David's Take: This is the Last Cycle

FULL ARTICLE HERE: https://www.bankless.com/the-last-crypto-cycle Is crypto entering its last market cycle before its mature era begins? For today's take, David makes the case that crypto will always have a Wild West, yet there are signs all around us that the ecosystem is trending toward being more dependable and safer. In other words? Crypto's growing up! ----- 🏹 Airdrop Hunter is HERE, join your first HUNT today https://bankless.cc/JoinYourFirstHUNT ------ 📣 SAFE CORE | Smart Wallet Infrastructure https://safe.global/core ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2 ⁠ 🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING ⁠https://bankless.cc/MetaMask ⚖️ ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum ⁠ 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle ⁠ 🦄UNISWAP | ON-CHAIN MARKETPLACE ⁠https://bankless.cc/uniswap 👾STADER LABS | ETHX LIQUID STAKING https://bankless.cc/Stader ----- 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.

• 0:03David Hoffman?

  Welcome Bankless Nation to Davis Takes, where every single week I drop a take in the Bankless newsletter and I read it to you here on the Bankless Podcast. Last week, I wrote about my big takeaways from ECC and all the industry themes that I identified from attending the talks, meeting with others, and overall just integrating the knowledge that is shared at these events. If you missed that episode, definitely go back and listen to it, because the information there, I think, will help you navigate the next meta of crypto that we are seemingly soon to be embarking upon. This week, I continue that exploration of industry themes and progression in a very boldly titled, "This is the Last Cycle", in which the title itself caused a bunch of controversy on crypto Twitter, almost exclusively from people who didn't actually read the article.

• 0:46David Hoffman?

  But how could I blame them for not reading the article? Because if people actually did read articles in this industry, then I wouldn't need to read them aloud on the podcast. I say right in the introduction, "The next crypto cycle is going to be the last one", is kind of a meme statement in crypto land. It's been stated before, and I don't mean to make a clear convicted prediction about this. I'm simply connecting some dots across the crypto landscape that point towards a new phase of crypto after this bear market is concluded. If you look closely, there are a handful of signs pointing towards crypto entering its last market cycle, before finally exiting its developmental phase and entering its long-term era of maturity, stability, and growth. This is the subject of this week's take. But first, before I read you my take, a moment to talk about some of these fantastic sponsors

• 1:31David Hoffman?

  that make this show possible. Extra thanks to Kraken, our preferred exchange for crypto in 2023. Whether you're dollar-cost averaging into crypto to prepare for the bull market or you're taking profits out of crypto, be sure to do it with Kraken. The newly-designed Kraken Pro makes it super easy to do both your basic financial transactions while also taking your trading to the next level. Kraken Pro is truly the trading UX that you've always wanted. So if your bull market archetype is the trader class, you need Kraken Pro in your toolkit. But if your character class is more of a DeFi journeyman or woman, then MetaMask Portfolio is the tool for you. MetaMask Portfolio is your DeFi multi-chain battle station. Any asset on any Ethereum layer 2, MetaMask Portfolio will present it to you. So don't get caught forgetting assets or missing opportunities. Make sure you're prepared for the bull run by prepping your MMS portfolio.

• 2:16David Hoffman?

  Moving on from tools you need to playing fields to play on. The Arbitrum Layer 2 is one of the main arenas in which this bull market will be fought on. Whether your character class is a DeFi Dgen, Airdrop Hunter, or Yield Seeker, the Arbitrum Coliseum is where a ton of the action is going to be. So whether you're on Arbitrum 1 for DeFi and NFTs, or Arbitrum Nova for Web3 Gaming, or a new frontier on Arbitrum using an Arbitrum Orbit Chain, there are so many opportunities to sink your teeth into. But as we know, the Ethereum rollup-centric roadmap produces all kinds of Layer 2s. And Mantle is one of the newest Layer 2s on the scene, with some of the newest technology that Ethereum Layer 2s has to offer in the year 2023. Mantle is built using the OP stack, but uses Eigenlayer's data availability solution instead of the expensive Ethereum Layer 1, reducing gas fees by 80% compared to other Layer 2s.

• 3:01David Hoffman?

  With billions of dollars standing by from BitDow to invest in Mantle, make sure you stay ahead of the game by building and growing your on-chain footprint on Mantle. Let's not forget about the ETH staking character class, and Stater makes it easy. Running a staking pool with Stater just requires 4 ETH for a deposit, letting you charge a fee to the remaining 28 ETH that uses your node to stake their ETH, increasing your yield by 35%. Stater's staked ETH token, ETHX, allows you to stake your ETH and use it in DeFi at the same time. For all you DeFi swappers out there, this one is for you. Uniswap X has opened up a brand-new landscape to play in, and it's the world of Intents. This is where those who employ this swapping ability get to team up with the evil MEV bot army, and they get to band together to discover the most efficient liquidity route

• 3:45David Hoffman?

  through the Ethereum landscape. Gas-free swaps, MEV protection, and theoretically optimal pricing. When swappers and MEV'ers come together, new metas happen, and it's thanks to Uniswap X. So the next time you trade on Uniswap, consider clicking the Uniswap X button to get your MEV protection. And so, if we're truly entering a bull market phase in crypto, which we totally are, then tokens are going to start flying all over the place. So if you're an organization looking to grow with token incentives, then look no further than Toku. If you want to distribute tokens to your employees, team members, or for payroll, Toku can help you comply with labor laws, tax obligations, and reporting for whatever country you Employ someone. Crypto is entering its regulated era and Toku can help you achieve your token incentive award goals with compliance.

