ROLLUP: What BlackRock's Bitcoin ETF Means For Crypto

Bankless Weekly Rollup 4th Week of June 2023 ------ 🚀 Unlock $3,000+ in Perks with Bankless Citizenship 🚀 https://bankless.cc/GetThePerks ------ 📣 CYFRIN | Smart Contract Audits & Solidity Course https://bankless.cc/cyfrin ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🧠 AMBIRE | SMART CONTRACT WALLET https://bankless.cc/Ambire 🦄UNISWAP | ON-CHAIN MARKETPLACE https://bankless.cc/uniswap 🎮IMMUTABLE | GAMING ECOSYSTEM https://bankless.cc/Immutable 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle ------ Timestamps & Resources 00:00 Intro 4:46 MARKETS https://blockworks.co/news/ethereum-staked-to-flip-eth https://www.theblock.co/data/on-chain-metrics/ethereum/cumulative-eth-deposited-to-beacon-chain-and-validators https://www.theblock.co/data/on-chain-metrics/ethereum/cumulative-eth-deposited-to-beacon-chain-and-validators https://twitter.com/eigen_intern/status/1671178301149265920?s=20 18:16 Blackrock Bitcoin ETF https://twitter.com/Delphi_Digital/status/1671221306413416461?s=20 https://www.coindesk.com/business/2023/06/15/blackrocks-ishares-files-paperwork-for-spot-bitcoin-etf/?utm_source=twitter&utm_term=organic&utm_medium=social&utm_campaign=coindesk_main&utm_content=editorial https://www.coindesk.com/business/2023/06/15/blackrocks-ishares-files-paperwork-for-spot-bitcoin-etf/?utm_source=twitter&utm_term=organic&utm_medium=social&utm_campaign=coindesk_main&utm_content=editorial https://www.sec.gov/Archives/edgar/data/1980994/000143774923017574/bit20230608_s1.htm https://twitter.com/fintechfrank/status/1671135185545441280 https://twitter.com/jchervinsky/status/1669502687749054465?s=20 https://twitter.com/coinbureau/status/1671805994039492609?s=20 26:08 Fidelity, Charles Schwab and Citadel launch a CEX https://www.businesswire.com/news/home/20230620110605/en/Digital-Asset-Platform-EDX-Markets-Begins-Trading-and-Completes-New-Funding-Round https://www.linkedin.com/feed/update/urn:li:activity:7076934393608511488/ https://edxmarkets.com/join-edx/ https://twitter.com/ramahluwalia/status/1671218922589175810?s=20 https://www.coindesk.com/business/2023/06/20/new-crypto-exchange-backed-by-fidelity-schwab-and-citadel-launches/ 33:42 Polygon 2.0 https://polygon.technology/blog/polygon-2-0-polygon-pos-zk-layer-2?utm_source=twitter&utm_medium=social https://polygon.technology/blog/polygon-2-0-polygon-pos-zk-layer-2?utm_source=twitter&utm_medium=social 47:40 ZachXBT Lawsuit https://twitter.com/zachxbt/status/1669783717236342785?s=46&t=2ZINVXJQKx6xO_6Wiiu_2g https://twitter.com/zachxbt/status/1669783717236342785?s=46&t=2ZINVXJQKx6xO_6Wiiu_2g https://twitter.com/machibigbrother/status/1670819142050652160?s=20 https://twitter.com/BanklessHQ/status/1669807545194803200?s=20 57:05 Goose Sells For $5.4M https://twitter.com/Sothebysverse/status/1669441570863566875?s=20 1:02:09 Fortnite x Nike .swish https://www.epicgames.com/help/en-US/fortnite-c5719335176219/epic-accounts-c5719365892123/earn-achievements-on-swoosh-a16225767406107 1:05:00 Metamask Integrates Conext Network https://twitter.com/ConnextNetwork/status/1669718823484764161 1:10:25 Questions From The Nation https://discord.com/channels/615592155481767941/1058053004705669211/1119374915565523164 https://discord.com/channels/615592155481767941/1058053004705669211/1121292294054760508 1:20:51 Takes of the Week https://twitter.com/ercwl/status/1670482207956168705?t=hInEHE4udRw9PEN_oe3KyA&s=19 https://twitter.com/ercwl/status/1670482207956168705?t=hInEHE4udRw9PEN_oe3KyA&s=19 https://twitter.com/nixorokish/status/1670484525472952320 https://twitter.com/cburniske/status/1671556663864619010 1:32:33 What Are We Bullish On 1:40:02 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 really do think that we could get a repeat of DeFi summer. If the timing's right. I think the timing will probably be right.

• 0:07David Hoffman?

  It just maybe just a little bit more commentary and alpha here. I do know of at least two startups. That definitely was planning on releasing a token last bull market. And then the bear market hit and they were like, we're going to sit on our hands and release our token later. So there is pent up airdrops that people are just waiting for bullish sentiment to reemerge. So that they can release their airdrop.

• 0:34David Hoffman?

  Bankless Nation, happy Friday. It is the Bankless Friday Weekly Rollup time where we cover the entire weekly news in crypto, which is always an ambitious endeavor. And yet again, we have Anthony Zizano tapping in to substitute teach for Ryan Chat RSA. Anthony, welcome back to the Weekly Rollup.

• 0:50Speaker 00

  Thank you, sir. Always a pleasure to be here.

• 0:52David Hoffman?

  Anthony, it was a bullish week this week, which is like the first bullish week that we've had in a long time. We're going to talk about why. Perhaps it's because TradFi decides to enter crypto all at once. BlackRock, Charles Schwab, the NASDAQ. We're going to talk about all of the things that just came out in the last one, one week, 10 days. That has changed the sentiment around crypto Twitter and crypto in general. Then we're going to get into Polygon proof of stake and how it has just submitted a proposal to turn it into a ZK rollup, a Validium specifically. We're going to talk about, I'm going to ask you, Anthony, the nuances between that and hopefully you can reteach me something I learned forever ago and then lost. And then finally, Zach XPT is sued and the crypto community is gathering to support him.

• 1:37David Hoffman?

  And all of that is coming up as soon as I plug the Daily Guey. Anthony, this is your YouTube channel, The Daily Guey. This is where I get my news and just as a big thank you. We gave you this plug at the end of last week's Weekly Rollup last week that we had you on. But we're going to do it at the start this time. Anthony, who are you and what is the Daily Guey?

• 1:55Speaker 00

  Yeah, I guess just generally I'm an Ethereum educator, Ethereum community member, been around for quite a while. And the Daily Guey is an education ecosystem for Ethereum. So I do a 30 minutes or so of video every weekday on the YouTube channel, and it's available in podcast format as well. Just recapping everything that's happened in the Ethereum ecosystem for that day and just giving my takes on things. And I'm actually going to be doing a regular podcast with Eric Connor again. We did one the other week, as you can see there, it's called the Daily Guey Drive Thru. So we're going to be doing that regularly. And anyone who may have listened to a podcast called Into the Ether back in the day, that was Eric and myself as well. So yeah, it's going to be exciting for Eric to come back there. But yeah, mostly it's just like me talking

• 2:38Speaker 00

  on the daily videos. But yeah, from time to time, there's other people as well. But hopefully going forward, Eric and I will be doing a regular thing as well.

• 2:45David Hoffman?

  Well, it's a great service that you do for the Ethereum and broader crypto ecosystem. I often say if you listener can get to the point of understanding what Anthony Sazano was saying on the Daily Guey, then you are in maintenance mode and you can just chillax and then just listen to the Daily Guey and you'll be fine. And it's where we get a lot of just news for the Bankless Weekly Rollup. So a lot of this Anthony is probably already going to have covered once before, at least in the last week or so. Because like he said, he does this every single day. Moving forward, Anthony, I know I've been pestering you about this. I'm trying to get you to come to Permissionless. This is a call to action for the Bankless listeners out there. We are less than three months away from Permissionless

• 3:27David Hoffman?

  in Austin, Texas, 11th through 13th. I've tried to get Anthony to come. I haven't convinced him yet. We didn't get him last year. Getting him all the way out from Australia is going to be a little bit difficult. But Anthony, we're working on some extremely exciting topics that I think I can get you for. But I will, I will reserve judgment until those topics come out.

• 3:48Speaker 00

  Yeah, I mean, I can't remember what are the exact dates for permissionless?

• 3:52David Hoffman?

  September 11th through 13th in Austin, Texas.

• 3:55Speaker 00

  Yeah, I would have come if I can, but I don't think I can make it work. Not just the travel time, which is brutal, of course, but also I have prior engagements around that time already. So unfortunately won't be able to make it, but the lineup looks killer. I mean, I saw this earlier today. The lineup looks great, guys, really, really great work you guys have done with that.

• 4:14David Hoffman?

  Yeah, and there's that's a without a bunch of EF members and some other topics as well coming on to the lineup. There is a link in the show notes if you want to get a ticket. If you are a bankless citizen, you get 30% off of the permissionless ticket, which basically pays for bankless citizenship. And so stay tuned, you can follow the permissionless Twitter account as more talks and things are scheduled. All right, let's get into the markets, Anthony. Like I said, it was a bullish week this week, so Bitcoin going up 15%. Look at that, we are at $30,005. Bitcoin started the week at $26,000, ending the week just above $30,000. 15%, it is not often that you get a 15% move in Bitcoin this week.

• 4:55David Hoffman?

  Ether, of course, also up, not as up as much, starting the week at 1750, went down to almost below 1620. But ended the week up 8.5%, currently at $1,900, 1893. And then, of course, that, what does that mean for the ratio? The ratio is down about 4%, down to 0.063, so kind of a big move downwards on the ratio. Anthony, what did you read on the markets this week? It's an exciting week for the markets.

• 5:21Speaker 00

  Yeah, it definitely is. I think it's pretty obvious why the markets moved over the past week for anyone who's been paying attention. But just to recap, a lot of noise is being made around Bitcoin ETFs again. Because BlackRock basically put in an application for a Bitcoin ETF. And for those of you who don't know, BlackRock is the largest asset manager in the world. They are not a small player. For them to do something like this is actually a big signal. And then a lot of other companies and money managers and stuff like that, they followed as well and have reapplied or applied for a Bitcoin ETF. So, and I mean, on top of that as well, there has been a string of news coming out about different TradFi institutions getting more involved with crypto. We recently had Powell, actually just yesterday, I believe, give this kind of speech.

• 6:06Speaker 00

  Or answer a few questions as part of some committee, basically saying that they need to kind of to pay attention to the stable coins, you know, stable coins should be regulated as money and that crypto is kind of here to stay as well. So just a lot of positive news from, I guess, like outside of crypto. But in saying all of that, I think that while it's been a bullish week, I think that tempering expectations is also something that people should be doing as well, because I think right now, this over the last week, what people are doing is they're speculating on future inflows of money, right? Like the existing money that's in crypto, the traders and everyone like that, they're basically saying, okay, well, this is a new narrative. This is something to latch on to. And there's potentially a lot of money coming in because maybe the ETF gets approved. Like for the for those who who don't know, there is no Bitcoin ETF

• 6:50Speaker 00

  and every other application that has ever been put in has been declined. There is a pseudo ETF known as GBTC, which is not an ETF. It is actually a pretty crappy product. It trades at discounts quite regularly. So it's not not something that that that people really want to buy. But but yeah, people are speculating on this one actually getting approved. So that's what you've seen so far. That's what you've seen this week. Now, whether this kind of continues, this price, a positive price action continues, I think is going to definitely rely on new money coming in. And if in absent that, I think it would it would just retrace because speculating that new money's going to come in can only get you so far, because if it doesn't actually materialize, you know, what you're speculating on, then it's just going to go back down. That's my kind of read. So I'm

• 7:33Speaker 00

  not like bullish or bearish, I guess. It's more of like a neutral stance and just to wait and see.

• 7:39David Hoffman?

