A Conversation with Michael Ippolito

David livestreams with Blockworks's Mike Ippolito in a freestyle conversation covering all things crypto. ------ 📣SUI | Register for Sui Basecamp https://bankless.cc/sui-basecamp ------ 🎧Listen On Your Favorite Podcast Player: https://bankless.cc/Podcast ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 💸 CRYPTO TAX CALCULATOR | USE CODE BANK30 https://bankless.cc/CTC ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

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

• 0:21David Hoffman?

  Bankless Nation, happy Friday. We got an unscripted conversation coming at you live. Me and Mike Ippolito are just gonna go at it. Whenever we talk a bunch in real life, it's always super, I always learn a ton from Mike Ippolito, and so I'm going to do that again today, but this time live on the stream. So we're gonna get into that conversation, but first, I'm going to talk about some of these fantastic sponsors that make this show possible. Kraken knows crypto. Kraken's been in the crypto game for over a decade, and as one of the largest and most trusted exchanges in the industry, Kraken is on the journey with all of us to see what crypto can be. Human history is a story of progress. It's part of us, hardwired. We're designed to seek change everywhere, to improve, to strive. And if anything can be improved, why not finance?

• 1:06David Hoffman?

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• 1:51David Hoffman?

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• 2:35David Hoffman?

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• 3:17David Hoffman?

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• 3:24David Hoffman?

  How's it going, Mike? How you doing?

• 3:25Speaker 01

  Doing very well, man. Doing very well. No complaints. Almost the end of the week. What about you?

• 3:30David Hoffman?

  Yeah, we never talk. We never ever talk. What's up with that? The joke is, we actually, we talk quite often, but we never get to talk, I think, open-ended.

• 3:39Speaker 01

  That's very true.

• 3:40David Hoffman?

  When we do, it's usually in some sort of like crowded, loud environment and not as productive as it could be. So I hope that, I hope we can kind of change the game a little bit with what we talked about today.

• 3:52Speaker 01

  Yeah, I agree. Well, what do you, where do you want to start first? I mean, it's been, it's been an interesting week.

• 3:58David Hoffman?

  It's been, it's been an interesting week. It's been an interesting quarter. I think things are crescendoing in their interest. Maybe, maybe we could start just as like where we left off when we had you on the podcast like half a year ago now. And you had, I think, one of the most banger podcasts that we had in a while, really just talking about the Solana thesis, the Ethereum thesis, the Cosmos thesis and how they're all kind of like representative of different points to enter into a becoming a blockchain. And how you were saying like, everything is kind of converging. Uh, that was like banger episode. Everyone loved it. Uh, and I'm just wondering like, uh, that was six months ago. There's a lot of stuff that has happened since then. Um, uh, maybe that I can just present that to you and see where you want to go with it.

• 4:41Speaker 01

  Yeah, I think, um, I think since then, we've started to see even more, even more convergence. And one of the, you know, there's actually a great, you know, this is basically anything that Vitalik writes is gold, right? But he's got this great, very nicely summed up, uh, very nicely summed up diagram, which is, uh, the, the basically three different ways that blockchains are evolving. Uh, and the common component of that is centralized block production, uh, but decentralized proofs and verification. And there are three different ways that that's playing out across a whole bunch of different ecosystems right now. So like, let's take two of these examples, which would be Ethereum, where there's Ethereum, um, and there are centralized builders and a couple of different rollups.

• 5:25Speaker 01

  Or there are maybe, let's call it one large rollup, uh, where there's one, uh, centralized sequencer that's doing a lot of the block construction up there. Or there's, uh, many different rollups, which is sort of what we're seeing now, but MEV is ultimately what ends up, uh, ends up re-centralizing that block production. Because you have, uh, MEV that gets extracted with very expensive proposition to build blocks across all of these different fragmented roles. That requires a big centralized builder to stand in the way. And then on the Solana side of things, like this would be sort of the high TPS chain, which is the third leg of that stool. You've got obviously higher bandwidth and hardware requirements for validators. But you actually saw, this was pretty cool from Sovereign Labs, you saw the very beginnings of a, of a light client over there, an SPV type light client.

• 6:08Speaker 01

  And we know we're going to get TinyDancer on the Solana side of things. So I think that Vitalik, uh, as per usual, said it much better than, than I ever could in a million years. But additionally, like we just saw Polygon release something pretty cool this week called the AG layer, which is this, we, we've been talking a little bit about aggregated ZK proofs, which do something very similar. Celestia, which I, to be honest, at the time, I didn't really get too deep on the design is also very similar. Kind of big blocks, a few chunky validators, but they've got these light nodes which verify and have special powers than the chain. So I think if anything, it's, it's pretty live and well.

• 6:41David Hoffman?

  So I think like before Bankless, I did this podcast with my old buddy Christian Corolas, who then went on to work at Bitcoin Media. And my arc in that role was like the everything guy. So I'm all the chains, the multi-layer ones, the Cosmos, the interoperability, the bridges. And then he was Bitcoin. He was the Bitcoiner. And then slowly over time, I kind of morphed my thinking, my like, my like, just like ideas for how this space would converge. And then I converged into the Ethereum camp and then became like a Bitcoin versus Ethereum podcast. And now I'm kind of like going back a little bit the other way. We're just like, you're seeing the writing on the wall.

• 7:22David Hoffman?

  Like Solana is not going away. There's so, there's always so much excitement on like newer chains, no matter what era you're in. Like right now, Celestia is super hyped and actually getting real, real adoption. Monad isn't even live yet, and people love it already. There's always going to be the move towards just like newer chains. I think people are always going to enjoy new chains. And so like, I'm kind of like waving the flag on just like one central chains that will like gobble up everything, even though I do think that like, there are forces that push towards that direction, and there always will be. But there's also like push forces that push away from that direction. And they're likely always will be because we've definitely seen that over the last, like, you know, eight years in crypto.

• 8:07Speaker 01

  So David, what do you think, if you had to outline, what do you think the forces that push us towards that direction of one chain to rule them all? And what are the forces that disperse us from that concentrated?

• 8:16David Hoffman?

  I think the very, very simple one is like, the bigger that the, the top dog chain is, like the one chain to rule them all, the bigger that that one is, the stronger of an incentive there is to fork off from that chain and try and build a new one, a better, like a better Bitcoin, build a better Bitcoin, like an Ethereum killer. So like, there's like this natural equilibrium that is set in between like, it doesn't matter how successful you are, the larger, the more successful you become, the stronger the incentive it is to be to dethrone you. And then you get into like the VCs playing like the alt-layer-one games, which, you know, retail also Loves retail loves that game too. And so like there is, I don't know if there's ever. And then also like there, there was that meme that John Charbonneau tweeted out that I think you retweeted maybe.

• 9:01David Hoffman?

  And it was like generalized chain wants to become more specific, more specific or app, app wants more sovereignty. So it becomes an app chain on a generalized chain. And then app wants more features, becomes more generalized. A new app comes and is born on that slightly more generalized chain. And then now that app wants more sovereignty, so it makes an app chain and there's like a cycle. There's always just like, you can't have too much of anything. Because there will always be some sort of opposing force to check on that. Uh, and so that's kind of what I'm seeing like, I'm just ready for like the new crop of layer ones. So like gain of attention, attention in this bull market and the cycle repeats.

• 9:36Speaker 01

  I'm, I'm with you. Another way of saying that VCs and retail love new layer ones is entrepreneurs love it too. That is, I think the single driving force, which is just that entrepreneur sees inevitably with these, you know, with blockchain architectures, you have to make trade offs. And there's always like one smart person who's like, I don't really like that you made this trade off. I actually think there's a market for someone who made the opposite side of the trade off. And then they go do that. So every experiment ultimately ends up getting run. And again, I think that's, I think that's a positive thing, but that's a, that's a funny meme. Because I think also one thing that might be changing at least my worldview about how I used to think about things. I used to think about the world very black and white between general block space versus app specific. So like general is like Ethereum, right? Like you can do anything you want.

• 10:20Speaker 01

  It's the world computer and then osmosis is an example of an app specific chain. It just wants to be a dex. That's what its block space is optimized for. But it's kind of converging in both directions. And even the general blockchains, like Ethereum's roadmap now looks like the main chain is a bulletin proof, a bulletin board for purchasing zk proofs and it's exporting money. And it's like, well, Bitcoin kind of started general, but now it's the app chain for money. Ethereum looks like it's heading in that direction. So Ethereum is specializing. But then some of those dexes like osmosis is like, hey, yeah, we've got a dex, but you should come build a dex on our dex. You know, and say like, yeah, we're actually, you know, we're building, you know, sector specific block space. So all of our validators have to run their own order matching engines like.

• 11:03Speaker 01

  You know, we're kind of converging on it probably both sides that, you know, once you have an app that reaches some amount of product market fit, you want to expand, but the big, really general ones are like, actually, the world is just too big. We need to specify. So we're kind of converging there as well, I'd say.

• 11:18David Hoffman?

  Are you, are you saying that there's no such thing as actually truly general block space?

• 11:23Speaker 01

  I think, yeah. I think I'm landing on that. I don't think, I think it might be a myth, similar to bridging.

