ROLLUP: Memestock Mania | ETH Spot ETF Countdown | $25M Hackers Charged | Crypto's Election Impact

The Bankless Friday Weekly Rollup Third Week of May ------ 📣 TRANSPORTER - SECURED BY CHAINLINK CCIP | TRY IT OUT https://www.transporter.io/ ------ 🎙️ SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum https://%E2%81%A0https//bankless.cc/Arbitrum 🌐 CARTESI | APPLY FOR A GRANT https://bankless.cc/CartesiGovernance ------ TIMESTAMPS & RESOURCES 00:00:00 Start 00:01:58 Markets https://pro.kraken.com/app/trade/btc-usd https://pro.kraken.com/app/trade/eth-usd https://pro.kraken.com/app/trade/eth-btc 00:06:07 Inflation Numbers https://www.nytimes.com/live/2024/05/15/business/cpi-inflation-fed 00:07:07 Gamestop and Memestock Mania https://x.com/TheRoaringKitty/status/1789807772542067105 https://imgur.com/PhBgZL2 https://twitter.com/vladtenev/status/1790560257196060741 00:11:12 Institutions Buying Bitcoin https://twitter.com/BitcoinMagazine/status/1789020004131737624 https://twitter.com/RyanSAdams/status/1789024343038586956 https://twitter.com/EricBalchunas/status/1790391049560498410 00:13:36 ETH ETF Approval Deadline https://twitter.com/vivekventures/status/1789161576987054271 https://x.com/RyanSAdams/status/1790856567979454711 https://twitter.com/RyanSAdams/status/1790825287229276526 https://twitter.com/SGJohnsson/status/1788973146478948614 00:20:46 Tornado Cash Devs Arrested https://twitter.com/valkenburgh/status/1790367445720445421 https://twitter.com/L0laL33tz/status/1790385855556698448 https://twitter.com/LynAldenContact/status/1790391222235758700 https://twitter.com/JDonoghueAuthor/status/1790485643950280894 https://twitter.com/RyanSAdams/status/1790450619074871527 00:25:04 SAB 121 Repealed! https://x.com/BanklessHQ/status/1791140496397468064 https://x.com/RyanSAdams/status/1791147869791002699 00:28:07 Crypto Gets Partisan https://www.politico.com/news/2024/05/10/trump-crypto-biden-00157051 https://twitter.com/mcuban/status/1789037772050702824?s=46&t=2ZINVXJQKx6xO_6Wiiu_2g https://twitter.com/mcuban/status/1789037772050702824?s=46&t=2ZINVXJQKx6xO_6Wiiu_2g https://twitter.com/arkhamintel/status/1790014778519265463 https://twitter.com/wileynickel/status/1788608778843074658?s=46 https://twitter.com/samlyman33/status/1788612636428374183 00:36:39 $25M MEV Exploiters Charged https://www.justice.gov/opa/pr/two-brothers-arrested-attacking-ethereum-blockchain-and-stealing-25m-cryptocurrency https://twitter.com/tmnxeq/status/1790778875816898602 00:43:42 Is Code Law? https://x.com/TrustlessState/status/1791128506614608014 https://twitter.com/MohamedFFouda/status/1790812568526704849 00:46:59 Lens Network https://twitter.com/LensProtocol/status/1790458242855751950 00:48:23 Permissionless https://bankless.cc/PermissionlessDiscount 00:49:01 Airdrop Meta Shifting https://twitter.com/PrimordialAA/status/1790033102837797069 00:51:14 Future of DAI https://x.com/RuneKek/status/1790777230341062660 00:56:59 WUTANG https://x.com/msantoriESQ/status/1788944762608754731 00:57:48 Kraken Push to Dismiss SEC https://x.com/ShaneMac/status/1747262469490536594 00:58:36 Polymarket raises $70M https://polymarket.com/event/nic-carter-vs-david-hoffman-Fight?tid=1715869550851 01:00:44 David vs Nic https://x.com/KarateCombat/status/1791077245194272830 01:03:05 Meme of The Week https://x.com/RyanSAdams/status/1790819671534411936 ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:03Ryan Sean Adams?

  Bankless Nation, it is the third week of May. The Crime and Politics edition of the weekly roll-up, if I might say so, David.

• 0:09David Hoffman?

  It's been the entire year, Crime and Politics.

• 0:12Ryan Sean Adams?

  Oh my god, when are we gonna get out of this, huh?

• 0:14David Hoffman?

  Yeah, Crime, Politics and Meme Coins, it's exactly what we love.

• 0:18Ryan Sean Adams?

  Yeah, some sad news to start, though, on the week, which is tornado cash developer Alexei Pertsev was actually sentenced this week, five years in jail.

• 0:27David Hoffman?

  In the Netherlands.

• 0:28Ryan Sean Adams?

  So we gotta talk about that, David. Yeah, it's in the Netherlands. What does that mean for crypto? What does that mean for privacy? What does that mean for the Roman Storm case? All of that.

• 0:35David Hoffman?

  Back on the United States soil. You know how we always say, "Front-run the opportunity in crypto"? Well, the Department of Justice said, "Well, not like that," as they charged two brothers for an MEV bot attack. Is code law, or not really? We'll unpack that and more. Big win in the Senate as well, what happened with this?

• 0:54Ryan Sean Adams?

  Oh man, there was a vote for pro-crypto legislation. This is a continuation of something we talked about last week. It's called SAB 121. If you don't remember what that is, we'll do a recap. But the big question is, is Biden going to veto this now? And David, I think crypto just got a lot more partisan. We also have the ETH Spot ETF, the approval or denial decision next week. And I kind of wonder how all of the politics is involved or wrapped up in that decision as well.

• 1:19David Hoffman?

  Yeah, mainly what happens next. And then lastly, time is a flat circle. GameStop short sellers get crushed for a second time. How did it happen twice? All this stuff and more. But first, a message from our friends and sponsors over at Transporter, a brand-new bridging app to help you bridge all of your assets across Optimism, Ethereum, Arbitrum Base, or Avalanche. Transporter is built using Chainlink's CCIP in the background to help you transport your assets from chain to chain to chain. Of course, very low fees. You can try it out at transporter.io, or click the link in the show notes, so you can just send it across chains. I like that. Cross chains with confidence is a good slogan there, too. All right, let's talk about the markets. What confidence level does the market have on Bitcoin this week, David?

• 2:03David Hoffman?

  Bitcoin, 5% more confident this week. Started the week at 61,800, ending the week at 65,150. That's a good week. Yeah. 5% more confident is decently more confident. If we could get fewer of those, more and more, that'd be great. Yeah, nice week for Bitcoin. And how about the ETH price on the week? Less confident, 2% less confident. Started the week at $3,000, we are now down to $2,940. And then if you just look at the ratio, Ryan. I was wondering if you were gonna, you were gonna say. If we're gonna skip it this week? Have to force you to do it, but yeah. The ratio is down a solid 25% in the last 80 days. We are down to 0.045. That is the ETH Bitcoin ratio. Three years. Yeah, the ETH Bitcoin ratio.

• 2:46David Hoffman?

  This is the lowest it's been in three years? Yeah, mhm. Even lower than when 3R's Capital got liquidated and they had to dump all of their ETH collateral to save their positions, which ultimately did nothing. I actually have a take about like why ETH is so weak and specifically why Bitcoin and meme coins are so strong relatively in this market. You ready for it? Yeah. Tell me, you tell me why this is a painful chart. I'll tell you exactly why this is happening. This is just my take. Bitcoin and meme coins are strong, and in contrast, ETH is weak. Why is this happening? Well, the answer with Bitcoin is very obvious. It had the Bitcoin ETF approval. It has gotten the regulatory stamp of approval by the powers that be. It is now accepted in banks.

• 3:30David Hoffman?

  It is now being bought by banks. We're gonna talk about that in a second. And overall, it doesn't have a fight with regulators. It doesn't have a fight with the nation state. It's not offending the nation state. Meme coins also, similarly, are not fighting like in regulatory circles. Like the meme coins being not a security or not even close to being a security are free to be like minted and distributed and everyone can go have fun with meme coins. No consequences, no fighting with any sort of like powers that be whatsoever. Ethereum, on the other hand, is like going toe to toe with regulators. We have tornadoes. Cash developer in jail. We have the ether at risk of being called a security by Gary Gensler. We have the Department of Justice going after the MEV supply chain.

• 4:15David Hoffman?

  Privacy is now banned and also privacy is trying to be developed by the Ethereum ecosystem. And so because like ETH is like doing it the most to offend the nation state. It is being weak this cycle because like people are scared. The market is scared because like the power, the ETF approval is not going to happen. And so I think the depression of the ETH price is like a result of like Ethereum trying to go toe to toe with some of the big things that nation states like to have monopolies over.

