SotN #3 GROWING (The Flippening is Back, India Banning China, DEXs going parabolic)

STATE OF THE NATION #3 - Tuesday, June 23, 2020 The State of the Bankless Nation is.... GROWING! The Bankless boys discuss why. Watch the video here https://www.youtube.com/watch?v=8eeswclmONI&t=8s. Covered: The Flippening is back (will ETH flip BTC?) India Bannking China (and why it's good for Ethereum & Bitcoin) DEXes going parabolic (bigger than Binance?) ----- GO BANKLESS WITH THESE SPONSOR TOOLS: 💸 RAMP - FIAT ONRAMP FOR DEFI (ONRAMP $100k FREE WHEN YOU MENTION BANKLESS) https://ramp.network/ 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://monolith.xyz/ 🌈AAVE - LEND & BORROW YOUR CRYPTO W/O A BANK https://aave.com/ 📈MULTIS - BANK YOUR BUSINESS W/O A BANK! (1 MO TRIAL - JUMP QUEUE WITH "BANKLESS") https://multis.co/ ----- Action items: Look at the Flippening Metrics https://www.blockchaincenter.net/flippening/ Read: An Inside Look at China’s Digital Currency https://news.8btc.com/dcep-an-inside-look-at-chinas-digital-currency Check out DEX metrics dashboard https://explore.duneanalytics.com/dashboard/dex-metrics ----- Don't stop at the show! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState Follow DeFi Dad on Twitter https://twitter.com/DeFi_Dad ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

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

• 0:04Ryan Sean Adams?

  All right. Welcome to another edition, the third edition of State of the Nation. I've got myself, Ryan, Sean Adams, and we've got David Hoffman. And we're here to talk about the state of the Bankless Nation today. David, how are you doing?

• 0:20David Hoffman?

  I'm doing really good, Ryan. Lots of things are moving around in the Bankless Nation. And I'm really excited to peel back the layers and get into it with you.

• 0:28Ryan Sean Adams?

  Well, I can't wait to ask you my starting question, but before we do, for those of you who are new to State of the Nation, we do this every Tuesday. So every Tuesday sometime mid morning or afternoon, depending on your time zone, we will release this on YouTube. So make sure you subscribe. We'll also release a podcast version of this on our podcast stream on Wednesdays, but you get it on YouTube a day earlier if you're subscribed and tuning in. This is where we talk about big picture stuff and we relate the events in the news to what is happening in the Bankless Nation. And the first question I always ask David on these is what I'm about to ask him. David, what is the state of the nation right now, sir?

• 1:08David Hoffman?

  The state of the nation is growing. So we had this bullish period and then we had this churning period. Those were the last two states of the nation. And now things are settling and things are really developing. And so we're seeing a lot of these applications come into maturity. The churning state of the nation last week was all about learning how these DeFi apps and users of these DeFi apps would come to grow accustomed to this new paradigm that we are in with the DeFi tokens, as well as the surge of automated market makers. And now that we have absorbed these new things, we are now maturing with them and they are developing and growing. And we are all doing that alongside the Bankless Nation.

• 1:53Ryan Sean Adams?

  I like that word growing. It also implies sort of that we've moved from maybe a period of infancy to adolescence. And are we, are we in puberty right now, David? Because, you know, not everything is going smoothly. We are growing, but there's sort of an awkward phase in some, in some ways, too.

• 2:10David Hoffman?

  Yeah, puberty was the real word that we wanted to say, but that was kind of, kind of an awkward word. But yeah, really, when we pull back the layers, we are talking about going through banklessness, the bankless nation is going through puberty, right? Like, we're seeing a lot of good strides and we're seeing a lot of voice cracks and hiccups and kind of, kind of our feet are really big and we're not used to it. Stuff like that.

• 2:31Ryan Sean Adams?

  Yeah, the smell of Axe body spray, you know, that kind of thing. All right. So let's talk about three things today. We want to talk about the flippening. We want to talk about India banning TikTok and really what they're doing is banning China and how that relates to crypto. And we're going to talk about the insane growth, that's your word for the state of the nation, of DEXs today and relate that into concepts. Let's first start talking about the flippening. David, when I say the word flippening, what comes to mind for you? What are we talking about there?

• 3:01David Hoffman?

  I think the most simple answer is the market cap of Ethereum flips the market cap of Bitcoin. But there are a bunch of other metrics that we could go into and each one represents its own flippening. But the real point, the real point of contention is the flippening between the market cap of Bitcoin and Ethereum, in my mind.

