ROLLUP: 3AC Meltdown Continued | BlockFi Down Bad | Grayscale Sueing the SEC | Contagion Market?!

Last Week of June, 2022 ------ 📣JUNO | Crypto Friendly Banking https://juno.finance/bankless ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: 🚀ROCKET POOL | ETH STAKING https://bankless.cc/RocketPool ⚖️ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum ❎ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across 🦁BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave 🌴MAKER DAO | DECENTRALIZED LENDING https://bankless.cc/MakerDAO 🔐LEDGER | SECURE STAKING https://bankless.cc/Ledger ------ Topics Covered: 0:00 Intro 5:10 Markets 5:15 BTC Price 5:35 ETH Price 6:55 ETH BTC Ratio 7:05 Crypto Market Cap 7:50 FED WATCH 8:00 Who’s to Blame For Inflation? https://ritholtz.com/2022/06/inflation-blame-15/ 11:58 How’d We Get Here? Dan from Pantera https://panteracapital.com/blockchain-letter/the-feds-twin-policy-errors/ 15:10 WSJ: Rising Interest Rates Will Crush the Federal Budget https://www.wsj.com/articles/high-interest-rates-will-crush-the-federal-budget-inflation-debt-spending-costs-recession-economy-11656535631 20:00 3AC Meldown Continued 20:22 Crypto Hedge Fund Three Arrows Ordered by Court to Liquidate https://www.wsj.com/articles/crypto-fund-three-arrows-ordered-to-liquidate-by-court-11656506404 23:55 Voyager $660M Unsecured Loan https://decrypt.co/103892/voyager-digital-issues-three-arrows-capital-default-notice 29:49 Three Arrows Capital Liquidation Ordered in British Virgin Island https://www.coindesk.com/business/2022/06/29/three-arrows-capital-liquidation-ordered-in-british-virgin-isles-report/ 29:55 Su Zhu’s Yacht https://twitter.com/AutismCapital/status/1540001243795542018 31:25 Vitalik Subtweet 33:19 BlockFi 33:22 Where it Started https://www.coindesk.com/business/2022/06/16/blockfi-liquidated-three-arrows-capital-report/ 35:25 FTX Seeks to Acquire BlockFi https://www.theblock.co/post/154929/ftx-blockfi-deal-sources 35:30 New Morgan Creek Bid https://blockworks.co/blockfi-has-a-new-bidder-in-morgan-creek-report-says/ 40:15 BlockFi Is Pursuing Plans to Go Public https://www.coindesk.com/business/2021/07/22/blockfi-is-pursuing-plans-to-go-public-even-as-regulators-close-in/ https://www.theblock.co/post/155069/ftx-walked-away-from-celsius-deal 42:15 4 Big Takeaways https://www.theblock.co/post/154681/a-leaked-investor-call-revealed-morgan-creeks-bid-for-blockfi-here-are-four-more-big-takeaways-from-the-call 43:30 Grayscale Sueing the SEC 40:35 SEC Rejects Grayscale’s Spot Bitcoin ETF Application https://www.coindesk.com/policy/2022/06/30/sec-rejects-grayscales-spot-bitcoin-etf-application/ 45:35 Michael Sonnenshein Didn’t Like That https://twitter.com/Sonnenshein/status/1542311510055292928 45:45 Grayscale Sues SEC https://www.globenewswire.com/news-release/2022/06/30/2471737/0/en/Grayscale-Investments-Initiates-Lawsuit-Against-the-SEC.html 52:10 NEWS 52:30 MakerDAO 52:42 Controversial MakerDAO Governance Vote https://twitter.com/labsGFX/thread/1541488156909912065 https://vote.makerdao.com/polling/QmWYajMq#vote-breakdown 54:22 Post-vote Thread From Hasu https://twitter.com/hasufl/status/1542196610775629824 57:03 Lido Voters Reject Growth Limit For ETH2 https://thedefiant.io/lido-rejects-self-limiting/ 57:25 Hasu Co-authored a Proposal for Lido stETH Governance https://twitter.com/hasufl/status/1535275167177490438 57:30 Proposal https://research.lido.fi/t/ldo-steth-dual-governance/2382 59:20 Arbitrum Odyssey 1:00:25 Odyssey Paused! https://twitter.com/arbitrum/thread/1542159105946787840 1:01:15 Dune Analytics Data https://dune.com/springzhang/arbitrum-odyssey-event-tracking 1:03:39 Optimism’s TVL Doubles https://thedefiant.io/optimism-layer-2s-surge https://l2beat.com/ 1:05:00 Merge Watch 1:05:10 Sepolia on July 6th https://twitter.com/sassal0x/status/1540352501605490689 1:05:30 NFTs 1:05:35 NFTs Down Down Down https://dune.com/hildobby/NFTs 1:06:00 ENS. Vision https://www.ens.vision/market https://dune.com/makoto/ens 1:06:45 BITCOIN Michael Saylor’s MicroStrategy $10M Purchase https://www.coindesk.com/business/2022/06/29/michael-saylors-microstrategy-purchased-another-10m-of-bitcoin-over-past-two-months 1:09:19 REGULATION China Covid Bankrun Stoppage https://twitter.com/NeerajKA/status/1541397028089073664 1:11:58 MISC Horizon Bridge Hack $100M https://twitter.com/harmonyprotocol/status/1540110924400324608 North Korea https://www.coindesk.com/business/2022/06/29/north-korean-hacking-group-behind-100m-horizon-bridge-hack-report/ 1:13:10 RAISES Digital Wallet Maker Dynamic Raises $7.5M a16z https://thedefiant.io/dynamic-wallet-fundraise/ 1:14:08 Jobs https://pallet.xyz/list/bankless/jobs 1:16:30 Community Questions 1:16:52 L2 vs Cross L1 Bridging Risk https://twitter.com/miner89r/status/1542272305627283466 1:20:38 Best dApps to Get Started https://twitter.com/kangaman_gus/status/1542179373070970881 1:23:48 TAKES 1:23:51 Why CeFi is breaking https://twitter.com/TrustlessState/status/1542284015796895744 1:24:50 Ryan Follow Up https://twitter.com/RyanSAdams/status/1542493426687541250 1:25:50 And You’ll Be Happy https://twitter.com/aubreystrobel/status/1541509159455277058 1:26:34 Internet Security https://twitter.com/kobigurk/status/1539140832615440385 1:27:22 Ethereum Rollup vs. Cosmos https://twitter.com/bkiepuszewski/status/1541065105634385922 1:28:55 What David’s Bullish On 1:30:09 What Ryan’s Bullish On https://twitter.com/RyanSAdams/status/1542504457140707341 1:35:20 MEME of the Week https://twitter.com/jackniewold/status/1539939621848727555 1:38:20 Disclaimers 1:38:43 Moment of Zen https://twitter.com/functi0nZer0/status/1542571158905786368 ----- Not financial or tax advice. https://newsletter.banklesshq.com/p/bankless-disclosures

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

• 0:00Ryan Sean Adams?

  Right, DeFi markets performed flawlessly, transparent, on-chain. It all worked. We did the same liquidations that the C-Fi lenders did, except DeFi didn't screw anyone over. It actually performed exactly as it was supposed to. It's because our regulations are based in smart contracts. So the SEC and other regulators could view DeFi as part of the solution here.

• 0:27Ryan Sean Adams?

  Hey, Bankless Nation, happy Friday morning and happy 4th week of June. This is the last week of June. We've got a lot to cover here, David. I'm fresh back from last week. I did get COVID last week. I went to the beach, had some fun, but also got COVID. So I'm a little bit under the weather, so I'll try to meet the coughs, David. But how are you doing, man? Your new place looks great.

• 0:47David Hoffman?

  Yeah, thanks, my man. Doesn't the brick look pretty good? I've got some big plans for what's going on behind me in the future.

• 0:53Ryan Sean Adams?

  Yeah, what are you thinking? Some little NFTs?

• 0:56David Hoffman?

  I've got a little bit of NFTs, but more than that, more than that, Bankless Studio, the plans for Bankless Studio is underway. More on that later in the show.

• 1:04Ryan Sean Adams?

  All right, we'll save that to the tease at the end. But we've got some hot things to cover, some big things to cover. I came back and I feel like I'm, you know, I left kind of shaking my head a little bit. And I came back and I'm just like still shaking my head, like what a mess. Last week was a complete mess again. I think the theme of the episode today, the roll-up today is crypto contagion. Once again, it's continuing to propagate. But we've got a few stories we're gonna chase down. What's the first one, David?

• 1:29David Hoffman?

  Yeah, we're gonna recap the dust that is settling around the Three Ours Capital meltdown. We've done this a few times before already, and the dust continues to settle. We are finally starting to get some clarity, although there's still much more clarity needed. So we're gonna go through all of what we are beginning to shake out as the final part of the story of Three Ours Capital. And then that bleeds right into the story of BlockFi. Again, the same stories that we've been covering, but because Three Ours Capital was related to BlockFi, we gotta cover the settling of the BlockFi issue as well. BlockFi, where it was previously raising at basically a $5 billion valuation about a year ago, is now being valued between 25 and 50 million dollars. Those are some, there's differences between those numbers.

• 2:14Ryan Sean Adams?

  That's down bad.

• 2:15David Hoffman?

  But then that bleeds right into the third big story of the week, which is that Grayscale is suing the SEC. And all of these stories are related to each other. One just like flows right into the other, which brings us back to like the theme of this whole entire market, which is contagion, contagion, contagion. And it really, Ryan, all kind of comes down to the GBTC discount. And so we're going to walk the viewers, the listeners through like how all of these things are tied together. How one rogue venture fund that everyone thought was Chad's was connected to this GBTC Grayscale Trust, which was an inferior product as a result of the SEC regulation. Whose fault is the bear market? Well, it's a lot of people's fault, but we can definitely name some names. And so we're going to cover all those stories.

• 2:58Ryan Sean Adams?

  All right, we're going to be naming names for you. Is that what you want in the bear market, guys? For us to talk about things that people did that were just straight up dumb? Because that's what we're going to do in today's episode. I think we have to camp on that to learn from our mistakes, hopefully. Also, wanted to tell you about our friends at Juno. Juno is a crypto bank, okay? But it's not like all the other banks in that it has remained solvent. And actually, this is kind of a bank account that I think of as DeFi's best friend, because they are so crypto native and so DeFi native. David, what kind of things does Juno provide in a bank account?

• 3:35David Hoffman?

  Juno, I think, pretty much has the world record for the fastest connection between your checking account and an Ethereum layer two. So Juno, it's like your new financial services, crypto-enabled financial services. You can get a checking account with on Juno. And you can go from your checking account to Polygon, Arbitrum, Optimism. And then they also are working on their Starknet and ZK syncing integrations as well. So like, that's already mind blowing. Like checking account to layer two in seconds. You can also swap your money for crypto assets with zero fees. We love that. And you can also, in your on Juno checking account, get 6% on your USDC or 3% on Ether or 3% on BTC. And so like, it's the crypto-enabled checking account for the future of the world. I mean, the address writes-

• 4:20Ryan Sean Adams?

  Yeah, absolutely. And you may think, hey, why are the bankless guys telling me to go open a bank account? Well, we're literally telling you to go do that because this bank account is so crypto native and crypto enabled. And look, you know, you're never going to get rid of your your bank account. There's always going to be a place for the banks. But this is what a neo bank really looks like. It's completely connected to the crypto world. And there's no borders. You have seamless transition between both. So know you guys probably want to get started. You can head on over to the link in the show notes. And when you do, there is a $10 back reward on your first crypto deposit and also $100 when you set up a direct deposit. Because once again, you can

• 5:02Ryan Sean Adams?

  actually get paid in crypto through Juno as a service too. So go check that out at juno.finance/bankless. All right, David, let's get on the markets report. So what are we looking at with Bitcoin price this week? We're down, it looks like.

• 5:14David Hoffman?

  Yeah, it's one of those weeks like, yeah, it's down every single week, isn't it? Started the week at $20,500. We are currently at $19,000. There's a few dollars above $19,000. Down 7% on the week. Oof.

• 5:27Ryan Sean Adams?

  That does not feel good to be below 20K. That's definitely bear market territory. It's getting chilly down here in the cold. How about ETH? What are we looking at on the seven day here?

• 5:36David Hoffman?

  Yeah, Ether started the week at $1,100. We are currently at $1,026. Down 6.7% on the week. Oof.

• 5:45Ryan Sean Adams?

  Flirting with that triple digit ETH.

• 5:47David Hoffman?

  I saw I saw triple digits this morning. Yeah, we got below triple digits. I saw 999.99. I was like, wow, that's a number.

• 5:55Ryan Sean Adams?

  That sucks. That's a bad number, huh?

• 5:59David Hoffman?

  Not for buying.

• 6:00Ryan Sean Adams?

  How deep is the cut here? How deep we going?

• 6:02David Hoffman?

  Oh, God.

• 6:03Ryan Sean Adams?

  You want to make some calls?

• 6:04David Hoffman?

  I mean, I think we're gonna have plenty of three digit buying opportunities. Maybe not plenty, but like, there will be numerous buying opportunities. There were three times I remember being able to buy $80 Ether in 2018 to 2020. This is the second time that I've seen triple digit ETH. So count them, like, two times.

• 6:21Ryan Sean Adams?

