ROLLUP: Goerli Merge | Tornado Cash Ban | Coinbase BlackRock Deal | Fake Solana DeFi?

2nd Week of August, 2022 ------ 📣 Forta | Help Make Web3 a Safer Place https://bankless.cc/Forta ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: 🚀 ROCKET POOL | ETH STAKING https://bankless.cc/RocketPool ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across 🦁 BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave 🌴 MAKER DAO | DECENTRALIZED LENDING https://bankless.cc/MakerDAO 🔐 LEDGER | SECURE STAKING https://bankless.cc/Ledger ------ Topics Covered: 0:00 Intro 5:00 MARKETS 7:30 ETH BTC Ratio https://ratiogang.com/ 12:30 Gas Markets https://twitter.com/TrustlessState/status/1555560926945939457?s=20&t=VcAg464--JOGiSzeNbyayA https://twitter.com/TrustlessState/status/1555560926945939457?s=20&t=VcAg464--JOGiSzeNbyayA 15:45 CPI Interest https://twitter.com/business/status/1557345174015066113 20:00 Layer 2 TVL https://l2beat.com/ 20:40 VC Money https://twitter.com/fintechintern/status/1556444033555234816?s=21&t=XxUVGr0qz0svCx83Xdo7Rg https://twitter.com/fintechintern/status/1556444033555234816?s=21&t=XxUVGr0qz0svCx83Xdo7Rg 22:00 EIP-1559 Anniversary https://twitter.com/takenstheorem/status/1555531313939087363?s=20&t=ptIP5_rsdZo0gUdYXg7U5A https://twitter.com/takenstheorem/status/1555531313939087363?s=20&t=ptIP5_rsdZo0gUdYXg7U5A 26:30 NEWS 27:15 Goerli Testnet Merge Announcement: https://twitter.com/BanklessHQ/status/1557544247619878913?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ https://twitter.com/BanklessHQ/status/1557544247619878913?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ Pandas! https://twitter.com/TimBeiko/status/1557543798523146240?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ https://twitter.com/TimBeiko/status/1557543798523146240?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ Details: https://twitter.com/vdWijden/status/1557555377314701312?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ https://twitter.com/vdWijden/status/1557555377314701312?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ 33:00 Tornado Cash Ban Press Release: https://home.treasury.gov/news/press-releases/jy0916 37:10 Secretary Blinken https://twitter.com/SecBlinken/status/1556661834287140868?s=20&t=4wDLBQG8U7PusK0R-3UCTQ https://twitter.com/SecBlinken/status/1556661834287140868?s=20&t=4wDLBQG8U7PusK0R-3UCTQ Full Story: https://youtu.be/lJZx8RyeJys 38:20 Freezing USDC https://twitter.com/bantg/status/1556712790894706688?s=21&t=iEzJRHGq48PgLH0Id10pNw https://twitter.com/bantg/status/1556712790894706688?s=21&t=iEzJRHGq48PgLH0Id10pNw 39:40 Github Suspensions https://twitter.com/semenov_roman_/status/1556717890308653059?s=20&t=-Um1R1tQa_4YPLFEAY9GGw https://twitter.com/semenov_roman_/status/1556717890308653059?s=20&t=-Um1R1tQa_4YPLFEAY9GGw 40:30 Summary Thread https://twitter.com/SethHertlein/thread/1557442355678117889 44:05 MakerDAO Impact https://thedefiant.io/tornado-impact-makerdao-dai 48:30 Normalizing Tyranny https://twitter.com/RyanSAdams/status/1557121749334065154?s=20&t=uv3Ux69ZVUrVvYjhUE9Okw https://twitter.com/RyanSAdams/status/1557121749334065154?s=20&t=uv3Ux69ZVUrVvYjhUE9Okw 55:30 Fake Solana DeFi? https://www.coindesk.com/layer2/2022/08/04/master-of-anons-how-a-crypto-developer-faked-a-defi-ecosystem/ 1:02:00 Coinbase BlackRock Partnership https://blog.coinbase.com/coinbase-selected-by-blackrock-provide-aladdin-clients-access-to-crypto-trading-and-custody-via-b9e7144f313d 1:03:00 Arbitrum Nova https://twitter.com/arbitrum/status/1557025237769805825 1:06:35 Uniswap Foundation https://gov.uniswap.org/t/temperature-check-create-the-uniswap-foundation/17358 1:07:30 MakerDAO HVBank https://twitter.com/SebVentures/status/1555234746539581444?s=20&t=rtTTlkxuLHK_73JuqFqrSA https://twitter.com/SebVentures/status/1555234746539581444?s=20&t=rtTTlkxuLHK_73JuqFqrSA 1:09:05 Meta Instagram NFTs https://www.theblock.co/post/161497/meta-expands-digital-collectables-support-on-instagram-to-100-more-countries-adopts-flow-blockchain 1:09:30 Voyager Bankruptcy https://decrypt.co/106791/voyager-digital-approved-return-270-million-clients 1:10:10 Immutable Gamestop https://twitter.com/Immutable/status/1556797772275208192 1:10:30 Vitalik Compression https://twitter.com/VitalikButerin/status/1554983955182809088?s=20&t=CP_wmjSv-X4KGDtdVjhk6A https://twitter.com/VitalikButerin/status/1554983955182809088?s=20&t=CP_wmjSv-X4KGDtdVjhk6A 1:12:30 Jobs https://pallet.xyz/list/bankless/jobs 1:16:00 Questions from the Nation https://twitter.com/BanklessHQ/status/1557397382744006656?s=20&t=D9vf5Thb0BlBK7osdhdYyg https://twitter.com/BanklessHQ/status/1557397382744006656?s=20&t=D9vf5Thb0BlBK7osdhdYyg 1:16:30 How to get the PoW fork? https://twitter.com/accounthome11/status/1557469851270238212?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ https://twitter.com/accounthome11/status/1557469851270238212?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ 1:18:35 Bridge Risk https://twitter.com/avi_g_/status/1557406430977994752?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ https://twitter.com/avi_g_/status/1557406430977994752?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ 1:22:00 Staking Wait Time https://twitter.com/mmaatt78/status/1557471309554237440?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ https://twitter.com/mmaatt78/status/1557471309554237440?s=20&t=-_fuRP3eW2MCE2WHkiWXyQ 1:22:30 TAKES 1:23:00 Pausing OP Incentives https://twitter.com/apolynya/thread/1556848533596037120 1:24:10 NFT Roulette https://twitter.com/ryananderson/status/1555639880612564992 1:25:20 Banning SSL https://twitter.com/phunk9871/status/1557309945841958912?s=21&t=V2jbdxuDNkHwLw9ZWbuQyA https://twitter.com/phunk9871/status/1557309945841958912?s=21&t=V2jbdxuDNkHwLw9ZWbuQyA 1:26:50 State of Market https://twitter.com/notthreadguy/status/1557370241377763329?s=20&t=FAvjCgR1WvvG4Fko8XHcug https://twitter.com/notthreadguy/status/1557370241377763329?s=20&t=FAvjCgR1WvvG4Fko8XHcug 1:27:30 What David’s Bullish On 1:30:10 What Ryan’s Bullish On 1:34:00 Meme of the Week https://twitter.com/calebini/status/1556090898487816192?s=20&t=qS3xmkeCe0NChYWbcVIgiA https://twitter.com/calebini/status/1556090898487816192?s=20&t=qS3xmkeCe0NChYWbcVIgiA ----- Not financial or tax advice. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

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

• 0:00David Hoffman?

  Merge is scheduled, inflation down. Hopefully that continues. L2 tokens are up, fee tokens are up. Not only is ETH bullish and proof of stake bullish, but tokens are also bullish.

• 0:14Ryan Sean Adams?

  Bankless Nation, happy 2nd Friday of August. David, what time is it?

• 0:18David Hoffman?

  Oh Ryan, it's the Friday Bankless Weekly Rollup Time, where we cover the entire week of news in crypto, which is always an ambitious endeavor, yet we persevere nonetheless. Ryan, it was a good news week this week.

• 0:29Ryan Sean Adams?

  Well, actually, it was very mixed. Week started on a bad note, ended on a very, very high note. Yeah, exactly. And so I missed a lot of the week. So I was over in the UK with my family for vacation. And you know how I usually say, grab your morning coffee? In the UK, David, I discovered that coffee means something different than it does in the US.

• 0:47David Hoffman?

  What?

• 0:48Ryan Sean Adams?

  At least, it was more like, when I would ask for a coffee, it'd be like, "Okay, what type of coffee would you like?" And the options are like espresso, cappuccino, macchiato. Like, it's like an array of coffee beverages.

• 1:02David Hoffman?

  Wait, that feels normal.

• 1:04Ryan Sean Adams?

  Not for me, though. Like, in the US, if you're like, "Hey, I want a coffee", then it's, okay, regular coffee. It's not an espresso, americano. Yeah, americano was generally the only option. Maybe this was just like where I was in the UK? Or, I don't know. Well, you're from Seattle. That's the coffee capital of the US. Is that what coffee really is?

• 1:27David Hoffman?

  Yeah, I think, well, I think if you go to a coffee store in Seattle and you ask for coffee, then they will continue like, "Yeah, what kind of coffee do you want?" Yeah, I think that's normal.

• 1:35Ryan Sean Adams?

  It's probably actually definitionally correct, but like, here on the East Coast, David, you can go into any place in the US and be like, "I'll take a coffee", and they won't ask you like, if you want an americano or an espresso.

• 1:45David Hoffman?

  They give you burnt black drip coffee.

• 1:47Ryan Sean Adams?

  Yeah, burnt. And then they will make it a beverage by putting cream and sugar in it.

• 1:51David Hoffman?

  Yes, they will. Yes, they will.

• 1:53Ryan Sean Adams?

  Anyway, Bankless Station, grab your bankless coffee beverage, if you will, and join us for some topics of the week. Number 1, David, the merge. The Ethereum merge. It has a date! It has a date.

• 2:08David Hoffman?

  We're merging, we're merging. What's the date gonna be? Oh, we'll tell you later. We're not gonna spoil it right now.

• 2:13Ryan Sean Adams?

  Yeah, we're not gonna spoil that. Also, there's some big stuff going on with tornado cash.

• 2:18David Hoffman?

  Yeah, that's the bad part of this week.

• 2:19Ryan Sean Adams?

  What do they do? What's happening there?

• 2:21David Hoffman?

  Tornado cash. The first ever smart contract on Ethereum is now illegal. There is now an illegal smart contract for US citizens. So if you are a US citizen, congratulations. There's like 40 or 50 smart contracts all associated with tornado cash that is illegal for you to touch. I didn't know that smart contracts could become illegal, right? That's news to me.

• 2:40Ryan Sean Adams?

  Yeah, it doesn't feel like they could do that constitutionally, but we'll get into the arguments there. The last thing is Coinbase just landed a $10 trillion client.

• 2:49David Hoffman?

  Wow.

• 2:49Ryan Sean Adams?

  We'll tell you who that is. But of course, you're gonna do the roll up with us. And if you like these roll ups, you gotta make sure you like, subscribe, rate and review. So like and subscribe if you're looking on YouTube, watching this on YouTube, or rate and review in your podcast player. If you're on Spotify, by the way, this comes in video form now. So you can get bankless via video, which is the best way to do a roll up, is to watch a roll up, not just listen to it. But of course, with Spotify now, you can do both. So that's pretty cool.

• 3:17David Hoffman?

  Ryan, did you know that this last week, we received our 2,000th five-star review? And then this same week, the merge gets a date? This is not a coincidence, sir.

• 3:28Ryan Sean Adams?

  It couldn't be. Who was that 2,000th reviewer?

• 3:32David Hoffman?

  I don't know. I'm sure they said something great.

• 3:35Ryan Sean Adams?

  It's probably Vitalik. Thanks, Vitalik. All right, before we get into it, though, we gotta talk about relay a quick message from our sponsor and friends at Forta. There have been so many hacks recently. And last year, there were a ton of DeFi crypto-related hacks. But I think Forta helps with that. What are these guys all about? What do they do?

• 3:54David Hoffman?

  Yeah, Forta does real-time mempool and transaction monitoring. So there might be a transaction that is coming for your TVL. If you built a DeFi app with TVL in it, there can be ways to exploit that. And so Forta can, you can set up a list of parameters for Forta to listen to. And if transactions come in that trigger one of these things that you don't want to be triggered, Forta can zap that. Transaction, it can front run that transaction and save your contract, your NFT, or your governance, whatever. So real time security and operational monitoring for over $36 billion in TVL, things like MakerDAO, Bridges, all the things that we use, Uma Finance, Poly Network, Compound Balancer, Liquidity, of course. There's a link in the show notes to get started. So you

• 4:37David Hoffman?

  know, not only do you need to get your smart contracts audited, but you can have an extra layer of defense with something like Forta.

• 4:43Ryan Sean Adams?

  Yeah, it notifies you in advance. You do not want to find out your smart contract has been hacked for millions of dollars on Twitter. Okay, Forta can notify you of that in advance. So you could do something about it. So go check that out. David, let's get to markets, man. What are the markets saying to us today? Let's talk to Big Daddy Bitcoin.

• 5:00David Hoffman?

  Markets are happy. Bitcoin's happy. Up a very impressive 8.3%. Started the week at $22,400. Where we are currently is $24,300. So almost up $2,000.

• 5:13Ryan Sean Adams?

  Okay, so we're happy. Up $2,000 in a bear market. That's feeling good. And tell me about ETH. Wow, this chart's looking bullish.

• 5:21David Hoffman?

  Yeah, that's a, that's a 18.7% up in one week for Ether. Started the week at just under $1,600, $15,092. And we are currently at $18,090. Yesterday, Ryan, right after the Gorley merge, which was a success, we hit 1950, 1950. Wow.

• 5:41Ryan Sean Adams?