• 3:20Ryan Sean Adams?

  Okay, so that was a meme that was like popular in 2017. Bitcoiners hated it. Etherians loved it. I remember in 2017, Ether, the market cap of Ether got within striking distance of the market cap of Bitcoin for the first time. It was like, it was like 70% ish of the market cap of Bitcoin. And then Bitcoin took off and Ethereum really, Ether really never recovered. And the meme of the flippening died pretty much, or faded out, if you will. Even there was a website called Flippening Watch, which I remember from back in that time. It's no longer maintained. So that tells you that the meme has died. It's, it's not updated. It's not even online. It's no longer maintained. But-

• 4:02Ryan Sean Adams?

  There is a new flipping, there's a new flipping dashboard that just came to my attention. I guess somebody, somebody built this and sent it out. I think that the meme might be resurrected. It's probably a bit early right now, but in the next bull cycle, I anticipate Ethereum bulls to be resurrecting this meme. Is there, is there anything to it? What I've got on my screen is actually the dashboard that I was talking about with some flipping metrics in addition to market cap. Do you think it's possible that we will see a flipping of market cap? And what about these other metrics?

• 4:38David Hoffman?

  Yeah, I absolutely think it's possible. And I think the more and more Bitcoin that comes to Ethereum just makes it more and more likely. And, and there are, so there are eight metrics here. We have like market cap, transaction count, trading volume, node count, active addresses, transaction volume, transaction fees, Google search interest. Like, like I said at the beginning of this, the real metric is market cap, right? All of these other metrics, including things like Google search interest, which aren't even something that's like a metric on chain. They're just meant to illustrate perhaps mind share or, and then the transaction volume is, is supposed to illustrate like currency, trading volume share. But really what we're going for is like market cap, right? That is the real flipping metric.

• 5:23Ryan Sean Adams?

  That's looking pretty weak.

• 5:25David Hoffman?

  Sorry?

• 5:26Ryan Sean Adams?

  That's looking pretty weak, wouldn't you say?

• 5:27David Hoffman?

  It's looking pretty weak.

• 5:28Ryan Sean Adams?

  Like 15%.

• 5:29David Hoffman?

  It's the worst one and it's the worst one.

• 5:31Ryan Sean Adams?

  Right? So right now Ethereum is kind of like ether is the dark horse here because there was a time where it's 70% of Bitcoin's market cap. And now it's on the flipping metrics website. It's only 15% of market cap.

• 5:43David Hoffman?

  Mm hmm. And all these other metrics, right? Especially things like active addresses and transaction volumes and transaction fees are supportive of the thesis that one day Ethereum will flip in Bitcoin. And so these things are supposed to support the concept that like that 15% market cap that ether is of Bitcoin is really low.

• 6:04Ryan Sean Adams?

  Right, yeah, exactly. And I think a lot of these metrics are about usage of the network, right? So on transaction count, which is interesting, is Ethereum today gets more transactions on a daily basis than Bitcoin. So that's already flippant. The other thing that's already flippant is the total transaction fees. That's been, we talked about that in the last State of the Nation, but that's been true actually for the past three weeks, that Ether, Ethereum block space is more valuable right now than Bitcoin block space. So it's bringing in more transaction fees on a daily basis. That's been true for the last three weeks. This might be the longest running period that that has actually been true.

• 6:44David Hoffman?

  Ever.

• 6:45Ryan Sean Adams?

  So like, those are two Flippening metrics that have, that have hit the checkbox. There are a couple of other interesting ones. Active Addresses is an interesting one. That's been on the rise. I think in the Ethereum network, it's the highest it's been since, since something like, you know, 2018.

• 7:03David Hoffman?

  We do have to asterisk that one because Plus Token is spinning up a bunch of just trash addresses trying to obfuscate their ETH that they, that they took in their Ponzi scheme. So like, they are inflating that number a little bit, but regardless, it's been moving up and up and up for, for the last two years.

• 7:20Ryan Sean Adams?

  Yep, yep. And that's at 56%. But what's interesting are some of these low ones, like Google Search Interest is only 10% of Bitcoin's Google Search Interest. So Bitcoin just has massive mindshare compared to Ether. Like even when, when people ask you about like crypto, you know, when people ask me, they ask like, oh, are you into Bitcoin? Like, you know, they don't even say crypto. They, they very rarely say Ether or Ethereum. And it just has captured more mindshare. And I think that reflects the search, Google Search Interest too, right?