• 4:46Ryan Sean Adams?

  So you're saying ether is getting whacked by regulators this cycle, whereas Bitcoin is basically being embraced by institutions and regulators and meme coins are just like, you know,

• 4:57David Hoffman?

  From the perspective of nation states, they're just meme coins are just irrelevant.

• 5:00Ryan Sean Adams?

  Yeah, I it's interesting. It's an interesting narrative. One response I would say to that is, okay, explain Sol. So Solana does not have an ETF and it has been like

• 5:14David Hoffman?

  The market is not considering the price of Sol in relation to the ETF.

• 5:18Ryan Sean Adams?

  Yeah. And I mean, so why has that outperformed would be a part of rebuttal. I actually have like a deeper take about, sorry, not a deeper take. Let me rephrase that because you know, your take was good, David. I don't want to, I don't want to put down your take here, but like I, I think my general take and I want to talk to you about this and maybe a bankless takes sometime. We'll save the rest of this content, but Ethereum is really just going through its growing pains because of migrating all of its execution to layer twos. And that's what this cycle is. And I think that's the big driver more than regulatory, but I will concede.

• 5:53David Hoffman?

  I think that can be both, yeah.

• 5:54Ryan Sean Adams?

  I think regulatory is a portion of this.

• 5:56David Hoffman?

  Overall, though, total crypto market cap 2.5 trillion, almost just below. And so still pretty healthy in the total crypto market cap. Still looking for that rampaging bull market. We just haven't had any of that. But meanwhile, we'll talk about some inflation numbers instead while we wait.

• 6:11Ryan Sean Adams?

  Yeah. So inflation has cooled a little bit on the So we got, we got the April numbers in prices climbed 3.4% bit lower than people expected. Also lower than March, which was 3.5% and the lowest annual increase in core inflation since 2021. So David, the markets like that because when inflation goes down, you know, Powell gets happier apparently. And you know, like the easy money, the probability of him reducing rates at some point in the future increases. And the easy money train like continues. You know, this is in contrast to the Lynn Alden episode we put out earlier this week, which, which is kind of making the case that what Powell does doesn't matter as much.

• 6:56Ryan Sean Adams?

  It still matters, but doesn't matter as much because we're in a fiscally dominated world. But you know, for the time being, the markets react to this. Low inflation is, is good for risk on assets.

• 7:07David Hoffman?

  Speaking of risk on assets, Ryan, were you paying attention to the trad stock market this week? Did you hear about this news?

• 7:13Ryan Sean Adams?

  I was paying a little bit of attention to it. Like I know something with meme stocks, maybe they're back. And we've got this tweet that you put in the agenda. I'm kind of confused why this is relevant. Somebody roaring kitty, while looking at is a picture of a person sort of like, you know, flashy animation style, like just sitting up in their chair, in their desk chair.

• 7:31David Hoffman?

  Yeah. So the, well, the meme is being tweeted out by roaring kitty. And it's a man of who's like leaning forward in his desk chair. He's like, okay, I'm paying attention now.

• 7:38Ryan Sean Adams?

  Oh, I see.

• 7:40David Hoffman?

  Roaring kitty is an account, a Twitter account that went dormant in, in 2021. This is the roaring kitty.

• 7:46Ryan Sean Adams?

  1.2 million followers?

• 7:48David Hoffman?

  Yeah.

• 7:48Ryan Sean Adams?

  It's a big account.

• 7:49David Hoffman?

  This is the roaring kitty who led the short squeeze on GME back in 2021. That started the whole meme stock revolution.

• 7:56Ryan Sean Adams?

  Do we, do we know who this person is?

• 7:58David Hoffman?

  Yeah, this is the guy with the bandana who like did some streaming about like the GMA. That's this guy. And he hasn't tweeted in like three years or something. He's the guy who testified in Congress. This is the guy who's just like, Congress, I swear, I just like the stock. This is, this is the guy who like led the GME short squeeze.

• 8:15Ryan Sean Adams?

  Okay.

• 8:16David Hoffman?

  And so like caused the whole like 2021, like shorts, like.

• 8:19Ryan Sean Adams?

  So this, this implies he's now paying attention.

• 8:22David Hoffman?

  Yes, but also hasn't tweeted in three years. And so this is his first tweet in three years. And he's like, it's like, okay, now I'm, now I'm paying attention. As a result of this tweet. The GME stock price pumped from $10 to $65.

• 8:37Ryan Sean Adams?

  Shut up.

• 8:38David Hoffman?

  Liquidating $838 million of GME short interest, which is the exact same thing that happened three years ago in 2021. We just did it all over again. Go look at the chart. Do you have the chart?

• 8:52Ryan Sean Adams?

  This is the chart?

• 8:52David Hoffman?

  This is the chart. Okay, so these are monthly candles. So that big chart is the chart of 2021. That big ass, excuse me, green candle that liquidated all the short hedge funds in 2021 and caused the whole Robinhood thing, caused all of that. And then that last green candle that you see is the thing that just happened this last week, which is just like a smaller version of the same thing that already happened.

• 9:14Ryan Sean Adams?

  Okay. I mean, but we've been since that GME. I haven't looked at these charts almost up. Like, we've been on a steady trajectory downward, right? And this is just like another spike.

• 9:22David Hoffman?

  Well, yeah, because like GameStop is not worth like the market cap that it was giving it. It was just an anomaly because so much short interest was on GameStop. So before the initial short squeeze in 2021, GameStop was trading at $3. It then went up to $120. It fell down to $10 where it started its second short squeeze last week, $10 to $68. So it's still up from its like initial, um, initial short squeeze. Robinhood printed $5 billion in equity trading volume yesterday because again, all of the GameStop short squeezers are on Robinhood. And so Vlad, the CEO of Robinhood, says, "One of the biggest days in the last 12 months."

• 10:01Ryan Sean Adams?

  So is this, um, you're like, what does this mean? What's the interpretation here? Are meme stocks back? Are we gonna have another meme stock cycle?

• 10:08David Hoffman?

  I don't know. I don't know what the impact is. Like, we've already experienced this in the markets once. Uh, and I don't, I don't know if it's like, do we do the AMC thing all over again? I don't, I don't know. Uh, but the fact that this happened twice is pretty hilarious.

• 10:21Ryan Sean Adams?

  Can I just be like, um, I feel like meme stocks, uh, again, I'm not a meme trader. So this is like, could be a totally just like old man take or whatever. But like, I feel like they're kind of boring compared to meme coins.

• 10:31David Hoffman?

  Meme coins.

• 10:32Ryan Sean Adams?

  Like, why do a meme stock when you can, with, with cash flows? When you could do a complete meme coin that basically just like, like, has that, has the GME community discovered meme coins yet? Do you think that crypto has sucked some of that meme, uh, like animal spirit out of the, the oxygen out of the room?

• 10:49David Hoffman?

  Well, the thing is with meme coins, there's like a much smaller circle of people who trade meme coins than the GME like army of people.

• 10:57Ryan Sean Adams?

  Doesn't have to be though. It's so easy. It's so easy.

• 11:00David Hoffman?

  Well, yeah, but the meme coin market caps just can't fit very many people, whereas the GameStop market cap can fit like an entire subreddit of people.

• 11:08Ryan Sean Adams?

  Okay. Well, I, yeah, I guess we'll have to monitor to see if that lasts or if it's just a week type thing. But you know, it's something that's long lasting, I think, David, is institutions buying the Bitcoin spot ETF. So a whole bunch of things were disclosed this week with SEC filings. Apparently a whole bunch of the banks actually have some Bitcoin ETF on their balance sheet. So this was a filing from JP Morgan. They actually own some Bitcoin, David, you know? Almost a million dollars worth of the Bitcoin spot ETF, which is kind of funny because Jamie Dimon is like publicly seems to hate it. I don't know if they're like stacking to hold Michael Saylor style or if this is some like administrative technicality.

• 11:50Ryan Sean Adams?

  But the fact of the matter is JP Morgan holds Bitcoin. So does Wells Fargo, by the way, which is kind of interesting. And also there are five big Canadian banks because like the Canadian banking system is all consolidated.

• 12:03David Hoffman?

  Are Canadian banks big fundamentally?

• 12:05Ryan Sean Adams?

  They're big for Canada. Okay. They're big for Canada. And so all of them, it was disclosed last week, actually own Bitcoin, like five out of five Canadian big banks own Bitcoin. So some of the banks are getting in on this and that's interesting. And also it's not just banks, it is states. All right. The state of Wisconsin.

• 12:26David Hoffman?

  State of Wisconsin. Let's go. Let's go Wisconsin. Shout out Wisconsin listeners.