  The Gorley merge, by the way, is a testnet merge, the last remaining testnet. We're going to talk about that in a little bit. So do you think the market is just responding to the, the merge news? If so, that makes me bullish, because like, the market actually responding to fundamentals is a thing that is relatively rare in crypto. At least I've found it rare. Maybe that's my cynic point of view. The market just generally responds to stupid things all of the time. Narratives, or like fake partnerships, or just dumb stuff that happens. It's rare that you actually have a market event that's affecting fundamentals, and the market digests that and immediately responds with upward or downward price movement. What do you think?

• 6:20David Hoffman?

  Yeah, the, the thing I've noticed about the market lately is that it's been responding positively to positive news. And it's not been responding negatively to negative news, which is generally indication of what the mind shift, like the mental state of market participants.

• 6:36Ryan Sean Adams?

  That's not a bear market.

• 6:37David Hoffman?

  That is not a bear market.

• 6:38Ryan Sean Adams?

  Because bear market, even when there's really good news, and it can be fundamentally good news, nothing happens.

• 6:43David Hoffman?

  Right.

• 6:43Ryan Sean Adams?

  Or it could continue to drop down. But now we're seeing good news and good things are happening to price, and that's following fairly rapidly after the good news in a timely, orderly way. Smart market now and not a bear market, maybe?

• 6:56David Hoffman?

  Yeah, I don't think you can say $1,900 Ether is a bear market. I don't think that's

• 7:00Ryan Sean Adams?

  You don't have the right to say that?

• 7:01David Hoffman?

  Yeah, I don't think so.

• 7:03Ryan Sean Adams?

  All right, but like, still, I think most people, if you ask the average crypto investor, they would still say, we're in a bear market. But this is starting to feel a little bit different. I guess we'll see what happens. But you know, when ETH is doing things relative to Bitcoin, we start talking about the flipping again. And let's, let's take a look at the ETH to Bitcoin ratio, and I'll go back to that, that flipping chart to see where we are. What's the ratio showing today?

• 7:29David Hoffman?

  Yeah, the ratio is up 10% in the last week, going from 0.0705 to 7.7777. Actually, on screen, it's 7796. But, you know, a lot of sevens, and sevens are lucky. I've heard sevens are lucky, which means your boy is back in the green in his ETH BTC trade. Look at that, look at that spike down and then back up. It's like, oh, yeah, it's like, if you just erase those months and like, act like nothing happens, like, look, we're, we're back in that trend line. This is great.

• 7:56Ryan Sean Adams?

  Yeah, that's great, too. I think we've made some bankless purchases around the $1,900 range, too. And I was like, David, it's going to drop further.

• 8:04David Hoffman?

  And it did. We got, I'm so bullish, the merge is coming. We got to buy at 1,900.

• 8:08Ryan Sean Adams?

  We got to buy again, 1,900. Let's go back to that opportunity that ETH afforded us two months ago. But anytime the ratio is going this direction, like, it starts to be a good time to look at the actual flipping metrics. And this is ratio gang.com. We are 50% of the way to the flipping.

• 8:28David Hoffman?

  48.9.

• 8:29Ryan Sean Adams?

  48.9. So what is the definition of the flipping, by the way? That is ETH's market cap exceeds Bitcoin's market cap. And that's never happened.

• 8:39David Hoffman?

  Never happened. It came very close in 2017.

• 8:41Ryan Sean Adams?

  There was a prophecy, right? It was like in 2017, it got us like 70%, something

• 8:45David Hoffman?

  I think higher than that. I think it was above like 85%.

• 8:48Ryan Sean Adams?

  Did it? Okay. So maybe a brief spike. It was

• 8:51David Hoffman?

  It was like a spike. It was a wick of a candle. Yeah, it did not stay there very long.

• 8:55Ryan Sean Adams?

  All right. So, so what do you think? There are, there are various events that have been predicted for a possible flipping. I know you are a believer in the eventual flipping at some point in time. I am also a believer in the flipping at some point in time. The difference, I think, with hardcore Ethereum bulls, of which David and myself would, would call ourselves for sure, is when they think that will happen. One of the catalyzing events people have said could be the actual merge on the back of the Ethereum merge. Maybe the flipping happens, you know, somewhere in the next, in the next few months potentially. What do you think?

• 9:31David Hoffman?

  I think if it happened in 2022, that would be way faster than expected. Although crypto is known for doing things faster than expected, like recovering out of that bear market, allegedly, knock on wood. I think the odds that it happens in 2023 are over 50%.

• 9:48Ryan Sean Adams?

  Wow. In 2023, that's next year. So not 2020. What do you think? What are the odds that it happens this year, 2022?

• 9:57David Hoffman?

  10 to 15%, 15% seems really high.

• 10:01Ryan Sean Adams?

  Odds that it happens by 2025?

• 10:04David Hoffman?

  Oh gosh. Okay. Well, see, the, the time is always in Ethereum's favor because of the significant reduction of issuance and the significant ETH burn, which we've talked about on the show an infinite number of times. But it's like Ethereum at that point and a post merge Ethereum, Ethereum just has to wait it out. And eventually, unless some other blockchain is generating more block space demand than Ethereum, which has never been, no one's gotten anywhere close. Ethereum is just a waiting game in Ethereum's favor to take the number one spot. So like as we go beyond 2023, it just the The percentage that it becomes the number one asset in the world in crypto is like approaches 99%.

• 10:44Ryan Sean Adams?

  Are you ignoring the bull catalyst for Bitcoin, though, of which there's at least one halving there? So 2024, there's going to be halving.

• 10:51David Hoffman?

  Yeah, but it's the same bulk, like the halving and the merge are the same catalysts. And the merge is objectively more powerful by like three orders of magnitude.

• 11:00Ryan Sean Adams?

  Not just that, central bankers, like central banks, maybe El Salvador is one, you know, Saylor is going to keep buying. I don't know, there's some other things that could happen with Bitcoin.

• 11:10David Hoffman?

  Those are not catalysts that Bitcoin has a monopoly over, sir.

• 11:14Ryan Sean Adams?

  So I, I agree. The probability is very high before 2025. I don't know if I'm ready to say like 50% in 2023, because one of us has to be, you know, the more conservative one, I guess. But like by 2025, David, I'm putting this at like 90%, 95%. I'll go conservative, though, and I'll say 90%. Like, and then by the end of this decade.

• 11:39David Hoffman?

  100%. It's 100%.

• 11:43Ryan Sean Adams?

  I mean, unless, unless we're completely wrong.

• 11:45David Hoffman?

  Discounting some like weird disaster merge scenario, which I guess you have to do.

• 11:51Ryan Sean Adams?

  David and I will quit crypto.

• 11:55Ryan Sean Adams?

  Yeah, no chopping off the pendages. Yeah, we just leave. Sorry, guys. We were wrong. Bankless is over.

• 12:01David Hoffman?

  We're done now.

• 12:03Ryan Sean Adams?

  All right. So we talked about that. Total crypto market cap, though, that's adding some money, right?

• 12:08David Hoffman?

  Yeah, up a bit $100 billion. So last, last week, it was at 1.1 trillion. We were at 1.2 trillion. So $100 billion on the market cap for crypto this week.

• 12:18Ryan Sean Adams?

  That's pretty nice. A lot of billions being added in the week.

• 12:22David Hoffman?

  Two tariffs, two tariffs.

• 12:23Ryan Sean Adams?

  Here's the thing. Here's a, here's a tweak on it. Okay. On the Ethable case, gas prices are down, my friend. Down bad. No, this is right, isn't it? What's the median gas price this week?

• 12:34David Hoffman?

  It's that purple one that you want. Oh, wait, no, it's the green one above that that you want.

• 12:38Ryan Sean Adams?

  This one, median gas price for the week.

• 12:39David Hoffman?

  No, scroll up, scroll up, scroll up, that green one.

• 12:43Ryan Sean Adams?

  Oh, distribution.

• 12:44David Hoffman?

  Yeah.

• 12:45Ryan Sean Adams?

  Okay, okay. So what is the transaction distribution for gas?

• 12:49David Hoffman?

  10. We're back up to 10. We went from nine to 10.

• 12:52Ryan Sean Adams?

  That was that. That's the distribution of the average.

• 12:55David Hoffman?

  Average Gue free for the last seven days is like 10 ish Gue.

• 13:01Ryan Sean Adams?

  Okay, so block space demand down for Ethereum.

• 13:03David Hoffman?

  Overall, yeah.

• 13:04Ryan Sean Adams?

  Bear case.

• 13:05David Hoffman?

  Right.

• 13:05Ryan Sean Adams?

  All right, there's the bear peeking its head. Why is it down, David?

• 13:08David Hoffman?

  Uh, cause it's a bear market. Like, people aren't doing their shenanigans. And also, we're getting better at scale. Like, simultaneously, things are scaling. More people are on more layer twos. And NFT volumes are super low. And so like, less layer one block space is being consumed. So yeah, things are just quieter in the in the smart contract space.

• 13:27Ryan Sean Adams?

  Okay, so let me throw that bear case by you again, right? Because like,

• 13:31David Hoffman?

  Right.

• 13:32Ryan Sean Adams?

  You know, block space is only going to get more efficient on Ethereum. We have rollups. And then in a post EIP 4844 world, of which, by the way, we talk in depth with Polly not.

• 13:42David Hoffman?

  Palenia.

• 13:43Ryan Sean Adams?

  With Palenia, excuse me, the pseudo anonymous persona on Twitter who knows so much about rollups. That episode's coming out on Monday. There is a world where like block space becomes very cheap, essentially. The data layer on Ethereum, and we're not actually burning as much ETH as we thought. And I guess maybe getting back to that, what price point for Gue are we actually burning ETH? Like, what is kind of the the break even burn rate here?

• 14:11David Hoffman?

  Yeah, so we've been saying for the last few weeks that the number is seven. And I think that number came from a historical number when less people had staked their Ether. As more people stake their Ether, the amount of Ether issuance actually goes up. So somebody corrected us and said, it's actually 15. And I verified this with Palenia and so a few others. 15 Gue is the ultrasound barrier. So Ryan, if we merged today, we would actually not be. Ultrasound. We would still be issuing ether.

• 14:39Ryan Sean Adams?

  We're still inflating more ether and we're burning.

• 14:41David Hoffman?

  Yeah.

• 14:42Ryan Sean Adams?

  And so we're at nine. So this has to go back up to 15 in order for us to start the burning process to fire the furnace.

• 14:49David Hoffman?

  Can we get some Ponzi's back? Can we have just one Ponzi, please?

• 14:53Ryan Sean Adams?

  Just all we need, just for a few days, anyway, like post-merge. This is the math behind that, by the way. Anything you want to say about that from Dom?

• 15:01David Hoffman?

  Uh, yeah, here's the math, if you just want to check it out. You take the active, uh, number of active validators on the beacon chain, and then you calculate the square root of that and multiply that by .0239. So that's how you get the number, the ultrasound barrier number.

• 15:17Ryan Sean Adams?

  There you go. Bankless is backed by math. Yeah, this is an article from the defined Ethereum gas fees fall to the lowest level in two years. Did you know that? Two-year lows?

• 15:26David Hoffman?

  Yeah.

• 15:27Ryan Sean Adams?

  So two years ago, 2020.

• 15:28David Hoffman?

  Well, the bull market lasted about two years, so that makes sense.

• 15:31Ryan Sean Adams?

  I guess it's not as dire as it seems, as it sounds. My, I think gas fees will go right back up.

• 15:36David Hoffman?

  Yeah, they definitely go back up.

• 15:37Ryan Sean Adams?

  This is kind of a short-term thing and probably in a post-merge world or even like, uh, leading up to the merge, we'll see some increase. But, okay, markets up this week, saw a lot of green candles and Bitcoin and ether. And it seems like the reason for this is maybe decent CPI numbers. But on the face of it, it doesn't look decent. So here's breaking from Bloomberg. US consumer prices rise 8.5% in July from a year earlier. That sounds bad, but then they also add slower than estimated. So maybe good?

• 16:09David Hoffman?

  Maybe good? Okay, so the trick about this is that actual July inflation was actually reported at zero. So there was zero inflation in the month of July. We have the prices are the, like, consumer prices or whatever are the same that they were one month ago. And so it's 8.5% because that is a 12-month lagging indicator. And so that's actually the really, really bullish news is that inflation seemed to have like ran up against a wall and has not gone higher for at least 30 days in a row. So, I mean, I would love to see this continue for another month, just to have another data point. But like, this is, this is the news that you want to see if you want to get bullish.

• 16:51Ryan Sean Adams?

  So I think the average analyst expectation was 8.7% inflation, annual inflation, and it came in at 8.5%. And as you said, there was no month-to-month increase, at least that's what it seems like. So let's declare victory. What room are we looking at here, David?

• 17:06David Hoffman?

  Yeah, this is the Squid Games guy where on the left, he's looking just like disheveled and like fearful, like 10,000 yard stare. Yeah, fetal position. And the caption is March, March of this year, inflation at 8.5%. Like, oh, my God, inflation at 8.5%. And now we're in August and we're at inflation to 8.5% and we're dancing like, all right, it's coming down.

• 17:28Ryan Sean Adams?

  I guess that's what it is. And markets really like this as well. It's not just crypto, but traditional, you know, risk on assets, let's say, including stocks. And the Trifid markets seem to be telling us that this is like a mild recession only, that we already kind of dipped, and it's looking kind of mild. And Powell does not need to be Volcker in order to curb inflation. Volcker, of course, tightened the monetary policy pretty excessively in the 1980s. And Powell maybe doesn't need to do that. And the soft landing is within sight. It's even possible. So the S and P is up. It's a 50% retracement from the June lows of 4,227. And the NASDAQ just bounced 21% from its June lows.

• 18:14David Hoffman?

  This is the moment that the crypto markets also just shot right up. Like Bitcoin went from $23,000 and then like half a day later, it was above $24,000. And then that's when Ether was at 1,700. And then as soon as this thing was announced, it just shot up to 1,850.