• 7:55David Hoffman?

  Yeah, yeah, and I've always been skeptical about Google search interest with Ethereum, right? Because Ethereum is not just one thing, right? So like, are they counting Maker Dow? Are they counting Augur? Are they counting like any, all of these Ethereum apps? Like, because I think those also count as like Ethereum Google search interest. And I'm guessing that this is just comparing raw Bitcoin to raw Ethereum, which only paints so much of a picture.

• 8:20Ryan Sean Adams?

  Yeah, it really does. Even when you look at the transaction volume figure. So transaction volume, that means the amount of value that has been sent is actually comparing transaction volume of Bitcoin to transaction volume of ETH. But it doesn't, it's not comparing Ether plus all of the ERC20 tokens on top of Ethereum versus Bitcoin. If you looked at just that metric, if you added Tether and everything else, this says right here that Ethereum would be way above Bitcoin in terms of the transaction volume because of all of the ETH and all of the ERC20s and the cumulative value exceeds the value of Bitcoin right now. So that's interesting. Yeah. So in some ways, we are comparing like two different networks.

• 9:04Ryan Sean Adams?

  One is a mono asset network, which is Bitcoin. The other is a poly asset network. So it's not exactly comparing apples to apples, but you know, as I like to say, both are fruits, so you can compare a little bit.

• 9:18Ryan Sean Adams?

  Yeah. So you know what's also interesting is actually the guy behind this was the guy behind the Bitcoin rainbow price chart as well. So this is somebody who's very into Bitcoin. And, you know, he just recently came out with the Ethereum flipping index. So I don't know if that's indicative of a mind share flipping too, but it does seem like there is a shift from maximalism to more interest in the Ethereum space. And we touched on that a little bit last time, too.

• 9:51David Hoffman?

  Yeah, absolutely. And Ethereum, the ETH price chart does follow some sort of like logarithmic curve. It doesn't look like Bitcoin's logarithmic growth chart because Ether skyrocketed into its market cap way faster than Bitcoin did at its genesis. But I'd like to see what happens when you do the rainbow price chart for Ether, too.

• 10:11Ryan Sean Adams?

  Yeah, I know.

• 10:12David Hoffman?

  I think that's not far off.

• 10:13Ryan Sean Adams?

  Yeah, I hope somebody comes up with that. And I'm actually surprised we haven't seen that because this is a, I mean, this is just a beautiful chart, right? This Bitcoin price chart, right? Like, so.

• 10:24Ryan Sean Adams?

  That I mean, this, what this is showing is that Bitcoin historically, if it's following the rainbow curve is in the undervalued territory historically, it would be a tremendous buy as of today. It's basically, almost basically a fire sale, but it's certainly a buy according to this chart.

• 10:43David Hoffman?

  Which is not financial advice.

• 10:45Ryan Sean Adams?

  No, none of this is financial advice, guys. Absolutely.

• 10:50Ryan Sean Adams?

  All right. So let's talk about something else, too. So something that piqued my interest, David, was that it seemed like India was, you know, banned a whole list of, of apps recently, particularly Chinese apps. This is a list of all of them. So TikTok is number, number one. I'm sure like a bunch of, you know, folks probably use that and have heard of that. Also, things like, let's see, WeChat, which is a Chinese messenger app. What do you think that's all about? Why is India doing this?

• 11:21David Hoffman?

  Well, I think the first thing that this illustrates to me is like how a lot of these very just, just, you know, normal apps are actually tools of the state and specifically tools of China, right? So like TikTok is, is I think the biggest one, that the biggest culprit of this is like, yeah, it's a cool app and it does, it's a social media app and allows people to have fun on it. But like, it's actually the way that China uses it is a way to see, see what's up, see what's going on. You guys peer into your data, get data on you. And India is having none of it, right? India is like, no, uh-uh. You don't get to get data about our people better, better than we are, for sure. And so it's basically India claiming self-sovereignty over China, right? So China is a nation-state,

• 12:06David Hoffman?

  it's got very defined borders, and it doesn't, it's not colonial, right? It's not like reaching out to the rest of the world and trying to claim it like Britain was in the 16, 17, 1800s. But it's doing that through technology, right? Like 90% of the world's chips are made in China, which is really scary to me. And like, a lot of these apps that everyone around the world used is developed in China, and China is spreading its influence through these applications. So what India is doing when they're banning these apps is saying like, no, China, like, get out, like, you are banned from, from our app stores of sorts. You, you don't get our data.

