ROLLUP: Stablecoin Surge | Hyperliquid Drama | Tornado Cash Freed | Robinhood Banking

This week, Mike Ippolito joins us to break down crypto’s big flip as institutions rush into stablecoins—triggering excitement and anxiety alike. Hyperliquid faces drama after a high-stakes market manipulation attack, BlackRock's tokenized treasuries surge to nearly $2 billion, and the U. S. Treasury finally removes Tornado Cash from its sanctions list. Meanwhile, Robinhood enters banking, raising questions about DeFi’s future. We dive into all of this and so much more. Follow Mike on X & Checkout Bell Curve: https://x.com/MikeIppolito_ https://www.youtube.com/@bellcurvepodcast/videos ------ 📣CRYPTO TAX CALCULATOR | TAXES MADE EASY https://bankless.cc/Cryptotaxcalculator ------ BANKLESS SPONSOR TOOLS: 🪙FRAX | SELF SUFFICIENT DeFi https://bankless.cc/Frax 🦄UNISWAP | SWAP ON UNICHAIN https://bankless.cc/unichain ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🌐CELO | BUILD TOGETHER AND PROSPER https://bankless.cc/Celo 🏦INFINEX | THE CRYPTO-EVERYTHING APP https://bankless.cc/Infinex ----- ✨ Mint the episode on Zora ✨ https://zora.co/coin/base:0xe36312b13decbe5af463aaf188a510b69f28ce7e ------ TIMESTAMPS & RESOURCES 0:00 Intro 0:56 Blockworks DAS Week Recap 6:45 Saylor’s Strategy bought more Bitcoin https://x.com/WatcherGuru/status/1904155021781901741 https://x.com/SaylorBuysBTC/status/1904631210887836142 12:33 Stablecoin Gold Rush https://x.com/TrustlessState/status/1905219932612178237 https://x.com/JasonYanowitz/status/1904886554708898112 https://x.com/KobeissiLetter/status/1904521913528975550 25:32 Blackrock’s BUIDL fund is expanding to Solana https://x.com/solana/status/1904520943667716531 https://x.com/carlosdomingo/status/1904516023623028894 44:59 Hyperliquid https://x.com/MacroCRG/status/1904895153384357990 https://x.com/HyperliquidX/status/1904923137684496784 https://x.com/toghrulmaharram/status/1904935313081856406 https://x.com/Dogetoshi/status/1904919007930577175 1:03:10 US lifted sanctions on Tornado Cash https://x.com/matthuang/status/1904192079691170137 https://wewantjusticedao.org/ 1:05:55 Robinhood Banking https://x.com/RobinhoodApp/status/1905127283532484696 1:09:38 Closing & Disclaimers ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

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

• 0:04David Hoffman?

  Bankless Nation, welcome to the Weekly Rollup. Each week, I'm bringing on a different co-host to help me go through the news. And this week, I have the pleasure of being joined by a dear friend and crypto media colleague, Mike Eppolito. Mike, happy Friday. Glad to have you here.

• 0:15Speaker 01

  Happy Friday, buddy. How we doing?

• 0:17David Hoffman?

  Really good, really good. Really good week. Interesting week. There is a lot to talk about. Michael Saylor bought more Bitcoin, which is the most boring thing of the week. It only gets more exciting from there. Stablecoins had a big week, were above $200 billion in supply, with four new stablecoin slash tokenized money markets being entered into the market, or at least announced. BlackRock's Buildal Fund triples in size in just the last three weeks. Hyperliquid had a rocky week this week. Market manipulation attack leads to an industry-wide discussion about what rules do and do not apply to Hyperliquid. The US Treasury finally removes tornado cash from the OFAC list. And then Robinhood announces Robinhood Banking, something I want to keep an eye on. That's the news of the week that I got for you to talk about this week, Mike.

• 1:00David Hoffman?

  But also, we're coming after just DAS week out of the Blockworks ecosystem. And broadly, that was for the industry as a whole. So maybe before we get into the specific news of the week, I can just get your broad strokes about how you're feeling about the industry, about the fundamentals, about whatever comes to mind first and foremost. Also, congratulations on DAS. You guys threw a killer conference.

• 1:21Speaker 01

  Thanks, buddy. I appreciate it. Yeah, I mean, we've been doing DAS now for six years. And it's funny, we have a little bit of, we have insights into both a very crypto-native part of the ecosystem, and obviously, we collaborate on Permissionless, which is kind of like our T-shirts conference. And then we've been doing DAS actually for longer, and that's for the suits. And so we've kind of had this view of what's going on.

• 1:40David Hoffman?

  T-shirts. I was wondering what you meant by that.

• 1:42Speaker 01

  The t-shirts and the suits. So we've got a view into what's going on in the institutional side of the space and more of the developer, builder, VC side of the space. And typically, I mean, over the course of at least the last six years, it's been very consistent that in the kind of the builder trenches, the vibes are almost always better. This was kind of a market shift or divergence in sentiment, where actually, you've got, you know, people in the gutter a little bit in more of our corner of the industry that you and I spend more time in. And the suits are kind of running around like a kid, the kids in a candy store, and everyone's very, very excited. And they're excited, I think, because a lot of the things that people have been talking about over in that corner of the world for a long time, RWAs, stablecoins, you know, a real regulatory embrace by the US administration, that's all finally happening.

• 2:24Speaker 01

  So, you know, the TLDRs, there's an enormous amount of capital and... You know, large new fintechs and more traditional, you know, financial folks building in that side of the space. I think they're actually waiting for Hagerty's genius stablecoin act, which hopefully should get passed in the next, I don't know, 90 days or so, and then the upcoming Fit Market Structure Bill. They actually have to wait until that stuff comes into effect. But once they do, I think there's going to be a massive inflow, especially in the stablecoin part of the ecosystem.

• 2:53David Hoffman?

  Yeah, the chant of crypto from Genesis is the institutions are coming, the herd is coming. And obviously, it makes sense that they are not actually coming until we get crypto regulation pushed through Congress, which is currently happening with the pro crypto administration. So finally, that meme that we have been chanting for over a decade now is finally here. And it's just interesting timing that that is happening with like the flipping of morale. Like you said, from institutions are very high morale and the retail crypto Twitter crypto natives have had some of the lowest morale that I've seen in crypto since my time in crypto, that I would say.

• 3:32Speaker 01

  Yeah, same. But I think that's, I think that's, I, you and I have talked about this a little bit before. I think this is a moment in time where it's kind of the end of the beginning, right? So the first 15 years or so of crypto have been very exciting. It's been marked by visionary founders, kind of tinkerers, people that are interested in building very wonky, crazy things. And now we're at a point where this industry has been accepted and embraced by at least this administration in the United States. And this is where rubber hits the road and we actually have the opportunity to build things that scale. That inevitably means that there are going to be compromises. It means that, you know, we need new types of founders and VCs and investors, or VCs that know how to grow and scale companies. Founders that are interested in doing that, they're not necessarily just tinkerers, but they're scalers and they're innovators.

• 4:16Speaker 01

  And so there's going to be a little bit of change and churn. And I expect some of the incumbents actually in the industry will be roughly upset about it. But I think the, the light at the end of the tunnel is we actually have globally scalable financial products, which is what we all wanted from day one. So I remain super, super excited actually about this, the next couple of decades. And yeah, I think we're in for a really interesting ride.

• 4:37David Hoffman?

  Yeah, I think the crypto native side of that spectrum just kind of needs to learn how to get comfortable in this new world. Like we, on Bankless, we have this theme of we're going west, this is the frontier. And what that means is like, you know, we're going away from civilization into the wild. And I've always kind of thought is like, the institutional side of crypto is the east, that's the New York, that's the Wall Street, that's Washington DC. And then the crypto ethos is, well, we're going west, we are leaving that part of the world, and we're going into this like lawless frontier. And then when the east finally arrives and like also moves its way west with us, then our like, the crypto native like way of life is like under threat a little bit. I think that's like, maybe that's kind of me reading into it a little bit too much, but that's kind of like how I kind of think about it.