• 18:30Ryan Sean Adams?

  I mean, some people are saying, David, that the NASDAQ, as of yesterday, actually entered bull market territory.

• 18:35David Hoffman?

  Wow, we're using the bull market word? Wow.

• 18:38Ryan Sean Adams?

  People are actually using that term. And I can't tell what's, you know, the statement that always remains true, no matter what part you're in the market cycles, sentiment follows price. Right. And so now we've seen price increase a couple of months in a row. And now the sentiment feels completely different than it did just six weeks ago. And so you wonder how much of that is going to happen. I'm not ready to say we're out of the woods yet, but I don't know, I'm just feeling pretty bullish this week on the merge.

• 19:05David Hoffman?

  Yeah, I mean, we get lower inflate, like, remember we had our conversation with Luke Gromman and also.

• 19:13Ryan Sean Adams?

  Lynn Alden.

• 19:14David Hoffman?

  Lynn Alden, yeah, there's all of our, like, the takeaway from all of those is that, like, yeah, wow, things are looking really bad. But there's like this needle that we can thread that the macro actually turns bullish at the same time that the merge happens. And this so far is the reality playing out, Ryan.

• 19:31Ryan Sean Adams?

  They also said that we're going to have multiple dunks in the tank. I remember Lynn Alden making this pretty clear that it's like, it'll look like inflation recovers for a period of time and everyone will celebrate and be like, hey, it's good. We're fine. We're back to the good old days again. And then we'll get dunked back in the tank again and inflation will be back and this will happen a few more times over the next decade. So I'm also conscious of that, but I don't know, it's hard not to be bullish in crypto.

• 19:54David Hoffman?

  Well, if you shorten your timeframes, Ryan, it's really bullish.

• 19:59Ryan Sean Adams?

  Whatever, just buy and hold, okay, people? Forget this. Why are we even talking about this week to week, David? But this, this chart also looks good. What are we looking at here?

• 20:06David Hoffman?

  Yeah, this is the TVL chart on layer twos. And so it is also having a bull market. It's been like up 40% in TVL on layer twos in the last like two weeks or so. So kind of just like the ETH BTC ratio, like it went down bigly. It went from like six or seven billion in layer twos down to like under three, under four billion, but now we are up to six billion in layer twos within striking distance of new highs.

• 20:30Ryan Sean Adams?

  And TVL, of course, is like, what, assets, the total value of assets on these layer twos?

• 20:34David Hoffman?

  All value deposited, yeah.

• 20:35Ryan Sean Adams?

  Yeah, so it's like assets under management, I guess, like AUM of these layer twos. That's what it basically means. More talk on TVL a little bit later in this episode, by the way. There also appears to be a lot of money sitting on the sidelines, David. This is a list from Fintech Frank of sidelined capital. $23 billion worth. What are we looking at here, David?

• 20:56David Hoffman?

  Yeah, we're looking at a list of all these funds that raise a bunch of money that have not yet deployed it. So A16Z coming at the top at $7.6 billion in cash. It's a lot of cash. Paradigm, 2.5 billion. FTX Ventures, 2 billion. Katie Hahn Ventures, 1.5 billion. Billion hive hive mind 1.5 billion. It keeps on going. There's a lot of cash out there.

• 21:15Ryan Sean Adams?

  This is all crypto cash. These are crypto funds.

• 21:18David Hoffman?

  Yes, but they they're not necessarily meant for like Bitcoin and Ether.

• 21:22Ryan Sean Adams?

  Right.

• 21:23David Hoffman?

  I think they're meant for like startups and investments. So, I mean, in my mind, I look at this and I'm like, oh, job security for startups, like funding.

• 21:33Ryan Sean Adams?

  Yes.

• 21:34David Hoffman?

  Funding is not yet secured, but there's funding out there.

• 21:36Ryan Sean Adams?

  That's one thing I think. The other thing I I think of is, oh, my God, private equity evaluations are not going down anytime soon. Right. So that's good if you're retail and you can't get in these private round deals anyway. It's like there could be a lot of value on the public side relative to private, which is pretty good. Like Bitcoin and Ether might look like good purchases or other DeFi assets that have been tokenized. All right. Did you know we just passed the birthday of EIP 1559?

• 22:07David Hoffman?

  One year of EIP 1559. As a result of EIP 1559, 2.1% of the total ETH supply has been burnt in the last year. So that's 2.5 million Ether. It's a pretty good amount of Ether.

• 22:22Ryan Sean Adams?

  That's a huge amount.

• 22:23David Hoffman?

  That's great. That's great. So like, you know, ultrasound or not, the EIP 1559 is kicking in. It's always going to be bullish.

• 22:31Ryan Sean Adams?

  Burning five ETH a minute last year. That's kind of the average. Okay, so the most famous EIP in existence. How many people do you think know what EIP 1559 is, 1559? How many people out there, even just like, let's take crypto people. Give me a percentage of like people you think that have a crypto asset that know that what this EIP is and its significance.

• 22:55David Hoffman?

  I think a good 20 to 30,000 people know EIP 1559.

• 22:59Ryan Sean Adams?

  Really? 20 to 30,000 people? That's it?

• 23:01David Hoffman?

  That might be a little high, actually.

• 23:03Ryan Sean Adams?

  You think that's high?

• 23:03David Hoffman?

  Yeah, I think that's high.

• 23:05Ryan Sean Adams?

  We have more bankless listeners than 20, 30,000. There's gotta be more than that.

• 23:08David Hoffman?

  Doesn't mean they understand it.

• 23:10Ryan Sean Adams?

  Come on.

• 23:11David Hoffman?

  I listen to a lot of podcasts with only half my brain.

• 23:14Ryan Sean Adams?

  Okay, so like, I don't mean like understand it to the depth that Vital understands it. Yeah, I just mean understand. Yeah, this is what I mean, David. I mean that like, just like Bitcoin has memed like memed that the halve.

• 23:29David Hoffman?

  21 million hard cap?

• 23:30Ryan Sean Adams?

  Yeah, in 21 million hard caps, some of those core numbers. How many people do you think?

• 23:34David Hoffman?

  I have, I have no idea. I have no idea.

• 23:36Ryan Sean Adams?

  I think it's still probably like. 10 to 20% of all crypto buyers.

• 23:42David Hoffman?

  Oh, that's low.

• 23:44Ryan Sean Adams?

  I think it's that, though.

• 23:45David Hoffman?

  Wow.

• 23:46Ryan Sean Adams?

  Of people that own crypto. There's a lot of people that own crypto. I mean,

• 23:49David Hoffman?

  Yeah, it's true.

• 23:49Ryan Sean Adams?

  They bought like Dogecoin and stuff.

• 23:51David Hoffman?

  Yeah.

• 23:51Ryan Sean Adams?

  Like, they just don't know what EIP 1559 is, what an EIP is, the significance of like ETH is burning. What does that even mean? There's a lot of, there's a lot to this stuff. It's, it's not simple to understand.

• 24:04David Hoffman?

  I think as you have more capital, you likely know what EIP 1559 is. So on an individual per person basis, sure, but I think a percentage of, I think over 50% of all capital in the crypto industry understands EIP 1559.

• 24:19Ryan Sean Adams?

  That's cool. And what's next EIP, the second most famous one?

• 24:21David Hoffman?

  4844?

• 24:23Ryan Sean Adams?

  Yeah. How many people know what that is?

• 24:24David Hoffman?

  Yeah, we'll get, we'll get there next. So there's also this really cool chart of EIP 1559 before and after it was included. And it just shows a really good mechanism design. Like, this is what EIP 1559 was supposed to do. Like, on the left side of this green line before EIP 1559 was introduced, like, the estimated gas for inclusion on the Ethereum blockchain was all over the place, super volatile. And on the right side, it's just way more regular, way more efficient. Yeah, there are a few spikes to the upside because of NFT drops, but it's just a much more stable mechanism. And overall, it has led to an actual reduction, like, I think a 10 to 15% reduction of perceived gas prices, as in people overpaying for gas. Really cool chart here.

• 25:06Ryan Sean Adams?

  A lot less volatility. You can see a lot more stability. It's really great. David, what's coming up next?

• 25:11David Hoffman?

  Coming up next in the show, we're going to cover the merge. We're going to tell you when exactly, the exact number that the merge will happen at. We finally have it. So that's going to, that's going to come up next. We're also going to talk about 280 Cash and the first ever illegal smart contract and how 7.5 out of the $11 billion of TVL on Solana was fake? Question mark? Wow, what a story, what a claim. So we're going to get into all of these stories and more right after we get to some of these fantastic sponsors that make the show possible. Rocketpool is your friendly decentralized Ethereum staking protocol. You can stake your ETH with Rocketpool and get our ETH in return, allowing you to stake your ETH and use it in DeFi at the same time. You can get 4% on your ETH by staking it with Rocketpool,

• 25:55David Hoffman?

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• 26:40David Hoffman?

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• 27:22Ryan Sean Adams?

  All right, guys, we are back, and we're talking about the merge. There's been some major updates this week, including we have a merge date. We're gonna get to that in a moment. But first things first, David, while I was out in the UK, the Gorley Testnet merge. So this was sort of, we've called it kind of the pre-show or the dress rehearsal for the mainnet Ethereum merge. And it happened this week. You were actually on the call, I think hosting the call, Bankless YouTube when it happened. So tell us what happened this week.

• 27:52David Hoffman?

  Yeah, there was like 50 people on the call of the livestream. You can go watch it on the YouTube. But basically, we were all sat on Zoom and watched the Gorley Testnet merge. And then it merged. And then we were like, okay, we waited, we, it's a little bit like, all these merge, merges are like a little bit like Y2K. You know it's gonna happen. Nothing's gonna break before that moment. It's the moment afterwards that everyone's interested in. It's like, alright, is there any damage? Like, is everyone okay? Is that anything broken? And so it took a while for us to figure out if anything was broken. There was a, there was like an oh shit moment. And so like when this thing like wasn't, wasn't finalizing or something, but it turned out to be a nothing burger. Turned out to be just like false reporting. And so after like four or five or six hours, people kind of realized like, yo, nothing broke. Nothing, everything's good.

• 28:33Ryan Sean Adams?

  Some people were saying like that, I saw some chatter on this. I didn't see any of it live because I was traveling. But like devs looked scared or something at some point.

• 28:40David Hoffman?

  Yeah, right. So like it wasn't, there was like something that wasn't finalizing, but it actually was finalizing. It just wasn't reporting that it was finalized on the front end. Something, it was something like this, some technical thing that I can't, so like for a while, we're like, oh, it's not finalizing. It's not finalizing. And then people realizing, no, no, it is finalizing. And so.

• 28:56Ryan Sean Adams?

  So overall, it was like successful, like just like previous merges, no issues whatsoever?

• 29:02David Hoffman?

  No significant issues whatsoever. And then what happens next, this morning, Thursday morning, there is a consensus layer call with all the core devs where they decided the TTD for the real merge. The TTD is the total terminal difficulty. It's basically like a block height. But it's, it is effectively the date. So the merge date has been decided. The emerge has been officially announced. It's coming in at a TTD number that's very, very large, but effectively puts us at the trajectory of September 15th to 16th.

• 29:35Ryan Sean Adams?

  There it is. That's the date then, September 15th to 16th. Okay, so, so back us into that again. So we have got this very large number, which is the TD, TTD. And that stands for what again?

• 29:47David Hoffman?

  Total Terminal Difficulty. It's basically a, a number that is, it's basically a number that we're going to approach as the miners do their thing. It's, it's, the reason why it's done this way, if you want to find out, there was an episode we recorded with Tim Baker forever ago. But once we hit a terminal, total terminal difficulty of that very large number, which doesn't really make any sense, it's basically approximately September 15th to 16th, Thursday or Friday of that week.

• 30:13Ryan Sean Adams?

  Okay, so has the code been activated yet? It's just been selected right now, right?

• 30:18David Hoffman?

  Yes.

• 30:18Ryan Sean Adams?

  The TTD, and then it gets activated at what point in time?

• 30:22David Hoffman?

  Yeah, there are these two software updates that will go out for the consensus layer and the execution layer, and then once those nodes get updated, people will update their nodes to follow the merge and merge at that particular time.

• 30:35Ryan Sean Adams?

  And, okay, and so that is approximately September 15th to 16th. And so how likely is it to fall on one of those two days versus outside of it? Are we like 90, 95% probability that we're going to be the 15th, 16th? We don't know the time, the exact time we will as it approaches, but we don't know exactly when, but it's going to be the 15th or 16th if this TTD number holds up.

• 30:57David Hoffman?

  Yeah, it has to do with hash power. So as hash power fluctuates up and down, it will change the actual arrival of that TTD number. We saw the Gorley estimated date, like, time, jump around actually kind of quite a lot. So it started at 6:00 PM. It went as far as late as midnight, and I was like, damn it, I have to host this thing at midnight. And then it came, it came forward to 9:00 and ended up happening at like 9:40. But like, we're talking about fluctuations of hours. I don't know how well that the Gorley testnet translates to the actual proof of work mainnet, but I don't think there's going to be too much fluctuation here.

• 31:31Ryan Sean Adams?

  Dude, I can't believe, so September 15th to 16th, it's gonna happen. We don't know what time of day. We do know we will be on a live stream somewhere, watching this happening. I'm gonna be sipping a Vitalic Buterin, of course, green tea mixed with red wine, all mulled together in some concoction I've never tasted before, but that's it, man. It's gonna happen in September. I'm gonna enjoy it, and I'm gonna enjoy the merge. What, are you expecting, like, do you think anything could go wrong here? I mean, there's always a chance, but like-

• 32:00David Hoffman?

  I just don't think so. This is something that has been planned for so long. It's like, the miners aren't like, oh, they're finally merging, now let's like, mess with them, like, no, the miners have known about this too. There's not gonna be any big shenanigans-

• 32:12Ryan Sean Adams?