  There you go, guys. It's look, if you're bullish on this space as we are, and if you're as bullish as on ETH and some of these other assets as we are, this is an incredible Opportunity. I'm not saying that we're gonna go up overnight, but I am saying that probably over the next weeks to months, maybe years, I don't know, will probably be one of the few triple buying ETH opportunities, if not the last one we ever see. But who knows? I mean, quote me, quote me on that later after I'm right. Don't quote me on that right now.

• 6:51David Hoffman?

  Not yet, not yet.

• 6:54Ryan Sean Adams?

  Forget I said that during the bear market. ETH to Bitcoin, the ratio, what are we looking at this week, David?

• 6:58David Hoffman?

  It's basically flat. We're at 0.054. That's where we were last week, so no significant change.

• 7:04Ryan Sean Adams?

  Not going down, though. And total crypto market cap, we down too?

• 7:07David Hoffman?

  We're down on that one. Yeah, we are at a clean $900 billion in crypto market cap, down $50 billion in the last week. $50 billion in crypto market cap used to be noise. That's not noise anymore. We lose $50 billion in the market cap. That's, what is that? That's 2.5%.

• 7:24Ryan Sean Adams?

  Do you know, it's still funny, though. Less than a trillion dollars.

• 7:27David Hoffman?

  That's 5%. That's 5%.

• 7:28Ryan Sean Adams?

  But less than a trillion dollars, right? It's like, you know, the dot com boom got to like 3 trillion in the big dot com boom. And if you do like inflation adjusted, that's more like 10 trillion. So like, you know, crypto did what? 2 trillion, 3 trillion?

• 7:41David Hoffman?

  3.5 in the peak.

• 7:43Ryan Sean Adams?

  Not that big compared to like the internet or the dot com boom.

• 7:47David Hoffman?

  Probably 3 trillion.

• 7:48Ryan Sean Adams?

  Yeah, exactly. Now we're, now we're back under a trillion dollars. But let's set some context here because David, I know we're gonna do a lot of macro episodes, and I think it's worth talking about macro for a minute. Our friend Kyla this week mentioned in her newsletter a meeting that happened at the ECB, the European Central Bankers, where all of the central bankers got together and they had a big conversation. Essentially, as Kyla says, they were like, wow, the entire economic regime is shifting from low inflation to whatever this is, whatever this is, is definitely high inflation, new paradigm. And Jerome Powell was actually quoted as saying, "We understand better how little we understand about inflation."

• 8:31Ryan Sean Adams?

  What? This is what Jerome Powell says. And it's kind of head smacking, right? Because you're just like, you have one job, Jerome Powell. And that is to like, look at the historical context for this thing.

• 8:43David Hoffman?

  He said that out loud?

• 8:46Ryan Sean Adams?

  Pretty sure he did, David. And so, um, your job is to literally understand what inflation is. This should have caught no one by surprise. In fact, there's a lot of things that the Fed could be doing. That's not to say though, David, that, um, like the Fed and Powell are the only ones to blame here. Okay, sometimes, yeah, you're like, all of the blame going around for inflation. People are like, oh, it's Trump. Other people are like, oh, it's Biden. They'd be like, oh, it's, you know, the war, Russia and Ukraine, it's Putin's fault. Everyone wants to blame someone. And the reality is like, yes to all of the above.

• 9:17David Hoffman?

  Right.

• 9:18Ryan Sean Adams?

  It's all of their fault. It's like, there's a lot of collective fault. This was a, a post that I read this week that lists 15 things that inflation can be blamed on and justifiable reasons for each. Number one, COVID. Number two, Congress. Number three, President Biden, the CARES Act won. Number four, President, uh, Trump and the CARES Act one and two. Number five, consumers who overspent. Number six, consumers who shifted to goods as part of COVID. Number seven, the Russian inflation of Ukraine. Number eight, just in time delivery, supply chains. Number nine, Fed monetary policy. Number 10, wages and unemployment insurance. Number 11, home shortages. Number 12, semiconductors, automobiles, price go up. Number 13, corporate profit seeking.

• 10:01Ryan Sean Adams?

  Number 14, tax cuts and infrastructure. And number 15, the author of this post even added crypto.

• 10:07David Hoffman?

  Why is it our fault?

• 10:08Ryan Sean Adams?

  A little bit funny. Uh, they just said, um, a lot of people made a lot of money on crypto. And then they bought things in crypto and drove up the prices of other things, but I would say-

• 10:17David Hoffman?

  Yeah, but that's true about the equities market too. There was more money made in the equities market than crypto. I don't feel a blame at all.

• 10:24Ryan Sean Adams?

  I'll take 1/15 of the blame, I guess, whatever. But like, the point here is, the broader point is, it's not any one thing, David. It's like a whole bunch of things that are causing, like, where we are right now with inflation. And it seems like the central bankers are still not quite sure what to do with it all.

• 10:43David Hoffman?

  Right, right. I would summarize, between all of those things, it really boils down to globalization. Because globalization made a pandemic global very, very quickly. It also is responsible for our supply chains, our very fragile supply chains. And then also, like, a Russian invasion of Ukraine, that also has global impacts, just because we have a global network. So like, we're super global, so like, I think like, five to seven of those things could fall under the globalization category. And I think also, five to seven of those things could fall under the fiscal irresponsibility category.

• 11:17Ryan Sean Adams?

  Money printing category.

• 11:18David Hoffman?

  Money printing, like, you know, payments for infrastructure, that like, is probably... Like, there's a bunch of corruption in the United States, like, you know, no surprise there. So like, between globalization and fiscal irresponsibility, I think is like, 2/3 of the blame, I would say, for all these things.

• 11:35Ryan Sean Adams?

  And then you got a war, you know?

• 11:36David Hoffman?

  War. Well, that's globalization though, right? Because then the war, like, impacts supply chains, impacts oil, blah, blah, blah, blah.

• 11:43Ryan Sean Adams?

  Sure, sure. So, there's the bumper sticker. Globalization, money printing, and war caused inflation.

• 11:49David Hoffman?

  And crypto. And those crypto bros.

• 11:53Ryan Sean Adams?

  Forget about crypto.

• 11:55David Hoffman?

  It's Bitcoin's fault.

• 11:56Ryan Sean Adams?

  Yeah. Well, you know what, I read a great, probably the best thing article I read this week was actually a letter from Dan at Pantera, and we've had Dan on the podcast in the past. He's really good from a macro perspective in particular. And he was talking about the big blame. Maybe he would say like, more like, hmm, more like 2/3 itself is actually on Fed policy. So he would wait what you just said, and he would probably agree. But I think he would wait things more towards Fed policy decisions, at least exacerbating all of the inflation that we were about to have. And two things...

• 12:34Ryan Sean Adams?

  The Fed did wrong. Powell, for some reason, and the Fed and central bankers around the world screwed this up in a big way. Number one, they kept rates low for too long. We should have been raising rates a year ago, David. That was clear, right? We went to transitory inflation. So it's number one. That's happened at times in the past, but like that's that's that's one issue. But the second issue is even bigger. They've been manipulating the bond market. Okay? First time in history, this has happened. If you look at some of these graphs from the Pantera like report, you could see, look what the Fed bought. $3.1 trillion in bonds, like buying a whole bunch of mortgages.

• 13:18Ryan Sean Adams?

  And Dan makes the argument that like when you have an interest rate of 2.3% in the US and when home prices are raising are increasing by 20% year over year, the Fed is basically daring you not to buy a house. In fact, don't just buy one house, buy two or three if you can.

• 13:37David Hoffman?

  Five houses.

• 13:38Ryan Sean Adams?

  Because it's all cheap money that the Fed is effectively giving you. So by manipulating the bond market and stepping in on the housing side of things and the mortgage side of things, the Fed just pumped this thing up way beyond levels that we've ever seen, probably historically, right? And so, um, yeah, we've got a lot of overvaluation to get through. And Dan actually says he doesn't think that this is going to be fixed until a few things happen. One, housing inflation goes negative, either that or unemployment rate goes up by 2%. So we're in a recession, that possibly, or core CPI gets closer to 2.5%.

• 14:17Ryan Sean Adams?

  Core CPI is not total CPI, it's CPI less energy and food, and it's about 6% in the US. Or the Fed has unwound the majority of all of the mortgage manipulation that it's been doing. And important thing to like, take a look at is, um, this is kind of a US problem, all right? The average core inflation across our peers, Japan is 0.8%, France is 3.2%, Canada 5.7%, Germany 3.8%, the average 3.4%, the US is 6%.

• 14:49David Hoffman?

  No coincidence that we also printed the most amount of money for semi checks. We also gave out the most amount in like unemployment and seamless checks. And then surprise, surprise, we also have the highest inflation.

• 15:00Ryan Sean Adams?

  100%. So this has to unwind, has to make its way out of, you know, through the system. And you have to wonder too, this is something that you picked out this week. The Wall Street Journal is talking about this in a different way than they've been talking about it. What's, what are we looking at here?

• 15:17David Hoffman?

  Yeah, they give that headline, "Rising Interest Rates Will Crush The Federal Budget." And like the, the conversation here is that if we raise interest rates and send our economy into a recession, not only is that a recession for the American, American economy, our own government can't pay its own debts. And so like the federal, the federal government is too indebted to suffer high interest rates. But also if we simultaneously, that's a problem. And then if we send our own economy into a recession, where's all the tax money going to come from to pay off the debts? So like in 2022, you know, like how much like the IRS, the treasury is going to receive in capital gains tax in 2022? Like nothing, basically.

• 15:57Ryan Sean Adams?

  A lot less, no one's taking capital gains.

• 15:59David Hoffman?

  It's going basically to zero. So like they're not making any money on capital gains. They're going to be able to make less money on just like other things, just because overall when the economy is down, the economy is the thing that they tax. And so if we have a recession in, like they have no inflows to pay their own debts. Meanwhile, the interest rates are going up because that's what we're doing to fight inflation. And so the Wall Street Journal, and it's important to note that the Wall Street Journal is saying this. Because like, yeah, it's an extension of like, there's some parts of the world are just extensions of the state. There's like arguments that like, the tech sector is just a surveillance arm of the state. The media sector is just like a, like a media arm of the state. If you just want to put this into like your conspiracy hats on, the Wall Street Journal is like very close to the state.

• 16:41David Hoffman?

  Right? And so like when the Wall Street Journal is saying like, hey, we need to defect from the, the policy of the Federal Reserve and say, hey, if you guys keep on raising rates, you're going to kill everything. It's important to note like where this source is. Now, this is just like one person's opinion in the Wall Street Journal, but I mean, it was published by the Wall Street Journal.

• 17:00Ryan Sean Adams?

  Yeah, and you know what? This is the thing I think we want to find out, and I want to find out, David. We have a lot of macro people coming in the podcast in the next couple of weeks, right? Like Lynn Alden's coming back. Who else? Luke?

• 17:11David Hoffman?

  Luke Grauman, yeah.

• 17:12Ryan Sean Adams?

  Yeah, Grauman.

• 17:13David Hoffman?

  We also have Travis Kling on as well. Like, we have like so many different macro commentators who are gonna give us-

• 17:19Ryan Sean Adams?

  One big question I want to find out is, okay, so you have people like Dan from Pantera saying, "The Fed's gotta raise rates, like 4% to 5%. And the fact that they're talking about like half a percent or 0.75% raise is laughable because they're already like months behind. And so they need to raise it to like 4% or 5%. You have that. And then you have a conflicting kind of conversation going on saying, "The Fed can't raise rates, or else the US won't be able to pay its interest payments any longer." So how does this get resolved is a big outstanding question for me that I want to ask some of these macro brains on Bankless. So Bankless listeners, stay tuned for that. A lot of conversation coming up.

• 18:01David Hoffman?

  The answer to that question probably is the answer that the whole entire market hinges upon right now. Like whether we are in a bear market or a bull market, or like a recession, depression, or revitalization, depends on the answer to that question, I would say.

• 18:15Ryan Sean Adams?

  Totally agree. Guys, we got some more stuff coming up. Three Hours Capital, they're dead?

• 18:20David Hoffman?

  I've got some things to say, Ryan.

• 18:22Ryan Sean Adams?

  David's gonna go through the full story, and he knows it. He's been doing his research here. Also, BlockFi lent Three Hours Capital $1 billion. BlockFi is suffering in this as well. This is the crash of the crypto banks. And lastly, we're gonna talk about the Grayscale suing the SEC, what that's all about. We'll get back to these topics when we come back. But before we do, we want to thank the sponsors that made this episode possible.

• 18:45David Hoffman?

  Rocketpool is your decentralized Ethereum staking protocol. You can stake your ETH in Rocketpool and get our ETH in return, allowing you to stake your ETH and use it in DeFi at the same time. You can get 4% on your ETH by staking it with Rocketpool, but you can get even more by running a node. Rocketpool is the only staking provider that allows anyone to permissionlessly join their network of validating Ethereum nodes. Setting up your Rocketpool node is easier than running a node solo, and you only need six To get started, you're getting an extra 15% staking commission on the pooled ETH that uses your node to stake. You also get RPL token rewards on top. So if you're bullish ETH staking, you can boost your yield by adding your node to the decentralized Rocketpool network, which currently has over 1,000 independent node operators. It's yield farming, but with Ethereum nodes.

• 19:28David Hoffman?

