ROLLUP: Gary And The SEC Will Not Defeat Crypto

Bankless Weekly Rollup 2nd Week of June 2023 ------ 🚀 AIRDROP ALPHA 🚀 https://bankless.cc/Alpha ------ 🚀 Asymetrix Go to https://bankless.cc/asymetrix ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask 👾STADER LABS | ETHX LIQUID STAKING https://bankless.cc/Stader ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/Toku 🎮IMMUTABLE | GAMING ECOSYSTEM https://bankless.cc/Immutable 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle ------ Topics Covered 1:09 MARKETS 6:29 Are we at a Local High? 9:25 Ethereum Validator Queue 12:52 CEX Volume Stats https://www.theblock.co/data/crypto-markets/spot/usd-support-exchange-volume-market-share 17:23 Gary Gensler on CNBC https://youtu.be/VKxXdUvMqAc?t=277 19:28 SEC Sues Binance US https://www.sec.gov/news/press-release/2023-101 https://www.sec.gov/news/press-release/2023-103 https://www.cnbc.com/2023/06/07/binance-lawyers-say-sec-chair-gensler-offered-to-be-advisor-in-2019.html 26:13 SEC Sues Coinbase https://www.sec.gov/news/press-release/2023-102 https://twitter.com/MikeSeligEsq/status/1666063676145819648?s=20 31:34 Can Gary Get Away With This? 33:51 Cypherpunks Take https://twitter.com/udiWertheimer/status/1666077587792166914?s=20 https://twitter.com/jack/status/1666078896327122946?s=20 38:39 Optimism Bedrock! https://twitter.com/optimismFND/status/1666155844776361985?s=20 https://twitter.com/jessepollak/status/1664349169073414147 41:47 Arbitrum Ran Out Of Gas https://www.dlnews.com/articles/defi/arbitrum-came-to-a-halt-as-its-sequencer-ran-out-of-gas/ 43:42 ETH Validator Proposal https://ethresear.ch/t/increase-the-max-effective-balance-a-modest-proposal/15801 49:22 ENS Upgrades https://twitter.com/nicksdjohnson/status/1666368619876327424 https://www.my.box/ 51:29 Rocketpool on zkSync Era https://twitter.com/Rocket_Pool/status/1664276628468547587 52:58 Pooltogether Case Dismissed https://twitter.com/lay2000lbs/status/1666532463428943875?s=20 56:12 Questions From The Nation https://discord.com/channels/615592155481767941/1058053004705669211/1114707321000562738 https://discord.com/channels/615592155481767941/1058053004705669211/1115619057593495552 1:03:12 Takes Of The Week https://twitter.com/zmanian/status/1658152508571697152?s=46 https://twitter.com/dankrad/status/1664958413829185536?s=46 https://twitter.com/FEhrsam/status/1665796974346420224?s=20 https://twitter.com/qaatani9/status/1664292528655413250?s=20 1:10:28 What Are We Bullish On? 1:14:05 Get More Of Anthony 1:15:29 Meme Of The Week https://twitter.com/pseudotheos/status/1665730241845944331?s=46 1:16:15 Risks And Disclaimers ---- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures

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

• 0:00Speaker 00

  I mean, it kind of feels like that because it's it's so bad that I mean, maybe the only way up is up from here. So yeah, maybe it really, it's like $80 ETH, right?

• 0:10David Hoffman?

  It literally cannot be worse.

• 0:16David Hoffman?

  Bankless Nation, it is Friday, which means it is time for the Bankless Friday Weekly Rollup. So grab your coffee because we're going to cover all of the weekly news in crypto with a little extra help today. Coming in from Australia, we got Anthony Cezano, a substitute teaching for Ryan Sean Adams today. Anthony, thank you for tapping in once again. I appreciate you. How are you doing, sir?

• 0:36Speaker 00

  I'm doing well and always happy to tap in when Ryan's getting a well-needed service and recharge.

• 0:40David Hoffman?

  Yeah, so some some software updates, some some tinkering, you know, you know, the deal. All right. It was a very big week in crypto this week, Anthony, as I'm sure you know. Gary Gensler declares war on crypto, a promising draft of a crypto bill. Optimism Bedrock comes in, Arbitrum runs runs out of gas and a cohort of interesting Ethereum proposals. So I think we're going to get into all of the news and more. And let's go and get started right into the prices this week. So Anthony, in the week that Gary Gensler declares war on crypto, we dumped a little bit, but then we recovered. Bitcoin down 1.8% on the week, Ether down just 1% on the week. What would you make of the price action this week?

• 1:22David Hoffman?

  Because look at this big dip where everything like dumps, but then like the Coinbase suit comes out and everything just recovers. So what's your take on the markets this week?

• 1:31Speaker 00

  Yeah, so it's actually quite interesting to see this because this confirms a lot of kind of, I guess, talking points that I've been bringing up on my own show lately. And that's this concept of a time-based capitulation in the market where essentially, we already had the price-based capitulation last year where things kind of bottomed out. Everything blew up, you know, everyone's leverage blew up. We had the mass deleveraging event, all the tourists kind of went away and haven't come back. And what we see now is literally just these opportunistic, short-term moves where day traders take advantage of any volatility that they can have because they They're starved for it right now and obviously big news events like the SEC suing two of the biggest crypto exchanges is going to cause some volatility, but it really didn't

• 2:16Speaker 00

  cause much. It really kind of, as you said, it went down a bit and then it went straight back up really because I think the market is definitely exhausted right now and the long, no long-term investors are going to be selling for this. Anyone who sold was just a trader and the traders are obviously selling, shorting, then they're going to close their positions and it comes back up. So I really think this is just the clearest signal that I've seen yet that we're in firmly in that time-based capitulation where essentially the things just go sideways for a while until interest just slowly, slowly comes back and we start going up again eventually and start a new bull market. So yeah, it's actually quite, quite interesting, the signal that this sends that I think may have escaped

• 2:58Speaker 00

  a lot of people, especially people who maybe this is their first crypto cycle, but these are the best signals to be paying attention to because this is the market literally telling you, hey, like I don't want to go down because I've already priced all of this in and like literally it's just traders trying to mess with the chart, basically.

• 3:13David Hoffman?

  Yeah, usually when events like this happen, people ascribe price movements retroactively. But I think what you're saying and what I totally agree with is that the headline, SEC sues Coinbase and SEC sues Binance is such a big scary high signal to the market's headline. And so we can actually look at the price movements and say like this happened because of that. And we can look at the price movements and see like, well, it didn't go anywhere. It didn't, it went down a little bit, but what you're saying is it was just the traders. Like everyone who's buying and taking exposure to crypto is unfazed by this. And since the market didn't really go down, you're saying that, man, we are in a place where anyone

• 3:54David Hoffman?

  who's was going to sell has already sold. And anyone who's left is just in it for the long haul. So we're in that phase between like, we're not, we don't have a bull market. We have nothing to be excited about, but we have no further reasons to be bearish. And so we're just crabbing. We're just neutral.

• 4:11Speaker 00

  Yeah, yeah, and I would wager most, if not pretty much all the people that are in this still right now and are long-term investors, they're probably not going to change their mind here. They're not probably not going to stop buying crypto. They're probably not going to sell what they have. You know, there are certain people I would assume that would be maybe selling some if they needed to take some risk off the table or maybe kind of changing their thesis because of this. But at the same time, we've known for a very long time now that the regulators don't like crypto at the moment. The SEC especially and Gary Gensler don't like crypto. So I think the fact that they actually made a move is a relief because markets generally hate uncertainty. And Gary Gensler making his move and basically putting it all out in the open, airing it out,

• 4:54Speaker 00

  basically removes that uncertainty from the market. And I actually think that people believe that this is going to either be settled and there won't be any kind of, I guess, material impact in the long run, or we'll actually get a positive impact from this where we actually get legislation written and passed and we actually get proper regulations put in place. Because I don't know how Gary Gensler is going to go to a court of law and argue that he has actually done what he's supposed to do to, quote unquote, protect investors while there's all this evidence to the contrary, especially going up against, as I said, like two of the biggest exchanges who have a lot of money and a lot of will to fight this. I think Coinbase especially,

• 5:35Speaker 00

  Brian Armstrong and definitely his chief legal officer, Paul Grebel, who you interviewed yesterday or the day before, I think they're very ideologically involved in this. And it's really for them about making sure that they can ensure that the SEC can't just get away with doing whatever they want, which I think is just based, I guess, at the end of the day.

• 5:56David Hoffman?

  Yeah, and we're definitely, we obviously have more to talk about with the SEC and Coinbase and Binance. But the, to me, the fact that Coinbase has a date with Gary Gensler and the SEC in court is bullish. That is a Good thing. That is something to be excited about. Just one last thing on this whole like time-based capitulation thing. Cause I remember when, when we went through this, Anthony, back in the last, uh, last bear market, right? Between 2017 and, or 2018 and 2020. We were in that 2019. I'm not sure of cracking charts. Oh, that's lovely. They do. Lovely. Uh, so like right now, it kind of feels like we're right here and I'm pointing to the era where Ether went up to like

• 6:35David Hoffman?

  almost $400 in the middle of 2019 before it went back down to 120 before the COVID dump, then back down to 80. And so like, to me, this was like, here is the, what we just went through from 2018 to 2019 and then 2019 to 2020 was the time-based capitulation part of the market. And I'm kind of worried if we like play this forward, we're like, we're, we're at this like local high and over the last year or so. And it kind of feels like 2019 where like, yeah, we bottomed and then we doubled. And then we went back down to the bottom again before we had a bull market. And I'm, so I'm kind of worried about, yeah, we are in a one-year era-long high that's going to find like, go back down just out of boredom, not for any particular reason,

• 7:20David Hoffman?

  but out of boredom, it'll go back down. How do you feel about that?