  We've tested this how many times?

• 32:14David Hoffman?

  We've tested this a bajillion times. Like, I'm thinking the drama is relatively minimal here.

• 32:19Ryan Sean Adams?

  So a successful merge, 15th to 16th-

• 32:22David Hoffman?

  The successful merge, yeah.

• 32:24Ryan Sean Adams?

  That's incredible. So there you go, guys. That's the date. And make sure you tune in to watch, I think, what will be the largest event in crypto

• 32:33David Hoffman?

  Crypto history.

• 32:34Ryan Sean Adams?

  Since Ethereum was launched.

• 32:36David Hoffman?

  Yeah.

• 32:37Ryan Sean Adams?

  I think this will stand out as one of three events that we've seen so far. Launch of Bitcoin, launch of Ethereum, and then merge, which means getting rid of the proof of work Ethereum chain and merging to the new proof of stake consensus layer. It's the third largest event in crypto's history as far as I'm concerned. And I think will be viewed historically through that as well.

• 32:58David Hoffman?

  So significantly.

• 33:00Ryan Sean Adams?

  Don't miss it.

• 33:01David Hoffman?

  It's a good time to be in Ethereum.

• 33:03Ryan Sean Adams?

  Yes.

• 33:04David Hoffman?

  Other than this, other than this.

• 33:05Ryan Sean Adams?

  Yeah, this is, this was, I saw this come through, of course, when I was in the UK. It's just like, but I couldn't believe this was happening. So tell us the headlines.

• 33:16David Hoffman?

  Right.

• 33:16Ryan Sean Adams?

  The Treasury apparently has sanctioned the virtual currency mixer, Tornado Cash. This is a press release from the US Department of the Treasury website. Can you give us the story? What happened here, David?

• 33:28David Hoffman?

  Yeah, so Treasury, OFAC, which OFAC, the Office of Foreign Asset Control, which is part of the Treasury, put the Tornado Cash smart contracts on like especially designated like persons list, which is weird because it's not a person. So this is the first, we're pretty sure this is the first person to go on like on a sanctions list that's not a person.

• 33:53Ryan Sean Adams?

  These are like specific ETH addresses that they're naming, right?

• 33:56David Hoffman?

  Yeah, specific Ethereum contracts.

• 33:57Ryan Sean Adams?

  Because each Ethereum contract maps to an ETH address and they put them, the ETH addresses themselves on the list.

• 34:02David Hoffman?

  Right. And what's also weird about this list is that it's, it's on the responsibility of the individual to make sure that they are not transacting with somebody on this SDN list. And so if you go out on the street and like hand somebody some cash. It's on your responsibility. It's your responsibility to make sure that that person that you're handing cash to is not on the OFAC list.

• 34:25Ryan Sean Adams?

  Because the OFAC list is...

• 34:26David Hoffman?

  It's your responsibility as an individual.

• 34:27Ryan Sean Adams?

  Who's on the OFAC list? It's like terrorists, rogue nations.

• 34:31David Hoffman?

  Yeah, exactly. Like North Korea, Iran, probably.

• 34:35Ryan Sean Adams?

  Enemies of the state.

• 34:36David Hoffman?

  Right, exactly. And now also tornado cash. And so they can't turn off tornado cash. So what they did is they said, hey, any US citizen that is interacting with tornado cash is in violation of the OFAC SDN list. And that can result in criminal penalties. Ryan, did you know that you and I have both interacted with the tornado cash contract address since this went on the OFAC list?

• 34:59Ryan Sean Adams?

  Well, how so, sir? Because I haven't touched any buttons on anything while I was away traveling.

• 35:04David Hoffman?

  Somebody sent us, and banklist.eth, .01 ether from the tornado cash smart contract. So the tornado cash smart contract sent davidhoffen.eth, RSA.eth, and banklist.eth, .01 ether. And now, and as a result of that, we have violated OFAC's SDN list because we have engaged with that contract.

• 35:27Ryan Sean Adams?

  How could we be violating when someone sends us these transactions? And by the way, it wasn't just us, of course. As I read, it was like, you know, A60Z, it was Logan Paul, Vitalik Buterin, Jimmy Fallon. Like, somebody, I guess a troll or somebody trying to make a political point, which I understand kind of the motivations, went through and sent tokens from tornado cash to all of these addresses? Is that what happened?

• 35:56David Hoffman?

  Yep, that's exactly right. Yeah, so every person that received the money violated OFAC. And the reason why this works is that like, okay, if North Korea sends you a check, you don't cash it. You don't cash that. And it says like, "from North Korea." You don't cash that thing. But North Korea can send you money to your Ethereum address with or without your permission. And so this is why this gets incongruent with like other mechanisms of payment that we've had previously.

• 36:20Ryan Sean Adams?

  But if North Korea sends like cash in the mail to my address...

• 36:26Ryan Sean Adams?

  Right?

• 36:26David Hoffman?

  Then you violated OFAC, yeah.

• 36:28Ryan Sean Adams?

  If I open up my mailbox, or if I do what? Or if it's in my mailbox, they send it to me?

• 36:34David Hoffman?

  I guess so, yeah.

• 36:35Ryan Sean Adams?

  That's kind of the parallel here. And the challenge with it is because ETH is completely fungible. The .1 ETH just merges with all of the other Ether that you have.

• 36:45David Hoffman?

  That's in your wallet, yeah.

• 36:46Ryan Sean Adams?

  In your wallet.

• 36:47David Hoffman?

  Do we report this as revenue? The .1 ETH that went to Bankless ETH, is that revenue?

• 36:52Ryan Sean Adams?

  I'm not touching any of it. But I don't know how to not to touch. I don't know what to do, David. Someone help me. I don't know what to do. I'm just trying to be like, you know, a good citizen and not go to prison. So like, here's maybe we should read the tweet out from Secretary Antony Blinken when this happened. What's he saying here?

• 37:11David Hoffman?

  He says, "We'll continue to aggressively pursue actions against currency mixers laundering virtual currency for criminals. Today, US Treasury sanctioned virtual currency mixer Tornado Cash, which has been used to launder money for US-sanctioned North Korea state-sponsored cyber hacking group." I did a full show on this, about a 30 to 35-minute-long show, new format, actually, where I interviewed Jerry Brito from Coin Center and Collins, a fantastic crypto lawyer. So if you just want the full story on this, Ryan was out of town, and so I had to do the State and Nation by myself. But instead of doing the typical, just like, interview format, I kind of tell the story myself and go in and out of interviews with Collins and Jerry. So the full story is available on the Bankless YouTube. Crazy story, crazy story.

• 37:55Ryan Sean Adams?

  Okay, so the fallout for this, Tornado Cash contracts get listed in the OFAC list, right? Side story is, you know, some trolls, somebody trying to prove a political point, goes and sends a bunch of ETH to specific kind of influencer-type Ethereum addresses, including, by the way, all of the crypto banks and such. Like, it's just like, everybody got this. Everybody who has an ETH address, who has a large account. That's a side story. Then there's some fallout from this as well. So Circle... Just they froze all of the USDC belonging to the unsuspected tornado users.

• 38:32David Hoffman?

  So tornado people, people put USDC into tornado cash because tornado doesn't only work with ether. It also works for USDC. And so people deposit ether or USDC into tornado cash, wait a little bit while it gets mixed up and then withdraw it later. But you have to wait for a while or else it doesn't work. So like all this USDC is sitting in tornado cash. And so at the moment that USDC froze that address, 75,000 USDC was frozen in tornado cash. And so like, yeah, like USDC, like regulated, domiciled US entity, they're not going to like, they're not going to go up against OFAC over $75,000. So they just bent the knee and like, it's the logical thing to do.

• 39:12Ryan Sean Adams?

  People were mad at Circle and, you know, Circle for doing this, for freezing the USDC. But it's like completely obvious that this is what they would do.

• 39:20David Hoffman?

  It's either freeze the account or shut down their business. Yeah. It's like, it's an obvious trade.

• 39:26Ryan Sean Adams?

  Right. And they're going to have to do this because they're kind of regulated in the way that they're, that's what USDC, the product is. And so if you didn't realize that about USDC, by the way, that is kind of a regulated, regulated staple coins, not at all like ETH in that way, then kind of now you know the effects of something like this. And also there's something to do with GitHub as well. So is this a tornado cash?

• 39:48David Hoffman?

  Yeah, Roman Semenoff, he's a tornado cash developer who's who published a lot of the tornado cash open source code. His GitHub was suspended. And so the tornado cash open source code was pulled down from GitHub, which brings in like First Amendment questions as to whether or not this actually violates speech, because after all, code is just speech. We learned this in the crypto wars of the seventies and seventies and eighties.

• 40:11Ryan Sean Adams?

  And by the way, there are, there are court cases establishing code and speech together. This Coach Bernstein, I believe, versus the US in 2000, kind of established code as speech. So this is also a US legal precedent as well. You should go through the summary.

• 40:27David Hoffman?

  Yeah, this is a great summary thread. I'll go ahead and read it. This is from Seth Hurtling. I'll try and do this as fast as possible. This week, US Treasury Department did something. ever done before, it sanctioned a piece of code. Weird, right? Specifically Treasury added the tornado cash URL and smart contract addresses to the specially specially designated nationals and blocked persons list. Tornado cash is a crypto mixer that allows people to maintain their privacy online. Prior to tornado cash sanctions had only been levied against persons. It's illegal for Americans to transact with any person on the SEN list. Due to the legal doctrine of corporate personhood, formal business entities can also be put on the naughty list. However, computer code is neither a natural person nor a legal entity. Code is speech, Bernstein versus the Department of Justice.

• 41:09David Hoffman?

  Similar money is speech, or more precisely what you do with your money is speech. And then he cites two more court cases as well. Buckley versus Valeo and Citizens United versus the FEC. The legal doctrine of prior restraint holds a preemptive government censorship is almost always unconstitutional. And even government acts that have been substantial, have a substantial chilling effect, which I've learned is actually a legal phrase, on speech may be unconstitutional. And then he cites another legal court case. Sanctioned law is a strict liability regime, meaning that if an American transacts with a sanctioned person without intent or even the knowledge of having done so, they can be sentenced to 30 years in federal prison. Ryan, you and I might be sentenced to 30 years in federal prison. You're smiling when you say this, but this is not a smiling matter, David. Why are you smiling?

• 41:51David Hoffman?

  Why, are they gonna send all like 200 of us to federal prison for receiving money from tornado cash? I don't think so. It sounds absolutely ridiculous, but that is what the letter of the law actually says, does it not? I will not be going to jail, Ryan. You'll drag me kicking and screaming. Anyways, the threat continues. Beyond the likely First Amendment violation, this action also raises significant due process concerns in that the code was not afforded adequate notice or opportunity to appeal. And individuals may be implicated without the means to comply. While this law does not seem to be in the Treasury's favor, litigation will take years to play out. Treasury knows this. Now, I've seen a lot of discussions essentially saying tornado cash was used by criminals and hackers, so it deserves to be shut down. While I don't support either, let me explain why this reaction misses the point. This is where we get into free speech stuff.

• 42:35David Hoffman?

  If Treasury had sanctioned the criminals and the hackers that use tornado cash, no problem. But tornado cash is an open source code, meaning it's not owned by anyone and is freely available to everyone. It is thus a public good. We enjoy the benefits of public goods and infrastructure every day. The internet, wireless networks, money, banking system, roads and highways, transportation, infrastructure. Guess what? Criminals use these every day, too. Of course, we should pursue criminal persons who misuse public goods, but we don't sanction SMTP because hackers send phishing emails, or I-95 because drug dealers drive on it, or cell towers that route terrorist calls. These are not persons, neither is tornado cash. Like emails and highways, tornado cash has been misused by criminals for criminal ends. However, tornado cash is also a tool that enables law-abiding

• 43:20David Hoffman?

  citizens to maintain their privacy on the blockchain for a host of legal purposes, including political speech, like political donations. Taking this to its logical conclusion, if Treasury can sanction tornado cash, it can sanction any code, no software safe. If sanctions are no longer limited to persons, what other objects or information can the government summarily jail you for 30 years for interacting with? Ultimately, there is no freedom without privacy, and there can be no democracy without free speech. Privacy and free speech are the bedrock of free and open societies. Make no mistake, this is what Treasury has sanctioned this week. Great thread. Great thread. Great summary.

• 43:52Ryan Sean Adams?

  We put this together, I think it's the Legal Council of Ledger.

• 43:56David Hoffman?

  Oh, well done. Well done. Well done.

• 43:58Ryan Sean Adams?

  Seth Hurtline. Maybe we should get him on the show. This was a fantastic thread and went through all the issues. I mean, I think we have some more to talk about this, David, but before we do, this also had some impact on Maker, potentially. There's some chatter in the Maker governance forums about an emergency shutdown. Other DeFi protocols are asking, what if they get put on the OFAC naughty list? What happens to them? So it's one thing for Tornado to be put on it, but what if Maker's core contracts were put on the OFAC naughty list because a bad guy decided to use DAI for some purpose that the US did not like? So what are the implications of this? What's actually being considered by Maker?

• 44:37David Hoffman?

  Yeah, so there's a nesting doll of trouble here. So USDC is now frozen in tornado cash, can't use USDC in tornado cash. You can put USDC into Maker DAO and mint DAI, and then you can take that DAI and put it in tornado cash. Right, so RUTRO, uh oh, and so like, and also, there's like 40% of outstanding DAI that's backed by USDC. So if you, if Circle was told by Treasury that they need to blacklist the MakerDAO USDC address.

• 45:07Ryan Sean Adams?

  Because it has something tainted from Tornado Cash?

• 45:10David Hoffman?