  You can get started at rocketpool.net and you can also join the Rocketpool community in their Discord. You can find me hanging out there sometimes in the chat, so I'll see you there. Maker Dow is the OG DeFi protocol, the first DeFi protocol to ever exist, even before we called it DeFi. Maker Dow produces DAI, the industry's most battle-tested and resilient stablecoin. Using Maker, you don't need to sell your collateral if you need liquidity. Instead, you can spin up a Maker Vault and use your collateral to mince DAI directly. With Maker, the power to mince new money is in your hands. And there's something new in the Maker Dow ecosystem. Every time a new Maker Dow is opened, the owner can claim a PoW, which contributes funds to One Tree Planted, an organization with ongoing global reforestation efforts, creating a world where digital participation and the health of our environment can live side by side.

• 20:11David Hoffman?

  Soon, Maker will be present on all chains in Layer 2s, bringing the biggest and best DeFi credit facility to everywhere there is DeFi. So follow Maker on Twitter, @maker Dow, and learn from the oldest and most resilient Dow in existence.

• 20:22Ryan Sean Adams?

  All right, guys, we are back. Going to start with the crypto contagion, the Three Arrows Capital meltdown. The story continues into this week. Here is a story from the Wall Street Journal. Crypto hedge fund Three Arrows Capital ordered by court to liquidate. David's going to go through all of the details, but just a little bit of background on this. Three Arrows Capital is absolutely massive during the bull run. 10 to 18 billion, maybe, assets under management. It's still kind of unclear, but a whole lot of money and a whole lot of prestige through this group. And now there's a complete meltdown. David, what's the story here? Take us through the timeline of what happened.

• 21:00David Hoffman?

  Now that we have seen the fallout from some of this, we get to start to peer inside the black box that is Three Arrows Capital. And all of this really started, and this behavior started at the very beginning of the bull market. For those that were here around the beginning of the bull market, the Grayscale GBTC Trust, it's GBTC.

• 21:20David Hoffman?

  is one to one towards Bitcoin, but not, there's no redemption window. And this is because we cannot have a Bitcoin ETF because of the SEC. They had to make a trust out of things. And so you could come to the grayscale GBTC trust. You could deposit one Bitcoin. You would be issued one GBTC share. And then six to 12 months later, you are allowed to liquidate that share on the open market. And this is for accredited investors only. As the bull market got underway and like institutions did not have Coinbase accounts or FTX accounts. They used the grayscale trust to gain access to Bitcoin. And since they're not one to one redeemable, since there's not a credit window, the grayscale GPT's trust could have a premium.

• 22:02David Hoffman?

  I think the premium got as large as like 148% as in like one Bitcoin was, one GBTC share was worth 1.48 times a Bitcoin when it should trade at par, but it doesn't because it's not an ETF.

• 22:16Ryan Sean Adams?

  So it's a nice arbitrage, right? It's a 48% arbitrage right there.

• 22:20David Hoffman?

  If you can take the six months illiquidity window.

• 22:23Ryan Sean Adams?

  Right.

• 22:23David Hoffman?

  So here's what Three O's Capital would do. They, they went out and borrowed as much Bitcoin as possible from the market to turn it into GBTC shares to milk this premium. They would borrow Bitcoin from some source and they would put it into grayscale. Six months later, they would have this like 48% like arbitrage and that number would fluctuate.

• 22:40Ryan Sean Adams?

  Because this premium would never go away, right?

• 22:43David Hoffman?

  It was so persistent for so long that that's what people thought. But then even, even the most average person will like, yeah, if there's a premium, people are going to milk it. And Three O's Capital, where are the people milking it? The thing is, Ryan, they weren't selling their GBTC in, to capture it on premium. They were giving it to, they were using it as other collateral. So like this starts off by Three O's Capital borrowing as much Bitcoin as possible, as much Bitcoin as the market would lend, lend to them from any lender facility possible, which is where this contagion starts. And so they put all their BTC that they are borrowing into the grayscale GBTC trust to get GBTC back. And then they start using that GBTC as collateral to borrow stable coins.

• 23:28David Hoffman?

  So they're now borrowing stable coins. Based on their GPTC and they started to invest in order to try and get the alpha, try and get the premium to start to pay their some of their loans back for borrowing Bitcoin in the first place. They invest bigly into Terra. We all know what happens there. They bought a bunch of vested AVAX tokens. Well, I mean AVAX is down bad and they're probably still vesting anyways. And they started to take more and more capital from wherever they could get it because they also have like loan and interest payments to get back, right? They get a $660 million unsecured loan from Voyager, which is a crypto exchange, not a lending facility, but somehow they convince Voyager to give them a $660 million loan, unsecured loan. They get a billion dollar

• 24:12David Hoffman?

  loan from BlockFi, over collateralized. I believe the numbers were some combination of Bitcoin and also GPTC shares. We'll talk about that later on. So they get a billion dollar loan from BlockFi with a 100 with a 30% over collateralization. So like $1.3 billion in side of BlockFi, they get a $1 billion loan and they go and speculate on the market with that. They get caught up in the staked ETH trade, like trading the merge, thinking that the merge is going to happen, like everyone's going to buy into staked ETH, but then instead of the merge happening, markets go down bad because of Fed Fed risks and like their staked ETH, instead of being worth one ETH, turns into being worth 0.96 ETH and they can't redeem that because that's how staked ETH works

• 24:56David Hoffman?

  in the first place. And so also like there's illegal stuff happening too. And so the Singapore Central Bank just gave three arrows censures, censures, I don't know what that means actually, three arrows capital for alleged misleading and false disclosures. And there's evidence for this that's going around on crypto Twitter and in throughout the markets. There's evidence that they falsified records to lenders in order to access more capital. So fraud, basically, they committed fraud so that they their balance sheet could look healthier so they could get more and more loans out from other people. There's also public reports that 3O's Capital allowed other trading firms to use their account on crypto exchanges to trade through their account, right?

• 25:38David Hoffman?

  3O's Capital, they had billions of dollars, they could negotiate with crypto exchanges to like, hey, charge us less fees on your exchange, because we're going to put a bunch of volume there and we don't want to pay those fees. And the crypto exchanges are like, yes, totally, you guys put all this volume through our exchange, we'll totally charge you less fees. And then 3O's Capital let other people put money into their account to trade on their account on crypto exchanges, so that these third parties could access less fees as well. You know what that is, Ryan? That is an unlicensed prime brokerage with Brink's secrecy act and wire fraud. These are criminal cases. And then there's also representation that they, there's also evidence that they represented to OTC desks. They had relationships with other entities and other OTC desks that they didn't,

• 26:22David Hoffman?

  in order to presume some legitimacy to other OTC desks. So they start off with this very normal, like, I'll just borrow Bitcoin to get this GBTC trade premium. They never sell, they never manage their risks. Instead of closing their risks, they just open up more loans on those risks. Then they somehow like give this crypto Twitter, like a brand about themselves that they're huge chads who make a ton of money. And so people loan them even more money. They took money in from DeFi treasuries, who like, DeFi treasuries, like they raise $50 million, they're sitting on it. They don't need to go get yield during the bear market, so somehow 3O's Capital convinced them, just give us your treasury, and we will give you like this percentage.

• 27:05David Hoffman?

  Meanwhile, they probably like stick it into something like Terra and get 20%, and then that thing goes to zero. So like a bunch of DeFi treasuries are down bad, down to zero, because they trusted 3O's Capital to give them the yield. And so like, not only did they like, they are one of the sources of contagion, because they borrowed from Voyager, they borrowed from BlockFi. If they didn't borrow from Celsius, they are one degree away from borrowing from Celsius.

• 27:27Ryan Sean Adams?

  What's crazy about this is like, this is the point retail starts lending to 3O's Capital without knowing it. So if you're putting funds into BlockFi... Right? And you're generating some sort of yield? You were effectively lending to Three Hours Capital. Now, this is an over collateralized loan, right? Of course, so people think that's super safe. But we'll talk about why that wasn't so safe with GDBC a little bit later. But I think the important point here is it wasn't just institution to institution. This became a retail phenomenon. When you're depositing funds into these crypto banks like a BlockFi or Celsius, you're actually giving some funds to SuZu and the Three Hours Capital team.

• 28:09David Hoffman?

  And that truth is rampant throughout the industry, right? Like Voyager, a crypto exchange, not a lending desk. Customers would come and deposit their money into Voyager exchange to do normal exchange stuff. And Voyager lent that money out to Three Hours Capital. So Three Hours Capital is at the center of the contagion. They are the contagion, Ryan. They have, they had their tentacles in every single entity that would ever lend them money, either over collateralized or under collateralized. And so like, it almost doesn't matter where retail entered the industry. Money flowed into Three Hours Capital because they took every single lending opportunity that they could and maxed that account out. That is crazy.

• 28:45Ryan Sean Adams?

  Does this blow you away? Like, it feels like they just made all of the noob mistakes in like one market cycle. They just did them all. It's like, check the box. I'll think the GDBC trade goes on forever. I'll get into Terra and see if, I'll do this staking trade expecting like some sort of timing on the other side of this. I'll do the alt layer one trade with Avalanche and all of these other things. Like, they're just checking the boxes of all of the mistakes a noob would make to lose their money during the bull market.

• 29:14David Hoffman?

  Right. And like, they made such a staggering amount of money during the upside of the market. Part of that was on the backs of they borrowed it and then like, you know, it works in bull markets. And then they lost it all in the bear market, right? And so like, I can't remember where I heard this quote from, but like, the venture firms or like, you know, hedge funds that do extremely well in one cycle, aren't going to be around it for the second cycle. Because if they were levered up, they were, if they were levered up on the way up, they're also levered on the way down and they don't make it the second time around. So like, having too strong a performance on the upswing means you're getting liquidated on the downswing. Definitely what happened. You want to see the cherry on top of this whole entire saga, Ryan?

• 29:53Ryan Sean Adams?

  Yeah, give me the sturdy cherry.

• 29:55David Hoffman?

  Suzu has a $50 million mega yacht that is being seized. I can't remember what the name of this yacht is, but it's some like internet meme. This is a triple-decker yacht that Suzu put a down payment on. Somewhere in like, I think it's the British Virgin Islands or somewhere, who has also made a court order to liquidate Three Hours Capital, because that's where Three Hours Capital, I believe, is domiciled. Anyways, yeah, so like, this is something that Suzu still has. Is this like $50 million yacht that he has his down payment on, which is absolutely crazy.

• 30:27Ryan Sean Adams?

  Absolutely crazy, absolutely brutal. And it sounds like the authorities are stepping in, nation-states. British Virgin Islands are ordering the liquidation. So like, the collectors are coming, probably for that yacht as well. I would imagine all the assets are going to get liquidated. It's pretty crazy that it's come to this.

• 30:48David Hoffman?

  Ryan, this is not a matter of like, Three Hours Capital going under and like, we're not seeing Three Hours Capital again. This isn't happening yet, this is still in speculation phase, but this is a criminal enterprise. This is a criminal enterprise. Kyle Davies and Suzu are, in my mind, I'm not a lawyer, I do not have insights to these things, do not listen to me, they are criminals on the run.

• 31:12Ryan Sean Adams?

  Yeah, it definitely is starting to seem that way. And unfortunately, it's cost the crypto market a lot in this cycle, including retail. This is a tweet from Vitalik. What are we looking at? This is not him weighing in on the whole controversy, but I think he's maybe being a little subtle here?

• 31:30David Hoffman?

  He's being a little snarky, yeah, for good reason. Vitalik says that there are far more honorable ways to burn $50 million to impress people than buying a super yacht.

• 31:39Ryan Sean Adams?

  They burned way more than $50 million, by the way.

• 31:42David Hoffman?

  Like becoming a Gitcoin grant's matching partner. Here is the matching partners for our current round. So if you want to look around in the space and like, look who is still capitalized and capitalized to the point of donating to public goods, it's the people in this graphic. We got Unlock Protocol, we got the graph. We got Radical, we got Aragon Project, Zora, Figment, ZK Valouders, Cello, Urn Finance, ENS Domains, Protocol Labs, Chainlink, sorry if I'm not writing all these polygons there, Aves there. These are the people that are so well capitalized that they are still donating money to public goods. Nice job, guys.

• 32:17Ryan Sean Adams?

  Yeah, there we go. And you know what? This is just, I hope, this is part of the cleansing process of getting rid of the excess of greed and leverage and margin that was going on during the bull market. David and I aren't celebrating the downfall of Three Hours Capital. At least I'm not, maybe David is a little bit. But like, it's, this had to end. This whole spirit of like, degen, short-term traders dominating, like, this had to end and we had to get back to the fundamentals of what we're actually building in this industry. And so I feel like from that perspective, this is the hard medicine the crypto industry, and everyone in the crypto industry has to swallow,

• 33:00Ryan Sean Adams?

  because the stuff we were doing in the cycle, and by we, I don't mean Bankless Listers necessarily, but collectively, the industry was not sustainable, was not healthy, and had to stop at some point. And so, better now than later, right? And I think this is a healthy thing. Well, let's talk a little bit about BlockFi, because the contagion has spread to BlockFi.

• 33:22David Hoffman?

  That was part one of the contagion.

• 33:24Ryan Sean Adams?

  Yeah, they had a $1 billion loan outstanding to Three Hours Capital, but it was collateralized by $1.3 billion, or something to that effect. How does this even happen? How does the contagion spread when you've got a collateralized loan to BlockFi, David? How does this spread into BlockFi's potential bankruptcy, or insolvency right now, is what it's looking like?