• 12:44Ryan Sean Adams?

  It's interesting that you use the word colonialism because some people have called this basically digital colonialism, which is kind of expanding the empire and breaking the self sovereignty of nation through technology, digital technology. What's interesting to me too is these can, let's be fair, these consumer apps, they're all opt in, right? China is not forcing any, like anyone from India or the US for that matter, at gunpoint to use TikTok. We're choosing to use these things. Like there's 900 million users on TikTok today. And to my knowledge, all of those users made a choice to jump into TikTok. Is that because we just don't care about privacy like we should? We don't care enough about data surveillance? Do you think that tide is going to shift at any point?

• 13:29Ryan Sean Adams?

  Or is just, is this basically a tragedy of the commons problem?

• 13:32David Hoffman?

  Yeah, you know, China is definitely doing that with, that is their strategy, right? Let's, let's make something useful for people so that they, they forget about like the whole privacy side of things. And, and we're seeing Apple start to develop their hardware in ways that are definitely pro privacy, pro consumer. So in the new iOS software, Apple has a little flashing icon whenever your camera or microphone is being used, either by an active app or in the background. And it's very much like an anti-China move, either, either with intent or not. But, but with regards to like what China means for the rest of the world, like China is the most anti-bankless nation that we can think of, right? Like it is the opposite of the bankless nation.

• 14:16David Hoffman?

  Like it's, the digital nations and that, that I've been describing as Bitcoin and Ethereum, like the antithesis isn't the nation state, it is the authoritarian nation state.

• 14:27Ryan Sean Adams?

  Absolutely, yeah.

• 14:27David Hoffman?

  The bankless, the bankless nation and the USA nation or Germany or France, those can co-mingle and coalesce and work together. The bankless nation cannot work with the China, the China nation. That is, it's oil and water. It's, there's nothing more antithetical to the China nation state and the bankless digital nation.

• 14:45Ryan Sean Adams?

  And to be clear, I think you're talking about the Communist Party in China, so the CCP, rather than the people of China. And it also could be the case that in, you know, Western, like democratic, formerly republic, you know, strong protocols for individual sovereignty and liberty, that those could collapse into more authoritarian regimes too, which is why we have to keep our guard up. Every generation, I feel like, has to keep their guard up against the encroachment of tyranny. That's really what the blacklist movement is about. It's about, you know, a bill of rights, essentially, that money should be separated from the state as we transition into this digital era, that the state should not get full control of our

• 15:27Ryan Sean Adams?

  monetary systems, so that despots and tyrants don't control us, essentially. I do think that this news with India's sort of banning, what they're doing is they're banning China, really. It's more than banning these particular apps, they're banning China. But in a way, that's really good news for credibly neutral crypto blockchain network systems, right, like Ethereum, like Bitcoin, to some degree. There's been talk often about what happens if China creates a blockchain, they're working, they have a blockchain initiative right now, or what about the Chinese digital currency, right? You know, won't that just stomp out all of these

• 16:09Ryan Sean Adams?

  public networks like Bitcoin and Ethereum? And I think the answer to that is, no, absolutely not. Because like, so if you just work out the game theory, if India is not willing to use China's TikTok application, there's no chance in hell they're going to use China's blockchain. There's no chance in hell they're going to use China's digital cryptocurrency, right? Think about the surveillance ramifications of that. And so what this means is, if the nation-states are going to use crypto and going to use blockchains, they're going to all settle on the one, the systems, the small number of systems that none of them control, and none of them can co-opt. It's, you have to kind of use the most credibly neutral system,

• 16:54Ryan Sean Adams?

  that's just how the game theory works out. So I think that's super bullish for Ethereum, and like, people aren't realizing that because of nation-state politics, essentially, you know, a national blockchain program cannot work at least outside of the bounds of one particular nation-state.

• 17:13David Hoffman?

  No, that's totally right. And at the start of that, you said, you talked about how like Bitcoin and Ethereum, these digital nations are checks on the nation state. And there is this theory, this attitude that the nation state, no matter what, even pick your favorite, best nation state. And it's, the theory is that it might just be moving towards authoritarianism organically. That might just be in the incentive of a nation state.

• 17:36Ryan Sean Adams?

  Right.

• 17:36David Hoffman?