  Yeah, I think that's I think that's a smart take to have. I'll add on additionally that, yes, there are traders that have rotated into Bitcoin. It's why the ratio is down. It's why Bitcoin dominance is up. On the news of BlackRock, the largest asset manager with over $10 billion of assets under management, has proposed a Bitcoin ETF. That is traders that have like that is not, there's no new money there. They have just proposed an ETF, along with everyone else that's also proposed and also gotten denied a Bitcoin ETF. And so I totally agree that this is traders making the Bitcoin price go up. Yeah, at this also at the same time, I think what is real is that it is Different when BlackRock does it. And also, they are doing it in spite of the worst regulatory environment that crypto has ever had.

• 8:24David Hoffman?

  And so, yes, you could say that like they are in speculation of future cash flows going into Bitcoin, so people are buying it now. But also, there's just like, the crypto has gotten absolutely fudged in the last three weeks, a month or so, with regulatory concerns. And so I think there is a take that the BlackRock ETF is a signal that, hey, those regulatory concerns were the bottom. The bottom of regulatory FUD. And so now that BlackRock is here and Charles Schwab and Fidelity are here entering the crypto space. People are perhaps thinking that this will be the end of regulatory FUD because now we have the trad players involved.

• 9:02Speaker 00

  Yeah, I think it's definitely a win change for sure. And I guess my comments were more maybe the short term kind of stuff, not definitely not long term. But it also means that the foundations are being laid for the next crypto bull market. And I believe strongly that there are foundations being laid everywhere right now, not just with TradFi coming in, but also in crypto foundations such as all the development in the Ethereum ecosystem. Obviously, we had staking withdrawals go live, which opened or de-risked staking for a lot of people. And we've seen inflows there, Layer 2, stuff like that. So all of this is just part of those foundations being laid. So long term, yes, it's incredibly bullish that this is happening. It's a win change. I did actually tweet the other day that I thought that the regulatory bottom was in.

• 9:44Speaker 00

  And I think that was before all this news came out, because it really did feel like the regulators overstepped, specifically the SEC, just overstepped their bounds here. And it doesn't matter, you know, how much support you think you have. If certain, I guess, players don't support you, then you are going to, you know, lose the support of the people that matter very, very quickly. So I think there's definitely a win change. And I'm actually trying to kind of figure out or speculating on, you know, who's the SEC going to go after next? Are they actually going to do any more high-profile lawsuits? Or are they going to pause now that these big players have basically shot their, you know, shot and basically put this signal out there saying, hey, you know, we actually think crypto is legit. We don't think this stuff should be, you know, killed in the US.

• 10:28Speaker 00

  And, you know, basically, you guys should stop. That's kind of my read on it.

• 10:32David Hoffman?

  Yeah, certainly, certainly. Really quickly, we have a $1.2 trillion market cap, which is up bigly. We almost fell below a trillion dollars last week, but this just shows what happens when Bitcoin puts a 15% week in the green there. And then also, like you said, Anthony, staking withdrawals went live, and so we've seen the post-withdraws meta emerge on Ethereum. 23 million Ether staked, seemingly up only, and interestingly also, Ethereum staked, the supply of ETH staked, is ready to flip ETH on crypto exchanges, which is just something you gotta love to see. Crypto exchanges losing in their ETH supply ownership percentage versus the beacon chain. So staking just really seems to be up only. Yeah, 23 million Ether staked. Any comments on this, Anthony?

• 11:18Speaker 00

  Yeah, I mean, it's definitely not something that surprised me, but what did surprise me was the speed of which it happened. I knew that that staking withdrawals was going to be bullish. I just didn't think that we would see this much ETH FOMO in, because it's just, I mean, the validator queue's been over 90,000 for a while now. It's like, okay, why didn't these people enter before? Well, the obvious reason was is because they felt it was risky, right? They felt it was risky to get in before withdrawals went live. And now that withdrawals are live, they're fine doing it now, right? Obviously, you know, the proof is in the numbers. And it's just been really amazing to see that. So yeah, just generally, great to see that the thesis played out that withdrawals was going to be bullish. And I believe that ETH staking is going to be up only for a while.

• 12:02Speaker 00

  It will obviously slow down and taper off. There's, I think there definitely is like a finite amount of ETH that can be staked outside of the total supply of ETH. And I think that, I don't think ETH's going to get to like 70 or 80% staked unless there's like an outside incentive such as Eigenlayer, for example, or restaking generally. If it's just vanilla ETH staking, yeah, I don't see it going like too high, because it's just the incentives aren't there for that. But yeah, generally, it's pretty bullish.

• 12:31David Hoffman?

  Yeah, we're looking at a chart here with two lines that are converging. One is the Ether on exchange and one is the Ether staked. And we are basically at that flipping point. I love the caption here. It's not the actual flipping.

• 12:43Speaker 00

  I think one, one kind of nuance to this chart that...

• 12:48Speaker 00

  I know this isn't probably something people want to hear, but a lot of the ETH stake goes through exchanges. So if they're staking it, it means it's not being counted as their exchange balance, but it's still theirs technically, right? Because they're staking it on behalf of their users. So I would like to see a more detailed chart breaking that out. Basically identifying which ETH was staked via a centralized exchange, you know, versus, but generally I think it's still fine. Because you have, I guess, like ETH being productive rather than just sitting, um, you know, and securing the network. So obviously there's, there's benefits. Uh, but yeah, I just, that's, that's a caveat and a nuance I thought I would, I would bring up.

• 13:23David Hoffman?

  Yes, yes, they're very, very important. Yeah, there should be a third line, which is ETH staked on exchanges. Uh, and if we could get that line to also trend downwards, that would be great. You brought up Eigenlayer, which I think this is, uh, important to bring up. Here is a graphic of just all of the different ETH stake derivatives. The staked ETH from Lido, RETH from Rocketpool and CB ETH from Coinbase being deposited into Eigenlayer after mainnet launch. Uh, and this happened in, this is an hourly timeframe. So this is a very short period of time while the, uh, until the caps were reached. The caps of 32,000 ETH, uh, 3,200 ETH, excuse me. Uh, and so like, not only do we have Ether staked on the beacon chain to watch, but now we have Ether staked on Eigenlayer to also watch.

• 14:06David Hoffman?

  All three of these, these things are capped. I think we covered this, uh, last, um, uh, last week or last week we had you on Anthony. But, uh, it's just fun to, to watch these, uh, Ether being staked across all of the different staking utility ecosystems. Any last comments on Eigenlayer before we move on?

• 14:22Speaker 00

  Uh, no, I mean, I didn't, uh, I wasn't surprised by this. I, I actually kind of woke up to both the announcement and the pools being filled. That's how, that's how fast it got filled up here. Uh, but yeah, it's going to be interesting to see which ones kind of fill up, uh, and, and succeed. Like in terms of market share, obviously it's going to probably reflect the market share of each of these LSTs themselves. But will it actually change the dynamics? Like, will there be more RETH minted, um, because the RETH cap, you know, won't be reached, uh, as fast as the STETH cap is? Because there's just more STETH out there. So I'm, I'm, that's what I'm watching, the dynamics there between the different LSTs. And how that drives the, I guess, dynamics of LST market share on the beacon chain itself.

• 15:04David Hoffman?

  All right, Bankless Nation, coming up next, TradFi enters crypto all at once. We're going to talk about each of the individual entrances into this crypto world, followed by the Polygon proof-of-stake chain set up to upgrade to a ZK for Lilium, and then, of course, the Zach XBT drama, the beloved crypto sleuth gets sued by a victim and crypto Twitter arises to his defense. And then we have goose season from Three Ours Capital. We're going to have to talk about the goose and a few other NFT things on Ethereum as well. But first, a moment to talk about these fantastic sponsors that make this show possible. Kraken Pro has easily become the best crypto trading platform in the industry, the place I use to check the charts and the crypto prices, even when I'm not looking to place a trade. On Kraken Pro, you'll have access to advanced charting tools, real-time market data, and lightning-fast trade execution, all inside their spiffy new modular interface.

• 15:49David Hoffman?

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• 16:34David Hoffman?

  The Mantle Treasury is one of the biggest DAO-owned treasuries, which is seeding an ecosystem of projects from all around the Web3 space for Mantle. Mantle already has sub-communities from around Web3 on-boarded, like Game7 for Web3 gaming, and Bybit for TVL and liquidity and on-ramps. So if you want to build on the Mantle network, Mantle is offering a grants program that provides milestone-based funding to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first DAO-led Layer 2 ecosystem, check out Mantle at mantle.xyz and follow them on Twitter at ZeroXMantle. All right, here's a tweet from Delphi Digital that I think sums this up pretty nicely. Over the past two weeks, BlackRock files a Bitcoin ETF, NASDAQ launches a crypto custody

• 17:15David Hoffman?

  service, Deutsche Bank seeks a crypto custody service, Soros's fund management says crypto's here to stay, and then Citadel, Fidelity, and Charles Schwab launch a crypto exchange, finishing up with the institutions are here. And so this has been the theme of the last two weeks, I'd say, starting with, of course, the BlackRock submission of the iShares paperwork for a spot Bitcoin ETF. This was a rumors like, oh, BlackRock is rumored to be close to be submitting for a Bitcoin ETF. And then about, I don't know, four to five hours later, it was confirmed that they did indeed submit a proposal to the SEC for an iShares Bitcoin trust. iShares is just their branding for BlackRock.

• 17:56David Hoffman?

  And so, BlackRock, the world's largest, it's either first or second after Vanguard, over $10 trillion, I might have said billion, trillion dollars in AUM. Interestingly enough, there's some stats I want to pull out. After the $10 trillion in AUM, BlackRock has received approval of 575 out of 576 ETF applications. They have only ever been denied their ETF applications once. So they've done, they've A, done this a few times before, in fact, 575 times, and they have gotten approval quite frequently, all except for once.

• 18:39David Hoffman?

  And so, this is using some crypto service providers, the custodian's going to be Coinbase, there is a Kraken subsidiary company that is providing the exchange data, and just everyone knows, BlackRock, plus Larry Fink, the CEO, has a lot of political power. And so, in combination with, like, finally, we're getting a spot Bitcoin ETF, not the futures ETF that no one really liked earlier, we also have the weight of BlackRock. And if you aren't familiar with BlackRock, if, in addition to all the context I just gave, BlackRock is the closest thing to the government while also not being the government. Like, they own half of the equities in the United States of America, like, it is part of the, it's an extension of the government itself.

• 19:24David Hoffman?

  It's kind of a cynical nihilistic take about the relationship between governments and public and private markets, but that's my take. Anthony, anything you want to add to this?

• 19:32Speaker 00

  Yeah, I think just on that note about the ETFs that they've approved or have had to approved and which ones have been denied, I actually looked up the one that got denied. So it was one in 2014, so quite a while ago now, and it was denied because apparently it was just a blind trust. So you'd buy it, but you wouldn't actually know what was in it. So you would be buying something you didn't know. So obviously, that's not something that you want to offer to retail customers especially. So that was denied there. And again, that goes to that kind of stuff we were saying before about the wind change. I don't think we brought it up before, but yeah, that point around the BlackRock seems to only file for ETFs when they know with like 99.9% certainty that it's going to get

• 20:13Speaker 00

  approved. It has people speculating, okay, well, there's a higher chance of this one getting approved, this Bitcoin ETF getting approved than not this time, right? It's not like it's a 1% chance, it's maybe over 50%. So that's what people are speculating on, I think.

• 20:29David Hoffman?

  I think that's right, yeah. And there's just a lot of speculation going on. So Frank Shapara says BlackRock, Fidelity, Citadel, they're all making big moves into crypto despite the Gensler crackdown. Tree of Alpha responds to this and says, you wrote despite instead of thanks to. And so the people with the conspiracy hat on, which I always love to put on, are saying like Gary Gensler and the SEC and the powers that be were just hammering the crypto native companies, right? The Winklevoss ETF denied, right? Like all of the other crypto native ETF proposals denied. And they're just, the claim, the conspiracy, is that they were just biding their time for some of the bigger players to come in. And it's just interesting that Fidelity, Citadel, BlackRock, all of these trad institutions

• 21:12David Hoffman?

  with trillions of dollars of AUM and strong political connections, all seem to come into crypto at once, right after the SEC and other regulators start hammering crypto native orgs. And so just the timing on this is curious. I don't, I think if I talked to somebody like Jake Shervinsky or somebody a little bit more measured, they would just say, yes, it's curious, but there's not really a there there. But I think everyone in crypto is like, yo, what the F is up with this timing? Do you have any thoughts on that, Anthony?