• 5:23Speaker 01

  No, I think your analogy is exactly right. Like, imagine you were a pioneer and you moved from the east coast out, you know, out to the wild west, right? The, what type of personalities were attracted to that? Kind of people that were very courageous, people that really like risk reward, right? It's a totally new, wide open zone. And you got there and there were things that were really nice. You had a lot of freedom, you had a lot of opportunity. You also might get shot in the middle of the night and you didn't have an enormous amount of recourse. So eventually, society catches up to you. For some people that were out there, maybe for, you know, maybe that were optimized towards that a little bit too much, it was kind of, there was a little bit of melancholy or sadness. But, you know, there were an enormous amount of benefits that came along with that as well. I kind of think that's the base that we're in in crypto, too.

• 6:06David Hoffman?

  Yeah, yeah. Speaking of society catching up to you, it's tax season. So if you were busy on-chain last year, we've got a perfect tool for you. This is a crypto tax calculator. We partner with them every single year during tax season because I think all of us westward people, we all hate taxes, especially in crypto, because they are the most ridiculous, convoluted, like accounting tool that we ever have to deal with every single year. But that's why we use crypto tax calculator. My accountant uses crypto tax calculator herself. So that's how you know that it's good. Bankless 15 to get 15% off. There's a link in the show notes to get started with crypto tax calculator. Make sure your taxes are easy this year. All right, starting this week off, With news that we hear almost every single week, but it has been a while.

• 6:49David Hoffman?

  Michael Saylor has acquired almost 7,000 more Bitcoins for $584 million last week. Average price, $84,000 per Bitcoin. That means they now own over 500,000 Bitcoin, 2.4% of the total supply. Mike, you have heard this news before. We have talked about this news before. This is nothing new. It's nice to see Michael Saylor buying again. There was a temporary hiatus of maybe like three weeks, maybe even four weeks. Anything to say, or is this just like par for the course?

• 7:18Speaker 01

  I think that Michael Saylor is a very savvy player and has played this game extremely well. I don't know. I met him at Digital Asset Summit last week. And you know what I can say about the guy is that he is a true believer in the cause and really wants to onboard, you know, a bunch of people and companies into buying Bitcoin. I get the sense that in private, he's very similar to how he represents himself in public. And you know, what I would say is oftentimes people get worried about, you know, Saylor. I think people have a little bit of PTSD from last cycle, where you had a bunch of centralized lenders and large holders of Bitcoin blow up.

• 7:56David Hoffman?

  Main characters.

• 7:57Speaker 01

  Main characters.

• 7:58David Hoffman?

  A lot of main characters, yeah.

• 7:59Speaker 01

  And so I think people are very worried about Saylor being, you know, at some point, an existential risk to Bitcoin. And, you know, he keeps issuing, you know, he just did a, an issuance of preferred stock strife, where you get a 10% essentially dividend there. And people are worried, hey, is he going to be able to pay these? And what I would say is, it's not like the operating company, MicroStrategy, is spitting off a lot of cash. But what I will say is that he, he has structured these, these offerings in a way that he's not at risk of being, you know, quote, margin called, right? He can suspend that 10% dividend and investors cannot be happy. That means that MicroStrategy, the stock can go down quite a bit. But what it does mean is that, at least from my vantage point, I'm not an expert at this, you know, but, you know, he's not at massive risk of liquidation or margin call.

• 8:43Speaker 01

  So I think he's a pretty savvy player and I think, you know what I would actually liken this to? Is that the advantage, the insight that he's taken advantage of here is that Wall Street wants to buy his stock, even though there's not a fundamental reason to. So you know how you and I sometimes Sometimes look at something in crypto and you're like, this is so stupid, but it's gonna go up.

• 9:01David Hoffman?

  But I'm buying it. Yeah.

• 9:02Speaker 01

  But I'm buying it. He basically did the Wall Street equivalent of that.

• 9:05David Hoffman?

  He made MicroStrategy into a Wall Street meme coin, right? Because that's the the brand value. I think part of the MicroStrategy strategy, it's actually not just called strategy today, is that Michael Saylor is himself this very grandiose figure. It would not, like the strategy strategy would not work with a humble Michael Saylor. He has to be like this larger than life figure in order to like add the meme power into the MicroStrategy stock, which is where he's getting this like, you know, margin to be able to lend out and just like, you know, sell equity, do these financial alchemies in order to to buy a bunch of Bitcoin. That's kind of my take on him.

• 9:44Speaker 01

  So what do you think? I don't know if you saw, but GameStop filed to sell, I think, 1.3 billion dollars of equity to purchase Bitcoin. And I'm I'm curious if someone else is going to be able to run back the Michael Saylor playbook. And, you know, one pattern that we've seen time and time again in crypto is that there is a there is a new sexy thing. It goes up quite a bit and then it gets replicated to death. And suddenly you have a bunch of different, you know, a large supply of different assets to express the same trade and it ends up getting compressed. I I think that it probably won't end up being the same here. I sort of doubt that GameStop sees the same success that Michael Saylor has and Strategy, but, you know. It's interesting to see that someone else is trying to run this playbook back.

• 10:27David Hoffman?

  I think that's right. Michael Michael Saylor and Strategy is the Bitcoin of the Strategy Strategy.

• 10:36Speaker 01

  It's getting very meta in the commentary.

• 10:38David Hoffman?

  Yeah, getting very, very meta. But but GameStop is itself also a meme stonk. Like it created this meme stonk category. And so I think it is a pretty viable like second candidate for the Wall Street Bets crowd to like add more meme power into the GameStonk stonk to do the Strategy Strategy.

• 10:56Speaker 01

  I agree. Okay, so the other thing too, I'm reading this, so it also, there's, these are convertible senior notes, so it's not an equity offering, but still, they're converts, but yeah, it's, yeah, we'll have to see what, well, what do you think? Do you have any predictions for, do you think this goes, how do you think the market responds to this, David?

• 11:14David Hoffman?

  I think it's all dependent on Bitcoin. If Bitcoin starts to go up, it will add more weight to the memetic idea that you can just issue equity to buy Bitcoin. And if Bitcoin goes down in the near term, then this like GameStop adding fuel to the fire is actually not working and there's no fire to add the fuel to. So I think it really depends on like the memetic value of Bitcoin, which is all memetic value.

• 11:40Speaker 01

  It's funny, it's, I don't know, there are a lot of times in crypto where you look at something that's happening and you think maybe it's working for some fundamental reason and there's some kind of regime shift or there's some sliding, sliding doors moment. And then the real reason ends up being much stupider than you ultimately hoped. And you remember there was, there's been a push for the last couple of years to put Bitcoin on company treasuries. And now to defend against the devaluation of the dollar, right? That feels very heady and real as a use case. And then you realize that actually it's just, why public companies are actually buying Bitcoin is to turn their stock into a meme stonk. It's like a much sillier reason than you would have ultimately hoped, but yeah, maybe it's a trend.

• 12:24David Hoffman?

  Yeah, it's a light comes on in the club moment, but so long as Bitcoin's going up from 85,000 to go higher, then the music will keep on playing. All right, let's get into something that's completely different than Bitcoin, which is stablecoins. So not this week, but maybe in the last like two weeks, stablecoin supply has broken above 230 billion. It's somewhere around 210 to 230 billion total supply. Ethereum stablecoin dominance at 58%, followed by Tron at 31%, but also we have four new either stablecoins or tokenized money markets that were announced this week. We got USD1 from World Liberty Financial. We got Avit from Custodia Bank. We got YS, WY.

• 13:06David Hoffman?

  ST from the state of Wyoming. And then F Y H X X, which is a money market, tokenized money market front from Fidelity. These are all announced. These are not launched. These are not alive tokens. But each one, each one is a little bit different, like World Liberty Financial, 100% backed by short-term US government treasury, USD deposits and other cash equivalents. Minted on Ethereum and Binance, a smart chain initially. Custodied by Bitco. Custodia Advantage Bank are introducing the first bank issued stablecoins. That is a bank and they are issuing a stablecoin and that is a first. Pre-existing bank establishing a stablecoin. That's pretty cool. The state of Wyoming. We will issue a fiat-backed stablecoin, the first issued by a US entity. I guess that means like a public entity, like a state.

• 13:52David Hoffman?