  Including the United States, like it might just move more and more authoritarian over time. And so like the, and a system like a Chinese central bank, digital currency, or any central bank, digital currency is an authoritarian type of digital currency, right? And the whole incentive of a nation state is to be extractive, right? Like, the reason why India is banning this is because it's saying that, no, China, you cannot extract out of our citizens, right, out of our citizenry. And so any sort of, any sort of digital currency that's operated by a central government is going to just increase the government's ability to be extractive of the people that use it, which is why it's really important to be using a credibly neutral system,

• 18:19David Hoffman?

  because those systems are minimally extractive, right? They, they, the whole point of the system is that there's no one at the center doing any extracting.

• 18:29Ryan Sean Adams?

  Yeah. And I, you know, that, that brings to mind, I was reading a statement this morning on the Chinese digital currency and electronic payments. So this is the, the Chinese digital currency is essentially that's being rolled out now. So it's been six years in development. It's now starting to be rolled out. And there was a statement in it, this is a good in-depth, we'll include this article in the show notes. If the government, that's the Chinese government, decides to deactivate a wallet or reverse a transaction, they can do so with one simple click. Like, how dystopian is that? One click, and we can eliminate you, citizen, from the world economic system.

• 19:12Ryan Sean Adams?

  You have a problem with our politics, our policies, our leadership? A bureaucrat can click a button and eliminate you from the global economic system.

• 19:24Ryan Sean Adams?

  That is terrifying to me.

• 19:26David Hoffman?

  Especially when we like include the fact that in the long term future, these digital systems are supposed to also be our identity systems, not just our money systems, that that centralized power of just removal is even worse, right? Like, not only is your economic and financial status gone, like you are gone, you do not exist. And we saw what happened when like a centralized regime like in the USSR, they would just delete people. They would just, you're gone, goodbye, you never existed. And now we're doing this in a point and click type fashion.

• 20:01Ryan Sean Adams?

  Well, you could even program algorithms to delete people, right? So, I mean, you could set up a whole nation state apparatus where, you know, robots are deleting people who travel in, you know, to certain provinces or in certain ways, and they automatically delete the citizen, or freeze their accounts, or, you know, steal some of their money, take out a fine. It's very scary to me. And the thing about it is, this is the, you know, we're talking about China and the Chinese digital currency. But I think that the US and Europe and Western nations will move in the same direction of becoming like of incorporating digital currencies into their nation state protocol, essentially. They kind of have

• 20:45Ryan Sean Adams?

  to, one, to compete with China, right? But, but, but two, it's just more convenient. I mean, the entire society is moving into the digital realm. I mean, when's the last time you paid with, with cash money, with Benjamins or anything, right?

• 21:00David Hoffman?

  My wallet doesn't even have a spot for cash. It's a hard only wallet.

• 21:04Ryan Sean Adams?

  Yeah, so is mine, because cash is like cumbersome. It's like older generations use cash. But I, cash is so, is also very important, because it is a way to opt out. Like, cash preserves individual privacy and anonymity more than any, anything else, any other form of currency, essentially. It's also a bearer asset. So when I give you cash, you know, the transaction is totally finalized. So if we eliminate, you can't. Well, you could burn it, I guess, but like, no one does that.

• 21:37David Hoffman?

  So, India, once upon a time, did delete cash. They just said, like, all right, these denomination of bills are, are no longer accepted. You have two weeks to turn them into something else. And so like, there is that weakness there. But until then.

• 21:49Ryan Sean Adams?

  That, yeah, yeah, absolutely. And that's fair. And this is the reason why criminals use use cash, right? Because it's untraceable. With with that activity, there's also tremendous downside, but there's also a bunch of freedom. And I worry that as we transition into this digital currency world, like, we lose all of that, both in China, in authoritarian regimes, but also in Western countries like the US. Like, in the US, it might look like Facebook and Libra, plus the Fed. And essentially, like, the Fed and the state government uses our technology companies as an apparatus to do the same thing, to deactivate a wallet, to reverse a transaction,

• 22:31Ryan Sean Adams?

  to take money from its citizen rate. It seems inevitable, to your point earlier, that nation-state governments will move in this direction. And to me, crypto is the only alternative. It's the only way to opt out. So once cash is eliminated, we will only have two forms of money. We'll have fiat from nation-states, and we'll have crypto. And those are the only two options, really.

• 22:54David Hoffman?

  Yep, that's it.

• 22:56Ryan Sean Adams?

  Yeah.

• 22:57David Hoffman?

