ROLLUP: Tornado Cash Fallout | Ethereum Merge Updates | $350m a16z Flow Buy | Sudoswap NFTs

3rd Week of August, 2022 ------ 📣 Chainlink | Register for SmartCon 2022 with promo code “BANKLESS” https://bankless.cc/smartcon ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: 🌱 LENS | ACCESS CODE: VITALIK https://bankless.cc/Lens 🚀 ROCKET POOL | ETH STAKING https://bankless.cc/RocketPool ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🦁 BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave 🌉 JUNO | BRIDGE FIAT TO LAYER 2 https://bankless.cc/Juno ⚡️ ZKSYNC | THE LAYER 2 SCALING ENDGAME https://bankless.cc/zkSync ----- Timestamps: 0:00 Intro 3:30 MARKETS 7:25 The Merge https://twitter.com/RyanSAdams/status/1559150913834684418 14:40 The S&P Price https://twitter.com/CanteringClark/status/1559164367903637506 16:10 Arthur Hayes Bullish https://cryptohayes.medium.com/eth-flexive-7e1921123f64 18:00 NEWS 19:00 Tornado Cash https://twitter.com/RyanSAdams/status/1558044593937170433 20:00 Arresting Developers! https://www.fiod.nl/arrest-of-suspected-developer-of-tornado-cash/ 22:12 Writing Code is a Crime? https://twitter.com/jchervinsky/status/1559534385128415235 24:35 Coin Center Legal Analysis https://twitter.com/jerrybrito/status/1559171083105976321 27:06 Historic Money Laundering https://twitter.com/avsa/status/1558076159102967810 31:18 Tornado Cash Backlash https://twitter.com/MicahZoltu/status/1558012733412753408 33:32 DeFi Backbone https://twitter.com/AntonioMJuliano/status/1558444605271597058 36:12 Censorship Resistance https://twitter.com/LefterisJP/status/1558944794658873344 36:47 Soft Fork Power https://twitter.com/ercwl/status/1559265708411965440 47:00 Eric Wall Takes https://twitter.com/ercwl/thread/1559678652308144129 50:24 BTC Maxi Twitter https://twitter.com/ercwl/status/1559265708411965440/retweets/with_comments 52:47 Press X to Slash https://twitter.com/brad_eth/status/1559355035623903233 56:00 Selkis Metal AF https://twitter.com/twobitidiot/status/1558849512780734472 58:00 Toxic Maximalism https://twitter.com/ercwl/status/1559692710822481923 59:22 Kevin O’Leary https://www.tronweekly.com/tornado-cash-take-down-was-crucial-kevin-oleary/ 1:01:00 What We Can Do https://twitter.com/JWVerret/status/1559470517941329920 1:03:07 Digital Bill of Rights https://twitter.com/RyanSAdams/status/1558481645040197632 1:04:52 Gitcoin September 7th https://twitter.com/RyanSAdams/status/1559565929163390979 1:06:07 Celsius Down $3 Billion https://twitter.com/blockworks_/status/1559290989688274944 1:06:37 Mashinsky Trading Strategy https://t.co/IkjtzHp8zl 1:07:27 3ac New Yorker https://nymag.com/intelligencer/article/three-arrows-capital-kyle-davies-su-zhu-crash.html 1:10:02 Genesis CEO Exits https://www.bloomberg.com/news/articles/2022-08-17/genesis-ceo-steps-down-as-crypto-broker-slashes-its-workforce 1:12:30 The Exact Merge Time https://twitter.com/vdWijden/status/1559232749210406917 1:14:20 Gnosis Safe Airdrop https://twitter.com/OlimpioCrypto/thread/1560284884156956677 1:16:55 OpenSea Stolen NFT Policy https://decrypt.co/107368/opensea-changes-stolen-nft-policy-following-user-outcry 1:19:05 Sudoswap Crushing It https://thedefiant.io/sudoswap-nft-amm 1:19:30 BendDAO Liquidation Risk https://twitter.com/cirrusnft/status/1559954449002401792 1:22:12 Mailchimp Crypto Crackdown https://decrypt.co/107099/intuit-owned-mailchimp-is-banning-crypto-content-creators 1:22:50 Taiwan IPFS https://decrypt.co/107293/taiwan-turns-to-ipfs-tech-to-thwart-cyberattacks-from-china 1:25:25 SEC Suing Dragonchain https://cointelegraph.com/news/2017-icos-aren-t-over-yet-sec-files-suit-against-dragonchain-and-its-founder 1:27:32 Canada Crackdown? https://twitter.com/TrustlessState/status/1560048202446999552 1:30:30 Inflation Reduction Act https://www.cnbc.com/2022/08/12/house-to-vote-on-inflation-reduction-act-tax-and-climate-bill.html 1:32:10 Galleon Portfolios https://blog.galleon.community/introducing-galleon-portfolios-narrative-based-indices-65c50be51c28 1:33:20 a16z $350m in Flow with Adam Neumann https://twitter.com/andrewrsorkin/status/1559148342013296641 1:35:30 Dragonfly Buys Metastable https://www.coindesk.com/business/2022/08/15/crypto-venture-capital-firm-dragonfly-buys-hedge-fund-report/ 1:36:00 Jobs https://pallet.xyz/list/bankless/jobs 1:38:00 Questions from the Nation https://twitter.com/BanklessHQ/status/1559934036352589825 1:38:45 Staking After the Merge https://twitter.com/mrymz_2/status/1559944361395101696 1:40:30 Post-Merge Narrative https://twitter.com/p3te_eth/status/1559947163832139777 1:42:00 TAKES 1:42:20 DYOR https://twitter.com/oooitscrime/status/1558846681747177476 1:44:25 Thanks OFAC! https://twitter.com/valkenburgh/status/1559544321489223682 1:46:15 What David’s Bullish On 1:47:04 What Ryan’s Bullish On 1:49:45 Meme of the Week https://twitter.com/null_eth/status/1557795334775926784 ----- Not financial or tax advice. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

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

• 0:00Ryan Sean Adams?

  Are they arresting developers now, David?

• 0:05Ryan Sean Adams?

  Hey, Bankless Nation. This is the third Friday of August. Hope you're doing well. It is time for the weekly roll-up. That's what we're about to do, David, every Friday, coming at you. You're in a different place. Are you going like mountain climbing or something this week?

• 0:18David Hoffman?

  No, not mountain climbing. I'm just gonna go climb a mountain, which is meaningfully different.

• 0:23Ryan Sean Adams?

  Oh, okay.

• 0:23David Hoffman?

  Me and the four alfalfa boys are right after this, we're about to go to the Olympics in Washington. So gonna go have a cabin weekend, and then we're gonna go to the High Divide Trail.

• 0:34Ryan Sean Adams?

  This is so, this is different. There's distinction between mountain climbing and climbing a mountain, which is like you're not using your hands. Is that the distinction?

• 0:43David Hoffman?

  We are just walking. We are just walking a lot.

• 0:46Ryan Sean Adams?

  I've been getting into the mountain climbing documentary scene. There's quite a, like Free Solo.

• 0:52David Hoffman?

  Inspirational stuff, right?

• 0:54Ryan Sean Adams?

  Alpinist?

• 0:54David Hoffman?

  Yeah, Donwall. Have you seen Donwall?

• 0:56Ryan Sean Adams?

  No, is that the next one?

• 0:57David Hoffman?

  Donwall is better than Free Solo.

• 0:59Ryan Sean Adams?

  All right. Does the guy die in the end, though?

• 1:01David Hoffman?

  No.

• 1:01Ryan Sean Adams?

  Because I can't do that.

• 1:02David Hoffman?

  No, he does not.

• 1:03Ryan Sean Adams?

  Can't do that again.

• 1:04David Hoffman?

  Well, in one of these three movies, he does, but not in the one I've just mentioned.

• 1:08Ryan Sean Adams?

  You're right. No spoilers, guys. Sometimes it happens. It's a dangerous freaking sport, which is why I'm glad you are climbing a mountain rather than mountain climbing, because this podcast would be pretty boring without my co-host, just me talking.

• 1:22David Hoffman?

  I have done ice, since we're on the topic, I have done ice climbing in the past, and let me tell you that's fun.

• 1:26Ryan Sean Adams?

  Yeah, I know, and that worried me.

• 1:28Ryan Sean Adams?

  But like with, like all strapped in, you're not like Free Solo.

• 1:31David Hoffman?

  Super strapped in. Absolutely. I am not a lunatic.

• 1:35Ryan Sean Adams?

  But still, you're edging, like, like ice climbing is not a tame sport. Anyway, okay, some adrenaline and crypto this week as well.

• 1:44David Hoffman?

  Certainly.

• 1:44Ryan Sean Adams?

  The tornado cash saga continues. Are they arresting developers now, David?

• 1:49David Hoffman?

  The answer is yes. There's an arrested developer.

• 1:52Ryan Sean Adams?

  Yeah, arrested. That's crazy. That's a big step up. And the question on the back of that is, is Ethereum really censorship resistant? We're going to get into that. What else we covering, David?

• 2:02David Hoffman?

  We're also covering the bad boys. Contagion topics are back. We got three arrows capital on the front page of the New York Magazine. So we're going to talk about that. Also, the Genesis CEO has stepped down and 20% of staff is being laid off as a result of the crypto contagion. And also more updates on Celsius. So bad boy season. And also coming in in the third hottest thing of the week. There's an exact date for the merge. We knew this last week.

• 2:29Ryan Sean Adams?

  Precise.

• 2:30David Hoffman?

  But somebody has got it down to the minute. So we're going to talk about that as well.

• 2:35Ryan Sean Adams?

  David, while we're talking about things, we should talk about our friends and sponsors at SmartCon. They wanted us to give the Bankless Nation a message, which is they are hosting a badass conference at the end of September, the 28th and 29th. Who's going to be attending SmartCon? What is this thing about?

• 2:51David Hoffman?

  SmartCon is Chainlink's annual conference. This is the first Chainlink SmartCon conference that is happening in real life. So there are some absolute chads in attendance. We've got Eric Schmidt, former CEO of Google, Sergey, of course, founder of Chainlink, Balaji, of course, we just had him on the show, SBF, we all know SBF Ed from Arbitrum, Stani from AVE, Kane from Synthetix. So that is coming to New York at the end of September. There is a link in the show notes if you want to take a peek and get a ticket. Also, if you do get a ticket, make sure to use the code BANKLIST to get a healthy discount on that ticket price.

• 3:26Ryan Sean Adams?

  A substantial discount. This is numbering in the hundreds of dollars.

• 3:31David Hoffman?

  Yeah.

• 3:32Ryan Sean Adams?

  So you definitely want to check that out. All right, David, let's check out some markets, man. What is Bitcoin telling us this week?

• 3:39David Hoffman?

  Bitcoin, slightly down, slightly down, down 4.7%. Started the week at 24,500, ending the week where we are today at 23,400.

• 3:50Ryan Sean Adams?

  Okay, slightly down on the week, no clear signal, above 20K. I'm not feeling good about Bitcoin unless it's above 30K. But how about ETH? What's that looking like?

• 4:00David Hoffman?

  Yeah, ETH, down 2.2% on the week, started the week at 1,900, currently clocking in at 1,860.

• 4:07Ryan Sean Adams?

  Are you surprised? I mean, we're going to get into all of the OFAC stuff, Arrested Developers, censorship stuff in a bit more detail. But are you surprised that this action didn't hit ETH even harder? Like price just kind of shrugged it off?

• 4:21David Hoffman?

  Yeah, I guess that is a good point that like all the tornado OFAC stuff was a big deal, is a big deal. And like it's been, it's gonna like now it's two weeks in a row that like crypto Twitter has been dominated by this like tornado cash OFAC conversation. Am I surprised that it didn't hit ETH harder? Um, maybe. I guess so. I guess in a different state of the market, I would have expected that to hit the price a little bit more. But like it goes back to, are we in a bear market? Are we in a bull market? Are we in a crab market? And like, one of the big indications, the like actual solid indications of what kind of market you're in is what do, what does news do to prices? And if bad news doesn't tank prices,

• 5:02David Hoffman?

  you're in a bull market. If good news makes prices go up, you're in a bull market.

• 5:07Ryan Sean Adams?

  I agree. And I do think back to the statement, I don't care if we say it every week on the roll up, that's fine. Sentiment follows price. Sentiment follows price. And so I think if prices on ETH were down like 15% on the week, there'd probably be a different narrative spun out. There's all OFAC, all censorship. That's why, that's why ETH is down on the week. So because it's flat, that really wasn't part of the narrative this week. And I do think it's maybe an indication that we are not in a bear market.

• 5:33David Hoffman?

  It's also worth considering that like these seven day price updates that we do every single roll up, like since we have what is basically one month on the screen, the seven days, it's just that red square that I'm moving my cursor around right here. The trajectory, the trend is clearly up. And so if we went for 14 days, it would be green. And so like the seven day, the inside, the seven day of just like just down 2.2%, it's actually in like a monthly long uptrend and it's still fitting there.

• 6:02Ryan Sean Adams?

  True, true. By the way, that's my cursor, David. That's not your cursor. They can't see your cursor.

• 6:07David Hoffman?

  Yes, they can. I'm the one who's recording my screen. You can't see my cursor. Yeah.

• 6:12Ryan Sean Adams?

  Oh, my God. I thought it was my cursor this entire time.

• 6:16David Hoffman?

  No, I do, I do capture your cursor. I also capture my cursor.

• 6:20Ryan Sean Adams?

  There's double cursors that people see on YouTube.

• 6:22David Hoffman?

  Yeah. And also mine's bigger. See, I just placed my cursor over your cursor and you can't, and your cursor's gone.

• 6:28Ryan Sean Adams?

  Unbelievable. All this time and now I find out. I guess I actually should have watched a roll up. To see that previously, or on Spotify, by the way.

• 6:37David Hoffman?

  Yeah.

• 6:37Ryan Sean Adams?

  On Spotify, you can catch that. Coinbase, sorry.

• 6:40David Hoffman?

  Coin market, coin market cap, yeah.

• 6:42Ryan Sean Adams?

  Yeah, what's the, what's the crypto market cap this week? We are, where?

• 6:47David Hoffman?

  We are slightly down on the week. We ended last week at 1.2 trillion. We are at 1.17, so down $30 billion. Basically noise, basically.

• 6:55Ryan Sean Adams?

  Above a trillion, okay. This is a metric we've been paying closer attention to, and it's gotten a lot more interesting in the last few months. That is the ETH Bitcoin ratio. What is that like on the week?

• 7:04David Hoffman?

  Yeah, it is up on the week. It is up 2.4%, almost breaching point 08. It broke point 08 earlier this week. Fell back down, but now we are at point 097957. So the ratio looking real good.

• 7:20Ryan Sean Adams?

  The trend on this has been up. We've got another graphic we'll show a little bit later when we, when we talk about it. But let's talk about the bullishness that is the merge. Because we can't not.

• 7:30David Hoffman?

  I'd love to, I'd love to talk about this.

• 7:32Ryan Sean Adams?