  Fully backed by treasuries, cash repurchase agreements, capitalization requirement of 102%. Currently being tested on Avalanche, Lana, Ethereum, Arbitrum, Polygon and then Base as well. Working with Layer Zero to facilitate token deployments across all these networks. And then testing phase will continue for until around a potential launch date of July. And then of course, Fidelity, just on-chain tokenized money market. Looking to go live in May. And then here's your co-founder, Jason Yanowitz tweeting out, maybe it's just a good summary of this is. Fidelity's stablecoin is just the beginning. Every bank brokerage fintech is thinking about doing the same. Stablecoin legislation passing in the next few months will satellite this. The biggest winners will be crypto's brand and Circle and Tether.

• 14:35David Hoffman?

  Okay, so I think the, one of the themes of the last two weeks is that people are very aware of that. That there is this institutional stablecoin gold rush that is happening. So that's all the news, that's all that news, like stablecoin supply, breaking all-time highs for new entrance into the market. What's your take on all that news?

• 14:54Speaker 01

  Yeah, I think it's very difficult to reason about what is going to happen when there's a bunch of new issuers coming to market with different stablecoin offerings. And I think you can broadly group stables into two different groups today. There's USDT and USDC, and these are the market leaders, but they're also unique in the sense that people just hold them. They don't need to pass their users' yield back, although USDC has a bunch of revenue shares with Coinbase, other market makers, et cetera. So there is some amount of essentially yield getting passed back. And Tether historically hasn't really done that. But from the user perspective, they're still holding that without the expectation of yield. And then there's a bunch of other stable coins, like the USDS type thing, which is they're sort of positioning themselves in the market as more of a savings vehicle.

• 15:39Speaker 01

  And so the advantage there is that they have this value proposition to users, which is, hey, you can hold this and get some amount of yield, although these stable coins are a net interest margin business, right? So you're directly eroding your profits by having to pass a lot of the yield back to users. Then you have all of these different new entrants here. So you've got Fidelity, you've got Custodia, you've got World Liberty Phi issuing on Binance Smart Chain, which is, I mean, that headline just in and of itself is absolutely bonkers. And then the state of Wyoming itself. And so I'm not 100% sure here. It really depends on what are the distribution rails for these stable coins. And I think if you look at today, why have certain stables taken off?

• 16:24Speaker 01

  It mostly has to do with becoming a liquid trading pair. So if you look at, like, why is Tether done so unbelievably well? Is because most of the trading activity for crypto has happened on offshore centralized exchanges. They could not hold dollars, so they needed another dollar-like instrument. That's what their users wanted. And they found Tether. All right, so Tether is this very, very sticky product where most of the trading activity happens. That's the distribution that comes from these centralized exchanges. There's a similar story with USDC as well, which is, obviously, they have a huge distribution partner in the form of Coinbase, but also the reason that I think USDC is very sticky.

• 17:08Speaker 01

  And USDC has come under a lot of fire and feels like it's coming under a lot of pressure lately. But they're also very dominant as a trading pair within DeFi, especially on Ethereum.

• 17:18Speaker 01

  And so the question is, who can replicate that use case? I, I think maybe, you know, there are certain fintechs like Robinhood here is a very interesting contender if they were to ever do this, right? Like they also have a large, you know, retail trading audience back. That could be quite interesting, but there's another form of distribution here, which is just payments in general. And it's interesting to see, you know, some entrants that have tried to move into this market like PayPal stumble and kind of fail here. And I wonder if that's just because the use case of trading today is still much, much higher than the sort of remittance and payments use case than that we'd all maybe like to see going into the future.

• 17:56Speaker 01

  But I do think that people are probably sleeping on that as a use case, because if someone was able to dominate this from the payment standpoint, I think, you know, you would end up having, uh, that, that would be, that would be a really great way to grow stablecoin distribution very fast. We just haven't necessarily seen it yet. So I think for now, I'm, you know, I'm looking at each of these names here. And I think the differentiating factor for something like fidelity is, you know, they have an enormous money market fund business that exists off chain. They, I'm, I'm, I'm sure that some of these large money market fund guys looked at Tether and the insane amount of profit that they're putting up and thinking, huh? I like some of that profit. That is not a small number, right? Even for someone of fidelity size, right?

• 18:38Speaker 01

  And so ironically, actually, it's, it kind of puts a target on your back if you're tethered. The, the question is, do they swim in similar markets and can fidelity erode that market share? I'm actually not sure. I think something like Custodia Bank maybe is a little bit interesting more from the standpoint of it probably is slightly more secure, right? Like there's probably a security differentiator here from the Custodia standpoint, like most of these stablecoins, you know, on the, on the absolute safest side. You're just, you're, you are collateralized with short-term treasuries, uh, but also bank deposits, right? Custodia is actually tokenizing a, essentially tokenizing a dollar deposit, which is backed by the Federal Reserve. So there's probably a security element here.

• 19:23Speaker 01

  It gets a little bit wonkish. I'm not sure if the market's ultimately going to care about that. But yeah, it's just very interesting to see what this new stable of issuers is going to do. And I, I would imagine maybe, I know that some people feel very, very strongly about this, but I think it will be probably hard for Tether to hold on to the. The lead that it has in terms of market share. I'm sure Tether, from an absolute standpoint, will continue to do well. But it feels unlikely to me that they're going to continue to have, you know, 90% or 80% market share or whatever they have, just from the sheer raw amount of issuers alone.

• 19:58David Hoffman?

  Yeah, the Tether dominance, you can just look at this chart. This is a Tether in green. Tether dominance is just really, really strong. 142 billion Tether issued. Second place is 49 billion from USDC and then third is 8 billion from MakerDAO Sky. When you were speaking just now, I really just got this like idea of like that there's this taxonomy out there of all these different properties that stablecoins are filling. One of them is payments, right? And Tether has really dominated payments, especially in developing countries. And I think that's something that we frequently miss on crypto Twitter, the US-centric, like developed country first world, is that like Tether, I was listening to Paulo Arduino on, with Nick Carter on their podcast, and he was talking about how in these developing

• 20:41David Hoffman?

  countries where Tether has a ton of payments volume, it's Tether and then a bunch of like Chinese-supported like physical infrastructure. And the only, and his point that he's making is that Tether is the only US presence that's actually in these developing countries as the dominant form of payment in these countries. And so he was kind of just flagging like, yeah, we are, we are the arm of the United States for a lot of these developing countries where only China is actually having any sort of presence. And so that's like the payments arm, the developing country payments. And then also Tether has liquidity in things like Binance and basically all non-US centralized exchanges. So that's like, it's kind of perks that it's got.

• 21:23David Hoffman?

  And then you labeled USDC has liquidity in Coinbase onshore and then also DeFi, DeFi liquidity and DeFi leverage. And it's interesting that I talked to a lot of Argentines and they say that they like to use Tether because it's not USDC. And then inside of the United States, you ask people like, what stablecoin do you use? And they answer, United States people usually answer, I use USDC because it's not Tether. And it's really just a Frame of reference as to like your proximity and trust in the government. And then there's like, like you said with Sky and Maker Dow, it's a savings vehicle, which is exactly how I'm holding, I'm holding STI. And so there's these different niches that different stablecoin products or tokenized money market funds are finding.

• 22:09David Hoffman?

  And I'm wondering how many total niches that there are and that there are left to be discovered. Cause maybe there's a lot more than I'm giving credit for, but I don't think there are that many niches left that are uncovered by like the current offerings by current products. What's your take?

• 22:27Speaker 01

  Yeah, I, I agree with that. I think actually one other, there was a really interesting interview done with Treasury Secretary Scott Beson. And we've gotten little snippets and clips of this administration talking about crypto over the course of the, of the last couple of weeks. There was actually a White House hosted digital asset summit, the lesser known digital asset summit, David.

• 22:51Speaker 01

  And Secretary Treasury Scott Beson talked about, I mean, he talked for maybe 30 seconds or 45 seconds, but what he did seem to focus on was stablecoins. And he brought that up again during this longer form interview on All In as a key, as a key lever that Treasury was looking at too. This is what guys like Nick Carter have been saying forever as a purchaser of US debt. Because this administration has to refinance something like $8 trillion of debt this year. And they're looking for buyers of that debt and stablecoins are a big part of that story. The other thing as well that, you know, people have talked about.