• 7:24Speaker 00

  So there are definitely a lot of similarities, um, between, I guess, the last maybe six to 12 months and 2019. I think on the non-price side of things, so like the social sentiment and stuff like that definitely feels very similar, but I would caveat the, the price action of 2019, um, especially on, on ETH with, uh, the fact that during 2019, especially during the time when ETH and BTC went up a lot and was a few months, about mid 2019, oh, I guess like early, mid 2019, there was a massive Ponzi being run out of, I believe, China called Plus Token. And this Ponzi took in a lot of ETH and BTC, like many billions worth. And it was this huge

• 8:04Speaker 00

  source of buy pressure. Now, uh, I believe that is the main reason why the price retreated so much. And I struggle to see how ETH is going to do the same kind of price reduction. Cause I believe it went to 360 and then down to like 100. So whatever percentage decrease that That is, I think it's like sixty percent down or something. Uh, I, I struggle to see ETH going down sixty percent from where did it go to like two thousand one hundred or something, two thousand two hundred, the last local top we had. So it could go down from here. I'm, I'm, I'm not sure, but at the same time, we don't have that, that same kind of artificial kind of buy pressure that brought us back up here. And also ETH is much bigger as an asset than it was in twenty nineteen. So the volatility is definitely going to be less.

• 8:46Speaker 00

  So yeah, as I said, I, we could definitely go back down. We could go back down to like fourteen hundred, which seems to be a place where people like to, to, to test levels because it's the old all time high, right? It's the twenty seventeen, eighteen all time high, but at the same time, yeah, the market's been extremely resilient in the face of everything over the last, I guess, six months especially.

• 9:07David Hoffman?

  Yeah, man, it has been a while since I have heard the words plus token. Uh, so yeah, maybe the claim is that the high of twenty nineteen was artificially pumped and perhaps even the low of twenty twenty three, twenty twenty two was artificially low because of, uh, the, uh, FTX. And all of the, the, the leverage of three hours capital, et cetera. Okay, cool. All right. Moving on to, uh, something I know that excites both you and me. Uh, this validator queue is up only. If we all want to look at charts that are up and to the right, the validator queue is the one to look at. Um, there are now seven hundred thousand validators coming, uh, uh, six hundred thousand active and a hundred thousand waiting to come into the network.

• 9:47David Hoffman?

  Uh, that is a wait time of forty four days, twenty hours, which is, I mean, it was at all time highs last week. It was at all time highs the week before. It's all time highs this week. Uh, and of course the execute is just zero. So you are free to leave ETH staking, but to get in forty four hours, twenty days. What do you get? What do you make of this, Anthony?

• 10:08Speaker 00

  Yeah, I mean, I honestly, as bullish as I am on ETH staking, I didn't expect there to be this big of a queue so, so quickly. I mean, we are not that far from Chappella or Staking Withdrawals being live. It's, it's almost been two months now since they went live and wow, those two months have gone by very quickly. Uh, but the fact that we're already at, um, like ninety five thousand. Pending validators with, you know, forty-four days waiting around here to clear that queue. And it's just been up only with, with basically besides Kraken withdrawing and a few other withdrawals here and there after Chappelle went live, we haven't really seen any withdrawals and uh, it, it has definitely surprised me in a, in a very good way, obviously.

• 10:50Speaker 00

  And I think that it's kind of a bit frustrating for me because I want to spin up some more validators and I'm like, I, I still do it, but then I'm like, ugh, I, I remember the days of not having to wait even like a day to spin it up, like, um,

• 11:01David Hoffman?

  You're just in limbo for, for forty-five days.

• 11:05Speaker 00

  Yeah, yeah. So, so basically, uh, but, but there are other ways to obviously get into staking as well. Um, I, I believe some of the LSDs like front the yield for you anyway, when, before they kind of activate the validator. But the, you know, i- i- there are different ways to do this, but I think that seeing it being up only like this just really validates a lot of people's theses around withdrawals being a master risking event and being incredibly bullish instead of bearish. And it's just funny to see how wrong the bears were about that, that kind of withdrawal upgrade.

• 11:34David Hoffman?

  God, Ethereum, Ethereum bears always wrong, always wrong.

• 11:38Speaker 00

  It is a trend.

• 11:39David Hoffman?

  It, it reminds me, I was saying this last week with Ryan, like we were all bullish on the burn, uh, pre EIP one, five, five, nine, and then EIP one, five, five, nine came in and it was burning way more than we all thought that it would. And now the same thing is happening with staking. It's like, we knew that, we thought, the Ethereum bulls thought that it would be a de-risking event. We didn't realize to what degree it would just open up the floodgates for so much ether to come in and started, I think like, once it, once it became slightly bigger than expected, that started to become a medic. It's like, oh, everyone's staking. Look at, look at how many people are staking. Maybe, maybe I should stake. And it was, it was big enough to the point where it turned into a meme. And now everyone's like, oh, everyone else is taking, I guess I'll just follow the herd.

• 12:21David Hoffman?

  And now everyone is staking, which I think is like, of all memes to get behind, that's a great one.

• 12:27Speaker 00

  Definitely. Yeah, it's just great marketing because everyone's talking about ETH staking now and people are understanding that you can get that really nice real yield on ETH staking because obviously there is the issuance part of the rewards, but there's also the execution layer rewards which are fees and MEV. That's actual real money that's being spent by network participants that go to validators. So yeah, I think people finally woke up to ETH staking.

• 12:52David Hoffman?

  Moving on to some stats here, I thought this was pretty interesting. Since we are in June halfway through the year, I wanted to pull out some centralized exchange volume stats. So, starting the week Coinbase was at 47% of United States trading volume, 47.5%. Now it's actually down to 38%. So Coinbase has actually lost 20% of United States market share. Kraken is at 14.8% to start the year and is actually up to 22%. So it's up 50% on the year. And Anthony, question to you, but number three, United States volume crypto exchange, LMAX Digital. What the hell is LMAX Digital?

• 13:31Speaker 00

  The only time I ever hear about them is on the block because they're their headline sponsor. You can actually see on the left-hand side of your screen there, it's got LMAX as their logo. They're all over the block as a sponsor. I've never used the exchange. I don't really know anyone that uses it, but yeah, I mean, it seems that their volumes are pretty big. Yeah.

• 13:51David Hoffman?

  Okay. All right. Never, never heard of it. You can see, here's just FTX is going to zero.

• 13:58Speaker 00

  FTX, geez. It just goes to zero.

• 14:01David Hoffman?

  It just goes to zero. Obviously, of course. Yeah. Pop quiz. What percentage do you think Gemini is at?

• 14:09Speaker 00

  Oh, it can't be that much.

• 14:11David Hoffman?

  I know you can see it on the screen, but it's pretty small. It's way smaller than I thought it would be. It is at 1% of United States trading volume. I did not realize it was going to be that little.

• 14:21Speaker 00

  Yeah, I mean, I feel like Gemini has always been the just the very small kind of not really talked about that much exchange or US-based exchange. They do make a lot of waves, I think, because of the fact that the Winklevoss twins are the, you know, the founders of it and they're pretty famous and they had their GUSD stablecoin, but that didn't really go anywhere. So I'm not, I'm not surprised by the the lack of volumes there, especially given that they, I believe, were affected a lot by the stuff that happened with Barry Silbert and his different companies like DCG and stuff like that. So, yeah, I do feel like that that's not surprising, but it might be surprising to people generally, though.

• 14:59David Hoffman?

  Yeah. Binance US volume started the year at just about 9% United States market share, currently coming in at just 7%, and I expect that to approach zero next month because of the SEC's approved request to freeze all of Binance assets, which is actually where we are going to get to next. We're going to talk about SEC suing Binance and Coinbase. We're going to talk about the promising new crypto bill inside of the United States and also this cool proposal that was put out on the ETH research forum to increase the maximum balance of ETH per validator, allowing us to go above 32. I know Anthony's probably got his finger on the pulse of that, so we're going to talk about all of that and more. But first, I want to talk about these fantastic sponsors that make this show possible, especially Kraken, our preferred exchange for

• 15:42David Hoffman?

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• 16:27David Hoffman?

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• 17:11David Hoffman?

  Go to staterlabs.com/eth and sign up to get access to the Stater staking protocol. Bankless Nation, we are back with our favorite person ever, Gary Gensler. Anthony, you ready to hear from Gary Gensler? Here we go.

• 17:24Speaker 02

  We don't need more digital currency. We already have digital currencies. It's called the US dollar, it's called the euro, it's called the yen. They're all digital right now. We already have digital investments. And you have entrepreneurs representing digital investments on this program all day long. And whether it's the big tech companies, the automobile companies, you name it. It's all digital right now, the investing world.

