure bill's broad language concerning crypto brokers. In a statement on the announcement, Emmer said, quote, certain blockchain developers and service providers, like miners and multi-signature service providers, should not have to register as many transmitters because they never custody consumer funds. And lastly, to round out the hard news of the week, a CFTC commissioner Brian Quintends, who is known for being pro-Crypto and was a recent guest on the show, just announced that he will be leaving office at the end of August. Time for fun bits.

Starting point is 00:40:15 Crypto adoption is up 880% compared to 2020. Blockchain analytics firm Chainalysis published a preview of its 2021 Geography of Cryptocurrency Report this week, which measures crypto adoption worldwide. According to Chainalysis's data, crypto adoption grew by a whopping 880% over the past year. The report uses metrics such as on-chain value received, on-chain value transferred, and peer-to-peer exchange trade volume to rank the crypto adoption rate amongst 154 countries. At the head of the leaderboard, by a significant margin was Vietnam, followed by India, Pakistan, and Ukraine. Interestingly, both China and the U.S. dipped compared to last year. In 2020, China ranked fourth in global crypto adoption and the U.S. ranks six. This year, the U.S. ranks eighth and China fell to 13th.

Starting point is 00:41:07 And actually, for the last fun bits, my assistant wants me to tell a little story, which is that my old hairdresser reached out to me. and he had moved to the West Coast and we were DMing at 8 a.m. Eastern time and I said, it's 5 a.m. for you. What are you doing? He was like, oh, I'm waiting for this NFT drop. So in case you're wondering just how crazy all this NFT stuff is going, you can talk to my DGN former hairdresser who is all into this and has, you know, one of those nifty JPEG PFCs and everything. All right. So thanks for tuning in. To learn more about Kyle, multi-coin capital and Solana, be sure to check out the links in the show notes.

Starting point is 00:41:50 Unconfirmed is produced by me, Laura Shin, with help from Anthony Yoon, Mark Murdoch, and Daniel Ness. Thanks for listening.

Unchained - Unconfirmed: SOL Is Up 3,800% YTD. Could It Eventually Displace Ethereum? - Ep.265

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