• 23:27Speaker 01

  There's a whole, this is a little bit wonkish, right? But there's a whole, there's a very large offshore market for dollars, which people refer to as the Eurodollar market. So there's kind of dollars which are issued on the US L1, right? Within our, you know, domestic banking system that the Fed has a lot of oversight into. But then the rest of the world also wants to transact in dollars, right? When, you know, different banks between, you know, Russia and China, you want to finance joint projects. They actually want to do it in dollars, but they can't interface this directly with the US banking system. And so what ends up happening is there are a bunch of dollars that over the years have been. In offshore, you know, banking centers and then those there are USD loans that get issued

• 24:09Speaker 01

  based on that dollar collateral. And so this actually this large kind of unregulated world of Euro dollars is actually larger. It's kind of a secondary market for dollars, which is much larger than the actual domestic US dollar market. And so stable coins are they look a little bit like Euro dollars in that sense.

• 24:28David Hoffman?

  They're crypto dollars.

• 24:28Speaker 01

  Yeah, crypto dollars. But the US, if the issuers are actually US based and regulated by the US, then they might actually have a lot more insight into and control over this overseas market. And that's when you were just describing Paulo's interview. That's kind of what I had in mind is like, actually, not only are these large buyers of US debt, but actually, this is probably a way for the US to get slightly more insight into and potentially control over, you know, what large, you know.

• 24:58David Hoffman?

  What's going on?

• 24:59Speaker 01

  Yeah, exactly.

• 25:00David Hoffman?

  What's going on? Yeah. Yeah. One of my favorite takes from my first podcast co-host CK is that United States dollar stable coins are actually the CBDC. If you understand that like the tech arm and also the fintech arms are just extensions of the government. Well, then you can look at USCC and be like, that is the central bank digital currency. It just has this like private entity that was totally beholden to the government as like this intermediary between the government and and circle or and the actual dollars. In related subjects, we can talk about Biddle as well. Biddle, the tokenized treasury fund from BlackRock. It was hovering around $600 million,

• 25:41David Hoffman?

  $500 million for the last like half of half a year, stopped really growing. But in the just the last three weeks, that has since grown to almost $1.9 billion, just in three weeks. So adding something like $1.2 billion in the market cap in just the last two weeks. Carlos Domingo, who works at Securitize, who is the like software service provider, tokenization provider to BlackRock, he tweeted out, "Tokenized treasuries passed the $5 billion market mark yesterday, with Securitize as the leading protocol and BlackRock's." Biddle as the leading asset with more than 34% market share. So $5 billion in tokenized treasuries. And then also out of the BlackRock Biddle ecosystem news is that they are also launching on Solana.

• 26:24David Hoffman?

  So this was primarily an EVM ecosystem token Ethereum in all of its layer twos. But it is now also being deployed on Solana. I don't know if it's already deployed, but it is going to be deployed. So that's the news in BlackRock Biddle. Any comments or takes here?

• 26:42Speaker 01

  Yeah, I think there was another interesting tweet from Guy from Athena, actually describing that the leverage that stablecoin issuers here have, you know, where I, this is unverified here, but it's interesting that they both use the same time period that 95% of the incremental demand for Biddle was driven by USDE in the last three weeks. So, and you also saw, you know, something else that happened last week around DAS was Sky announced the results of their Grand Prix, right? Where they're basically getting different issuers of RWAs to bid for, you know, for inclusion within Sky's ecosystem. So I think the winners of that were, no surprise, like Biddle, but also Superstate was a winner. There's one more that I'm blanking on.

• 27:27Speaker 01

  But I think one thing that I think will be interesting to see is if there are advantages, right? The currently the structure of these centralized issuers are you have a dollar representation off-chain and or on-chain, and then you have a bunch of treasuries or fixed income securities or bank deposits or whatever, all of that, you know, the asset side of the balance sheet is managed off-chain. Well, if you were to bring the asset side of the balance sheet on-chain, so you actually had the treasuries on-chain as well, are there advantages to that? And, you know, immediately what comes to mind is there, it's 24/7, right? Unlike the US banking system, which actually has off-hours and sleeps, right? So if people want redemptions, things like that.

• 28:10Speaker 01

  Actually, Paulo has mentioned this as a, as a challenge. So he just did an interview with Nick Carter on On The Brink, where he mentioned that the MICA framework stipulates that in Europe, 60%

• 28:22Speaker 01

  Of a stablecoin issuer's balance sheet has to be held in bank deposits. And first of all, that's challenging just from a risk perspective, right? Those are not secure, right? In the same way that a money market fund would be. But also, if you have to meet an enormous amount of redemptions on-chain very quickly, which can happen in crypto in times of extreme stress like the Luna de-peg, that can be really problematic, right? For you as a large stablecoin issuer. So having those assets on-chain is really interesting. There's also ways that you can transform, for instance, in the same way that you have steeth and wrap steeth, where wrap steeth is more efficient from a tax perspective because it appreciates. So you can just pay capital gains tax as opposed to paying tax every single time you're getting yield. You could do the same thing with treasuries, right?

• 29:06Speaker 01

  So there are interesting transformations that you can achieve moving off-chain stuff on-chain. But I think also, from a liquidity and 24/7 perspective, I think stablecoin issuers will be a driver of demand for RWAs as well. So that's the kind of link that I see there.

• 29:25David Hoffman?

  One of the big questions that we frequently see in the Bankless Discord, just the community Discord that we chat with listeners with, is just, what does this mean for my bags? And I think just the, well, because like, you know, you're not going to get rich by holding USDC, right? And, you know, we can't invest in Circle, we can't invest in Tether. The entities making all this money are private. You know, you can invest in MKR, that's an option. You can invest in Ethereum's E and A governance token, that's an option. But really, there's not that many ways to get broad exposure to this. And really, like, those are tokens and those are valid tokens. But we mostly, as an industry, have Bitcoin, Ether, Solana, Layer 1 assets as our primary bags that we hold.

• 30:09David Hoffman?

  And like, my quick answer here is, it's like, well, this represents a shifting of global finance to being on-chain, and that's fundamentally good. But you can also take the inverse of just like, oh, there's a very OG Nick Carter article that he actually wrote on Bankless was talking about "Stablecoins are actually parasitic to Ethereum." So not just Layer 2s are parasitic to Ether, the asset, but it sounds like stablecoins are also parasitic to Ether, the asset. If that's a perspective to take, what's your take on it?

• 30:37Speaker 01

  Okay, so.

• 30:40Speaker 01

  Potentially, it depends on what Ethereum and L1s define as their value prop or the reason to be held. So I'm gonna end this argument with something that I've told you a million times, but I think there have been broadly like two theories for value accrual for ETH or L1s in general. And one of those, one of those theories has been an idea of moneyness or the desire to hold this as a collateral. And the other has been yield and generating fees. So on the, on the moneyness side of things, right, this is what Bitcoiners like to talk about. It's divisible, it's portable, it's fungible, it has all these properties, it's better than gold, it's the best meme coin ever. This is why people ultimately want to hold it. And it looks like, it looks like Bitcoin has been successful, frankly,

• 31:21Speaker 01

  and they've, they've sort of won that battle. But I think that this idea of moneyness and pristine collateral, we have ported over from Bitcoin. And it looked like there was initial product market fit, at least on the Ethereum side of things within DeFi, right? Like you had, you know, big, like LP pools, right? Like ETH was kind of one of the, one of the assets in the big pools. People wanted to get leverage against their Ethereum in the early days of Maker and Ave. You know, when you were buying NFTs, you were doing it denominated in ETH. And so people had this idea, ETH is, ETH is money, right? And that, and so that, that idea found its way into the rollup centric roadmap where we're

• 32:01Speaker 01

  okay with giving most of the fees that are generated in this economy to L2s because what we're gonna do is export this moneyness of ETH and this desire to hold ETH the asset. That, I think is dead as an idea. And I think the, the sooner we accept that, the better everyone is gonna be because you can already see that people want, people want to hold the USDC and, you know, the Bittles and the tokenized, like USD denominated assets more than they want to hold L1 tokens on other layers. That's, I think that's just objectively true at this point. And so I haven't read Nick Carter's article, but I'm gonna agree with him if that is, if that is the idea, that people want to hold US dollar

• 32:42Speaker 01

  denominated assets more than they might want to hold the L1 token, especially as you go layers away from. The main chain, but the value proposition that I think would be good, right? Like as a good, if you, if you listen to the way that Robbie Mitche, so he's the head of digital assets at BlackRock, speaking at DAS, the way that he described Ethereum was it is a bet on, it is a technology bet on all of these different assets being issued on, on one chain. But what you need to see there is yield, right? So all of these different activities that are like stable coins and treasuries and all of these different activities that are happening on either ETH main chain or L2s, they should be fee generative. And if Ethereum can find a way to take a slice of all of the different, you know, transfers

• 33:27Speaker 01

  and trading activities and whatever, suddenly that's a super attractive value proposition, right? Just imagine, so you have this substrate that an entire global economy can be built on top of, and you can take a slice of all of that economic activity? That is a great story. What is not a great story is I am competing with the dollar that people want to hold. And every single time some lending protocol replaces the, you know, the dominant asset or the reserve asset as ETH into the dollars. And we're like, oh no, this is, this is so bad for my value accrual. That's going to be a bad story, but if you can find a way to capture a slice of yield there, I think that'll be very positive, actually. And then I think you can bet on stable, stablecoin adoption and RWA actions through something like ETH.