  David, we're like less than a month out, okay? It's like less than four months. It for a month from now, four weeks. Yes, let me not fund the merge. Four weeks from now, we will be in a post-merge world. And this is what that world will look like. Monetary issuance rates, if you compare fiat, the dollar, Ethereum, proof of work, gold and Bitcoin and proof of stake, Ethereum proof of stake. I'm going to read these numbers from you. And this is from a Bloomberg report, actually, where they're increasing their coverage of Ethereum. It's getting me pretty bullish. So if you look at the fiat issuance rate from the 1970s until now, it's been about 12.8%, 12.9%.

• 8:15Ryan Sean Adams?

  If you look at just the dollar, it's issued, this is different than inflation. This is issuance at 9.2%, okay? Per year, these are all annualized numbers.

• 8:25David Hoffman?

  Yeah.

• 8:26Ryan Sean Adams?

  Ethereum has been, under proof of work, 4.2%. All right, so already significantly less than fiat. But gold is even better than that. They only mine about 1.8% gold from the ground, new gold issuance, every single year since the 1970s. Silver, a little bit better than that, 1.4% Bitcoin, better still, of course, right now.

• 8:50David Hoffman?

  That that number that they are showing on screen is post 2024 happening. So they are jumping forward in future. So the current issuance rate is about 1.7%.

• 9:01Ryan Sean Adams?

  1. Yes, 1.6, 1.7.

• 9:03David Hoffman?

  Which makes Bitcoin on par with gold.

• 9:06Ryan Sean Adams?

  Basically, and that's currently now, if you want to project forward to the next happening, that'll be cut in half again. So it'll be 0.8%, 0.9%, something like this. But Ethereum, under proof of stake, coming in in four weeks from now at 0.18%. All right. And then if demand recovers.

• 9:26David Hoffman?

  Current fees, yeah.

• 9:27Ryan Sean Adams?

  Issuance, and then that's with current fees. And if demand recovers to the fees that we were generating during the bull market or over the past year or so, it will be deflationary at negative 0.43%. Pretty stunning numbers here, David.

• 9:43David Hoffman?

  Yeah, we've been talking on previous rollups of like, man, Brian, we might not be deflationary post merge. But then if you look at this graph right here and it's like, oh, we'll be point zero, we'll be 0.18% inflationary is like, oh, like.

• 9:57Ryan Sean Adams?

  Who cares?

• 9:58David Hoffman?

  The difference between 0.18% inflationary versus negative 0.43% is like actually relatively small. It's like still fundamentally bullish.

• 10:07Ryan Sean Adams?

  These scales for fiat and gold are like 50 year scales.

• 10:10David Hoffman?

  Right.

• 10:11Ryan Sean Adams?

  Right. We're going to be like, this is when you're a monetary asset, you have to look in 50 year scales. There's another number that was on this graphic that I want to get you weigh in, your weigh in on is if you actually look at Apple stock buyback. Okay, that's a deflationary asset too, at negative 3.7%. And so some people, when I posted this, they said, oh, actually, if you're saying Ether is a great store of value, you should actually be saying Apple is an even better store of value. And that's an interesting take, but the difference between Apple and Ether is Apple is not a monetary asset. All right. It's not used within the Apple economy. You can't pay anything with Apple dollars or Apple as a. Unit of exchange.

• 10:55David Hoffman?

  There is no reservation demand for Apple stock in financial like, well, actually, okay. So you could like, you could like stake, you could like collateralize your Apple stock if you're a billionaire and you can like make that deal with Goldman Sachs.

• 11:07Ryan Sean Adams?

  Slight amount, that's it.

• 11:07David Hoffman?

  Right. But like, other than that, like, it's not like inside of permissionlessly global networks that have DeFi applications that are also permissionlessly built, right?

• 11:16Ryan Sean Adams?

  And it never will be because it doesn't have the credible neutrality because Tim Cook and team can change the issuance policy at a whim, stop those buybacks, right? It doesn't have the credible neutrality, doesn't have the decentralization, is not used as a store of value, unit of exchange, and what's the other one? Medium of exchange and unit of account, it's not used as a money.

• 11:38David Hoffman?

  Right. And so like, but Ether actually gets like the best of both worlds. It gets the stock buyback mechanism of EIP 1559, which is the same mechanism that drove Apple stock to be like, quote unquote, deflationary. So it gets that, but it also gets the reservation demand of being like collateral money inside of DeFi. It gets to have both.

• 11:57Ryan Sean Adams?

  Yeah, I, I agree. Compare it to equities, compare it to monetary instruments. You kind of have to compare it to both and in both it's pretty favorable. I've got to say, we are bullish on ETH and so are you, David. Here's a tweet from you.

• 12:09David Hoffman?

  Yeah. So here, here's a nice metaphor that I was cooking up. And I say, think of the merge as a current, like an ocean current or like a river current. Swimming against the current, which is equivalent to swimming against proof of work issuance is hard. If you are a swimmer and you are swimming upstream, you are swimming and you're probably not going very far. You're getting, you're becoming a really good swimmer, but because you are have to swim against the current, which is swimming against the structural cell pressure of proof of work miners, you're swimming against the current, like you're, you're a strong swimmer, but you're not going anywhere. And so I'd say Bitcoin and Ether have become strong swimmers in order to sustain their current prices. They're swimming against the current, they're developing their muscles, but they're not really going very far.

• 12:54David Hoffman?

  They're not moving, but the merge kills the current because it kills the structural cell pressure of all of the proof of work miners. And so as Ether has become this like jacked swimmer, swimming upstream, all of a sudden, this, the, the stream doesn't, stops being upstream and it actually starts being downstream. And so Ether goes from swimming against the current to swimming with the current. And so I continue in the tweet thread.

• 13:21David Hoffman?

  That I say like when Ethereum's network activity increases, EIP 1559 actually increases the speed of the current that is pushing Ether forward. And so like the speed of water that the swimmer is swimming in increases or decreases as a function of gas fees, as a function of EIP burning. And so the more network activity, the faster the current is that's pushing Ether forward after Ether's already developed all of these jacked muscles swimming really fast. And so like, that's like, that's like the metaphor of the merge and Ether like supply economics.

• 13:52Ryan Sean Adams?

  What I love about David Hoffman metaphors is you could just close your eyes and just visualize them. So if that didn't stick with you the first time, close your eyes, rewind this, rewind this podcast and listen to that again.

• 14:03David Hoffman?

  Merge ASMR.

• 14:05Ryan Sean Adams?

  That's what's happening. And the question I think is, is the merge priced in or not? We had an excellent episode with Hal Press, who's I think the best writer, the best thinker on this, the best investor on this. He literally bet his fund on the merge trade. He wrote a fantastic post in the Bankless Newsletter that you should absolutely read. It's fairly long, but it is incredibly detailed. Send this to somebody with a tie, financial analysts as well. They'll enjoy this. And we did an episode with him earlier in the week that you can catch on the feed. But David, we've got to get the contrary take a little bit. Okay? And the contrary take to all of this bullishness is, hey, ETH bulls, crypto bulls. Here's a tweet from Clark. You weren't playing any ETH merge.

• 14:49Ryan Sean Adams?

  You were telling yourself a comfortable story while you longed the S and P. I think he is showing a correlation between Ethereum maybe and the S and P price on this chart. I'm not sure if that's what we're looking at.

• 15:02David Hoffman?

  That's what's going on.

• 15:03Ryan Sean Adams?

  Yeah, that's what's going on here. So basically the tweeter is saying, hey, ETH bulls, like you're getting so excited, but look, NASDAQ's up. And we all know risk on assets do really well when NASDAQ's up. And that's what you're actually trading. Cut, cut out the ETH merge BS. This is actually just the NASDAQ and S and P stocks are up, so ETH goes up in, you know, higher beta form.

• 15:25David Hoffman?

  And they're probably right to some degree and you know, perhaps ease a decent a decent degree, like maybe it's actually greater than 50% of the effect. But we know with complete certainty, at least I'm completely certain that it's not the full story. And we know that that is true because of the ETH BTC ratio has rocketed off the floor, going from where it was at like 0.05 to where it is now at 0.08. And so did Bitcoin follow the S and P 500? Perhaps yes. Did Ether follow the S and P 500? Perhaps yes. But Ether was like a 2X multiplier on what Bitcoin did. And so like, only one of these things followed the S and P, and one of these things followed the S and P even more. And Ether did it even more. And my

• 16:08David Hoffman?

  argument is like, that's clearly because of the S and P, or because of the merge.

• 16:12Ryan Sean Adams?

  I agree. So we're looking at an ETH Bitcoin chart, and this is actually from an Arthur Hayes article, basically talking about how bullish he is on ETH, the asset and the merge and the trades. We'll include a link to that in the show notes. He just published that this week. It's great, great article as well. And he's showing like, this is ETH Bitcoin ratio, and you could see that line of the merge probability increasing, and ETH is just gaining strength on Bitcoin. But also, interestingly enough, David, alt layer ones are not doing the same thing Ether is. Okay, they are still not up relative to Ether. So that's another, you might say, well, of course ETH is up relative to Bitcoin, because it's more, you know, risk off,

• 16:54Ryan Sean Adams?

  or risk on, excuse me. But alt layer ones have not appreciated relative to Ether. So I think this really goes to the fact that people are pricing in the merge. That's kind of what we're seeing in the ETH price right now. At least, all the evidence points towards that. David, we've got a lot more to talk about. What are we, what are we going to cover next?

• 17:13David Hoffman?

  Coming up next. Are they arresting crypto developers? And is that the future of crypto? Because there's already one in jail. So we're going to talk about that arrest and why that happened and our speculation around that. And leading to the broader question, is Ethereum really censorship resistant? Like, I'm pretty sure, Ryan, there's a bunch of listeners that don't pay attention to crypto Twitter. So like, they kind of get it through this. So we're going to speedrun them through the seven day conversation that was the Ethereum community on crypto Twitter about its relationship with censorship. Because a lot happened on that conversation in the last seven days. So we're going to, we're going to give that conversation to listeners. And also, of course, bad boys, bad boys, what you gonna do?

• 17:55David Hoffman?

  Three Hours Capital is on the cover of New York Magazine, not in a good way. Alex Matshinsky took over trading of Celsius in the last days and really drove that thing into the ground in a grand fashion. And of course, the Genesis CEO steps down and lays off 20% of employees with it. So all of this spicy, spicy stuff and more, coming right after we get through some of these fantastic sponsors that make the show possible. Lens Protocol is an open source tech stack for building decentralized social media applications. It is the new era for social media. We all have toxic relationships with our Web 2 apps. We want to break up with them, but we can't. These applications own our digital lives and all the relationships that we've made. We need to break through to a new paradigm of social networking applications that we control, rather than them controlling us. Lens isn't a social media app.

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• 19:22David Hoffman?

  while DeFi protocols continue to see increased liquidity and usage. You can now bridge straight into Arbitrum for more than 10 different exchanges, including Finance, FTX, Huobi, and Crypto.com. Once on Arbitrum, you'll enjoy fast transactions with cheap fees, allowing you to explore new frontiers of the crypto universe. New to Arbitrum, for a limited time, you can get Arbitrum NFTs designed by the famous artists Ratwell and Sugoi for joining the Arbitrum Odyssey. The Odyssey is an eight-week-long event, where you can play on-chain activities and receive a free NFT as a reward. Find out more by visiting the Discord at discord.gg/Arbitrum. You can also bridge your assets to Arbitrum at bridge.arbitrum.io and access all of Arbitrum's apps at portal.arbitrum-one in order to experience DeFi and NFTs the way it was always meant to be:

• 20:05David Hoffman?

  fast, cheap, secure, and fiction-free. Arrest of Suspected Developer of Tornado Cash. Uh, no longer suspected. We do know that this is actually the Tornado Cash developer, and this is F I O D dot N L, the website, which is a Netherlands website as to where, because that's where this individual, this developer, was arrested, in Amsterdam. So on Wednesday, August 10th, the F I O D arrested a 29-year-old man in Amsterdam who was suspected of involvement in concealing criminal financial flows and facilitating money laundering through the mixing cryptocurrencies through the decentralized Ethereum mixing service Tornado Cash. F I O D is the Netherlands investigation of financial services and financial crime organization, and they arrested a Tornado Cash developer.

• 20:48David Hoffman?

  Now, uh, it's one thing to arrest open-source developers. Uh, that would be egregious. Uh, we're not totally sure if that's what happened. And so there's speculation out there that not only was this, uh, this person happened to be a Tornado Cash developer, but they were actually perhaps also assisting and like aiding people in laundering money. Um, but we don't actually know, because F I O D released a statement that basically didn't give us any clarity. Ryan, what's your take on this?

• 21:19Ryan Sean Adams?

  Well, my take on this is, you know, first of all, it seems very much like possibly they didn't have another reason for arresting this Tornado Cash developer rather than publishing the code. As David, you said, "We're not certain of that." Uh, that is kind of the base case assumption. And if that's the case, a man was arrested for writing code that served as a public good for people to maintain their privacy online. That means they put a man in jail because people use his open source code. And I don't think, David, that can stand in any free society on earth. As you said, we still don't know if there are other reasons that this arrest was made. But I believe on the 16th, Fayed provided some sort of statement on this,

• 22:03Ryan Sean Adams?

  but it wasn't really clear. This is Jake Chervinsky saying, "They refuse to say what charges are alleged, if any, so we still don't know if they think writing code is a crime." Does Fayed think writing code is a crime?

• 22:18David Hoffman?

  Two outcomes I see here is that there is an ongoing investigation that they don't want to show their cards for. And this is me like trying to retain my grip of bullishness on humanity. As in, like, there's a really good reason. I'm trying here. Is that like there's this guy like aided and embedded like money laundering of criminals and actually committed crimes versus they didn't say anything because they know that like they just arrested this guy for building tornado cash, which is the outcome I do not want.

• 22:45Ryan Sean Adams?

  So it's possible that the first outcome, the still be bullish on humanity outcome is still out there, right? And so we need to remain open to that possibility. But I will say a few other things happened concurrent with this, which is they deactivated the tornado cash Discord.

• 23:03David Hoffman?

  Right.

• 23:04Ryan Sean Adams?

  Okay. They killed the GitHub repos of all devs. And these were centralized companies doing this. So you could argue this is kind of a chilling effect, but still the chilling effect is an effect, isn't it?

• 23:15David Hoffman?

  Right.

• 23:15Ryan Sean Adams?

  It's legally a legally defined term, as you explained last week on the tornado cash episode. And then this is the backdrop where OFAC actually banned not individuals, but they banned some smart contract code. So what does the weight of evidence point us towards for this arrest? It's very possible that they made an arrest of an open source developer who just published some open source code. Bad guys used it, and that's why they want to send him to prison. And if so, that is a big, big problem, I think. Not for, we'll get to these takes later. Not necessarily for Ethereum, not necessarily for crypto, though it is a Problem for for the technology, more problem for the the countries and the citizens

• 23:58Ryan Sean Adams?

  that live in those countries who are restricting their First Amendment freedoms. First Amendment, of course, is a, I guess that's a US only term, but like freedom of speech, freedom to write and publish code. Some of these things are very important in any free democratic society, and these are the things that are in threat of being breached right now.

• 24:17David Hoffman?