• 33:49David Hoffman?

  Well, so $1.3 of over-collateralized loan for a $1 billion loan, like, that's sure. But like crypto prices went down by like 60 or 70% and 3R's capital didn't have any money to top up their loan. So that $1.3 billion in collateral was probably below the $1 billion loan that BlockFi gave 3R's capital.

• 34:10Ryan Sean Adams?

  Well, my understanding is BlockFi, there was like, there was like a $1 billion or something loan, right, that BlockFi had with 3R's capital, they were lending them, and they had, you know, we'll call it $1.3 billion over-collateralization of that. A whole chunk of that was Bitcoin. And that could be collateralized as prices go down, BlockFi is going, sorry, that could be liquidated. As prices go down, BlockFi is going to liquidate that entire position. And my understanding is they did. But another chunk of that, of the $1.3 billion that was supposed to collateralize this loan, was actually GDBC. And that is not liquid in

• 34:52Ryan Sean Adams?

  the same way that Bitcoin is liquid, right? And so my understanding is that's really where BlockFi has gotten hung up on the GDBC collateral that was not worth what it seemed like it was worth in the market. And that's the part that really punched him, knocked him out. I mean, there's other things that BlockFi was probably doing from a risk perspective, but this was certainly a big one. And has led, what, to BlockFi, it's, there's been some purchase talk? Yeah, what's going on there?

• 35:24David Hoffman?

  Yeah, there is a tug of war. There is a race to acquire BlockFi. And so this is a race between Morgan Creek Digital, which already has a bunch of block-wide equity to begin with, and then also FTX. So FTX gave BlockFi, I think, a $200 million like credit revolving door, like, facility, I think, a couple of weeks ago. 250 million, yeah, credit agreement. And so like that allows for like users to withdraw their money. As far as I know, users can still withdraw their money. And that that comes off of like a credit credit agreement with FTX. And I think what that means is that FTX has the ability to purchase FTX shares from the equity holders at like, basically, from what BlockFi was previously valued at,

• 36:09David Hoffman?

  basically free. Like, at this current valuation, BlockFi is valued at 25 to 50 million dollars, which is an extremely low number from where they came from.

• 36:17Ryan Sean Adams?

  It's basically wiping them out. It's basically, you're taking all of the equity holders of BlockFi, whether that's the founders, or employees, or previous investors like Morgan Creek, you're wiping them out. But what FTX was doing here is placing its debt to BlockFi as more junior to depositor debt. So that means they were kind of like protecting depositors. So if you were a regular user and you had deposited funds into BlockFi, you want to make sure you're going to get that money out. And you want to get that money out before, in a liquidation event, FTX gets its money out. And so that was the benefit that this was providing. And I actually think it's laudable that BlockFi is trying to look out for its users.

• 37:01Ryan Sean Adams?

  Maybe they're also trying to just prevent, like, criminal charges, or something like this, right? So maybe it's not all kind of moralism here. Maybe they're actually trying to protect themselves here. But depositors getting protected in this scenario is a good thing. It's not clear that that's what's happening in Celsius. Seems like depositors are probably going to take some haircut when the Celsius dust settles. And so that at least was good about FTX. But then Morgan Creek is like, um, why should BlockFi only be worth 25 million dollars? Like, this is somebody coming in and basically scalping BlockFi when they're down, and they're trying to raise some emergency capital

• 37:42Ryan Sean Adams?

  to value the company at a higher amount and provide that 250 million injection. And I think that valuation, if Morgan Creek deal goes through, is something like 500 million dollars. So far higher than the FTX deal.

• 37:57David Hoffman?

  Right, but like you said, that puts the equity holders, current and new equity holders of BlockFi above depositors. So this is not only a tug of war between FTX and Morgan Creek, this is a tug of war of who gets bailed out first, I guess.

• 38:13Ryan Sean Adams?

  Yeah, I don't know that's the case. I don't know all of the details of the Morgan Creek and what position it puts depositors in. I think Morgan Creek is trying to also protect depositors. That's not clear to me. But yeah, I guess there's a lot of dust to still settle in the BlockFi case. But in good news, I actually had some funds. I know, did I confess two weeks ago that I had some funds on Celsius? Again, Ryan likes to try everything. Ryan tried some centralized lenders, including Celsius, Nexo, a few others, just a small amount of funds, right? Because you gotta try things.

• 38:50David Hoffman?

  You gotta keep an eye on those crypto banks out there.

• 38:52Ryan Sean Adams?

  You gotta keep an eye on it.

• 38:53David Hoffman?

  Gotta keep an eye on them.

• 38:54Ryan Sean Adams?

  Not looking good for my Celsius deposit, all right? But I was actually able to withdraw from BlockFi in the last few days. And so that's at least a good sign. That's a stress test of some sort. They're not freezing accounts yet, so it doesn't seem to be it's in as bad a position as Celsius is. I have a BlockFi credit card, like credit card too. I hope that's gonna be okay. What do you think, David?

• 39:18David Hoffman?

  If it's a credit card, it's probably gonna be fine. There's a really good article out of The Block that really summarized these whole things, saying four big takeaways from a leaked investor call, kind of recapping what we've already said. BlockFi is currently being valued at less than $500 million. If the FTX deal goes through significantly less than $500 million, we're talking about $25 to $50 million, if the Morgan Creek deal goes through, maybe it's around that, give or take. Morgan Creek Digital says BlockFi's loan to 3ROs Capital was $1 billion and the collateral on 3ROs Capital loan was 2/3 Bitcoin and 1/3 GBTC. During the call, yes, the XTX deal gives the firm the option to buy BlockFi, but not if Morgan Creek can get there first.

• 40:03David Hoffman?

  And then, of course, obviously, more layoffs may be in the works at BlockFi. BlockFi is kind of what I would be, I would expect. But Ryan, I would like to take this opportunity to go backwards in time about one year to June 2021, when BlockFi was on the verge of going public, right when the SEC came into BlockFi and told them that they could no longer accept new customer deposits in their existing, their existing lending products. And BlockFi fought them on this. The SEC wanted them to close their existing lending products. BlockFi fought them on this and said, hey, we just won't accept any new inbound, but current customers get to be grandfathered in. And that's the settlement of that, that whole thing.

• 40:43Ryan Sean Adams?

  Can I just?

• 40:43David Hoffman?

  BlockFi then.

• 40:44Ryan Sean Adams?

  Can we just say, like, is the SEC saving the day here? I mean, like.

• 40:49David Hoffman?

  They're not, not doing that.

• 40:50Ryan Sean Adams?

  They weren't wrong about this, were they?

• 40:52David Hoffman?

  They weren't wrong. Nope, not at all. And so at the same time, BlockFi wanted to go public. And so it was, it was going to raise $500 million on their Series E, which would put them at $4.7 billion valuation. $4.7 billion valuation a year ago.

• 41:13Ryan Sean Adams?

  12 months.

• 41:13David Hoffman?

  One year ago. Fast forward to today, BlockFi is on the, on the market for $25 to $50 million in valuation. Oof.

• 41:23Ryan Sean Adams?

  Yeah. That's, that's down bad and it's unfortunate that retail has been involved. And again, it's people depositing into BlockFi. You see the crypto contagion. BlockFi issues some, some loans to 3O's capital. 3O's capital goes bust and eventually that flows back to retail, right? This is, this is the problem. I think this is a great contrast point with DeFi did quite well during all of this. A lot of lending going on in DeFi. And when crypto goes down 70% to 90%, right? A lot of the C-Fi lenders are caught like insolvent. And yet DeFi unwound it very gracefully with a highly efficient market.

• 42:05Ryan Sean Adams?

  We're going to get more to a take on that in a little bit, but it's, it's quite the contrast.

• 42:10David Hoffman?

  The juxtaposition is just so clear.

• 42:12Ryan Sean Adams?

  Exactly.

• 42:13David Hoffman?

  It's so clear.

• 42:13Ryan Sean Adams?

  More clear.

• 42:14David Hoffman?

  And as a quick, fun little side quest before we go on to. The next thing, the SEC thing, there was an article out of the block that states that FTX was interested in making a deal with Celsius, kind of in the same way that they're making a deal with BlockFi. But then they looked at Celsius's balance sheet and they were like, oh, no, no way. We're out of here. So declined buying Celsius once they took a look at their balance sheet, which is not a good sign. Allegedly, according to a source, Celsius has a $2 billion hole in their balance sheet. So like, no one would like to take responsibility of that one.

• 42:47Ryan Sean Adams?

  David, did you, did you see that meme? It was like a person reaching down to someone's hand and they're in the water and looking like they're drowning. And it says FTX and it's like, I'll help you. And Celsius is the person drowning in water. Then the person goes down under and it's only the hand. And like, the FTX caption is like, oh, you're too deep. See you later. Sorry. It's kind of like, it's kind of what's happening. I mean, Celsius is in a far worse place than BlockFi was. And so we're kind of seeing the quality of these crypto banks right now, right? We have some that are still left standing.

• 43:19David Hoffman?

  Right.

• 43:20Ryan Sean Adams?

  Nexo is still left standing. Juno, which we talked about earlier, they're still left standing.

• 43:25David Hoffman?

  Yeah.

• 43:26Ryan Sean Adams?

  Coinbase is fine. They're going to be totally fine. CZ Binance, they're actually like buying things. FTX, they're buying things right now, too.

• 43:34David Hoffman?

  FTX is in a great position right now.

• 43:36Ryan Sean Adams?

  Yeah, they're in a great position. Anyway, so, okay, what does the GDPR C thing have to do with all of this? We've mentioned it a few times and Grayscale is actually suing the SEC. They are the creators of the GDPR C product. Can you explain what's going on here for us, David?

• 43:53David Hoffman?

  Right, and so the GPTC discount is something like 30 to 35% at the moment. As in, the GPTC is worth only 70% of what one Bitcoin is worth.

• 44:03Ryan Sean Adams?

  And GDPR C is a product that you can get in your retirement account, right? Retail can buy in their retirement account because we don't have an official ETF in the US. We have to use products like GDPR C, which is a trust.

• 44:16David Hoffman?

  Right.

• 44:17Ryan Sean Adams?

  And it's like,

• 44:18David Hoffman?

  Like almost inarguably, an inferior product. Like it's supposed to represent one Bitcoin, yet it's only representing 70% of one Bitcoin. And there's like a six-month illiquidity lockup period for creditor investors between when they deposit Bitcoin and then they, when can they redeem their GBTC? So like a lot of capital lockup, a lot of capital efficiency during a time where crypto markets go down like 75% on average. There is a discount, a 30% discount on GBTC and illiquidity lockup phase. When people need liquidity the most, this trust model sucks it all dry. And it's no fault of Grayscale at all. It's the SEC's fault because the SEC won't let them turn this into an ETF.

• 45:00David Hoffman?

  And so the SEC rejected Grayscale's bot Bitcoin ETF application, which from all the commentators like Jake Stravinsky and others that I'm aware of, say like, there's literally no reason why the SEC should deny this. This is totally above board. They should accept this. But for some reason, people just got the feeling that the SEC was going to deny it. And so the day that the SEC said that they are denied the Grayscale conversion of the trust to an ETF, Michael Sonnenschrein tweets out, "We're filing, we filed a lawsuit against the SEC, dollar sign GPTC, ticker sign GPTC." 15,000 likes, which is a big, big number. And so they also released this PR report that talks about the details. Nice to like there. "Grayscale investment initiates lawsuit against the SEC." We're going to court.

• 45:45David Hoffman?

  Crypto is taking the SEC to court. And everyone, I think, in my opinion, should be behind this conversion of the trust into an ETF because it would immediately restore 30% of like, like capital that should be there in the GBTC token. And it would allow a one-to-one redemption window between GBTC and Bitcoin. So many people would get much more liquidity. So many people would become much more capitalized in a time and a place in the market where people need it the most. So, statement out of Grayscale says, "The SEC is failing to apply consistent treatment to similar investment vehicles and is thereby acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934.

• 46:28David Hoffman?

  There is a compelling and common sense argument here, and we look forward to resolving this matter productively and expeditiously," says Grayscale. Take it to court, Grayscale.

• 46:39Ryan Sean Adams?

  Go do it. Well, look, man, look, indirectly, the SEC cost retail a lot of money. So much. Because of this market inefficiency. Now, I'm not saying like Suzy's actions and BlockFi's risk actions caused all of this, but I am saying that there's an inefficiency in GDBC and the Bitcoin spot price that doesn't actually need to be there and wouldn't be there if the SEC just allowed Gracestale to convert it to an ETF. And so it's just kind of an example of like, sometimes regulators in the SEC are helpful to the industry, right? And it's like, okay, we have a centralized lending provider. All right, we need some regulation. We need some windows into that. We need some auditing. We need some insight into that. Okay? So like,

• 47:25Ryan Sean Adams?

  there should be a role for regulators in, you know, looking at Celsius in depth and looking at BlockFi in depth and making sure that like they're on the up and up. Okay? That's one thing that we could benefit from. By the same token, we also want from the SEC, an ETF for retail. Like, so why can't you get rid of like, help us with the things we need help with as a crypto industry, but then also give us the things that will protect retail that we need, like an ETF. Give us a safe space to play. And of course, like this kind of silence on DeFi from regulators and almost hostility towards DeFi, an undue hostility towards DeFi, and it's kind of a TBD. We don't know if we're going to allow

• 48:09Ryan Sean Adams?

  that or not, right? When DeFi is part of the answer to this, right? DeFi markets performed flawlessly, transparent, on-chain. It all worked. We, we did the same liquidations that the C-Fi lenders did, except DeFi didn't screw anyone over. Actually performed exactly as it was supposed to. It's because our regulations are based in smart contracts. So the SEC and other regulators could view DeFi as part of the solution here. And they're not quite there yet. I'm hopeful it gets resolved, David, but like, I just feel like anything with regulators is kind of a, a double edged sword. Cause we want you guys here.