• 11:29David Hoffman?

  Okay, so Ethereum at block, at the genesis block in 2015, and then before it became, had any sort of like actual, real applications on it, that was general block space, right?

• 11:41Speaker 01

  Yeah, yeah.

• 11:42David Hoffman?

  Yeah, unmorphed.

• 11:43Speaker 01

  And then had to specialize at some point.

• 11:44David Hoffman?

  And then had to specialize, yeah. But is Ethereum specializing now? I guess now, it will still be pretty general until Dankun, and that is the first instance of Ethereum specializing with block space, right? Like, it's still pretty general up until that point. It's just like the apps have started to force it into being more dedicated towards specific reasons, but not, not anything inherently at the base protocol.

• 12:09Speaker 01

  I think ultimately, every, even like Solana, which is the, you know, it's the light speed, it's the world, it's consensus of the speed of NASDAQ, global, all that stuff. It's probably going to have to end up specializing. I'm not technical enough to be like, at this level of throughput, this many transactions, this globally distributed is when you would have to start specializing. But I sort of do trust the modular camp that eventually, not the entire internet can sit on one layer with one set of validators. Ultimately, you're going to need to start specializing. So I think it's coming for Ethereum and Solana, and not in a bad way. It's just, hey, we have product market fit on these certain things. We should double down on this and really expand.

• 12:47David Hoffman?

  Yeah, well, I think we just did this super long podcast with Mike Neuter and Domathy, two hours, 45 minutes around the Ethereum roadmap. And that's kind of like when, like, once again, it was impressive upon me that the long-term conclusion of Ethereum is this like super lightweight, layer one blockchain that just receives and verifies proofs of what could be anything at higher levels. And then, and that's also what the Bitcoiners want Bitcoin to be. Like, that is, if you're a Bitcoin builder, if you're a Bitcoin Renaissance, not a Bitcoin maxi, then like, you're really interested in Bitcoin being like the truth layer for any sort of expressive alternative layers. They've just never been able to figure out how to get Bitcoin to become that. But that is what Bitcoin wants to be, according to them.

• 13:32David Hoffman?

  And the thing is like, if Bitcoin achieves that, like, there's a lot of focus on the BitVM right now. If Bitcoin achieves that, then like, it's actually achieved that faster than Ethereum did, and without all of the like, technical debt that Ethereum has, which is just kind of funny.

• 13:46Speaker 01

  It would be hysterical if they wound up doing basically the same thing. But I also think here's a challenge, or here's just something I've been trying to think through when it comes to Bitcoin, and you let me know. So the great thing about Ethereum from a monetary standpoint is it's this very large, very liquid asset, and people historically want to do things with that asset. It has this culture of like, okay, I have my Ethereum, then I buy an NFT, or I deposit into this DeFi protocol, or I'm going to restake it and loop up. Probably not financial advice, maybe don't do that so much. But still, there's this culture of like, once you have this crypto native capital, Ethereum's tend to want to unlock that capital. Whereas that's much less proven out in the world of Bitcoin. Bitcoin is the largest, Bitcoin is the largest form or pool of crypto native capital. But,

• 14:29Speaker 01

  and there was early product market fit through BlockFi. Like, you saw Bitcoiners wanted to earn yield on their Bitcoin. There is a culture there of not wanting to do things. Like, the culture in Bitcoin is like, I bury this shit deep in cold storage, you know? It's like Arctic Tundra cold storage. So I, how much of that unlocks into these new cool use cases on drive teens that I have no idea. I have no idea. And that's the big question.

• 14:53David Hoffman?

  Okay, yeah, I think I have some sort of like, not answer, but just like, I think why there is that culture in Bitcoin is because they haven't been given the tools to express themselves and their desire for more productive asset in Bitcoin. And so like, all of the people who are like, I'm going to dig a five foot hole inside my backyard and bury my Bitcoins in it and not touch it. Those people have all of the tools to like, broadcast their culture and their preferences, because Bitcoin hasn't been expressive. But now we actually have like, ordinals as a tool for Bitcoiners to be like, no, I want to like, play with my Bitcoin. And there's actually been a bunch of deals that we're like, looking at at the Bankless Ventures. Do you actually know that, you know, who's the largest custodian of

• 15:35David Hoffman?

  Bitcoin? Like, who's got all the Bitcoin? Binance. Because like, people just trust Binance with their Bitcoins, Binance custody. And so like, there are deals like, who are working inside of this realm of just like, actually, there's a lot of Bitcoiners who have given up their private keys, because that's what, that's whatever. And so they're trying to build like, utility around that whole part of the world. And so I think once Bitcoiners have like, The tools to be degens, then they will become degens.

• 16:02Speaker 01

  I think so too. So one of I we going into this year prediction episode, one of my highest convictions bets was actually Bitcoin JPEGs for exactly this reason. So I I've been cheering on just because, you know, when C5 blew up, it it eliminated the the tools for Bitcoiners to do anything with their Bitcoin, right? But I think basically BlockFi and Celsius was proof positive that people do Bitcoiners do actually want to earn yield on their Bitcoin, do fun things. I just don't know enough about the limitations of building on Bitcoin to know if, like, for instance, like Bitcoin still, those blocks are tiny.

• 16:40Speaker 01

  And there are 10 minute block times, not 12 seconds, like the 12 second block times are tough enough in Ethereum. Like, I just don't have a good enough sense about what the actual technical limitations are of that. But JPEGs are just so easy. It's like, yeah, I want to buy this monkey JPEG. This looks cool.

• 16:58David Hoffman?

  It is kind of funny how fast JPEG culture got inception into Bitcoin. I feel like they have a bigger JPEG culture than Ethereum does these days.

• 17:06Speaker 01

  They do. And and low key, Magic Eden, you know, they pivoted away from Solana, but they basically own, they have super dominant market share there. Like, if you want to trade a Bitcoin JPEG, you basically go to Magic Eden. So props to them for doing that. What do you think, David, about, there have been a lot of hot takes on the death of the 10,000 PFP collection. What do you think about that?

• 17:26David Hoffman?

  The death of the 10,000 PFP collection. Well, what was the last 10,000 PFP collection to really come out?

• 17:33Speaker 01

  Well, I guess you had like Mad Lads. I don't know if it was actually 10,000, but that was somewhere.

• 17:37David Hoffman?

  Mad Lads was, yeah, it counts, right? Mad Lads was like a year ago.

• 17:41Speaker 01

  Yeah, yeah.

• 17:42David Hoffman?

  There's like, there's like the Brian Armstrong one on base, but that's never really exploded beyond base, right?

• 17:48Speaker 01

  I agree. Yeah, I wouldn't count that. I mean, in Solana, there have been a couple. There have been tensorians I would put in there as well.

• 17:56Speaker 01

  There's a Bitcoin, I don't know how many there there are, but there's node monkeys and there's, there's also, there's the Bitcoin wizards.

• 18:05David Hoffman?

  Right. And then Quantum Cats was like the new one, which minted out 0.1 Bitcoins and got up to like, I don't, I haven't checked the price in the last like week or so, but like the last I checked, it was like 0.27 Bitcoins.

• 18:15Speaker 01

  That's what Node Monkeys was trading at. I was like, I just can't make myself do that.

• 18:18David Hoffman?

  Yeah, that's too high.

• 18:19Speaker 01

  Too high. That's too high. Yeah. So, but what do you think about that as a concept? Because, you know, the, if you were against that concept, you'd say this was ridiculous. These JPGs aren't worth very much and there's no reason they ever should have traded at that valuation. But I think there's maybe another case there, too.

• 18:35David Hoffman?

  I mean, in a digital world, I've always thought like the PFP like utility on your profile has immense utility. Like

• 18:45Speaker 01

  Me too.

• 18:45David Hoffman?

  It's to a, to the point where I'm like, meeting people at a conference and I'm like, trying to like, get a gr- like a grasp on who they are. And then they show me their Twitter and I recognize immediately their PFP.

• 18:58David Hoffman?

  And that hasn't seemed to be like taken up lately. I think people care a lot less about that now. And people are just ignoring that aspect, but that was like the big thing last cycle. And I don't know why that would like go away. It didn't, it doesn't seem like a flash in the pan.

• 19:13Speaker 01

  They've got built in distribution. There's a guy named Scott Galloway, uh, who's kind of this talking head, but he also, he's pretty good on brand. Not so great on crypto, but he's, he's really good on brand. And, you know, he, he talks about basically every, all the great products out there, they end up applying. They, they tap into this very primal human desire. So it could be like sexual fitness. It could be survival and security, whatever. And PFPs kind of have that. It's a flex, right? Like some people just don't get that and some people

• 19:41David Hoffman?

  I have a fucking Crypto Punk right here.

• 19:44Speaker 01

  You know, baby. There you go. Yeah. I've been saying for months that I'm going to get, uh, get art here and hang it up. But I haven't, haven't done it yet. But every time I go over to your place, I'm like, yeah, I actually got to do this. But yeah, I think it's, um, I think it's a, I mean, it definitely taps into that. The other thing that they have really native built in distribution, like better native virality than maybe any other product that exists. And here's an interesting thing that started to happen as well is have you been noticing that these PFP collections like Bad Kids? Or Pudgies are getting, uh, airdrops?