• 12:31Ryan Sean Adams?

  A hundred million dollars worth of the BlackRock iShares Bitcoin ETF. This is Eric Balchunas. He goes, wow, a state pension bought iBit in the first quarter. Normally you don't get these big fish institutions for a year or so when the ETF gets more liquidity. But as we've seen, these are no ordinary launches, a good sign, expect more as institutions tend to move in herds. Okay. So that's, that's one state. We got another 49 to go. All right. So Wisconsin.

• 13:00David Hoffman?

  What's the MicroStrategy state of pension? Can we get one of our states to just become like the Bitcoin buyer?

• 13:07Ryan Sean Adams?

  How do you think that happens? You think the state of Wisconsin Investment Board?

• 13:13David Hoffman?

  Whoever's on the Wisconsin Investment Board is just a big Bitcoiner.

• 13:16Ryan Sean Adams?

  Yeah, you think they listen to Bankless?

• 13:18David Hoffman?

  Shout out whoever that person is.

• 13:19Ryan Sean Adams?

  They're probably onto the Bitcoin podcast, not so much Bankless, but maybe they listen as well. Well, shout out you, you're a hero, state of Wisconsin employee. Thank you.

• 13:27David Hoffman?

  When we finally get the ETH ETFs, maybe we'll have a war of the states as to whether they decide if they're going to be Bitcoiners or Ethereum, which ETF they're going to buy.

• 13:36Ryan Sean Adams?

  I mean, speaking of that, the date is coming up next week. So we're going to be talking about it on next week's roll up. That is, the Ethereum ETF approval needs to be either

• 13:43David Hoffman?

  Or denial.

• 13:44Ryan Sean Adams?

  Approved or denied by May 23rd. And let me, I want to ask you what you think is going to happen, David, before I give my take. But like, let's talk about, let's recalibrate on the backdrop here. ETH sentiment is kind of bad right now. We just talked about the ratio, okay? ETF approval, basically no one thinks it's going to be approved. Prediction markets are basically like 0 to 25%. The Bloomberg, you know, fellows who stay really up to speed, they're like, hey, there's no chance. We just had the SEC suing everybody, including consensus. And we had that Joe Lubin episode where he's basically, yeah, it's not going to happen. They're out to get Ethereum. So it seems like our chances are dim. But what say you?

• 14:28Ryan Sean Adams?

  What do you think about approval odds?

• 14:31David Hoffman?

  Below 10%.

• 14:34Ryan Sean Adams?

  That's not 0%. That's not 0% though.

• 14:37David Hoffman?

  It's not 0%.

• 14:38Ryan Sean Adams?

  And what do you base that on?

• 14:39David Hoffman?

  I think the market has priced in below 10%. I think that's what the market is pricing in, below 10%.

• 14:43Ryan Sean Adams?

  That's why ETH is just like not going anywhere?

• 14:47David Hoffman?

  Yeah, like a few rolls ago, we were like, why would you hold ETH? Like Bitcoin is the one with the ETF and Solana is the one with all the meme coins. And that continues to be like the state of things.

• 14:56Ryan Sean Adams?

  I think that's the base case. Let me give you two tail outcomes that could happen. Okay, that the tail, I guess, positive and a tail negative. All right, so the tail event on the good side would be approval. All right, and this is not very likely to happen. I definitely give it under like 5% odds. But there is a chance here, David, and here's what I think it is. If, and this is a big if, Biden and the Democrats wake up. It's 11th hour. They realize that their party is getting painted as the anti-crypto party. And this becomes a November-

• 15:29David Hoffman?

  Which wins them zero votes.

• 15:30Ryan Sean Adams?

  Wins them zero votes. They only lose votes. They only lose money. And Trump steps in and tries to make this a wedge issue. If they want to counteract that, they might actually put some political pressure on the SEC and Gensler to just throw a bone to crypto, just to prove the ETF.

• 15:46David Hoffman?

  Right.

• 15:46Ryan Sean Adams?

  Okay? Just like, call off Gensler. Hey, you can let this one slide. If you don't, it'll hurt us come November. It's not worth, you know, losing a White House over. That's a possibility here. And we'll talk more about the politics of this in the next section. But can you see that as a faint possibility? Maybe some hopium?

• 16:05David Hoffman?

  Hopium for sure, yeah. Pass whatever you're smoking.

• 16:09Ryan Sean Adams?

  Well, I'm not smoking. I'm just throwing-

• 16:11David Hoffman?

  You're hypothesizing.

• 16:13Ryan Sean Adams?

  Okay, so here's the other hypothetical, though. This would be a tail risk on the bad side. Imagine instead of approving, okay? Gensler comes out next week and they declare ETH as security. This is not that far-fetched, actually, because there's evidence. This is Eric Balchunas, and they dug up some papers. Like, if you go into all of the, you know, like, 50-feet-deep pile of legalese, there's actually maybe some commentary that shows that the SEC, in Eric's words, is perhaps considering that ETH is a security as part of their denial. So they might say, no ETH ETF. By the way, it's a security.

• 16:51David Hoffman?

  And also it's a security.

• 16:52Ryan Sean Adams?

  Yup.

• 16:53David Hoffman?

  Which this outcome seems just more likely.

• 16:55Ryan Sean Adams?

  Oh, really?

• 16:56David Hoffman?

  I can simulate this outcome in my head.

• 17:00Ryan Sean Adams?

  So that's another tail risk, or a tail event that could happen, right? So we got it both sides. I guess we have to see next week what's gonna happen.

• 17:07David Hoffman?

  But I think that's also meaningfully priced in. Maybe not that ETH is formally a security. I don't know if that's completely priced in, or just like the bad sentiment is.

• 17:15Ryan Sean Adams?

  Dude, but like, don't you think if Gensler says ETH is a security, we're headed for a big ETH price drop?

• 17:21David Hoffman?

  Yeah, whether it'll be sustained or not, I don't know. But yeah, it's obviously not bullish. That's for sure. It's not bullish. Which is like, it's bad sentiment has just like completely, there are fewer and fewer ETH sellers left. And so like, yeah. Shake them all out. Will I sell ETH because Gary Gensler calls it a security? Like, no. And like, there's a higher proportion of people, me, left in the market because, you know, the weak hands have sold. And like, the believers are still holding. And that's where the price equilibrium has been discovered. That's right. Buy more, David. That's what I'll do. That's right. Yeah. You know what? That's, ETH says it's a security. That's bullish. Bullish. What do we got coming up? Coming up next, tornado cash developer Alexey Persif convicted. What were the arguments? And does it set a precedent for court cases in the United States? We're going to cover that.

• 18:05David Hoffman?

  Pro crypto legislation just got passed in Congress. Last week Biden said he would veto it. Now the time is coming to actually see if he's going to follow through on that. And then lastly, the Department of Justice charged two brothers with the exploit of an MEV bot. What happened? How does the government perceive MEV? And overall, it's just another day of code is law versus law is law in crypto. All this and more. But first, I'm going to talk about some of these fantastic sponsors that make this show possible, especially Kraken, our preferred crypto exchange in 2024. If you do not have an account with Kraken, consider clicking the links in the show notes to getting started with Kraken today. If you want a crypto trading experience backed by world-class security and award-winning support teams, then head over to Kraken, one of the longest-standing and most secure crypto platforms in the world.

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• 20:46Ryan Sean Adams?

  Sad news for crypto this week. The Tornado Cash developer Alexey Pertsev was convicted on money laundering charges. This is one of the two Tornado Cash developers who got arrested. This court case happened in the Netherlands, and a three-judge panel, Dutch panel, sentenced him to 64 months in prison. That's over five years. One of the judges said this in the proceedings: "Tornado Cash, in its nature and functioning, is a tool intended for criminals."

• 21:15David Hoffman?

  Ooh, hot take.

• 21:16Ryan Sean Adams?

  A tool intended for criminals. So, we've got 14 days to appeal the decision, so it's not completely done. Of course, Bankless listeners will know, Tornado Cash is what, David? It's an on-chain mixer, smart contracts, primarily... It's still in operation, right? It's immutable code.

• 21:34David Hoffman?

  It still operates.

• 21:35Ryan Sean Adams?

  And Alexey deployed this, along with Roman Storm and, like, maybe some others, to Ethereum. This is immutable, it's autonomous, it's open source, was used by...

• 21:47David Hoffman?

  North Korea and me. I also use tornado cash.

• 21:52Ryan Sean Adams?

  Yeah.

• 21:53David Hoffman?

  No longer.

• 21:53Ryan Sean Adams?