• 48:49Ryan Sean Adams?

  To help us with the scams and like the clear like things that we need help with where retail is getting screwed over. But we don't want you to like, say the whole thing is off limits and hamper the entire industry and try to shut it down and get it out of like the US because part of the reason we're doing these things is because we are routing around dumb regulation that doesn't work for the people. That's my, that's my rant on the SEC, David.

• 49:15David Hoffman?

  Love it. So going back to the, the market section where we talked about like the 15 different sources of inflation. Like here's, here's a source, here's like the four sources for the contagion in the crypto industry. We had like irresponsible centralized lenders, both unsecured and secured. We had 300's capital taking advantage of that. We had an inferior product out of, out of grayscale with the GPT trust, again to no fault of their own. And then SEC unwilling and unwilling to work with this industry to provide clarity or, or allow this industry to move forward in a way that protected retail investors. And allow these markets to do efficient and orderly clearing of liquidations. Like the SEC, which is their mandate, got in the way of that.

• 49:59David Hoffman?

  So like this, the contagion of crypto, the reason why it's so big is like three or four different interwoven reasons. Like some degeneracy culture, like central, like the same reasons of like DeFi people like, like talk crap about C5 stuff is like black, black box. Human folly, like you can't manage stuff, so you let the code do it. And then because of that inferior stuff, you have like 300's capital who like exploits every single possible like way to get money out of it. Like that congratulates, that is the bear market of the last six months.

• 50:31Ryan Sean Adams?

  We're all on the hook for it. It's a lot of, a lot of blame to be shared across all groups doing this. David, we got more to cover, man. We're going to talk a bit more about makers DeFi governance, the biggest maker proposal in history.

• 50:45David Hoffman?

  Most controversial, yeah.

• 50:46Ryan Sean Adams?

  An update on Arbitrum Odyssey. This is their latest update and what's going on there. Guys, we'll be right back, but before we do, we want to thank the sponsors that made this episode possible.

• 50:55David Hoffman?

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• 51:37David Hoffman?

  So go to across.to to quickly and securely bridge your assets between Ethereum, Optimism, Polygon, Arbitrum, or Boba networks. There is a brand-new staking feature in the Ledger Live app today. We all like staking the assets that we're bullish on, and now you can stake seven different coins inside the Ledger Live app. Cosmos, Polkadot, Tron, Algorian, Tezos, Solana, and of course Ethereum. With Ledger Live, you can take money from your bank account, buy your most bullish crypto asset, and stake that asset to its network, all inside the Ledger Live app. Through a partnership with Figment, Ledger also lets you choose which validator you want to stake your assets with. And Ledger is running its own validating nodes, offering a convenient way to participate in network validation, and it even comes with slashing insurance.

• 52:20David Hoffman?

  Ledger Live is truly becoming the battle station for the bankless world, so go download Ledger Live. If you have a Ledger already, you probably already have it, and get started securely staking your crypto assets. And we are back. Longtime Bankless listeners will know that MakerDAO holds a very close place in my heart. I think it's a very cool project. And there was the most contentious, most controversial governance proposal over MakerDAO just happened. The highest amount of all MKRs showed up to vote, and it was neck and neck up until the very end. Here's GFX Labs putting everything into a nice summary. Thirty percent of all token supply voted, which is crazy to think because like all so many MKRs scattered around like all of DeFi. Thirty percent of them showed up.

• 53:03David Hoffman?

  Voting was neck and neck until the last two hours. The vote was to add a new core unit to over- See the DAO's onboarding of collateral assets and also form a specific framework for growing the protocol. This core unit also came with a hefty price tag. Basically, the framework was a little bit more of kind of like a constitution, a constitution-ish about like what MakerDAO needs to do, where it needs to go, the direction it needs to go in. And it was a pretty like, like, big turn off of its current path. And so, unlike, the thread continues, unlike most governance votes, two distinct sides developed. Those who wanted to see more organization and control voted yes, which is like the TradFi VC real-world assets camp. And then the noes, which are like the kind of the core MakerDAO community,

• 53:48David Hoffman?

  opposed the price tag and didn't really like the specific direction and wanted to continue with Rune, the founder of MakerDAO's, his end game plan. That's the name of a post that he wrote. And so, after the dust settled, it ended up being that the TradFi and VCs did not make the, did not make the proposal. They got outvoted by about 15%. So the MakerDAO decided to go with the continued end game plan. But the idea here is that there are, there's a tight, there's a tug of war going on over MakerDAO, and no one thinks that this is over. And so, after this, Hazu actually put in that very interesting thread together about his vision for the future of MakerDAO.

• 54:29David Hoffman?

  Hazu was on the yes side of these things, like the TradFi and VC side of things. And like, I know TradFi and VCs are generally heard as a negative term, like abstain your, your opinions on that word in this particular context, because these are crypto VCs who have opinions. Hazu puts a tweet out that says, "I just proposed a series of simple governing changes to MakerDAO that address many problems that exist in governance today. This includes a general lack of vision and strategy as well as low accountability for maker holders." Hazu has been thinking a ton about DAO governance lately. And so he puts these like, this proposal into place that basically like streamlines governance, because there are so many things that's going on with MakerDAO that everyone has to vote on all the things. And there's no, just like, there's no centralization of decision-making, basically.

• 55:14David Hoffman?

  Like, it's really taken the DAO at heart. So like, he puts these vision, strategy, tactics, and implementation categories. Together and promotes like three different ideas that just streamlines all of these things. And so if you are into the world of DAO governance and like on the frontier of that, pay attention to what Hazu wrote. We're gonna get him on the podcast soon. But basically, there's a very controversial MakerDAO vote pulling MakerDAO into two different directions. And while this new direction did lose, I don't think it's gonna be the last time we hear from this.

• 55:42Ryan Sean Adams?

  Well, I do think it's healthy, honestly. I think the two directions are kind of healthy, right? So it sounds like VC investors are just like, hey, we want more accountability. And our method for solving that is like, let's install a core unit, a new management team effectively, some more centralization, right? And here's the community saying, no, everything's good. We have a plan. Let's keep going in the direction we're going. And this is a healthy tug of war, I think, because like, the other reality is everyone who owns the Maker token does have another vote beyond this governance vote. And that vote is just to sell their MKR tokens if they no longer believe in the direction of the project. And so any investor in MKR tokens could do that at any time.

• 56:23Ryan Sean Adams?

  And anyway, it's good to see. I do think sometimes communities veer on the other side of the whole decentralization debate too much and they're like, no structure. All structure is bad. All leadership is bad. Any kind of token mechanic that increases the value of the token is bad. And that is obviously not the right choice either, right? It's like, I would love to see a bit more investor action in something like the UniToken, for example. Like, I would love to see it there. Anyway.

• 56:54David Hoffman?

  Let's turn on that fee switch.

• 56:56Ryan Sean Adams?

  Yeah, exactly. I think it's all healthy and I'm anxious to see how this all plays out, but it's playing out transparently in real time. Here's another governance vote from Lido. What's going on here, David?

• 57:04David Hoffman?

  Yeah, this is not the end of the DAO governance saga, also related to Hazu. There was a proposal from the Lido DAO to itself to say, hey, should we cap ourselves? Should we limit how much Ether is in Lido? Because Ether is dangerously close to passing a threshold that would allow Lido to have undue control over the entire Ethereum network. I wouldn't actually be surprised if that limit has already been passed. So Lido submitted a governance Proposal to itself saying, hey, should we like cap ourselves? Should we prevent more ether from being deposited so we don't grow too big? And surprise, surprise, 99.81% of Lido said, no, we should not cap ourselves. Which like makes sense, right? Like Lido is not going to say like, I think that we should should make less money because our product is too good.

• 57:48David Hoffman?

  Like, they're not going to say that. And so, HAZU, again, co-authored another proposal for Lido stake to ETH governance, which I think is really innovative. And I think it is a model that we can take out for other DAOs, right? And so the idea here is that Lido governance will stay Lido governance, but stake to ETH holder holders, Ryan, get the ability to veto any Lido DAO proposal. So they don't like stake to ETH holders don't get to say yes, they don't get to submit new proposals. But if a new proposal is submitted by Lido DAO governance and the Lido DAO governance says yes, then stake to ETH holders can come in and say no.

• 58:26Ryan Sean Adams?

  That's kind of cool.

• 58:27David Hoffman?

  Really cool.

• 58:28Ryan Sean Adams?

  Nice check and balance.

• 58:28David Hoffman?

  Really, really cool. Yeah. So like there's the stake to ETH holders get one tool, which is no, you get to veto.

• 58:34Ryan Sean Adams?

  Veto power.

• 58:35David Hoffman?

  Right. And so I think that's great. I think that's really cool.

• 58:39Ryan Sean Adams?

  That's really smart. And that's the kind of evolution which I'm most excited about in kind of DAO governance is new ideas like like HAZU's idea here. And to see how that emerges. No surprise, though, that Lido would vote to you self-limit, right? In fact, the original proposal, I mean, there, I don't think anyone was calling for a self-limit. Like even Vitalik was not talking about a self-limit. He was talking about like raise fees.

• 59:02David Hoffman?

  Raise the fees.

• 59:03Ryan Sean Adams?

  After you have a certain percentage of market share. So even the original proposal seemed kind of like constructed in a very binary way. That was a little bit weird, but of course token holders are going to vote in their own self-interest. David, let's talk about some layer two stuff too. So Odyssey from Arbitrum. What is Odyssey? And what happened with it this week?

• 59:23David Hoffman?

  Right. So Arbitrum Odyssey is basically this this journey around the Arbitrum ecosystem where you would go and do some things and you would get some NFTs. The first week of the Odyssey was Bridge Week. So you bridge on to Arbitrum and you would get an NFT if you did that. And so they We're going to go from Bridge Week into like App Week, which is going to be the remainder of the Odyssey, like Weeks 2 through 8. But as soon as App Week got started, like Arbitrum got congested. Because so many people came on to Arbitrum during Bridge Week. As soon as I started doing App Week stuff, they got congested. And that's because a lot of the applications that was in this first week was like heavy computation stuff. There was a lot of, what was the app that was being used? It was GMX, which are perps and leverage, which just require a ton of computation.

• 1:00:09David Hoffman?

  And so like, you know, simple transfers on Arbitrum, like that's not going to clog the network. But like, as soon as you do like computationally heavy stuff, that will start to clog the network. And so they are putting the Odyssey on pause until they release Nitro. And once they get Nitro back, then once they get Nitro online, and they get the Arbitrum like Layer 2 updated to this new update, then they're going to resume the Odyssey and the Odyssey shall continue. I asked some of the Arbitrum folks, like if you could give us some numbers on like what the scalability of Nitro. And they said, "A nice, easy, easy to interpret number of 7 Ethereum's." As soon as the Nitro update is on online, Arbitrum is going to be about 7 Ethereum's.

• 1:00:51David Hoffman?

  And like, like all Layer 2's, like these updates are just the beginning. And so like, going to where Arbitrum is now, which I think is like 2 to 3 Ethereum's, going up to 7 Ethereum's, nice big jump. But then like, there's also again, for EIP 4488 that increases the scale as well. And so, there's also like some crazy numbers that we have. There's a Dune Analytics page, which I'll have you pull up, Ryan, which just showed the sheer magnitude of people that went on to Arbitrum during Week 1. 250,000 new bridge doors, at least bridging addresses, that happened on Arbitrum. So 250,000 addresses went on to Arbitrum in 7 days. And like, that wasn't congested at all, just again, because like, simple transfers are totally fine.

• 1:01:32Ryan Sean Adams?

  So can I ask you, David, did they, they just paused the Odyssey itself, right? They didn't pause the network or anything like this?

• 1:01:37David Hoffman?

  Oh, God, yes. No, no, no, no. Network is doing just fine. Like, the congestion's not even here at this point.

• 1:01:42Ryan Sean Adams?

  They just paused their marketing program, basically. Because they were like, "Oh, too much too soon. We want to deploy Nitro." first, which is gonna 7x their network and you know that so that's the reason why the pause. Why are people doing this for worthless NFTs, David?

• 1:01:58David Hoffman?

  I mean, okay, so like the simple take is that if you get all the NFTs, you'll get all the airdrops.

• 1:02:03Ryan Sean Adams?

  Oh, okay.

• 1:02:04David Hoffman?

  That makes.

• 1:02:05Ryan Sean Adams?

  So these are like participation NFTs, right?

• 1:02:07David Hoffman?

  Participation NFTs, like it's so obvious that I'm kind of skeptical on it. It's like, yeah. Like Arbitrum, obviously, we're gonna give you NFTs. You can be on a list of people who got the NFTs.

• 1:02:17Ryan Sean Adams?