• 20:15David Hoffman?

  Yeah, yeah, certainly. Pudgies would love to tell you all about the airdrops that they're getting. But that can't, that can't be, there's limited ammo there, right?

• 20:25Speaker 01

  So let me describe, I mean, so here's why it makes sense from the perspective of protocol that's airdropping. Imagine you are about to launch your protocol. And what you want to do is you might have multiple different objectives, right? Like Starker is pretty interesting. They wanted to do, they want to bring, they want to reward their early users. They want to attract new users. They want to reward and continue to incentivize the developer community. They want to transition some people who are staking on ETH to be like restaked operators on Eigenlayer. So they have all these objectives. The problem is Sibyls, right? Like that's the big thing. You don't want just these industrial airdrop farmers to come in and take everything. So NFTs communities are this really interesting intersection of both those things where they're Sibylt, right?

• 21:09Speaker 01

  So you're not going to be dumping that to airdrop farmers and their wealthy new community members, right? Like if you have the floor of pudgies are like 50,000 bucks. So if you're dropping to the pudgy community, you know, if you get even a really low conversion rate, that's probably worth it. You know, you've probably got acquired some really high value customers. So I feel like we're a couple of months out from all these threads being like, I paid for my pudgy with XYZ airdrop.

• 21:31David Hoffman?

  Airdrops?

• 21:31Speaker 01

  And yeah, so I could see that being a huge, and there's going to be a million airdrops this year as well, so.

• 21:37David Hoffman?

  Yeah, there are going to be a million airdrops. It's actually kind of nuts. But okay, but pudgies got like two airdrops though. Like I don't know if we have enough data to say that this is, this is, maybe you're just saying it doesn't, data doesn't matter. This is just what makes sense to you?

• 21:51Speaker 01

  This is what makes sense to me.

• 21:52David Hoffman?

  Yeah, but like pudgies are just so far away from just like Starknet.

• 21:57Speaker 01

  Yeah, I, so Starknet, Starknet didn't do this, but like Dimension, like the Dimension airdrop. The Dimension airdrop got targeted pudgies and bad kids and some of the other NFT questions.

• 22:07David Hoffman?

  I have no idea. Did you know about Dimension before it's airdrop?

• 22:11Speaker 01

  I had heard of it, but I couldn't have articulated what it did.

• 22:14David Hoffman?

  Cause there are these tokens that are getting airdropped and all of a sudden these protocols are like between like two and 10 billion dollars that I've never heard of before.

• 22:22Speaker 01

  Yeah, I'm on this page with you, dude. If you have a logical explanation for why Dimension is trading where it's trading, I would all.

• 22:29David Hoffman?

  No clue, dude. It's just like, I, I lost my, like, well, I need to go find it. It's somewhere. I sent it to an address. I need to go find which address, but I haven't been able to actually like sell my D Y M. And that's what I've heard. It's like people just like can't figure out how to actually sell the tokens. But it's not the only one, right? Like Alt Layer also dropped into some sort of insane valuation and I don't think anyone heard of it, uh, like a month prior.

• 22:54Speaker 01

  Yeah. I mean, even the F, the F D V of Starknet is, I mean, Starknet's obviously a, a super credible, uh, you know, very attractive project, but like that's super high. I mean, these are, some of these are great projects, but even like Gito and Jupiter, like great projects, you know, but they're launching, launching a multi-billion dollar F D Vs is like crazy. And I know people say that at this point, F D V is a meme in the cycle and then people don't care until they do. But I think people watch F D Vs.

• 23:18David Hoffman?

  I, I look at F D V exclusively and I, sometimes I feel like an asshole for doing that because everyone says that F D D is a meme, but I'm like, what is the most rational number that exists?

• 23:30Speaker 01

  Yeah. Well, here's the other, I mean, the other.

• 23:33David Hoffman?

  I'd love to get Vance's take on that. Can you, next time you have a podcast with Vance, can you ask him about that?

• 23:37Speaker 01

  Yeah, actually in one of the early Belkrev episodes, he was like, wait, what do you guys look at market cap or F D V? And we paused and he was like, please, for the love of God, there's a right answer here. So I know he's on the F D V train, but, uh, yeah, I, I don't, I don't really have a great explanation for it other than just like risk. There's just, the, the market is just kind of risk on again.

• 23:56David Hoffman?

  Right. Yeah, that's, that's kind of like, yeah, people just are not hitting the sell button. People are hitting the buy button. Yeah.

• 24:02Speaker 01

  No. And, and to be fair, I mean, maybe to assign like some amount of rational thinking to this, like, are you selling anything right now?

• 24:08David Hoffman?

  No.

• 24:09Speaker 01

  Yeah.

• 24:09David Hoffman?

  Yeah. Okay. So like the, the two airdrops that I got, which I'm big fans of, Alt Layer and Dimension, both of them, I'm like, well, if I keep them, it might qualify me for a future airdrop. If I don't sell. So I'll sell.

• 24:24Speaker 01

  Market. Yeah. That's you probably just answered that question. So yeah, and just on the margin, people like, well, you know, I feel like everyone is in the same, you know, we're crypto, what the total market cap right now is at like two trillion, right? Bitcoin is, you know, 20, 25% off its all time highs. I think most people have the same framework that we're going to slowly grind up from here and then it really gets on, you know, the party really starts when we cross the all time high. So I guess to answer my own question, why are you selling anything at the current moment? You probably, you probably don't. And, and I, everyone has these stories too, right? Of like an airdrop that they flipped and they, you know, they tweet out, oh, I would have had one and a half million dollars.

• 25:06Speaker 01

  So that's definitely the mindset that I have. I'm just holding on to everything for the most part right now. So.

• 25:10David Hoffman?

  Dude, the, I think everyone is trying to be Celestia right now. Every like there are future projects that are going to airdrop their tokens. And they're like, how do we airdrop our tokens at a low valuation so that it can pump for a long time afterwards? Like, how do we do that? I'm like, you guys can't force the market to do anything. But like the fact that Celestia dropped and it just rocketed and did a 10x to airdrop holders, kicking off like the bull market, like blowing up the whole like modular money meme into like this new mind share that everyone has. And then actually gaining adoption by some of the Ethereum rollups. And it, it was airdropped to a bunch of like random people.

• 25:50David Hoffman?

  And then it pumped 10x. That's like the bar that everyone will remember that, that they're like that this airdrop could be that. This airdrop could be that. And like the next year of airdrops, we're all going to hold our airdrops because it could do a Celestia.

• 26:06Speaker 01

  But even when Celestia launched, I don't remember thinking that was particularly cheap, you know, like it was launched at a $2 billion FTV. I was like, oh, it's like a lot, you know, but it just ripped and it was.

• 26:17David Hoffman?

  Did not stop. Yeah.

• 26:19Speaker 01

  I mean, Celestia is a phenomenal project and they deserve it. But like that, that initial price action was, I'm sure massive for the general psychology of the product.

• 26:27David Hoffman?

  Right.

• 26:27Speaker 01

  So, yeah.

• 26:28David Hoffman?

  Right.

• 26:30Speaker 01

  But you know, Celestia is also kind of like, Celestia is also, you know, going back to this convergence thing, you know, Bitcoin bulletin board where you can post like really small blocks, doesn't even support smart contracts. That's where Ethereum headed, that's what Celestia is doing as well. Celestia is actually really similar to Bitcoin in its construction because it also, you can't, it doesn't support smart contracts at the, you know, at their layer. So yeah, in a lot of ways, like that's all, that's a super interesting ecosystem, I would say as well.

• 26:59David Hoffman?

  Yeah, I have not yet been able to like categorize Celestia very well in my brain, like in the big blocker category, but not, not, no virtual machine, so no settlement. I don't know how to think about Celestia.

• 27:13Speaker 01

  Yeah. So the way that I think about Celestia is they have found a way to obviate a lot of the negative trade offs of what was this huge argument back in the day of the block science war. And there were two very different camps of thinking about blockchains, which is one, you know, you want to keep the, ironically, actually, the small block camp is not the way that Satoshi thought about it. I know it's gotten a rebrand, but like the original vision of the Bitcoin, in the Bitcoin white paper is digital peer to peer cash, which required scaling hardware. And so eventually there, you know, you came to this disagreement about like, how big do we make the blocks? The miners wanted bigger blocks. The core devs did not want as big of blocks. And ultimately Bitcoin, I think, made the right decision and went the, the small block route.

• 27:57Speaker 01

  I think a lot of that design inspiration has found its way into Ethereum, the Ethereum way of thinking as well as just the next large, successful blockchain post, post Bitcoin. And I think Solana and Celestia, I would put in this camp of, you know, the Solana approach is that we're going to have larger validators now. We're going to do, they don't even really have a concept of block building. It's continuous building, but it's basically like, allow for larger validators now, let, you know, let, what's that law where?

• 28:24David Hoffman?

  Moore's law?