  Well, and it is good that, like, the digital nation currencies exist because they their mere existence, the ability to opt out of an anti-cash authoritarian society is a is itself a check on that. So like, even that people that aren't participating in these digital nations, they still get the benefit of them, because you can't go full authoritarian if something like Bitcoin or Ethereum exists, because then you're just going to hasten the arrival of these technologies.

• 23:24Ryan Sean Adams?

  Totally. Like, so even if even if these systems occupy 10%, 15%, 20% market share of the world monetary system, that's that's enough of a check and balance to resist this kind of stuff. All right. So, man, dark topic, but our word of the day, state of the nation is growth. Can we talk about growth? Because DeFi exchanges, these are called decentralized exchanges. So people shorten that, they call them DEXs. They are going absolutely parabolic, like they're going crazy. What's happening here, Dave?

• 23:59David Hoffman?

  Well, so we, we found this very early primitive and we turn, it turns out we can jiggle it around to really fit our needs in a bunch of different ways. And what I'm talking about, of course, is the automated market maker model. And the reason why the AUM, AUM model is so strong is because it is, instead of a, being a peer-to-peer exchange, it is a peer-to-contract. And so peer-to-contract is so much more scalable than peer-to-peer because you don't need to operate an order book. You don't need any infrastructure. You just need a single contract on Ethereum and that can scale out to the whole entire world, right?

• 24:39David Hoffman?

  And so many, many, many people can all trade with each other by going through this intermediary contract that coordinates everyone. But you don't need to have like an order book. You don't need to have a matching engine. You don't need to have a server, which a lot of these other DEXs tend to do. And so the AUM, Automated Market Maker, AMM, excuse me, Automated Market Maker model has just absolutely exploded.

• 25:04Ryan Sean Adams?

  Yeah, it's crazy to see. This is a tweet from Hayden, who was the original creator of the Uniswap protocol, whom we, we've had, we, we talked about on the Bankless Podcast previously. He, he said, and this is kind of happening behind the scenes, is everyone's talking about liquidity farming. But Uniswap's June volume was greater than all of its 2019 volume combined. So one month, in one month, June, we're not even halfway through 2020, it beat, Uniswap volume beat all of 2019.

• 25:37David Hoffman?

  We're not even done with June.

• 25:39Ryan Sean Adams?

  Not even done with June. This is actually a tweet from the June 25th. So like, where are we going next is, is the question. I've got a chart here. God, this thing's in the way. There we go. I've got a chart here on Dex metrics. And you were talking about like, so one form of a Dex is an automated market maker that you talked about, right? Which is what Uniswap is, but there are other order book types of DEXs. But what's interesting here, when you look at the, first of all, that volume is crazy, 450 million over a seven day volume. But when you look at the breakdown, 41% of that is Uniswap. And 12% of that is Curve.

• 26:18David Hoffman?

  Which is another AMM.

• 26:20Ryan Sean Adams?

  Yes, so Curve and Uniswap are the two AMMs.

• 26:24David Hoffman?

  And then it got 8% of balance or two, right? So that is 60%.

• 26:28Ryan Sean Adams?

  60% plus, so a healthy majority, almost two thirds of majority of all of the decentralized exchange traffic is from automated market makers. I think that's, I think that's pretty interesting because that is a new use case that only DeFi enables. It's kind of a, it's kind of the first completely innovative product market fit. I think that, that I've seen. It's something that doesn't exist in traditional finance at all, to my knowledge, right? Like, if you think about Maker, there's loans and collateral, that sort of thing exists in traditional finance, but these automated market makers, money robots, as we like to call them, are pretty unique to DeFi.

• 27:12Ryan Sean Adams?

  And they are just growing like crazy and they're dominating everything else out there.

• 27:17David Hoffman?

  And importantly, the Protocol Sync thesis predicts this, right? So automated market makers are like the most dense type of DEX that is available, right? So super high utility, lots of people want to use it. And also, when it comes to its scalability and its trustlessness and its permissionlessness, it has it all. It has the full marks, right? Which means that any automated market maker system, because, because an automated market system, excuse me, an AMM is just a application that accepts any token. So like, anyone can use them as it sees fit. And so it really is a, in AMM exchange, it just reflects the demand of the world around it.

• 27:58David Hoffman?