• 17:52David Hoffman?

  What do you think about that, Anthony?

• 17:54Speaker 00

  Oh, man, he just really revealed his true intentions, huh? It seems like his true intentions for crypto is to basically effectively ban it in the US because he seems to personally not like crypto, which, oh, man, which is just ridiculous because a bureaucrat like this shouldn't have the power to do that, let alone be able to just openly say that and basically try to impart his own views on an entire industry. It's ridiculous. And honestly, I believe at this point he should resign, given not only what he said here, but a lot of the stuff that he's been doing. But unfortunately, due to politics, I don't think that's going to happen

• 18:36Speaker 00

  because the Democrats don't want to have their chair, the SEC chair that they appointed, resign because it would look really bad on them. But generally, yeah, him saying this is literally just him being like, "Oh, well, I'm going to drop the facade now and I'm basically going to tell the world what I really think."

• 18:52David Hoffman?

  Yeah, that's exactly what Jake Shavinsky's take was is like he has been operating by like a veil of obfuscation and uncertainty and unclarity. And now with suing Coinbase and Binance after doing the whole thing like Coinbase, you're totally allowed to go public, you're totally fine. And then suing them later after the fact. That's exactly what Jake said too, is like he's just now revealing his true intention is his true colors, even though like we all, we all kind of knew it. It was still just like a gut, gut feeling that we knew it. And now I feel like everyone has like the strong assurance is like, no, this, this is Gary and he's being a rogue tyrant. So just to recap the news, Bankless has done four shows on this this last week. So we'll just recap this really quickly.

• 19:34David Hoffman?

  SEC has sued Binance and CZ on allegations of violating federal securities law, failure to register as a clearing agency, failure to register as a broker and failure to register as an exchange, staking securities and staking as a service were also implicated. So the, the, the staking service provided by Binance US was deemed a security. Tokens, including Solana, Cardano, Matic, COT, Algo, Filecoin, Atom, Sand, Axie, Infinity and Mana were deemed as securities. Interestingly, and unique to the Binance case was that CZ and Binance were charged with co-mingling funds.

• 20:14David Hoffman?

  So a customer's assets were put through an illegal entity that CZ owned and controlled called Sigma Chain. So that is unique to the Binance case. That is just not something that is in the Coinbase case that we're going to get to specifically. Interestingly also, BUSD was named as a security, BUSD, the stablecoin. And using the customer funds that was funneled without customers' permission, apparently over $20 billion went through this, or this entity that CZ owned, Merit Peak, that was associated, I don't know if all $20 billion was, was buying BUSD, but. Some amount of money going through this legal entity that CZ controlled called Merit Peak,

• 20:57David Hoffman?

  purchased BUSD, the stablecoin, and some of that money was users' funds. So, not great, not great. Interestingly, the day after, the SEC has seeked emergency relief to ensure Binance US customers are protected. And that is just implementing a restraining order, a freeze on all Binance US assets. And so if there is any concern that Binance US at least is insolvent, we're about to find out. I don't think there's any indication that there is, but either way, we will learn.

• 21:30David Hoffman?

  Anthony, what's your take?

• 21:32Speaker 00

  Yeah, I mean, the Binance case, I guess, like outside of the securities, kind of unregistered securities that the SEC claims that both them and Coinbase have been trading in, is generally, I guess, pretty strong, to be honest, because, I mean, it's been an open secret for a while that Binance has been pretty shady, right? Especially in the early days of Binance. It's not like, it really has been an open secret. It's not something that I think that most people would disagree with, given that they've been operating basically on this notion of regulatory arbitrage, where they move around different jurisdictions. They don't really have a permanent office. And they do a lot of things that are quite dodgy. And there is a lot of evidence that the SEC has and has put out there that, I mean, it doesn't prove anything yet.

• 22:17Speaker 00

  Obviously, they have to prove it, but it makes Binance look pretty bad. And the Coinbase case really doesn't have any of that, because I don't think any of that went on. And they're really just going after Coinbase for trading things that they allege are unregistered securities. So I think Binance, look, I want Binance to win just based on the fact that the SEC doesn't deserve to win any of these cases, given just how fragrant they have been and how they're trying to stuff things into them, like the unregistered security stuff. But at the same time, I'm not going to sit here and defend Binance and say that they're totally innocent in this and they haven't done anything wrong, given that the evidence that I've seen so far. But also given what I know about Binance, since I've known about them since they basically became a company and all their practices over the years. But yeah, I mean, it's going to be interesting to see what comes out of this,

• 23:02Speaker 00

  because we've already seen a bunch of dirty laundry aired by Binance lawyers themselves. I don't know if you're going to, if we're going to talk about this, about how Gensler tried to become an advisor to Binance in 2019. So yeah, you've got it up there. So if we're getting that this early, what else are we going to be getting from Binance's lawyers? Are they just going to take the gloves off and start airing all this stuff? I don't know. It's going to be interesting time to see what happens here.

• 23:26David Hoffman?

  Yeah, the Binance case is interesting due to its mixed bag nature. There are things that are not about Binance that Binance is charged with, like staking as a service platforms are deemed to be a security. Binance is caught up in that. Bусе stablecoin as security, Binance is caught up in that. Like Solana, Matic, all these tokens trading on Binance exchange or securities, Binance is caught up in that. And then there's the co-mingling of user funds from offshore entities that CZ controls. And to Gary Gensler's benefit, he's able to wrap all of these things up together and say, "Look at what these crypto exchanges are doing. They are operating in unregulated Wild West fashion with no rules outside of the rule of law."

• 24:11David Hoffman?

  And he gets to wrap everything together and put the bad things next to what the crypto industry thinks are just like the normal and good things. So that, I mean, it's a pretty smart strategy from Gary Gensler, but like still illegitimate nonetheless. Yeah, so the headline, of course, "Binance lawyers allege that SEC Chair Gensler offered to serve as advisor to the crypto company in 2019."

• 24:34Speaker 00

  It's just, it's been amazing.

• 24:36David Hoffman?

  You could not write a better script.

• 24:38Speaker 00

  Really? I mean, it's amazing to see how Gensler has changed his tune over the year, because, over the years, because he used to teach courses on Bitcoin and blockchain at MIT. He used to promote other kind of blockchains like Algorand, right? Of all blockchains, he was promoting Algorand. And then, you know, two, yeah, exactly. Two, three years later, he's just completely changed his tune to effectively wanting to ban crypto in the US. So I don't know exactly what has changed. I don't really have evidence to what has changed. I have my own speculations, one of them being that it seems like he cares more about his own personal power and political power and he wants to... Advance his own career of anything else and he sees crypto as like a joke, it doesn't

• 25:20Speaker 00

  deserve to live and it's just his way to, I guess, get more power by going after crypto because right now it's very popular to go after crypto. But also I feel like he's trying to get a lot of the egg off his face from basically cozying up to SBF and not going after FTX, but now going after Binance for pretty much similar things that he should have gone after FTX for. There's a lot of things, a lot of moving parts here, but yeah, it doesn't seem like Gary Gensler is acting in the best interest of the American people at all. It seems like he's acting in the best interest of himself and himself only.

• 25:50David Hoffman?

  Yeah, that was Jake Shavinsky and Amanda's take when we did the show yesterday is Gary Gensler is using crypto as a means to an end to elevate his political status for some sort of political aspiration. So he's just one of those figures, one of those people that plays a political game that would like a bigger and bigger chair. And so he's using crypto as a way to do this. Okay, turning into the Coinbase side of news, SEC charges Coinbase for operating an unregistered securities exchange brokerage and clearing agency, more or less the same exact suit that they took to Binance. The big things here, the unique thing that is unique to the Coinbase suit is that they

• 26:30David Hoffman?

  emphasize the Coinbase wallet and they said that Coinbase is offering brokerage, brokerages services via Coinbase wallet. And so they, and this is what was actually said in the Squawk Box that interview that Gary Gensler was on is like Coinbase lets you trade 16,000 tokens using their, their software. He was just basically just saying, yeah, with Coinbase wallet, you can trade on Uniswap and you can access all the tokens there is basically what he's saying. But they, in this suit, the wallet is being mentioned as part of Coinbase's exchange infrastructure, which is kind of positioning the SEC to go after generalized DeFi, non-custodial wallets, non-custodial apps, anything that allows a token to be traded.

• 27:14David Hoffman?

  So that is a foot in the door that sets a precedent that is, that is unique to this case. Of course, the, the big components about this thing is, is unlike the Binance case, the The only thing about the SEC v Coinbase is that Coinbase is being charged with eliciting securities and doing security things, like the staking as a service with CB ETH, Solana, Matic, like the many of the other tokens were deemed securities. And so there's nothing that Coinbase did like commingling funds or sending users money offshore, etc., anything like that. It's just about, hey Coinbase is doing things with securities. And so that's really all they are claiming about Coinbase.

• 27:54David Hoffman?