• 28:25Speaker 01

  Hard work, Moore's law, to catch up on costs and eventually we'll be able to decentralize that way. And Celestia has a different approach where they say, we're okay with big blocks. We actually are going to have fewer validators that are bigger and more expensive. Still permissionless, but there's a barrier to entry. But what we have that the Bitcoiners didn't have at that other time is these things called light nodes and this technology called data availability sampling. So what the light nodes do is they basically can call a check on the few chunkier nodes that are producing these very big, very cheap blocks to keep them honest, you know, to talk about it at a very high level. So it's kind of a cool best of both worlds type thing. And that's, that's the, that's the architecture.

• 29:09David Hoffman?

  Right. And that go back, so it goes back to what you're saying about Vitalik's vision of just like big, big blocks being checked by small blocks, basically. Big block philosophy and being checked by a small block philosophy.

• 29:19Speaker 01

  Exactly. Yeah. And I do think, you know, honestly Polygon has done a really good job of this. I'm not actually a huge fan of the ag layer branding, but I think they've kind of nailed it with that design.

• 29:31David Hoffman?

  Yeah, I actually have not looked into that. I think we might have a show scheduled or something like this. What, what is the ag?

• 29:38Speaker 01

  Brendan is the guy.

• 29:40David Hoffman?

  Yeah.

• 29:41Speaker 01

  Basically, the idea, like my, my brain breaks around ZK proofs. Like that moon math is just beyond the left side of the bell curve guy like me. But basically the idea is that, all right, if you, you know, take, take the example that you want to do things on, like you are on chain X and you want to do things on chain Y. And maybe that's a swap or something like that. That requires multiple different legs to, to ultimately end up getting completed. You need proof, somehow you on chain X need proof that this thing happened on chain Y. So that's what these execution proofs are. They get posted to the central layer. So everyone knows that you, that everyone has done the action that they said that they were going to do.

• 30:24Speaker 01

  The big question about ZK proofs and these ag layers in general is what is the setup of the proving? Is it decentralized? What is the cost? What is the latency? Cause obviously if you can only make, send one of these proofs, you know, once a year, then that's not useful to anyone, you know? But if you could do it every one or two seconds, which is where Polygon wants to get, pretty freaking useful, actually.

• 30:46David Hoffman?

  Is it just a settlement layer that's on top of Ethereum, but below the layer twos?

• 30:51Speaker 01

  I think I would think of it almost as kind of next to the layer twos. It basically just allows you to take, there are all these different execution environments, which are super different from one another, right? And originally, like, we kind of thought it would be really nice if these execution environments all could like directly pipe into each other and talk to each other. But now, what the ag layer concept sort of asks is, I'm just going to let you do things the way that you would like to do them in your layer. I'm going to do them the way that I would like to do them in my layer. I'm going to create a proof that the outcome, the important outcome here, don't really care how you did it, but the outcome here that you said that you were going to do is right, and that all goes to this common layer. So I don't know if it's on top of or below or next to, but like, it's complimentary, I think, to the rollups.

• 31:35David Hoffman?

  Yeah, there's a lot of these composability technologies as being innovated on in the Ethereum landscape, and some of them overlap, some of them don't overlap, some of them are solving their own problems in different ways. And there's like eight of them, eight different categories of ways of solving Ethereum composability, and they're all happening in parallel. And coordination between, because like in order to actually get perfect composability, it's going to need to take like the best of all of these things and put it into one like more seamless solution, which sounds like a massive coordination lift. But the only like thought that I have about Ethereum composability is that it dies a thousand cuts, but there's no one golden silver bullet, it just dies in a bunch of small, different ways.

• 32:17Speaker 01

  Or what if the best solution just wins?

• 32:21David Hoffman?

  Or one, but I don't know, I haven't seen one solution actually be able to encompass all types of composability issues, is, I haven't seen that.

• 32:30Speaker 01

  Well, all right, here's the, maybe to move into like some spicier waters here, but I think the challenge with, the challenge with the ETH rollup landscape as it exists today is actually that the rollups don't have as much of an incentive to be composable as you might think. I think everyone would say that they want to, but really, the economic incentive is to keep people.

• 32:52David Hoffman?

  They want to in spirit, but not in their bags.

• 32:54Speaker 01

  Yeah, they want everyone else to do the thing that I'm doing. Like, we should all interoperate, right? I've got these great standards, take my standards.

• 32:59David Hoffman?

  Yeah, Polygon, come be an OP stack chain.

• 33:02Speaker 01

  Come on, come on. I've been working so hard for this, you know? Just come and do my thing. But I think they'll get, but so that, I think that's the challenge is, I think what you're alluding to, David, is it's not necessarily a technical challenge, there are probably multiple different tech solutions that could work. But it's kind of a social, it's a social challenge. And I ultimately think the market is going to end up proving out like, here's a question that I've been asking myself. So Ethereum, what it's trying to do as a, as a protocol is to export its currency. The, the way, where it's exporting itself is its rollup environment. How is, where is the ether going to go? Is it going to go evenly distributed to every rollup?

• 33:45Speaker 01

  Do optimism and Arbitrum end up taking the lion's share of that ETH? Do, uh, do weird schemes like Blast end up taking a shit ton of ETH because they're offering yield when no one else is? How do you think? Like, I'm curious. There's a ton of ETH out there. How do you think when it gets pushed up these rollups? Like, how's it going to shake out?

• 34:05David Hoffman?

  Like, where are the final, uh, sinks for ETH in the grand scheme of things?

• 34:11Speaker 01

  Yeah.

• 34:12David Hoffman?

  Hmm. And so we're not talking about Eigenlayer because that's still on the layer one.

• 34:18Speaker 01

  Yeah. Well, that'll be another sink too, I think.

• 34:21David Hoffman?

  Are you asking like a pick your chains? Like is optimism is Arbitrum or are you kind of?

• 34:25Speaker 01

  Yeah, we don't have to. Basically what I'm getting is like, I, what I would guess is there's this like power law where the, the bigger, like, let's just say there's a couple of different sinks for ETH, right? There's like the rollup sync, which is, um, probably where most of the ETH I would say is going. Then there's probably this sort of weird sync for people that want to wrap their ETH and use it on Solana, which I would guess is like a really small market. And then there's this kind of restaked, uh, sync where, you know, you stake it in, uh, in Lido or something like that. And then you go into this crazy liquid restaking ecosystem and do a bunch of yield type activities. But I think people that want to use ETH the way that you and I have thought about using ETH in the past. They want to do stuff like buy NFTs or trade or whatever.

• 35:06Speaker 01

  I think they'll end up on these rollups and I'm guessing a huge amount of ETH is going to migrate out there. It already is. So is it going to evenly distribute? Like, you know, two ETH for Arbitrum, two ETH for optimism, one ETH for Scroll? Or is it going to like accelerate and more ETH is going to pour into the rollup that already has the advantage?

• 35:26David Hoffman?

  It really depends on the categories. Of composability solutions that we come up with. Uh, because like if there is, uh, so like say there's like a sliding scale of composability across rollups and like the on the zero side, we just can't figure it out. Like bridging takes, you know, you know, minutes and days. There's like, you know, asynchronous uniswap pools that take forever to settle. There's like high arbitrage between these things. Composability sliders at zero versus composability sliders all the way at a hundred. And there's like perfect synchronous universal composability. It's one single state, even though there's many different chains. Like cross chain contract calls are perfectly seamless and they never fail. And so like we're, we're at, we started at zero. We're already marching somewhere further away from zero.

• 36:11David Hoffman?

  So we're already off of zero in composability. Maybe we're at five, 10, 15, something. Still pretty low. And the really, the question is, is like, how far down the slider of perfect synchronous composability can we get? And can we get to a hundred? And if we can get to a hundred, then there is no sync. There is no chain that dominates all of the DeFi. There's no like DeFi chain. If, if we stayed closer towards zero, my answer would be like the DeFi chain. All of the liquidity, all of the capital would aggregate into the, the DeFi chain. And then you would have like systems like Starknet, which would be like the fully on chain gaming chain. That doesn't really need that much ETH. It just need payments, right? Uh, and then there would be like the Zora. It doesn't need that much ETH. It just needs payments, right?

• 36:53David Hoffman?

  And so like, uh, there would be like the one single DeFi chain and then the 10,000 payments chains. And the payment chains would be for different purposes, like gaming or collecting or whatever. Uh, but then as we start to slide, uh, on down the scale. Like if we get past on the composability scale to the point where like uni chain is its own chain and not a deployment on Arbitrum and optimism and Polygon and whatever. And we get that far and like this trading on uniswap is a contract call to uni chain. And that can happen in settlement across rollups. Then all of a sudden capital will be much more diffuse across the rollups. Uh, because then you'll have uni chain, maybe you'll have compound chain.

• 37:33David Hoffman?

  Then you'll have like the general purpose chains, like Arbitrum and optimism, attracting like whatever activity they're going to attract. Uh, and then there's going to be a lot more of like application specific rollups doing whatever the hell they want. And then it'll be a lot more diffuse. So my, my answer is like, it really depends on that slider when, where we end up.