  Yeah, no longer, ever since it's been OFAC sanctioned, of course. But this is a well-known privacy tool. So Peter Van Valkenburg from Coin Center had some response because the big question is, will this carry forward into the US? We've got Roman Storm's case, which is not happening in the Netherlands. It's happening in the US, and that's definitely one to watch. He says that the standard for culpability in the Netherlands is different, maybe much different than the United States. And so that means because Alexei didn't try to stop North Korea, I mean, it's unclear what he would even do to stop North Korea in the case of a mutable start smart contract. But the judges decided he was negligent. He didn't do that.

• 22:34Ryan Sean Adams?

  And the standard for criminality in the US is much more specific. You actually have to have an intent for crime, and the prosecution must prove that the defendant intended to launder money, not merely know that it is possible for some bad actor to do this.

• 22:51David Hoffman?

  Right, so yeah, the difference between the precedent in the Netherlands is that Peter says, "mere knowledge of a significant chance that one's actions could facilitate crime" is what made Alexei Persav guilty in the Netherlands. This is not the precedent that we think and a hope we have in the United States, whereas like you actually have to take an action. You have to actually be an agent in the facilitating of money laundering or like aid other people who are also doing it, which is not what Alexei did. The fact that Alexei knew that the tool that he was developing could be theoretically used for crime was apparently enough to rule a guilty verdict in the Netherlands.

• 23:32Ryan Sean Adams?

  Which, by the way-

• 23:33David Hoffman?

  I think is ass backwards.

• 23:34Ryan Sean Adams?

  It's a crazy standard, because how deep do you go with this, right? It's like, how about Ethereum validators? I mean, do they have knowledge that bad actors could use Ethereum?

• 23:42David Hoffman?

  How about like any messaging platform you can use to facilitate like criminals can use to coordinate and communicate their intent to communicate a crime?

• 23:51Ryan Sean Adams?

  Yeah, go all the way down to the internet. How about TCP IP? I mean, like North Korea is using that as well.

• 23:57David Hoffman?

  If you develop a hammer, you like a criminal could like use that to kill someone.

• 24:02Ryan Sean Adams?

  It seems like an incredibly unjust interpretation of the law, even if that is the law in the Netherlands. This is an independent journalist commenting on this. The entire tornado cash verdict, they say, is completely insane and will turn the legality of building any privacy service on its head. Because what it shows, David, is three things. That the devs are fully responsible when their open source code is used for criminal activity. That's crazy. How can they be fully responsible for that? And secondly, building an unstoppable privacy system as laid out suggests criminal intent. So even if you're building any privacy system, then criminals could use it. So that means you are a criminal. Absolutely crazy that that's how this would be interpreted.

• 24:43David Hoffman?

  Alexi's co-founder Roman Storm is facing similar charges in the United States. He's from Seattle. And so that is also going to be very informative about that, how the United States approaches this same exact issue, hopefully with a little bit more freedom and less oppression. That trial is scheduled to go before a federal court in New York in September.

• 25:04Ryan Sean Adams?

  Right, so that's the bad news on the week, David. But we got some good news too. What's the good news? Give it to us.

• 25:08David Hoffman?

  The continuation of the repeal of Sab 121 move into the Senate this week. Last week, it was voted to be repealed by the House. We want it to be repealed. This is a rule coming out of the SEC that the Congress is like, yo WTF, this needs to like go through actual legislation. So they are voting, Congress is voting to repeal it. We want it to be repealed because it basically stops any sort of commercial enterprise to ever facilitate the custody of crypto assets. So we, the industry, want it to be repealed. It was voted to be repealed by the House last week, yay. Just this morning, it was voted to be repealed by the Senate by a 60 to 38 vote. So a pretty solid vote.

• 25:49Ryan Sean Adams?

  Huge.

• 25:50David Hoffman?

  It's actually, that is pretty big.

• 25:51Ryan Sean Adams?

  That is surprising. I think even like people who are bullish on this were surprised by these numbers. Because that means a ton of Democratic senators actually voted against the White House and for this pro crypto legislation.

• 26:05David Hoffman?

  Yeah, so it was expected that this vote would go in favor of the repeal. It was not expected that this discrepancy, the 68 to 30 vote, was this large. This is the thing that Biden said, that if it comes across his desk, he will veto. And so he just, this is what he said last week, and this is what kicked off last week's like drama between the Dems and the Republicans, saying like, well, clearly Biden is an anti-crypto candidate. That just got cemented. This is the thing he will say, he will now veto. So now he has to go veto it to actually like, you know, put his money where his mouth is.

• 26:38Ryan Sean Adams?

  I think this is absolutely crazy because not only Biden said he would veto it, and it's not just declaring the intent for the White House to veto this, but it's part of that, right? But it's also just, I think that's a message to Democratic senators, like, get in line. Like, vote this down. I mean, don't embarrass me in an election year. I said I'm going to veto this. We have to stand by our guy, Gary Gensler, who created a rule that says, never mind whether it makes sense or not, that says, you know, like, all banks, anyone who wants to custody crypto in the US, it's an institution of some kind, can't do it. Never mind whether it makes sense or not, we have to stand here and veto it. And this is a whole bunch of senators just going against the White House in a key election year?

• 27:19Ryan Sean Adams?

  What this is to me, David, is Elizabeth Warren's anti-crypto army getting publicly crushed, like publicly humiliating. Yeah, and to add to that, even Chuck Schumer voted pro-crypto on this one. So it's not only a repudiation of Elizabeth Warren, I think it's a repudiation of Gary Gensler. And this is why, David, I still, I still haven't given up hope on the EPT.

• 27:41David Hoffman?

  There's still a chance.

• 27:42Ryan Sean Adams?

  There's still a chance. But this all puts it in Biden's court. So this bill is now going to come across his desk. And is he going to do what he said he would do last week, which is veto it? If so, that is a marker. You're basically voting anti-crypto at that point, and it's coming from the White House.

• 27:59David Hoffman?

  He's the anti-crypto president.

• 28:00Ryan Sean Adams?

  Against Congress and against many members of his own party. So what do you think happens? Like, where do we go from here?

• 28:08David Hoffman?

  Well, the obvious thing is Donald Trump just takes the free real estate. And so all he has had to say, which he did say, is that he told crypto backers at his Mar-a-Lago press conference that they better vote for him because the Biden administration has unleashed a regulatory crackdown on the industry. Whether or not Donald Trump is all pro crypto does not matter because the Biden administration is just serving him the crypto vote on a silver platter, which he's like, "Thank you, that's free real estate, that's mine now."

• 28:36Ryan Sean Adams?

  Yeah, the fact, so this is an article that came out on Friday. I know you were climbing mountains, David, and like, so you probably weren't looking at this, this political stuff, but this article with the title "Crypto is Trump's New Weapon Against Biden," this was published in Politico. It's what like, the normie political people read, right? This is not like on CoinDesk or on Bankless or somewhere else. This is on Politico, okay? And so Mark Cuban retweets this article, this very article, and says, "If Joe Biden loses, there's a good chance you'll be able to thank Gary Gensler and the SEC. Crypto is a mainstay with younger and independent voters. Gensler has not protected a single investor against fraud."

• 29:19Ryan Sean Adams?

  This tweet gets like almost 20,000 likes, a whole bunch of retweets.

• 29:24David Hoffman?

  Nice job, Mark Cuban.

• 29:24Ryan Sean Adams?

  Yeah, it goes absolutely crazy. He says, "This is a warning to Congress, crypto voters will be heard this election." All right, so there's a lot of clamoring. People are starting to see the tide shift, and that is the backdrop to this like 60-38 vote.

• 29:39David Hoffman?

  And you can see really Donald Trump taking advantage out of this. Last election, he was really just like anti Bitcoin, pro dollar. He decried crypto on social media during his presidency. And then key cabinet members, Steve Mnuchin, remember, that was like the whole like introduction of this like self-hosted wallet term. He wanted to ban non-custodial wallets. Since Donald Trump's election, he has minted an NFT collection, has a crypto net worth of $7 million, holds $5 million of Trump? Is that a token or is NFTs? I don't know. His last activity was sending 250 Ether to Coinbase five months ago. His NFTs earned him $2.8 million in crypto.

• 30:23David Hoffman?

  And he's a B on Coinbase's Stand With Crypto report on crypto friendliness. B, not like way better than any of the Democrats. Also, since Donald Trump's last presidency...

• 30:35David Hoffman?

  We got the paradigm poll last week, we talked about this last week. Forty-eight percent of crypto owners favor Trump, thirty-nine percent favor Biden, thirteen percent is undecided. But twenty percent of voters in several battleground states consider crypto to be a key issue in the elections and are crypto favorable, which is a large number. Twenty percent of voters in battleground states. And so, like, to say that crypto is, like, going to be an issue here is, like, we know that that's true.