  It doesn't really have any impact upon, it doesn't do anything else other than reflect the needs and desires of the Ethereum ecosystem, right? And so it just is a good tool for people to use. And just because of its simplicity and its, and its maximal utility as an application, it's become really, really dense. And so we're seeing Uniswap and Curve just gain and gain and gain density in the form of, you know, monthly, weekly, daily volumes, right? That is the metric of density for these AMM applications.

• 28:28Ryan Sean Adams?

  Yeah, absolutely. It's been exciting to see it. And yeah, everyone knows the rules of the game that they're playing with. So each of these automated market makers have a, you know, specific curve. And, you know, it's all transparent. They can't cheat you. So these are, I think, much more economically dense protocols than than centralized exchanges. We're actually starting to see that. So I was blown away. Last week I saw this. USDC, which is the stablecoin, like the second largest stablecoin, and Tether, which is the largest stablecoin. The trading volume on Curve exceeded Binance over the past 24 hours. This was on the 20th.

• 29:07David Hoffman?

  It's crazy.

• 29:09Ryan Sean Adams?

  Right? So Binance, like mighty Binance, the largest exchange, centralized exchange out there with a vast majority of the market share. They're being beaten by Tiny Curve. Like, look at Curve. This is Curve. All right. So this is the decentralized protocol, DeFi protocol Curve. Back in February, this was their deposits. February 10th, they had $8,000 in liquidity.

• 29:38Ryan Sean Adams?

  $8,000. And you fast forward, this is around when the comp token launched.

• 29:45Ryan Sean Adams?

  Fast forward to now, they have 50 million in US dollars deposits. And Curve is specifically, they're really good at exchanging like-for-like things. So stablecoins, for instance. So USDC and a Tether would be a perfect exchange for them, or like two forms of tokenized Bitcoin on Ethereum. And they are beating centralized exchanges already. And it's only been like four months.

• 30:09David Hoffman?

  Right.

• 30:09Ryan Sean Adams?

  Right?

• 30:10David Hoffman?

  Like, the growth is absolutely insane. Like, and Binance, you can kind of compare Binance to Coinbase. And using the Protocol Sync model, right? Because like Coinbase is a lot more restricted. And it requires KYC and Binance doesn't. And Binance is more global, more scalable, doesn't really care about what country you're from. It takes any asset it can think of. And so like using the Protocol Sync thesis, Binance is denser than Coinbase, perhaps. And even even Binance, like the most the most dense like centralized exchange that the centralized world can cook up is still losing to Curve in a four month time period, in a five month time period, like absolutely blown out of the water, at least with stable

• 30:54David Hoffman?

  coins. But I think all the other assets are not far along.

• 30:58Ryan Sean Adams?

  Yeah, it's it's super exciting. So, you know, growth is definitely the theme. And like the last thing maybe to mention on this whole trend of decentralized exchange growth is that it's back to what we've been talking about in the previous State of the Nations and our podcast with Dan Elitzer is these DeFi tokens are essentially going to be rocket fuel on top of this, all of this. So these DeFi tokens, you're essentially, you know, what does Dan call it? Time, time spacing? Like you're bringing profit from the future into the present with these things. And you're using that to supercharge liquidity and make the future more inevitable, essentially. So that's what Comp is doing. It's incentivizing

• 31:41Ryan Sean Adams?

  liquidity, it's pouring rocket fuel on all of these DeFi systems. And now Curve is coming out with their own CRV token to further incent liquidity. So that was Curve's growth that we just saw, just given the recent, you know, DeFi token launches of Comp and other things. It hasn't even launched its own token yet. It hasn't even poured its own rocket fuel on top of the rocket fuel that already exists. So there there is scant detail about CRV tokens right now. But Curve did release a PDF about it, I believe, earlier this week, or perhaps it was last week that shares some more details. We'll include that in the show notes. But

• 32:22Ryan Sean Adams?

  that's something to to look at, these decentralized protocols, particularly DeFi exchanges, starting to incorporate their own tokens to further incent liquidity. It's just going to be, I think, a pretty large explosion.

• 32:36David Hoffman?

  Yeah. And then the explosion that comes after that is using all of those tokens as collateral and in things like Maker Dow and allowing to mint new DAI based off of the value of all These capital asset tokens, because for the first time, I think Maker Dow has a nice wide variety of selection of good assets to choose from, which they haven't really had before, like that's not really the best token like WBTC, fine, I'll take it. But like now we have these real on, it's most importantly on chain, like WBTC is not on chain. All of these, all of these comp governance tokens, the curve token, the balancer token, these are going to be great collateral for Maker Dow and allow for a lot of new value to be created inside of the Ethereum ecosystem.