• 37:50Speaker 01

  Yeah.

• 37:52Speaker 01

  I don't know. I think the composability stuff is gonna take a while. So I would bet on high. Yeah, it's gonna take a while. So I feel like there's a path dependence thing here where it's a little bit of a race. Like if I was sitting in the, if I was sitting in the driver's seat of one of these big frameworks, I'd be like, how can I get as much ETH onto my platform as I possibly can? Right now, because I feel like that's gonna be a colossal moat. So.

• 38:14David Hoffman?

  Is that what you think blast explicitly what blast was doing?

• 38:18Speaker 01

  Yeah, yeah, I do.

• 38:21David Hoffman?

  They thought in your terms and they're like, we're just going to do whatever we can to get as much ETH as possible because the door is shutting. And so we're going to play whatever game possible to make that happen.

• 38:30Speaker 01

  I am, I look, I don't know Pac-Man. I actually like, I like the way he thinks a lot. I'm not 100% sure if I'm a big fan of blast yet, but here's my, here's the, here is the logical series of events as I saw it. He launches blur, right? It's NFT trading, very, very successful in taking market share from OpenSea. Just like every other exchange operator that's ever operated on Ethereum says these gas fees suck. Oh, this is great. We have these new things called layer twos, which have cheap gas fees. Man, why would I take this app where I have a ton of product market fit on and go launch it on someone else's L2? I'm gonna create my own L2. Here's the problem though. I don't, I'm gonna launch this L2 and there's gonna be no liquidity.

• 39:15Speaker 01

  How can I get the liquidity on? Oh, I know. I'll allow people, I'll do it with yield. You know, I'll allow people to earn yield. And I think that was the series of events that if I had to guess, yeah.

• 39:31David Hoffman?

  I've, I've never understood the blast yield incentive because I have ETH in AVE on optimism, except in like, and I have like stables borrowed against it. And it's staked ETH, it's Lido staked ETH. So I'm getting the same ETH on optimism that someone else is on blast. So what's the fucking deal?

• 39:50Speaker 01

  Well, I probably, a lot of these people are airdrop farming is right now, right?

• 39:55David Hoffman?

  Right.

• 39:55Speaker 01

  That's what I would guess. Uh, yeah. So they're probably airdrop farming and it's kind of this idea, like I, I really think crypto people love yield. TradFi people love yield. I had a conversation with, with someone who works at a big, very crypto native, but very tradFi type trading desk and they were describing to me, so most of the liquidity still exists in Bitcoin and ETH around trading pairs. Right? So if you want to trade in and out of something, the, the highest likelihood is that you're going to have the most liquidity on an ETH or Bitcoin cross. It's like 70%. Uh, but what they don't like doing is just holding ETH or Bitcoin on their balance sheet because it doesn't earn any yield.

• 40:34Speaker 01

  So now what they have is they're swapping out their non-yield earning stables for, uh, there's a new compliant yield earning stable. Uh, the hash node just launched this week and they're going to hold STEETH. And when they want to make a trade, they move from STEETH into ETH, back into the yield bearing thing. And they're trying to literally, David, reduce the amount of time that they're in non-yield bearing stuff. So this is, this is, the yield thing is not a story that's going away. And I mean, it is kind of nice, right? Like I could just, I don't even have to think about it on this L2, just whenever I'm in ETH, I'm just earning yield on it. That's kind of nice.

• 41:10David Hoffman?

  Yeah. And it, it solves a problem that's a different problem, which is like, when I go on to optimism or Arbitrum or like I look at my wallet and I'm like ETH, but like the optimism logo and then ETH with the Arbitrum logo. And like, so, so like what you, if you, there can't be like Lido ETH on, uh, blast. It just has to be blast ETH and they have to homogenize all ETH that goes on to their layer two. Like it can't have any sort of like derivative in front of it because they all need to be blast ETH. Um, but I mean, I maybe I guess that's table stakes for all layer twos though.

• 41:40Speaker 01

  It's table stakes for all layer twos. I actually, you just hit on a super important point. This is not my observation. This was John Charbs' observation, which I'll give him the credit for the initial observation and then I want to abstain from any incorrect conclusions that I draw from it. But basically, uh, basically protect him from all the, uh, wrong stuff that I say after this. But the idea, like every single ETH, uh, instance that exists off of main chain is a wrapped version of that ETH. Like it's OP ETH, it's RB ETH, et cetera. So once you've made that mental leap, why wouldn't you just hold the yield bearing version of that wrapped token?

• 42:15David Hoffman?

  Yeah, I agree with that. And that's why I have staked, I have Leido staked ETH on optimism inside AVE. And so I have AVE wrapped staked ETH, optimism wrapped AVE staked ETH. That's the derivative set that I have.

• 42:33Speaker 01

  That just feels a little bit more complicated than just as soon as I, as soon as I get up there, I'm immediately earning yield. And it just feels like, I don't even know. I, I think, we'll see. I, I just, I don't know. But it's, it was a novel strategy that other protocols weren't doing at the time, that clearly allowed him to attract an enormous amount of liquidity. It will probably allow him to attract a lot of activity up to that roll up. And it'll be a good home for Blur, which is where I'm assuming that they're going to migrate.

• 43:02David Hoffman?

  I'm, I'm just skeptical as to like, how, because a ton of ETH went into BLAST and BLAST had the, we have native ETH, yielding ETH on our, our layer two, which doesn't exist. And then also the, the point farms, right? Also the token airdrops. And like, everyone is describing a ton of legitimacy to like BLAST's new innovative strategy of native yield. But really, but really, it was legitimized by the point farming. And maybe it was actually not that big of a deal. We were just thinking it's a big deal because of all the ETH that it got from the point farming. Like, I'm worried that we're running into that trap.

• 43:35Speaker 01

  David, let me ask you a question. All of this interest in Eigenlayer, how much of it do you think is the demand is coming from yield from ABSs versus farming Eigenlayer points?

• 43:46David Hoffman?

  Okay, Eigenlayer had hype before the point farm.

• 43:50Speaker 01

  I agree. I agree. But, but.

• 43:53David Hoffman?

  But then, then the point farm amplified.

• 43:55Speaker 01

  I do think, I think a lot of people are in there for the points. So.

• 43:58David Hoffman?

  Yeah.

• 43:59Speaker 01

  And that's the hope of this whole thing, right? It's like you, the value proposition to someone that is YOLOing into Eigenlayer, because, look, Eigenlayer, the team is phenomenal. But there is eventually going to be slashing risks. There is smart contract risk. You know, the, the way that they solve this cold start problem with this cool idea, but if I'm not getting this extra thing, I don't want to risk my funds is. Is points and rewards and all that stuff. That's how our system works and some brave souls will try it, some will be rewarded and some are going to get in trouble for, for taking too much risk. But the Eigenlayer part of the ecosystem, you know, you and I talked about this a lot. It's definitely, I'm like simultaneously the most concerned about it, but I'm the most interested in it and excited about it at the same time. I think it is where a lot of the action is going to happen this cycle.

• 44:44David Hoffman?

  Yeah, I, I judge ecosystems by their ability to nerd snipe people into crypto. So like Bitcoin won because it nerd sniped like the digital gold bugs and like gave them a banner to like rally under. Uh, and then Ethereum nerd sniped a certain set of people, uh, and with, that was sufficiently large to create the Ethereum ecosystem. Solana nerd sniped a bunch of other people that Bitcoin and Ethereum did not nerd snipe. And I'm, I'm watching Eigenlayer nerd snipe people that know, nothing else in crypto has ever nerd sniped people before. Both people in like on Wall Street and Silicon Valley, like the SaaS, SaaS companies can like rally behind Eigenlayer.

• 45:24David Hoffman?

  Don't care about Bitcoin, don't care about Ethereum, don't care about Solana, but just like trust as this like module that they can like incorporate into their product offering. Like that makes sense. And like Wall Street is also like totally able to wrap their heads around Eigenlayer. So like Eigenlayer is in the middle of this like very slow motion nerd snipe. And I'm just like, kind of fascinated to see what kind of, what types of people it brings into the fold.

• 45:44Speaker 01

  Yeah, I'm, I'm with you on that too. I, I want one maybe dimension that I would add to what's driving a lot of the Eigenlayer buzz. And this flywheel that's kicking in for them is as much as it is an economic security play. Where if you're either a Cosmos chain or an AVS and you do not want to pay an enormous amount of emissions to convince people to stake, uh, your chain. Like it makes a ton of sense from the, that's the demand side of their marketplace. But the other reason why you might want to launch as an Eigenlayer AVS is kind of a growth story as well. You know, in the same way that remember a little while ago was like, all these chains were moving to Ethereum rollups because the idea was like, hey, let me plug into this massive ecosystem in it.

• 46:29Speaker 01

  I think that was pretty good play for a lot of those, a lot of those, uh, you know, L1s that were kind of.