• 31:04Ryan Sean Adams?

  I mean, it seems, it seems like it could swing the election, like, I know-

• 31:08David Hoffman?

  It could swing the election. Crypto could swing the election.

• 31:10Ryan Sean Adams?

  Of course, it must be a bankless, a crypto show, and of course, you guys think you're powerful enough to swing, swing the election, but like, we're talking about the marginal voter here, we're talking about really tight margins-

• 31:19David Hoffman?

  A very tight election.

• 31:20Ryan Sean Adams?

  We're talking about independents, and you're also swinging some, like, a single-issue voters, like, the other direction in this. We should say, of course, not all Democrats are anti-crypto, so a number of them-

• 31:32David Hoffman?

  It's just the establishment Democrats.

• 31:34Ryan Sean Adams?

  Yeah, and a number of them voted for this policy. Here's a tweet from a Democrat representative in Congress. Representative Wiley Nickel, "We cannot hand this issue," he means crypto, "to Republicans. Digital assets shouldn't be a partisan issue. I'm going to continue working a bipartisan way to support Web 3 so we can protect American consumers." There's also Gilda Brand, who's been very, she's a senator, she's been very pro-crypto. I assume she, she voted in favor of the SAP 121 repeal. She gets an A, strongly support, on, on stand with crypto, so there's some of them. In fact, some people are saying that this is not really a partisan issue at all. It's more of a generational one. This is a tweet from Sam Lyman. "Case in point, twenty-one Dems voted to rein in Gensler's overreach on crypto."

• 32:19Ryan Sean Adams?

  I think that was in the House. "The average age of this voting group, forty-eight. Contrast these young Gen Xers to the Dem party leaders they defied with yesterday's vote. Maxine Waters is eighty-five, Joe Biden's eighty-one, Elizabeth Warren is seventy-four." So he's basically saying that this, this also skews, like, old versus young.

• 32:38David Hoffman?

  It's neoliberals versus progressives.

• 32:40Ryan Sean Adams?

  I think so. I think there's an element to that, but I will say, a lot of the- The so-called like neoliberals in the Republican Party have definitely swung in the direction of crypto. And I think they're just partially just doing that to stand in contrast to like watching the Democrats shoot themselves over the in the foot over this issue.

• 32:58David Hoffman?

  Well, anyways, this issue is going to be a reoccurring theme until now and September, until this election actually happens. So Bankless Nation, get used to politics being in the weekly roll up, whether you like it or not. Sorry, I don't necessarily like it, but nonetheless, it's relevant. Coming up, coming up next, the Department of Justice charges two brothers for a $25 million TAC using MEV bots. Was it crime? Or was it just a highly profitable trading strategy? We also got Kraken versus the SEC and a new socialfi Layer 2 architecture that could host a billion users and die. The stablecoin is going to fork into two different kinds. What's going on with all of that and more. But first, a moment to talk about some of these fantastic sponsors that make this show possible, especially Mantle, the Layer 2 with all the yield. If you have not checked out Mantle's Layer 2, check it out.

• 33:43David Hoffman?

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• 34:28David Hoffman?

  that provides milestone-based funding to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first DAO-led Layer 2 ecosystem, check out Mantle at mantle.xyz and follow them on Twitter at ZeroXMantle. Have you ever felt that the tools for developing decentralized applications are too restrictive and fail to leverage advancements from traditional software programming? There's a wide range of expressive building blocks beyond conventional smart contracts and solidity development. Don't waste your time building the basics from scratch and don't limit the potential of your vision. Cartesi provides powerful and scalable solutions for developers that supercharge app development. With a Cartesi virtual machine, you can run a full Linux OS and access decades of rich code libraries and open source tooling for building in Web3.

• 35:13David Hoffman?

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• 35:58David Hoffman?

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• 36:39Ryan Sean Adams?

  The title of the press release on the DOGJ website: "Two brothers arrested for attacking Ethereum blockchain and stealing $25 million in cryptocurrency." So, David, there's this accusation against these two brothers, a conspiracy to commit wire- Wire fraud, actual wire fraud, conspiracy to commit money laundering. It turns out they exploited, through some MEV-type exploit, $25 million. When I saw this story come through, I didn't quite know what to think because the DOJ is doing all sorts of things these days. In fact, it's the DOJ versus Roman Storm, and they're calling tornado cash money laundering. So I didn't know quite what to make of this particular case. I'd not been following the details. So what are they? What is going on here?

• 37:21David Hoffman?

  So whenever the case of the Department of Justice and nation states and the world of MEV comes up, this idea of code is law always gets invoked. And generally, the powers that be never really think that code is law and actually this thing called wire fraud, and it happened. And this is actually one of the more unique MEV cases that we've ever seen. So there was an exploit here specifically, and this was not about code on Ethereum. This was not relevant to code on Ethereum. This was not an exploit of a smart contract. This was in the pre-blockchain layer around block builders, Flashbots, MEV Boost, and the eventual block proposer. This is how all happened in the mempool, supply chain, networking layer, before transactions ever landed on Ethereum.

• 38:05Ryan Sean Adams?

  Was this an exploit of MEV Boost itself, like the Flashbots MEV Boost?

• 38:09David Hoffman?

  This was an exploit of the MEV Boost software that allowed for the theft of $25 million, whether you think it's theft or not. I do think it's theft. And so let me explain the exploit and how I came to that conclusion that I think it's theft, which I actually kind of agree with the Department of Justice. That's just my take. But here we go. Okay. So typically, block builders who build blocks, and then they build a block, pass it off to the proposer, who is an Ethereum validator, and the proposer just proposes it to the blockchain. The block builders receives bundles of transactions that they cannot alter or interfere with. They get these from MEV searchers. The MEV searchers search the blockchain, produce bundles of transactions for builders to build into a block.

• 38:51David Hoffman?

  Flashbots, the Flashbots MEV Boost relay, which relays the blocks around whoever needs to receive these blocks. They hide the content of these bundles. Bundles from block builders, because if block builders were able to see the contents of these bundles, they could just reconstruct the bundle themselves, because they have all the data, submit that bundle themselves and have that MEV collected for themselves. So you have to hide the bundle in order to protect the searcher, so they can actually receive their MEV that they are owed. It turns out that the MEV Boost relay, which is a relay from Flashbots, will return all of the transactions unbundled and disclosed if the producer, if the proposer signs the block correctly.

• 39:36David Hoffman?

  And so, once the block is signed correctly, you can now see the internal contents of that block, because it's assumed that that block propagates around the network and becomes embedded into Ethereum, so there's no longer the opportunity to steal that MEV. Unfortunately, this is the exploit here, if that signed block is invalid, then it would never be accepted by the network. And so, the block builder can sign a block legitimately, but that block can be an invalid block. And so then they can see the internal contents of those transactions, and then they can do their exploit. So, because the relay was never able to broadcast the block, it was a simple matter of taking the revealed transactions,

• 40:18David Hoffman?

  deconstructing the bundles, claiming the liquidity from MEV bots that were unlucky enough to be included in the block. So, here's what happened. In this scenario, some sophisticated player baited an MEV bot to frontrun them by executing a sandwich attack in which they would buy up a bunch of tokens to be able to dump on the person who was also buying them in that same block. Very standard practice, this is a sandwich attack. But, this is the different part. The exploiter bought a ton of those tokens prior to the sandwich attack, from the very standard sandwich attack that happens all the time. They bought the tokens ahead of time, and then they did this exploit where they unbundled their transaction, and then they were able to sell the tokens that they had bought

• 41:04David Hoffman?

  to the MEV bot that tried to execute the sandwich attack. So they basically frontran the frontrunner using an exploit.

• 41:12David Hoffman?

  From the MEV Boost relayer. The net effect is the MEV bot bought a bunch of tokens, which the exploiter had bought earlier at a much lower price. Since the MEV bot bundle was compromised, the exploiter was able to dump the token at a much higher price because they had baited the MEV bot into buying it again through an exploit in the relay.

• 41:31Ryan Sean Adams?

  So first of all, that's really smart. I think these were, were these MIT students? Like, like college kids or something like this?

• 41:37David Hoffman?

  I don't know.

• 41:37Ryan Sean Adams?

  Brothers working on this?

• 41:38David Hoffman?

  Perhaps, yeah.

• 41:39Ryan Sean Adams?

  That's a very, that's a very sophisticated.

• 41:41David Hoffman?

  Very sophisticated.

• 41:42Ryan Sean Adams?