  Yeah, yeah, or it just enables usage of it, right? So like, you can, so like, it's kind of similar to like, I could, I could spin up a contract. I could make it, write a contract that interacts with Tornado Cash on my behalf. And then I could send my Ether or U or DAI into that contract. And then that contract can go talk to Tornado Cash. And my address is haven't touched Tornado Cash, so I'm free and clear. But the proxy address did go touch Tornado Cash. That's basically USDC and MakerDAO is you can take USDC, go to MakerDAO, just use MakerDAO to talk to Tornado Cash. It's the same, same. So like, is Treasury really gonna let that go? Like, RUTRO, uh, and so this is being, caused a great cause of concern in the Maker Discord.

• 45:52David Hoffman?

  Uh, and so they are now like, more aggressively prioritizing how to become much less dominant of USDC lately.

• 45:59Ryan Sean Adams?

  Yeah, including, I think, so there's, um, yeah, how much, how much DAI is backed by USDC, David, right now?

• 46:06David Hoffman?

  There is 3.56 billion dollars of USDC in MakerDAO, which is like, it'd be one thing if it was just, you know, a smaller amount. But it's hard to like, you know, swap out 3.5 billion dollars.

• 46:18Ryan Sean Adams?

  This has been a known challenge that the DAI has had, right? Which is like, it's, it's trading off some scalability for some decrease in censorship resistance.

• 46:27David Hoffman?

  Yeah.

• 46:28Ryan Sean Adams?

  And the way to get pure censorship resistance and scalability on Ethereum is you actually have to use ETH. It's just the only, you know, the most unsensible, uh, store of value asset in order to back all of your DAI. And of course, they went the multi-clateral route, which makes sense for the product. But, um, you know, you could, you could swap something else out if, uh, if needed. Um, so I guess, what do you think about this? Like, first of all, why do you think Treasury is, is doing this? Do you think this is partially because, um, North Korea, essentially?

• 47:03Ryan Sean Adams?

  Has hacked, they've been involved implicated in a number of bridge hacks recently and they have used tornado cash to try to anonymize their ill-gotten gains. And so now treasury and now US national security apparatus is taking a very close look at tornado cash. And so they've just said, no one can use this if you're a US citizen, you just can't use these contracts anymore. Is this where this, all of this ire is coming from? Because tornado cash has been in existence for like, I don't know, three years, something like this. And Zcash even longer, which is privacy-enabled cryptocurrency.

• 47:37David Hoffman?

  Yeah, this, the implications of this are significant and people are mainly asking, all right, where does this go next? How many more smart contracts are going to become like, quote unquote, illegal? It's kind of unfortunate that tornado cash, I asked Alex Svanovic from Nansen, like, how much of tornado cash funds is like illicit, deemed illicit? And he came back to me with a number of 35% of funds going through tornado cash is stuff that we know came from like, bridge hacks, some sort of hacks. But Ryan, that's just what we know about. So like, could be as much as 50% of the money flowing through tornado cash is like illegal or illicit, which makes it really hard to defend.

• 48:16Ryan Sean Adams?

  So it's not that they're wrong, that it is, there is some illicit activity, illegal activity on it. It's not that they're wrong about that.

• 48:22David Hoffman?

  There's more than just like a little, there's like quite a, quite a lot.

• 48:25Ryan Sean Adams?

  But the precedent that this sets and the implication that anyone using tornado cash is, is guilty. I mean, at its core, tornado cash is just a service that allows you to have privacy. I had to take as, as I was thinking about this a little bit and the implications of how I feel as, you know, somebody who received some funds from tornado cash that were just sent to me, is they're trying to make you feel like a criminal for wanting basic privacy. At its core, that's what tornado cash is doing. And I don't think that's a radical thing for us to want the same sort of privacy anonymization that we have in the real world with cash. If I were to pay you a cash payment, David,

• 49:07Ryan Sean Adams?

  Like, no one needs to know about that. The government doesn't have to record that in a ledger, the amount that I gave you. You don't have to identify yourself to me. I don't have to identify yourself to me. But if I give you some gold, there's no sort of registry that needs to be created. And it's not radical for us to want digital privacy, privacy on our digital transactions. What I do think is radical about the way Treasury has gone about doing that, this, is that an unelected surveillance bureau, that's what Treasury is, a branch, the executive branch, they're unelected, and they are a surveillance bureau, and they can make privacy illegal. I think this is normalizing tyranny, if we let this go, because

• 49:50Ryan Sean Adams?

  what privacy tools do they suggest we use? If not public good code like tornado. If I want to have some sort of privacy on my crypto transactions, what tool do I use, Treasury? Are they saying we can't use any of it as an American citizen? Sorry, privacy is not

• 50:08David Hoffman?

  More or less, they're saying that, more or less is exactly what you're saying.

• 50:11Ryan Sean Adams?

  How is that defensible?

• 50:12David Hoffman?

  The reason why tornado cash is being used by criminals is because it's really good at offering individuals privacy. And so, it's not like criminals would be able to use tornado cash in silo, right? If only criminals were using tornado cash, you would just like, okay, well, there's criminals going in, therefore criminals going out. But it's because tornado cash is useful to individuals, and it's because it does provide privacy to individuals, that that's actually what enables the fact that criminals and hijackers can use this. Because they can't use tornado cash without there being a crowd to hide in. So it's a very important order of operations, as the individuals, just like you and me and people who don't want to have the eyes of the world upon their financial history

• 50:57David Hoffman?

  to like, see what they're up to, they use tornado cash, and that gives the option of criminals to use tornado cash. Because they couldn't use it without, you know, normal people also using it. But the normal people come first, which makes that ours, Ryan, in my mind.

• 51:11Ryan Sean Adams?

  Yeah, and the other piece about this, of course, that's indefensible is the breach of First Amendment rights, which is freedom of speech, right? And so if governments can start shutting down Gitcoin, or sorry, GitHub repos of developers for writing code, that's a scary prospect. That brings up some dystopian ideology. So I'm still kind of trying to figure out what we do as a crypto industry to react against this. Have you identified any sort of action steps, things we can do? I mean, is Treasury going to get sued at some point? Who can sue them for this?

• 51:50David Hoffman?

  I hope so.

• 51:51Ryan Sean Adams?

  I guess we have to settle this in courts.

• 51:53David Hoffman?

  Yeah, we've got to settle it in courts.

• 51:54Ryan Sean Adams?

  Legislation, crypto-friendly politician, politicians that want to respect and embed in our legal protocols a basically digital rights, which is a thing we, I think as Americans and probably everyone across the world, do not have embedded in our legal protocols. We have no digital rights at this point. We have to ultimately find politicians, support politicians who will write laws in order to protect and enforce our digital rights. But for now, like, we have a First Amendment, at least in the US, with freedom of speech, and this should fall under that. So what do we do with all of this, David?

• 52:30David Hoffman?

  The good thing is that we've done this before. The cryptography wars of the 70s and 80s was more or less the same fight, where the United States of America wanted to make code illegal, and the cryptographers won the fight by saying, no, code is free speech. We're basically revisiting this same exact, there's already legal precedent for this. The only difference now is now there's money. Now it's not cryptography, now it's cryptocurrency. So we're gonna like, we're, you know, right? We speedrun the history of money and finance, and now also law. And we've done this before, and we'll do it again. It's just gonna be like, yeah, we're gonna have to like, every time they take away our rights, we're gonna have to fight for them back. But crypto people fight for their territory, right? This is our home.

• 53:08Ryan Sean Adams?

  So are you optimistic that we'll be able to kind of fight this and get this sort of stuff overturned in the same way that, you know, we did with the previous crypto wars? Or do you think the US is past that point when it comes to finance and money transactions? Like, because every single democracy, Western liberal democracy, is going to have to contend with this. Because these privacy tools are not going away.

• 53:29David Hoffman?

  Right. That's the other thing, is like, so many privacy tools are going to, like, it's gonna be whack-a-mole.

• 53:35Ryan Sean Adams?

  What do we do with Astek?

• 53:36David Hoffman?

  You're not gonna be able to ban them all.

• 53:37Ryan Sean Adams?

  Astek Layer 2. Complete layer to you, which is, I believe it's EVM compatible as well. And privacy is not quite, but like privacy for everything you put inside Vaztec. Is that legal? Are Americans just banned from legally using crypto privacy tools? How is, how is, how is that?

• 53:58David Hoffman?

  Right, the only way for them to make a ruling that satisfies their actual desires is just to say like, all transactions on a blockchain need to be fully traceable. And at that point is like, well,

• 54:08Ryan Sean Adams?

  You're banning Ethereum.

• 54:09David Hoffman?

  Yeah, you're banning, right.

• 54:10Ryan Sean Adams?

  Which goes to question of where does this stop, David? Right, because like today, we find the tornado cash smart contracts on the ban list. Tomorrow, is it Uniswap?

• 54:19David Hoffman?

  Right, for the SEC, yeah, sure.

• 54:22Ryan Sean Adams?

  I mean, like the SEC or OFAC, let's say, let's say North Korea uses Uniswap for some transactions.

• 54:28David Hoffman?

  Sure they do.

• 54:29Ryan Sean Adams?

  In fact, on the back of this, just to cause more chaos, maybe they will.

• 54:32David Hoffman?

  What if, what if North Korea became like the dominant LP for like DAI? Or like Uniswap or Uniswap LP for Ether and USDC?

• 54:42Ryan Sean Adams?

  Yeah.

• 54:42David Hoffman?

  What if, what if they had 50% of the liquidity? So like all of your counter trades are North Korea.

• 54:47Ryan Sean Adams?

  They could be listening to this podcast and getting these types of ideas.

• 54:50David Hoffman?

  That's a really good idea.

• 54:51Ryan Sean Adams?

  For real.

• 54:52David Hoffman?

  And so where does this podcast illegal?

• 54:55Ryan Sean Adams?

  This is, these are the questions I'm asking, right? Like, we're going down this path and this is a very dystopian path. I feel like we're going down it. It's the first time I felt like that with crypto. It's like, oh, okay, we've entered a new territory now. Nation states are actually attacking what we're trying to do in this space. And attacking the freedom of individual citizens as a result. And I think that's different. This week has felt different.

• 55:18David Hoffman?

  Right.

• 55:18Ryan Sean Adams?

  Starting pistol on all of this, David.

• 55:20David Hoffman?

  We gotta move on though.

• 55:21Ryan Sean Adams?

  Are you sure?

• 55:22David Hoffman?

  If you want the full story, you gotta go watch the YouTube video that's already out on the YouTube.

• 55:28Ryan Sean Adams?

  It's hard to move on. Okay, uh, the fake team that made Solana DeFi look huge.

• 55:33David Hoffman?

  Oh, God, let's speed run this one. Uh, okay, so there was this ecosystem on Solana that had a bunch of TVL. Uh, it was Saber and a few other like protocols, Sunny aggregator. Uh, and, uh, there was a dev team behind it and it had like, like 10 or like $7 billion out of the 10 or 12 billion dollars of Solana TVL. Um, but as it turns out, instead of like a suite of devs and a big community, it was actually just like one guy and his brother with a bunch of sock puppets, Ryan.

• 56:06Ryan Sean Adams?

  He's just faking different online identities?

• 56:08David Hoffman?

  Yeah. Uh, and so I'll read some, some quotes out from this article. Uh, coding as 11 purportedly independent developers, Ian, how do you pronounce this name? Uh, Ian Macaliano, Macaliano, um, a 20-something computer whiz from Texas created a vast web of interlocking DeFi protocols that projected billions of dollars of double counted value onto the Saber ecosystem that temporarily inflated the TVL on Solana as the network was racing towards its zenith last November. The DeFi, uh, the DeFi faithful regarded TVL as the barometer of on-chain activity, of course. Uh, so a quote from a blog post that was unreleased, which is how this, all this news came about, says that Ian Sett wrote, "I devised a scheme to maximize Solana's TVL. I would build protocols that stack on

• 56:52David Hoffman?

  top of each other so that a dollar would be counted several times." Ian's ploy worked for a while. By his count, Saber and Sunny comprised 7, comprised 7.5 billion of Solana's 10.5 billion TVL at their peak. Billions of those dollars were double counted between his two protocols. And so there's also the component of fake friends. In public, Ian and his brother Dylan called their anonymous personas friends or friends of friends. And a quote from, from Ian, "I wanted to make it look like a lot of people were building on our protocol rather than ship 20 disoriented programs as one person." Uh, so they just like spun up 10, 20 developers about on the same protocol. Uh, and so this whole entire thing created this narrative that had a substantial role in driving the Solana token price from

• 57:34David Hoffman?

  under $40 in July to a peak of 259 in November of 2020. A significant portion of bullish Solana narrative now seems to be based on a series of deceptions, wrote CoinDesk. So TLDR, this guy Ian and his brother built an interwoven DeFi ecosystem on Solana, spun up a bunch of Twitter sock puppets to make people think that there were a lot of devs, attracted a small amount of TVL that would then double, triple, quadruple be counted in the overall TVL of Solana. And what really what this whole entire story reveals is that, you know, less than a small handful of people with dishonest intentions can produce like significantly distorted like realities in the crypto markets. Absolutely crazy.

• 58:13Ryan Sean Adams?

  They did. This is 7.5 billion of Solana's 10.5 billion TVL at their peak. It was basically faked by this one dude and all of its sock puppets.

• 58:24David Hoffman?

  And his brother.

• 58:25Ryan Sean Adams?

  And his brother. What's crazy, I guess the implications of this are, we were talking about the beginning of this episode, the TVL on Layer 2. It's very important not to, very important to know that TVL is a very gamable metric at this point. And there are people who are actively trying to

• 58:44David Hoffman?

  It isn't, it's just, it's not, when you put ether into-

• 58:47Ryan Sean Adams?

  In isolation is what I mean.

• 58:48David Hoffman?

  Well, not necessarily that too. When you put ether into Arbitrum or Optimism or whatever, that is TVL. It's how you count it. That's the, what, people just forgot to stop double counting all this stuff and really didn't look under the hood.