  And without evidence that these FID arrested this developer because they actually committed explicit and real crimes, then I think as a community, we have to assume that the man is innocent and didn't do anything. Until they tell us, then in my mind, this guy just got arrested for writing code.

• 24:35Ryan Sean Adams?

  So what are the legal experts telling us at Coin Center? This is a crypto lobby group that investigates this and yeah, has lawyers on staff. What are they saying, David?

• 24:43David Hoffman?

  Yeah, so Coin Center released a very thorough and detailed statement analysis, legal analysis of the OFAC ruling of tornado cash being on the SDN list. So here, here's basically some excerpts from it that I think are important. They write, "If the tornado cash application is not property in which some foreign country or national has an interest, then the tornado cash application cannot properly be added to the SDN list or blocked under the specific powers granted by Congress to the president in the IEEPA." IEEPA is what gives OFAC power. Something should be, someone should be able to challenge the designation as being made outside the bounds of the statute and therefore invalid." Basically saying OFAC, Coin Center saying like, "Someone should be able to challenge this."

• 25:28David Hoffman?

  There's like strong legal grounds for somebody challenging this. And Coin Center basically lays out the two big claims as to why somebody could challenge this. So claim one, "OFAC's designation of certain autonomous contract addresses denies Americans their liberty and property without proper procedural due process." Yes, covered this. And claim two, "An overbroad interpretation of the IEEPA substantially chills First Amendment protected speech." So those are the the main core claims that Coin Center believes that there are legal precedents, there's legal ground for someone to take Coin Center to.

• 26:02David Hoffman?

  Or excuse me, for someone to take OFAC to court. And CoinCensor is not the only organization focused on freedom to release a statement like this. The EFF, the Electronic Frontier Foundation, which is an organization just dedicated to promoting, they're protecting the frontier, basically. And they put out a tweet that says, "The EFF is deeply concerned that the US Treasury Department has included an open source computer project, Tornado Cash, on its list of sanctioned individuals. Tornado Cash is an open source software project and website that publishes a decentralized cryptocurrency mixer." And then they go on in their tweet thread and also release an article backing this. And so now we have our lobby groups, our protection, our like, our frontier protecting agencies, putting up a flag and say, "Yo, OFAC, no, back off."

• 26:47Ryan Sean Adams?

  Yeah, and I, so important to note that OFAC didn't arrest this developer. It was the group in the Netherlands, of course, but it's all like, it's all part of the same thing, isn't it? This global kind of financial apparatus trying to enforce these quote unquote "financial crimes." And is privacy one of those financial crimes? This is a great tweet from Alex, David. What are we looking at? Just if you want to get the scope of other notable money laundering scandals in perspective. And let it be known, of course, Tornado Cash was used by some bad guys for money laundering. I think you pegged the percentage at like 35%, according to you, to Annabelle. So at least 35% of the funds inside of Tornado Cash was like North Korea and some other like bad actors,

• 27:32Ryan Sean Adams?

  money launderers, but that wasn't the only use case. And let's compare it to other money laundering scandals in history. What are we looking at here, David?

• 27:39David Hoffman?

  Yeah, so we're looking at a graphic of just the previous biggest money laundering scandal. So coming in at number one, at 390 billion, we have the 2010 Wacovia Wells Fargo case, where, which was allowed to, allowed drug cartels from Mexico to launder almost $400 billion during 2004 to 2007. Damn, coming in at number one. Coming in at number two, 265 billion, Standard Chartered, British banking giant, 2012, accused by New York Department of Financial Services says of its failure to control money laundering. Then helped the Iranian government to circumvent US regulations to clear money to the tune of 265 billion. Damn. Donks Bank, Donks Bank, Donks Bank.

• 28:21David Hoffman?

  Money laundering scandal arose in 2017 to 2018 when it was, uh, became known that 200 million, 200 billion euros of suspicious, suspicious transactions flowed from Estonian, Russian and Latvian sources through the Estonian bank branch of Denmark bank, Donks Bank from 2007 to 2015. 228 billion. Damn. And so, uh, getting to go back through those again. 390 billion from Wells Fargo. What happened was a $160 million fine, no arrests. The standard charter, the number two, 265 billion. The bank paid a $842 million fine and disciplined 10 employees. I wonder what that means.

• 29:00David Hoffman?

  Coming in at 228 billion, the Danks Bank, uh, result, 10 employees were arrested. So 10 people went to jail. Okay. All right. Uh, no, no fine.

• 29:10Ryan Sean Adams?

  Maybe not to jail, just initially arrested.

• 29:12David Hoffman?

  Arrested, yeah.

• 29:13Ryan Sean Adams?

  We don't know what the outcomes were.

• 29:14David Hoffman?

  Coming in at number four, 8 billion, uh, HSBC, uh, the result was this, a $300 million fine, no arrests. Uh, coming in at number five, 11 billion, Westpac Bank, uh, Bank payday, $1.3 billion fine, no arrests. Tornado Cash, coming in at number six, uh, Tornado Cash.

• 29:32Ryan Sean Adams?

  Possibly.

• 29:33David Hoffman?

  Question mark, yes.

• 29:34Ryan Sean Adams?

  We don't know.

• 29:35David Hoffman?

  At its highest point, it held 500 to 900 million dollars. But while authorities link some of these addresses to North Korean hacker groups, it's unclear how much of that total was used for illegal purposes. Ryan, earlier you said, uh, 35% uh, was in Tornado Cash. That was in Tornado Cash at the moment of it getting added to the OFAC list. And that's after the Nomad Bridge hike, uh, heist, all of these other recent, uh, heists. When I was using Tornado Cash as for my own personal use cases, like, uh, in 2021, it was really before. Pre-sanction, importantly, pre-sanctioned. It was really before all of the bridge, uh, heists that we've seen. And so like, I bet you back in 2021, it was way below 35%. I bet you it was something down below 20%.

• 30:17Ryan Sean Adams?

  And the scope of this, we're talking like, uh, look, 100 million to 300 million dollars. All right. Look at these things.

• 30:23David Hoffman?

  Insane.

• 30:23Ryan Sean Adams?

  Uh, 300 bill, 390 billion. Our friends Wells Fargo in 2010 did this. Standard Charter, 265 billion, billion with a B versus like 100 to 300 million dollars, right? And these are banks, these are banks doing this. So what, David, should, should we shut down the banks? Like just shut down banks?

• 30:43David Hoffman?

  I'm sorry, no bank has ever given me any privacy services. Like, what have they done for me? Tornado Cash gave me privacy services. These banks didn't do shit for me, Ryan.

• 30:52Ryan Sean Adams?

  If the rationale is that smart contract code can be used by money launderers, we also know that banks can be used and are used by money launderers. And by the way, these are just the ones we've caught. Okay? So in that rationale, we're trying to sanction the smart contract code. Should we also sanction all banks? Right? Like, this is not the way to handle the situation. It appears very egregious to me. But David, maybe we should talk about the conversation on Twitter. And that is part two of our story here because there are a lot of implications. There's some backlash too, but there are a lot of implications of getting smart contract code on the OFAC list. What is the first implication here and what are we looking at?

• 31:32David Hoffman?

  Yeah, this is going back to the chilling effect that has been created as a result of this OFAC SDN list of Tornado Cash. So Mike Zoltul, he put out a tweet saying, adding to the shame list, OpenSea, DYDX, and Microsoft, because Microsoft owns GitHub. And he says, all of these companies have gone beyond what the sanction laws required. They didn't just obey an unjust order, they went out of their way to do additional injustice. And so there's been this meme created about these, the over-complier. And so like, ah, I'm over-complying. Did you see the OFAC additions today? modifies no to censor transactions. Seven hops from Tornado Cash, fire an AML report. There's all of these people in the ecosystem that are just like doing these things that was not requested of them,

• 32:17David Hoffman?

  not related to the OFAC SDN list, and is censoring and prohibiting freedoms and users from doing the things that they want.

• 32:24Ryan Sean Adams?

  Well, it's true. Everyone on Ethereum with an ETH address is probably two or three hops, maybe four hops away from a Tornado Cash fact.

• 32:30David Hoffman?

  That was an analysis, like the 90% of Ethereum addresses are two hops away from a Tornado Cash user.

• 32:36Ryan Sean Adams?

  90%.

• 32:37David Hoffman?

  And I mean, that's probably because of like the aggregation of centralized exchanges, but whatever.

• 32:41Ryan Sean Adams?

  Sure.

• 32:41David Hoffman?

  So some of the people doing this, AVE had a front-end block. So Anthony Cisano, one of the recipients of two sasal.eth, a .1 ETH from the Tornado Cash like dusting that happened, he got blocked from the AVE front-end. AVE has recently, has since then pulled back all of this front-end blocking, but they...

• 32:57Ryan Sean Adams?

  And it was a third party that they used for the blocking, right? And they said, we gotta get more control over the third party. And it's just the UI, not the smart contracts.

• 33:04David Hoffman?

  It's not the smart contracts.

• 33:05Ryan Sean Adams?

  But still, even just the UI, I get it.

• 33:07David Hoffman?

  D Y D X blocking tornado cash user. So if you've used tornado cash, you get blocked from D Y D X. And these are things that like are they are not required of them. And so this triggered a conversation on Twitter is like, yo, like, is Ethereum like going to just bend over backwards and become like the censorship chain? And this triggered a huge conversation inside of the Ethereum community.

• 33:31Ryan Sean Adams?

  Well, there was a back and forth that I had over the weekend with Antonio and I want to make kind of like, because it's important not to get overly like purist about this as well, right? And so I tweeted out, and this is around the time of where I was starting to see UI blockages from the OSAC. It's time for DeFi to grow some backbone and fight back instead of just blocking ETH addresses. Unelected bureaucrats blacklisting citizens without cause or due process is unconstitutional, illegal, and incompatible with the free society. It does if it doesn't stop here, it just gets worse. And then Antonio, who is the founder of D Y D X, he was like, what am I supposed to do, Ryan? Like, are you saying you want

• 34:14Ryan Sean Adams?

  me to go to jail? And if you're saying that, then why don't you spin up a front end of tornado cash? Like, why don't you put some stake in the game? And to be clear, that's really not what I'm saying, right? It's like, I replied to him, no, it's not time to go to jail. Let's be smart. But also, on the other hand, it's not time for DeFi, David, to sit down and die. And I really feel like this week has been a wake up call for DeFi. We have to catch our breath. We have to organize. We have to develop some strategy around this, deploy some resources and execute. I'm not saying now is the time to go to jail for like an organization like D Y D X. But we have to find strategic, legal ways to push back

• 34:59Ryan Sean Adams?

  on this, to protest and to move crypto and DeFi forward. And I think this has been a wake up call for that.

• 35:07David Hoffman?

  Yeah, certainly. But it's actually gotten even worse. There has been a conversation of like this fork of Geth, which is facetiously being called OFAC Geth, which is a version of Geth that does not propagate transactions or validate blocks with sanctioned transactions. This is Stefan from Flashbots, who is actually going to come out on the podcast on Monday. But he's being facetious about this. I'm not saying he's actually like creating OFAC Geth. But the conversation, to bring up the conversation is that like, there's this world where like, we have these Ethereum clients that download a list of sanctioned Ethereum addresses and just like, don't include transactions from those Ethereum addresses. It's in the base layer software.

• 35:49David Hoffman?

  It's a base layer software, which creates protocol level censorship, which, in my mind, is bad. But the point is, it triggered this conversation, which is really, really, it was a great conversation that the community had on crypto Twitter. And then, so the next part of this conversation, I think, was really triggered by Leftaris. And Leftaris, can't pronounce his last name, sorry. He goes, "Question for Lido, Coinbase, Kraken, Staked US, and Bitcoin Suisse. These are all the biggest Ethereum stakers." And he asked them, "If a regulator asks you to censor at the Ethereum protocol level with your validators, what would you do? Would you A, comply and censor at the protocol level, or B, shut down the staking service in order to preserve network integrity?" And he's retweeting a

• 36:34David Hoffman?

  tweet that talks about just like, if you add all of these stakers together, you get something like 80 or 90% of all stake. And so, this conversation really triggered the conversation that flowed. And so, Eric Wall, a man with very sharp edges, who's also very poignant, says, "Question for the Ethereum community. If a majority of stake chooses A in this poll," and this is the poll that Leftaris put, "would you, 1, X, consider the censorship an attack on Ethereum and burn their stake via social consensus," and we'll define what social consensus is, "or Y, tolerate the censorship?" And then, and then he scrolls down and actually puts a poll. And so, the poll is, you know, X or Y. X, burn the stake. Y, accept the censorship. And coming in-

• 37:17David Hoffman?

  61% we have, the people chose X. 9% of people chose Y. So a very stark difference. And then 30% of people picked show results. And so really, this is not really something that you can put into the protocol level that the Ethereum community will state, "We will burn your stake if you censor." This is something that we need to communicate to each other as a communities. Like, these are our values, and we're going to make these values explicit.

• 37:46Ryan Sean Adams?

  Well, can you just walk through that for people? Because I'm not sure everyone understands the mechanism of how social, like, how the, like, a social fork could essentially burn people's stake and create a fork that is nonsense, like, uncensored while the censored fork happens. Could you just walk through a scenario here? So let's say those stakers in Left Dress's tweet become evil. We call it evil. Coinbase, Kraken, all of them, you know, and they decide to say...

• 38:14David Hoffman?

  Or just some of them.

• 38:15Ryan Sean Adams?

  Yeah, and maybe it's not evil. They just say, "We have to comply with OFAC." And so we are now going to only validate blocks from every other block that is not on an OFAC sanction list. So essentially, they create an OFAC sanctionable Ethereum base layer. And because there's so much stake there, essentially, a lot of blocks are not getting through. They kind of control it. So what happens in this scenario? What is Eric Wall actually teeing up? What does the Ethereum social layer, Layer 0, do about this?

• 38:46David Hoffman?

  Right, so the scenario here is that if all of those listed entities, Coinbase, Lido, Kraken, all the big stakers, all followed OFAC sanctions lists and didn't propagate any blocks that included transactions that came from an OFAC sanctioned list. Basically, if you are an OFAC sanctioned list address, your block, you only get like one, like, five out of 100 blocks that will be validated by a staker who's not following the OFAC sanctions list. So like, five out of 100 blocks of your transactions only go through. So making Ethereum just really hard to use. And the Ethereum community, through this poll, where like 61 to 9 say that "We will not tolerate that, and we will send, we will burn their stake via social consensus." What does that mean?

• 39:31David Hoffman?

  In Ethereum, we have this concept called slashing. And slashing is this very objective event of you're a proof of stake validator with a stake bond, and you try to process an invalid block. You lied to the blockchain. You did some irregular thing, and that is completely objective. You published two blocks, and they're conflicting, trying to fork the chain, basically doing something invalid, and you're trying to attack the chain. That's what we do with slashing that is objective and built into the protocol and going to happen automatically. Then there's this thing called social slashing, which is something is going on with a validator. Maybe it's Coinbase, maybe it's Lido. They're censoring an address. Maybe they're censoring every single transaction.

• 40:14David Hoffman?