  Exploit, I would say. But what you're saying is essentially they, they baited MEV bots using an exploit in order to like steal these funds. So like, because when I saw this headline, I was wondering, is the DOJ trying to say that like all MEV arbitrage, all of that stuff, the things that makes market efficient? Is all of that illegal? Are they going after that? And you're saying, well, this is, this is kind of an edge case where it looks like using the exploit to kind of hack. I'll use hack and air codes to hack.

• 42:14David Hoffman?

  I think it's.

• 42:15Ryan Sean Adams?

  Hack, steal like $25 million. And you, you think this is a legitimate case brought by the DOJ against these MEV exploiters?

• 42:24David Hoffman?

  This is, I'm not an expert in wire fraud. I'm not a lawyer, but I'm pretty sure this is just what wire fraud is. Like this was not the intent of the MEV bots. This was a bug in a software that was exploited. And also there's, this is not perfect evidence, but post, both pre and post the actual exploit, the exploiters, Google searched some terms, including money laundering, computer fraud abuse, and does the United States extradite to like foreign countries? And so, bad facts, not, not great facts.

• 42:58Ryan Sean Adams?

  Not great evidence, not great facts. Although like Google searches doesn't necessarily mean that what they do. Like, this is why all of this has to be proven in, in a court of law.

• 43:06David Hoffman?

  Yeah.

• 43:06Ryan Sean Adams?

  But it doesn't sound like it's a, it's a case of just like, MEV arbitrage, oh, 20 years in jail. Because that's what the charge is, 20 years in jail. And this is a contrast point. So let me read out a tweet that you said in the, you're, you're kind of like, I'm talking about this at the beginning. Code is law, according to Ethereum, you say. Law is all. Also law according to nation states, these are not mutually exclusive. You can execute code according to EVM and you can also go to jail for that. This is not a difficult take. So what you're basically saying is a lot of people came out and said, well, because it was possible to do the exploit. Right. It worked in the code like this is not criminal activity. It's not real theft. This, this reminds me of some of the arguments being made in the DAO hack.

• 43:46Ryan Sean Adams?

  Like back in, wait, you know, like 2016, like it was technically possible to exploit and steal all of the money inside of this DAO. But was it legal? Was it still theft? Also, yes, like also, yes.

• 43:59David Hoffman?

  So I would actually make a contrast between the DAO hack and this.

• 44:02Ryan Sean Adams?

  What do you think?

• 44:03David Hoffman?

  The DAO hack was a exploit of on-chain code that was on Ethereum that didn't have any terms and conditions. I don't think the Flashbots Mev Boost relay has terms and conditions.

• 44:13Ryan Sean Adams?

  But you'd bucket both in theft, in the, in the category of theft, would you not?

• 44:17David Hoffman?

  I, I think that this is way more thefty than the DAO hack. I think like maybe at the end of the day, a judge would say like the DAO hack was theft. But like, I think you could make a reasonable case that it was not theft. Because it was executed as the code intended.

• 44:34Ryan Sean Adams?

  So there's a spectrum of theftiness.

• 44:36David Hoffman?

  There's a spectrum of theftiness and this is pretty damn thefty.

• 44:39Ryan Sean Adams?

  Both, both cross, for me, both definitely crossed. Like it sounds like both crossed the line, but you're saying that this was even farther across the line than the DAO hack.

• 44:48David Hoffman?

  Because this, this actually had, was not about on-chain smart contracts on Ethereum. This was about third-party proprietary software called Mev Boost operated by Flashbots, which then immediately went and fixed that patch. Like this wasn't a difficult patch to fix.

• 45:01Ryan Sean Adams?

  Well, okay, let's say you're, let's say you're right. And this was actual theft and the DOJ has to approve that in a court of law. And that, that's kind of what the legal system is, you know, set up to do. Somebody like beats a crypto person over the head and steals their ledger and like takes all their money just because they can, because code is law. Like most people want the legal system to like, uh, help them in those cases. This is, but this is some downstream impact maybe from Mohammed, who says, "The indictment from the DOJ for the traders who baited MEV bots is mind blowing." First of all, it dives into every detail of how Ethereum blockbilled. And draws out analog to TradFi. So DOJ is getting really smart about this. So this is both, one, a recognition of the power of Ethereum to settle financial transactions.

• 45:43Ryan Sean Adams?

  Yay, good. And also, number two, a trap to pull every operator on Ethereum into a web of legal compliance requirements. That's what I worry about, David. This is what I worry about, that this kind of thing sets precedence for, yeah, come in and register all your validators. All your ETH staking has to be registered, has to be compliant. Like, nation state says there's bad things going on here, and so everyone has to kind of like, no code isn't law at all. Like, there's no such thing as code is law. Law is law. And we don't respect any of the code-based protocols that you put into place, so come in and register, you know? That's what I worry about, the precedent in this type of thing.

• 46:18David Hoffman?

  Yeah, there's definitely two different philosophies at play here. Nation states prevent, like, TradFi MEV. They prevent it with laws. Like, if you do, like, MEV in the Trad world, you go to jail. We, in the crypto world, in the Web3 world, try to prevent MEV with mechanisms, which I think are much more robust and less prone to corruption. But nonetheless, we have the regulators coming in to interfere with our goals and desires.

• 46:42Ryan Sean Adams?

  And when you say MEV, right, you're talking about, like, bad, clearly over-the-line, illegal MEV, right? Because there's also MEV that happens in TradFi all of the time. Just go, we flash boys.

• 46:52David Hoffman?

  Arbitrage is also MEV.

• 46:54Ryan Sean Adams?

  It's called front-running, and it's legal, you know? It's market arbitrage, and so that can happen as well. We'll see how that case turns out, though, David. Tell me about Lens protocol. Scaling to billions of users?

• 47:05David Hoffman?

  Yeah, moving on to extremely crypto-native things. Lens has launched Lens Network on the ZK stack from ZK Sync. And so this is going to be a hybrid rollout phase as the Lens Layer 2 gets more and more robust. It's starting off with off-chain data availability. They're calling this the seed phase. A ZK rollup with off-chain DA is called a validityum. Later, optional on-chain DA, if users so choose. This would be the bloom phase of Lens. And this is called a volition, where you have a ZK rollup. Users can choose to have their DEA settled on mainnet Ethereum if they just want to pay a little bit more. Additionally, some improvements as well. Gasless, signless transactions using account abstraction, so no more wallets,

• 47:48David Hoffman?

  with embedded wallet support, and also network bridging and near-instant transaction finality. This is the power of ZK rollups. This is the power of the ZK stack. This is why we like ZK stuff.

• 47:57Ryan Sean Adams?

  This is pretty exciting to me because I think this architecture that they're selecting, which is like ZK Sync, ZK EVMs with Validium, DA, right? And then the option to put DA on-chain through a volition. I think this scales, this architecture scales to billions of users, Ethereum. It's like the power of horizontal scalability.

• 48:14David Hoffman?

  It's pretty end gamey.

• 48:15Ryan Sean Adams?

  Yeah, it's not saying that that's all ready and available right now, but it can scale. Like, you don't need a new architecture in order to scale it. And that's pretty bullish to me. It's also, we should shout out, David, the Permissionless Conference, which you'll hear us talking more and more about this as the weeks progress, the months progress, is happening in October. What are the dates of the Permissionless Conference, David?

• 48:35David Hoffman?

  October 9th through 11th. Where both Stani from Lens and Alex Glukowski from ZK Sync, they'll be both at Permissionless. So whether you want to talk about SocialFi and Lens, or you want to talk about the ZK rollups and ZK tech with Alex, both of those people, both of those leaders will be at Permissionless. If you are listening to this, you can get a 10% discount, Bankless 10, to get 10% off your tickets. If you are a Bankless citizen, you can get a 30% discount on the perks page at bankless.com.

• 49:02Ryan Sean Adams?

  David, the airdrops meta has been shifting recently. There's this battle with sibblers who are trying to farm all of the airdrops, spin up fake accounts. And Layer Zero has been an interesting airdrop for that because they're trying to get rid of these sibyl attackers. What's happening with Layer Zero on the week?

• 49:19David Hoffman?

  They're only trying to get rid of 85% of these sibyl attackers.

• 49:22Ryan Sean Adams?

  That's a lot!

• 49:23David Hoffman?

  Well, sibyl attackers receive 15% of the otherwise issued tokens that they would have gotten if they had, quote-unquote, gotten away with it.

• 49:31Ryan Sean Adams?

  It's like, come in and turn yourself in.

• 49:33David Hoffman?

  Turn yourself in for 15%. Yeah, so like, take an 85% haircut and still get 15%.

• 49:37Ryan Sean Adams?

  Is this tweet, right? Up to 100,000 self-reported sibyl addresses? So 100,000!

• 49:43David Hoffman?

  Yeah, so it sounds like people are just taking the 15%. It's like, well, yeah, I kind of sibbled you guys, so I'll just take the 15%.