• 59:02Ryan Sean Adams?

  Yes. So sloppy counting of it and TVL is only one metric among many, I think is, and, and I guess the other takeaway are, be careful who you trust online. I don't know, like.

• 59:14David Hoffman?

  Anon devs are always dubious.

• 59:15Ryan Sean Adams?

  Well, it's, it's not, Satoshi was an anon dev, right?

• 59:20David Hoffman?

  Okay, not always dubious, but like, they're not, they're more dubious than a non-anon dev.

• 59:24Ryan Sean Adams?

  They can start with a clean slate, clean reputation every time. So I think it's worth saying that it it should take them longer to establish, you know, trust than a person in the real world who basically you establish your trust over multiple cycles of doing good things. And that's how you create your, your reputation and your name, a name for yourself. And anon could just like have one reputation for one account, another for another. So yeah, we have to be careful who we trust, I guess. That is the end state.

• 59:51David Hoffman?

  The, the next CoinDesk article about this concludes with something really, really funny. Quote from the article says, "Further, users have now seemingly been abandoned with McAlino's announcing that they're shifting projects, shifting their focus towards new projects on the Upstart Aptos blockchain." So they was rotating to the new like faster blockchain.

• 1:00:10Ryan Sean Adams?

  They did it with Solana, now they're gonna play the same trick with Aptos. So be wary of that, crypto nation, beware of that.

• 1:00:19Ryan Sean Adams?

  Coming up next, Uniswap is getting a new foundation?

• 1:00:22David Hoffman?

  Alright.

• 1:00:22Ryan Sean Adams?

  Question mark. Tell us about that, David. Also, a brand new Arbitrum train.

• 1:00:26David Hoffman?

  Arbitrum 2?

• 1:00:27Ryan Sean Adams?

  Is adopting it, it seems like. Vitalik gives a statement and idea on theory crafting. We'll talk about that as well. It's all coming at you, but first, we want to thank the sponsors that made this episode possible.

• 1:00:39David Hoffman?

  There is a brand new staking feature in the Ledger Live app today. We all like staking the assets that we're bullish on. And now you can stake seven different coins inside the Ledger Live app. Cosmos, Polkadot, Tron, Algorian, Tezos, Solana, and of course Ethereum. With Ledger Live, you can take money from your bank account, buy your most bullish crypto asset, and stake that asset to its network, all inside the Ledger Live app. Through a partnership with Figment, Ledger also lets you choose which validator you want to stake your assets with. And Ledger is running its own validating nodes, offering a convenient way to participate in network validation. And it even comes with slashing insurance. Ledger Live is truly becoming the battle station for the bankless world. So go download Ledger Live. If you have a Ledger already, you probably already have it. And get started securely staking your crypto assets.

• 1:01:24David Hoffman?

  The Layer 2 era is upon us. Ethereum's Layer 2 ecosystem is growing every day. And we need Layer 2 bridges to be fast and efficient in order to live a Layer 2 life. Across is the fastest, cheapest, and most secure cross-chain bridge. With Across, you don't have to worry about high fees or long wait times. Assets are bridged and available for use almost instantaneously. Across's bridges are powered by Uma's Optimistic Oracle to securely transfer tokens between Layer 2s and Ethereum. Across is critical ecosystem infrastructure, and Across V2 has just launched. Their new version focuses on higher capital efficiency, Layer 2 to Layer 2 transfers, and a brand new chain with Polygon, all while prioritizing high security and low fees. You can be a part of Across's story by joining their Discord and using Across for all of your Layer 2 transferring needs.

• 1:02:07David Hoffman?

  So go to across.to to quickly and securely bridge your assets between Ethereum, Optimism, Polygon, Arbitrum, or Boba networks. And we are back. Coinbase lands a $10 trillion client in BlackRock, providing Aladdin clients access to crypto trading and custody via Coinbase Prime. So Coinbase is going to be the crypto backend by BlackRock, which is the biggest AUM institution hedge fund ever in the world.

• 1:02:32Ryan Sean Adams?

  10 trillion.

• 1:02:34David Hoffman?

  You can't catch a bigger fish than that.

• 1:02:36Ryan Sean Adams?

  Yeah, the biggest fish, I guess, entering crypto is the bottom line here.

• 1:02:40David Hoffman?

  So the Coinbase Prime will provide crypto trading, custody, prime brokerages, and reporting capabilities to Aladdin Institutional's client base, who are also clients of Coinbase. I don't know what Aladdin is, but something associated with BlackRock. Anyways, Coin, the equity for Coinbase, up 15% on the news, bouncing off the low lows that it set a couple of months ago.

• 1:03:00Ryan Sean Adams?

  That's good, because it's been down badly.

• 1:03:02David Hoffman?

  Really down bad, yeah.

• 1:03:03Ryan Sean Adams?

  A bit of bullish news. Also got this, David. This is a tweet from Arbitrum. "A new dawn is upon us. Arbitrum Nova is now live and open to the public." Nova, this is a definition. It's not like Arbitrum 1. It is a new train, built on the Arbitrum AnyTrust technology and optimized for social and gaming applications that require ultra-low fees and high security. So this is another instance of Arbitrum. It is not the Arbitrum 1 chain. Arbitrum, when they came on the podcast about a year ago, and they were launching the very first Arbitrum chain, they said they could do this. They said they could launch other chains as well.

• 1:03:38David Hoffman?

  It's kind of implied in the Arbitrum 1 name. You know, 1 kind of implies 2.

• 1:03:42Ryan Sean Adams?

  This is not 2, this is Nova.

• 1:03:44David Hoffman?

  Yeah, but it is the second chain, though.

• 1:03:45Ryan Sean Adams?

  Arbitrum Nova. Nova means new, I guess. So it's a new chain built on Arbitrum, and it is for social and gaming applications that need ultra-low fees and also high security. That's part of the news. The other part of the news is, coinciding with the launch, Reddit, Reddit, will be migrating community points onto Nova. So of course Reddit, 400,000 some-on daily active users, of which I'm one. Big fan of Reddit, it's a social media entity. They are going to be deploying on Nova as well. If you pop the hood on Nova, this is the website. What actually is it, David? So it's a new chain from Arbitrum Technology, so it's definitely a roll-up for game developers and social projects. We know that. What?

• 1:04:30David Hoffman?

  The main difference is that Arbitrum 1 chain posts all of its data to the main Ethereum chain, and the main Ethereum chain is like where you get a lot of cost for rollups. So Arbitrum Nova has kind of created a committee of entities like Coinbase Cloud, I think is one of them, and there's others as well, that instead of the Ethereum blockchain, they're going to post data to this committee, right? So Reddit is one of these people, ConsenSys, FTX, Google Cloud, Offchain Labs, QuickNode, P2P. And so instead of posting it to Ethereum, they're posting it to all of these entities that can kind of use databases. So it's more centralized, but for gaming and social applications, it doesn't really matter because they're not financial applications. So you don't need as much security.

• 1:05:12David Hoffman?

  And the costs are just probably many orders of magnitude cheaper. So faster, cheaper, like basically zero transaction fees, I would guess.

• 1:05:20Ryan Sean Adams?

  ConsenSys is still secured on Ethereum. So ConsenSys is still Ethereum. That's what makes it a rollup. But data is now not being posted on Ethereum. It's being posted this data availability committee run by this set of organizations.

• 1:05:34David Hoffman?

  Right.

• 1:05:35Ryan Sean Adams?

  So it's almost as secure as Ethereum, but the data part is not quite as secure. So there's a bit of a tradeoff. But in exchange for that tradeoff, you get a pretty great chain that's very cheap for social and gaming type applications. That's what Reddit's going to be using.

• 1:05:48David Hoffman?

  You get a chain that emulates and has the UX of Web 2. So it's a great place to start for like Reddit, like points. For example, that, you know, you don't need to have like MetaMask pop up and ask for approval.

• 1:06:00Ryan Sean Adams?

  This is kind of like, if you're into like rollup terminology, it sounds kind of like a Validium. There might be some differences here, and we should probably have Arbitrum tell us more about it at some point. But yeah, it's pretty cool and good to see Reddit adoption for sure. This is, by the way, Nova on Layer 2 beat.

• 1:06:17David Hoffman?

  Damn.

• 1:06:18Ryan Sean Adams?

  Look at that TVL of Nova.

• 1:06:19David Hoffman?

  Well, from zero to $878,000 inside of seven days. So kind of technically up infinity percent.

• 1:06:26Ryan Sean Adams?

  Yeah, infinity percent. Still under a million dollars. So it's like, you've got to waste your go.

• 1:06:31David Hoffman?

  A million dollar TVL in seven days is great.

• 1:06:33Ryan Sean Adams?

  Not if all TVL is fake, David. How can we trust TVL anymore? Did we just talk about that? How about Uniswap? What are they doing?

• 1:06:40David Hoffman?

  Yeah, Uniswap is making a foundation. And so a foundation has always been missing, absent from like the Uniswap ecosystem. There's Uniswap Labs, but that's a for-profit company that doesn't have complete and total alignment with the uni token. Uniswap Labs is the thing that acquired the Genie NFT aggregator, but the value of that Genie NFT aggregator doesn't go to the uni token, it goes to Uniswap Labs. So we need this Uniswap Foundation to kind of put like a central thinking head upon the Uniswap DAO. And so this Uniswap Foundation has been proposed. And so this is just a temperature check, but I'm pretty sure this is going to go through. This isn't a direct one-to-one like link, but I think like something like this is a necessary step to turning on the fee switch. Because the Uniswap Foundation can have the best interests of the uni token holders at heart.

• 1:07:25David Hoffman?

  And the labs can't because of SEC regulations. So bullish.

• 1:07:30Ryan Sean Adams?

  We're trying to fix our governance tokens here right now. How about MakerDAO? This is a pretty interesting news that happened last week as well.

• 1:07:38David Hoffman?

  Yeah, there's an HVB bank minted $25 million in a single transaction. So MakerDAO really leaning into the real world asset, real world collateral, which I've always been bullish on. So congratulations to them.

• 1:07:50Ryan Sean Adams?

  I wonder if this week changed any of that.

• 1:07:52David Hoffman?

  I know, no, it didn't. It didn't. It's like, everyone tries to conflate these things, but it didn't.

• 1:07:58Ryan Sean Adams?

  It's interesting, though, if like, if the US government goes aggro on DeFi, what the fallout will be. I don't think that's where the, I don't think we're there yet.

• 1:08:08David Hoffman?

  The US government isn't like a monolith. It's not, it's like, oh, the government's going to come from MakerDAO. Like some specific agency has to get offended by this, and I don't think there's, there is one. Plus, again, real world collateral is not like this centralized thing. It's also decentralized. It's just decentralized in meat space, not in crypto space.

• 1:08:27Ryan Sean Adams?

  You mean the fact that these banks could be from any jurisdiction in the world?

• 1:08:30David Hoffman?

  Any jurisdiction, yeah, like you're right. Yeah. And like, there's not one like contract to rule them all. So if you, if you shut down one contract, all the other ones are still standing, right? So you have to go one by one by one and fight each one in court. It's a different level of, different kind of decentralization.

• 1:08:43Ryan Sean Adams?

  The other thing I think that that makes this bullish and going after real world assets is now you have HV Bank that knows about DeFi and is an advocate, right? And is also going to stand up and fight on the side of crypto in any battles that are to come.

• 1:08:55David Hoffman?

  See, you're getting it. You're getting it. Real world, real world assets is so bullish.

• 1:08:59Ryan Sean Adams?

  It is. And I'm so glad we have all of these experiments playing out at once because I think, you know, Ethereum crypto is a very big tent. So news from Meta, David, what are we looking at?

• 1:09:09David Hoffman?

  Instagram has rolled out its NFT support to a bunch of more countries, 100 more countries, and also the Flow Blockchain. Instagram rolled out their NFT support forever ago. I haven't really like seen anyone been using any of that, but maybe it's because we haven't had 100 more companies do stuff with it or countries do stuff with it.

• 1:09:26Ryan Sean Adams?

  Yeah, I don't know. It's a slower rollout, but we'll see. I think they've got some bigger things planned. David, do you remember all those bankruptcies? This is some news from the bankrupt crypto broker Voyager. They just approved to return, they've just been approved to return $270 million to their clients. I guess if you're a depositor or maybe a debtor to Voyager.

• 1:09:46David Hoffman?

  Like a customer, yeah, like a normal customer.

• 1:09:48Ryan Sean Adams?

  You're getting some money back, maybe cents on the dollar. I don't think you're getting all your money back, but I don't know the details of this.

• 1:09:54David Hoffman?

  Specifically, it's returning $270 million to affected customers. And so I think that means retail is getting this before like other creditors or debtors or whatever.

• 1:10:03Ryan Sean Adams?

  I hope so. We'll see, but it's like, it's going to work its way out over the months to come, as we said, so we'll see more of this as, as they wind out. This is some news from Immutable as well and the GameStop partnership. What's happening here?

• 1:10:15David Hoffman?

  Yeah, we saw this coming from a mile away, but Immutable X, the layer two, and also GameStop Wallet, the Wallet are now integrated. So this, this whole like immutable GameStop asset gaming ecosystem, it's moving pretty fast. We're liking what we're seeing here.

• 1:10:32Ryan Sean Adams?

  David, a tweet from Vitalik this week, some quick theory crafting. That's a great word, theory crafting. How much data space we could save by improving compression? So this is Vitalik talking about compression of various ERC 20 tokens. And there's a lot of detail in this slide, but can you dumb it down for us? What are we looking at?

• 1:10:51David Hoffman?