  And so imagine like all of these people, all of these 90% of stakers, Lido, Coinbase, Kraken, like the government comes and says, hey, we want you to shut down Ethereum. And since you're producing 90% of blocks, we want your blocks to be completely empty. And then if they had a gun to their head, they would probably choose to not die and only publish empty blocks. And that would be censoring 90% of blocks that would go through Ethereum, making the blockchain really, really just troublesome and useless. And so in the event that this happens, you can't actually slash that person at the protocol level because it's more subjective as to what is going on. As in Coinbase is not processing transactions that interact with Uniswap.

• 40:57David Hoffman?

  Like they're still processing blocks, and the blocks are valid. They're just choosing to not include transactions that interact with Uniswap, or interact with Tornado Cash, or do something. And so how do we, as a community, get back our ability to use these DeFi apps? There's this thing called social slashing, or a user-activated soft fork. And so what this means is that because we have this like unique property in Ethereum that Coinbase, Kraken, Lido, these blocks are being proposed by specific Ethereum addresses. So we know these specific Ethereum addresses are censoring transactions, and these specific Ethereum addresses have some amount of ether staked with them. And so what we can do is we can fork the chain, and we can do something

• 41:41David Hoffman?

  That punishes them. We can either freeze their stake. The most nuclear option is you can just delete their entire stake. That would be pretty, pretty damn nuclear. We probably wouldn't do that on the first iteration. The, the thing that we probably do first is we would do what is called an inactivity leak. We would prevent them from being able to validate the chain and they would be forced to withdraw their ether staked from the network. And during that time, they are no longer able to process blocks. And then they're like, you could also slash them some arbitrary amount. We would have to decide this as a community. But I think the, the first step would be like, hey, we're just going to kick you out of the validator pool. We're not going to, we're not going to delete your ether. We're going to inactivity leak you, which means you are losing as much ether as you otherwise would be gaining if you were staking.

• 42:26David Hoffman?

  So forcing you to exit and kicking you out of the validator pool and only allowing validators who have not been censoring. And this is, this is a social slashing event. This is a user activated soft fork. This is something that the community would have to coordinate around saying, hey, OFAC made Coinbase and Lido and Kraken. They made them by the powers of the nation state, the monopoly on violence. They made them censor transactions. And we do not accept that in the base layer. And so we are going to coordinate around a fork. And when that fork does is that kicks these validators out of the validating pool and they must withdraw their ETH. Or else the, it's just like in limbo if they don't. And so this is what's called a user activated soft fork. And it's something that can only be done by social consensus of the Ethereum community,

• 43:11David Hoffman?

  which is why this poll from Eric Wall is so important because it's showing that a 61 to nine ratio of Ethereum community members says that we will do this if, if our entities censor transactions.

• 43:25Ryan Sean Adams?

  Now, this is a Twitter poll, of course, right? It's like, it's not necessarily reflective of everyone, of course. But like what David's describing is basically the end game scenario here. So a bunch of stakers, centralized stakers decide that they are going to censor Ethereum via OFAC. Okay. The community says, we're not running that software. We're continuing to run the original non-OFAC version of Geth. We'll fork you. This is the true Ethereum. And then they're trying to run an OFAC version or a censored version of Ethereum. It's forked. So you have ETH on both chains. You have every DeFi app that needs to select which one to spend their resources on.

• 44:08Ryan Sean Adams?

  The community has to decide, a set of validators, which one to essentially run, which software to run, and it's a fork war, and may the best fork win. And I think, David, in every single case, what will happen is, as long as we have a social layer around Ethereum that says, "Look, censorship resistance is baked into the base layer of the Ethereum project. This is the true Ethereum," that the non-censorable version of Ethereum will win in the end. And the reason it will win, we know this from a game theory perspective, is why would China go deploy and trust the OFAC version of Ethereum that's completely US-controlled? They're not going to. So the state will continue to collect to the non-censorable

• 44:53Ryan Sean Adams?

  version of Ethereum, and the community will eventually win. Like, this is what I mean. As long as you have a Layer 0, a social layer, that is upholding these values and willing to run the original version of Ethereum that is non-censored, we win. And this is what would happen. It would be a messy outcome. The cool news, I think, is if you're an ETH holder, you just get ETH on the OFAC version of the chain, you could sell that if you want to.

• 45:19David Hoffman?

  Dump that because it doesn't align with your values.

• 45:21Ryan Sean Adams?

  Dump that it doesn't align your values if you want to, or you could keep it, you could do whatever you want, and then you could run validators on the real Ethereum chain that is uncensored. That's where you'll find me. You're gonna find me on the non-censored Ethereum chain. I think a large portion of the community, you'll find them there, too. By the way, this same mechanism plays out in Bitcoin, does it not?

• 45:42David Hoffman?

  Yes, and this is a great history lesson. So we can move forward. One of the reasons why I focus on this, yeah, this conversation on Tenebros Cash happened on Crypto Twitter. It's really important that this conversation happened because a lot of new people came into Ethereum in the last, like, 12, 18, 24 months that are still learning concepts like this. And so we have to have these conversations out in the public where the Ethereum community defines like, hey, like, these are our values, like, no censorship at the base layer. And so this conversation continues. Eric Connor retweeted Eric Wall and says, I do agree with Eric. We should make it known as a community that we, stakers, will burn the stake of any entity, burn at the stake, any entity that tries to censor transactions, no matter the reason.

• 46:23David Hoffman?

  These are the values that we're indoctrinating, we're instantiating into our layer one. Now, going back to what you just said about this, this, the user-activated soft fork has been a mechanism that the crypto world has seen before, that we've done this once before. And so Eric Wall put out this fantastic Twitter thread, which I'm going to read here. And he goes, "As the Ethereum community gears up to prepare for its user-activated soft fork defenses, to force any validator to think thrice before bending over to OFAC, there's going to be a lot of snark from Bitcoiners." And so we'll talk about the Bitcoiner relevancy here. It's envy. User-activated soft forking is the single most exciting thing that you can do in crypto. Bitcoiners had their user-activated soft fork moment in 2017, and it is their proudest

• 47:08David Hoffman?

  moment. I am a Bitcoiner, and it is my proudest Bitcoin moment. The idea that Ethereum would even be even close to achieving something similar is the most annoying thing that could ever happen. They'll never let you have it. The entire Bitcoin rhetoric relies on the reason that they were able to pull off their user-activated soft fork is because users ran full nodes. This is the basis for the entire design philosophy. It is, it is true that the ability to run a full node is useful in a user-activated soft fork, but annoyingly Ethereum can still pull it off, annoyingly to Bitcoiners. First off, Ethereum users can run nodes, despite what Bitcoiners will tell you. Even if the default is to sync using state commitments, that doesn't mean you can't enforce a user-activated soft fork. You, of course, can.

• 47:51David Hoffman?

  Secondly, the outcome of a user-activated soft fork is a much more of a market phenomenon anyways. You still win a user-activated soft fork just by demonstrating superior pricing power. So, meaning that if you're not a person who doesn't know how to run a node or doesn't want to, you can still dump all of your OFAC ETH and buy all of your censorship resistance. What's the true Ethereum? Is it ETH classic? It's the one that has a higher price. Right. And so Eric Wall continues and goes, "All of these things should be narrative violations for Bitcoiners. Ethereum should not be able to user-activated soft fork is a core Bitcoin thesis." And I'll say this, Bitcoiners are better at user-activating soft forks than Ethereum. They are, but they weren't born with that ability. They were taught that they had this power. What is that word, Ryan?

• 48:33Ryan Sean Adams?

  I have no idea. Chalene Frye?

• 48:35David Hoffman?

  I don't know. Ethereum can be taught the same, basically saying that Bitcoiners don't have a monopoly on the concept of a user-activated soft fork. What most people don't know is that if Ethereum's master user-activated soft fork under proof of stake, they gain access to a weapon that is more powerful than the user-activated soft fork of Bitcoiners. This is because a user-activated soft fork in proof of stake can selectively punish censoring validators. I talked about this earlier. Bitcoin, you can't selectively punish a miner. In proof of work, if a majority of hash rate is censoring, you have to build a, build more hash rate than the attacker, which is possible, it just is hard and takes time. The non-censoring miners also earn transaction fees that the censoring miners do not. I wanted to mention this earlier. If you have like OFAC guess, and you have

• 49:18David Hoffman?

  90% of blocks that are block stakers that are not processing OFAC non-compliant transactions, the remaining 10% of stakers actually make more money because they do get to process those transactions. So you're actually rationally like incentivized to process the illicit transactions.

• 49:35David Hoffman?

  If you can't overpower the attacker in proof of work, the only option is the nuclear one. You change the proof of work function and vaporize the entire billion-dollar mining industry in one shot, but you also kill the honest miners. In proof of stake, there is currently $25 billion of ETH securing the chain. If 10 billion of that is involved in censoring, you can surgically vaporize the bad part and you keep the $15 billion of remaining honest stakers on your side.

• 49:58Ryan Sean Adams?

  And you vaporize it on your fork, the non-censored fork, right? So it's like punitive actions. Like, hey, you're going to pay for this, guys, because your fork's not going to be successful. Ours is. And on the successful Ethereum fork, you won't have any of your ETH. That is like the stick that a social fork can yield.

• 50:17David Hoffman?

  It's brilliantly elegant because you reward the honest people and you punish the negative people. Now, Ryan, like, I've always been curious about this, like, because you and I could take our crypto Twitter conversations into this weekly roll-up quite a lot. And I'm actually cognizant that I think maybe like 25, 33% of listeners are actually on crypto Twitter. And so I've always been kind of curious, like, damn, like, from the perspective of the listeners, like, damn, Ryan and David are always concerned about like the Bitcoiners and like the Bitcoin Maxies and like the tribes. I want to, I want to go to the quote tweets from Eric Wall's first tweet. And so this is the set of quote tweets, people that retweeted Eric Wall's tweet. And you're going to get two classes of people here.

• 50:59David Hoffman?

  One is Ethereum's retweeting the tweet saying, I vote X, I vote to slash. And the other is you have Bitcoiners trying to brigand, brigade, brigand the poll and saying Bitcoiners, vote Y because it makes Ethereum look bad.

• 51:14Ryan Sean Adams?

  Can I just say, whenever you're saying Bitcoiners, I want to make sure that you are talking about like, not everyone who owns Bitcoin, but a specific subset of Bitcoiner, which is a Bitcoin maximalist, who wants all other chains to fail and only Bitcoin to succeed. That's what you're talking about when you're shorthand Bitcoiners, when Eric Wall is doing that as well.

• 51:33David Hoffman?

  If you're not on crypto Twitter, you're not like exposed to these like tribes that are war. And the zero sum games that are being played.

• 51:40Ryan Sean Adams?

  And we're overexposed, I would say.

• 51:41David Hoffman?

  And we are overexposed to these people. So yeah, if you want to like scroll down, Ryan, and just see some of these conversations, because like if the quote tweets, the list of quote tweets, just keep scrolling, just go through all of them. There's so many. The list of quote tweets, again, it's like, here's stats, sex and snacks. At it's time for Bitcoin. Imagine what it would feel like to know the integrity of your favorite shitcoin depends entirely on both stablecoin custodians and a status mole rat that lives in a $100 million LA mansion to do the right thing, even though it could sink them cry harder.

• 52:10Ryan Sean Adams?

  Who's the mole rat?

• 52:12David Hoffman?

  I don't know, like, these Bitcoiners are insane, dude. These Maxies are insane. And so like, again, like, there's two types of quote tweeters here. People that are Ethereum saying, I vote X. And then people that are Bitcoin Maxies trying to like manipulate and attack the Ethereum community because of exactly what Eric Wall was saying. It's envy, he says. The user activated software incorporates the most single exciting thing you can do in crypto. And Bitcoiners don't want Ethereum's to have this power because right now it's the only thing that the Bitcoiners have.

• 52:43Ryan Sean Adams?

  Maxies.

• 52:44David Hoffman?

  Maxies, Maxies.

• 52:45Ryan Sean Adams?

  Yeah, I think that's what's going on. What are we looking at here, David?

• 52:48David Hoffman?

  This was a meme. Again, the Ethereum community is taking this opportunity to meme into existence. Like, this is the "press X to doubt" meme, but it's "press X to slash." And so the entire Ethereum community is like, "Yo, we will absolutely slash anyone who invalidates our values."

• 53:03Ryan Sean Adams?

  And look, so here's the thing. A lot of this is talk, conversation on Twitter, blah, blah, blah. I mean, at the end of the day, if this ever happened, and by the way, this is such, I just want to emphasize, this is still incredibly remote. This is a conversation in crypto Twitter, but there is no talk of OFAC or like the Coinbase's of the world or any of the validators running sanctioned code or running censored code here and complying with OFAC's sanctions. And OFAC is not even asking about. So this is just a remote probability that I feel like the crypto space went and ran with this week as a thought exercise, but it's a useful thought exercise, but it's still incredibly remote. And this is, by the way, we have the stick,

• 53:45Ryan Sean Adams?

  but we also have like the kind of the carrot, I think, for people who are centralized staking providers. So Brian Armstrong actually replied to Leftress's tweet when he asked, "If regulators ask you to censor, do you comply and censor? Or do you shut down your staking service if you're a Coinbase?" Brian Armstrong, the CEO of Coinbase, says, "It's a hypothetical, important to note, we hopefully won't actually face, but if we did, I pick option B. I would exit. Coinbase would stop staking. It would not censor transactions. It would not run the OFAC sanctioned validator code."

• 54:25David Hoffman?

  Worth to note that the Coinbase staking is extremely profitable. They make a ton of money. And Brian is saying, "Instead of censoring the chain and compromising the integrity of Ethereum, we will shut down that business."

• 54:36Ryan Sean Adams?

  Just we won't do it. And what will happen if they shut down, more people will have to kind of run their own nodes, obviously. So I think we've got a lot of defenses against this level of state, the state level of censorship resistance. And I think more defenses in a proof of stake world.

• 54:52David Hoffman?

  And it's definitely worth noting that these large entity stakers like Lido, Coinbase, et cetera, they're highly incentivized to not censor the chain because they don't want to piss off the community. Like they, they will, will punish you. We have that power. And so like the, the fact that this conversation is happening in the Ethereum community is planting a flag saying, hey, if you censor our transactions, we're going to kick you out. We'll fork you. And so like they, and we'll burn your stake. And so they have to pick B because the community is forcing them to do that.

• 55:23Ryan Sean Adams?

  They have a fiduciary responsibility to pick B because they could get screwed. Imagine if they got slashed and they lost all of their depositors' money.

• 55:31David Hoffman?

  Right.

• 55:32Ryan Sean Adams?

  What are the costs of that? So even just the prospect of us being able to do this? And this rhetoric on Twitter of like, you do this and we'll fork and we'll slash.

• 55:40David Hoffman?

  Right.

• 55:40Ryan Sean Adams?

  That reins them in. They, they can't take the risk.

• 55:44David Hoffman?

  It's about having this user-activated software as a threat without actually using it. The fact that it's an option keeps us from having that to use it.

• 55:52Ryan Sean Adams?

  Mutually assured destruction, baby.

• 55:53David Hoffman?

  Exactly, exactly.

• 55:54Ryan Sean Adams?