  And of course, interestingly, the SEC used Coinbase's risks disclosures from their own S1, which an S1 is what you file before you go public as a company. They used, the SEC used Coinbase's S1 as evidence against Coinbase, because Coinbase said, hey, some of the, the SEC might deem some of the assets that we have on our exchanges to be securities. And the SEC goes, haha, so you knew, which is insane, because it's actually self-referent, it's a self-referential argument. Anyways, about Coinbase specifically, Anthony, what's your take here?

• 28:30Speaker 00

  Yeah, I mean, I feel like there's a lot of shotgun approach here from the SEC, basically trying to go after everything at once and maybe try and overload Coinbase's resources, because they know that Coinbase will, will fight this and, and fight this basically till its end. They're not going to give up, it seems like. So maybe they're just trying to go after them with everything they've got and, and water them down or kind of make it harder for them. But at the same time, yeah, there is all this evidence of, of the SEC doing things that don't make any sense, right? They basically let Coinbase go public and, and they, they're now alleging that they're trading securities or trading unregistered securities that, that were trading at the time that they went public. So when you kind of look at that from that lens, it looks, looks very weird.

• 29:12Speaker 00

  And it seems like the SEC has a bone to pick with Coinbase specifically as well. I think because Coinbase is fighting so hard, they're like, well, if you're going to fight us on this, then we're literally going to come after you with everything we've, we've got, which is what I feel is happening. Because this isn't the first time the SEC has gone after Coinbase and given them grief. Obviously with Kraken, you know, they went after Kraken for their staking product and then Kraken. Kraken closed their staking product down and the SEC hasn't gone after them for anything else. Like, why isn't the SEC going after Kraken for trading the same assets that Coinbase is is trading? Maybe they will, like, maybe this is going to age poorly and they're actually going to sue them as well. But if they don't, then it clearly seems like they are only going to go after the people that say they're going to fight.

• 29:54Speaker 00

  Because they want to make sure that no one else gets the idea of fighting them. Because if you try to fight us, we're going to come after you with everything we've got. Now, that's just pure speculation on my part. Maybe I'm wrong. Maybe they will sue Kraken. But yeah, it seems like they're definitely trying to go after Coinbase as hard as they can. And with Binance, it's limited in scope, just as a related point here, because it's only Binance US. They can maybe have some jurisdiction over Binance globally if they can prove that CZ was commingling funds and all that sorts of stuff. But it's probably going to be limited to Binance US. And I think that what's going to happen is Binance US probably just shut down. I don't think Binance cares enough about Binance US to keep it alive in the midst of this. And then, yeah, once it shuts down, I don't think they're going to cry over it. But the SEC pretty much gets what it wants as well.

• 30:40David Hoffman?

  In a extremely Chad move, Brian Armstrung says that he will not be shutting down the staking service. So Coinbase will continue to run the CBE staking as a service program. They were ready to prove this in court that what they are doing is not a security. And so they appear to be so confident that it's not a security, that they're not even going to bother to to shut it down. Senator Bill Hagerty says, "The SEC is weaponizing their role to kill an industry, allowing a company to list publicly and then stonewalling their attempts to register is indefensible." Gary Gensler expects to hear from Congress. So like, it's stuff like this that is like, man, Gary, what you doing, bro? Because it's, you're going up as Icarus, right in, flying right into the sun.

• 31:23David Hoffman?

  At least that's what it appears, appears to me. And he's getting pushed back from not just, you know, all of the crypto industry, but many, many regulators and legislators in in government. For some reason, Gary thinks that he can just do this and get away with it. Anthony, do you have a take here?

• 31:43Speaker 00

  Yeah, I mean, you can see that this is a Republican, right? So I don't think Gensler actually cares about what they say. I think Gensler cares about what high ranking Democrats think and what they say. And unfortunately, they're on his side, right? You have Elizabeth Warren that's on his side. You have by proxy, really Biden that's on his side because he listens to Elizabeth Warren on a lot of this stuff. You have Maxine Waters, I think, as well, Brad Sherman. There's just these names you see pop up time and time again that take the side of the SEC and say that the SEC is doing a great job, blah, blah, blah. And, you know, Democrats, at least in the Senate, in that the presidential level are in power right now. So I think Gensler doesn't necessarily care what these people think. He only cares what those people think. And I've been thinking about this recently.

• 32:26Speaker 00

  This might be a bit of a crude analogy, but I'm thinking of it as like the human centipede of the high ranking Democrats, where you basically have these three high ranking. I think it's like, you know, Biden, Elizabeth Warren and Gary Gensler. And they all seem to be working on the same wavelength of, you know, screw crypto. The SEC needs to be able to regulate this industry. It's bad for everything. Warren's trying to go out and say that crypto is responsible for the fentanyl crisis in the US. And I'm like, this is just insane. They're literally making shit up now because I think that they're getting so much pushback from the crypto industry and they're getting so much pushback from other angles. They're just like, you know what? We're just gonna make stuff up now. We're just gonna say whatever to get what we want.

• 33:07Speaker 00

  Because maybe they're even getting frustrated at this point because crypto is putting up such a fight as well. But yeah, it's very weird when you look at it and very weird what they're doing. But then when you kind of come to the, I guess, conclusion that a lot of them are just in it for power and they want as much power as they can assume for themselves. Maybe at the end of the day, they don't actually care how this all resolves. They just wanna make headlines. They just wanna market themselves and that's really it. Because Gensler may not be the SEC chair when the Coinbase and Binance cases are resolved because it could take two, three years for it to resolve. And Gensler may have moved on already to Treasury or something like that. So I think really it's all just a power play for them at the end of the day. And I haven't said anything really to suggest otherwise.

• 33:51David Hoffman?

  Moving on to a different part of this conversation, I know this one triggered you, Anthony. This is a Jack, Jack Dorsey, Jack on Twitter retweeting a question saying, "Is ETH a security?" And Jack, Jack Dorsey, former CEO of crypto, or of Twitter, just says, "Yes." And I'm going to also bring up this tweet from Udi Wertheimer, who goes, "Coinbase onboarded millions to Bitcoin, minted many multimillionaires by giving them trusted access to Bitcoin early on, helped onboard institutions such as MicroStrategy," and he says, "Seeing laser-eyed Maxis cheering as the SEC tries to take down Coinbase makes me sick to my stomach." Anthony, I know you've got some hot takes about this.

• 34:34Speaker 00

  Yeah, I mean, like, there's no secret that Jack is a Bitcoin maximalist, right? And it's just very sad that these people fall into this camp of, "Oh, we're cypherpunks, oh, we're anti-nation state, we're anti-government. Oh, wait, no, SEC, please label ETH a security, please police all the other crypto assets out there, and please just bless Bitcoin, and make sure that Bitcoin is the one holy asset in crypto." And it's just really embarrassing and disgusting. And then Jack says this, and then he's challenged on this, and he doesn't reply to any of the challenges, because people actually explained to him, "Hey, you know, ETH is not a security because of this, this, and this reason." And yeah, there's no logic here, there's no reasoning behind it. All it is, is tribalism and fanaticism, and these

• 35:19Speaker 00

  people just wanting the competition to be killed by the state, which is just the grand irony of it all coming from Bitcoiners.

• 35:27David Hoffman?

  But don't forget that today, this week, the SEC is officially 89 years old. So Gary Gensler is saying, "Happy birthday to the SEC, thank you to the Securities Act, Securities Exchange Act of 1934." And then he breaks it down with a thread.

• 35:44David Hoffman?

  It's unreal, man.

• 35:45Speaker 00

  It's so bad, man. If you scroll down a bit, you might see my reply to this. I don't know, it may be show more replies. I don't know if that's gonna... Yeah, there you go. I said like 89 years old.

• 35:56David Hoffman?

  You're zeroing in on a ratio on him.

• 35:58Speaker 00

  Yeah, explains why there doesn't seem to be any signs of cognitive function left. I thought that was pretty funny.

• 36:04David Hoffman?

  Oh my god, what world does this live in? And then to tie, finally tie off this, this conversation, we just have Gary Gensler kind of doing like the aliens pose and goes, "Earth is a security," because everything is a security, according to Gary Gensler. Okay, that was all of that conversation. Coming up next, we got a bunch of Ethereum news. We got both optimism and arbitrage experience downtime this week. One was planned ahead of time, one was not. An ETH research proposal to change the 32 ETH stake number, along with a bunch of other pretty cool, exciting things. Nick Johnson's got an ENS update, Pool Together's got an update, Rocketpool and ZK Sync Era has an update. We're going to get to all these conversations and more, but first, a moment to talk about these fantastic sponsors that make this show possible. Learning about crypto is hard, until now.

• 36:49David Hoffman?

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• 37:34David Hoffman?