  Yeah, basically, each, there's a bunch of like bars and each bar is cut up into sections. And it's basically anatomy of a transaction. So you have the nonce and how much data that consumes is like one, one section of the bigger bar. You have the priority fee and how much data that is, the gas and how much data that is, the token address and how much data that is. The signature is a really big chunk of this overall data. And you can kind of just see the way that Ethereum scales is not necessarily like adding bigger blocks or shards or more block space. That is one way, but it's also by compressing all the transactions into a smaller packet of data. And so I just thought this visualization by Vitalik shows how much scalability there's left in Ethereum for just a normal ERC 20 transfer.

• 1:11:34David Hoffman?

  So if, for the viewers on YouTube, if you're looking at the top, that's where we are currently. It's this bar that spans the whole entire page. And then at the ideal stateful compression, it goes to a much smaller bar. And so we're at 188 bytes currently for an ERC 20 transaction. And then the ideal stateful compression is 23 bytes. And so in the future, with all of these optimizations, how many times can you fit 23 into 188? Quick math is 8.7 or 8.2 times. And so with all of these compressions, which have nothing to do with the actual protocol of the blockchain, the actual like block space of the blockchain, we can get eight times more scale in a basic ERC 20 transfer. So I just like this visualization.

• 1:12:14Ryan Sean Adams?

  It's a great visualization. By the way, in that Palenya episode, we talked about scalability in compression, right? And he thinks, sorry, they think with the introduction of EIP 4844 plus compression, this is the compression that Palenya was talking about, we're going to get a thousand X increase in roll up transaction throughputs and Ethereum transaction throughput. So that's what all this leads to and compression is an important part of that story. You know, it's another important part of the crypto story is the jobs market in crypto.

• 1:12:43David Hoffman?

  Jobs.

• 1:12:44Ryan Sean Adams?

  Jobs market still going strong. David, this is our time to remind the Bankless Nation to do what?

• 1:12:51David Hoffman?

  To get a job. And actually, you should get a job at Bankless, because Bankless has more jobs on the job board. Look at that. Podcast editor, we're throwing out more podcast content, so we're gonna need a third editor to add to the team. Also, if you know how to make like, DeFi tutorials on YouTube, if you're good at like, whatever those like Adobe, that's whole suite, and you can make good tutorials, we're definitely looking for that. Media operations, also at Bankless. Bankless is hiring so many, God, we're hiring so much. Jesus, this is crazy. Yeah. Oh, I'm reading off the jobs right now. That's not what I do. You should.

• 1:13:21Ryan Sean Adams?

  Yeah, no, you're supposed to be dancing right now. So I get to dancing, sir. Boardroom Labs.

• 1:13:25David Hoffman?

  If I read out the jobs, does that mean you dance?

• 1:13:27Ryan Sean Adams?

  No, it doesn't. It's not bidirectional, all right? This is unidirectional arrangement here. Boardroom Labs, they are, I better start this before I'm asked to dance again. Software engineer, DAO governance, also Manticore Games, manager of crypto marketing. What is that, David?

• 1:13:43David Hoffman?

  Oh, non-technical.

• 1:13:44Ryan Sean Adams?

  Thanks. Bankless, we're also looking for a writer, Vertex Protocol, Marketing Coordinator, still want a senior newsletter editor for Bankless Streams, Financial Analyst, Bankless Academy, Product Manager. Wow. I guess it's all Bankless jobs this week, but there are plenty of others. Actually, I shouldn't say that. There's a head of marketing, Pleaser Dow, The Sandbox wants a Biz Dev Manager, On Juno, Ethereum Foundation wants a front-end developer. There's a ton more. Go to the bankless.pallet.com/jobs URL to get access to those jobs and make sure you sign up to get these jobs via email. Guys, we got a lot more coming up. David, tell them what's coming up next.

• 1:14:20David Hoffman?

  Oh, we got the questions from the nation. How to get the ETH proof of work token if you think that token is valuable. I do not think it will be, but if you do, we'll tell you how to get it.

• 1:14:29Ryan Sean Adams?

  You're gonna get it anyway.

• 1:14:30David Hoffman?

  You're gonna get it anyway, whether it's worth zero pennies or whatnot. Also, some bridge risk stuff, and of course, the hot takes out of crypto Twitter. So, in order to get some of that stuff, you gotta go like and subscribe. You're gonna get it anyways, but you should also like and subscribe anyways. And we'll be right back after we get through some of these fantastic sponsors that make this show possible. Arbitrum is an Ethereum Layer 2 scaling solution that is going to completely change how we use DeFi and NFTs. Some of the coolest new NFT collections have chosen Arbitrum as their home, while DeFi protocols continue to see increased liquidity and usage. You can now bridge. Straight into Arbitrum for more than 10 different exchanges, including Finance, FTX, Huobi, and Crypto.com. Once on Arbitrum, you'll enjoy fast transactions with cheap fees, allowing you to explore new frontiers of the crypto universe. New to Arbitrum,

• 1:15:13David Hoffman?

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• 1:15:58David Hoffman?

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• 1:16:34Ryan Sean Adams?

  All right, guys, we're back with some questions from the Bankless Nation. That's questions from you. And if you've got a question for the weekly roll-up, make sure you follow Bankless HQ on Twitter. We post a request for questions once a week, and you can get your question answered if you post there. Number one, from nobody: "If there is a proof-of-work fork at the merge, will you receive the airdrop to a Ledger wallet?" I think that's a Ledger Wallet specifically, wants to know if this user wants to know if they will receive a part of that token, ETH POW token. Will they, David?

• 1:17:06David Hoffman?

  Well, you will absolutely because a ledger wallet means that you have your own private keys. So it's actually less about the ledger and more about do you have your own private keys? And because you have a ledger, you have your own private keys. So the answer is absolutely yes. If you have your own private keys, then you will get that you will be able to access your ether on the proof of work chain. If you have that ether, though.

• 1:17:28Ryan Sean Adams?

  Okay, so what happens if you have your ETH at somewhere like Coinbase?

• 1:17:32David Hoffman?

  Well, so that means you don't have your private keys, which means that is up to Coinbase. And historically Coinbase has honored forks. And we've seen that happen before. That happened with Bitcoin Cash, so when Bitcoin forked off into Bitcoin and Bitcoin Cash. Coinbase gave all Bitcoin holders their owed Bitcoin Cash. I mean, but blockchains forked many, many, many times. And so there have been other forks where Coinbase was like, that's too small of a fork. We don't care about that one. So you didn't get those other forks. And so, I mean Coinbase hasn't really taken a position. But if there's enough of like a movement behind the ETH proof of work chain, you could see Coinbase listing that chain, excuse me. And then they would give you your ETH proof of work token if they choose. But you're beholden to Coinbase.

• 1:18:16David Hoffman?

  It's up to Coinbase because you know, you trusted them with your keys.

• 1:18:19Ryan Sean Adams?

  I think some other exchanges have signaled that they would support a trading pair.

• 1:18:23David Hoffman?

  All the trash train, all the trash exchanges.

• 1:18:26Ryan Sean Adams?

  They will, but as long as someone, someone does it, then you could sell. That's how that works. If you want to sell, you can sell. And by the way, that's taxable income, apparently, if you're receiving air job.

• 1:18:36David Hoffman?

  Taxable income.

• 1:18:38Ryan Sean Adams?

  Taxable income for your air job, so sell it quickly. Second question from avi gupta dot ETH. I don't even remember the bridge I used to transfer my funds to Layer 2. But once funds reach L2, am I still exposed to bridge risk? Or just the risk of smart contract for L2?

• 1:18:56David Hoffman?

  That is a great question.

• 1:18:58Ryan Sean Adams?

  It's a great question. Once you bridge, you still have the risk of the bridge on your assets lingering forever?

• 1:19:03David Hoffman?

  Yeah, Ryan, can you go to bungie exchange real quick? Okay, so this is bungie exchange. It's like a bridge aggregator plus also a dex aggregator. So Ryan's got Ethereum to optimism. He's got 0.044 ETH on one side on the Ethereum chain, and he's asking for 84.8 USDC on the optimism chain. And so here's all these bridges. On the on the top one, this thing automatically selects the bridge that gives you the most value on the other side. And so that is currently hop for this current transfer. Tells you how much you're going to pay in gas, how long it's going to take. The next best bridge after that is the actual canonical optimism chain. Below that, you have hyphen bridge. Below that, you have across. Below that, you have multi-chain bridge.

• 1:19:46David Hoffman?

  There's all these different bridges, all like so many different ways to get to optimism. Does does the security of your assets on optimism depend on any of these bridges that you take over there? The answer is no. No, it does not. The only thing that matters is the canonical optimism bridge. Because once you get over to optimism, the only security dependency that you have is the actual canonical optimism bridge. And so, once you have ether on optimism, the bridge that you use to get there can break, and you still have ether on optimism. It's not beholden to that particular bridge. And this is only true for layer twos on Ethereum. This is not true for cross-layer-one bridges. If you are a cross-layer-one bridge,

• 1:20:31David Hoffman?

  a multi-sec bridge to Ethereum to Solana, or Ethereum to Avalanche, then you are beholden to whatever bridge that you use to get there. But then you could so you could bridge your ether from Ethereum to Avalanche, and then you could trade that ether for the AVAX token. And then you are no longer beholden to that bridge, because you sold that risk off to somebody else. And so, this is a really good lesson in just like bridge risk. For all layer twos, if you're on Arbitrum, and you have your Arbitrum ether, you only are at risk of the canonical Arbitrum bridge, not the bridge that you use to get there.

• 1:21:05Ryan Sean Adams?

  That's really cool, David. So like, yeah, good overview here. So you can cross with whatever. Like, you can cross with whatever janky bridge.

• 1:21:12David Hoffman?

  Right.

• 1:21:13Ryan Sean Adams?

  Like you'd need to, it could be any bridge entirely, as long as the optimism bridge itself remains intact, you are fine. There is still bridge risk.

• 1:21:23David Hoffman?

  Right.

• 1:21:24Ryan Sean Adams?

  In that the optimism bridge itself, the canonical bridge could go down, but if like you cross over to the island on some bridge that looks like something like this, this janky sort of like it's got holes in the middle of it.

• 1:21:35David Hoffman?

  Right.

• 1:21:35Ryan Sean Adams?

  And it's just rope and like pieces of of of wood. Uh, as long as the main optimism bridge stays intact, all the other bridges could collapse. You will be fine.

• 1:21:46David Hoffman?

  Mm hmm. Right, exactly. And there, there is bridge risk. So if you're using hop to go from Ethereum to optimism, there is bridge risk while your assets are like in flight, while like you're there out of your Ethereum wallet and they have not yet landed in your optimism wallet. Yeah, 20 minutes or less, usually it's less. Uh, once it's, once it lands on optimism, then the only bridge that you have risked to is the actual canonical optimism bridge.

• 1:22:07Ryan Sean Adams?

  Very cool. Here's another question. If I stake one minute after the merge, am I allowed to un-stake whenever I want? Or I'm, am I subjected to the same waiting time to un-stake of who staked before the merge?

• 1:22:17David Hoffman?

  You, sir, or yes, sir, Matt, are beholden to the same wait times. Withdrawals are on, are not enabled for anyone staking their ether for six to 12 months after the merge. So even after the merge happens, if you begin staking, then you do not, you're not able to withdraw. You are still stuck like everyone else.

• 1:22:36Ryan Sean Adams?

  Uh, six to 12 months, and then there will be some sort of software upgrade, a fork, and then everyone will be able to un-stake at once. But until that time.

• 1:22:43David Hoffman?

  Nope, no, they will not be able to call un-stake at once. There is, there is a queue. Yes.

• 1:22:48Ryan Sean Adams?

  But like everyone can start the process of un-staking at once.

• 1:22:51David Hoffman?

  To un-stake, yes.

• 1:22:52Ryan Sean Adams?

  That's a good clarification.

• 1:22:53David Hoffman?

  Yes.

• 1:22:54Ryan Sean Adams?

  So we're all in the same boat together. We're all like staking until that next fork happens, which by the way, is pretty bullish for ETH price.

• 1:23:00David Hoffman?

  It's really bullish.

• 1:23:02Ryan Sean Adams?

  Speaking of one-way tickets, fam. All right, let's get to some takes of the week.

• 1:23:06David Hoffman?

  Takes of the week.

• 1:23:07Ryan Sean Adams?

  From Palenia. Palenia coming to the podcast again on Monday, but what is Palenia saying here? This is a governance post.

• 1:23:14David Hoffman?

  Yeah, so Palenya actually produces a governance post per optimism. This is one of the few like governing things that Palenya does. And says, they introduce a proposal to pause governance funding voting cycles until some level of optimism layer to decentralization has been achieved. So what Palenya is really saying is that we should stop distributing the OP token, stop doing rewards, stop doing governance proposals, until optimism is more decentralized. And they cite regulatory risk as one of the big reasons behind this. So they're just saying, hey, let's make sure the actual thing, optimism, is more decentralized than it currently is before we start paying out OP tokens as like reward incentives.

• 1:23:57David Hoffman?

  So, you know, kind of a contrarian take, but this is kind of why we appreciate Palenya, because they are very just clear and sober minded.

• 1:24:05Ryan Sean Adams?

  And Palenya being a good governor too. There's a pretty detailed post about this too. I think I am sticking to Palenya on the optimism.

• 1:24:13David Hoffman?

  As am I.

• 1:24:15Ryan Sean Adams?

  Oh, cool. This is a take from Ryan Anderson. He says, "The NFT space is like cavemen inventing the wheel and then only using it for roulette."

• 1:24:24David Hoffman?

  And then this is a valid use of a wheel.

• 1:24:27Ryan Sean Adams?

  Yes. Do you think there will be some non speculative NFT cases, use cases in the future in the next bull run?

• 1:24:35David Hoffman?

  I know a project that's working on right now, Ryan.

• 1:24:37Ryan Sean Adams?

  Utility NFTs, baby.

• 1:24:39David Hoffman?

  Utility NFTs. Token gated access.

• 1:24:42Ryan Sean Adams?

  Do you remember when ICOs were just basically speculative tools?