  Do it. Don't do it, though. Please. This will be fine. We don't have to fight. There were some bad takes, though, on, I think on this takes. And love Ryan Selkis, previous guest on Bankless, respect a lot of his ideas. He did not have the best take this week, but I think it's a summation of a lot of people who were saying like Bitcoin was looking great and Ethereum was looking very censored. What was his take here?

• 56:20David Hoffman?

  Yeah, Ryan Selkis says Ethereum is amazing, but I don't get the sense most in the Ethereum have the stomach to full decentral, for, to push full decentralizing without compromises, USSEC, of course, and OFAC imparting that. And then he follows up Bitcoin remains metal AF. Both are important for the decades ahead, but let's be honest. ETH is fintech three, not web three. Absolutely terrible take, Ryan.

• 56:44Ryan Sean Adams?

  Love you, though. Love you, Ryan.

• 56:47David Hoffman?

  And so I follow up and I say tornado cash is banned in the United States. Yet tornado cash is up and running. Ethereum is fulfilling its promise on unstoppable applications. Metal AF, like sub tweeting Ryan Selk is here.

• 57:01Ryan Sean Adams?

  And so like You don't get points if you don't even have privacy at the base layer.

• 57:05David Hoffman?

  Right. And so like, people are just obsessed with giving Bitcoin so much credit. It's like, well, you didn't see Bitcoin get banned. You don't get credit for not having any useful applications.

• 57:15Ryan Sean Adams?

  It did show up at the game. It's on the bench. Okay?

• 57:17David Hoffman?

  You're like Bitcoin is just like this neutered app chain. Like you, you can only get like coin mixing at the centralized level, which has also been banned before.

• 57:27Ryan Sean Adams?

  Bitcoin, because besides, you know, transfers Bitcoin uses, basically it's banking layer, it's privacy layer, doesn't have one, doesn't have a privacy layer. But if you did want to use quote unquote privacy, it would be through centralized exchanges, which are fully OFAC compliant.

• 57:43David Hoffman?

  Yeah.

• 57:43Ryan Sean Adams?

  You're not in the game, guys. I love you. I love Bitcoin. It's really important, but you're not in the privacy game. That's why OFAC is not bothering you. Nation states aren't bothering you is because you don't have a tornado cash on chain. That does not make you Bitcoin stronger. Okay? That just makes them not participating in the game that Ethereum is playing.

• 58:01David Hoffman?

  We're jumping around here, but here's a tweet of all these like annoying Bitcoiners that are on crypto Twitter that are extremely toxic. Eric Wall again says Bitcoin maxis want you to fail. You haven't even started and they're already laughing their ass off. This doesn't even include all Bitcoiners, though. I'm a Bitcoiner and I will help in as far as I'm able. And he's put in four screenshots of just, you know, the typical example of like a toxic Bitcoin maxi. And this is like Dr. Bitcoin MD, a famous crypto Bitcoiner on crypto Twitter, just like laughing at the possibility of a user activated software in Ethereum. Basically, there's like this cohort of Bitcoiners that want to see Ethereum fail. And they are, they think that they are just like about to dance on Ethereum's grave right now, because they don't think Ethereum has the guts.

• 58:42Ryan Sean Adams?

  From a base, from a base principles perspective. Like, so for me, the value set, the base principle is freedom, it's decentralization, it's privacy, it's censorship resistance, okay? And any chain, doesn't matter what it is, any chain that supports those base principles, I support. To the extent Bitcoin supports that, I'm a Bitcoiner. To the extent Ethereum supports that, I am Ethereum. The extent Solana supports that, or freaking Tron supports that in the future, or Cardano, I'm a Cardinian? A Tronian? Solatian? I don't know.

• 59:15David Hoffman?

  Isn't that the...

• 59:16Ryan Sean Adams?

  But like, it's not about a specific tribe, or a specific coin, or a specific asset. It's about a specific set of ideals that we're protecting. Another take here, an equally bad take, I think. This is from Kevin O'Leary, another previous Bankless guest. "We love you, Kevin. You've got a lot of great takes. This was not one of them. This is a hell no." Kevin O'Leary says, essentially, "I'm glad the Tornado Cash developer was arrested. Now we get to move on, we get to be more regulated." I'll read some of the direct quotes. "I think we're getting to that stage now," Kevin says. "Maybe we're in the third or fourth inning towards that, but I'm tired of this crypto cowboy crap." He's talking about privacy here in Tornado. "I want to get involved in a regulated place where we can bring billions of dollars to work. I want that too.

• 59:58Ryan Sean Adams?

  I don't need to be a crypto cowboy, and I don't want to be one because I work in the regulated world." Okay, understand that, but this is the take that really gets me. At the end of the day, it's okay to arrest that guy.

• 1:00:09David Hoffman?

  Oof.

• 1:00:10Ryan Sean Adams?

  The Tornado Cash developer. Why? He's messing with the primal forces of regulation.

• 1:00:14David Hoffman?

  What do you think we're doing here, Kevin?

• 1:00:17Ryan Sean Adams?

  If you have to, if we have to sacrifice him, that's okay, because we want to have some stability in that institutional capital. It is not okay to sacrifice an open source developer who is working on the public good. I know why I'm here, and it's not for that.

• 1:00:34David Hoffman?

  He says, "We are messing with the primal forces of regulation." That's why I'm here, Ryan. That's what I'm here to do.

• 1:00:43Ryan Sean Adams?

  Well, it's just, there's different kind of cohorts and reasons for like, so we get some, you know, like we get different tribes, crypto tribes certainly warring it out. Well, we also get people who are just here for the money and that's okay. But you got to rest on top of the base principles of why the social layer is here. Another bad take. But the question of all of this is David, what can we do about this? All right. So what is this JW Verit person doing? Who is a, I believe he's a legal professor and a lawyer. What is he doing?

• 1:01:12David Hoffman?

  Writes very eloquently. He tweets out, "I bite OFAC in the nose over their vague sanction of tornado cash. I applied to OFAC for a license in a way that would either obviate the harm that they did, or give my nonprofit, The Crypto Freedom Lab, standing to sue them if they deny my license." I think he's basically saying, "I've put OFAC in a corner. Either answer that they that they give me opens back up tornado cash." And he wrote this very eloquent, like concise blog post about the choice rule that he's forced OFAC into. And basically saying like, either way, like I'm taking like, either they do, they take option A and like tornado cash becomes freely accessible to everyone again,

• 1:01:53David Hoffman?

  or option B, and then they give me grounds to sue them and I will sue them. So we have this individual going after OFAC right now.

• 1:02:00Ryan Sean Adams?

  It's great. JW Verit, we applaud you. They might just, OFAC might just take option C, which is don't reply to these things, which they often do.

• 1:02:08David Hoffman?

  Which he also stated that he will sue them for as well.

• 1:02:11Ryan Sean Adams?

  Nice. Good job. JW has all his bases covered. We applaud efforts like this. Also, Coin Center is doing some fantastic things. So just, you know, three of what they're doing. First of all, they're seeking to engage OFAC. So let's not, in all of this, let's not attribute to malice which may just be incompetence. They may not know what a smart contract is. They may not know the importance of privacy. Let's make some space for that.

• 1:02:37David Hoffman?

  Press X to doubt.

• 1:02:38Ryan Sean Adams?

  Coin Center is going to help OFAC with some of these things, maybe. Second, there are some innocent Americans who have funds deposited in tornado cash, and they don't know whether they can take the funds out or not. My guess is probably not. None of this is legal advice. Don't know, but Coin Center is helping those citizens. And then finally, they said they are going, they're beginning to explore with counsel, a court challenge to this action. Stay tuned. All right. So that's what our crypto lobbyist friends are doing. We applaud Coin Center for doing that. I think, David, there are a few long-term things we could work on. All right. The very first politician who comes out with a recognition and a need that we all have for a digital bill of rights, I am supportful of that platform.

• 1:03:23Ryan Sean Adams?

  Because, David, we need a digital bill of rights that protects our privacy, that protects our cryptography, that gives us the right to own our own private keys, that gives us the right to run our own software that recognizes that code of speech for all citizens. Some of these rights are implied in the Constitution with freedom of speech. I think it's now time, as we transition to this digital era, to make this more explicit. I would support laws on the books towards this. That needs to happen, but it's going to be a slow process. The other thing we can do, of course, is start to form prototypical crypto nation states, network states, as Balaji calls them. So imagine a crypto-native country. This is a decades-long project. It'll take years to get to this.

• 1:04:05Ryan Sean Adams?

  But imagine if we set up such a constitution for digital freedom, where we enshrined property rights in Ethereum and other smart contract chains. We made sort of, you code as law from a financial perspective. We backed our currency by ETH and Bitcoin. We had a citizen-level IDs that are maybe verified credentials or soulbound NFTs. We use DeFi as our banking system. We use DAOs for capital formation. And that idea from Balaji's burned in my head of like, let's start to work on this project. We can eventually get UN recognition, maybe years down the road. Even if we fail, this could be a prototype that other countries look at and they're like, huh, you guys had some good ideas here. Like, maybe we should incorporate some of that because it's been successful.

• 1:04:49Ryan Sean Adams?

  So that's another thing we can do. And then lastly, David, what is Gitcoin up to? And how can we help actually donate as individuals?

• 1:04:57David Hoffman?

  Well, there's plenty of privacy forward and also open source software freedom projects on Gitcoin. And so Gitcoin and like four grant rounds a year, I believe, the next one coming up on September 6th, 7th, there is a $3 million matching fund, as in there's $3 million out there to be matched for other donations. So Ryan, you put out this bundle, or this request for bundling of the top three to 10 projects fighting for free speech and privacy and give them money. Because you know what moves the needle the most? Money.

• 1:05:28Ryan Sean Adams?

  Oh, you don't say.

• 1:05:30David Hoffman?

  Yeah. And so there's in the Gitcoin, there's going to be this privacy bundle, which you can just like donate to in net. And like all of your money will be matched by this $3 million matching fund. Coin Center, I'm sure will be in there. There are other efforts as well. But money, money moves needles.

• 1:05:48Ryan Sean Adams?

  Save your money for September 7th. We're going to kick this off. We're going to promote it on Bankless. And yeah, we're gonna, we're gonna fund where our values are in the future. Wow, that was a lot, but I think.

• 1:06:00David Hoffman?

  That was, it was a lot, but it was very significant. It was by far the most significant happen, thing that happened.

• 1:06:04Ryan Sean Adams?

  Totally agree. All right. With that, let's move on to some other things, David.

• 1:06:07David Hoffman?

  And on to the bad boys of the crypto industry. Celsius owes 6.7 billion in crypto assets and they only hold, Ryan, 3.8 billion of crypto assets. Rut row, those are different numbers.

• 1:06:19Ryan Sean Adams?

  That's a delta there.

• 1:06:21David Hoffman?

  Yeah, there's a small delta there. I mean, this isn't anything new, but we're just getting more and more insight into the state of the Celsius books. And it is what you would call down bad.

• 1:06:31Ryan Sean Adams?

  It's a sorry state. Did you know, David, Financial Times reported that Alex Mashinsky actually took control of Celsius trading right before the bankruptcy. So he was like, oh, things are going bad. I know what to do. I'll be the captain. I'll start trading. I'll fix this.

• 1:06:46David Hoffman?

  I'm pretty sure this is what's called revenge trading. And I know.

• 1:06:51Ryan Sean Adams?

  Hate trading?

• 1:06:52David Hoffman?

  Hate trading. Yeah. So it's like, oh, one last trade to get us out of the hole. And so we watched Celsius do this. They were like, instead of paying down their debt, they were just adding more and more collateral to their Maker Dow positions.

• 1:07:05Ryan Sean Adams?

  You gotta take riskier and riskier bets to get yourself out of the hole.

• 1:07:07David Hoffman?

  Right, and that was Alex. That was Alex doing that.

• 1:07:10Ryan Sean Adams?

  Bad.

• 1:07:10David Hoffman?

  Nice job, Alex. Nice job, Alex. Just complete disservice to your entire company and customers. And also grifting off of the whole DeFi name. Just a grifter of the ages.

• 1:07:20Ryan Sean Adams?

  It is not, yeah, it's pretty crazy. And actually reminds me sort of the Three Arrows Capital story. They just kept doubling down and doubling down, and they made the cover of a magazine, the New York Magazine, but not in a good way.

• 1:07:33David Hoffman?

  The title of this magazine is "How Two Wall Street Washouts With A Can't Lose Crypto Head Fund Vaporized A Trillion Dollars." The crash of Suzu and Kyle.

• 1:07:42Ryan Sean Adams?

  Vaporized a trillion dollars? Can you imagine?

• 1:07:45David Hoffman?

  Imagine having that associated with your name.

• 1:07:47Ryan Sean Adams?

  Are we at the point where we can laugh about this, David, a little bit?

• 1:07:50David Hoffman?

  I mean, I've been laughing about this through and through. If you're, if you're gonna like bleed out your eyeballs about this thing, you're just not gonna make it in crypto. You gotta, you gotta like see the silver lining of this.

• 1:08:01Ryan Sean Adams?

  Yes.

• 1:08:02David Hoffman?

  I guess.

• 1:08:05David Hoffman?

  The cover of New Yorker for the podcast listeners is kind of odd. It's like those two like bitmoji type emojis for Suzu and Kyle. And then the actual article itself is like these just like actually kind of cool illustrations of them with like sparkles in their teeth.

• 1:08:21David Hoffman?

  Yeah.

• 1:08:21Ryan Sean Adams?

  Good art.

• 1:08:21David Hoffman?

  I don't know, I don't know what to make about that. In the, a small excerpt from, from the article. "Among crypto's smartest observers, there's a widely held view that Three Arrows Capital is meaningfully responsible for the larger crypto crash of 2022. As market chaos and forced selling sentenced Bitcoin and other digital assets plunging 70% or more, erasing more than a trillion dollars in value."

• 1:08:41Ryan Sean Adams?

  I'd say that's true.

• 1:08:42David Hoffman?

  Yeah, that's about right. Yeah. Sam Bankman-Fried says that in the article, "I suspect they might be 80% of the total original contagion. They weren't the only people who blew up, but they did it way bigger than anyone else, and they had way more trust than the ecosystem prior to that." Yeah, so like this article is basically claiming that a trillion dollars of vaporized wealth was due to Three Arrows Capital contagion, which that sounds about right. Yeah.

• 1:09:06Ryan Sean Adams?

  I'm kind of done with it, David. Like, I know we, we want to like cover it in pieces, but like I hope this is getting near to the end of talking about these guys. And I saw Do Kwon did an interview last week. I don't even, I don't even care. I'm not gonna watch it. I just don't care anymore. Right? Like, let's move on as an industry, learn what we can from these mistakes. It's gonna happen again.

• 1:09:25David Hoffman?

  Is no one going to jail?

• 1:09:28Ryan Sean Adams?

  I don't know.

• 1:09:28David Hoffman?

  Is no one going to jail?

• 1:09:30Ryan Sean Adams?

  Developers gone to jail, potentially.

• 1:09:32David Hoffman?

  You're telling me Alex Mashinsky, who traded customers' funds outside of the scope of the product, not going to jail? Three Arrows Capital, who defrauded investors, not going to jail? Like, what? Who? Why isn't DoKwan's not going? Why aren't people going to jail?