• 33:22Ryan Sean Adams?

  Yeah, they're all crypto native capital assets, which is super exciting. Now, that's not to say some of them might be tremendously overvalued, but at least we have a value accrual mechanism and we have a way to benchmark the value that that we have and that, you know, could be accrued by these tokens, which I think is is is pretty unique. Why I sort of think of it as it's it's a bit like in, you know, let's say it was early, it was like 1999, early internet. And let's say every time you use the Google search engine instead of AltaVista, Google would award you with Google shares. That's essentially what these tokens are doing.

• 34:01Ryan Sean Adams?

  Now, it could be the case that instead of Google, Google shares, you're getting like pets.com shares or some some other stupid.com, right? Because we don't actually know, you know, what the what the winning protocols are going to be. But they are capital assets that you're getting almost like shares, right? There's the protocol shares that you're getting in exchange for using the protocols, which is is pretty interesting. And, you know, the the original internet movement did not have that sort of feature. It was Google was not giving out its shares for, you know, Googling something in their search engine.

• 34:37David Hoffman?

  Absolutely not. And this is, I think, why I'm so bullish about this particular instantiation of governance tokens of sorts, right? Because what a what a share of of Google is is a governance token. And I do hope that these governance tokens start paying dividends pretty quickly, because we've seen.

• 34:57David Hoffman?

  These tech companies and the stock market have these tokens, these governance tokens over these massive tech companies. But the only reason why they're valued is because of the greater fool thesis, right? There's no, these tokens, these shares of companies don't actually give you anything. They, like, no one's actually actually using them for governance. They're just shares of a company that aren't paying any dividends. And I think that's actually a huge problem in the legacy markets. And so I kind of hope these, these governance tokens on Ethereum start paying dividends really quickly. Because the whole point of these tokens is that they are access to cash flows. I know that wasn't really on our list or topics, but I thought I'd bring that up.

• 35:35Ryan Sean Adams?

  No, it's true. And they're, they're being valued as if they're going to pay dividends in the future. So if they're not, then they're, they're way overvalued at this point. If they are just governance tokens without any option on future cash flows, then I think the, the valuation behind all of these things completely breaks down.

• 35:52David Hoffman?

  Right.

• 35:53Ryan Sean Adams?

  So it seems like the market is, is assuming and almost depending at these prices on these tokens becoming full shares essentially that reward through dividends or burn mechanisms and other things we've talked about. I'm with Dan. David, anything else, man? I think that's all we, that might be all we have time for today. I think we're out of time.

• 36:13David Hoffman?

  That, that was it. The, the bankless nation is growing, is developing. It's not all good. There are, their balancer got hacked. They lost a bunch of money. Comp, the code tokens got extracted out of the balancer system. There, it's, it's, it's, we're going through the fire. We're going through the fire. But there's a lot of growth, a lot of things happening right now. So DeFi is hitting puberty at the moment.

• 36:37Ryan Sean Adams?

  Yeah, nice. This is the Wild West, everyone remember. So risks and disclaimers, guys. This is, none of this is financial advice. Keep in mind, all of these protocols are risky. Crypto, ETH, Bitcoin, all risky investments to, to have and to own. So be careful out there for sure. As far as action items, we will include a link to the flipping chart that I sent you in, that we, we looked at in the show notes. Also, things to watch, we'll, we'll include a link to the information about the CRV token on Curve. And you've got to hit subscribe as well. That'd be the third action item. So subscribe to YouTube. Subscribe to the Bankless Podcast. Speaking of the Bankless Podcast,

• 37:18Ryan Sean Adams?

  July is going to be hot in terms of podcasts, guests. David, who's coming on the Bankless Podcast this month?

• 37:26David Hoffman?

  We're going to be interviewing Chris Bernesky on Thursday, so that episode will be out next Monday. And then after that, who do we have after that? We have Fatalik coming on, which is also just going to be absolutely insane. We're going to talk a lot about the article that I'm about to release, maybe this week, maybe next week. So stay tuned for that one. And then Ryan, remind me who we have after that.

• 37:48Ryan Sean Adams?

  We have Ben Hunt from Epsilon Theory, who's one of my favorite writers about everything that's going on in the capitalist world these days. And then also Eric Voorhees to kind of close out the month. So it's going to be awesome on the podcast. We are glad that you are with us on the Bankless journey. This has been State of the Nation, episode three. Thanks a lot.