• 49:49Ryan Sean Adams?

  That's a lot!

• 49:51David Hoffman?

  100,000 addresses, yeah. And like, so is a reduction of 85%, but like, the costs of spinning up Sybil accounts is also very low. And so I kind of think 15% is pretty generous. Overall, this has caused like, a bunch of conversation around Layer Zero's strategy, about like, Sybil attacks. They benefited from Sybil attackers. So like, should we be even pruning Sybil attackers? They're not totally pruning Sybil attackers, they're giving them 15%. Overall, I think like, Layer Zero is doing a pretty good job threading the needle of like, like, not rewarding everything to Sybil attackers, but still allowing Sybil attackers to have some skin in the game. Like, so far, it's been like, a pretty productive conversation.

• 50:28Ryan Sean Adams?

  I also like how obvious it makes it, that these people are Sybil-ing. Because like, why would you self-report unless you truly were Sybil-ing? And so, we get a headline with like, 100,000. It's like, oh crap, there's lots. Because, you know, it feels more centralized to have it all at the discretion of the team. Does that make sense? To just say, no, these addresses are Sybilers. Well, how do we really know? When they self-report-

• 50:48David Hoffman?

  Well, there's going to be a line that the Layer Zero team chooses, as to what is a Sybil and what is not a Sybil. So they still have a centralized choice to make.

• 50:58Ryan Sean Adams?

  But, but these self-reporters are getting ahead of that. And just, they're clearly, they're clearly Sybil-attacking, aren't they?

• 51:05David Hoffman?

  What's interesting is that you can actually narc on Sybil attacks and get 10% of a Sybil's allocation if you narc on someone who is unreported. Which is pretty funny.

• 51:14Ryan Sean Adams?

  David, tell me about the future of DAI. It seems like there is a fork in the road. And DAI is moving in both directions at once? Or maybe one direction more fervently? So tell me what's going on here. What's this tweet from Rune at the Maker Foundation?

• 51:29David Hoffman?

  Rune tweets out, "Reconciling the two opposing paths for decentralized stablecoins." And then he goes and talks about the stablecoin trilemma, and talks about just like, the trade-offs of having a fully permissionless version of a stablecoin versus a more compliant version of a stablecoin. So he is proposing to fork a DAI into two new stablecoins, both with placeholder names. One is called NewStable. This is the one with real-world assets as collateral. And will also have, this is the new thing, a freezing contract. And so, maker governance can freeze addresses as needed, just like USDC, just like Tether-

• 52:06Ryan Sean Adams?

  Like OFAC sanction type stuff.

• 52:08David Hoffman?

  So, yeah, just to be more compliant. And so that's NewStable. And then he's also proposing Peer DAI, again a placeholder name. With governance eliminated, crypto-only collateral and no freezing contracts. So MakerDAO is just like trying to do both. Interesting strategy. New stable will be the focus of MakerDAO. That's going to be the main product. I'm going to guess that's the one that's going to dominate in market share. They are pointing all of the yield from DAI savings rate, which is like the accrued fees of the MakerDAO balance sheet. They're pointing all that yields towards incentivizing growth of new stable. Pure DAI will remain as a censorship-resistant option. So no freezing contract and no governance, which is what many people wanted in the space out of DAI in the first place.

• 52:52Ryan Sean Adams?

  And all ETH as collateral, right? Basically, so it's all completely crypto-native.

• 52:55David Hoffman?

  I think maybe other crypto assets as well, but just or some sort of censorship-resistant collateral.

• 53:00Ryan Sean Adams?

  Just crypto-native stuff like staked ETH, ETH, maybe anything else that's censorship-resistant entirely, yes?

• 53:06David Hoffman?

  Yes, that's right. Yeah, yeah, yeah. And so this is what Maker Rune is proposing as the future of DAI. It's actually two stable coins. I'm going to guess one is going to be like the market cap of the compliant one is going to be like 95% of the market cap. And then pure DAI is going to be like 5% of the market cap in the fullness of time.

• 53:21Ryan Sean Adams?

  So what's your take on this? I know both you and I got started in DeFi with Maker. It caught the vision and, you know, here it is. And as you said, this maybe 95% goes with the new stable rather than pure DAI. Isn't this just like letting the market decide? And if the market chooses to go with the kind of the regulated, you could freeze me, stablecoin, then like the decentralized one isn't as popular? And the market's spoken? What's your take on all this?

• 53:47David Hoffman?

  Yeah, so I've always been like, people have criticized MakerDAO for having real-world assets as collateral. Like the critique is like MakerDAO is just like a USDC wrapper. It's not censorship-resistant. I was always like very resistant to those takes. Both the censorship resistance of the DAI ERC20 token and the buffer that is both the risk parameters of the vaults of MakerDAO and the MKR backstop. These are all filters that filter out the risk profiles and the actual values of the assets that back DAI from actually going into DAI. So you can have like real-world Asset collateral, you can have a USDC collateral, but nonetheless, DAI is a censorship resistant stablecoin.

• 54:32David Hoffman?

  And also, if like some of that real world asset collateral gets rugged, then MKR gets printed to preserve the cypherpunk values of DAI. And I've always thought that that's like, we can make compromises, but we can also like minimize those compromises by making sure that they don't impact the value of DAI. And so I've always been like, you do have your concessions because like they very minimally work their way into the DAI token. And now this is no longer the case. So like, this is a kind of disappointing to me. But also I get at the same time, like if Maker Dow is trying to maximally scale, and we are also living in a time in which we are not living in that authoritarian of nation states, then like maybe new stable, the compliant stablecoin is the way to go.

• 55:14David Hoffman?

  Because we just don't need a censorship resistant stablecoin if nation states aren't being authoritarian. And if that inverts and nation states do become authoritarian, then at least we still have pure DAI. And then maybe the market will demand more pure DAI.

• 55:27Ryan Sean Adams?

  Yeah.

• 55:27David Hoffman?

  And so I guess we have both options, but I do think that this is a concession that I wasn't necessarily like thrilled about.

• 55:33Ryan Sean Adams?

  Yeah, this is a case where the center cannot hold it, it seems like. And I guess I wasn't disappointed with it. I was actually kind of like, oh, cool. We're finally like calling it for what it is. It's just like, we can't do real world assets, backing our stablecoin and also like keep max decentralization, right? Because like, I don't know, who holds MKR wants to go to jail, right? Basically. And so it's like you're forking both and maybe we get to have both and the markets choose. And in good times, maybe we'll be okay with a centralized, you can freeze me type of stablecoin. And in bad times, we revert to the pure DAI. Okay, so I'm just hopeful the pure DAI really gets off the ground. It's, it's been a little disheartening to me and I know to you as well that like,

• 56:19Ryan Sean Adams?

  when given the choice, people don't choose the decentralized stablecoin. But like, maybe that's the market reality. I will say for myself personally, I don't have strong preference of like DAI versus USDC, right? But I do have strong preference for like Bitcoin and ETH versus USDC. And so like, there's an element of like store value in these crypto native assets. And then for just like payment coins, that kind of thing, I use a stablecoin. So maybe that's just the reality of product market fit for this and this is how it has to turn out.

• 56:52David Hoffman?

  Yep, maybe that's right. Anyways, this is just a proposal. We will see this actually play out over the long term as the Maker Endgame progresses. "Once Upon a Time in Shaolin," if you don't know what that is, it's because you're not a Wu-Tang fan. I wasn't a Wu-Tang fan until I joined Pleaser Dow. This is a very famous one-of-one album that got created way before crypto was even relevant, was sold to Martin Scurelli, who had to forfeit it to the US government when he went to jail for whatever he was charged for with a whole insulin thing.

• 57:22Ryan Sean Adams?

  Yeah, jacking up prices on insulin, yeah.

• 57:24David Hoffman?

  Jacking up prices on insulin, yeah. And then Pleaser Dow, or I bought it from the US government as it was auctioned off. Pleaser Dow is releasing "Once Upon a Time in Shaolin" to the public, which is the crazy thing that people thought was impossible. There are going to be details revealed to this. If you want to be a part-time owner of the "Once Upon a Time in Shaolin" album, you can go to thealbum.com and stay tuned.

• 57:48Ryan Sean Adams?

  A quick update this week on Kraken versus the SEC. It's another court case, of course, that's going on. They are asking the courts to dismiss the SEC lawsuit entirely. Kraken's lawyers are saying that the SEC has not identified any investment contracts that would or could be traded, brokered, or settled on Kraken. They're basically saying this is a frivolous case. The courts shouldn't even hear it. Just like, save us all time, save the taxpayers some money, and just dismiss it. Coinbase tried this, of course, too. Part of their case was dismissed, part of it wasn't. So we'll see how Kraken fares here. Of course, the SEC is folding their hands and crossing their arms and saying,

• 58:29Ryan Sean Adams?