  Just because it's obvious, dude. ETH is obvious right now, the merge. I think that that's what's totally gonna happen. Again, none of this is can, we don't know anything from the Arbitrum team.

• 1:02:26David Hoffman?

  Right.

• 1:02:26Ryan Sean Adams?

  About any of this, but like what's really nice about this is that if they're giving out NFTs for real things that people are doing. They get a pretty clean whitelist of actual individuals doing real things in the network.

• 1:02:38David Hoffman?

  Well, not if you farm it, though.

• 1:02:41Ryan Sean Adams?

  So people are just farming NFTs instead?

• 1:02:43David Hoffman?

  Right, farming NFTs, that's a concept.

• 1:02:45Ryan Sean Adams?

  I bet they'll, I bet they'll find a way like around that, but it gives a nice base of additional data to differentiate for a future airdrop, which. It's gotta be happening, man. It's gotta be happening.

• 1:02:56David Hoffman?

  Oh, well, the arb token is coming for sure. I've been trying to figure this out, Ryan. What is the Arbitrum token gonna be called? ARB or ARBI or something else?

• 1:03:06Ryan Sean Adams?

  Arby?

• 1:03:07David Hoffman?

  Arby? Arby's kind of a cool name.

• 1:03:09Ryan Sean Adams?

  Like Arby's? It makes me think of fast food. It's like Arby's? Arb is cool, though, because it's like arbitrage.

• 1:03:14David Hoffman?

  Right.

• 1:03:15Ryan Sean Adams?

  RB. What is optimism?

• 1:03:17David Hoffman?

  OP.

• 1:03:18Ryan Sean Adams?

  What's?

• 1:03:18David Hoffman?

  OP.

• 1:03:18Ryan Sean Adams?

  It's just OP, right?

• 1:03:19David Hoffman?

  Yeah, which is, I think, super hot.

• 1:03:22Ryan Sean Adams?

  Could be AR.

• 1:03:23David Hoffman?

  AR? AR versus OP?

• 1:03:25Ryan Sean Adams?

  Gun.

• 1:03:27David Hoffman?

  Oh, yeah.

• 1:03:27Ryan Sean Adams?

  Yeah, I don't know. I don't know. We'll have to see when it comes out.

• 1:03:30David Hoffman?

  I do think optimism won the name, the name debate or the name fight, but that's just my take. OP's OP's pretty hot.

• 1:03:36Ryan Sean Adams?

  Uh, okay.

• 1:03:37David Hoffman?

  Speaking of optimism.

• 1:03:39Ryan Sean Adams?

  They're going up too. Trading activity surges on Optimism's Layer 2 as total locked value doubles. David, this is a Layer 2 beat. Look at this. Optimism now number 2, ahead of DYDX in terms of total locked value on the rollup. The number 2 rollup behind Arbitrum, which has $1.96 billion. It seems like the recent OP airdrop has helped in terms of getting more value locked inside of this platform. Also impressive that this is happening during a bear market. So rollups continuing to do well even despite a bear market. Any other takes here?

• 1:04:16David Hoffman?

  I wonder if the minus 11% flowing out of DYDX is a reaction to their DYDX chain, or if just people are scared in the bear market, so they're not trading leverage?

• 1:04:25Ryan Sean Adams?

  I don't know. Could be. I'm tempted to say it's kind of noise for now, but that's going to be one to... DYDX no longer going to be on L2 beat, David? You sad about that?

• 1:04:35David Hoffman?

  Right, yeah. This is going to be an L1 beat.

• 1:04:37Ryan Sean Adams?

  Yeah.

• 1:04:38David Hoffman?

  There is an L1 beat, yeah.

• 1:04:40Ryan Sean Adams?

  Yeah, by the way, guys, we had an episode with Antonio, where they talked about, earlier this week, they talked about their transition to an app chain for a Layer 2. You go listen to that episode. I have some thoughts coming out of that episode. I won't share them all here, but in the weeks to come, maybe we'll share some of those thoughts. But anyway, great episode if you want to hear their rationale for doing this. Eat stuff, merge stuff. When merge, David? July 6, something's happening?

• 1:05:05David Hoffman?

  We still don't know that. July 6 is not when the merge is happening. That is when the Sepolia testnet merge is happening. And so that's coming up. That is the second of three testnets that we must get to to get to the actual merge. The second one is happening on July 6. It's going to be livestreamed on Anthony Sisano's Daily Guay, or maybe the East Akers. It'll just be a whole entire event. So that's on the horizon.

• 1:05:26Ryan Sean Adams?

  That's good. Another dress rehearsal down. David, speaking of down, though, NFTs have been down pretty bad. I don't know if you've looked at the price of your JPGs lately, but it's not going to give you any comfort, okay?

• 1:05:37David Hoffman?

  I love all my JPGs. I don't look at the price.

• 1:05:39Ryan Sean Adams?

  Yeah, okay. Yeah, it's just, David's just here for the images. Um, he's here for the art, okay? So, NFTs, USD volume, it's back to like 2021 levels. Like, early 2021 levels.

• 1:05:52David Hoffman?

  Right.

• 1:05:53Ryan Sean Adams?

  Down pretty bad. But there is one bright spot in the NFT economy, and that is...

• 1:05:58David Hoffman?

  ENS names. ENS names, outperformers right now, especially the three-digit numbers. Some crazy, crazy sales have happened in the last three days. Uh, 003.ETH got sold for 83.5 ETH. 8888 got sold for 38 ETH. Um, 0037 got sold for 30 ETH. 383 got sold for 27 ETH. Ryan, porno.ETH got sold for 184 ETH. So, ENS names are hot right now.

• 1:06:28Ryan Sean Adams?

  Yeah, hotter than Sam.ETH, which only came in at 100 ETH.

• 1:06:31David Hoffman?

  Oh, poor Sam.

• 1:06:32Ryan Sean Adams?

  Porno's got you beat, Sam, sorry. But yeah, look at these numbers, man. May was like the biggest month ever for, um...

• 1:06:39David Hoffman?

  ENS names.

• 1:06:40Ryan Sean Adams?

  For ENS. And June looks like it's gonna be strong, too. Uh, so, pretty impressive. All the while, Michael Saylor continues to dollar-cost average into Bitcoin.

• 1:06:51David Hoffman?

  Right.

• 1:06:51Ryan Sean Adams?

  In the bear market, he hasn't stopped. It's probably a better time to actually buy the Bitcoin at this point in time. But he just purchased another $10 million of Bitcoin. David, are you getting concerned that, like, Saylor owns too much Bitcoin at this point? Like, he's gotta be close to 1% of the entire Bitcoin supply.

• 1:07:09David Hoffman?

  Uh, one, yeah, okay, 1% is 210,000, and he's got 130,000. He's still got a ways to go for 1%. The only, the only thing I see when I see Michael Saylor buying more Bitcoin is like, dude, you spent all of your ammo at the top. Like, that's not dollar-cost averaging. He's just like putting in his fumes at this point.

• 1:07:27Ryan Sean Adams?

  Sir, expand your time horizon. The top of what? Not the top of the decade, okay? Just a local top. It's just a local top, my friend.

• 1:07:34David Hoffman?

  Oh, God.

• 1:07:35Ryan Sean Adams?

  You can't time these things. You've got a dollar-cost average.

• 1:07:37David Hoffman?

  A kind of a useful website, uh, Ryan, you might want to pull this up while I talk about this, is BitcoinTreasuries.net. Uh, and so, this can just show you people and the treasuries. People around the world and how much Bitcoin they have and when they bought it all. The cost basis for MicroStrategy is basically $4 billion. They've taken $4 billion USD and bought Bitcoin with that, which is currently valued in today's dollars at $2.4 billion. So they have lost $1.5 billion on their Bitcoin trade. They have down 40%. And then you can see how much of the 21 million they have.

• 1:08:12Ryan Sean Adams?

  Dude, that's not bad. I've been down worse than this. Good job, Sailor.

• 1:08:16David Hoffman?

  40% or $1.5 billion?

• 1:08:20Ryan Sean Adams?

  Definitely the former, alright? I've been down worse than 40%. I do think that, like, I know people are making fun of him now. I do think this trade is ultimately going to pay off really well. Like, when you zoom out, and you know, the capital he's getting is kind of basically free. It's a publicly traded company, it's taking these loans at very low Fed interest rates. I know that's not what MicroStrategy should probably be doing directionally, right? They're a business analytics firm, but it's probably going to pay off for them. I still think this.

• 1:08:52David Hoffman?

  I just see that $10 million is a drop in the bucket on their $2.5 billion position, which started at $4 billion. Like, you should have saved your ammo, dude.

• 1:09:02Ryan Sean Adams?

  Oh, yeah, that's what everyone says, right? You can't time these things.

• 1:09:06David Hoffman?

  I mean, I'm also...

• 1:09:08Ryan Sean Adams?

  Sailor, I still support you buying, man.

• 1:09:09David Hoffman?

  I'm telling this to myself, too. Don't get me wrong.

• 1:09:13Ryan Sean Adams?

  Keep buying the dip, Sailor. It's, you know, maybe you could reverse things for us. David, this is a tweet from Niraj from Coin Center. And just through the crypto industry's attention to this, I thought this was an interesting story. Chinese officials are using the COVID health code system to stop a bank run. They turned all would-be withdrawals codes red before they could get to the bank, effectively unpersoning them. So what was happening in the banking system in China, what's been happening, is rather than suffer a bank run where individual citizens were going to the bank to try to withdraw funds, the banking system would just give them a COVID code, a COVID red code.

• 1:09:57David Hoffman?

  You are COVID positive. You cannot leave your house.

• 1:09:59Ryan Sean Adams?

  Exactly. Cannot leave the house and effectively excommunicates you from the social system, but also the financial system. So, cutting off your bank access that way in order to prevent a bank run. This, my friends, is very terrifying. This is scary. This is the reason we can't have the nation states in control of the banking system and in control of the money supply. And with the bureaucrat's ability to just press a button and eliminate you from the economy. Why? To stop a bank run? Who knows? Who knows the why? What the why will be in the future? Maybe because you have different political persuasions. Maybe you voted a different way. Maybe you've said something publicly

• 1:10:44Ryan Sean Adams?

  on TV. This is very terrifying to me. And I think I am most alarmed that countries in the West are actually embracing similar capabilities. This is what a centrally administered central bank digital currency.

• 1:10:58David Hoffman?

  Right.

• 1:10:59Ryan Sean Adams?

  This is actually the power that that gives.

• 1:11:01David Hoffman?

  Right. They wouldn't even need to deem people as COVID positive. They would just skip that step and just go straight to like, no, you can't have your money. There's a quote from this article says, "The news about the health codes has gone viral on China's social media platforms. Sooner or later, this sort of thing is going to happen to all of us. Wake up, people," one user wrote. "National pandemic prevention policy has been reduced to a private weapon," said another. "This is the height of expansion of power, ideological decay, and evil influence." Oof. Oof.

• 1:11:30Ryan Sean Adams?

  Guys.

• 1:11:31David Hoffman?

  Coming to a CBDC near you.

• 1:11:33Ryan Sean Adams?

  The end of the decade, we're only going to have two types of money. There's going to be state surveillance controlled money, and there's going to be free money. It's all going to be digital. The free money, the only free money available will not be cash anymore. It will just be crypto. So, you got crypto and centrally controlled money, and those are the two options. And this is why we need to preserve crypto as an option. You hear that from us every time on Bankless. David, there was a bridge hack this week too. We got to cover that real quick. What happened?

• 1:12:00David Hoffman?

  Yeah. Harmony to Ethereum Bridge, $100 million was stolen in another bridge hack. I mean, we've been here before. Ryan, you want to know who was behind it?

• 1:12:11Ryan Sean Adams?

  Um, who isn't it?

• 1:12:13David Hoffman?

  North Korea.

• 1:12:14Ryan Sean Adams?

  North Korea?

• 1:12:15David Hoffman?

  It was North Korea. Yeah.

• 1:12:16Ryan Sean Adams?

  My god.

• 1:12:17David Hoffman?

  Once again, North Korea hacked a bridge and now has all the money. Does not look good when half of this industry's hacks end up in North Korea's pockets. Oof.

• 1:12:27Ryan Sean Adams?

  You know, the, uh, it was interesting in our conversation earlier this week with Matthew Green, how he said he was having conversations with, uh, the, you know, US national defense. And they were like, hey, how can we come help the crypto industry to prevent hacks from these like happening? Because every time North Korea goes and hacks something, right? They get more funding for their government to go, I don't know, what?

• 1:12:49David Hoffman?

  Do whatever they do.

• 1:12:50Ryan Sean Adams?

  Nuclear weapons or something like this. So it actually becomes it. These hacks actually become a national security risk.

• 1:12:56David Hoffman?

  Right.

• 1:12:56Ryan Sean Adams?

  Interestingly enough.

• 1:12:57David Hoffman?

  Right.

• 1:12:58Ryan Sean Adams?

  Uh, crazy angle on that.

• 1:12:59David Hoffman?

  Use a layer two, prevent nuclear war. Is that a fair take?

• 1:13:04Ryan Sean Adams?

  Yeah, it might be a stretch, David.

• 1:13:05David Hoffman?

  Is that a stretch?

• 1:13:06Ryan Sean Adams?

  There's something there. Maybe there's a future article, David Hoffman article about this. Um, digital wallet maker Dynamic raises $7.5 million. Good to see a raise still coming through in the bear market. Anything special about this one?