  Go to learn.metamask.io and add Metamask Learn to your guides to get onboarded into the world of Web3. Mantle is a brand-new, high-performance Ethereum Layer 2 network, built differently from the other Layer 2s you may be familiar with. Mantle is a modular Layer 2, built on the OP stack, but uses Eigenlayer's data availability Instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle's gas fees by 80% compared to other Layer 2s, but it also reduces gas fee volatility. Mantle has a decentralized sequencer set, eliminating the risk of downtime and censorship on the network. And because Mantle implements multi-party computation nodes, Layer 1 settlement execution is shortened from 7 days to as low as just 1 or 2. Mantle is the first Layer 2 built by a DAO

• 38:18David Hoffman?

  and is backed by one of the biggest DAO treasuries in the world: BitDAO. Mantle already has sub-communities from around Web 3 onboarded to help the growth of Mantle, like Game7 for Web 3 gaming, or EduDAO for the world of D-Side, and Bybit for TVL liquidity and on-ramps. Check out Mantle at mantle.xyz and follow them on Twitter at @zeroxmantle. And we are back with Bedrock. Bedrock is now installed, installed? Is that the right word? Into the OP mainnet. So the OP mainnet went down for a few hours while they upgraded the network into its Bedrock update. And so that is now concluded, and the Bedrock sequencer is now up and running. Bedrock, RTO's Bedrock Do, it reduces transaction fees.

• 39:01David Hoffman?

  It sets up the OP mainnet to have this coherent superchain ecosystem. It does a bunch of other things, everything to be really excited about. Just lays the foundation for a bunch of future steps. And it also improved the security by implementing a two-step withdrawal process for bridge assets, which helps the security of the chain itself. Loading up a Layer 2 fees.info. You can now see the optimism. A swap on optimism is coming in at 9 cents, which I believe makes it the cheapest optimistic rollup that there is. Of course, there's a ton of variables that goes into this thing, so that is not just a simple, a simple way to view these things. But still, coming in at 9 cents on a UNO swap swap, that's pretty good. Anthony, what's your take about optimism Bedrock?

• 39:46Speaker 00

  Yeah, I mean, it's been a long time coming. It's basically their version of Arbitrum Nitro. So Nitro went live on Arbitrum a few months ago and now Optimism has with Bedrock. And it's gone, it's basically upgraded the whole OP stack. So anyone that's using the OP stack such as Base, the Coinbase Layer 2, will be able to take a benefit of this as well. And I think one of the major things, and you've got it up here on your screen, that Jesse Pollock talks about is that with the Bedrock upgrade, optimistic rollups built using the OP stack will actually be able to use validity proofs and not just fraud proofs. And a validity proof essentially, if you use that instead of a fraud proof, you make your chain what I guess is known as a zero knowledge rollup instead of an optimistic rollup. And you can build hybrid constructions as well and things like that.

• 40:31Speaker 00

  So, and this is something that I've talked about for a long time, saying exactly what Jesse says. Yeah, it's not zero knowledge or optimistic rollup, it's both. It doesn't have to be, you know, either or, you don't have to choose. You can literally do both and the best technology can win in the long run. And Optimism and Arbitrum's networks can be upgraded to be, you know, ZK rollups essentially. So they're not stuck being optimistic rollups, which I always found bizarre that people thought that they were stuck and they couldn't upgrade when literally it's just technology, it's just software. Of course, you can upgrade it, right? And neither of these chains right now are trying to be like super decentralized or they have to go through a long ass process to get upgrades into the network. They're upgrading and moving at a pretty rapid pace. So, so yeah, but yeah, Jesse's tweet here, I think addresses that nicely as well.

• 41:15David Hoffman?

  Yeah, and it's important to note that a validity prover, a ZK validity prover is a very important step to enable what the Optimism ecosystem calls the superchain, right? The cross-chain composability of OP stack chains. ZK tech from just a high level just allows for composability and synchronicity across chains. So this is just a step in that direction. So congrats to the Optimism team for shipping Bedrock. They've been having, they've been, they're sites on that update for a very long time now. Also in the Layer 2 world. Arbitrum ran out of gas, so it stopped deploying its transactions, its checkpoints to the layer one because it ran out of gas to do so. That happened for about an hour before

• 41:59David Hoffman?

  someone sent 1.4 ETH back to the sequencer so that it could continue to checkpoint to the layer one. But the Arbitrum actual chain still continued as normal. It still was a blockchain, a layer two, adding Arbitrum blocks onto the Arbitrum blockchain, it just wasn't checkpointing to the layer one for a little bit over an hour until we filled it up with gas. It's one of the more unexpected reasons as to why a layer two will stop checkpointing. How would you classify this, Anthony? Because this isn't downtime, it's just like non-finality of a layer two. How would you explain what this meant?

• 42:39Speaker 00

  Yeah, definitely downtime is probably the wrong term for it, but also there's some added nuance here that the reason why the, I guess, like, the address that's used to batch ran out of ETH for gas was because there is an automated process that actually refills that address with ETH, but there was a bug, you can actually see it's detailed here, there was a bug that occurred on the sequencer that led to its batches reverting on chain. So when the batches revert, the sequencer has not refunded the gas cost for sending the batch from the contract that refunds them. So this isn't like a human sitting there having to re-up the ETH that's in the account. This is an automated process, but because there was a very specific bug, it made it so that automated process didn't

• 43:22Speaker 00

  happen, because if it did happen, it would have actually drained all of the ETH for no reason. It wouldn't have worked properly. So this bug happened, they fixed it, and it wasn't just someone forgetting to send ETH to the contract. And in saying that as well, anyone can send ETH to this contract. So anyone could have started this up again if they wanted to, which is, I think, actually pretty cool.

• 43:43David Hoffman?

  Okay, moving on to this ETH research proposal. Increase the max effective balance, a modest proposal. So this is coming from Mike Neuter. Basically, this idea is to reduce the rigidity around the 32 ETH minimum to become a validator. Now, it's not proposing a lower number, but it's proposing that 32 doesn't have to actually be the maximum number. So right now, validators are in increments of 32. 32, or 64, or, oh gosh, 96. 96 is how that math works. And so he's saying, we don't actually have to have that rigid upper bound. So it could be 32, it could be 33, it could be 32.5. And so as a result of this 32 ETH rigidity, we have a very large validator set, because

• 44:27David Hoffman?

  every increment of 32, instead of 320 ETH becoming one validator, it becomes 10 validators. And so what does this do? This has just an overhead. It increases the overhead about the whole networking layer. And so this proposal to increase the 32 ETH max effective balance, what this actually does is actually, in my mind, I think it's really bullish for solo stakers, because as they get Ether from staking, they have to wait to accumulate 32 Ether in order to redeposit it. But with the increase of the max effective balance, they can stake 33 Ether, 33.1 Ether, 33.2 Ether. And so they get to auto-compound their stake and have faster compound interest.

• 45:09David Hoffman?

  There's a bunch of other benefits, but Anthony, I'll leave it to you to explain those, because those are more technical, and I know you're more technical than I am.

• 45:16Speaker 00

  Yeah, well, so the way this basically would work is that, right now, I mean, the way it works today is that, you're right, 32 ETH is the minimum that's required to spin up a validator, but it is also the maximum, in that if you add more than 32 ETH to one validator, you are not going to earn more rewards. You are only going to earn rewards on that 32 ETH. And if you were to spin up a second validator with another 32 ETH, that's when you start earning additional rewards, because you've now spun up another validator. And with this proposal, what would happen is that, as you said, you could stake a maximum of, I don't know what the exact number is, I don't know if that's been ironed out yet, but let's say the maximum is like 90. Six ETH, right? So it's a three validators worth. Well, you could stake like seventy ETH or eighty ETH in one validator.

• 45:59Speaker 00

  And you would earn the rewards based on that. So proportional to your ETH stake. Now, why this is really cool? Is that it doesn't mean that you, like as a solo stake, as you said, you don't actually have to save up to spin up another thirty two ETH validator. So say you have thirty two ETH and you've staked it, and then you have another ten ETH. Well, to stake that into another validator, you would need to acquire another twenty two ETH. But with this proposal, you could just add that to your existing validator. And then also with your rewards that you get, you can also add them to your validator. And the advantage that LSDs have right now over solo staking is that they can actually compound their rewards. Because they have a huge amount of rewards coming in and they can compound it for the whole share of the LSD network.

• 46:41Speaker 00

  Whereas solo stakers actually have to wait until they have thirty two ETH again to compound their rewards. So this would basically allow them to do this. And now because of this, what this also does on the technical side of things is it basically allows for a reduction in the amount of, I guess, like actual validators there are. But it's not a reduction in security. There would still be the same amount of ETH stake. There would still be the same amount of full nodes. And it's just that the validators, like instead of someone running ten validators because they have three hundred and twenty ETH, they would run one validator that gives them three hundred and twenty, uh, three hundred and twenty ETH as well. So that has three hundred and twenty ETH then, and the rewards would be the same. So, and then as I said, the compounding rewards would also also factor into this, which is, which is really exciting.

• 47:22Speaker 00

  And what this does by reducing the validator account is it takes the load of the peer-to-peer layer. So it makes it easier to run validators and full nodes. It's already really easy to do this, but it takes the load off, takes the load off the network, makes the network generally more stable, resilient and secure. And then it also enables other things. So if you scroll up to the top of this post, Mike actually says what this, uh, what this does. It actually unblocks something called single slot finality and enshrined PBS and reduces unnecessary strain on the peer-to-peer layer. So single slot finality and enshrined PBS are two of the biggest upgrades coming, I believe, to the beacon chain over the next few years. And I'll quickly just explain both of those. Single slot finality basically reduces the finality time. From the current around 13 minutes, so two epochs to 12 seconds.