• 46:35Speaker 01

  You know, wasting away into obscurity, but now I get to plug into this ecosystem. I get to put myself in this narrative. There's a bunch of ETH that wants to move up into rollups. Like, it was really good for a bunch of those chains. And I think there are going to be a lot of chains. Like, that is another element to the Eigenlayer thing that people are sort of missing, which is like, I could be this weird, you know, AVS that does this middleware thing that no one really cares about, or I can be the next Eigenlayer chain, baby. And I could be a part of this point, you know, take a bunch of the, you know, there's $8 billion of capital, ETH capital, that wants to find its way into these chains. So I think it's a growth story as well as a security story.

• 47:15David Hoffman?

  Interesting. A growth story, right?

• 47:18Speaker 01

  Is that, that's what I mean? Yeah. I think that's the meta that, that a lot of these AVSs are, that, that these AVSs are playing. It's like, I could either launch this weird, obscure middleware thing that no one's going to care about, or I can catapult myself into this narrative spotlight and $7 billion worth of ETH, which is looking for a home in various AVSs, of which I could be one.

• 47:40David Hoffman?

  Right. Yeah. Yeah. Well, that's kind of like the bullish element of like shared security is that it actually costs very little to get a lot of security, right?

• 47:49Speaker 01

  Yeah.

• 47:49David Hoffman?

  And there's like economies of scale here. The more AVSs that are providing like some minor amount of yield to the entire system, more like a leveraged amount of capital comes into that because of how free that yield is. It's free yield. Free yield, baby.

• 48:04Speaker 01

  It is real. Yeah. You're just opting in to this incremental additional yield, which is, feels like a win-win.

• 48:10David Hoffman?

  Right. Yeah. And so is, is what you're saying is like, there's like a, just a lot of pent up potential energy here between like the massive amount of ETH that's in Eigenlayer that has nowhere to go, except for these LRT projects who are also filling to the brim with ETH right now. And then like all, all these AVSs are like, there's no supply side. There's demand for me. And there's like zero AVSs. And there's about to be like eight. And then maybe in a year, there'll be like 16 or something. And so like, you're saying like, well, as an AVS, it's going to be so easy to attract a ton of capital. Is that what you're saying?

• 48:42Speaker 01

  Attractive ton of capital to, you know, the, the hope is that some of those people end up being, they're trying to acquire some of the, the users from the people who have this ETH and they're also trying to put themselves in this kind of sexy spotlight and narrative, you know, I think that's, I think that's all a big part of it. But there's also, there, there's a very real reason why this exists and it's super cool. And I, the way that I view the LRTs and even projects like Ethos is there, there are a lot of, it's very difficult right now for projects to actually connect with Eigenlayer directly. So what the LRTs basically are, are allowing, it's like adding modularity and flexibility

• 49:21Speaker 01

  in terms of how these AVSs end up procuring that security capital and spend. So, but like, we're, we're talking about a lot of high-minded stuff here, David. Let me, let me take us out of the weeds for a second. I want to get your, I want to get your take on.

• 49:35David Hoffman?

  Can I, can I actually share something, Josh?

• 49:37Speaker 01

  Yeah.

• 49:38David Hoffman?

  I'm going to share my screen. Are you ready for me to share my screen?

• 49:42David Hoffman?

  Josh is the operator, Bankless Nation.

• 49:47David Hoffman?

  All right. All right. All right. I'm going to throw my screen in a second. Uh, here we go. Share screen.

• 49:55David Hoffman?

  Here we go. Ready for this, Mike?

• 49:58Speaker 01

  I'm ready.

• 49:59David Hoffman?

  Uh, Yuga Labs just acquired Proof. Wow.

• 50:04Speaker 01

  Oh, no way.

• 50:04David Hoffman?

  I did not see that coming.

• 50:06Speaker 01

  Wow.

• 50:07David Hoffman?

  Yeah, this is in the YouTube comments.

• 50:09Speaker 01

  Can you give us the background of that? I'm actually not as familiar with, that's Kevin Rose's.

• 50:13David Hoffman?

  That's Kevin Rose's. It's the Moonbirds thing, the Proof Collective. Uh, and so, yeah, apparently Yuga Labs just acquired all of them. So I guess, yeah, the Moonbirds collection is now part of Yuga Labs, who owns Bored Apes, Mutant Apes, CryptoPunks, uh, MeBits, all of these. Uh, all right. Cool.

• 50:35Speaker 01

  Do you think, do you think, uh, without looking or cheating, do you think Moonbirds goes up or down? The price of Moonbirds, Birds go up or down?

• 50:42David Hoffman?

  Uh, definitely up, definitely up. A, A, it's a bull market. B, uh, there's, can't go down anymore.

• 50:53Speaker 01

  Yeah. God, you're right. You're right. Um.

• 50:57David Hoffman?

  All right. What were you going to bring up? Unless you want to keep going with that?

• 51:00Speaker 01

  No, I don't know.

• 51:01David Hoffman?

  Where do you want to go?

• 51:02Speaker 01

  I want to just get your thought on, it's such a cliche question, but just like, where are we in this cycle here? Your sort of mental framework for it, like, are you, you know, do you wake up a lot of mornings feeling particularly euphoric and bowled up and excited? Like, where do you, you know, maybe especially if you like, haven't been in the space for a particularly long time, and this is your first time going through one of these cycles? You're starting to get jazzed up, price Bitcoin's above 50K again, like, how are you, how are you feeling?

• 51:28David Hoffman?

  I think we are further along in this bull market than what the typical newer entrants will give credit for.

• 51:37David Hoffman?

  I think I was reflecting upon like my experience last bull market. And like last bull market, like, I thought I came in with a reference like it started in like January of 2021. When Ether like pumped and hit new all time highs, or it hit like 11,000, right, or 1100. After being at 100 for like a year, 100 to 300, so it did like a three to four X. Like, all my Ethereum friends were like, over the moon, like, we're fine, like, we're finally getting out from under the shadows of Bitcoiners. And then like, and then NFT mania hadn't actually started yet, but it started very quickly after that. And that's, that bull market, I was like, okay, that's when the bull market started. It was like January, February of 2021.

• 52:22David Hoffman?

  So we got like a good like 18 months, two years left in this baby. When we actually only had like 10 months, because like I wasn't accounting for, you know, DeFi summer. When like ETH price action stayed below 300. Like, people were making a ton of life-changing wealth, but you wouldn't have really called it a bull market. Like, there was still during DeFi summer, there was like, is this, this isn't product market fit. Like, this is not what people, people don't want to gamble on food tokens. Like, this isn't mainstream, this isn't causing Bitcoin to go up, this isn't causing ETH price to go up, this is just a bunch of like long-tail, like, risk-on assets to turn into like yield farms. That's not a bull market, and so I never accounted for, I never added that onto my bull market time.

• 53:06David Hoffman?

  But that was a mistake, because it totally was the bull market, like, people were making a ton of money. And I learned this from Chris Bernisky, is like, it's just like, It really depends on how much net paper gains the entire industry has. And that will determine whether the bull market ends or not. Uh, and so like paper gains have started. People's like paper, people like you're, we're just like, people are receiving billion dollar airdrops, not selling them. Uh, like so, soul bros are like massively up, haven't sold, definitely, probably. Uh, like, you know, NFTs are, are rising, like everyone's sitting on like a good, healthy stack of paper gains right now. And no one's taking anything off the table because like retail's not in yet. And then retail's going to come in and then like, we're going to, our paper gains are going to be massive.

• 53:49David Hoffman?

  And that's really when the clock starts ticking, but like, I'm saying, we're like, we're like approaching halfway through the bull market. Which I think is a lot further along than most people think.

• 53:59Speaker 01

  Yeah, I was going to say about probably time wise about, yeah, halfway through. I was going to say fourth inning, but.

• 54:05David Hoffman?

  I think fourth inning is right.

• 54:06Speaker 01

  Fourth inning is almost halfway through. Yeah. Because you know, the real.

• 54:09David Hoffman?

  Fourth, you know, we got the fourth, we're in the middle of the fourth.

• 54:12Speaker 01

  Yeah, you know, it, it's just funny dude, because I, my experience was exactly yours. I have this really vivid memory of, because COVID happened. That was the big thing that happened last time, right? So it actually, at the end of 20, if you go back and look at the price action of 2019, you'd be, it looks good.

• 54:28David Hoffman?

  It's up only, it's up only the whole year.

• 54:32Speaker 01

  Not how it felt during that period of time.

• 54:34David Hoffman?

  Not until the very end.

• 54:36Speaker 01

  Yeah, not until very end and, but then COVID happened and you were like, oh my God, is this industry. I, Bitcoin went down to 4,000 and then it started to creep up. And I remember, I didn't even really start paying attention to it until it went it, until it was at like 13 or 14. It was like, whoa, I have not seen Bitcoin at 14 in a long time.

• 54:53David Hoffman?

  Right.

• 54:53Speaker 01

  And then I sort of started to watch it heat up and go and go. And I really only was like, yes, it is the bull market after it cleared all time highs. So that's exactly my framework now because, I mean, it's interesting, like Coinbase earnings came out yesterday. And we don't need to go into the weeds of it, but you saw the very beginnings of retail was back more than institutional. The retail volume was up more than the institutional.

• 55:17David Hoffman?

  Hmm.