• 1:09:48Ryan Sean Adams?

  Because they didn't write free, open-source privacy software, David.

• 1:09:52David Hoffman?

  Jesus.

• 1:09:52Ryan Sean Adams?

  Where's the justice in the world? I don't know. Maybe in time, it'll sort itself out. Not sure, but like, hey, it's back to layer zero. We got to protect these freedoms and hold people accountable in the right ways. Some more crypto contagion, though. Genesis CEO, this is the largest centralized crypto lending and borrowing OTC desk on the planet by far. The CEO just stepped down. He'd been working as CEO for like seven years. And Genesis also cut staff by 20%. This is more Three Arrows Capital contagion. Just took, I guess, a couple of months for it to catch up with Genesis and for these headlines to break.

• 1:10:29Ryan Sean Adams?

  I guess, you know, more down bad.

• 1:10:31David Hoffman?

  All right, and that is the recap of that thus far. I hope that this is kind of like the last recap of this that we get, until somebody gets charged with something, that would actually be a turning of the page of this whole story.

• 1:10:42Ryan Sean Adams?

  Or I get my Celsius money back.

• 1:10:43David Hoffman?

  Or I get Celsius money back. Coming up next, in the weekly roll-up, of course, the exact merge time, down to the second, although it's going to change. We have, down to the second, their current predicted merge time. And Taiwan, using IPFS, ahead of just trying to protect themselves from China cyber attacks? What is going on there? That's an interesting development. So we're going to get to all of these developments and more, right after we hear from some of these fantastic sponsors that make the show possible. Rocketpool is your friendly decentralized Ethereum staking protocol. You can stake your ETH with Rocketpool and get our ETH in return, allowing you to stake your ETH and use it in DeFi at the same time. You can get 4% on your ETH by staking it with Rocketpool, but you can get even more by running a node.

• 1:11:26David Hoffman?

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• 1:12:37Ryan Sean Adams?

  Alright guys, we are back talking about the projected exact time, a precise time that the merge will happen. This is Marius, a tweeter from Twitter tweeting out. He's finally back from vacation, and he ran some computation to confirm the TTD date for mainnet.

• 1:12:54David Hoffman?

  And the projected date, according to the TTD, is September 14th at 10:57 Paris time, and what that translates into is about 4:57 Eastern Time. The TTD is not actually a clock, it does not listen to the sun or go with the rotation of the Earth, so as miner hash power goes up or down, this number moves forward or backward. But if we hold hash power constant, we are merging at September 14th at 4:57 PM Eastern Time. That number's going to change.

• 1:13:30Ryan Sean Adams?

  That number's definitely gonna change. I love the precision of this tweet and this estimate, but like, it's coming, right? Like 14th, 15th, 16th, somewhere in that range, probably more likely the 14th or the 15th, would you say?

• 1:13:42David Hoffman?

  Yeah. Yeah, I think, I think, I'm gonna guess that this date moves up as in comes earlier, because I think miners will turn off Right, like, no one's investing more into hash power now.

• 1:13:53Ryan Sean Adams?

  Hash will go lower.

• 1:13:54David Hoffman?

  Hash will go lower. It will either stay exactly the same or go lower. Not, hash rate's not gonna come online now. It's too late.

• 1:14:01Ryan Sean Adams?

  Oh, what time do you hope it is? I hope it doesn't, like, happen on the 14th, like, early in the wee hours of the morning. Although, that'd be fine.

• 1:14:08David Hoffman?

  I would like to be awake for it, yeah.

• 1:14:10Ryan Sean Adams?

  Yeah, cuz you wanna just do a party. You wanna just, like, some celebratory activity. It shouldn't be, like, early in the morning.

• 1:14:17David Hoffman?

  Yeah.

• 1:14:19Ryan Sean Adams?

  Alright, merch party's on, guys.

• 1:14:20David Hoffman?

  Merch party's on, yeah.

• 1:14:22Ryan Sean Adams?

  There's also another airdrop this week. Actually, a pretty significant one, I think.

• 1:14:25David Hoffman?

  Yeah, this is a big deal. Yeah, the Safe airdrop for the Gnosis Safe. And so, this happened, this is breaking as of, well, today, the time of recording. Gnosis Safe published an eligible wallet's address list. 50 million tokens, about 5%, are available for airdrop, airdrop claimers. If you have a Gnosis Safe wallet that had a certain amount of ETH in it. So, little bit of a surprise. I don't think people saw a Gnosis Safe wallet token coming. So if you had a multi-sig, a Gnosis multi-sig, with more than 10 ETH in it, and it also made two transactions, you got the airdrop. Wrapped ether or ether are considered no other assets.

• 1:15:09David Hoffman?

  And the minimum distributed was 400 tokens, although I don't know what the total supply is.

• 1:15:14Ryan Sean Adams?

  Go pick that airdrop up. We will include a link to the show notes where you can click on that, see if you're eligible or not. I guess, they just raised money recently, so, you know, airdrop on the back of that, maybe?

• 1:15:25David Hoffman?

  I guess so. Why does a multi-sig need a token, Brian? I'm confused.

• 1:15:30Ryan Sean Adams?

  Hey, you said everything that can be tokenized will be tokenized. I recall you saying that on Bankless Podcast, my friend, so.

• 1:15:36David Hoffman?

  I did say that. I guess, this one confuses me.

• 1:15:43Ryan Sean Adams?

  Well, it can be tokenized. So according to Hoffman's law, it will be tokenized.

• 1:15:48David Hoffman?

  I don't even agree with Hoffman's law anymore, but it's still working. It's still working as a law.

• 1:15:52Ryan Sean Adams?

  It hasn't yet been disproven, all right? So it's still a good thesis. OpenSea, what are they up to on the NFT world?

• 1:15:59David Hoffman?

  Yeah, so there's been this controversy with OpenSea's policy on stolen NFTs. So if an NFT was stolen by an exploiter or hacker, that hacker might go and then sell that, and then OpenSea would like report that NFT is stolen and then freeze it. But the problem is, a buyer, a legitimate buyer, would buy a stolen NFT, and then OpenSea would freeze that legitimate buyer's NFT, basically freezing them out of the liquidity of OpenSea. This was, this caused a big consternation, a big problem with the community, because you had legitimate buyers coming to buy NFTs on OpenSea that were sold by thieves before OpenSea could flag these NFTs as stolen. So OpenSea is changing that policy. What's going on is that they are still freezing stolen NFTs,

• 1:16:42David Hoffman?

  but if a police report is not filed within seven days, then they are automatically lifting that freeze on that NFT. And basically, this is a tactic to get around false reports. So people could like grieve other people and say like, "That NFT is stolen," and then OpenSea would freeze it. And then the owner would be like, "It wasn't stolen. That's my NFT." And so they're still freezing stolen NFTs, but they're need, they need to show the owner, previous owner or current owner, needs to file a police report. And if they don't do that, then that, that lift is automatically released. And so it's not frozen.

• 1:17:15Ryan Sean Adams?

  I want to get in the headspace, get out of our crypto bubble for a minute and get in the headspace of enforcement agencies like the local police. Okay, right here. So think about this. You're a board of ape yacht, yacht club owner. You have an ape, and you lost it because you did something real stupid with your private keys. You know, you just left him out there and somebody took it. And you have to file a local police report?

• 1:17:36David Hoffman?

  Yeah.

• 1:17:37Ryan Sean Adams?

  Like, so what's the police gonna do? They're gonna be like, what are you doing? Like, why did you do this?

• 1:17:41David Hoffman?

  Cop car gonna come to your house?

• 1:17:42Ryan Sean Adams?

  What are they going to do?

• 1:17:44David Hoffman?

  Police officers gonna write down notes?

• 1:17:45Ryan Sean Adams?

  If I was a cop on the beat, I would be incredibly annoyed.

• 1:17:47David Hoffman?

  Right.

• 1:17:48Ryan Sean Adams?

  Just at the prospect of NFTs even existing. Now, I have to go hunt for like stolen digital property online. Like, how, what am I supposed to do with this?

• 1:17:56David Hoffman?

  Right.

• 1:17:56Ryan Sean Adams?

  And the tie here is actually like, the OFAC sanctions, you notice, came on the back of North Korea hacking their own sidechain, right? FBI has to get involved. All of these smart contract hacks, the DeFi is basically saying to the FBI, hey, come help us sort this out. The FBI is probably like beyond annoyed. Like, no, how about you guys write your code better so it doesn't get hacked?

• 1:18:17David Hoffman?

  Don't lose your private keys, yeah.

• 1:18:19Ryan Sean Adams?

  And so what do they do, right? Government responds and is like, we're gonna sanction OFAC. I just think that this is like, these are all somewhat related. And if we get out of our crypto bubble once in a while and we put our, you know, headspace in the minds of like enforcers, right? They're probably like pointing to crypto and be like, hey, I understand what you're saying about that whole OFAC thing, but also how about you get your stuff together? And like, don't let North Korea hack millions of dollars worth of crypto.

• 1:18:46David Hoffman?

  Yeah, I think what we're really missing here is like virtual police. It's like, our local law enforcement is not, they're here to settle like physical disputes. We need like virtual police to go after this?

• 1:18:58Ryan Sean Adams?

  Digital police?

• 1:18:59David Hoffman?

  Digital police, but I don't even like that. I'd rather just us get our shit together. I think that's a better solution.

• 1:19:04Ryan Sean Adams?

  Same here.

• 1:19:04David Hoffman?

  Here's Pseudoswap, royalty fee, Pseudoswap is finding favor with NFT traders. Basically, this is a news report talking about the absolute fantastic volumes going through Pseudoswap. So, Pseudoswap is just like an NFT liquidity primitive, and it is doing some, some great volumes. So, $10 million, I believe, in the last accumulative trading volume. So, congrats to Pseudoswap liquidity coming for NFTs. And we really need it because of what's about to happen next.

• 1:19:31Ryan Sean Adams?

  Well, what is about to happen next then with this liquidity comes great responsibility and power, doesn't it?

• 1:19:36David Hoffman?

  Yeah, so I've talked about this before. We've talked about the concept, the category of collateralized NFTs where you put up your NFT for collateral and borrow against it. We know DeFi loves to do collateralized stuff. It's like one of our biggest things. And so there's this application called Bend Dow, which does this, allows for collateralization of NFTs and allows you to borrow against it. And this Twitter account Cirrus NFT says, "There's currently 32,000 Ether, about $60 million worth of NFTs being used as collateral for a loss on Bend Dow. For the first time ever, a lot of these are at serious peril of liquidation." And he puts together a thread of the biggest risk to the NFT market that no one is talking about, a little bit, a little bit hyperbolic. Basically, Bored Apes and Mutant Apes, these

• 1:20:21David Hoffman?

  two NFT categories are on the precipice of a cascading set of liquidations. Because Bend Dow puts collateralized apes, or collateralized NFTs up for auction at like probably a discount, 5-10% discount to the floor price, hoping that somebody comes and scoops these up. A lot of them are collateralized. And so a lot of these are going to be put on the market. And there's just a, like, just like we saw that the 70% drawdown in crypto and like because of Aave liquidations and C-Fi liquidations, we can see on-chain that there is a cascading liquidations of Bored Apes and Mutant Apes ready to go because of this like NFT collateralization. Like, I'm sorry, Ryan, how many times I talked

• 1:21:05David Hoffman?

  about how this was going to happen on the weekly rollup over the last like nine months? At least like four or five times I mentioned that this, like, as soon as we get NFT collateralization, we're going to have Dejans going along on their NFTs, and then they're going to get liquidated and lose their NFTs.

• 1:21:17Ryan Sean Adams?

  That's all right. That's efficient markets, man. So people who are risky lose their money and that's okay. It's a pawn shop NFT. Everyone's going to be okay, I think.

• 1:21:25David Hoffman?

  Yeah, yeah, this is my truth I say, like, we're too degenerate as a community to not trigger cascading liquidations on our NFTs. And since there's an update on this, that's about, the first liquidation of one is about to happen. There is one Bored Ape, Bored Ape number 533, which the floor price is about 72 Ether, but it's being sold for 68.4 Ether, which lowers the floor price, Ryan. And so, you know, the floor price keeps on dropping, which could potentially liquidate more NFTs. So

• 1:21:56Ryan Sean Adams?

  Hey, if you're looking for deals on it. If you're looking for deals on NFTs, though, head over to the pawn shop. They're liquidating.

• 1:22:01David Hoffman?

  Yeah, liquidating the apes. Like, the fact that it is the apes, I think, is just like, of course.

• 1:22:06Ryan Sean Adams?

  Hey, there's some crypto punks in here, isn't there? There's gotta be.

• 1:22:09David Hoffman?

  No.

• 1:22:09Ryan Sean Adams?

  No, it's all apes.

• 1:22:10David Hoffman?

  It's all apes.

• 1:22:10Ryan Sean Adams?

  Never mind. You know, Mailchimp as well. So Bankless, of course, has a newsletter and we use Substack right now. We're looking at transitioning to something else. But did you know, David? Mailchimp has created a crackdown on crypto newsletters, including Muzari at the edge. Because basically, if you have a crypto newsletter, they are not sending the emails out.

• 1:22:32David Hoffman?

  Yeah, so your crypto newsletter got rugged. Sorry, Muzari.

• 1:22:35Ryan Sean Adams?

  Again, the, I think they're back. I think they've resolved it somehow. I don't know with Mailchimp or with someone else. But the hazards of centralized companies, if you're decentralized, if you're crypto media publication like us, David, this is kind of a wake up call to us to make sure that we have redundancy here. Also, a wake up call for Taiwan in the face of cyber attacks from China. They're actually looking to Ethereum's IPFS tech to help out. I don't know if this is a big way or what, or if this is sort of a small trial. But David, I think what this speaks to is interesting that nation states themselves will start to increasingly need to use decentralized technology like Ethereum, like IPFS,

• 1:23:19Ryan Sean Adams?

  like, of course, cryptography, which they already use today, in order to defend themselves against other nation states. That is the reason at first the US, Marc Andreessen told us on the podcast, the US did not want to adopt SSL, did not want to, did not want to allow crypto technology, cryptography technology in the browser on the web. But they had to in order to protect all of their stuff from other nation state actors. So they just said yes to it. I think that is the destination for Ethereum, by the way, and why the OFAC sanctions will not hold up, because eventually they're going to need these decentralized asset money networks to protect against other nation states. And maybe we're seeing a whiff of that with Taiwan here.

• 1:23:59David Hoffman?

  Certainly, like cryptocurrency, cryptography, blockchains, these are technologies that supersede nation states. They are a level, they are a dimension higher than nation states. And so when you are a minority, like nation state entity like Taiwan, it's advantageous for you to adopt these crypto protocols, these cryptography mechanisms.

• 1:24:21David Hoffman?

  Because the cryptography mechanisms, cryptography supersedes nation states. So if you are a sub-dominant nation state, you use cryptography, you use IPFS, you use blockchain stuff to get out under the thumb of a larger nation state. And so the IPFS, for those that don't know, is the interplanetary file system. It's a decentralized peer-to-peer network that lets users back up and store files and websites by hosting them across a network of nodes, eliminating central points of failure, and circumventing censorship efforts. The storage and file referencing system for Ethereum is frequently compared, like IPFS is frequently compared to a file sharing protocol, kind of like BitTorrent. And there's, I don't think there's any coincidence that the news of this IPFS upgrade of Taiwan,

• 1:25:06David Hoffman?