• 21:41Speaker 00

  Yeah, I mean, the the timing is what I think a lot of people are latching on to when it comes to putting their conspiracy hat on, right? But there is another lens you can view this from. You can basically view this as these tradfi institutions had their hands forced by the SEC. Because the SEC went after Coinbase, the biggest crypto company in the US. They went after a bunch of different tokens or had used those tokens as evidence against Coinbase. Obviously, they went after Binance, which isn't US, I mean, Binance US, but obviously, they're trying to extend that to Binance Global as well. So I think that maybe these tradfi institutions were already interested in getting into crypto. They just hadn't announced their plans yet.

• 22:21Speaker 00

  And then because the SEC went after Coinbase especially, they're like, OK, well, we need to send a signal back now that we're actually wanting to play in this arena. And the SEC needs to calm down with whatever they're trying to do.

• 22:34David Hoffman?

  Interesting. OK, so that's actually just like the pro crypto. It's like they were they were always ready to pull this trigger, but then they they decided to like, hey, let's publicly stand in support of crypto before Gary Gensler destroys the industry that we want to generate fees from.

• 22:48Speaker 00

  Yeah, pretty much. And like, I think not just Gensler, but all the high ranking Democrats that have been anti crypto. These companies probably like, well, it's time to put a stop to that, right? It's time to if we want to be involved here and make money from it, we can't have all these regulators and these politicians trying to kill crypto in the US. And that's why I said it's a wind change where it was like blowing in one direction. Now it seems to be blowing in the complete opposite direction.

• 23:11David Hoffman?

  Yeah, speaking of a wind change, here's a meme that I thought kind of sums this up. Larry Fink, the CEO of BlackRock, first initially said Bitcoin is an index of money laundering. And then the meme is, you know, first they ignore you, then they laugh at you, then they fight you, and then they create a spot Bitcoin ETF.

• 23:28Speaker 00

  Yeah, all these comments from like, yeah, Larry Fink and like Jamie Dimon and their change of tune over time. I think like a lot of times you can just chalk that up to. They've been around a long time. They've been around markets a long time. They're very experienced there. They've, you know, they've probably seen it all. And a lot of these things, these new things that come along end up failing, right? A lot of these new things people get excited about end up failing. So I think for them, crypto needed to, you know, exist for a long time and needed to become a much bigger asset class than it traditionally had been. I needed to affect maybe the political sphere as well and be conversational there. For these tradFi people, these CEOs, to actually be like, okay, well, this thing's here to stay. Let's focus on it, right?

• 24:13Speaker 00

  Because CEOs have a million things to think about and I doubt Jamie Dimon sitting there every day being like, oh, crypto. I'm going to go look into what's happening with Bitcoin mining. We're going to go look into what's happening with Ethereum L2s. No, they're not doing that, right? They've got their own things they need to focus on. They need to run the business, the existing business. And their innovation arms or whatever will look into it. That's why Jamie Dimon was saying these comments while JP Morgan was making. I believe they were making an Ethereum client or working on Ethereum client or something got to do with the EVM. So that's why I think these things happen. So yeah, I don't think that the CEOs really, you know, when they make those comments, they're not making it from a position of being super involved with crypto or being like a believer. They're more from the sidelines.

• 24:54David Hoffman?

  Sure. So yeah, certainly, certainly. And of course, this was not the only thing in the trad world about the crypto world. Fidelity, Charles Schwab and Citadel have launched a centralized exchange, a non-custodial centralized exchange titled EDX. I don't know what EDX stands for. What is with these acronym-based exchange? I don't know. Okay, so EDX is launching. It's a non-custodial exchange, non-custodial centralized exchange, which I think is interesting to the crypto world, but it actually is normal in the trad world. And so the EDX, the quote from the CEO Jamil Nazarali says, "EDX's official launch allows our outstanding team to bring the crypto the same values and standards of competition,

• 25:35David Hoffman?

  transparency, fairness and safety that investors in traditional assets expect and enjoy." And so, okay, so what's the big deal here? Rahm Alawalia, who we've had on the podcast before, "The non-custodial aspect of EDX refers to its settlement process. Unlike traditional crypto exchanges like Coinbase or Kraken that require customers to deposit assets into wallets." Controlled by the exchange, EDX just plans to use a third-party bank or custodians to hold customer assets. So you use a custodian, a custodian service, and this is how like the NASDAQ works, this is how TradFi works. There is a custodian or a bank, and then there's just like API access. And so the trading happens on paper by this brokerage, by this trading service, and then there's settlement after the fact. Whereas crypto

• 26:20David Hoffman?

  exchanges Coinbase, Kraken, Gemini, anyone where you submit your crypto assets and they are the custodian and then they also let you trade, those things are co-mingled. And the trad world likes these things separated. And so this is just following the old model of separation of exchange duties and custodian duties. And so this is being a hyper-compliant new form factor for an exchange. And so the website is edxmarkets.com, you can check it out. But you actually can't trade on there. It's not for you. It's not for retail investors. It's not like your Coinbase or your Kraken. It is meant to be like a software service

• 27:00David Hoffman?

  for trad custodians. And then trad custodians will allow you to trade. So I would imagine if you are a customer of Fidelity, which you have Bitcoin or Ether there, that trading of if you press the buy button or the sell button, or I don't know, the options button for Ether or Bitcoin, that information as an API gets routed to EDX, and then EDX does the trading, and then there's final settlement between the custodians later. And so this specifically is intended to avoid serving retail investors. Interestingly, Paradigm is an EDX investor, and also interestingly, they only offer four tokens: Bitcoin Ether,

• 27:44David Hoffman?

  fine, Litecoin, and Bitcoin Cash. Interesting. Nazarari, the CEO, says, "We have a limited set of tokens because until there's more regulatory clarity, we don't want to trade something that is potentially a security." So, hyper-compliance, fitting the old form factors of TradFi, meant to serve TradFi institutions, backed by Fidelity, Charles Schwab, Citadel. Interestingly, Nazarali, the CEO, was a former Citadel employee. Anthony, that's the summation of the details. What's your take here?

• 28:17Speaker 00

  Yeah, no, I think that's a great, uh, great summary of everything. Um, before I dive into my take, I just want to point out that the E on the logo there is the currency symbol for ether on E D X. I don't know if that's intentional or not, but that's pretty cool.

• 28:30David Hoffman?

  Pretty sure that's not intentional.

• 28:32Speaker 00

  No, probably not. Uh, so the assets that you, that you rolled off there, the ones that they're trading, right? Uh, you know, as you said, Bitcoin ether, no brainer. That's fine. But Litecoin and Bitcoin Cash, I mean,

• 28:43David Hoffman?

  It's like, what era is it?

• 28:45Speaker 00

  Yeah, yeah. This, so this is what's frustrating about the S C C not giving clarity to anything because it means that these platforms are very limited into what they can trade. And they literally will trade things that just are dead, right? That, that, that no one really cares about, right? That are, that are kind of old coins, dinosaur coins, or dino coins, as we call them in crypto. Um, and they could trade all these other stuff if, if there was clarity, because what they could do is that they could literally register with the S C C to trade securities. So even if these crypto assets were securities, they would still be able to trade them, but they can't do that because the S C C does not offer any way to actually do that. And, and, and contrary to what they've said around the, the Promethean thing, which in my eyes, the Promethean thing is like, uh,

• 29:31Speaker 00

  an S C C plant, to be honest. I, I, I think that whole thing is just absolutely wild. Um, but like, yeah, the, the E X, not even E D X can probably register with the S C C to trade crypto asset securities. Because there's just no guidance there. So it really does speak to the fact that the S C C, as I said, has overstepped completely and has just provided absolutely no guidance to anyone. Um, and I, I think that's super frustrating because it means that instead of actual crypto assets that people want to trade being on this platform, you have Litecoin and Bitcoin Cash, which like no one cares about. I mean, maybe some people do, but I think the majority don't, right?

• 30:04David Hoffman?

  Yeah, it also just sends a, a bad signal to investors. It puts Bitcoin Cash. And Litecoin, shoulder to shoulder with Bitcoin and ethers. Like, it's just the wrong signal. Like, let's not legitimize Bitcoin Cash when, like, it's more of a nuanced discussion, but really, there's just ever only going to be one Bitcoin. And very clearly BTC has won that fight and Bitcoin Cash has very clearly lost. And so I don't think there's, the investors who are clients of Charles Schwab are sufficiently informed about the dynamics of what a hard fork is and what like block space competition is. And so like, they're like, oh, Bitcoin Cash, it's cheaper, I'll buy it. Like, they're gonna fall for that. And so it's just like, it's a poor service, at least in my opinion.

• 30:49David Hoffman?

  And I will say like-

• 30:51Speaker 00

  I'm surprised I don't have Ethereum Classic on there.

• 30:52David Hoffman?

  Yeah.

• 30:53Speaker 00

  It's the cheaper Ethereum, right?

• 30:56David Hoffman?

  Right, yeah. And it's, so like, I know like neither you nor I are necessarily bullish on like Solana, at least in comparison to Ether. You and I lean towards the Ether camp, but I will be way more bullish on Solana than Litecoin or Bitcoin Cash. And I'm sure that's a sentiment that's shared by almost anyone that's gonna have an account with some of these Charles Schwab fidelity types. One more comment from Nazarri, the CEO of this new exchange, left a comment for CoinDesk. "Regulators like the different approach." This is talking about the separation of exchange function and the broker dealer function. "Investors want to trade through trusted intermediaries, and that is especially true post-FTX."

• 31:38David Hoffman?

  And so this is also just naturally a, it's going to service a demand for the more conservative, cautious trad investor who doesn't like any of these crypto-native companies, even the great ones like Kraken and Coinbase that we in the crypto world completely trust because they've been around. But still, like, to the trad investor, you put up Coinbase and you put up FTX and people are like, I can't tell the difference, just because they just aren't informed. Any last comments before we move on?

• 32:08Speaker 00

  No, I mean, I think that's right. And then these other financial institutions have been around for a very long time. But a- a- as well, they're also like registered and and regulated uh within the proper frameworks. And that's what crypto exchanges are trying to do in the US, but they just have no path towards that. But I would, I will say that Coinbase and Kraken, particularly Coinbase, is viewed very, very favorably by US tradFi kind of people. I mean, as you say, EDX is using Coinbase as a custodian. No, sorry, not EDX.

• 32:37David Hoffman?

  Yeah, that's not true.

• 32:38Speaker 00

  The ETF, the Black. They're using Coinbase as a custodian. And to use someone as a custodian is obviously a huge deal because they have all the assets, right? So you only want to be using companies that are completely legitimate, that you trust, and that have good practices around this. And I would say that Coinbase's custody practices are the best in the industry. I don't think they've ever actually had a hack at all or an exploit. Not to say they obviously won't. You can't ever say they won't. But that that test of time that they've been around for a very long time and through, you know, from the youngest days of crypto to today is a huge kind of deal for these these more tradFi kind of institutions.

• 33:16David Hoffman?

  Yeah, that's a funny point where if like trad investors are like, hmm, I'm not really sure about these crypto exchanges. I don't really know about Coinbase. I'm going to use BlackRock. And BlackRock's like, well, we're going to use Coinbase.

• 33:28Speaker 00

  Yeah, exactly.

• 33:30David Hoffman?

  All right. Okay, moving on to Polygon news, the other big news of the week. There is a proposal submitted by Polygon Labs to Polygon Governance titled Polygon 2.0 Polygon Proof of Stake to ZK Layer 2. Okay, so a proposal was published to move the Polygon Proof of Stake chain, the big one with all of the trading activity, the economic activity, to a ZK EVM Validium. So Polygon already has their ZK EVM, so this is a new chain. Well, it's the same chain, the Polygon Proof of Stake chain. They want to turn that into a ZK EVM Validium, which is a specific kind of ZK rollup. So this is a core part of their whole Polygon 2.0 vision, where they, everything ultimately just becomes a ZK Layer 2.

• 34:16David Hoffman?