• 1:24:45David Hoffman?

  Right.

• 1:24:45Ryan Sean Adams?

  And like not very useful.

• 1:24:46David Hoffman?

  I remember when ICOs were the future.

• 1:24:48Ryan Sean Adams?

  Tokens were, right? Like tokens did nothing. They were completely stupid and useless in 2017. And it was only during the bear market. By the way, are we at a bear market still? Do we still say that?

• 1:24:59David Hoffman?

  I don't think so.

• 1:25:00Ryan Sean Adams?

  God, the bear market didn't last very long.

• 1:25:02David Hoffman?

  No, it really didn't.

• 1:25:02Ryan Sean Adams?

  We're trying to brand this thing the build market. And like, if we're already done, then I guess all that work is over.

• 1:25:08David Hoffman?

  Yeah, that's actually a good point. We should have, we should, it'd be nice to have the bear market for a little bit longer, just to really put a fire under people's ass.

• 1:25:15Ryan Sean Adams?

  I don't think we'll bull yet. I think we'll crab for a while. I think the merge will be catalyst.

• 1:25:18David Hoffman?

  Yeah, crab between 3 and 2000.

• 1:25:20Ryan Sean Adams?

  The crab market's not, doesn't sound well, good though. It's either bull or bear. There's no in between. All right, this is another take. I can't read my own takes.

• 1:25:30David Hoffman?

  Ryan shot Adams' classic take. Ryan says, "I hear bad people use the internet. Let's just ban TCP IP and SSL and be done with it." And Funk9871, Funk is it backwards, punk? They say, "Especially SSL." Do you know what SSL stands for? Secure Sockets Layer is a standard security technology for establishing an encrypted link between a server and a client, basically a website. Okay, cool. Okay, and so Funk9871 says, "Especially SSL. You can have military-grade encrypted communication with servers? Scaredy face? Imagine what could be wired there. Pedophiles, instructions for bomb building, conspiracy theories, hate speech. We need to censor this." Yeah, "Also, your transaction and credit card data. Let's make sure that that stays like open for all of the internet to watch." No, thanks.

• 1:26:16Ryan Sean Adams?

  Exactly. Exactly the point. So it's like, what do we do? You just ban everything?

• 1:26:20David Hoffman?

  Right.

• 1:26:21Ryan Sean Adams?

  I mean, we need privacy. We're gonna have digital crypto technology. By the way, what does this say for the central bank digital currency? Right? Do you think Treasury is going to want to enable privacy by default on that thing? The central bank digital currency? No, they're not gonna give you privacy. They're gonna want a backdoor into everything.

• 1:26:39David Hoffman?

  This is why, like, in a CBDC, there would also never be like a public accessible virtual machine, because then you could build tornado cash on it.

• 1:26:47Ryan Sean Adams?

  Exactly. Right? So they're gonna hamstring the whole thing, which is, I guess, the bull case for crypto. But I guess your take is, David, it's all gonna work out okay, right?

• 1:26:56David Hoffman?

  It's all gonna work out okay. Have faith. You gotta have faith. All right. This one's great. You zoom out a little bit.

• 1:27:02Ryan Sean Adams?

  Is this the meme of the week? No, we're not in the meme stage yet.

• 1:27:05David Hoffman?

  Well, we had two memes of the week, and this is the one that we put in the take section. The tweet says, "Inflation is down 0.2% to 8.5%. Second worst recorded inflation ever." And then the picture goes crypto MFers. And then it's the picture of the hangover, and they're all gambling at their roulette tables. Like, yes, inflation's down 0.2%. Let's go to the casino.

• 1:27:27Ryan Sean Adams?

  It is. I'm surprised the market reacted so bullishly to this like speck, tiny, tiny micro speck of good news. But such is the market. All right, David, close this out, man. What are you bullish on this week?

• 1:27:40David Hoffman?

  Can I really say anything other than Ethereum right now? Like, we just scheduled the merge, bro. Okay, so this is something I always think is super ironic. In 2017, that bull market got, the Ethereum bull market was partially catalyzed by everyone wanting to buy Ether so they could stake it. And that was me. I was like, oh, gotta get as much Ether as I can get.

• 1:27:57Ryan Sean Adams?

  Passive income, baby.

• 1:27:58David Hoffman?

  Yeah, passive income, because they're gonna go to proof of stake in 2018. And then 2018 came and like the roadmap just like was not defined and then we went into a bear market. And then like DeFi summer hit and I was like, oh yeah, like proof of stake by the end of 2020. Like, oh my God, I gotta get as much Ether as I can, so like, so I can stake it at the end of 2020. And then like that came and went. And then like now we're into the second, the last part of 2022. And we actually have it scheduled. It's actually real this time.

• 1:28:22Ryan Sean Adams?

  It's actually having.

• 1:28:23David Hoffman?

  Now, so instead of like being the catalyst for like a bull market that's actually happening, right now, it's a catalyst for a bull market that is completely proof of, like Ethereum proof of stake being driven right now, so far.

• 1:28:35Ryan Sean Adams?

  No, to be fair though, David, you could stake when the beacon chain went live.

• 1:28:39David Hoffman?

  True.

• 1:28:40Ryan Sean Adams?

  Right? Which is a long time ago, but you've been, have you been waiting with the bulk of your ETH for kind of the merge?

• 1:28:45David Hoffman?

  No, my, my, the bulk of my ETH is not on the beacon chain.

• 1:28:49Ryan Sean Adams?

  Are you gonna start staking like post, post-merge? Is that your catalyst or you're gonna wait for the, um, the next fork where you can actually withdraw?

• 1:28:55David Hoffman?

  Um, yeah, that's a really good question. I have not seriously considered that.

• 1:29:00Ryan Sean Adams?

  You haven't thought about what you're gonna stake or how much? You know what we need, David? Do you remember that episode we did on, uh, how much ETH can you retire on? A long time ago.

• 1:29:07David Hoffman?

  Right, right. How much was that? I think it was like, I think it was just a little over 100 ETH. To get a $60,000, this, a $60,000 a year salary off of 100 ETH.

• 1:29:17Ryan Sean Adams?

  This was before we had two years of like 20% each year inflation, but, or like, you're like massive inflation, so maybe it's a bit higher now.

• 1:29:24David Hoffman?

  That was also assuming a $5,000 ETH price as well, but we'll get there too.

• 1:29:28Ryan Sean Adams?

  Okay, yeah. Anyway, how much, the conversation's back, baby.

• 1:29:32David Hoffman?

  Yeah, okay, so like, the, the merge is scheduled. Inflation down, now hopefully that continues. L2 tokens are up, fee tokens are up, like not only is ETH bullish and proof of stake bullish, but tokens are also bullish. Tokens are having a great moment right now. So like, people are feeling good about stuff. And I'm hoping, Ryan, that that makes people feel better about stuff in the future. And then we can have a bull market.

• 1:30:00Ryan Sean Adams?

  Here's a picture for you. Which of these people are you, okay?

• 1:30:05David Hoffman?

  The one missing the tooth.

• 1:30:07Ryan Sean Adams?

  I'm showing the hangover picture again. That's it. That's us right now.

• 1:30:12David Hoffman?

  Which tokens have I put my bets on? Ryan, what are you bullish on?

• 1:30:17Ryan Sean Adams?

  I was listening to the Balaji episode again, the episode that came out this Monday, the one on nations. And then like in the backdrop of an actual nation state banning a privacy protocol, banning code, banning effectively speech, right? Went back to like, what am I bullish on? Nations. And the way Balaji defined it is nation is different than a nation state. Nation is a community. It's a tribe of people. The Wikipedia definition is a community of people formed on the basis of a combination of shared features, such as language, history, culture, territory, belief. Nations. What are nations? They are communities. That is not the nation state, but I feel like the nation state is kind of conflated those two together.

• 1:31:03Ryan Sean Adams?

  And they want the word nations to actually mean this nation state type thing. And it's different. It's different because we can have these things that are internet nations, digital nations. And I think this unlocks something big for communities, for societies, for groups of individuals with shared beliefs. And this opens up an avenue for humans coordinating outside of the nation state. At first, the nation states are, I think, going to feel a little threatened by this. We're starting to see some of that, like feeling threatened, don't know what to do with this new thing.

• 1:31:37David Hoffman?

  You're not a nation. You don't have a flag.

• 1:31:40Ryan Sean Adams?

  You don't have rights. You don't, like, you can't, you're creating your own money? That's not real money. It's fake internet money. And like, you're not, and it'll take time. But the things that we will build in this new digital nation, internet nation, will be different than the nation state. And I think we'll be complementary to it over time. And I can't wait to start unlocking some of those new things. Balaji said in our episode, he was like, the 2010s, we discovered internet money. The 2020s are going to be about discovering. Internet nations. And I think that is a big thing. We're going to like define and uncover and start to see use cases for this decade. I think people, people have a hard time think

• 1:32:23Ryan Sean Adams?

  imagining this right now in the same way that is very difficult to imagine a crypto internet money back in 2011. You have to have like a big, broad imagination. But I think that's it, man. We're in the process of defining and like, what I love going back to is like, you remember Blas, he was talking about sometimes you have to go back in order to go forward.

• 1:32:42David Hoffman?

  Right.

• 1:32:42Ryan Sean Adams?

  I find myself being very attracted to like, some of the founding principles of nation states, right? Like you go back to kind of like the Federalist Papers and like the United States Constitution. And like, those are the base principles for

• 1:32:55David Hoffman?

  They got it right.

• 1:32:56Ryan Sean Adams?

  Humans want to live. They got that right. And they built a protocol called a state around that. And that's cool. But like, some of these base principles, we can manifest the core base principles of life liberties, liberty and the pursuit of happiness in internet protocols. And what does that look like? Anyway, I think we're in this new era of nation builders.

• 1:33:17David Hoffman?

  Yeah, I think I think you're saying you're bullish on nations without states.

• 1:33:23Ryan Sean Adams?

  Yes.

• 1:33:23David Hoffman?

  Nations without states.

• 1:33:24Ryan Sean Adams?

  Very, very careful not to stay nation states. I'm bullish just on nations and specifically internet nations.

• 1:33:31David Hoffman?

  Right.

• 1:33:31Ryan Sean Adams?

  That is bullish on small communities of people.

• 1:33:33David Hoffman?

  Yeah. I think that's what means you're bullish on Discord channels.

• 1:33:37Ryan Sean Adams?

  Yes. Discord channels.

• 1:33:39David Hoffman?

  Discord channels. I mean, I said I was bullish on tokens. I think you just said what I meant in a different way.

• 1:33:44Ryan Sean Adams?

  Yes. Well, you're bullish on their assets, all right. I'm bullish on the abstract idea.

• 1:33:49David Hoffman?

  But they do have tokens.

• 1:33:52Ryan Sean Adams?

  I think Blas just nailed it, man. I just, it's a good episode. Anyway, but what do we got for meme of the week?

• 1:33:59David Hoffman?

  Meme of the week. Let's do it.

• 1:34:01Ryan Sean Adams?

  Just cooking it up. I am sharing a picture of trains and Godzilla.

• 1:34:06David Hoffman?

  Yeah. So this is my, the reason why I love this train Godzilla. Where'd you get Godzilla?

• 1:34:11Ryan Sean Adams?

  I don't know. It's blurred. What is that thing on the track?

• 1:34:13David Hoffman?

  That's one of those things that like ends a train from going off the track.

• 1:34:16Ryan Sean Adams?

  What? That's not like a Balrog or a winged beast thing?

• 1:34:20David Hoffman?

  What are you looking at? Man, did you watch this bunch of Lord of the Rings with your kids on vacation?

• 1:34:24Ryan Sean Adams?

  Actually, I did.

• 1:34:25David Hoffman?

  It's just like a barrier. It's like a wooden barrier because that's the end of the train track. Okay. We watched it. This is a Back to the Future movie where they go back and is this Back to the Future number one? I think it might be. Maybe my number two, I can't remember. Anyways, this is when they have to get their car up to 88 miles an hour using a train.

• 1:34:41Ryan Sean Adams?

  Yes, it's three, Back to the Future 3.

• 1:34:43David Hoffman?

  That's Back to the Future 3, okay. So then they get, they get the DeLorean up to 88 miles an hour, and so then it disappears and goes back to the future. And that is the merge. The merge is when like the Ethereum chain disappears from the proof of the big, slow, chunky proof of work train, and then it disappears, and then it goes to the proof of stake chain, which is the future. And then the proof of work train literally goes off of the track and crashes and burns. And this is why I've been calling the DeFi ecosystem on the proof of work chain is divided by zero. Once the Ethereum chain leaves proof of work and goes to proof of stake, the proof of work chain crashes. It goes off the bridge. It dies. And this is a great meme that encapsulates this.

• 1:35:23Ryan Sean Adams?

  There you go. It's Back to the Future, nothing to do with dragons or Lord of the Rings or whatever else I said. But this does look like it's from a video game. Am I right about this? Or are these actual scenes from a movie?

• 1:35:33David Hoffman?

  80's animation, bro.

• 1:35:34Ryan Sean Adams?

  That's 80's animation? It looks so terrible.

• 1:35:36David Hoffman?

  When did Back to the Future come out?

• 1:35:37Ryan Sean Adams?

  It's 80's, yeah, for sure.

• 1:35:39David Hoffman?

  1985, yeah.

• 1:35:40Ryan Sean Adams?

  Man, alright. How time flies. That's it for this week, guys. As always, none of this has been financial advice. Never is on Bankless.

• 1:35:49David Hoffman?

  Wasn't legal advice either.

• 1:35:50Ryan Sean Adams?

  It wasn't legal advice whatsoever, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:36:00David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcasts, and community as a Bankless premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content, and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anythings, and weekly rollups where

• 1:36:43David Hoffman?

  we summarize the week in crypto and other fantastic content. Thanks everyone for watching and being on the journey as we build out the Bankless nation.