• 55:17Speaker 01

  Uh, it really, it's not even going to show up in their numbers. It's where does Coinbase, where is Coinbase on the, the app store? And that started to jump up. And yeah, it's like, we're starting to see the very early signs. But you know what's something that's kind of, I mean, I'd love to get your perspective on this from your bankless venture seed. But one thing that hasn't really started to happen yet is like funds are raising a bunch. Um, I've heard it's actually still kind of tough sledding out there for uh the fundraising environment, which is surprising to me. Because yeah, what do you, what do you, is that accurate, inaccurate? Um, because that's another, that's another big marker of when these funds start to get raised.

• 55:55David Hoffman?

  Funds are deploying bigly. Uh, it's uh valuations of startups have crept up a pretty meaningful amount, but nothing over the top, nothing like sloshy. Uh, uh, I haven't heard of funds raising, but I'm also just not tapped into that, that world because like we're done raising, so we're not, we're not doing that. Uh, we were like one of the only funds to raise in, uh, what year was that? 2022, 2023?

• 56:21Speaker 01

  Yeah, you guys crushed it.

• 56:23David Hoffman?

  Yeah, like we were the only ones who could really like get away with it. Um, uh, I haven't heard of funds raising, um. So no, but I, I wouldn't be the one because like I'm not paying attention to funds like I'm, I'm paying attention to portfolio companies and funds are definitely deploying right now. Like cash is being spit out and there's a lot of startup interest. There's a lot of like people are actually building really cool shit, really novel shit. Um, and so I would definitely call it a pretty like exciting market. Nothing is too hot. It's definitely a founders market, not a VCs market. The pendulum has shifted to the founder now. Whereas like uh maybe a year ago, it was definitely still on the V C side of things. Um, but yeah, that's, that's kind of my take.

• 57:06Speaker 01

  So you don't think the, the private markets and public, like public market just being liquid tokens, I guess, in crypto? You think they're still walking relatively similarly or is one crept up in front of the other?

• 57:16David Hoffman?

  I, I, I think so. Uh, I've heard other people, I think, I've heard Chris Bernuski say that like private markets are starting to get like kind of crazy and I, I've, I've seen, I know, I see what he's talking about, but I don't, wouldn't call it crazy. Chris definitely knows more than me. Um, uh, but like everything seems okay to me like, uh, I'm, I'm the bull of bankless ventures. Uh, Ryan's the, the breaks and Ben's like the rationalist. Um, but like at some point, like I'm just like, guys, like these like. Fifty to eighty million dollar seed rounds are have become the norm. Like that is like, and there it's a hot market and this is like, and they're like, oh, that's really expensive. I'm like, yeah, so was all the other ones like this is just what it is.

• 57:59Speaker 01

  Yeah, there I heard. You know, one way of thinking about it is you're you're a price taker, not a make like you just got to find the the best prices that exist out into the market will tell you what the valuation is, and you just got to decide whether or not you want to take it. But you guys raised at a really opportune time because it's going to become like we've talked about this before, but there's probably a window where especially for like most people, your first and even second cycle, you don't make any money because you wait until the the new all time high. You have way less time than you think, you know, you go small in the beginning, but then the euphoria kicks in and you invest most of your money at the top where you shouldn't. And there probably is some period of time to just sit on your hands.

• 58:45Speaker 01

  I don't know when that is.

• 58:47David Hoffman?

  The I think FTX actually painted an exemplar model of how everyone fails in a bull market, which is they started off conservative, they started doing like arbitrage, like free arbitrage trades between Bitcoin and stable coins. And then over the bull market, they started to become more and more risk on with their trading strategies to the point where they ended where they were like, how can we take the most amount of leverage? Three Earth Capital also did this. They were also like a very safe GBTC premium trade. And like even before that, I can't remember what the trade was, but it's even safer. It was like, like risk off trading during the bear market. And then as the bull market continued, it was like, okay, we we are down to take price exposure rather than just like time it like settlement a risk, right? We'll actually take, we'll take upside now.

• 59:32David Hoffman?

  And then it was like, okay, we'll take leverage now, or we'll take even more leverage now. And so like they were every everyone who failed was taking leverage at the top. Whereas like you should be taking leverage at the bottom and then clear it out before the top and then sell at the top. That's what everyone ought to be doing, but everyone does the opposite. Everyone just goes make more and more exposure as the markets go up in price.

• 59:51Speaker 01

  I know, and I mean, the other thing too, a couple of other dynamics about this is there were a lot of funds last cycle, good funds that are still around that went from. Ten million dollars in AUM to a billion dollars in AUM. And your universe of investable assets or opportunities is so much smaller when you have that size. And I watched this interview that the Three Arrows guys gave. Their defense on GBTC was that, oh, it was a really good trade, but you know, we couldn't account for other people piling in. It's like, yeah, you actually could account for that and you're supposed to. That's what you're supposed to account for. That's why you're a professional money manager.

• 1:00:28Speaker 01

  You, you know, and the GBTC thing was just such a hilarious concentric hallucination because those close end funds always trade at discount to NAV. It should have been really obvious to this industry that I just did an interview with a guy who was a huge part of that ETH part of that trade. And dude, it was just, I mean, it's literally as simple as, have you heard that quote? There's nothing so damaging to your health as hearing that your neighbor made money. Like, that's what it is. It's just a couple of people made 15 or 16 X their, their, uh, what they put in and everyone just fomod into that trade. So I'm sure the same thing is going to happen here at this time. I just, I just don't know what it is.

• 1:01:08Speaker 01

  Everyone thinks it's going to be restaking, which makes me think it's not going to be restaking because everyone literally thinks that it's going to be. But I have, I have no idea, but.

• 1:01:17David Hoffman?

  I think there's like a lot of just like ancient wisdom that people in Wall Street know that like people in crypto definitely don't know. And just by in the fact that like sometimes we're in a bubble and so are they and our bubbles don't mix. But it's not going to be me to bring that over here because I don't know it.

• 1:01:34Speaker 01

  No, I don't know it either. Actually, you know, it's funny.

• 1:01:37David Hoffman?

  I feel like of all people, you do know it the most because you interview all the macro people.

• 1:01:42Speaker 01

  So a golden rule of this that I've found interviewing macro people is that you know how when you hear old macro people talk about crypto? And you're just like, oh my God, that's the most cringe take ever. You do not know what you're talking about. It goes the other way too. And when you hear crypto people talk about macro, you're like, oh God, you have no idea.

• 1:02:03Speaker 01

  I'm not saying that I know enough to make great predictions about macro. I definitely don't, but I've done enough interviews where I can understand who knows what they're talking about and who doesn't. And I mean, one thing that should have been. Extremely obvious to our industry that wasn't at the time is when they started raising rates, we all should have gotten extremely concerned and I was not concerned.

• 1:02:24David Hoffman?

  I had no frame of reference for this. I remember a Jim Bianco tweet saying like the times have changed. This is, I think maybe he used a term like paradigm shift. And I remember this tweet because it's burned into my brain. I'm like, uh, Jim Bianco, what do you mean by that? I, I don't get it. Like, why, why is the, a new phase of markets? I don't understand. And then like 10 months later, I very much understood exactly what he meant. I very much, and so did my portfolio. Like, oh, that's what you mean by that? The fastest rate hike in history? But this is also like why like the, the end of last bull market was also just like so weird. And maybe it wasn't, maybe it ended just the same way it always going to end because everyone was sitting on the mountain of paper gains that I was talking about.

• 1:03:06David Hoffman?

  But also we had the fastest interest rate hike that we've had in most market participants, more participants' living memory.

• 1:03:14Speaker 01

  Yeah, it's, I feel like it's always going to be something. I, I sort of am in the camp that I'm in the Chris camp of everything that goes up must come down. Crypto goes up so fast that it must come down. Although I do think that there's good reason to believe that it's not different this time. But here's, here's a trend that's been happening since, for, for basically as long as crypto's in existence. Every bull cycle becomes slightly more muted. Like the peak to trough returns of say Bitcoin as you go along has gone lower and lower. And the volatility of Bitcoin and Ethereum, the assets go lower and lower. And the reason for that is really just a law of large numbers things.

• 1:03:55Speaker 01

  If Bitcoin peak to trough returned what it did in the 2011 cycle, it'd be the most valuable asset on earth 10 times over. So that just can't happen, but, uh, but that's probably good. And then the other thing is these ETFs might've not changed the game, but they might've exacerbated that existing trend. Because. Think about who, what was driving the price of Bitcoin in the 2020 to 2021 cycle. It was retail FOMOing their STEMIs into Bitcoin, or it was smart money that was front-running that retail. And so the incremental dollar moving into Bitcoin was that hot money retail kind of just chasing this trend.

• 1:04:35Speaker 01

  But now with the Bitcoin ETFs and soon ETH ETFs, which I think everyone is generally sleeping on, is the next incremental dollar is not a hot money retail dollar. It is a slow passive dollar that is moving into Bitcoin now. And the people that trade the Bitcoin ETFs aren't like you and me. They don't see, oh, Bitcoin go up, I should probably buy more. They say, oh, Bitcoin's up 10% this week, it's probably going to mean revert, I'm going to sell. And that behavior over time is just going to level out the, the price appreciation of Bitcoin. So, and I think it's going to happen with ETH, and that is the way that it should ultimately end up happening. I think that's a good thing, but.