• 1:13:19David Hoffman?

  Uh, yeah, this is something that, uh, for those that pay attention to crypto Twitter, Nick Carter and Castleion Ventures raised, uh, put money into this round. An Ethereum wallet that has like digital identity features baked into it. And he got absolutely hounded by the Bitcoin community, uh, like the cyber hornets, just because like, from their culture, you don't touch anything that's not Bitcoin. And so Nick Carter, the blasphemous, sinning Nick Carter, uh, touched something Ethereum. Uh, now he's being like excommunicated from the cyber hornet culture. Um, just, you know, a small peek into the window of Bitcoin maximalism.

• 1:13:54Ryan Sean Adams?

  Did you read his post? Bitcoin maximalism is dead, is bankrupt?

• 1:13:57David Hoffman?

  No, I haven't, but like, I feel like I could already know it.

• 1:14:00Ryan Sean Adams?

  Yeah, I think he's over it, man. He's over Bitcoin maximalism for sure. As am I, as are you.

• 1:14:04David Hoffman?

  Always, always have been.

• 1:14:07Ryan Sean Adams?

  Still, even in a bear market, all right, this is an incredible time to get a job in crypto. Cause crypto is still hiring. There was a lot of money created and raised during the bull market and, uh, good firms are still hiring. Here are a few firms. I will lead them out, uh, read them out and their job openings. Number one, Alliance DAO CTO, Alliance DAO Software Engineer. Alliance DAO is also looking for an executive assistant. Go check that out. Otterspace is looking for a solidity engineer. Abstract Ventures, a front-end engineer. Boolean Labs, looking for a founder and web three for their web three community analytics platform and a CEO. That's a big one. Bankless was still looking at Twitter specialist resumes. Blockchain Capital wants a research engineer.

• 1:14:51Ryan Sean Adams?

  Swell Network, a tech lead. Go check out all of those roles.

• 1:14:55David Hoffman?

  There's so many more. There's so many more.

• 1:14:57Ryan Sean Adams?

  That's the place. banklist.pallet.com/jobs. Guys, we'll be right back. Coming back with hot questions from the Bankless Nation, as well as some hot takes from Twitter. We'll get right back to that. But before we do, we want to thank the sponsors that made this episode possible.

• 1:15:11David Hoffman?

  Arbitrum is an Ethereum Layer 2 scaling solution that is going to completely change how we use DeFi and NFTs. Some of the coolest new NFT collections have chosen Arbitrum as their home, while DeFi protocols continue to see increased liquidity and usage. You can now bridge straight into Arbitrum for more than 10 different exchanges, including Finance, FTX, Huobi, and Crypto.com. Once on Arbitrum, you'll enjoy fast transactions with cheap fees, allowing you to explore new frontiers of the crypto universe. New to Arbitrum, for a limited time, you can get Arbitrum NFTs designed by the famous artists Ratwell and Sugoi for joining the Arbitrum Odyssey. The Odyssey is an eight-week-long event where you can play on-chain activities and receive a free NFT as a reward. Find out more by visiting the Discord at discord.gg/Arbitrum.

• 1:15:52David Hoffman?

  You can also bridge your assets to Arbitrum at bridge.arbitrum.io and access all of Arbitrum's apps at portal.arbitrum-one in order to experience DeFi and NFTs the way it was always meant to be: fast, cheap, secure, and fiction-free. The Brave Browser is the user-first browser for the Web3 internet with over 60 million monthly active users. And inside the Brave Browser, you'll find the Brave Wallet, the secure, multi-trained crypto wallet built right into the browser. Web3 is freedom from big tech and Wall Street. More control and better privacy. But there's a weak point in Web3: your crypto wallet. And most crypto wallets are browser extensions, which can easily be spoofed. But the Brave Wallet is different. No extensions are required, which gives Brave Browser an extra level of security versus other wallets. Brave Wallet is your secure passport for the possibility...

• 1:16:35Ryan Sean Adams?

  Web3 and supports multiple chains, including Ethereum and Solana. You can even buy crypto directly inside the wallet with Ramp. And of course, you can store, send and swap your crypto assets, manage your NFTs and connect to other wallets and DeFi apps. So whether you're new to crypto or you're a seasoned pro, it's time to ditch those risky extensions and it's time to switch to the Brave Wallet. Download Brave at brave.com/bankless and click the wallet icon to get started.

• 1:16:57David Hoffman?

  Question time. Questions from the nation. A tweet goes out of the Bankless Twitter account every single Wednesday. And it says, "What question do you have for Ryan and David? Let us know. We'll talk about it." Every time I put this agenda together in the mornings, I go and check out all the hot questions and I grab some of the hottest ones that everyone seems to want asked. So we got two of them this week. Dan Scott says, "Does bridging Ether to a Layer 2 have similar risks as bridging Ether to an alternative Layer 1 like Solana or Avalanche?" Ryan, you want to take this one?

• 1:17:28Ryan Sean Adams?

  Uh, sure. I would say it depends. It depends on the bridge that you're using. But one benefit, if you're kind of like into visuals, one benefit that a rollup has versus an alternative Layer 1 is it has a trustless, immutable bridge that cannot be destroyed. Okay? So it's a bridge that works regardless of any security dependencies on the chain itself, on the Layer 2 itself, right? So if you're picturing kind of bridges in your mind, the other bridges, routes around to Layer 2s and to alternative Layer 1s,

• 1:18:05Ryan Sean Adams?

  these bridges can be destroyed. These could be like, um, these can crumble, these can fall if some of the security assumptions on the other chain go by the wayside. But a rollup always preserves a bridge where you can always withdraw your funds back to Ethereum. And that is why a rollup is a rollup, because it doesn't have dependencies that are external to Ethereum for your security. So there's always that bridge, but there are some bridges you can take to these chains that are also like multi-sig and don't have those same security assurances. So you have to be sort of, you know, careful and cautious as far as which bridge you're using. To transmit your funds onto the layer two.

• 1:18:48David Hoffman?

  I think there's a decent amount of like semantics confusion that goes around here when we bridge from like one layer one like Ethereum to another layer one like Solana or Avalanche. There's no actual like bridge being built. Like there's no, there's, there's, it's not like it's something you go across and you transport your ether from one side to the other. You put your ether into one contract on Ethereum and then somebody else on the Solana or Avalanche or other layer one application is looking and observing that contract and say, oh, they submitted some ether here. I will mint them an IOU on the other side. So it's a little bit more like a teleporter and like you have a central operator teleporting you with it with an IOU. And if the teleporter breaks, your IOU on the other side is worthless.

• 1:19:31David Hoffman?

  With a layer two on Ethereum, there is something like, like a canonical bridge, a cryptographic bridge that has much stronger assurances that, that doesn't actually have to operate on like what is usually a multi-sig. And so you have just an extra layer of risk removed because the layer two bridges, they don't have to make their own independent blockchain. They are giving up their independence in the name of security and having an actual, like it's still not an actual bridge because like at the end of the day, the metaphor breaks down. But you have like a strong cryptographic assurances that the bridge will always be there. And if the bridge isn't there, then the whole network's not there. So like Solana can go up and stay up. Ethereum can go up and stay up and that bridge can go down. But

• 1:20:13David Hoffman?

  on a, on a layer two, if the bridge goes down, the whole network is going down. Right? And so the network, the layer two network on Ethereum cannot stay up while the bridge is down. That doesn't work. And so

• 1:20:25Ryan Sean Adams?

  There's always a, a bridge of last resort.

• 1:20:27David Hoffman?

  Right.

• 1:20:27Ryan Sean Adams?

  On the L2s. And so it's less risky is I guess the short answer.

• 1:20:32David Hoffman?

  Right.

• 1:20:32Ryan Sean Adams?

  Bridging to a layer, layer two. And that is essentially the point. Okay. So here's another question for us, David. What are some of the best DAPs that you can recommend to help beginners start living a crypto native life, a bankless life? David, what do you recommend?

• 1:20:46David Hoffman?

  Yeah, I put some of my, some of my favorites down. First, you know, if you're going to go into the world of the bankless nation, if you're going to go into the metaverse, you need a name. You need, you Need your new Metaverse name. And so you gotta go get an ENS name. So go like, just like how you when you sign into Instagram, sign into Twitter, whatever. You you make a new handle. When you're going into the Metaverse, you need an ENS name. So go get porno, somebody got porno dot. Maybe not that one. So once you get your Metaverse name, I I think the next coolest thing you can do is you can take some of your ether. You can put it into Maker Dow and you can literally mint money. That is the cool thing about crypto. You can mint money. And then you can take that money, like put one ether into Maker Dow. Like, make sure you're measuring the gas fees.

• 1:21:29David Hoffman?

  Put one ether into Maker Dow, mint some dye, put that dye on a layer or two. And then you've done like some really cool stuff. And I would, that's what I would say where I would start with.

• 1:21:39Ryan Sean Adams?

  I I think that's great. And I I think that like the path to going bankless is like, number one, you have to start taking custody of your own keys. Right? So it's the move from an exchange to actually taking custody of your keys. Whether you're doing that in a smart contract wallet, like an Argent or something, a hardware device like Ledger. Or for small bits of money, maybe MetaMask, something like that. You you have to go through that step. But once you're on the other side of that, I think about still like the money verbs that we've talked about, you know, so often. Like, what are the things you want to do with your financial life in in a typical banking system? Well, one thing you want to do is like, save your money and invest. And I can think of no better investment, my friend, and saving mechanism for the long run.

• 1:22:22Ryan Sean Adams?

  It's going to be volatile in USD and ups and downs than something like ETH. Okay, and maybe after that, a basket of some other tokens. But you definitely want to have ETH that you don't spend. All right, you also need some ETH for gas, but ETH that you don't spend. So that's like a store of value type use case. And then once you have that payment use case, stablecoins are amazing. Dude, I I could send money to anyone in the world for like fractions of a penny. Okay, and like, it can be any amount of money. This is so freeing and so cool. And it's something that you should learn how to do, whether you're using USDC or DAI. Having some stablecoins in your crypto reserves is is kind of cool. Then you can use something like Pool Together, which is like a a fun.

• 1:23:05Ryan Sean Adams?

  DeFi savings type tool. It's a really interesting starter application in DeFi. Go check that out. Pull together and you could deposit your funds, actually save your money. They have a lottery. It's called a no loss lottery. They have a system that, you know, rewards various people based on the pool size. It's really cool. Just check it out. It's a good first app. If you're lending and borrowing, Ave is fantastic. And then trading, of course, like go check out Uniswap. So we got storing value, basic payments, savings, lending and trading. And that's a good place to start because you just knocked off like, you know, five of the different money verbs that you're going to need for a crypto native bankless life. From there you can do all sorts of other things, but that's where I would start. David, let's get to some takes of the week, man.

• 1:23:49David Hoffman?

  Takes of the week.

• 1:23:50Ryan Sean Adams?

  So here's a take from you, my friend. This is all about C5 versus DeFi.

• 1:23:55David Hoffman?

  I say, C5 lenders are blowing up specifically due to the properties of centralization. They're black boxes. You gotta trust them to withdraw your assets and they're subject to human folly, human decision making. Not only now do DeFi lenders have fewer competitors because like a few of them have blown up, but their competitive edge is now proven and legitimized. C5 is fragile and unstable. DeFi is robust and stable. And so I think it's that last line. DeFi has fewer competitors because all the C5 things blew up. They blew up because of the properties of centralization in the first place. So now like, not only do they have less competition, but their differentiation is justified and proven out in the market. And I think that's awesome.

• 1:24:37Ryan Sean Adams?

  I totally agree with you. And you know, I think another lens on this, this is something I tweeted out is for regulators. And I said this, regulators around the world should be watching DeFi criticals closely to congratulate them. All right. Because DeFi provided a fair, orderly and transparent drawdown during the 70 to 90% downturn we've just seen while the C5 peers went bust. You want to regulate crypto? DeFi is crypto regulation.

• 1:25:06David Hoffman?

  Self-regulation.

• 1:25:07Ryan Sean Adams?

  A commenter on this tweet said, yeah, that's effectively what a smart contract is. It's regulations written to code. That's what we're doing.

• 1:25:15David Hoffman?

  Point, the EVM is the regulator for DeFi. We are like, that's the whole thing that makes it what it is.

• 1:25:23Ryan Sean Adams?

  Exactly. Smart contracts are simply self-regulating and self-enforcing themselves. And this is where regulators can lend a hand, is maybe they need some smart contract auditors on their team. Maybe they want to spin up some transparency dashboards. This is where DeFi can use your help, not to say that, like, we're getting rid of all DeFi. Anyway, I don't know how many regulators listen to Bankless, but that's our message to them. Here's another take, David, from Aubrey. What's she saying?

• 1:25:50David Hoffman?

  Yeah, Aubrey, the first time I got Aubrey taken here, she goes, "SBF will own everything and you'll be happy."

• 1:25:57Ryan Sean Adams?

  Why is she saying this?

• 1:25:58David Hoffman?

  Because SBF is like buying up everything. He's like the lender of last resort. He's like trying to buy FTX, they provided a credit window for a bunch of other things. SBF and like Alameda and all these people that like were capitalized during the bull market and like had a lot of stables, are now like looking at some pretty sweet deals right now.

• 1:26:15Ryan Sean Adams?