  "Nuh-uh, we have a case." And so we'll see what the judge has to say in all of this.

• 58:37David Hoffman?

  Polymarket, the prediction market, raised $70 million this week. Decentralized prediction market that allows users to place bets on future events that will happen in the future, of course. $45 million raise, Series B, from Founders Fund. This is Peter Thiel's fund. One confirmation, who are also early investors in it, Parify, Dragonfly, and also Fatalik Buterid, which is actually kind of interesting, because Fatalik... I'm assuming when he makes investments, he's not doing it for a capital return. Like usually he makes like, when his investments are like basically grants.

• 59:08Ryan Sean Adams?

  He kind of wants to see the thing manifest in the world usually.

• 59:11David Hoffman?

  Yeah. And he's also been a big fan of prediction markets. So Polymarket has been like running along for years, hasn't totally exploded into mainstream, has at times kind of acutely, but still doing pretty well. And I would definitely say crescendoing in relevancy, still looking for its breakout moment.

• 59:29Ryan Sean Adams?

  Yeah, I think this election cycle could actually be it potentially. Like Trump versus Biden, people love betting on politics and the UX is actually like super easy to use these days. We did an integration at Bankless with a use case that feels very native for Polymarket, which is what's the probability of an airdrop in a given quarter? And like we integrated that all into the airdrop hunter.

• 59:49David Hoffman?

  Wow, I actually did not know this.

• 59:50Ryan Sean Adams?

  You didn't know this?

• 59:50David Hoffman?

  This is cool.

• 59:51Ryan Sean Adams?

  It's like 53%. So chances for airdrops by June 30th, this is all data provided by Polymarket. ZK Sync, you know, chances 53% and you can go through the airdrop hunter and like you sort.

• 1:00:01David Hoffman?

  53% chance that ZK Sync is going to happen in, by June 30th, according to Polymarket.

• 1:00:07Ryan Sean Adams?

  Yeah, right? It's a great use of prediction markets, it's super crypto native. So yeah, we love that data set. And also there's another prediction market that's going on, which is.

• 1:00:16David Hoffman?

  This is going to be the breakout, the breakout market.

• 1:00:18Ryan Sean Adams?

  Yeah, this is going to be the one. Forget Trump and Biden, it's Nick Carter versus David Hoffman. Who's going to win? It's coming up, uh, May 30th, the karate combat fight.

• 1:00:27David Hoffman?

  14 days away.

• 1:00:28Ryan Sean Adams?

  Oh, man. You ready for this, David? Like Nick's not.

• 1:00:31David Hoffman?

  The prediction market between me and Nick Carter is split perfectly down the middle.

• 1:00:35Ryan Sean Adams?

  Wow.

• 1:00:36David Hoffman?

  47% to 47%.

• 1:00:39Ryan Sean Adams?

  Wow.

• 1:00:39David Hoffman?

  Nick to David and then a 9%. Those numbers don't add up, but a 9% draw slash no winner.

• 1:00:45Ryan Sean Adams?

  Okay, so that's, that's, that's really evenly split, man. This is, um, this is of course the promo and I didn't know this, but Kraken is apparently sponsoring this event, so shout out Kraken.

• 1:00:57David Hoffman?

  Yeah, we, we know which side Kraken's on. What's up, Kraken?

• 1:01:01Ryan Sean Adams?

  This is the alt promo poster, which I personally prefer. This is a fantastic picture of David Hoffman and a, you know, like Nick Carter.

• 1:01:11David Hoffman?

  Nick Doge. Nick in the weak, Nick's face on weak Doge body.

• 1:01:17Ryan Sean Adams?

  This is, this is a Nick photo from when I think, like, I first knew Nick.

• 1:01:22David Hoffman?

  That's, that's how I got to learn about Nick Carter.

• 1:01:24Ryan Sean Adams?

  Yeah.

• 1:01:24David Hoffman?

  Through that photo. That was his headshot for a very long time.

• 1:01:26Ryan Sean Adams?

  That's always the Nick Carter to me. Like Miami Nick, I mean, that's a different.

• 1:01:30David Hoffman?

  Miami Nick was like a big pivot away from academic Nick.

• 1:01:34Ryan Sean Adams?

  I personally would not want to fight Miami Nick. I will fight, like, I would consider fighting New York Nick.

• 1:01:39David Hoffman?

  Glasses Nick?

• 1:01:40Ryan Sean Adams?

  Yeah, Glasses Nick. Glasses on Glasses? Like, maybe, but not Miami Nick. You're a bold man.

• 1:01:45David Hoffman?

  Yeah, yeah. Mustache Nick, yeah.

• 1:01:47Ryan Sean Adams?

  Oh, you're talking.

• 1:01:48David Hoffman?

  It looks different.

• 1:01:49Ryan Sean Adams?

  Talking some smack. The two hardest men in crypto. Here they are. Speaking of old photos, this is David Hoffman.

• 1:01:55David Hoffman?

  This is my old headshot, yeah.

• 1:01:57Ryan Sean Adams?

  This is David Hoffman, standing, I believe, the lore of this.

• 1:02:00David Hoffman?

  This is pre, pre 2021 bull market David Hoffman.

• 1:02:03Ryan Sean Adams?

  Standing in front of a literal Wells Fargo bank. I think you had just come out of the bank.

• 1:02:07David Hoffman?

  Yeah.

• 1:02:07Ryan Sean Adams?

  Did you make your deposit? Or did they?

• 1:02:09David Hoffman?

  That was actually, no, so that was the Wells Fargo Tower, Wells Fargo Center in Seattle, where my first crypto job was, so.

• 1:02:15Ryan Sean Adams?

  Wait, your first crypto job was inside of a bank office?

• 1:02:19David Hoffman?

  It was a big tower. It was like, Wells Fargo owned the tower. Where like, I just owned the name to the tower.

• 1:02:25Ryan Sean Adams?

  Oh, man. Well, glad, glad we got you out of there. You literally, literally going bankless. No more bank towers here. I think we're gonna have a watching party for you, David. We're gonna have to livestream this.

• 1:02:38David Hoffman?

  Yeah, if bankless listeners want to know where to watch the livestream for the Nick versus David fight, it's on the YouTube. So if you're already on YouTube, then you're already there.

• 1:02:45Ryan Sean Adams?

  That's what we're doing, okay.

• 1:02:46David Hoffman?

  On our YouTube.

• 1:02:47Ryan Sean Adams?

  I guess I'll be announcing it? I don't know what we're doing for that.

• 1:02:50David Hoffman?

  I don't know if, I don't know if you have those skills.

• 1:02:51Ryan Sean Adams?

  I don't have those skills, which might make it more entertaining, but we'll, we'll see what we can put together. Somebody, somebody better than me knows what they're talking about with karate, karate combat. David, you ready for the name of the? I don't know what I'm talking about with karate combat. Meme of the week, here it is. What are we looking at?

• 1:03:08David Hoffman?

  We're looking at the, oh god, how am I going to explain this one? I don't even know what this thing is, but we have a shiny, strapping, young cryptoed person thing saying code is law. And then we have two very buff, much larger people. One is the United States, one is the European Union, laughing at said tiny little crypto, and starts beating the absolute shit out of the crypto, saying code is not law, we are law. You're like, if you're going to be law, you kind of need an army.

• 1:03:34Ryan Sean Adams?

  That's what they think. I don't think they're right, though. All you need is social consensus.

• 1:03:38David Hoffman?

  Proof of stake validator is social consensus?

• 1:03:40Ryan Sean Adams?

  You just need some coordination. Yeah, we could do this thing peacefully. That's what the crypto revolution's all been about. But we are getting beat in the face right now. That's what it feels like on the week, to be in crypto. Oh, man. Guys, well, we got a job opportunity, but you're going to have to stick around. Pass the disclaimers to get there. And here they are. Crypto is risky. You could lose what you put in. But we are headed west, of course. This is the frontier. It's not for everyone. But we're glad you're with us on the Bankless journey. Thanks a lot. Oh, by the way, we're hiring. Podcast Operations Summer Internship. David, what is this?

• 1:04:14David Hoffman?

  We need more firing power on the Bankless podcast team, so we're looking for a summer intern. If you know about audio and video editing, then we want to talk to you. Fully remote, of course, because Bankless has no offices. And so if you can work with the team and work with our very Chad podcast team, there's a link in the show notes to apply to be our Podcast Operations Summer Intern.

• 1:04:33Ryan Sean Adams?

  This is the frontier of podcasting. It's what this position entails. See you guys next week.