• 48:07Speaker 00

  Because a slot is a block on the Ethereum beacon chain. Or, I mean, it's not literally a block, but people think of it like that. It's 12 seconds. You would have finality within 12 seconds. And then Enshrined PBS is basically taking what MEV Boost does today with the relays and the MEV ecosystem there. And basically enshrining it in the Ethereum protocol itself. So it's not a piece of separate software you run. It's actually part of the core protocol. And this would allow for those things to go live there. And I think just one last thing, I know I'm ranting a little bit here, but one last thing. There is potentially a downside to this that people have brought up in that it would unfairly reward those who basically had, I guess, like more ETH to compound than those that didn't because of the share of rewards. But I haven't looked too much into that. I haven't done the math on that.

• 48:51Speaker 00

  So I can't give too much of an opinion on that. But I believe that would be something that needs to be researched and kind of ironed out before we could do something like this. But overall, this is a very promising proposal and something that I believe in one way or another, one shape or another, will actually get implemented into the protocol.

• 49:08David Hoffman?

  Yeah, this was just proposed two days ago on the ETH Research Forum. So it is in its pre-EIP phase. I don't even know if it has an EIP number. So very, very early in the process, but I think many, many of us are very excited about it. Moving on to ENS update, so this is nick.eth, Nick Johnson from the ENS organization. Excited to show that this is now public. My dot box, dot box will be the first blockchain native DNS routable TLD and it's enabled via ENS. All registrations and transfers will be on-chain and the owner of the NFT will own both the DNS and ENS names. I think what this means, check me if I'm wrong, but there's these new domains called dot boxes. And owning, which is a DNS domain.

• 49:54David Hoffman?

  And so you can own, you can make like anthony dot box, which is a DNS domain, not just an ENS name. So you would go like www.anthony.box. box. But owning that domain is as an NFT on Ethereum and it routes and then plugs into the ENS ecosystem. Did I explain this right?

• 50:12Speaker 00

  Yeah, I mean, it's kind of hard to explain this like I'm five because if people aren't familiar with the way DNS works, it could be quite hard to explain that. So I'm not going to get into how DNS works. I mean, I probably don't remember all the details there either. But yeah, the cool thing about this is that there is currently like, you know, sasol.eith, right, where I could host a website on sasol.eith. It's not just my Ethereum address, but I could host a website on there and it resolves. I could host it on IPFS, but it's not part of DNS. It's not DNS routable from what I know, unless you're using a service that does this like .limo, I believe is one of the services out there. Whereas .box, from what I can tell here, it would be routable on DNS. You could just visit it on any browser and it would be fine. And it

• 50:56Speaker 00

  would also obviously be enabled as integrated with ENS and an NFT on Ethereum 2. So there were some concerns around this in the comments. I don't know, just to bring up the concerns that it's not as censorship resistant and it doesn't really, it can be seized by the FBI, like they can seize domains. It's a valid concern, but at the same time, I don't think everything needs to be totally censorship resistant and decentralized. There can be these solutions that that kind of people can use and they can use other ones if they want as well. So I guess just another solution that plugs into the ENS ecosystem.

• 51:29David Hoffman?

  And then the other cool, exciting announcement that came out, Rocketpool coming to ZK Sync Era. So you'll be able to liquid stake your ETH on ZK Sync Era by just holding our ETH in your wallet, just like on mainnet and other layer twos, our ETH will continue to accrue staking rewards automatically. Can you, I didn't have time to fully unpack what this announcement is, but what's, how does, it's not just our ETH on ZK Sync Era, correct? It is actually a more formal integration?

• 51:57Speaker 00

  I mean, it is, and I guess like it's done so that people can obviously buy our ETH without having to buy it on mainnet, right? So you would buy it on a layer two and it'd be a lot cheaper to buy it on there. And that that our ETH is actually part of the canonical Rocketpool chain. So it actually still, Rocketpool network, I should say, and it actually still accrues the same values as you would on on layer one. So yeah, it really is a Effectively just buying kind of our ETH on on there. I you're not able, as far as I can tell, I don't think so. You're able to do this. You can't stake your ETH and spin up a mini pool on ZK Sync Era and anything like that. It's really just to be able to acquire our ETH and then be able to accrue

• 52:38Speaker 00

  the rewards the same way you would on L1 Ethereum. And I think these partnerships and integrations are announced like this because of the liquidity. Obviously, you can't just say, oh, go buy our ETH on this layer two if there's no one providing liquidity for it. So I think that's what they try to do. They bootstrap it with the L2 themselves, with the Rockpool community, and then it allows people to buy our ETH on these L2s.

• 52:59David Hoffman?

  And then something that I saw that made me really, really excited. This is Leighton Cusack from Pull Together. The whole Pooley movement, the the blue birds that people have on their on their profile pictures. This came from a lawsuit that was going against Pull Together forever ago, frivolous lawsuit from some lawyers, I think in New York. That case has been dismissed. So the Pooley saga is now fully closed. So I know Leighton has had to been dealing with this for over a year now. I'm sure that is a huge weight off of his back. It put together a huge community of puffers, poolers. I don't know what these, poolers? I think they're poolers. But just like, congrats to Leighton for having this case dismissed because it was a frivolous lawsuit,

• 53:42David Hoffman?

  frivolous class action lawsuit by some lawyers that are known to be doing that. And so it's a big, big congrats to Leighton here.

• 53:50Speaker 00

  Yeah, yeah, I saw this just before. Yeah, I mean, the lawsuit itself was garbage. It felt like it was literally just done to try and attack DeFi in some way. And the fact that this case was dismissed, yeah, huge, huge win for Leighton and the entire DeFi ecosystem, really. I'm just really happy that this was the outcome.

• 54:06David Hoffman?

  Coming up next, Bank of the Nation. We got some questions from the nation as well as some hot takes from the week. We're going to talk about Cosmos. We're going to talk about this layer two definition conversation. I don't know if you were tapped into that one, Anthony, but that was funny. Anyways, all of that and more.

• 54:21Speaker 00

  I see it.

• 54:22David Hoffman?

  All of that and more. But first, a moment to talk about these fantastic sponsors that make the show possible. Immutable is at the forefront of Web3 gaming, on a mission to bring digital ownership to every Player, offering the world's best games and game development platform. Immutable lets game builders and players focus on great gaming experiences. So build your next web three game on easy mode with immutable's leading full stack web three gaming platform. It's built in UX features like the immutable passports are designed for games to scale to the next billion players coming to web three. With immutable, players can sign up with an email, pay with a credit card and experience a frictionless purchase flow inside of games. So discover your next favorite game and explore a network of 150 games building on immutable,

• 55:03David Hoffman?

  including such titles as Gotham Chain, Guilds of Guardians, Illuvium, Ember Sword and Metalcore. So join web three's largest ecosystem of games and players. Build, play and connect at immutable.com. Hiring people worldwide, paying them in crypto, providing them access to benefits. It all so complex, but it doesn't have to be complying with labor laws, payroll rules, tax obligations and crypto regulations in every country that you employ someone is difficult, time consuming, manual and costly, and it's drawing more and more attention from regulators and governments. But there is good news. Toku is here. Toku is the first employment and compensation platform for the crypto industry that makes this easy. Toku helps you hire employees or contractors and pay them in fiat or crypto legally,

• 55:47David Hoffman?

  compliantly and with all the taxes handled in over 100 different jurisdictions. So whether you're an early stage company with just a team of two or you're an enterprise with 200, Toku has a solution that meets your needs. Toku is already working with the leading companies in the space. Protocol Labs, Hedera, Gitcoin and many more. So transform your employment and token payroll operations with Toku. You can reach out to Toku at toku.com slash bankless or click the link in the show notes. And we are back with questions from the bankless nation. If you want your question asked and you are a bankless citizen, hop into the discord. Every Wednesday we ask y'all, what do you want asked on the bankless weekly roll up? And then we ask them, this first question comes from Simon Bruce 1974. I'm guessing you were born in 1974, Bruce or Simon.

• 56:30David Hoffman?

  After listening to the episode on Eigenlayer, I would like to understand where the actual yield comes from. If the yield for ETH staking is capped at roughly around 4%, how is it that by restaking you are able to earn 7% or more? If the underlying asset yield is capped and Eigenlayer doesn't have a token, where is that coming from? Next and that's the first question. Next question is, isn't this the kind of thing that blew up the global economy in 2008? Anthony, what's your answer?

• 56:55Speaker 00

  So my answer is, I mean, first of all, a good question because you always want to ask where the yield's going to come from, right? But my answer is that with Eigenlayer, there are a number of different ways the yield can actually be paid out by whatever project is using Eigenlayer as the backbone of whatever they're building. So for example, let's say that someone uses Eigenlayer to spin up a new oracle network. Well, maybe that oracle network has a token and maybe people are paying that oracle network to use their oracles. So they could, one, pay out token, right? Token, I guess, like tokens as liquidity mining to get that yield number, right? And two, those fees could also be going to the people that are restaking, which would be as the yield.