  So the goal here is to upgrade the Polygon proof of stake chain, which is actually not not people will throw a flag at the calling it a roll up because it's technically a proof of stake sidechain. So this turns it closer to being an actual roll up and this proposal itself actually re-triggered the what is a true roll up conversation on crypto Twitter because a validityum is a roll up and there's but there's an asterisk asterisk there. So like we're going to get into some of that nuances, but first, just like what is the big difference? Higher security for users compared to the proof of stake chain. Again, the proof of stake polygon chain is a sidechain, turning it into a ZK validityum actually does

• 34:56David Hoffman?

  produce more final settlement on the Ethereum layer one itself. There's better interoperability because of the ZK part of this component to the rest of the Polygon 2.0 ecosystem. All the applications on Polygon should continue and fees should actually get much, much, much lower. And so, okay, what is a validityum? I'm going to briefly answer this and Anthony, you're going to help me help me define this. Validium is a lower cost, high through points throughput sibling of a ZK roll up. So the pros are that it fully inherits security of Ethereum, except for transaction data, which is kind of actually an important part. So publishing transaction data to Ethereum is expensive and it limits throughput.

• 35:38David Hoffman?

  So a validityum, it has similar security guarantees to a roll up, but the transaction data is made available off chain. So that'll be made available by proprietary Polygon solution. And so much, much lower fees than a true ZK roll up as ZK EVM like Scroll or ZK Sync Era. It doesn't, this doesn't consume Ethereum gas to store transaction data. So there's higher scalability. But the cons are there is an external dependency, the transaction data, the data availability for transactions is secured outside of Ethereum. So there is an extra dependency there. Anthony, what would you add to my limited definition of a ZK validityum?

• 36:18Speaker 00

  No, I think you covered it quite well there. There is obviously a lot to unpack here. So I will offer a bit of just extra kind of context around this. So Validium was a term that was, I think, coined by Starkware back a while ago, and it basically just describes a construction where the, as you mentioned, the transaction data is not stored on the same, I guess, like layer that the ZK proof is. So the ZK proof is, in this case, for the Polygon ZKVM Validium will be stored on Ethereum L1, and that's the cheap component, that is very cheap to store on Ethereum L1, whereas the transaction data, which is the expensive component, will be stored on the existing Polygon validators nodes. So their Polygon validator set consists of around 100 validators.

• 37:03Speaker 00

  And there's obviously staking with the Matic token. They've got a deposit system or a delegated proof of stake system. So those validators will be where the data is stored. Now, what this does is that it enables cheaper fees because storing the data with Polygon validators is cheaper than storing it with the Ethereum validators, just by the virtue of how each of these networks work here. But in saying that, there is no, in a typical Validium construction, there is no kind of limit to where you can store your data. So you can store your data on anywhere, basically. You could store it locally if it allows you to do that, right? You could store it on another L1 altogether, or you could store it on a data availability network itself,

• 37:47Speaker 00

  something like Celestia or a Veil, which actually spun out of Polygon, or potentially Eigenlayer data availability layers if those things get spun up. But it's all about the security guarantee, right? Because what is the actual practical implication here of not storing your data on Ethereum L1 but storing it elsewhere? Is what happens is that there could be a withholding of data. So let's just say, for example, that the Polygon validators all go offline, right? And the data's gone, like, not gone but inaccessible, right? You can't actually, so if you want to withdraw your funds from the ZKVM Validium, you wouldn't be able to do that because you don't have the data to allow for the cryptographic proof to basically say, well, you've got the proof, right? But you don't have the other

• 38:28Speaker 00

  Part of it, which is the data to say, hey, these, you know, this is my funds. This is the state of my account. Please give me my funds on wherever Ethereum L1, wherever else. Now that's the worst case scenario. They can't steal your funds. They can freeze your funds, but they cannot steal your funds because they do not have the proof that is tied to your, your address. Um, at least that's, that's my understanding of it. So that's the trade off basically where you do get more security than the Polygon POS chain. But uh, because the data is stored off chain, you still rely on those validators uh, in order to access your funds. So your funds would be frozen in, in that world now. Obviously that's not ideal, but that's the trade off for the cheaper fees.

• 39:06Speaker 00

  In saying all of that, post EIP 4844, which is proto dank sharding, which uh, it basically creates a new transaction type for uh, for rollups. If the costs are low enough for Polygon uh, for what they want to achieve for their ZKVM. What they could do is they could essentially just store the data on Ethereum and still get the same fees that they would by storing it uh, elsewhere. And that would make it a full roll up. So a full roll up needs its data and its uh, its transaction and its proof uh, stored on the same kind of uh, I guess like settlement layer such as Ethereum L1 here. And another thing that they could do as well is that with the Velidium construction, they can, as I mentioned before, allow users to store their data wherever they want.

• 39:49Speaker 00

  So if you store your data yourself, you, you pay for it yourself. Obviously, if you want to store your data on Ethereum L1, cool, do that, but you have to pay for it, right? And by doing that, you actually now have the same guarantees. You, you have the guarantees of a roll up on Ethereum. And if the, the Polygon validators go offline, it doesn't matter for you because your data is actually on Ethereum. So you would still be able to get your funds out. But you can store your data anywhere actually as well, which is, which is actually, I think a really cool uh, kind of um, construction type here is where you could have it default stored on the Polygon validators, then give the users the choice to store it wherever they want. Uh, but we'll have to see. I, I, I think that the, if um, Forty-eight, forty-four offers enough scalability for Polygon. I think that they could end up

• 40:31Speaker 00

  defaulting to Ethereum L1. And then maybe in times of like high congestion, they change over to the Polygon validators. So there are literally various different ways that this can be done, which is actually what's really cool about this. But yeah, that hopefully gives people extra context around this itself. But just the last thing I'll say, I know I'm going on a little bit here, but the last thing I'll say is that the reason why this is really bullish for Polygon is because the POS chain has a huge network effect, right? Yes, it's a sidechain. Yes, it's obviously less secure than Ethereum and everything. It's not a rollup or an L2, but it has a lot of activity, has a lot of apps, has a lot of users, has a lot of network effect. So converting this over to a ZK VM for Lilium inherits all of that and keeps all of that,

• 41:15Speaker 00

  and just gives it more security. And if it's a full ZK rollup, then you've literally just converted what is essentially a separate L1 into an L2 on Ethereum. And that right there, I think is a playbook for other L1s to potentially follow. Not to say the other L1s have as much activity as the POS chain, but at the same time, it shows that it can be done. It shows that it is possible, and it shows that it works. Because from my reading, this is actually easy to do. In the proposal, the Polygon said, this is actually not a difficult thing to do. We can actually do this with relative ease. And then everyone, and there's no need for users to do anything. It's like the merge on Ethereum. The merge was obviously not an easy feat, but it's like the merge where essentially it happens and the users don't feel anything,

• 42:00Speaker 00

  they just get the same experience. So yeah, overall, I think very bullish, even though obviously there's a lot of nuance to the construction itself. But I think that once you understand the nuances there, you have a better understanding of all of it.

• 42:13David Hoffman?

  God, I'm so glad I have you this week to explain this one. That was so helpful. You talked about the size of the Polygon rollup. Over $2 billion of assets, tens of thousands of dApps, and an average of 2.5 million transactions per day. That is in the current proof of stake Polygon chain. And so just to really drive this point home about like this ZK Vilidium.

• 42:36David Hoffman?

  K part of a ZK validityum. The ZK part is the cryptographic proof that prevents the operators of this rollup from stealing your assets. The tradeoff is that you do not have the same assurances of having your data, but at least they can't steal your assets. They can only prevent you from retrieving your assets. And so it's basically like what's left is a griefing attack is they can only prevent you from withdrawing. So there's no incentive for them to do anything else because they can't steal it from you. They can only prevent you from withdrawing. And so there's a much significantly reduced attack surface area down to the circumstances of just like when a griefing attack by a layer two operator or set of operators would be,

• 43:17David Hoffman?

  would be viable, which is just like, that's much less incentive to be malicious than if they were actually able to steal your funds. So the ZK part of the ZK validityum prevents them from actually being able to steal your funds. So what's left is just like, they can withhold it from you for, and be mean for some particular reason, but the reasons for doing that are much, much more reduced. And then on top of that, you also have the Matic staking as well, which I'm assuming if they do this, if anyone griefs or censors your withdraws, then they have Matic at stake, which can get slashed, which is an additional protection against this. All of this is correct, right, Anthony?

• 43:56Speaker 00

  I'm not sure. I don't actually know if Matic has, or the Polygon POS chain validators have slashing mechanism. And I'm not sure if that will be implemented as part of this move. I haven't, I don't actually know the details of what they have there. But generally, what you're talking about is the data availability kind of problem, right? Where the thing, this is, this is a huge problem in crypto generally. And the way Ethereum aims to solve it is by using some, some really fancy cryptography that is beyond my understanding, that is part of the dank sharding roadmap. But so with the, with where the data is stored, if it's stored with the POS chain validators. It, I don't know if all of them are going to store all of the data or how long they're going to store it for.

• 44:41Speaker 00

  Because they could say, okay, I'm going to keep it for thirty days and then discard it because it's too expensive for me to, you know, to keep it, right? Or a portion of them will only keep the data. So maybe only like thirty percent of them will keep the data and the other seventy percent won't. So if thirty percent of, if they withhold the data, it doesn't matter that the other seventy percent don't. They don't have the data to withhold in the first place. So there's been all this research and development over data availability guarantees and how to actually do it in a scalable way. Because storing data is expensive and serving it is expensive. Because it's all hardware at the end of the day, right? You're storing the data, it's literally gigabytes or megabyte, whatever, storage you store on a computer. It's the same concept, but then you also have to serve that and that costs money to do, right?

• 45:25Speaker 00

  You need to serve it off of a good connection. You need to be online so the data is available. It's like running any kind of a node or validator or anything like that. So from that lens, when you're talking about the cost of this, the cost is always borne by the people storing the data. And if it becomes economically inefficient for them to do that, they're either going to discard the data or they're just going to shut down their validators. So that's where the problem of data availability comes from and how do you ensure that the data is always available? Even if only a subset of validators have it. And that's where all the research that's going to dang sharding has come from, which uses all the very fancy cryptography. Which obviously is way beyond my knowledge there. I'm not a cryptographer. But yeah, I don't know exactly how Polygon is going to construct this and which validators are going to keep it for how long.

• 46:10Speaker 00

  But that's why I think that they should make it so that the Validium has that option to fall back to Ethereum L1, for example, if you want to, to pay there. Because, for example, big players who don't care about fees, they could use this chain and just post their data to L1 Ethereum. So they'll have no risk of their assets being frozen, right? Whereas smaller players, maybe they don't, it's not worth it to them to do that. So they can just have it stored somewhere else. So again, giving the users choice, I think is very important. But yeah, this is a huge design space when it comes to research around this.

• 46:41David Hoffman?

  Yeah, the last thing I want to pull out is that, interestingly, in this blog post, they talked about, like, Polygon talked about why this is a good thing. So they say, "Upgrading the Polygon proof-of-sake chain to a ZK Validium would offer very high scalability and very low fees. Yes, we know this. It would be a great fit for applications that have high transaction volume and require low transaction fees." For example, Web3 Gaming, Social, and Micro DeFi. Interestingly, that they added the word "micro" because you wouldn't want to do a million-dollar transaction with constrained settlement assurances. So even they are admitting that, like, hey, this is great for microtransactions, micro DeFi, but for large-scale DeFi services, you would want the full ZK EVM,

• 47:24David Hoffman?

  which Polygon also happens to have supplied to the market. Okay, wrapping up the Polygon conversation, thank you for helping me navigate through that one, Anthony. ZachXPT, a Twitter thread, says, "It's unfortunate that I have to write this thread, but I'm being sued by Maki Big Brother for an article I published in June 2022. Today, Maki filed the defamation lawsuit. The lawsuit is baseless and an attempt to chill free speech. I intend to fight back and defend free speech." For Bankless listeners who are not on crypto Twitter or not tapped into who ZachXPT is, he's a, I would call him a famous crypto sleuth. He has done a massive job, just like thankless job, just crawling through EtherScan,

• 48:08David Hoffman?

  tracing transactions, watching crypto influencers talk a big game about crypto assets while secretly selling them on the other side and then exposing them on crypto Twitter, and generating, like, massive threads of research. And so I definitely call him a beloved member of the crypto Twitter community, the broader crypto community. ZachXPT was actually the one that exposed, who was the...