  I don't think this is a fair tweet, David, because CZ is going to own at least some of this too. Not just SBF. We're having CZ on the podcast tomorrow, so we're going to ask him about the CZ of Binance, of course.

• 1:26:28David Hoffman?

  Today, for the listeners, actually, it's probably going on right now as you listen to it.

• 1:26:31Ryan Sean Adams?

  Oh, true. Wow.

• 1:26:32David Hoffman?

  Okay.

• 1:26:32Ryan Sean Adams?

  Stop listening to the rollup.

• 1:26:34David Hoffman?

  I really liked this take. I really liked this take. This is a kind of a snarky way that also is really educational as to how optimistic rollups work. Kobe Gurkam says, "The security of optimistic rollups is based on the fact that people will, with great zeal, strive to prove that somebody is wrong on the internet." This is how a fraud proof works. If you do something fraudulent in an optimistic rollup, you can get away with it, but the way that security of these optimistic rollups work is like as soon as somebody is doing something fraudulent, somebody is out there going to prove that. And so, security of optimistic rollups, based on the fact that the internet people like to prove that other people are wrong. And if they do, they get rewarded. So that is a little quick lesson in how optimistic rollups are secured.

• 1:27:19Ryan Sean Adams?

  Everyone becomes an auditor. That's the model we're moving towards. This is a take from bartech.ee. Being an Ethereum rollup is like having the strongest army in the world securing your estate. Becoming Cosmos chain, you are now protected by your token holders. Unless you use interchain security, an upcoming feature, in which case you pay Atom holders for protection. I think this is probably background commentary on DYDX's move from a Starkware rollup to its own app chain. And I know you and I commented on this after the show. We have a ton of respect for Antonio as a builder. Built something phenomenal with DYDX.

• 1:27:59Ryan Sean Adams?

  But it also seems like it's gonna be a lot of work for them to spill, spin up everything necessary for a layer one chain. And kind of the analogy to me is like, you want to start a butcher shop and so you're founding a country in order to do that. I was like, why not just park your butcher shop in a country that already exists?

• 1:28:19David Hoffman?

  On Main Street, yeah.

• 1:28:20Ryan Sean Adams?

  Yeah, military and tax code system and money system and monetary policy and like defense network and legal. Like, it seems like a lot less work and I think it is. And so, this is a comment on that. I do think that there's obviously room for all sorts of chains to spin up. But what they are spinning up is sophisticated nation-state type of economies. And I think that's more difficult to do than some people assume.

• 1:28:50David Hoffman?

  I think that's exactly right. And I think that is the last of the takes. Ryan, should we get into what we're excited about?

• 1:28:56Ryan Sean Adams?

  Yeah, what are you excited about? What are you bullish on?

• 1:28:59David Hoffman?

  Do you see this like awesome brick background behind me, Ryan?

• 1:29:02Ryan Sean Adams?

  I do, I do. It's amazing. Looks like you got a ton of room there.

• 1:29:06David Hoffman?

  Right, yeah. So like, look at all, look at all this space. And like, my desk is in the middle of this space. Let's see if I can zoom out. It starts off as a blank brick background, but it's gonna, it's gonna change in the future, Ryan. And I'm not just talking about me putting up my NFTs on the wall.

• 1:29:22Ryan Sean Adams?

  That's what people are envisioning. How's it gonna change?

• 1:29:24David Hoffman?

  I'm sure that's what they're envisioning. It's gonna change. Bankless studio is gonna become a thing. I got some plans. I got some plans.

• 1:29:32Ryan Sean Adams?

  Live studio for live podcasts. That's what you're talking about, right? This is what this means.

• 1:29:36David Hoffman?

  Yes. Yeah. I did a show with Julia from Orca not too long ago. And like, we were very awkwardly like on the same couch as I interviewed her. And then I looked at the YouTube comments. I was like, well, that needs to change.

• 1:29:49Ryan Sean Adams?

  So this is the change, thankless studio. It's gonna be awesome, man. Yeah, I uh, I'm excited to come up there one time with you.

• 1:29:56David Hoffman?

  Yeah, we'll do your layer zero here.

• 1:29:58Ryan Sean Adams?

  No, I was gonna say, I wanna get you on a layer zero.

• 1:30:00David Hoffman?

  That's my podcast, bro.

• 1:30:02Ryan Sean Adams?

  I know, but I gotta interview, who's gonna interview you? You know, let Anthony Sisano interview you for layer zero, it's gotta be me, come on.

• 1:30:09David Hoffman?

  Yeah, that's right, that's right. Ryan, what are you excited about?

• 1:30:13Ryan Sean Adams?

  Um, I'm excited, I guess, about the overconfidence of bears right now. Here's something I tweeted out, "When prices go up too fast, people get dumb." Of course, that's true. "But when prices go down too fast, people also get dumb." And I'm seeing a lot of the dumb sentiment now, David. Like, you know, just this morning, I was like cruising around Reddit. The amount of threads, this was like on r slash gaming of like, "NFTs were the dumbest idea ever. Ha ha, crypto bros, get wrecked, you guys suck." Uh, "Crypto's so useless, it's a scam." All of this noise is going on. And like, detractors and critics are absolutely gleeful, right? And what they don't know is like, we've already been through this, like, three or four times.

• 1:30:57Ryan Sean Adams?

  Exact same people, not the same people necessarily, exact same sentiment, maybe different set of actors, crypto is dead. Uh, and I, I think the overconfidence of the bears actually makes me optimistic that we are closing in on a potential bottom, alright? Now, this could still last a very long time. We're still talking, uh, months, potentially years. I don't know how long it's going to last. But, um, I'm starting to, to, to hear that, like, overconfidence that feels very much and sounds very much like bottom type of talk. And I think it'll persist for a while, but it's actually making me bullish

• 1:31:39Ryan Sean Adams?

  to hear the same, the same patterns that we've seen so many times in crypto start to play out in the sentiment right now.

• 1:31:45David Hoffman?

  So just curious, uh, when prices go up too fast, people get dumb. When prices go down too fast, people also get dumb. In what scenario do people not get dumb?

• 1:31:56Ryan Sean Adams?

  I think when like there is a sweet spot of sober time. Do you know like, don't you feel like this in every, every market? Like the sweet spot was probably for me for this, this cycle around was probably like sometime 2020, early 2020.

• 1:32:10David Hoffman?

  DeFi summer?

• 1:32:11Ryan Sean Adams?

  Yep. And I think in late 2019 into 2020, I feel like we had six months or so, maybe nine months of just the sweet spot. Where things were happening, the builders were building, the market sentiment was like rational.

• 1:32:27David Hoffman?

  So the end of the, the end of the bear market.

• 1:32:30Ryan Sean Adams?

  Mm hmm. Basically. And that's the sweet spot. And then I start to hate my life again. I hate my life. I hate my life now when things are like irrationally bearish and everyone's like, you're such an idiot. You're such a, you have a crypto podcast.

• 1:32:45Ryan Sean Adams?

  But then I also hate like the market, I don't know, three months ago, six months ago, when you're like, um, you know, this Terra thing might not be sustainable. And everyone's like, you loser, you're so dumb. You Heath Maxie. Like I hate that side of it too. So we only get rest during like this, this eight month period, I don't know, six to nine month period, maybe in between these two cycles. And that's when the market is less dumb. That's how I experience it.

• 1:33:10David Hoffman?

  I think I talked about this last week with Anthony when you were on your little AI vacation.

• 1:33:16David Hoffman?

  But like my, my mom would text me every now and then saying, hey, I met up with like Linda. She said like, hey, how, how's Dave doing? Is Dave doing all right during the crypto crash? And like, I've gotten these texts like three times. Like, is David, is David okay? Like, they know I've been in crypto since 2017. I'm like, can you guys please go look at the chart, please? I tell my mom like, hey, I'm hiring a bank.

• 1:33:40Ryan Sean Adams?

  You're telling your mom, Linda, to look at a chart?

• 1:33:41David Hoffman?

  Well, no, tell, tell those people to go look at the chart, like Ether at a thousand dollars. Anyways. But just like, yeah, it's just like so frustrating. It's like, they don't really ask if I'm doing okay when Ether is at $4,000. I didn't hear anything then.

• 1:33:54Ryan Sean Adams?

  Mom, David's mom, don't be concerned about David until ETH is like double digit. Okay? Then you can start sending phone calls and getting concerned.

• 1:34:02David Hoffman?

  Then I might not be okay at that point.

• 1:34:03Ryan Sean Adams?

  You might not be okay. But Bankless listener, we think you're going to be okay. This is all going to be okay.

• 1:34:10David Hoffman?

  Ryan, you said at the end of 2019, start of 2020 was when you felt like most rational and like just the best in the crypto market. Like that was the era in crypto, and I was thinking about this earlier. That was the era in crypto where all the people that stuck around during the bear market, that's when all the people were like, yo, wait, the bull market, it's on. That's what happens next. Like people that stuck around during the bear market, they identified that the bull market was started in April of 2020. Like, we knew this. Everyone had the conviction like, yes, the bull market is back on. Like, it's on, baby. And the only way that you were able to know that was if you rode through the bear market. And so the people that rode through the bear market were able to ride the bull market from Genesis in like April of 2020, when Ether was $200 to $300,

• 1:34:55David Hoffman?

  Bitcoin was like $6,000, $7,000. And then they rode those things like, and then retail figured out that the bull market was on sometime in like middle of 2021. So if you ride through the bear market, you have a one-year head start in a bull market that generally only lasts about two years. So like, that's your alpha. That's your advantage.

• 1:35:17Ryan Sean Adams?

  It's exactly where you want to be. That is the reason you don't leave during times like this, when prices are down. The reason you stay is exactly for that reason.

• 1:35:26David Hoffman?

  Totally.

• 1:35:27Ryan Sean Adams?

  All right, David, let's get to the meme of the week. What are we looking at on the screen? I'm seeing a whole bunch of bulls here.

• 1:35:34David Hoffman?

  This is a...

• 1:35:35Ryan Sean Adams?

  These look like sad bulls, though.

• 1:35:36David Hoffman?

  This is a, what are these called? The Dungeons and Dragons, like disposition charts or whatever. So you got like lawful good, neutral good, chaotic good, you know, lawful evil, neutral evil, chaotic evil. So for the listeners, podcast listeners, sorry, this is going to be kind of hard to explain. In the lawful good corner, we got good old USDC being the lawful good. Like, everyone likes USDC.

• 1:35:55Ryan Sean Adams?

  These are all stablecoins, right?

• 1:35:55David Hoffman?

  These are all stablecoins. Everything on stablecoin, yeah. In the neutral good, top center, we got DAI. It's neutral. It's $1 good. And we also have chaotic good for Frax, the algorithmic 85% backed algorithmic stablecoin that has admirably held its peg. Nothing wrong there. Coming up in the neutral camp, we got the lawful neutral of the actual US dollar, the fiat in your bank account, the cash in your wallet. In the true neutral corner, we have the curved three pool, the tether, dye, USCC curved three pool and the bull. Every single one of these has a bull that's colored the color of the stablecoin. And this bull happens to be both green for USCC, excuse me, blue for USCC, green for tether and yellow for dye.

• 1:36:40David Hoffman?

  So true neutral is the curved three pool. Chaotic neutral, we got Mim. Didn't that one go to zero? I don't know.

• 1:36:47Ryan Sean Adams?

  Not yet.

• 1:36:48David Hoffman?

  I don't know.

• 1:36:48Ryan Sean Adams?

  Did it?

• 1:36:49David Hoffman?

  I don't know. I don't know. And then in the evil row, we got the lawful either, which is evil, which is tether. It's lawful because it's actually $1 redeemable for $1, but it's evil because it's a black box. We got the neutral evil, which is USDD, the terra fork on Tron that somehow is maintaining its peg. And then we also have chaotic evil in the bottom right corner, which is UST, Terra USD, with also, if you notice, Ryan, Mike Novogratz's wolf tattoo on the arm.

• 1:37:23Ryan Sean Adams?

  It's crazy, man. I definitely agree with the bottom row, I think. And particularly the chaotic evil being UST. But also this Tron stablecoin, man, like, that's gotta be next to go.

• 1:37:36David Hoffman?

  Yeah.

• 1:37:38Ryan Sean Adams?

  Justin Sun, I can't believe the audacity of this. I'm gonna spin up a stablecoin a month before UST goes, and it's gonna be Elgo-backed, same kind of mechanism as Luna UST. And like, that is not okay. And if you're in that, like, be very, very careful.

• 1:37:54David Hoffman?

  Yeah, it's a game of chicken.

• 1:37:55Ryan Sean Adams?

  Probably not listening to Bankless, though.

• 1:37:56David Hoffman?

  Yeah, that's probably true. I saw a post that talks about how Justin Sun had plenty of capital to backstop the USDD, de-pegging and de-peg down to 94 cents. But he wanted it to de-peg more so he could buy it at like a cheaper discount.

• 1:38:12Ryan Sean Adams?

  So dumb. This is terrible. Justin Sun is a central banker. No, thank you. Give me ETH, give me Bitcoin. Guys, of course, none of this has been financial advice. It never is. Crypto is risky, so is ETH, so is Bitcoin, so is all of it. You could lose what you put in, definitely, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:38:37David Hoffman?

  Block buy! Rocket ship! Get on board! So why is...

• 1:38:45David Hoffman?

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