• 34:13David Hoffman?

  Okay, so there's a growing cohort of people inside of the Ethereum ecosystem who are trying to get this idea out there that if we want ETH, ETH to be money, if we want ETH to be valuable, we need to stop talking about revenue as the source of value for Ether, because it needs to be the, the memetic side of Ether, the reservation demand side of Ether. Like Bitcoin, that makes ETH as money. But what I'm hearing from you is you're actually on the pro revenue, pro yield side of Ether's value accrual story more than you are the more memetic Bitcoin-esque side of things. Is that, is that right?

• 34:51Speaker 01

  Yes.

• 34:52David Hoffman?

  Okay.

• 34:53Speaker 01

  A hard, unequivocal yes.

• 34:56David Hoffman?

  Because I have talked to a couple of people in the last two weeks who are on the exact opposite side of the spectrum from you.

• 35:02Speaker 01

  That's great. I mean, I have no idea. This could play out completely differently from what I think, but I think there's been a, I mean, one of the challenges with Bitcoin in the long term is that even today, people have a huge amount of trouble. You probably had this experience describing Bitcoin to normies, or something like DeFi or ETH to normies. Like, I don't know, I go back to early conversations that I had with my dad, who, you know, had a lot of trouble getting around this idea of Bitcoin, not because of the technology side, but because it's a pet rock and it doesn't derive any cash flows. And there's just a huge amount of people that will never wrap their heads around that. And, you know, it's the greater fool theory, it's all of this stuff. But anything that generates yield and feels like a productive asset, it has a much, much larger TAM, in my opinion. And, you know, what I always point, you know, I know people love to point to

• 35:46Speaker 01

  gold. The market for treasuries is much larger than the market for gold. And I think the reason for that is that it does effectively the same thing, but one has yield, and you can put some amount of, you know, quantitative analysis around and others you can't. And so I think that the market, I would love to stop using magical language when it comes to crypto, and just replace that with Occam's razor. Like, why am I going to hold this L1? Why am I going to hold this L1 token? Because it pays me a yield. That, to me, is such a simple story. I think the, this is what I kind of meant at the beginning, at the top of this episode, where the last 15 years have been these cool stories and big ideas. And I think, you know, we got to get serious here. And I think, I think it's, there are other reasons we're at an inflection point, is because all L1s priced

• 36:31Speaker 01

  in Bitcoin have not done particularly well. If this last cycle was a cycle, what happened is that we, you know, we made, we're making all time lows here. We're going all the way back to, you know, 2020 levels of ETH BTC, and it looks like Sol BTC is about to run that back too. You know, if you are an L1, everyone has to answer the existential question, why is someone going to hold this instead of Bitcoin? You're not going to out memetic value Bitcoin. It's already won that. But you can compete on a totally different vector, on something that Bitcoin can never compete on, which is being a productive asset and having yield.

• 37:04David Hoffman?

  That train of thought, that like series of logic is something that I have a hard time arguing against. And I understand the desire for like ETH to be money because it's like Bitcoin, but with yield, you know, it's ultrasound. It goes down in supply when the activity on the chain goes up. But like, and so like, I still haven't really figured out my position on this, but I'm leaning towards your side of things. And I guess this thing I would say to the people who are advocating for to stop talking about revenue when associating it with either the asset is that you actually can't do that because that's how the protocol

• 37:45David Hoffman?

  works. And the reason why Bitcoin has this privilege is it because it's because it's stripped everything out of the protocol to just leave 21 million units. It's there's nothing else to talk about. And if Bitcoin went as reductive as possible to strip anything away, any utility away from the blockchain, so that the only thing that is left to talk about is the memetic value of Bitcoin. And that's like this kind of giga brain, like giga brain move to like go become so useless that you become a medic. And I don't think any other chain has the ability to do that because especially in theory, like we're concerned about long term security. Maybe Bitcoin has a long term security problem, but right now, every other chain has like a memetic problem where like it's exactly

• 38:28David Hoffman?

  what you say, like the only way forward is to capture revenue.

• 38:34Speaker 01

  You know, yeah, I think that there's an element to this, which is a long time ago, everyone other than Bitcoin, so Ethereum, Solana, whoever decided to not go down the memetic route. They decided to go down the utility route. So that decision, in my opinion, has already been made. And it's a little bit silly at this point to try to go back on it. But the other reason I think it's silly is just because Ethereum has a larger market than Bitcoin. It has a larger market than you can look at these analogs and there's a great interview that came out on Ford guidance a couple of years ago with an ex central banker, Sir Paul Tucker. And he described, he had a sentence, he was describing around COVID, why, and just why in general, central banks have issued so much debt.

• 39:15Speaker 01

  And he had this one sentence, which to me was a massive light bulb, which was, people prefer yield-bearing money to non-yield-bearing money. And what he was talking about there is there's a greater demand for treasuries as a monetary money-like asset than there is for non-yield-bearing dollars. And I just think you see this pattern repeated time and time and time again over long periods of time. And I think that we, for whatever reason, I see this all over the place, especially on the infrastructure side of things that we just said, oh, you know what, this is going to get commoditized and, you know, my revenues are going to go down over time and there's no use even competing for it. That's, that's not true, right? Like, the thing that everyone consistently underappreciates in especially new paradigm

• 40:00Speaker 01

  shifts is just the amount of demand, right? It's difficult, it's an unknown unknown. We know demand is coming, we don't know exactly what form it's going to take, we don't know when, you know, what year it's going to come in, but we do know that, like, there's no real point being in crypto if you're not betting on a massive increase in demand for block space. And even if, yeah, the percentage that you get to take as a slice of that goes down over time, even if it's very competitive, the market opportunity here is huge. And for some reason, in crypto, we've just, we said, you know what, revenue's impossible, I'm not even going to try for that, so I'm going to try for this memetic money-like thing instead. And it was just way too soon to give up on the obvious course of action, which is to generate fees, right? And I think, you know, the other reason too that people resist this in general is because

• 40:43Speaker 01

  if you run a DCF on the yield that something like Ethereum or Solana is generating, everything looks very overvalued.

• 40:49David Hoffman?

  It doesn't look great, yeah.

• 40:51Speaker 01

  Okay, I just, I think that, again, these things are not companies. I think that, again, if you look at the value proposition of something like an L1, it has other traits that are very desirable, like, they're very large, they're very liquid, they're global, you aren't taking things like counterparty risk. I don't think you're going to evaluate it exactly like you would a company and run a DCF on it. And, again, I kind of look at treasuries as this really interesting market where, why do people buy that? You're not taking very much risk, really large, global market, very liquid, yield.

• 41:22Speaker 01

  They're relatively similar. And so, yeah, I would really push back against the people that want to lean into something around memetics. Eventually, this market's going to get more quantitative, more serious, and you need a hard reason for people to buy and hold your L1 asset. And I think the answer is the same for everyone that's not Bitcoin.

• 41:40David Hoffman?

  Yeah, I think that's right. Speaking of things that are not companies, we're going to have to talk about Hyperliquid because there's a bunch of shenanigans that's going on on that side of the market. But first, before we talk about Hyperliquid, we're going to talk to some of these fantastic sponsors that make this show possible. Starting with Uniswap, it's a browser wallet, it's a mobile wallet, it's the best place to do DeFi. Let's go hear from Uniswap right now. Introducing UniChain. Built for DeFi, empowered by Uniswap, UniChain is the fast decentralized Layer 2, designed to tackle blockchain speed and cost challenges. With this mainnet now live, you can enjoy transactions at up to 95% cheaper than the ETH Layer 1, all while benefiting from an impressive 1-second block time that will be getting even faster very soon. UniChain is the first Layer 2 to launch as a Stage 1 rollup on Day 1.