• 48:33David Hoffman?

  Who is the Quadringa ex-founder that was also?

• 48:36Speaker 00

  Oh yeah, I don't remember the name. I don't remember the name, but yeah, that was the Canadian exchange.

• 48:41David Hoffman?

  Right, they're the part of the Wonderland Sifu, Zero X Sifu, yeah, part of the Wonderland Exchange was Zero X Sifu, who turned out to be this ex-scammer and Zach broke that story. And so he has just done a number of, number of just jobs, exposing fraud in the crypto space. And so he continues and says, "My understanding is that Maki is very wealthy. I am not. He is using his money to try and silence me. I'm asking for your help so that this doesn't happen and the truth survives." He also created a donation address to assist with legal costs. Basically, the story is that Zach accused Maki Big Brother, whose name is Jeff Huang, of launching over 10 failed pump and dumps in NFT projects, including treasury management services from Formosa Financial.

• 49:25David Hoffman?

  Formosa Financial co-founder George H. withdrew 22,000 Ether from the project's treasury wallet in June of 2018. And then this, all of this data, based on blockchain data, Zach XBT concluded that these were Maki's addresses. So Zach XBT blames Jeff Huang for draining of the funds as the ETH inflows of private round funds into the multi-sig before the two 11,000 Ether withdrawals were made by both Jeff and George in June 22nd, 2018. Basically, Zach traced a lot of fraud back to Maki Big Brother. And then Maki Big Brother has sued him for defamation. And so I will say, everyone gets their day in court. Maki Big Brother gets his day in court.

• 50:06David Hoffman?

  He is suing Zach because he would like to clear his name from the record and say that he is, this is, none of this has happened. What Zach XBT is not correct, what Zach is claiming is not correct. And so he would like to have his name cleared because Zach is wrong. And Zach, who published this article, is saying, "Hey, I, I am right. I also need help defending myself in court." And since Zach is so beloved by the broader crypto world, over a million dollars has been sent to the Zach XBT donation address. The last I checked, it was over a million dollars. And so crypto Twitter has absolutely risen to the occasion to defend Zach XBT

• 50:47David Hoffman?

  from Maki and kind of judged Maki is guilty, at least collectively, just because Zach's prowess in the crypto Twitter field is just so strong. Anthony, what's your, what's your summation of all these events and what's your take?

• 51:02Speaker 00

  I mean, I think you summarized it all very well there. You gave all the relevant background. I will say that I consider Zach, for those who don't know, to be like crypto's Batman. But he's not a billionaire, unfortunately. So he obviously had to set up this donation address. And obviously Crypto Twitter came out, or crypto people came out and donated to him and stood behind him. I am not going to, you know, obviously say that Maki Big Brother is guilty or not because I don't want to get sued. But the thing about this suit is that what happens is there's a period of discovery. And what that means is that everything's going to come out into the open about what Maki wants to actually defend against and what Zach has accused Maki of.

• 51:45Speaker 00

  Now, if Zach is right, and everything that he's accused Maki of is correct, then Maki is just opening himself up to lawsuits from other people that will now have all this evidence to go after him with. So I don't know if this lawsuit is actually going to continue for that long. Maybe he thought that Zach wouldn't be able to defend himself and Zach would just basically cave and apologize to Maki. Because Zach has actually issued a public apology before to Ran Nu... Nu... Nu? I don't know how to say his last name. Right. But he's pretty big in the crypto ecosystem. Yeah, yeah. So he has actually issued an apology before because I believe Crypto, Ra Man, or whatever his name is, was going to sue Zach.

• 52:25Speaker 00

  But this time around, Zach either wrongly or rightly feels he has a good enough defense and good enough kind of evidence here to defend himself against Maki. So maybe Maki miscalculated here. Maybe he will withdraw the suit. But yeah, it's great to see Crypto Twitter come out with huge support for Zach. And I think obviously if Zach needs more money, if he exhausts the existing funds, people are going to come out and help him with it anyway. Because he has done a lot of good work for crypto unveiling scammers and grifters at great personal risk. Because he's not really an Anon, right? People know who he is now. He started off Anon, but then he was traced down. And obviously you can't put that... Couple that back in the, in the bottle once it's out. So yeah, he does this at great

• 53:09Speaker 00

  personal risk, uh, and it's a thankless job, as you said, because yeah, okay, he's gotten some donations from people here and there, but the risk that he takes on is, is huge. I can't even, uh, overstate like how big the risk is because if he goes after the wrong person, um, you know, that is probably a scammer, but is a bit crazy. They could physically harm him, not just sue him, right? There could be physical kind of violence involved here for him or his family. So, so yeah, it's, it's great personal risk, but it's, it is a duty that needs to be done because there are so many scammers and grifters that just get away with things in crypto that we do need a Batman at the end of the day.

• 53:45David Hoffman?

  Yeah, a hundred percent. And, and if you've been following Zach's Twitter account, he has already published the death threats that he has gotten just from around the space. And so this is, this is not speculation, this is a reality. And I, I will say that even, even in the circumstance where Maki is correct and he, uh, was not doing the things that Zach believes that he was doing. I think the, still the public signaling from crypto Twitter of sending Zach over a million dollars to help pay for the suit is important because even if Zach gets this one wrong in that particular version of the universe, we still want Zach to do the stuffs he's doing because his track record is so strong. Uh, and so like, we still want Zach around. I think we want to support him. Uh, Bankless,

• 54:26David Hoffman?

  we sent him $25,000 just to help support him and kind of wrote a thread to, uh, talk about like why we were doing this. Um, and so like, yeah, even in the event that like Zach misses one or two every now and then, like on net, oh my gosh, he's such a valuable resource for, for the crypto world. Uh, so again, all of these links are in the show notes, uh, including the donation address for, for Zach XBT if you feel compelled, uh, to donate to Zach's defense. Uh, okay. All right. That was all of the big news of the week. Coming out next, we got the three arrows goose gets sold for how much? I will tell you. And then there's Nike's nftplatform.Swoosh continues to grow even though no one in crypto Twitter seems to care. MetaMask is going cross-chain. We'll talk about that and more, but first a moment to talk about these fantastic sponsors that

• 55:11David Hoffman?

  make this show possible. MetaMask has something new. Introducing MetaMask Portfolio. MetaMask Portfolio is the best way to view your crypto portfolio from a holistic level. See everything across all the chains all at once. In your portfolio, MetaMask will report the aggregate value of all the assets in your MetaMask wallets, and even the other wallets you import too. But MetaMask Portfolio isn't just a passive portfolio viewer. It is a place to do all of the money verbs that make DeFi so powerful. You can buy, swap, bridge, and stake your crypto assets. So not only is MetaMask the easiest place to see your wallets in aggregate, but it's also a powerful battle station for all of your DeFi moves. So go check out your MetaMask portfolio, because it's waiting for you to open it up. Check it out at portfolio.metaMask.io.

• 55:55David Hoffman?

  If you haven't experienced the superpowers that a smart contract wallet gives you, check out Ambire. Ambire works with all the EVM chains that are out there. The layer 2s like Arbitrum, Optimism, and Polygon, but also the non-Ethereum chains like Avalanche and Phantom. Because of the power of smart contract wallets, Ambire lets you pay for gas in stable coins, meaning you'll never have to spend your precious ETH again. The web app has numerous fiat on-ramps to make it easy to dump your fiat for crypto. And if you like self-custody but you still want training wheels, you can recover a lost Ambire wallet using an email and password, but without giving the Ambire team any control over your funds. Check it out at ambire.com for the web app experience. But also, the Ambire mobile wallet is coming soon for both

• 56:36David Hoffman?

  iOS and Android. And if you want to be a beta tester, you can sign up at ambire.com/app. And since you stayed to the very end of this ad read, you should know that Ambire is airdropping its wallet token to early users for simply just using the wallet. So, if you want to get started with Ambire, all the links that you need are in the show notes. Is it a bull market? Is it a bear market? Or is it a goose market? Because apparently... You like that one? Apparently it is a goose market because the goose, which is a ringer, one of the more famous art block collections that famously Three Arrows Capital's Starry Night Fund bought at the absolute top of the NFT market, has been sold for $5.4 million.

• 57:18David Hoffman?

  Sue and Kyle, Suzu and Kyle Davies, of course, purchased the goose, this ringer is known as the goose, in August 2021 for 1,800 ether, about $5.8 million. And so I think the value of the goose in ether terms has almost tripled. August 2021 ether was definitely around a high 3 to low $4,000. So $5.48 million when they bought it, sold just now for $5.4 million. It was estimated to sell for $2.223 million, so basically double the estimation. And it got, oh, it got sold to Punk6529, previous podcast guest and famous NFT bull. Anthony, what's your take on the story?

• 58:03Speaker 00

  Yeah, I mean, I don't follow the NFT space too closely, and I don't think I'm someone that gets it. I mean, I get collectibles, I get spending lots of money on things like this, but I don't know, it never really clicked for me. Like, I look at this and I don't really feel anything. It doesn't say anything to me. I mean, I see the goose, obviously, but it doesn't say anything to me. There's no kind of excitement for me about this. It's not something that I would even buy for like $10, right? Like, that's just, but that's just me, because I have other things that obviously I'll, you know, I spend money, my money on that that are important to me. But I think what this says is really that NFTs are here to stay, given, even though 99% of them are just trash, right, and were created

• 58:48Speaker 00

  for, for no reason, for money grabs, but the NFTs that survive and that continue to thrive and continue to hold their value, it's just going to really reflect the, the art market. And the art market has existed for, you know, thousands of years, and it's going to be a new cultural zeitgeist, I think, but it's going to take a while to play out. It's not something that's going to happen overnight. DC Investor talks about this a lot. He's big into NFTs. He talks a lot about how this is like a multi-decade thing. This is not something that's going to happen overnight. And the things that survive for that long... You know, that's the typical thing with art. If it retains its value and and stays in the cultural zeitgeist for decades, centuries, then it is incredibly important and incredibly valuable just because of that alone, let alone all the other reasons why.

• 59:33Speaker 00

  So I think that maybe ringers is that's right. Maybe in 10 years, this goose is selling for like $50 million. Who knows, right? So I think that people are obviously speculating on which ones are going to survive and which ones are going to thrive and be culturally relevant going forward. Uh, but yeah, me personally, I'm uh, it's not something, it's not something for me. It's not my, my jam.

• 59:52David Hoffman?

  Yeah, I I've, I agree with you. I've, I've never really felt compelled to, by the art blocks movement. I mean, I think they're cool, but they're, they're priced to interest a person that is just, you know, beyond me. But regardless, I will say that like a, a ringer, the ringer, this is now the ringer. There's the ringer collection. I think there's, it's like a 10,000 art block collection. There may be, it might be a different number, but it's like that. This is the ringer. And so like, there's definitely a premium because it's the goose. It actually looks like something. There's also a, a moose. I think DC investor owns the moose. But like, there's like art blocks or these like ringers that look like animals. And so they have a premium to them. But the goose

• 1:00:34David Hoffman?

  is famous because of Furo's capital. Like they bought it because it was the goose and then they got liquidated because they spent, you know, money at the top. But so like this has like a legacy to it, but having a ringer be bought at 5.4 million dollars in the middle of a bear market, I think absolutely cements art blocks and, and things like this as valuable. Like these things aren't going to zero. There's always going to be a market for these. And when the precedent is set that in a bear market, something will be bought for 5.4 million dollars.

• 1:01:05Speaker 00

  That, and that's the culture I was kind of talking about, right? That's the, the story, like the things that tell stories are usually things that are very valuable. Um, but you know, it it depends on what story you resonate with, uh, you know, what story resonates with a large crowd, stuff like that. So for for me, for me personally, you know, I put value in things that obviously I personally experienced and like trading cards, for example, that I collected as a kid, they're very valuable to me, or in-game items when I was playing uh uh online games, things like that. Those things more valuable to me. But other people who are into NFTs want to own the culturally culturally relevant pieces and the things with with interesting stories behind them. Then yeah, I I totally get why someone would go for something like the Goose here. Uh, but yeah, just it speaks to, I think, the different kind of

• 1:01:49Speaker 00

  very different subjectivity there is in the NFT kind of market.