• 57:38Speaker 00

  So one of them would be, I guess, like a inflated kind of imaginary yield, if you, you know, if you take that view when it comes to token incentives. And the other one would be a real yield from real users paying to use the network. And to use another example, not just an oracle network, but like a data availability network, where people are paying to use this, this network, paying to post their data there. And then those fees would go to the E3 stakers that are, I guess, using Eigenlayer. And then on top of that, I mean, you say Eigenlayer doesn't have a token. I mean, my, my kind of number one talking point within crypto is that like, if it doesn't have a token right now, it's probably going to have a token in the future. Yeah, yeah. So they could also be doing token incentives, Eigenlayer themselves for this sort of stuff. So good question of asking where the yield's coming from.

• 58:22Speaker 00

  But yeah, I mean, if it's coming from like new tokens that are being printed just infinitely and some kind of like weird Terra-like thing, then yeah, I mean, it would obviously be something that should be called out and people should be saying, you know, this looks like a Ponzi. But at the same time, there is a real yield there. If users are paying to use it, right? They're paying fees to use it, then that would go to the restakers, which would reflect as a percentage yield. I don't, I haven't watched the episode yet, so I don't know, you know, the full context yet. But that's, that's basically where the yield would come from.

• 58:54David Hoffman?

  And then the other thing I'll just say is just like Eigenlayer is meant to spawn many, many, many networks. But the economics of all of these networks are more or less the tried and true science that we know about crypto economics. As in, you need security, you pay for security with fees and token emissions until your network is sufficiently bootstrapped. The only difference is that with new networks, it was like, hey, new native token that is the staking token. And then with Eigenlayer, it's like, hey, Ether is a staking token. The Nickeren token does something else, but Ether is a staking token. And so you Ether get some of the yield of the network. And so that is simply the pattern where the yield comes from. The next question, which is, isn't this the kind of thing that blew up the global economy in 2008? I mean, there's a lot left to be learned about Eigenlayer.

• 59:39David Hoffman?

  I think the simple answer is no, because like credit default swaps and black market who owns what is not really, I would say, relevant to the Eigenlayer system. There are risks to Eigenlayer. And like restaking, it definitely sounds like re-hypothification. But I would actually say that there's a pretty big difference between what these things are. Not to say that there are no risks, and those risks might be significant, but they are at least different from the risks that we saw in 2008. Next question coming in from Udamania. Udamania, how do I ensure my normie wife has access to my ETH if I die? My biggest hesitance in furthering my investment is to make sure that she has access to it. Anthony, do you have any advice for Udamania here?

• 1:00:24Speaker 00

  So there are services popping up that are, I guess, like trying to make a solution here on how this actually gets handled and how estates get handled. But the problem with something like this is that there is a lot of real world legal kind of work and stuff around this that exists already for handling estates of deceased people, that these solutions that are coming online for crypto assets need to work within those frameworks. And obviously, within different parts of the world, there's different frameworks, different legal processes. So yes, there are solutions coming online for this. If you do self custody your ETH and then for some reason you pass away and then you want to pass that on in in a way where your kind of like normie wife in this context can actually access it, you can use tho- those kinds of services.

• 1:01:10Speaker 00

  But if you want to maintain like full self sovereignty, full self custodial over your own funds, then I guess the simplest way would be to just write her a guide and then make sure that she can actually follow it and know how to access it on her own. So basically test her, say, hey, I want you to do this all on your own. And if she can access it and she knows what to do, then then that's it really. I mean, there's not much else you can do other than that. It's like teaching them how to access it and in which way while keeping your own funds still secure. But yeah, it is definitely a big problem, I think, right now for for people. It's not something enough people talk about, but there are definitely solutions being worked on. I don't know the names off the top of my head right now. I'm sure you could Google for them. But yeah, I I I think the the best way right now would probably just be to make sure that you write them a guide and they

• 1:01:54Speaker 00

  can follow the guide and get access to it in like a trial run. It's not that hard, really. I mean, depending on how you secure your funds, of course, but I guess if you're doing things like staking it all or putting it somewhere else, how is your wife going to know how to like unwind a uniswap liquidity position, right, or things like that? So that's where things get get complex. And I think that's where these third party services may be of of much uh much more help than just trying to write a guide for her. But but yeah, unfortunately, I don't have many better solutions than that right now.

• 1:02:21David Hoffman?

  It's tough to give advice for it because every case is uh unique and of itself, right? I think another kind of catchall advice is like if you have a trusted crypto friend who you know knows how to operate a wallet and do all these things, maybe the thing you tell your your wife or your normie relative that needs to recover your funds is that, hey, go talk to this person. And if it's a trusted friend, then they can help uh help you them out. And if that if you're worried about that that person just like steals the funds, well, then you get to go to like nation state legal systems because you have one person who was responsible and clearly did the theft. And so that you just can fall back there.

• 1:03:03David Hoffman?

  Okay, last question from Let's Go Ride Bikes. Will Ryan ever read the ads? That answer is no, because I am the one with the teleprompter. All right, moving on from Takes of the Week. This is coming from Zachy Manian out of the Cosmos ecosystem. Interesting take here. "I think Cosmos," he says, "social capital has about 12 months to do something unique and differentiated. Otherwise, we will get swallowed by ETH-flavored variants of Cosmos, originated ideas like Roll Apps and Eigenlayer. I feel intense urgency. The hour is late." Interesting tweet out of Zachy. Did you see this tweet, Anthony? What was your take?

• 1:03:39Speaker 00

  I think I did see it, and I think my initial reaction to this was that Zachy is like at least 12 months late on this take. I'm sorry, but I have been going on about this personally and about Cosmos just not being able to find product-market fit for a long time now. Probably as early as 2020, I believe. I just never got the value prop. And yeah, I think he's right. I think that the ideas that they've been pushing on, such as kind of like the app chain stuff and Roll Apps, things like that. Like, the Ethereum ecosystem is just much better positioned to take those ideas and run with them, because it has all the economic kind of like weight there. It has all the money. It has all the social capital. It has all the attention.

• 1:04:21Speaker 00

  Whereas Cosmos, no one really knows kind of like what Cosmos is trying to do and what the central hub is, because they have this like hub-and-spoke model. But then Cosmos was kind of like not the hub for a little bit. There was another thing that was like acting as the hub. And then people were fighting. There's a lot of infighting in the community. So they don't really seem to have like a shelling point that people can actually like go to and be in the Cosmos ecosystem. Not to say there aren't good people working on it and there aren't stuff, there aren't interesting things happening there. But yeah, I do think that their time is pretty much out. The L2s are already big. The Eigenlayer has so much hype behind it that I'm very confident it's going to accrue a lot of attention, a lot of attention, a lot of economic capital behind it very quickly.

• 1:05:03Speaker 00

  So yeah, I feel like he's potentially late on this by at least 12 months.

• 1:05:08David Hoffman?

  Yeah, I mean, he's basically making a big call to actions like, yo, Cosmos ecosystem, it's time to get our shit together, otherwise we will get routed around. This next take coming in from Dankrad Feist, he goes, "Blockchain researcher discovers that value is social, mind exploding emoji, blames rollups." And this is coming out of John Charbonneau's article that he drops, who was like, "Hey, y'all don't know what a rollup is, here's what it actually is." And Dankrad continues and says, "A few people saying this analogy made them more sympathetic to John's argument, I wonder what their model of value was before." "You think that maths or cryptography somehow store value, you're wrong, they only help a community coordinate."

• 1:05:51David Hoffman?

  Ah, I thought that was a great take, like cryptography, you can't store value in cryptography, value is inherently perceived. And so this whole blockchain rollup debate is like, basically the TLDR is like, from a rollups perspective, it's a layer one. Like optimism, from the optimism perspective, is a layer one, it just happens to use Ethereum for data. And then it turned into just like this ontology debate about like, what's a rollup and what is provenance and all of this stuff. Anthony, what's your take on Dankrad's take?

• 1:06:23Speaker 00

  Yeah, so this was a take that was basically, I mean, the whole debate stemmed from this blog post that John put out around social consensus, basically, and telling people that you don't know how rollups work, you know, you've been lied to, blah, blah, blah. It was very bombastic, it was very, I guess, clickbaity, but the essence of his post was that, yeah, it's all social consensus. Now, for people who have been around for a while in this ecosystem, understand that it's all social consensus, no matter what it is, doesn't matter if it's a rollup or an L1 or an L2 or an asset, doesn't even matter if it's the ERC20 token standard, right? Someone used this, I believe Dankrad used this analogy. But ultimately, it is all social consensus at the end of the day.

• 1:07:06Speaker 00

  We value things, we use the standards, like, there's no reason why a token has to be an ERC20, it can be another standard. Like, you can literally fork ERC20, copy the whole thing, call it ERC50 or whatever you want to call it, and it'll be the same thing, but the thing is, it relies on people actually giving it value, it relies on the social consensus. Same with like, if there's a fork of an L1, for example, the reason why Bitcoin Cash isn't the real Bitcoin and Bitcoin is the real Bitcoin is because it's social consensus. No one believes Bitcoin Cash is the real Bitcoin, except a small minority of people. Whereas the majority believes Bitcoin is the real Bitcoin. So it's the same is true for L2s. If someone wanted to fork optimism and say, okay, well, this is the real optimism now. And this is the, the, the thing.