• 42:22David Hoffman?

  That means it comes with a fully functional, permissionless proof system from the start, increasing transparency and further decentralizing the chain. More than 80 apps are joining the UniChain community, including Coinbase, Circle, Lido, Morpho, and Uniswap. You'll be able to bridge, swap, borrow, lend, and launch new assets and more from Day 1. Built by Uniswap Labs, the team behind the protocol that's processed over 2.75 trillion in all-time volume with zero hacks, UniChain truly enhances DeFi experiences with faster, cheaper, and seamless transactions even across chains. And soon, the UniChain Validation Network will allow anyone to run a node and earn by securing the network. Visit uniswap.org and swap on UniChain today. Cello is transitioning from a mobile-first, EVM-compatible Layer 1 blockchain

• 43:03David Hoffman?

  to a high-performance Ethereum Layer 2, built on OP stack with EigenDA and one-block finality, all happening soon with a hard fork. With over 600 million total transactions, 12 million weekly transactions, and 750,000 daily active users, Cello's meteoric rise would place it among one of the top Layer 2s, built for the real world and optimized for fast, low-cost, global payments. As the home of the stablecoins, Cello hosts 13 native stablecoins across seven different currencies, including native USDT on Opera MiniPay, and with over 4 million users in Africa... Alone in November, stablecoin volumes hit $6.8 billion, made for seamless on-chain FX trading. Plus, users can pay gas with ERC 20 tokens like USDT and USDC and send crypto to phone numbers in seconds. But why should you care about Cello's transition to a Layer 2?

• 43:46David Hoffman?

  Layer 2's unify Ethereum, L1's fragmented. By becoming a Layer 2, Cello leads the way for other EVM-compatible Layer 1s to follow. Follow Cello on X and witness the great Cello happening, where Cello cuts its inflation in half as it enters its Layer 2 era and continuing its environmental leadership. You may have already heard about InfineX. InfineX has, in my opinion, the nicest cross-chain swap and bridge feature that you will find anywhere. It is called Swidge, swap and bridge, and we're going to show you what it looks like. First, we're going to log into my InfineX account with a passkey. Now, there's no seed phrases in InfineX. This is just a one-click setup with biometric passkeys. But in addition to that, my InfineX account is fully non-casorial. So bam, I just logged in. It was two clicks and I'm already into my InfineX account. So let's go make a Swidge.

• 44:30David Hoffman?

  I'm going to go Swidge my USDC that is on base, and I'm going to buy BaraChain, which is a completely different chain. So we're going to Swidge this. I'm going to press that button, and then InfineX is going to execute this order, this cross-chain order for me. And now it is done. But actually, I'm not really feeling bearish anymore, so I'm going to go from Bara to Penguins. I'm going to buy a Penguin on Solana, so I'm going from the BaraChain to Solana. See, no transaction signing, no gas to worry about. You just Swidge across whatever chain that you want with InfineX. That was so easy. Go check out InfineX and try your first Swidge today. All right, Mike, let me run you down on the news about HyperLiquid, just in case the listeners aren't familiar with what went on. March 26, HyperLiquid, which is a Layer 1 protocol with a very low number of validators. I think it started off as four. I think it has something like 16 now.

• 45:16David Hoffman?

  It is a perps exchange, and it is the dominant perps exchange in terms of just market share of perps and volume. It was hit with a market manipulation attack when HyperLiquid itself left itself vulnerable by having a perpetual market available for an extremely low market cap, low liquidity token, we'll call it a shitcoin, called Jelly Jelly. A trader on Hyperliquid opened up a $6 million short position on Jelly, which has a total market cap of $20 million. So a 30% short position on the entire market cap of a shitcoin. That same trader went to other exchanges, other on-terrain exchanges, maybe Uniswap, maybe even centralized exchanges. They just started buying Jelly across other trading venues, pushing the price up,

• 45:59David Hoffman?

  and liquidating their own short position on Hyperliquid on purpose. Because, once that short position is liquidated from the trader, that position is then transferred to Hyperliquid, the Hyperliquid Vault. And it's basically a toxic position, because so much of the outstanding supply of the token is short, it's impossible to clear the position without Hyperliquid taking on something that was about to be something like a $13, $14 million loss. So that was the attack. In response to this, Hyperliquid voted with their validators, all 16 of them, forced to close the Jelly market. And they also did this top-down maneuver to override the oracle price,

• 46:40David Hoffman?

  to liquidate the attacker's position, leaving the attacker with a small loss, and basically taking the loss from the Hyperliquid balance sheet and putting it back onto the trader's balance sheet by simply overriding what the price of the Jelly oracle price was. So it was a successful attack that was overwritten by basically these Hyperliquid validators, who were able to coordinate and just do a top-down changing of a oracle price number in the Hyperliquid's Excel sheet. This is a meme from Torg, Togroll, who I think just tweeted out a pretty funny meme, which is like, "This is your Hyperliquid validator set",

• 47:24David Hoffman?

  and it's just the same guy 16 different times. And now this spawned a conversation about the decentralized nature of Hyperliquid, because they seemingly can coordinate to prevent themselves from taking on a $12 million toxic position. But previously, it's also been known that North Korea, the Lazarus Group, has sized positions open on Hyperliquid and in that instance, they chose to do nothing. And so it's a, I think the hyper liquid has been under scrutiny about they are saying that they are decentralized when it benefits them and then they are taking centralized maneuvers when also that benefits them. I think this has also created a conversation around the relationship between centralized exchanges like Binance. This is a tweet that I think exemplifies this point.

• 48:09David Hoffman?

  Some, some account on Twitter just tweeted out, hey, Binance, hope you are aware that if you buy $20 million of jelly right now, you will have one less competitor. And there's been some, some friction between Binance and other centralized exchanges and hyper liquid because hyper liquid seems to be being, being able to like have their cake and eat it too. Again, decentralized when they want to be centralized when they want to be kind of get to play it both ways. That's my summary of the news. Maybe there's something I'm missing, Mike, but when you were watching all of this, what was your take?

• 48:38Speaker 01

  Well, it was pretty obvious to know who was long hyper liquid or short hyper liquid based on their takes on Twitter. But yeah, I kind of have sympathy for both sides here. I think that on the one hand, this looks like an attack, right? And potentially some form of market manipulation. There were allegations that this was tied to Binance or OKX or potentially BitGet in some way. I didn't look into and see if any of that was verified. I have no idea if that's true. I kind of doubt that would be the case, but that probably would not, that would not be okay, right? If that, if that actually were proven out. I do think though, that there was, this was obviously a faulty, there is faulty mechanism,

• 49:22Speaker 01

  there is a faulty mechanism here at play. And the value proposition of hyper liquid, you know, as an exchange in general is that it's really good with listing things fast, even very low liquidity shitcoins that people want to take punts on or gamble on. And so someone said, it kind of reminds me a little bit of, there are elements here weirdly of, if you remember Avi's Mango Markets exploit.

• 49:45David Hoffman?

  Very highly profitable trading strategy, that one?

• 49:48Speaker 01

  Yeah, that rhymes with this. There are also funnily enough. There, okay, I'm not making this comparison at all so people don't get upset here because a lot of FTX 2.0s have been thrown around lately. But the relationship between HLP and Hyperliquid a little bit reminds me of of the relationship between Alameda and FTX. Where if you remember, the game I think that FTX or that Sam Bankman-Fried was playing is that he had a hedge fund and he also had an exchange. And if you remember, people used to talk about FTX as having unbelievable technology, like really good risk management and stuff like that. But actually, once you got into the head, it didn't have particularly good tech.

• 50:30Speaker 01

  What it did have was a hedge fund which was willing to absorb the losses of, you know, FTX traders, right? So the calculus from FTX's standpoint or from Sam Bankman-Fried's standpoint is I got an exchange that has a bunch of happy customers and a lot of equity tied to that, and I've got a hedge fund. So if ever my exchange ends up taking losses, I can transfer that loss over onto my hedge fund balance sheet and not take the loss of equity and customers in my, you know, in my exchange. And so there might be a little bit of an element of that here as well. But I don't know, I don't have an enormous amount of sympathy here for the voices on Twitter who are just saying that this is an attack from centralized finance against decentralized finance. Come on, guys. You can't have your cake and eat it too.