• 1:01:53David Hoffman?

  Yeah, big agree. Yeah. Okay, so moving on into uh dot swoosh. We we covered this a little bit over a month ago, maybe five or six months ago or weeks ago. Uh, dot switch is Nike's NFT platform. I think it's a play off of dot ETH, but they have dot swoosh. Uh, so the headline here is that Fortnite and Nike have teamed up uh on NFT gated drops. And so users can link their Epic Games and Nike dot swish account to get achievement NFTs that grant them access to uh first access to future dot swoosh Air Max virtual collections. Uh, and so definitely going to categorize this thing in

• 1:02:31David Hoffman?

  NFTs and things that are meant for specific people who really care about Nike and that whole like sneaker side of the world. Um, but I think the interesting thing here is that Fortnite is now being plugged into the dot swoosh ecosystem. Uh, and so achievements in the Fortnite universe are tied to their dot swish profile, cannot be traded, sold or exchanged. Uh, and so this is just the dot swish platform growing. The dot swish platform has attracted a lot of users and these are all not anyone that you would find on crypto Twitter or inside of Discord or in your Telegrams or talking about the goose. These are completely adjacent communities that are, I'm assuming, enjoying their dot swoosh

• 1:03:15David Hoffman?

  virtual collection achievement uh experience. And the fact that this is like growing, this is Nike and Epic Games.

• 1:03:25David Hoffman?

  Are doing stuff with NFTs and NFT gated drops. They've created their own words that aren't NFTs that are just like more suitable to them. They're not using crypto transactions. You can buy these things with your credit card. But all of this is totally happening, happening in a very crypto native way. Anthony, do you know what chain this is on?

• 1:03:44Speaker 00

  I know nothing about this. I think this is like my peak boomer moment because I'm looking at this and I'm like, what's going on? I mean, obviously I know who Nike and Epic Games are. I know about Fortnite, but I look at this and I'm like, wow. Maybe 10 years ago, this would have been a thing that I looked at. But now I'm looking at it being like, I understand obviously why a lot of people are excited about this and why it appeals to a certain crowd. But yeah, I'm, I'm max boomer when it comes to this.

• 1:04:10David Hoffman?

  Well, that's the point, right? Like it doesn't have to be for us. We are allowed to have products on our chains that are meant for other people, non crypto people. But like,

• 1:04:20Speaker 00

  I think this might be on the Polygon POS chain.

• 1:04:22David Hoffman?

  This is on Polygon. This is on the Polygon POS chain. The fact that crypto people don't know that is hilarious. This is on the same chain that we do all of our DeFi things on.

• 1:04:33Speaker 00

  Yeah, yeah. I mean, it's bullish for adoption, that's for sure. And I've, I've long said that there's going to be a lot of things happening in crypto that I'm going to have no idea about. And I'm not going to really be following closely, but I'm going to bring in a lot of users.

• 1:04:47David Hoffman?

  Okay, moving on to back into the crypto native things. MetaMask has integrated Connectst network. And so here, what is Connectst? It's basically a cross rollup bridge. It's a bridging service between various rollups around the Ethereum ecosystem. So inside of MetaMask portfolio app and the MetaMask browser extension, users can now bridge. And so there's a bridge part of MetaMask. Connectst enables trust minimized. What does that mean? One that doesn't rely on external validators, so should be more secure. Trust minimized communication between chains and layer twos. So ETH mainnet, Polygon, oh, even BNB chain, Optimism and Arbitrum. And so the reasons why MetaMask chose Connectst, they cited reg, recent and regular audits

• 1:05:30David Hoffman?

  of the deployed code contract, battle tested with time and volume on multiple mainnets, high liquidity and reliability, robust handling of failure cases. So this is a pretty cool partnership. MetaMask, of course, is a sponsor of Bankless and also disclaimer, both Ryan and I, and I think also Anthony are all investors, angel investors into Connectst network. Anthony, what's your take here?

• 1:05:52Speaker 00

  So Connects, obviously, as you mentioned, is like cross-chain, cross L2 bridge. But I think what they want to do and want to evolve into and want to be more involved with is doing kind of like cross-chain native applications. So basically, the applications that are made or built with Connects that allow for native cross-chain things to happen. So not just the bridge between chains, but having apps that actually are deployed and kind of work on multiple chains and have that interoperability going on kind of between them. So it's cool to see MetaMask supporting it because it means that any apps that get built using Connects technology, any cross-chain apps that is powered by it, will also be available to MetaMask users. And MetaMask as a wallet has more users than I think any wallet in the ecosystem still

• 1:06:37Speaker 00

  by far. In the bull market, they reported, I think, 20 million monthly active users, which was pretty big. Yeah, yeah, right. So, but I think that's obviously come down a lot recently with the bear market, but at the same time, they have a huge market. So getting Connects integrated with that is obviously a huge win for Connects. And MetaMask already natively supports any EVM chain that you want to connect to, which is the majority of the ones that actually have anything happening on them. So yeah, it's a partnership that I think is really, really bullish.

• 1:07:07David Hoffman?

  Yeah, I remember during our episode with Olaf Karlsson-Wie from Polychain, a line he said that stood out to us was that it's all chains and bridges, as in like even bridges are also chains themselves, as in like they also have state and apps on them, which I thought was an interesting perspective. Maybe state's not correct, but the idea remains that just like, yo, bridges do very similar things to chains themselves. And so that is, I think, with the world that Connects is stepping into. Let's see. Do you have anything you want to say on that? Do you want me to move on?

• 1:07:43Speaker 00

  I mean, I just kind of like generally agree, but it's kind of remains to be seen how it's going to play out. I think that with the prevalence of all these new app-specific L2s, the cross-L2 cross-chain thing is going to become more prevalent. But it remains to be seen if people actually want to use cross-chain native apps, or they just want to use their apps on the different chains and the different app chains and just bridge between them.

• 1:08:08David Hoffman?

  Bankless Nation, coming up next, we got questions from the nation. We got some questions I pulled out specifically to be more relevant for Anthony here. So we're gonna, we're gonna go back and forth on these questions. Then we got some hot takes from crypto Twitter. And then, of course, we're gonna finish up with what David and Anthony are bullish on. So we're gonna get to all of those things and more. But first, a moment to talk about some of these fantastic sponsors that make this show possible. You know Uniswap. It's the world's largest decentralized exchange with over $1.4 trillion in trading volume. You know this because we talk about it endlessly on Bankless. It's Uniswap, but Uniswap is becoming so much more. Uniswap Labs just released the Uniswap Mobile Wallet for iOS, the newest, easiest way to trade tokens on the go. With the Uniswap Wallet, you can easily create or import a new wallet, buy crypto on any

• 1:08:51David Hoffman?

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• 1:09:32David Hoffman?

  With a recent addition of Arbitrum Nova, gaming and social dApps like Reddit are also now calling Arbitrum home. Both Arbitrum One and Nova leverage the security and decentralization of Ethereum and provide a builder experience that's intuitive, familiar, and fully EVM compatible. On Arbitrum, both builders and users will experience faster transaction speeds with significantly lower gas fees. With Arbitrum's recent migration to Arbitrum Nitro, it's also now 10 times faster than before. Visit arbitrum.io, where you can join the community, dive into the developer docs, bridge your assets, and start building your first app. With Arbitrum, experience Web 3 development the way it was meant to be: secure, fast, cheap, and friction-free. And we're back with questions from the nation.

• 1:10:15David Hoffman?

  This one coming in from glee man dot eth. Anthony, this one I've specifically picked out for you. What alt layer ones are most likely to pivot into being layer twos? This is a question I thought of while making sad trombone noses at my algo and adam bags. Anthony, what's your perspective here?

• 1:10:33Speaker 00

  So I have a lot of thoughts on this topic.

• 1:10:36David Hoffman?

  I know you do.

• 1:10:37Speaker 00

  Um, I, I will try not to rant on too much about it. I think just at a high level, a lot of these L ones, they have founders who are very egotistical. And because of that, they really want to make their L one be this thing, right? They want to grow this L one, they want to grow this ecosystem to be this big thing. They obviously want to grow it to be as big as something like Ethereum. And they have a lot of vested emotional interest in that happening. Now, if they were to pivot that L one to an Ethereum L two, what they're doing is admitting defeat. Right? And I think you always have to, to look at the human element here. Because this would be like someone who creates a company to compete with a big company. Right? And then they get acquired by said company.

• 1:11:21Speaker 00

  Even though they stayed it all along the way, they wanted to compete with that company. They wanted to kill that company. They wanted to be bigger than that company. And then in the end, they're just like, ah, oh, well, uh, we failed at that. Uh, we'll just get acquired or we'll kind of just pivot to, to being friendly with them or whatever it is. Right? So I think that that's a huge disincentive and a huge, uh, point against a lot of these alt L ones, uh, becoming L twos on Ethereum. Another point is that these old town ones, most of them don't have much activity to begin with. So them pivoting to becoming an L two is probably not going to help with that. Um, I, I, I, I think it would actually be worse for them because I think it would just show a signal that their weak, uh, their weak ecosystems and they need to actually become an L two on Ethereum to even have a chance of growing an ecosystem.

• 1:12:06Speaker 00

  And then they just have to compete with the existing L twos on Ethereum, which obviously have all the favor, have all the network effect, have a lot of, um, you know, goodwill within the community already there. And on top of that as well, they have their own native tokens where people believe that the value of these tokens, for better or worse, and this is not something I believe, but people believe this, that the value of these L one tokens comes from, obviously it's used as a staking token, but also it's used as a fee token. So would they pivot to being an L two and then still use that token to pay for fees? Or would they change to something like ETH? I think still using the token to pay for fees would hamper adoption because a lot of people don't want to buy those tokens just to interact with the chain. And they, and if they're coming in from ETH, they have, yeah, sorry, if they're coming from Ethereum, they have ETH.

• 1:12:50Speaker 00

  So you're gonna have to accept ETH to be used as fees. ETH is a better unit of account. It's much more liquid. It's a better money, right? So that's gonna be the asset that dominates your ecosystem. So what ends up happening to your token? Well, you now have to pivot that token to being something else. Maybe it's a governance token. Maybe it's a staking token for sequences to accrue value there. But in saying all that, I don't believe that most of a token's value comes from its uses like paying fees. I believe most of a token's value, especially when it gets to like ETH and BTC's level, comes from its moneyness and its store of value. Whereas a token can be equity-like, where it will accrue dividends, for example, from like fees being paid on the network and that fear of when you're going to token holders.

• 1:13:33Speaker 00

  But that's very different from the token accruing value because it is a fee token in of itself. So those are just some of the things. As I said, I don't want to go on too long about this, but those are just some of the things that I think may mean that pretty much like the vast majority of L1s will probably never become L2s themselves. But they may get forked. You know, there is already a project working on a Solana, a fork of Solana as an L2 on top of Ethereum. So maybe they get forked and turned into L2s by other people, but them actually pivoting themselves? Yeah, it remains to be seen. Maybe one or two do it. I'm not sure which ones those would be. I don't think it's, unfortunately, I don't think it's gonna be Cosmos because they have a pretty different ecosystem to other L1s where the Cosmos thing is like the Cosmos like hub, right?

• 1:14:18Speaker 00

  And then you've got these spokes around. So you would have to coordinate the spokes to also integrate with it. It just wouldn't really work. And Algorand, I mean, admittedly, I don't know that much about Algorand, but it doesn't strike me as one that would actually pivot to being an L2 either. So yeah, those are some of the reasons why I think for the vast majority, it's not gonna happen.

• 1:14:37David Hoffman?