  I don't know what that means, like, I'm sure it's not just like universally like Taiwan.

• 1:25:09Ryan Sean Adams?

  No, no, I think it's probably in a very small way.

• 1:25:11David Hoffman?

  Yeah, and also the important stuff. But comes right after Nancy Pelosi shows up in Taiwan and then China starts flexing its muscles. Like, that's no coincidence that this is happening.

• 1:25:22Ryan Sean Adams?

  Crypto is entering the geopolitical nation-state level conversations here. Decentralized tech is. David, do you remember all the way back from 2017? Do you remember Dragon Chain?

• 1:25:31David Hoffman?

  Yeah.

• 1:25:31Ryan Sean Adams?

  Dragon Train, Dragon Chain bros?

• 1:25:33David Hoffman?

  Yeah.

• 1:25:34Ryan Sean Adams?

  This is like Disney's version of Ethereum? I remember it was marketed that way.

• 1:25:37David Hoffman?

  It was, Disney was, they couldn't officially associate their brand with it, but it like, for some reason, it got like, a wink, wink associated with it. Yeah, like ex-Disney people, and like, it was, it was one of these things that pumped to the absolute moon in 2017.

• 1:25:53Ryan Sean Adams?

  Also, back in the days where we had a, Asia had an Ethereum killer called Neo, Disney had an Ethereum killer called like Dragon Chain, it was all of these Ethereum killers.

• 1:26:02David Hoffman?

  Dragon Chain.

• 1:26:03Ryan Sean Adams?

  Right now, so the news is not that, not Dragon Chain, it's kind of dead. But the SEC is filing suit against Dragon Chain all the way back from 2017. So this is like five years coming, and now it's happening. There would be comment on that in and of itself, but just if you go to the price of Dragon Chain, David, do you know all-time highs for Dragon Chain? Above $5, $5.50.

• 1:26:24David Hoffman?

  Yeah, it pumped from like, it started below a penny and then it pumped to $5.50. It made a lot of people very, very rich.

• 1:26:30Ryan Sean Adams?

  You know what it's trading at now?

• 1:26:32David Hoffman?

  I'm guessing it's down bad.

• 1:26:34Ryan Sean Adams?

  It's down real bad.

• 1:26:36David Hoffman?

  Real bad.

• 1:26:37Ryan Sean Adams?

  Two cents.

• 1:26:38David Hoffman?

  Oof.

• 1:26:39Ryan Sean Adams?

  Five fifty, five dollars fifty cents to two cents as a ninety nine point nine something X drop.

• 1:26:45David Hoffman?

  That's a deletion of wealth right there.

• 1:26:47Ryan Sean Adams?

  Uh, yeah. So you weren't into Dragon Chain?

• 1:26:49David Hoffman?

  I was not. I, uh, my friend was, but not, not me personally. Like, I just like Dragon Chain, like, I have this, the name itself, I was like, back when like names were important. I was like Ethereum, Dragon Chain. Ethereum, Ethereum name is way better. So I'm gonna stick with like the serious name. It's, it's worth noting that the SEC statute of limitations is seven years. So if you issue an illegal security and the SEC doesn't come after you for seven years, you're good. Five years. They almost made it. They almost made it. Uh, but you know, you're not out of the woods for seven years and Dragon Chain got caught at five years.

• 1:27:25Ryan Sean Adams?

  Yeah, I, I guess it takes a long time to go through the process of this. It's another lesson for crypto where we think things happen fast. Uh, on other news, in other news, Ontario cracking down. What's this tweet from you, David? And tell us the news.

• 1:27:38David Hoffman?

  Yeah, there's new regulatory outcome, like changes coming out of China for centralized exchanges. They are, if you're, if you're a cryptocurrency that is not-

• 1:27:46Ryan Sean Adams?

  David, you said China, but I think you meant Canada.

• 1:27:48David Hoffman?

  Well, I mean, that's-

• 1:27:49Ryan Sean Adams?

  But you know, that's what's funny about it.

• 1:27:51David Hoffman?

  That's what's funny about this.

• 1:27:52Ryan Sean Adams?

  Freudian slip.

• 1:27:52David Hoffman?

  Yeah, exactly.

• 1:27:53Ryan Sean Adams?

  Okay. So it's Canada. It's Ontario specifically, but Canada. Go ahead.

• 1:27:56David Hoffman?

  So all other crypto assets that are not Bitcoin, Ether, Litecoin, or Bitcoin Cash, these are the four cryptocurrencies that you can buy without any limits. All other cryptocurrencies in Ontario, there's a thirty thousand dollar limit a year that a individual retail investor can buy crypto. So that includes Solana. And I would say as much as crap as I give Solana, it is way better than Litecoin. It's so much better than Bitcoin Cash. There's no competition there. Litecoin, like, this, this is living in twenty seventeen. Uh, and so like only the, there are these like enshrined cryptos that are like, okay, you can buy as much as this. Like Bitcoin and Ether good, Litecoin, Bitcoin Cash, absolute trash.

• 1:28:37David Hoffman?

  But then all the other cryptocurrencies are like, like you're not allowed to touch them for more than $30,000 a year. This is very similar to accredited investor laws where the wealthier you are, the higher your limits are. But like, dude, what the F? What the F?

• 1:28:49Ryan Sean Adams?

  What are you doing in Ontario?

• 1:28:50David Hoffman?

  What's going on?

• 1:28:52Ryan Sean Adams?

  It's not all provinces, of course. It's Ontario, and this is kind of Ontario's version of the SEC doing this. And some people actually, when I tweeted this out to you, they said, oh, these rules have been in effect for a while. They're just kind of now getting rolled out. So they were in effect starting last year. They're getting now, they're getting rolled out. The other like tweak on this is it's basically they're enforcing this at the the central exchange level. So there are ways to circumvent it, which is like, you could open up nine different exchange accounts, I guess, and get $30,000 of Solana on each if you really want to.

• 1:29:24David Hoffman?

  You could also buy a ton of Ether.

• 1:29:26Ryan Sean Adams?

  And then convert it.

• 1:29:28David Hoffman?

  And then send it to Uniswap and then have no limits there. So it's not a ban on like you buying Uniswap, for example.

• 1:29:33Ryan Sean Adams?

  It is the principle of the thing. Regulator knows best.

• 1:29:37David Hoffman?

  Right.

• 1:29:37Ryan Sean Adams?

  These are the four crypto assets Ontario regulators have sanctioned you for. Bitcoin, ETH, Litecoin, and Bitcoin Cash. These are the safe ones, guys. And you can put as much as you want in there.

• 1:29:51Ryan Sean Adams?

  I don't understand it. But for people to know, I actually grew up in Ontario, so I'm a Canadian and American. But I moved to the US when I was kind of in middle school. That was a freaking tough move, by the way. Another story. Moved to another country in middle school.

• 1:30:05David Hoffman?

  I'll ask about it in your layer zero.

• 1:30:07Ryan Sean Adams?

  But now, like, I just feel like I have to look for where I live.

• 1:30:11David Hoffman?

  Right.

• 1:30:12Ryan Sean Adams?

  With like, how crypto friendly is it? Yeah. How free do I want to be? And like, this is like, if I ever wanted to move back to Ontario, I might be second guessing it if stuff like this is coming down the pipe.

• 1:30:22David Hoffman?

  Right.

• 1:30:23Ryan Sean Adams?

  So anyway, Canadians got to resist too. We're working on it on the OFAC side, but there's lots of regulatory fights to to fight.

• 1:30:30David Hoffman?

  Yep. Coming in next, we have the House passes the massive climate tax and health bill titled the Inflation Reduction Act and is now being on its sent on its way to Biden to receive his signature, which he's totally expected to sign. $437 billion Inflation Reduction Act, 15% minimum tax on large corporations, 1% excise tax on share buybacks, tax credit for electric vehicles, there's 369 billion spending on climate and energy policies, and also allocate 64 billion to extend Affordable Care Act program to reduce insurance costs. Interesting that there's all this extra stuff, which is like stuff that we hear about all the time, like, you know, Affordable Care Act, you know, green energy investment,

• 1:31:14David Hoffman?

  but it's inside of this like Inflation Reduction Act. The name itself is like, kind of like the Patriot Act, like Inflation Reduction Act, like you can't hate it. And also, there's something completely oxymoronic about spending over hundreds and hundreds of billions of dollars in new spending to reduce inflation. Like, you should be that that's what creates inflation. Like, you're spending more money.

• 1:31:36Ryan Sean Adams?

  To be fair, so a couple of things. So one is, this was actually, I think the article we're looking at is from Friday. Biden did already sign it. So it is, it's law now. Done. And, um, yeah, there, there are obviously some tax pieces to this too, right? So they are raising some income, not just spending, they're, they're doing a little both. But call me skeptical if this is actually going to do anything to reduce inflation. It's just not, I mean, the Fed has impact on inflation. This is just a micro drop in the, in the bucket, obviously, before November elections, which makes sense. Nice, nice bill to call it, the Inflation Reduction Act, not going to happen, not going to do much for it, though. David, what's this? We're on the releases side of things. Galleon portfolios? What are Galleon portfolios?

• 1:32:17David Hoffman?

  Yeah, people, new listeners, people that came in the last few years, probably aren't familiar with this thing called token sets or set protocol. It was a big, all of the rage back in the bear market, 2018, 2019. But basically, people could create their sets of tokens and like, I created my set, other people created their set. Galleon is working Uh, building on top of that protocol to make just like more, it's a little bit like index co-op. So Galleon portfolios, there's four of them. You have like the merge portfolio, the fees portfolio, SPI. And it's just a collection of tokens for in different ecosystems. So the merge index 50% wrap staked ether, 20% liquidity providers like gladio, rocket pool, 30% DeFi primitives, uni, Ave, SNX.

• 1:33:00David Hoffman?

  You have the Spartan index ecosystem SPI, which is SNX, Lyra, Thales, the VE token index for holders of vote is all the VE tokens out there. So curve, CFX, FXX, BOW, butterfly. So it's just a new index, index machine out on the world, Galleon portfolios. So cool, nice release.

• 1:33:18Ryan Sean Adams?

  There you go. On the raises side of things, we've got A16Z. They just gave $350 million to Flow. This is Adam Neumann's company, A16Z. This is the biggest, one of the biggest checks they've ever written. Values flow at $1 billion. Adam Neumann, of course, is the entrepreneur in quotes behind.

• 1:33:39David Hoffman?

  Visionary, yeah.

• 1:33:40Ryan Sean Adams?

  Visionary, right? There've been many documentaries about him, some kind of scandalous. But A16Z is a believer. It's funny that like three or four months ago, David, Flow was actually a crypto carbon company.

• 1:33:54David Hoffman?

  No, that was, that was Flow Carbon. This is.

• 1:33:56Ryan Sean Adams?

  That was Flow Carbon. It's the same, it's the same kind of thing. It was Adam Neumann. Flow Carbon was the name. They shortened it to Flow and now it's a completely different thing. So I'm not sure. It'd be an interesting story to hear like what Adam and the team decided about the crypto carbon market, deciding it wasn't ready and then pivoting completely to real estate. But the other side of this is this is an absolutely colossal raise with a massive evaluation. And Jason Calcanis has a take on this. What's his take, David?

• 1:34:25David Hoffman?

  Yeah, Jason Calcanis from the All In Podcast and he states, if a startup is worth $1 billion before it launches a product, it's probably a scam. I tried to do some research on what this product actually is. I actually can figure it out. And that was actually a comment in one of the articles I read is that we still haven't been able to figure out what this product actually is.

• 1:34:45Ryan Sean Adams?

  So that's the juxtaposition because we also know that Marc Andreessen is like one of the best investors of his generation and he's pretty savvy and pretty smart. And this is him giving justification for why they're doing 350 million in this thing. Interesting juxtaposition, I think. Not super crypto related, other than this used to be-

• 1:35:02David Hoffman?

  Well, that's what that's what it is. People are like, like trying to look into the quote from one article that came that came from some investigative journalist said that Adam is building a next generation multifamily property management system with a proprietary payment system, adding that the system will include full financial services wallet, a tokenized reward program and crypto payment method. What?

• 1:35:25Ryan Sean Adams?

  Yeah.

• 1:35:25David Hoffman?

  What?

• 1:35:27Ryan Sean Adams?

  Yeah, I don't know what that's about, David.

• 1:35:28David Hoffman?

  I don't know what that's about.

• 1:35:29Ryan Sean Adams?

  All right, Dragonfly, they're a crypto hedge fund. They bought another hedge fund called Metastable. Metastable was like a 2017, 2018. In fact, they were earlier than that to crypto. They bought them to 400 for $400 million, all their assets under management. Kind of some consolidation in the crypto hedge fund world. David, let's talk about jobs, though.

• 1:35:48David Hoffman?

  Let's do it.

• 1:35:49Ryan Sean Adams?

  We talked about raises, so we gotta talk about jobs. A lot of hot crypto jobs going on. What do we remind folks every week, David?

• 1:35:56David Hoffman?

  That you should get a job in crypto because the private markets have a ton of money and these private markets are going into the jobs that you see here on the jobs boards. There is a ton of jobs in crypto. Ryan, read them off.

• 1:36:07Ryan Sean Adams?

  I gotcha. DYDX is hiring a software engineer on the backend. Stakefish wants an HR business partner.

• 1:36:13David Hoffman?

  It's not technical.

• 1:36:14Ryan Sean Adams?

  Stakefish also wants a backend full stack engineer and a front end software engineer and a dev ops engineer. Bankless, we need somebody for media operations.

• 1:36:21David Hoffman?

  It's not technical.

• 1:36:22Ryan Sean Adams?

  Podcasts, videos, that sort of thing. Software engineer for Boardroom Labs, a manager of crypto marketing.

• 1:36:27David Hoffman?

  Non-technical.

• 1:36:27Ryan Sean Adams?

  At Manticore Games, we need a thread or at Bankless. A VerTek Protocol needs a marketing coordinator.

• 1:36:33David Hoffman?

  Non-technical.

• 1:36:33Ryan Sean Adams?

  A financial analyst from Streams, product manager for Bankless Academy.

• 1:36:37David Hoffman?

  It's not technical.

• 1:36:38Ryan Sean Adams?

  I could go on, but I don't need to because you can get all of these jobs at the Bankless jobs board, bankless.pallet.com/jobs. Go check it out. David, what's coming next, man?

• 1:36:47David Hoffman?

  Questions from the nation. Every single week, we ask the nation, what do you want us to answer? So we got those questions coming up next. Does staking before the merge matter? And also, what comes next after the merge? And also, some hot takes from crypto Twitter. So these fantastic questions and the hottest takes are coming up right after we talk to some of these fantastic sponsors that make the show possible. ZK Sync is an Ethereum Layer 2 network that is pushing the frontier of high-performance blockchains that don't compromise on security or decentralization. ZK Sync has combined the power of zero-knowledge rollups in the Ethereum virtual machine, enabling developers to build the greatest Web3 projects possible, ones we haven't even seen yet. Crypto needs its killer applications to onboard the world, but crypto-killer apps need ZK Sync as a platform to build on first.