• 1:05:15David Hoffman?

  I learned this from, I can't remember, how, how press. And maybe I need to get a second opinion on this, but like his big idea was that as soon as we have like sustainable dependable flows, you get less volatility. I think that's just like true of any financial asset. If you have sustainable flows, like volatility goes down, which would be great for like the PR and optics. If Bitcoin can stop and Ether stopping so volatile, that'll be just, that's a maturing market. You said that these markets dampen over time, law of large numbers, totally true. Like you can see that in the Bitcoin and the ETH volatility. But also like looking at the market, bull markets as like events, events in crypto,

• 1:05:58David Hoffman?

  they can still be just like equally frothy as the last one, because people will always go down the long tail. And like, there's no cap on how far down the long tail you can get. Like, we were trading like JPEGs of text at one point when they, one of them, like the floor got to 25 ETH. Like that was some extreme frothy shit. And like sometimes like I think it's kind of a little bit lost to his, lost to history. But the ICO waterfall. Of just like the shitcoin waterfall that was in the 2017, like that was an insane time. Where like it was completely disconnected from reality and it's kind of hard to express. It's even hard to remember how insane it was.

• 1:06:37David Hoffman?

  I think before he's had a tweet where he was talking about like, yeah, most people are just under indexing about how insane the 2017 ICO mania was. Because it's just like lost to memory like it's it's like the memories are smoothed out. You can't really remember it's hard to compare to the 2021 bull market. But also I think like with Bitcoin and Ether are massively large numbers. Those are just hydraulic pumps down on the long tail and can make the long tail equally frothy, no matter what kind of bull market it is.

• 1:07:06Speaker 01

  A hundred percent those those arguments never held that much water with me. You you hear people talk about, you know, we're never going to inject $7 trillion in the into the market again. That was as crazy as it's ever going to get. I think 2017 was crazier than 2020 and 2021.

• 1:07:22David Hoffman?

  I I can't without confidence, I think that's true.

• 1:07:27Speaker 01

  It felt crazier. It was I remember looking at the price, I mean.

• 1:07:30David Hoffman?

  But that was also our first bull market, though. We had no frame.

• 1:07:33Speaker 01

  I know, but I think that it was just smaller and the prices, dude, I just remember these things would go up like, you know, 60, 70% a day. I I guess maybe if I missed the whole NFT thing last time, which is maybe why I'm doubling down on it.

• 1:07:47Speaker 01

  But uh, but yeah, I I just, I don't know, equally crazy. And there's going to be something equally crazy next time. But yeah, the long tail of cryptos is interesting as it's ever been, I think. And it's as dispersed as it's ever been. I can't keep up with all the different, you know, it's it's tough to keep up with everything that's going on. But David, what are your thoughts on the the ETH ETF in general? Because I've been seeing there's a there's an argument on Twitter that it's not gonna be as big of a deal. Yeah, the.

• 1:08:15David Hoffman?

  People are saying that.

• 1:08:17Speaker 01

  Yeah, yeah, it's not as attractive to institutional audience as as a Bitcoin ETF is. What do you think?

• 1:08:23David Hoffman?

  So I asked Sandy from Franklin Templeton about like my, my perspective on Ether is that like it's a more attractive asset for Wall Street. Surprise, the bankless guy thinks that Ether is a more attractive asset, just because it's like a tech platform. It's like a platform, technology play, and that just resonates with them like Bitcoin is digital gold. Okay, great, but Ethereum is tech with like apps and other chains built on top of it. And just as a form factor, it just is more understandable. It's got like, you can do DCF analysis on, on ETH. And I know like you want to throw for your flag about how to value networks with a DCF analysis. But the point is you can, and they will accept it because that is what they understand.

• 1:09:05Speaker 01

  I think you're, I think you're probably right about that, David. Yeah.

• 1:09:07David Hoffman?

  And so like, it doesn't, maybe I'm only like right a little bit on the fact that like, okay, Wall Street likes it a little bit more because of the tech play, the DCF play. But also ETH is one third of the size of Bitcoin. So liking it a little bit more for that reason, like you multiply that by three because just like it's, and then also this is a, you know, from Van Spencer's Twitter. And it's like, there's just much less float on Ether on them, on the markets because it's in layer twos. It's in Eigenlayer, right? It's like, it's in compound, it's in AVE. And so like a dollar means a lot more to the Ether price than it does for the Bitcoin price.

• 1:09:43Speaker 01

  I, I think that's going to be the ultimate driving thing. People, the crypto natives will debate, what is ETH's story? Is it a money or a tech platform? Is it yield or is it ultrasound money? You know what TreadFi thinks? They don't give a shit.

• 1:09:56David Hoffman?

  Yeah.

• 1:09:57Speaker 01

  They don't care. They just need a story. It's like Bitcoin, it's the next Bitcoin, it's smaller, get in now. I, and, and I think another, another thing that I don't believe that the Bitcoiners have always believed is it's only Bitcoin. It's only, central banks will only buy Bitcoin, and that's the safest one. I've just never bought into that idea. If anything, I think the most, the, the most realistic outcome is a basket. They they love baskets. They love baskets like

• 1:10:23David Hoffman?

  They're already building baskets with bonds, equities and Bitcoin in there. They're already building the baskets.

• 1:10:28Speaker 01

  There you go. I that's and so there'll be a crypto basket. And how many times have you heard David from maybe someone who is on the older side who I don't really understand this. I just want to give me broad exposure. Like, I just want exposure, you know, they don't. So I just I I've never bought into that idea that it's only going to be Bitcoin. I think if anything. I think if anything, right now, the Bitcoin ETF has surprised people with the flows.

• 1:10:53David Hoffman?

  Yes.

• 1:10:54Speaker 01

  Even the most bullish people.

• 1:10:55David Hoffman?

  More and more.

• 1:10:57Speaker 01

  Yeah, and I don't know if we're in some kind of near peak. If you if you do a run rate of 250 trading days, $500 million in flows a day. You wind up with 100 billion, and I think that's that just sounds wrong to me. That sounds too high. But it's looking like it's going to be a phenomenal success for Bitcoin, right? People are going to say ETH is going to do something similar to that. And Vance pointed this out on on Bell Curve, but Bitcoin ETH Bitcoin bottomed, the ETH BTC ratio bottomed like the day of the ETFs. And it's probably not to make a prediction, but it's probably if it hasn't bottomed, it's probably it's probably a good bet that that's gonna. Yeah. Yeah, so that's and also, this is the time.

• 1:11:40Speaker 01

  Solana really messed everyone up. You and I have talked about this before.

• 1:11:43David Hoffman?

  Yeah.

• 1:11:43Speaker 01

  The the typical thing that happens during this point of the cycle is everything sells off Bitcoin sells off the least ETH is the second least, and then everything else is this kind of bucket. And then what ends up happening is that's when Bitcoin dominance peaks, then Bitcoin runs first, and then everything else follows, and people move out along the risk spectrum. Solana just messed everyone up because it was so there was that idiosyncratic FTX event. And so it got drastically underpriced, then it got overpriced, but this is just really typical stuff for this part of the cycle. Bitcoin is running first. ETH is going to run again soon. So that's that's how I feel about it. And the people say it's the ETF narrative, but it's probably just what was always going to happen, honestly.

• 1:12:27David Hoffman?

  Yeah, that's probably right. That's probably right. Yeah, there's a lot of things like that, like

• 1:12:32David Hoffman?

  the the whole interest rates were hiking faster than all time, but the bull market was ending. Like, it was yeah, we were we were trading text JPEGs like we're time now.

• 1:12:42Speaker 01

  Yeah, like, how much longer do you think we would have gone if even if the interest rate thing hadn't happened?

• 1:12:47David Hoffman?

  It couldn't it couldn't have been that much longer.

• 1:12:49Speaker 01

  I agree. What goes up must eventually come down, so.

• 1:12:54David Hoffman?

  All right, man. Should we call it here?

• 1:12:56Speaker 01

  We can call it. Yeah, this was a lot of fun, buddy. I like these unscripted things.

• 1:12:59David Hoffman?

  Yeah, I really like them.

• 1:13:00Speaker 01

  Raw, unvarnished Davids. I think people want that, David, don't they?

• 1:13:05David Hoffman?

  Am I? I don't think I think Ryan's the more like varnished one. I'm always kind of like more unscripted and shooting from the hip, but maybe maybe that's my take.

• 1:13:13Speaker 01

  That is true, in the in the best way, in the best way.

• 1:13:16David Hoffman?

  All right, man. This is great. Thank you so much. What's your Twitter handle if people want to follow you?

• 1:13:21Speaker 01

  I am Mike Ippolito underscore. You can follow me there.

• 1:13:25David Hoffman?

  We'll put those in the show notes. Thanks, Mike. I really appreciate it.

• 1:13:27Speaker 01

  Thanks, Potter. Cheers.

• 1:13:28David Hoffman?

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