  Yeah, I agree, I agree with most everything that you said. And I agree in some circumstances with everything that you said. And then there are other circumstances, which I think the opposite is a worthy case to consider. I do agree with you that the ego and primacy of some Layer 1s gets in the way of them becoming Layer 2s. I think if you can name the founder of a Layer 1 and you follow them on crypto Twitter and follow their tweets, that founder's not going to roll their thing into a Layer 2. Because there's like ego and audacity involved, right? Like Layer 1s want to be Layer 1s. They want to exist in of their own, right? So the major layer ones, the mayor players, right? The major alt layer ones. I don't think we would consider it. I don't think we'll see those rolling up into layer twos.

• 1:15:22David Hoffman?

  Because like, like what you're saying, it's admitting defeat. If you are a layer one, your asset is competing in the world of money, or at least trying to. And if you become a layer two, you are no longer competing in the world of money. Right? You, you are, yeah, you're waving the flag and saying like, hey, the Ethereum ecosystem, the Peloton of the Ethereum ecosystem is just going to outrace me. And I, and I totally understand that. Like a lot of layer, alt layer one founders, the valuations depend on that not being true. They aren't now on the other side of things. There are, there are layer one chains that don't have that demand to, or desire to be a layer one money. And they, and they are meant to do certain things that aren't necessarily be Ethereum killers, right? More, more like chain specific, more ecosystem, unique layer ones that like, again, the founders

• 1:16:07David Hoffman?

  aren't so egotistical. They are willing to work inside of a Peloton, perhaps going in. And what is a Peloton? A Peloton is like the line of bicyclists who are all in a line and they're all drafting off of each other. That's my kind of vision for the layer two ecosystem. And people that want to join the herd, join the ecosystem, I think, and might be compelled by all of the economic activity, they might be compelled to do that. And I don't want to only make it an egotistical thing, but also it's just like, it is, it is a tribal thing. And so if you are a crypto tribe and your tribe is centered around a layer one, that layer one pivoting, pivoting into a layer two is like against the social contract of that one ecosystem. Like they don't want to violate that social contract. That layer one tribe wants to be a layer one tribe.

• 1:16:51David Hoffman?

  And so making the choice to become a layer two is against kind of probably the will of the community. And also just like, go for it.

• 1:16:58Speaker 00

  Yeah. I was just on that point, the, the culture, right? And the reason why I bring up the egotistical founders is because if you have a founder that's egotistical, that's the culture that's set, right? That's the culture that the community adopts. That's, that's the tribalism that they adopt. And I think a good analogy here, just to show what, what we mean by, you know, the, how hard it would be for an L1 to pivot to an L2 as well. Is can you imagine, like, let's use the analogy of of different nation states in on on Earth, right? Could you imagine China becoming an ally with the US, right? And then the US effectively not owning China, but like China just admitting defeat to the US? Imagine the implications of that, right? And this is on, obviously, the extreme grand scale and grand side of things. But this is how to think about it, where you have your own culture,

• 1:17:42Speaker 00

  you have your own social contracts, you have your own ecosystem, your own community, your own tribe. And then you basically say, well, OK, we're not going to be our own thing anymore. We're going to get, you know, we're going to here. You know, and and and we've seen this play out in real life for for tens of thousands of years, but just by force, where countries invade other countries. They go there and they're like, OK, well, you you're not part of our country. But the integration is very hard because there's different cultures, right? And there's different, there's there's different people that have different belief systems and and different things like that. And that's why you've seen all the problems in in the world around multiculturalism, right? And I'm all for multiculturalism. I mean, I I live in Australia and we're very multicultural here. But a lot of problems stem from that because of that clashing of cultures,

• 1:18:25Speaker 00

  because of that clashing of belief systems and social contracts and and and culture over thousands of years. So when you take that as an analogy and apply it to crypto, it's the same thing. There are different communities, not at the same scale, of course, but different communities, belief systems. You know, the Solana, for example, the Solana ecosystem has a very different belief system about what blockchain should be to what Ethereum does. It's it's the polar opposite. Solana believes in the monolithic vision. Ethereum believes in the modular vision. You can't, you couldn't get Solana to integrate with Ethereum. Exactly, exactly. And and if you try to and you try to cross pollinate, it may work, but it's not going to work at scale, right? There may be some people that can get along with each other. But it's very different because you're going to have this tug of war going on constantly with the Solana community being like, no, you know, this is how it should be done.

• 1:19:10Speaker 00

  You know, this is the the monolithic approach. We believe in this approach. Then you have the Ethereum people being like, no, this is how it should be done. So keeping those things separate is much better than putting them together. And then progress being halted, basically. Because could you imagine the Ethereum governance process being weighed down by people who just don't align at all with Ethereum values and what Ethereum wants to be? So yeah, that's how I think about this thing. And this is like level 10 crypto stuff. Whenever we talk about this stuff, I always feel like I lose some people because it's such a an intricate thing and such a nuanced thing. But this is what powers blockchains at the end of the day. This is what forms strong chains. This is why Ethereum and Bitcoin, you know, given credit there are so strong because they have this. They have these strong social layers. They have these strong kind of things. Um, and these other ecosystems, they're always trying to grow.

• 1:19:55Speaker 00

  They're always trying to break out. They're always trying to form their own, but it's very hard, right? It is very hard and most will fail.

• 1:20:01David Hoffman?

  Yeah. So going back to the original question from Glee Man, what alt layer ones are most likely to pivot to being layer twos? Uh, I think the answer is there are some that are more likely than others. Um, there's the specifics, you know, impossible to tell. I will say that I have a meeting on my calendar with a layer one leader, call it, uh, that is interested in asking that question of like, what does it mean? And what does it take? And what are the pros and cons of pivoting to a layer two? Uh, so that conversation is not irrelevant. Like some layer ones are perhaps interested in joining the herd. Uh, and I will leave all of that alpha at that. All right, takes from crypto Twitter. Of course, we're going to start with Eric Wall. Uh, he says the switch of opinion from a layer two must be EVM compatible,

• 1:20:45David Hoffman?

  or it's DOA dead on arrival to actually a layer two that doesn't take this chance to get far away from the EVM is kind of missing an opportunity. Uh, this is a kind of a hard tweet to read, but he's saying that that take happened fast within me and no, with no notice. And I just woke up and felt, uh, one day felt different. So let me just like regurgitate, reiterate this take again. Uh, Eric Wall is saying that once upon a time, he thought that all layer twos must be EVM compatible or else it's just not going to work. And then he switched his opinion to actually a layer two does need to take the chance of getting away from the EVM. And if they don't, it's missing an opportunity and that he switched his opinions very hap, very, very fast, uh, with no notice. He just woke up and one day felt different.

• 1:21:27David Hoffman?

  So Anthony, again, we are in like level eight, nine or 10 of, of Twitter, crypto Twitter terminology and, and conversation. But what's your take here? The conversation of like, do layer twos, should they just be as EVM equivalent as possible? Or should they take a chance and be very, very different? And I'll just add one a little bit more kind of context. I would say things like StarkNet are a layer two on Ethereum that is extremely different and extremely specified and away from the EVM. Also, things like Aztec, a very different, very, very unique and separated from the EVM. And then you have Optimism, which is like maximally EVM equivalent. Arbitrum to Polygon, pretty similar. And so there are, there's a different strategy here. So what was your take on these two perspectives?

• 1:22:12Speaker 00

  So my take is actually Eric's next tweet where he said, the correct take is probably let's try both and let the market decide. This is what I have always said. I've always said that the EVM compatible stuff is fine. It is obviously, it obviously makes a lot of sense for teams to do this because the EVM has a very strong network effect and it's very easy to integrate with all of the existing infrastructure that exists, such as wallets and, and stuff like that. But at the same time, there is an opportunity with, with L2s to do non-EVM stuff because you do not need to follow the rules of the Ethereum Layer One protocol. You only need to follow those rules to post your proofs and data down to it. But anything else, you can do whatever you want, right? You can build whatever construction you want. And as you said, StarkNet is, is doing, Starkway is doing this with StarkNet.

• 1:22:58Speaker 00

  Aztec is doing this with their new privacy first rollup, which they've said and stated numerous times that they couldn't actually do what they wanted to do using the EVM. They have to build it from scratch. So I am all in favor of trying both and letting the market decide. And in saying that, I think the market so far has decided that the EVM stuff is very valuable, right? It's very valuable and not just within the L2 space, but within the L1 space as well. Because the alt L1s that actually had any kind of economic activity, most of them were EVM compatible, right? Like your Avalanche subchain that was even compatible, your Phantom, a few other things. I think Solana during the bull market at least was not EVM and had a bit of activity there for, for a little bit, but hasn't really kept that. But neither have any of the other L1s, to be fair.

• 1:23:43Speaker 00

  Whereas the L2 EVMs have gotten, you know, pretty much most of the activity. StarkNet's going, you know, it's going slower. Because it doesn't have that existing network effect, it needs to build it. And then obviously Aztec will will have that that same kind of issue there. But at the end of the day, we're still very early in the game. There's still millions and tens of millions, hundreds of millions of people to to onboard. So let's, you know, build these things. Let's see what people want to use, what what what they find to be most user friendly, what they find to be the most value. And let's not dictate things. And I'd be probably like a little bit bearish on L2s if it was just EVM stuff. I would I would kind of be like, oh, this is a missed opportunity here. We need to do more than that. Um, and you know, it's not just Starkware and um, and Aztec doing it either.

• 1:24:25Speaker 00

  It's Arbitrum actually doing it as well with their stylist thing where essentially you can uh, code up smart contracts in uh, non solidity languages. So basically any language that you want to use. So that's another part of it as well that plays into this, not limiting people to solidity, but letting them code their smart contracts in other languages. So yeah, I mean, as I said, let's let the market decide at the end of the day.

• 1:24:46David Hoffman?

  Yeah, and it's also not just completely a binary choice of being EVM equivalent or very, very differentiated. I think ZK Sync is mostly EVM compatible, but there are like differences that actually do separate it. And so it's nowhere near the specific specified end of the spectrum like Aztec or Starknet, but it's also not EVM equivalent like Arbitrum or Optimism. It's mostly EVM compatible, except for a few small nuances. And then the ZK Sync uh, gambit is that those small changes produced outside outsized benefits with what can they can do on their chain? Like account abstraction, for example, account abstraction, not EVM equivalent, immense benefits, right?

• 1:25:25David Hoffman?

  And so that's why uh, platforms like ZK Sync and and other ZK rollups uh, begin with account abstraction out of the gate because people have elected that that choice is just a smart choice. All right, next take, uh, this is from nixo.eth. Uh, and so this is retweeting a picture uh, coming from the ETH stake your subreddit. And the title of this uh, post on Reddit is had enough, exited my validator. And then continues and says, "Sorry, the APY is way too low. ETH continually declining in price and exchanges are being shut down or charging a fortune in fees. At this rate, crypto will be a back alley, a relic. I'd rather put the money into assets that appreciate and generate a decent return." We'd all love that. "When crypto is this difficult to use, it will never see wide adoption.

• 1:26:08David Hoffman?

  And regardless, the API is incredibly low for the effort and risk required. See ya." So validators exiting the service. And then Nexo retweets this picture and says, "This is healthy and working as intended. The Ethereum proof of stake consensus mechanism doesn't overpay for security like proof of work did. If there are more than enough validators, low yield encourages you to put your assets elsewhere. Validators are in service of Ethereum, not the other way around." Anthony, help me interpret this.

• 1:26:38Speaker 00

  Yeah, so I gave a pretty long kind of take on this on the refuel the other day, but I can kind of condense it down a little bit, just to give people the high level here. So firstly, the post that Nexo has shared, there's a lot going on in that post. It just seems like a very angry person. They're not just angry about ETH staking, they're angry about other things. And it's funny because I think this was posted like at the bottom before we pumped or something, or the local bottom before we pumped, so another funny thing. But generally, I guess the point here is that the issuance curve and the APR of ETH staking is variable, right? There's two sets of rewards. There's consensus layer rewards and there's execution layer rewards. They're both variable. More validators come online, less consensus layer rewards for everyone,

• 1:27:23Speaker 00

  and less execution layer rewards for everyone, assuming the same demand. Now, execution layer rewards are incredibly variable because they rely on tips and MEV revenue. So if gas is at 100 Gwei, you're going to be making a lot more as a validator than if gas is at 20 Gwei, right? But assuming same demand of 20 Gwei, then as more validators come online, that APR is going to drop as well because it needs to be spread out among those validators. So it remains to be seen at what point or what kind of, I guess, yield percentage people stop. Kind of crowding into ETH staking, like is it 3%, is it 4%, right? I think if you do like a backward looking APR over 30 days, it's still like 5.5%.