• 1:37:31David Hoffman?

  It's generally accepted that zero-knowledge rollups are the conclusion of crypto blockchain scaling technology, and ZK Sync is leading the charge into the final frontier of crypto-economics. So if you're a developer who wants to build your app on a future-proof foundation, which gives your users the best UX possible, check out ZK Sync's website at zksync.io. And yes, there's also going to be a token, so give them a follow on Twitter too, @ZKSync. The Brave browser is the user-first browser for the Web3 internet, with over 60 million monthly active users. And inside the Brave browser, you'll find the Brave Wallet, the secure, multi-trained crypto wallet built right into the browser. Web3 is freedom from big tech and Wall Street. More control and better privacy. But there's a weak point in Web3: your crypto wallet. And most crypto wallets are browser extensions, which can easily be spoofed. But the Brave Wallet is different.

• 1:38:15David Hoffman?

  No extensions are required, which gives Brave browser an extra level of security versus other wallets. Brave Wallet is your secure passport for the possibilities of Web3, and supports multiple chains, including Ethereum and Solana. You can even buy crypto directly inside the wallet with Ramp. And of course, you can store, send, and swap your crypto assets, manage your NFTs, and connect to other wallets and DeFi apps. So whether you're new to crypto or you're a seasoned pro, it's time to ditch those risky extensions, and it's time to switch to the Brave Wallet. Download Brave at brave.com/bankless and click the Wallet icon to get started.

• 1:38:45Ryan Sean Adams?

  All right, guys, we are back. Reminder, we're getting to the questions. If you have a question for the weekly rollup, you can reply to the tweet thread. Bankless HQ on Twitter tweets out every week and get your question answered. This is the first question from skiing.lens on Twitter. "Is there a reason that ETH should be staked prior to the merge versus post-merge? Does staking post-merge carry any negative connotations, such as missing out on rewards, versus possessing already-staked ETH going into the merge? Should I stake now or should I wait until after the merge, David? What do you think?"

• 1:39:14David Hoffman?

  I think that it does not matter. I don't really, there's nothing really special about staking through the merge. Like, you get to say that you did it, and that's the biggest thing, is like, you get to say that you were there. Like, the financial ROI, like, you're gonna get, like, 0.005% more ETH between, like, now and the merge, because, like, you're just staking for such a little amount of time. I would say if you are not already staking your Ether, the risks might actually be higher, because there might be some weird shenanigans with the merge. So I would say, if you're not already staking your Ether, I would just say, hold on to it, and then stake post-merge, and do that.

• 1:39:49Ryan Sean Adams?

  But this is my take too, and this is personally what, like, I'm doing, right? It's like, why stake now? Why not wait till after? Like, a year ago, when issuance...

• 1:39:57David Hoffman?

  De-chain?

• 1:39:58Ryan Sean Adams?

  Yeah, when stake rewards were much higher, it was like, something like 7%, something like that. Maybe there's some reason for it. It was never 7, it was like 6.

• 1:40:06David Hoffman?

  Oh, it did start off very...

• 1:40:07Ryan Sean Adams?

  Started off high, when it was very low. Anyway, I could see that, but that's gone down. And for me, like, there's maybe some execution risk in there, but also, like, I wonder about forking. So if there is a POW ETH version, do you think they might disclude anyone who's staked from that?

• 1:40:25David Hoffman?

  By definition, by definition, you will not get the proof-of-work staking.

• 1:40:30Ryan Sean Adams?

  Again, I know you're not very bullish that there's gonna be a high-value POW chain, but that's another reason you get more of that forked token if you don't stake pre-merge. So I'm gonna wait. I think that's the right call. What's our next question from pete.eith? He says, or they say, "What will be the next thing to look forward to post-merge?" What do you think, David?

• 1:40:50David Hoffman?

  Yeah, I think the meta of conversation will shift into 4844, and this is gonna be the thing that, like, cuts Layer 2 transaction fees by like 1/100. I think that'll be kind of the next thing that the general Ethereum community focuses on. And there's always something to focus on, but I will say, it's also like, like... The merge EIP 1559, like staking, we'll be in the rearview. We do have to like, at some point, like the Ethereum chain just like runs, guys. At some point, like, there is no next thing.

• 1:41:20Ryan Sean Adams?

  Appreciate that for a little bit?

• 1:41:21David Hoffman?

  Yeah, we do just, we should just appreciate that.

• 1:41:23Ryan Sean Adams?

  Bask in the glow.

• 1:41:24David Hoffman?

  But it will be 4844 that we talk a lot about.

• 1:41:26Ryan Sean Adams?

  So 4844, probably next year, probably sometime in 2023, hopefully. And this gives scalability to rollups. Makes rollups essentially free.

• 1:41:36David Hoffman?

  Yeah, basically.

• 1:41:37Ryan Sean Adams?

  I'm using hyperbole, but like, close to free.

• 1:41:39David Hoffman?

  Good. It's good hyperbole. I think after that, I would also say proposer builder separation, but that is in the very distant, that's like 2024 stuff.

• 1:41:46Ryan Sean Adams?

  Yeah. And by the way, rolled up into the next, um, next fork, which could happen in 2023, is also withdrawals. So if you stake, it's gonna be locked in there. That's good for price.

• 1:41:57David Hoffman?

  Sakers are like, you guys, I'm totally looking forward to withdrawals.

• 1:42:01Ryan Sean Adams?

  Yeah, I mean, I

• 1:42:02David Hoffman?

  I would like to get my ETH back, yeah.

• 1:42:04Ryan Sean Adams?

  Yeah, exactly. And that's coming, that's, right now, it's bundled in the same fork. They're gonna co-release those things, but that may not be the case. They could release them in separate forks, too. All right, David, takes of the week. This one, uh, from Peter Van Valkenburg. He is a crypto lawyer at Coin Center.

• 1:42:20David Hoffman?

  He's the one that wrote the Coin Center report. And he says, "I don't know who needs to hear this, but if the big regulatory battles are being fought about a different cryptocurrency, it's not because your preferred crypto is more decentralized, it's because, it's because governments aren't worried about the things it does and how it does them." And then, of course, with some nice context, Ryan Shonadams says, "I think I know who needs to hear this." Basically, this is, this is subtweeting all the Bitcoiners who are like, "Ha, ha, ha, like Ethereum is being targeted by like regulatory and like nation state regulations." And then, like, Peter is saying, "Yeah, it's because, like, your Bitcoin, the government's not worried about Bitcoin. It's not a threat to them."

• 1:42:58Ryan Sean Adams?

  Let, let, let Bankless, let you and I, David, make a public commitment. Like, I just want people to hear this, right?

• 1:43:06Ryan Sean Adams?

  Bankless is about freedom, it's about decentralization, it's about censorship resistance, doesn't matter what chain.

• 1:43:13David Hoffman?

  Yeah.

• 1:43:13Ryan Sean Adams?

  All right. If Cardano needs to fight the fight around this.

• 1:43:17David Hoffman?

  Right.

• 1:43:17Ryan Sean Adams?

  Because they're being unfairly targeted. If Tron needs to fight the fight around this. If Solana needs to fight the fight around this, or Bitcoin needs to fight the fight around this, we show up.

• 1:43:28David Hoffman?

  We show up.

• 1:43:28Ryan Sean Adams?

  And I hope anyone in crypto shows up for these fights, because we're all in this together, right? It's like, I think the tribalism doesn't want us to believe that we're all in this together, but at the end of the day, we are. This is the crypto nation. We are all fighting for the same things, at least if we are preserving those basic essential rights. So I just want to say that publicly, in case that's not clear.

• 1:43:52David Hoffman?

  And I'll say it again, like, if you're on crypto Twitter, like, in these trench warfares with tribal warfare, like, I understand how weird it is that me and Ryan are like, "Get all these Bitcoiners, Bitcoiners." But like, they are so annoying in my mentions, of talking about like, how Ethereum is like the centralized scam coin that's controlled by Vitalik's basement. Like, it's just so exhausting.

• 1:44:13Ryan Sean Adams?

  It could be that Twitter algo tricking you, though, that David, like, we're gonna screw with David today, let's put all these things in.

• 1:44:19David Hoffman?

  No, the Bitcoiners are like, "They target my tweets and they descend on them and they just harass me."

• 1:44:24Ryan Sean Adams?

  I know, there's some of that. This is another take, do you want to read it?

• 1:44:28David Hoffman?

  Yeah, Ryan Sean Adams says, "People gonna think twice about staking their ETH in a centralized exchange now. Thanks OFAC for promoting decentralization." What do you mean? What do you mean?

• 1:44:38Ryan Sean Adams?

  The meta take here is that this is getting us all thinking about decentralization and where the centralization vectors are. And I think it's super good for the space, long term. So we're thinking about our front ends, right? Maybe more of these should be on IPFS. We're thinking about validating staking. And what happens if major validators go rogue and promote something that's centralized? What does the Ethereum community do to react? We're game strategizing all of these potential outcomes. Super healthy, pretty excited. So, this is the beauty of crypto, I think, is anytime you get kind of like censorship or massive crackdown.

• 1:45:16Ryan Sean Adams?

  Like, it's just like, it's just like, kind of the, the water balloon. It just kind of squeezes through the, like authoritarian fingers and like manifests somewhere else. And so, uh, yeah, I think this is what progress looks like, is the bottom line, what I would say. It's, it's actually a good thing. Is that, is that weird to say? I mean, people are like, rose colored glasses. What, how are you saying that this OFAC sanction thing is a good thing? But in a way it is.

• 1:45:38David Hoffman?

  Right. The, it's Ethereum crypto. These are organic systems. These are anti fragile systems and the community is the antibodies. And when the community gets faced with a stressor, we, we respond and we, we make it things. When something comes to attack Ethereum, we fix it and make it more decentralized. So if there was a weakness, we solve it. And this is, it only happens when there is stress, like animals, organisms, they respond to stress. Ethereum is being stressed by this OFAC sanctions thing and we are responding to it by making us stronger.

• 1:46:12Ryan Sean Adams?

  Yep, we're just rattling around, rattling around. David, what are you bullish on this week?

• 1:46:16David Hoffman?

  Brian, this was gonna be atypical for me. I am bullish on mountains. I'm going, I'm turning off Twitter. I'm deleting Twitter.

• 1:46:23Ryan Sean Adams?

  Is this nature?

• 1:46:23David Hoffman?

  I'm, yeah, I'm going, I'm going into the mountains. I'm not connecting, disconnecting from cell service. You can't get cell service out there. Gonna hang out with four of my homies and only think about trees.

• 1:46:35Ryan Sean Adams?

  You're gonna release all of the digital toxins from your body?

• 1:46:38David Hoffman?

  Yes.

• 1:46:38Ryan Sean Adams?

  Cause it's gonna happen.

• 1:46:39David Hoffman?

  Yes. This is, this is my first non crypto trip since like 2019.

• 1:46:44Ryan Sean Adams?

  Oh dude, you did a long time coming then.

• 1:46:47David Hoffman?

  Yeah.

• 1:46:47Ryan Sean Adams?

  Enjoy it, enjoy the grass. Enjoy being outside.

• 1:46:50David Hoffman?

  Yeah, I'm gonna sing grass for hours.

• 1:46:52Ryan Sean Adams?

  Yeah, I'll, I'll keep everyone at bay on Twitter for you, alright?

• 1:46:55David Hoffman?

  Yeah, thank you.

• 1:46:56Ryan Sean Adams?

  All the maximalist, you know?

• 1:46:57David Hoffman?

  Thank you.

• 1:46:57Ryan Sean Adams?

  That'll be on me this weekend.

• 1:46:58David Hoffman?

  I'm, I'm bullish on zero cell reception. Ryan, what are you bullish on?

• 1:47:03Ryan Sean Adams?

  I am bullish on layer zero, my friend. So what is layer zero? That is the, uh, the people underlying all of the guarantees, all of the security that we have in crypto. You have a podcast called Layer Zero, all about the people in crypto. Because ultimately, this is our only defense, our best defense against everything that comes at this industry. And people don't realize this, whether it's Bitcoin, whether it's Ethereum, whether it's Solana, is the thing that enforces all of the immutability and censorship resistance. And anything else that makes a blockchain, a blockchain goes back to the, the layer zero, right? And that's what we've been talking about, right? So it's like, if- If enough people believe in censorship resistance for Ethereum as a core value and

• 1:47:47Ryan Sean Adams?

  a core property that the project needs to have, they will run the software that makes that possibility a reality. So it all comes back to the people. If the people stop believing this, then we lose and we don't get the censorship resistance. This is why I think movements like Bankless are so important, is because we are working on that layer zero. And the tech can be great, but if you don't have the layer zero to support it, to run the software, to say no in the face of censorship, and to say yes for immutability, you don't really have a blockchain. And I was bullish this week, I guess, back to bullish, on what I saw in Ethereum. And the X movement of like, I vote to fork out any censorship resistance

• 1:48:31Ryan Sean Adams?

  and run a different chain, sell my assets on the censored chain, burn the stake if I need to, and preserve censorship resistance. I'm very bullish on that, David.

• 1:48:41David Hoffman?

  Yeah. And it's the community that supports the blockchain that makes the blockchain, right? And like I said earlier, so many new people came into this cryptocurrency industry in the last like 18 months, and they probably haven't been exposed to these very tough questions. Because like, some people didn't even think about, people are learning about what this means right now. And we need to have these conversations every two years, because new people come in and they haven't had one of these conversations yet. And so we just have to keep on rehashing and reinstilling what our values are on a regular basis, because otherwise we'll lose them.

• 1:49:16Ryan Sean Adams?

  It's like 2022 has been the year of learning lessons, right? We learn the hazards of centralization in centralized lending providers with Celsius and BlockFi and others. We learn the hazards of massive speculation on margin through A16, sorry, through Three Hours Capital and others like them. Now we're learning the value of censorship resistance. This has been a fantastic year for teaching us lessons.

• 1:49:39David Hoffman?

  Bear markets, this is why bear markets are so awesome.

• 1:49:41Ryan Sean Adams?

  I love them. This is great.

• 1:49:45Ryan Sean Adams?

  Me of the week, David. This is hilarious. What are we looking at, man?

• 1:49:49David Hoffman?

  We are looking at Vitalik's new album, which drops September 15th, called The Merge. And so for, this is not actually his album, but for the podcast listeners, this is like a very like dark looking like rap album with Vitalik in like this shadowy like look staring right into your soul.

• 1:50:09Ryan Sean Adams?

  Parental advisory explicit content.

• 1:50:12David Hoffman?

  The Merge. It drops September 15th.

• 1:50:15Ryan Sean Adams?

  That's awesome. That's it from us. We got a moment of zen for you. But before we do, we got to tell you, none of this has been financial advice. It never is. On Bankless, you could definitely lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:50:33David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcast and community as a Bankless premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks and exclusive content and even the Bankless token for airdrops, raffles and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anythings and weekly rollups where

• 1:51:17David Hoffman?

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