• 1:07:48Speaker 00

  Well, I mean, no, because the bridge, uh, the optimism bridge is what holds all the value. Right. And to, you can't fork that bridge. You can't fork the, the, um, the value of that bridge. You would have to convince people to use your kind of bridge and for you to be the real optimism. So really, at the end of the day, it is all social consensus. But I think people took issue with John putting this out because they're like, dude, like, we know this. Like this isn't a revelation. Um, but at the same time, I can see from John's perspective how he's like, I don't think enough people know this because it is kind of like, it, it like, if there's 10 levels of crypto, understanding that everything is social consensus is like level 10.

• 1:08:23David Hoffman?

  Right.

• 1:08:23Speaker 00

  And I don't think most people are at level 10.

• 1:08:25David Hoffman?

  That's when you're like seeing the matrix.

• 1:08:27Speaker 00

  Yeah, exactly. So I think John's whole point of, of this post was to just outline it for people who may not think like this, which I can, I can resonate with because I'd like, would like more people to understand this. But at the same time, yeah, I, I think it annoyed a lot of the, the level 10 people, that's for sure.

• 1:08:42David Hoffman?

  The only, uh, participation I had in this whole like Twitter debate was, uh, noticing that all these people were debating about the ontology of rollups. And like, man, that is some deep bear market shit if ever I saw it.

• 1:08:55Speaker 00

  Yeah, this is what we do in bear markets, right? We just debate like the meanings of words.

• 1:09:01David Hoffman?

  Uh, Fred Arisim's take, uh, apples, and this is coming off of the hype of the, uh, new Apple Vision Pro, uh, launch. Apple's optic ID authentication in the Vision Pro is world coin orb built into a mainstream device. So Fred is just saying like, hey, that world coin orb that everyone thinks is super dystopian. Well, now Apple's doing it and everyone's cool with it because it's a mainstream advice. Uh, what's your overall like take on the, the whole world coin vibe and whether or not it's like dystopian?

• 1:09:27Speaker 00

  I mean, it's all about the marketing at the end of the day. The orb is dystopian. The goggles, they're not dystopian, right? The goggles, people are used to goggles, they're used to glasses. You know, it's Apple as well. So Apple gets to swing their weight around there. But the orb, I mean, come on, like, how many times have we seen, like, sci-fi movies and stuff like that? With the orbs as being this thing?

• 1:09:49David Hoffman?

  The orbs are always bad. Whatever the orb is, it's evil.

• 1:09:52Speaker 00

  Exactly. Orbs are always evil. Goggles and glasses, they're, you know, goofy at worst, right? So I think that's the difference here. It's all in the marketing. And I think WorldCoin really kind of screwed up their marketing because they, I think they thought the orb would be something that was good marketing for them, which maybe it was, but maybe it was like, there was too much negativity as well. Not to say that WorldCoin isn't, you know, doing well on their own, right? I think they're doing a lot of great things. I don't have a strong opinion on the orb or whatever. But yeah, I think naturally, people just say the orb is dystopian, goggles are just goofy.

• 1:10:26David Hoffman?

  That's a great take. All right, Anthony, as we come down to the end of it, the last few questions for you is, what's your bullish on? What gets you excited these days?

• 1:10:35Speaker 00

  Jeez, so many things.

• 1:10:36David Hoffman?

  If you tell me, Eath, dude.

• 1:10:38Speaker 00

  I'm not gonna tell you either, because like, that's like table stakes at this point. I think what I'm, what I'm still most bullish on is the fact that we are executing on the Ethereum roadmap at layer one faster than we ever have been. If you had told me that we were gonna get 40, AIP 48, 44, so soon after the, you know, withdrawals going live and the merge, I probably wouldn't have believed you. I would have been like, nah, nah, that's, that's way too soon. Because it's slated for the end of this year, right? As part of the Dinkun upgrade. And the fact that that is not a minor upgrade, it is a major upgrade, and that will actually be felt by end users. Because typically on layer one, we like to do upgrades that don't really get felt by end users. Because, I mean, the whole point of Ethereum layer one roadmap is really just to

• 1:11:20Speaker 00

  enhance layer two, which is where the end users sit, and also make the layer one just more secure. But that's not something end users see. But this is a very big, major, end-user-facing upgrade, and the fact that it's coming so quickly is extremely bullish. And it's coming so quickly because there are so many awesome people working on it, not just from the traditional core devs and researchers, but also from other organizations like Optimism, like Coinbase has been contributing to it, like Arbitrum and all these other teams, they're contributing to it in a really positive way, and they're working in harmony together. And it just, yeah, it gets me really bullish just knowing that we can actually ship Ethereum L1 upgrades in a much faster cadence than we have in the past.

• 1:11:59David Hoffman?

  Yeah, that's always been the thing that has, I've noticed over the last like four or five years, is the acceleration of protocol development, even like inside of bull markets, inside of bear markets. It doesn't matter, like the ETH developers and developing ecosystem, whether they're core developers or just client teams, or EIP proposers, or Layer 2 teams, everything just seems to be accelerating perpetually. And like, just like you said with Base, now we have a big, big company entering the fray. And so, yeah, there's, yeah. And especially when like, protocol development actually turns into optionality for apps and bridges and change, like everything is gonna cohere very, very well next bull market.

• 1:12:43David Hoffman?

  You're gonna ask me what I'm bullish on, Anthony?

• 1:12:46Speaker 00

  Is that what I have to do?

• 1:12:47David Hoffman?

  Yeah, that's what you're doing is now.

• 1:12:48Speaker 00

  Okay. Okay. What are you bullish on, David?

• 1:12:52David Hoffman?

  Oh, thanks for asking me, Anthony. I'm just bullish on like, this being the bottom of the United States. Gary Gensler, I think, is at his peak. He has a court date with Coinbase. Coinbase is not delisting any of the tokens that Gary Gensler said are securities. They're not ending their CBEETH program. They're looking forward to their day in court. And I think everyone in crypto is like, yeah, that's gonna be good for us. So I'm calling the bottom of the United States. There's been a big migration eastwards to Asia. There's a lot of focus on Asia right now because all of these founders and developers are scared shitless to issue a token inside of the United States. I'm calling the bottom on that. So I am no patriot. I don't, I do not care to wear an American flag,

• 1:13:36David Hoffman?

  but I'm saying, don't paperhand the United States right now because I think it is up only from here. And that is what I'm bullish on.

• 1:13:44Speaker 00

  Yeah, yeah, I mean, it kind of feels like that because it's it's so bad that I mean, maybe the only way up is up from here. So yeah, maybe it really, it's like $80 ETH, right?

• 1:13:55David Hoffman?

  It literally cannot be worse.

• 1:13:57Speaker 00

  Yeah, right.

• 1:13:58David Hoffman?

  All right, coming in to close out this episode. And Anthony, thank you so much. Oh, yeah. Before we do the meme of the week, Anthony, you just gave us an hour and 12 minutes of content. So we appreciate your time. But if listeners want two and a half, three hours of content every single week from you, where can they go?

• 1:14:16Speaker 00

  Just the daily way. And you can find the links to that at my Twitter profile, SASSAL, S A S S A L zero X. Yeah, all the links are there for that. And yeah, as you mentioned, I do about, yeah, three hours of content, you know, the half an hour video every weekday of Ethereum updates. And I've been doing that for quite a while. Actually, just today, recorded the 600th episode of the refuel. So that that's a lot of content, right? Yeah, yeah. So it's fun. You know, as I said, it's about Ethereum, all about Ethereum. I give a lot of my takes, a lot of my hot takes on it. And there's a really great community. People should join as well. Our daily great Discord community are very active in there. Lots of people in there. They'll answer all your questions. But yeah.

• 1:14:56David Hoffman?

  Yeah, bankless listener, longtime bankless listeners will know. But if there is a concentric circles of crypto media, I would put the core devs and all of the blog posts and announcements and progress that they make. And then I would wrap the daily way around that. And then I would wrap the bankless around that. A lot of a lot of what Anthony puts out on the daily way ultimately just ends up in the bankless weekly roll up content, which is why it's so easy to bring him into the weekly roll up whenever Anthony's down for me, excuse me, whenever Ryan is down for maintenance. So Anthony, we always, we always appreciate it. Ready for the meme of the week, Anthony?

• 1:15:29Speaker 00

  Yeah, let's do it.

• 1:15:30David Hoffman?

  This one came from pseudo Theos. I'm sure you saw this one. But this is once again about the roll up debate, the roll up debate in one image, which is the the astronaut shooting the other astronaut. Wait, it's all social consensus. And then the other astronaut says it always has been. It's always social consensus all the way down and always has been. Any comments on this last meme?

• 1:15:50Speaker 00

  I mean, it always will be until our AI overlords take over, right? But then it's the social consensus of the AI overlords. So yeah, it's always social consensus.

• 1:16:00David Hoffman?

  Someone's social consensus. Bankless Nation, thank you for sticking with us through the crypto news of the week. It was a big one this week. And of course, Anthony, thank you once again for helping me go through the news. Risks and disclaimers, Bankless Nation, crypto is risky, Bitcoin, Ether is risky. Crypto, they might be crypto securities, you don't know, but you could lose what you put in. We are headed west, this is the frontier. It's not for everyone, but we are glad you are with us on the Bankless journey. Thanks a lot.