• 1:28:07Speaker 00

  Taking daily and weekly APR is kind of useless, even monthly is not great. So, you know, because it's a yearly thing, right? You're extrapolating out a yearly kind of APR based on just like a day, which I don't think is very, very accurate. Um, but it remains to be seen where people are going to, to stop kind of plowing into staking because it just doesn't become worth it. But that's the thing, if they leave, if people say, oh crap, the yield's so low, I'm going to leave. Well, okay, then it'll reach equilibrium where people will be like, well, okay, uh, I don't, I'm not going to leave because the yield's actually good now. Cause the yield goes up for everyone, assuming same execution layer rewards. Um, because the consensus layer rewards, uh, have to pay to less people and, and obviously the yield goes up for everyone. So it's a balancing act.

• 1:28:47Speaker 00

  It, it's designed to naturally reach an equilibrium based on supply and demand dynamics and based on obviously preferences. Where there is a bit of a wrench that gets thrown into this is the extra yield you can get on things like LSTs. So for example, people have been talking about Eigenlayer and saying that, okay, well, if the vanilla yield you're getting from the beacon chain is 1%, right? But then you re-stake an Eigenlayer and they're paying 4%, then your yield is like 5%, right? It remains to be seen if that yield is ETH denominated, but let's assume it is. Then you've gotten to 5%, but you're only getting 1% from the beacon chain. So that throws a wrench in things and that might be something to worry about later down the line when it comes to, to Ethereum's consensus. And this is actually the main concern people bring up around Eigenlayer.

• 1:29:32Speaker 00

  But generally it's a balancing act, as I said, it's, it's designed to reach an equilibrium.

• 1:29:36David Hoffman?

  All right, coming up, the last take of the week, this one's a short one. This is Chris Brunisky retweeting one of his own tweets and, uh, he goes, his initial tweet is, when it feels like it'll never end, it ends. And I'm pretty sure he's talking about the regulatory fud, which just felt like an onslaught for like almost a month straight. And then he retweets it and goes, and so it begins. I think Chris is just calling for a pivot in sentiment, which I definitely felt this week. Now it's only one week old, uh, maybe Gary Gensler's got another shoe to drop or something. Uh, but I think what Chris is really just saying here is, man, this storm felt really dark, but the night is darkest before the dawn. Uh, and all of a sudden you just need one or a few reasons to be bullish and all of a sudden it begins.

• 1:30:21David Hoffman?

  Any takes here?

• 1:30:23Speaker 00

  I mean, it's amazing how fast crypto sentiment changes just generally, right? And I think that because of the speed at which it can change, it catches a lot of people off guard. So I don't think that the sentiment change of the last week is going to lead us to a new kind of bull market anytime soon. I still think it's going to take a little while for us to get to a full blown crypto bull market from here. But at the same time, everyone's now like, okay, well, was that it for the regulatory stuff? Are we actually entering an era of positive outside or external crypto institutions and people being positive on crypto? That's a speculation right now. I think we might be, as I said, I did put out my own tweet where I said it felt like the regulatory FUD bottom was in because it felt like they overstepped. But it remains to be seen.

• 1:31:08Speaker 00

  I don't like taking short term things and extrapolating them out to the long term. I don't like looking at like one week's worth of data and saying, oh, okay. Well, that means the next year is going to be amazing because that's how you very quickly, especially in markets and investing, get yourself wrecked. So I cautiously optimistic, I see this, I'm okay, this is a positive change. This does feel like a win change, but let's see if it actually continues. Let's see if it's not just something that happened and that's going to be short lived. And then we just straight back to the, you know, what we were at before. Let's wait and see and then, and then, you know, we are, we'll see how it all plays out. But this is also in, when it comes to investing, this is where the maximum alpha comes from. If you can accurately predict the win change or the sentiment change and accurately predict the timing of it, you can make a lot of money because you place your bets at the right time.

• 1:31:53Speaker 00

  But most people don't do that. They wait for confirmation, just like I was saying, you know, you wait for confirmation. But at the point of confirmation, you might be buying an asset two or three times what it was at the point of a win change. So it's like the risk reward curve just gets, you know, better and better as you go up. But the, sorry, the, sorry, the risk gets lower and lower, the reward gets lower and lower as you get closer to the, you know, to confirming that win change rather than betting on it when the risk is still high, right?

• 1:32:22David Hoffman?

  All right, so closing out this weekly roll up. And once again, thank you so much for, for coming in and substitute teaching. Last question for you. Where do you bullish on?

• 1:32:31Speaker 00

  Like ETH, of course, obviously. Like, that's not even a question, but generally I am lately becoming very bullish on like just the app-specific L2s just because they're finally becoming a thing, right? We didn't talk about it, but Zora Chain launched, I think, today.

• 1:32:51David Hoffman?

  Oh, I didn't have that in the agenda. What's up with that? Well, we did an entire podcast with that with Jacob from Zora. So, sorry, yeah. News of the week, Zora launches an OP stack chain. Sorry for not including that in the weekly rollup.

• 1:33:03Speaker 00

  Yeah, yeah. So, so Zora Chain, AVO, which is an options chain built on OP stack, has been getting a lot of traction lately. So just these kind of app L2s, I'm getting more and more bullish on because they're actually getting traction, they're actually going live. So that, yeah, and, and I think that that's going to be a trend over the, over the next few months at least. But then the pendulum might swing back to generalized L2s once, once base launches, because that's obviously going to be a huge launch and going to bring in a ton of new people. So, yeah, that's, that's kind of what I'm bullish on. But, but what about you? What are you bullish on?

• 1:33:34David Hoffman?

  Oh, I, I love that you've learned that that's what you ask, Ken. You've done this enough times. I'm kind of back to the conversation we were just having, which is that sometimes bullish sentiment begets bullish sentiment, which is what you were saying, that sometimes the winds just change. And I remember going through the 2018 to 2020 bear market, thinking like, man, what is it going to take to get us out of this? We are so deep in this hole. And all of a sudden, crypto Twitter just woke up bullish one day. And I know you always tweet, woke up bullish. One day, the entire industry just decides to be bullish. Like, we're just done being bearish. And all of a sudden, the, the, I don't know, call it the bear-colored glasses turns into bull-colored glasses.

• 1:34:17David Hoffman?

  And you, you see that, like, okay, we, we dumped off of the SEC news, but then we just rallied after, rallied right after it, right? And so like, what is, how is news impacting markets? Like, well, we saw a 15% rise in Bitcoin in the last week or so. And so we have capacity to go up. And I think as soon as the winds change, as soon as bullish sentiment comes, we can look back at the last year of innovation, all of the progress of Layer 2s, including the Layer 2s that don't have tokens, you know, Koff, Zora Network, the brand new one. And we can look back at all the things that we've built and be like, I'm not taking crazy pills. All of that is really bullish. I would like to get exposure to

• 1:35:01David Hoffman?

  that before like before anyone else. And all of a sudden, like the desperation turns into hunger and like good hunger, right? Bullish hunger. And so I don't know if this is that, like you said, like no one really knows when the winds change. We could be back to being bearish next week. But I do think that the time is running out of there's like there I had, oh my gosh, and I know you had this too. I had so much bullish fatigue at the end of 2021. I was like, I'm just done being bullish. I'm just so tired of this. Like the we're talking about the next, like web three gaming Ponzi and NFT like I'm done. And I feel like we're I don't know if we're at that point now, but I'm kind of done being bearish. Like, right? Like, I'm fatigued of

• 1:35:44David Hoffman?

  being bearish. And I think that works both ways. And so what am I bullish on is I'm bullish on the sparks, the embers of bullish sentiment be getting further bullish sentiment. And so that's, that's what I'm bullish on.

• 1:35:57Speaker 00

  Yeah, I mean, I agree with all of that. I think that, yeah, I like that sentiment of being sick of the bull market, especially for us multi cyclists and being like, we want a break from this, you know, bear market would be welcomed, even though we kind of forget, I think, how painful bear markets. Yeah, we definitely forget how painful they are. But at the same time, they're a necessary thing. They're cleansing of the ecosystem. And just like the bear markets are necessary, so are the bull markets. So yeah, even if this wind change takes another 12 months to actually play out and to get us into a new bull market. If we look back on this in 12 months, and we can say, okay, well, that was when it changed. That's when the winds changed. That's when the sentiment changed. And that's what led to where we are today. Who knows? Maybe we will, maybe we weren't. I'm looking forward to it.

• 1:36:40David Hoffman?

  Yeah. And maybe one last piece of clarity on this, or just commentary. The winds changed very clearly during the last bear market when Compound released their governance token. It was the first utterance of governance token that we've ever had. And liquidity mining was a thing which created yield farming. And that was a very clear moment. It's like, yo, the winds have changed. There are things to be bullish on. It's also when the Nasha asset was issued, like, hey, we have a reason to issue tokens. And that was in Endogenous factor, whereas this BlackRock ETF and TradFi bullishness on crypto is more of an exogenous factor, I do think we need an exogenous factor to truly spark a bull market. Because what every single bull market that crypto has ever had has become, has come from

• 1:37:23David Hoffman?

  an appetite for tokens, an appetite for minting new assets. I don't know if we have that yet. I'm not sure about that.

• 1:37:31Speaker 00

  I don't think we have that yet, but I have been saying over the past few weeks, especially that I think that we could potentially be gearing up for a layer two summer in the next six to 12 months, where that brings that back cheap, you know, places for people to play with, tokens will be launched, base will go live, being a lot of new users. So yeah, I really do think that we could get a repeat of DeFi summer, if the timing's right. I think the timing will probably be right.

• 1:37:57David Hoffman?

  It just, maybe just a little bit more commentary and alpha here. I do know of at least two startups that definitely were planning on releasing a token last bull market, and then the bear market hit and they were like, we're going to sit on our hands and release our token later. So there is pent up airdrops that people are just waiting for bullish sentiment to reemerge so that they can release their airdrop. And so not only is there like, okay, we have, once we have a bullish catalyst, we have all these layer twos that can issue tokens, but there were other tokens that were going to be issued a couple of years ago that have not yet been issued because people were like, okay, the founders were like, the market's not right, we'll, we'll release it in a bull market. And so you, you know that there's some kindling

• 1:38:40David Hoffman?

  ready to light a fire when the sentiment, when bullish sentiment becomes bullish sentiment.

• 1:38:46Speaker 00

  Yeah, exactly.

• 1:38:48David Hoffman?

  Okay, Anthony Cizano, thank you so much for tapping in. Once again, of course, the Daily Gue is where you can get your daily dose of Anthony Cizano. 30 minutes every single day is where I get my news. It's where so many others in the Ethereum ecosystem get their news. You can go to YouTube and type in Daily Gue. I get it on my podcast. They finding the podcast feed for the Daily Gue is a little bit hard, so at me on Twitter, I can send it to you. Anthony, any last words about the Daily Gue before we sign off here?

• 1:39:14Speaker 00

  I think you covered it quite well. Yeah, if anyone wants to hear me rant about Ethereum every weekday for 30 minutes, then The Daily Gaze is where you will find me.

• 1:39:21David Hoffman?

  Yeah, and you'll also find him actually on the weekly roll-up twice in July, this time with Ryan, because I am taking my first ever vacation, ever, from Bankless.

• 1:39:31Speaker 00

  I think I need one of those. I need one of those.

• 1:39:34David Hoffman?

  Well, if we're talking about a bull market starting, like, I need to take a vacation before that starts, because I am not ready for that. Anyways, so more of Anthony coming. But if you can't wait for Anthony and RSA to have their first ever weekly roll-up debut, you can go to YouTube and type in The Daily Gaze. Risks and disclaimers, Bankless Nation, you know the deal. Crypto is risky, DeFi is risky. You can lose what you put in, but 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.