• 51:14Speaker 01

  Hyperliquid is not a decentralized protocol, as evidenced by the fact that Jeff handled this. Now, if I were in Jeff's shoes, I wouldn't have done anything different here. I also probably would have overrode and shut this market down. But, you know, while I understand that move, and I think it was the best move for Jeff, for Hyperliquid, for customers, for everyone, you can't say, you can't get on your high horse and say this is an attack against decentralized finance. That's just not the case.

• 51:42David Hoffman?

  Right. There's nothing decentralized about this.

• 51:46Speaker 01

  Yeah, there's nothing decentralized about this.

• 51:47David Hoffman?

  We have a distributed validator set of Hyperliquid, but there are 16 of them and they're all in the group chat.

• 51:54Speaker 01

  Right. Well, it's kind of like the, I don't know if you saw this meme going around of the captcha of like, "Spot the Hyperliquid validator" and it's all Jeff. So. You know, now, what I will say is, I think something that's gone a little bit under the radar is that, so what what HLP does, right, like, I'm not an expert on this by any means, but it's kind of a, it's a programmatic market making algorithm where if you wanna, if you wanna trade something, and someone doesn't take the other side of your trade, this vault will essentially do that. And this is backed up by the insurance fund, which is hype token, the hype token. And so, the the challenge, this is something that I wish we would stop doing in crypto,

• 52:38Speaker 01

  insurance funds, which are denominated in the native asset of the protocol.

• 52:43David Hoffman?

  Equity, yeah, that's, that's crazy.

• 52:45Speaker 01

  We, guys, we need to stop that.

• 52:47David Hoffman?

  Hozu wrote about this years ago.

• 52:49Speaker 01

  Yeah, this is, and by the way, there's like, long historical precedent here. If you go back to Enron, right, a huge part of why that unraveled is they were collateralizing these weird off balance sheets agreements with Enron's stock, which meant, when the hole was exposed in Enron, all of these, there was this unbelievably fast unwind. And if there were ever a large exploit on something like Hyperliquid that they couldn't just step in and overwrite an oracle and fix, that insurance fund is absolutely worthless. So I know everyone was talking like, really excited about the buybacks and, you know, buying the hype token. But, yeah, we, we really need to stop denominating insurance funds and things like that.

• 53:28David Hoffman?

  Denominating insurance funds, especially with, if you have liabilities and you denominate insurance funds in your equity, that is the Terra Luna model. You have a hyper liquid, like, exchange that's profitable that separates the the stablecoin from the Luna asset equity, and there's other things like that. But ultimately, if you backstop your platform with your equity, that is Terra Luna.

• 53:49Speaker 01

  Okay, so, so I know, we're gonna get attacked on Twitter for this. I'm not saying that Hyperliquid is Terra Luna, not even close, there's a, those are different, because the entire Terra Luna system was collateralized, right? Like, it was 160 billion dollars worth of, worth of collateralization there, which is a completely different quantum, right? But, in principle, I agree with you, it's the same thing, so, so guys, we need to stop doing that.

• 54:13David Hoffman?

  The structural pattern is still there, but yes, I, sometimes I need to taint my brakes. The structural pattern is similar to Terra Luna, where you're taking on a similar category of risk. But it is not the same thing, it's not equivalently.

• 54:24Speaker 01

  Right, there's something like 200 million in this insurance fund to cover much, you know, lower quantum of losses versus 60 billion dollars of, you know, stablecoin deposits which are collateralized, but so different, but yeah, guys, we need to stop, we need to take the lessons of that finance has taught us for 100 years. This is not something that you can engineer with technology. This is just a concept that, you know, this is financial gravity here that cannot be undone. So I would love to see us stop doing that.

• 54:51David Hoffman?

  There's a, in summary, a tweet from Steven from the block, he tweeted out, in summary, it was crime to manipulate the hyperliquid jelly market. It was also crime by exchanges to liquidate hyperliquid, if that happened. It was also crime by hyperliquid to edit their Google sheet to edit their exit price. It was all crime. This is a sophisticated, maybe somewhat serious tweet, but I think that what's kind, what's interesting here, and this goes back to some of like the early Cypherpunk ideas of just crypto at large and like these servers with laws in the cloud, which is what a blockchain is. It's a, it's a autonomous server with its own independent laws. There was this idea that Bitmex was

• 55:31David Hoffman?

  this, the first ever like transnational company that was actually beholden to no laws because it was Bitcoin denominated. So even after Bitmex had the CFTC sanctioned, it was still functioning as an exchange. And so they, you could, it could get sanctioned, but the rules actually were not necessarily capable of being enforced. And so now we have like this Wild West, again, if it is true that centralized exchanges try to attack hyperliquid, you have this Wild West where Binance, this transnational company, is going after hyperliquid, which is not incorporated, so there's no laws defending hyperliquid. I'm pretty sure hyperliquid was not incorporated. And so like there are, there's this like, these gargantuan

• 56:11David Hoffman?

  Titan exchanges just doing cipher warfare with each other over blockchains. And there's no like nation-state legal system really doing any oversight over this, at least that I know of.

• 56:24Speaker 01

  Yeah, I, you know, I hesitate even comics. I have no, I haven't looked into it. I have no idea if these centralized exchanges were involved in this. It looks like to me this was purpose manipulation and an attack, which is of questionable legality. I have, you know, I'm maybe a little bit naive or optimistic. I doubt that centralized exchanges would be involved in this. Maybe they were, but I do think that, yeah, it kind of makes you, I mean, one thing that it makes me think about as well is would users, people equate decentralization with safety and kind of makes you think, right? In this instance, would users have been better off if Hyperliquid were decentralized and they couldn't have protected against this attack?

• 57:05Speaker 01

  In a way, having a decentralized validator set here would feel more robust and protects against certain types of attacks, right? The attack that this would prevent against is the Hyperliquid team, you know, you, you basically are trusting them to manage, you know, your assets on a, on a Google sheet.

• 57:21David Hoffman?

  Your property rights, yeah.

• 57:22Speaker 01

  Exactly. But what you become more vulnerable to in this type of environment is these market manipulation type attacks, which can take a long time, right, for users to recover funds from, and you're more at risk and exposed. So, I don't know. It, that's what it made me think about a little bit as well.

• 57:39David Hoffman?

  Yeah. Hyperliquid is the first time that a purpose exchange has attempted to be decentralized, and there are significant features that all these centralized purpose exchanges have.

• 57:52David Hoffman?

  Yeah, that's a good point. That's a good point. Okay, so the point that I was, I am trying to make is that centralization is a protective measure against perps markets like these. And decentralizing adds in an external, like, market manipulation risk attacks that centralized exchanges just have an easy fix, easy control for. And so this is, at least at the end of the day, Hyperliquid is getting like stress test in real time with real money on the line. So if a truly decentralized perps exchange can exist, like this, we're just kind of like smoothing over some of the rough edges. At least this is only a $12 million loss on a $12 billion token, so it's not that crazy in the grand scheme of things. But also, it does prove that Hyperliquid as a product is not done yet.

• 58:36Speaker 01

  A lot of the DeFi, I gotta give a huge shout shout out here and vote of appreciation to some of the early generation DeFi founders who are really building in hard mode. And not only were they

• 58:48David Hoffman?

  With no one that's setting precedent?

• 58:49Speaker 01

  Yeah, not so not only was there no precedent, but they were doing things in a in a world where they probably had a lot more regulatory and legal risk that they were taking on. The infrastructure they were building on was far more primitive than what we have today. And they were trying to do it in a completely decentralized, you know,

• 59:04David Hoffman?

  Right.

• 59:05Speaker 01

  accordance with the original cypherpunk ethos of crypto.

• 59:08David Hoffman?

  Decentralization maxi, yeah.

• 59:10Speaker 01

  That is the definition of hard mode. That is

• 59:14David Hoffman?

  The good days, man.

• 59:16Speaker 01

  Yeah, insane ludicrous mode. Yeah, I mean, that is shout out. So I don't have a massive take here. I think that people are.

• 59:24Speaker 01

  I think that people are emotional about this because hyper liquid has been one of those assets that's done well and garnered a ton of attention over the course of the last year or so. And some people are very long hyper liquid, and so emotions tend to run high around this stuff. But yeah, I think it's. I also think there is a little bit of irony here around the, I think if there's one group that embodies the phrase, don't throw stones if you live in a glass house, it's probably the world of centralized exchanges. So I don't think anyone should be throwing any stones here, right? We're all living in glass houses. So I don't know. That's kind of my take on the whole thing.

• 59:57David Hoffman?

  All right, two topics left. We're going to talk about tornado cash and also Robin Hood banking. And then if we have time, Mike, I want to get your take on tokenized media. But first, before we get to all of those takes, a message from some of these fantastic sponsors that make this show possible, starting with Frax and the Frax stablecoin. It's got some of the best yields in DeFi. It's like Circle, Athena, Maker Dow had a baby, and they've got their own Layer two as well. Let's go hear from Frax right now. In the Wild West of DeFi, stability and innovation are everything, which is why you should check out Frax Finance, the protocol revolutionizing stablecoins, DeFi and Rolex. The core of Frax Finance is Frax USD, which is backed by BlackRock's Institutional Biddle Fund. Frax designed Frax USD for besting class yields across DeFi, T-bills and carry trade returns all in one.

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• 1:01:22David Hoffman?

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• 1:02:58David Hoffman?

  And the best part is that this is all in addition to their already-launched products like Mantle Network, ME, and FBTC. Ready to step into the future of finance? Follow Mantle on X at @mantleofficial and join the on-chain revolution today. And we're back with, I think, some of the biggest news. I think, to me personally, I think this is some of the biggest news that we'll ever have in crypto for a long time. Because this is an arc of the, you know, the cypherpunk cryptography wars versus the United States government that started in the 90s. So recently, the tornado cash smart contract addresses have been taken down from the OFAC SDN list, which means that it is not, you are not sanctioned if you are using tornado cash.

• 1:03:40David Hoffman?

  I'm not a lawyer, maybe you should ask a lawyer if it's okay to use tornado cash. But that kind of means that it's okay to use tornado cash. It's not a sanctioned smart contract. So we are unwinding the idea that a smart contract can be legal. So this was the fight over open source software. This is the fight over cryptography and consumer privacy. So now it's okay to use tornado cash. So that's pretty cool. That's the big news that came out this week. Roman Storm, of course, he is still has his court case, which is in April, which is coming up. But everything around Roman Storm has been given the green light in terms of legality, which is pretty interesting. Pretty monumental day. Mike, what's your take?

• 1:04:21Speaker 01

  Yeah, I agree with, so first of all, kudos to the Wall Street Journal. I love the way that they phrase this headline. A crypto coder's invention was used by North Korean hackers. Did he commit a crime? I think that's getting at the heart of the issue, which is, yeah, if someone, there's actually a great movie, Thank You for Smoking, which kind of asked a similar question at one point during the film. Like, if someone were to hijack a plane, is that Boeing's fault? It's not, right? Like, there's a clear separation, at least in my mind, of a tool, which can be used for good or bad things, and someone that hijacks that tool with malintent. And, you know, my hope is that, again, I actually saw Scott Bessin comment on tornado cash being removed from the OFAC sanctions list, which is great.

• 1:05:03Speaker 01

  Now, and again, shout out to Matt Huang at Paradigm, who it seems like has been super active on supporting, and you as well, David, you and Bangl is have been very supportive of this issue in general. Now we just got to get Roman Storm, you know, defended here. And this will be a happy ending, and I think a big win for the cypherpunk and, you know, sort of ethos of crypto.

• 1:05:23David Hoffman?

  Yeah, yeah, the fight does not end until Roman Storm walks through. It would be just an incredible tragedy if tornado cash was given the green light in terms of legality. There's precedent for open source software devs can't write illegal code. And then somehow Roman Storm still goes to jail.

• 1:05:41Speaker 01

  Yeah.

• 1:05:41David Hoffman?

  That would be, that would be a crazy tragedy. So there's one last fight to fight. We have all the ammo on our side. He still needs donations. Maybe we'll, we'll put a link in the, in the show notes for the donation link. And like I said, his court case is sometime in April. Something that's not crypto, but I think is worth keeping an eye on. Robinhood has announced Robinhood Banking. So basically trying to replace your bank account with a Robinhood bank account. 4% APY savings account, $2.5 million FDIC insurance. And then also you can get a cash delivery by a courier straight to your doorstep. So if you need cash, somebody can deliver you cash. And that is part of the Robinhood Banking service offering that they just announced yesterday.

• 1:06:26David Hoffman?

  So TradFi, banks, Wells Fargo. I was always bullish on DeFi just because like, think about how archaic and terrible the traditional banking system is. And of course I'm still bullish on DeFi, but Robinhood is, you can't really call it TradFi. It's fintech, but it's also, it's sharpening up. It is a viable competitor to some of the DeFi products that, that we see on the crypto side of things. Mike, what's your take?

• 1:06:50Speaker 01

  I really like Robinhood. I think people have slept on it, especially in the beginning. It's not crypto native. In the beginning, they, they messed up with some stuff that crypto natives won't like, right? Like you couldn't actually hold or withdraw your, I think Bitcoin in the early days of Robinhood. But I think they've done a phenomenal job of leaning into crypto in general. And I think they're a slept on player that will do some very interesting things probably later this year. But I also think that they're They're kind of merging. I think they're also, one of the cool things about crypto is it's starting to make finance look at itself in the mirror and think, huh, does some of this stuff actually make sense? And an early iteration of that actually was NASDAQ announced that

• 1:07:29Speaker 01

  they were moving to 24, not 24/7, but 24/5 trading. And to me, that just 100% comes from crypto, right? They're like, oh, yep, this actually just makes sense. We're living in the 21st century. There's no reason for these markets not to trade 24, yeah, you know, at all hours of the day. And I think that crypto is going to make this division in between brokerages and, you know, banking services and exchanges, maybe take a look at itself and like, wait, why do I have a checking and a savings account, right? Like, do those really need to be different things? Like, do I need to-

• 1:08:00David Hoffman?

  Yeah, why are those different things?

• 1:08:01Speaker 01

  Yeah, I, you know, does, do I need a, do I need a brokerage where I place my trades in? And that's different from my banking relationship? I don't know. Historically, I'm sure there's good reason for that. Maybe there's some sort of psychological reason for that. But I think those barriers are going to start to break down. And where you're going to see a lot of this innovation is on the fintech side of things, where there's actual incentive for them to, to push the envelope. And I'm also excited to see, you know, I think that the form factor that people need for something like an exchange or a brokerage is an application, right? You just need centralized coordination to provide a good product or service to customers. But, you know, that DeFi mullet that you and I have been talking about for so long, you're starting to see that actually take shape in the form of these partnerships between the

• 1:08:44Speaker 01

  Morphos and the Coinbase's of the world. And I think that some of these more centralized exchanges and, and brokerages leaning into crypto, you're going to see more adoption of DeFi from this mullet relationship.

• 1:08:56David Hoffman?

  Yeah, yeah, the idea is that DeFi builds the product and then C-Fi just says, oh, thank you for that product. That's mine now. And then they, they put their wrapper on it. They put their logo on it and they offer it to their customers. Mike, it's been a doozy of a week in terms of news. Thank you, brother, for helping me walk through the news with the Bankless Nation. Really appreciate it, my man.

• 1:09:15Speaker 01

  Yeah, it's been awesome. Thanks for having me, buddy. It's a, it's a lot of fun.

• 1:09:18David Hoffman?

  Yeah. And Mike, if people liked your takes, they liked the sound of your voice, where can they hear more of you?

• 1:09:24Speaker 01

  Yeah, if I fooled you into thinking I have good takes, you should head over to Bell Curve. So that is a podcast that I've been hosting for a little while. I'm joined by the Framework Guys, Michael and Vance, on Friday Roundups. And then just follow me on Twitter, Mike at Bolito underscore.

• 1:09:38David Hoffman?

  We will get that into the show notes. Bankless Nation, you guys know the deal. Crypto is risky. You can lose what you put in, but nonetheless, we are headed west. This is Frontier. It's not for everyone, but we are glad you are with us on the Bankless journey. Thanks a lot.