• 4:26David Hoffman?

  So, thank you to all the sponsors that support Bankless and all the podcast editors, newsletter writers and operations managers who make the Bankless organization the best that we can be. We truly appreciate your support and for all the listeners out there who listen to the mountains of content that we churn out each week, especially this one right here. So, let's go on to the show. I hope you are ready to hear about why I think that this might be the last cycle that crypto ever produces. And the first reason, the first rationale I have is about the regulatory and institutional approval climate in crypto right now. Crypto is going through its largest regulatory battles ever. Indeed, this has always been inevitable. As an industry based around money and finance, we cannot simply just waltz into mainstream acceptance

• 5:07David Hoffman?

  without going through the trials of regulatory acceptance. In order for the biggest players to be able to play in Web 3, they need assurances that the nation state and its monopoly on violence actually allows them to do so. Becoming mainstream means that crypto makes it through these regulatory trials. But don't be scared. Crypto wins no matter what. All we have to do is wait until the hazing is over and it can only last for so long. Crypto is an unstoppable force and the nation state is not an immovable object. Gary Gensler will tell us to come in and register. Elizabeth Warren will stamp her feet. The banks will try and choke us out and Ethereum will produce the next block. History is ultimately defined by the arc of technology.

• 5:51David Hoffman?

  Every blow that the anti crypto regulators and legislators throw at us ultimately will be walked back by the power of the free market. This current phase of crypto shouldn't really be considered as the nation state attack on crypto, but instead as the nation state hazing of a disruptive technology. Like every freshman in college or every pledge of a fraternity, we just have to make it to the other side. Ripple just told Gary Gensler to sit down. BlackRock, Fidelity and all the other big TradFi players have just signaled to the powers that be to cool their jets. Major brands largely unconcerned about financial regulations continue to explore crypto avenues. Our court cases will be fought, bills will be drafted, voted on, rejected and then voted on again.

• 6:33David Hoffman?

  It will be frustrating and painful, but one day it will come to an end. The regulators will eventually sit down and all we have to do is wait. Time is on our side. Once the regulatory trials are behind us, the cautious curiosity of mainstream interests in crypto will flip to a zealous gold rush as they realize that there is fertile ground out there and the regulatory path to accessing these new frontiers are clear and that the risk is acceptable because the regulators are no longer fighting and hazing crypto. They will be given the green light. We're going through regulatory battles. It's not really about winning or losing because crypto can't die. Whatever form of crypto comes out through these regulatory battles will be accepted and it will be given the green light to all big players who are curious to play in crypto

• 7:17David Hoffman?

  that now that these regulatory hazings are over, whatever is on the other side of that is given the thumbs up. You're good to go. Go play. Moving on to the second point, protocol maturity. At the same time that we can start to see the light at the end of the regulatory tunnel, we can also start to see the end game for many of the protocols that this industry is built upon. A large focus in my takeaways from ETH CP's was that many of the protocols that Web3 needs are evolving into their final form. We're not there yet, but the end game is viewable on the horizon. Soon in Web3, we'll have more data availability than we'll know what to do with. EIP 4844 will commoditize access to the world's most secure block space. Thanks to ZK rollups, transactions will be instantaneous.

• 8:00David Hoffman?

  Shared sequencing blurs the boundaries between chains and all of these technologies are pursuing the same outcomes to make blockchains invisible. By the time the next bull market rolls around, the costs of Web3 compute will have found their theoretical minimums. High gas costs and slow block times will not be a bottleneck for the adoption of decentralized protocols. The responsibility of innovation will shift to the application devs who will be charged with making use of the ample supply of compute resources supplied by the protocol devs. Next bull market will not be constrained by limits on scale. No one will cite high costs and protocol immaturity as a reason why they did not integrate with Web3 systems. Ethereum's rollup-centric roadmap will be sufficiently expressive and customizable

• 8:43David Hoffman?

  that proprietary chains can spin up with ease to fit the use cases needed by any curious player. This opens up access to the long tail of crypto use cases. When Web3 is slow and expensive, the only use cases that are accessible are money and finance and high-value assets. If it costs tens or hundreds of dollars to do something, then the only rational activities that can be supported are things that are worth thousands of dollars or more. When the cost to engage in Web3 approached sufficiently low numbers, it starts to become more rational for platforms to just subsidize their own users, which is also how the internet got built in the first place. Ads actually built the internet. Ads, the ad model of Web2 was the actual adoption vehicle, the adoption motor.

• 9:28David Hoffman?

  Because of ads, we could actually finance a lot of the growth of Web2. It wasn't users pulling out their credit card. It was some third-party mechanism actually subsidizing the use of these platforms because the platforms itself actually got cheap enough and they became sufficiently a commodity where subsidizing usage to a third-party for some particular reason actually became a viable path. Once users' transactions become subsidized by platforms competing for users, then the full scope of crypto use cases finally becomes open to all. What can Web3 do when it is effectively free to access? What new apps can be built? What new populations of users can we onboard?

• 10:10David Hoffman?

  The answers are everything, all of them and everyone. The long arc of Ethereum. In 2015, Ethereum laid out an ambitious roadmap for itself. As the years progressed, this roadmap would only increase in ambitiousness, much faster than it would actually increase in completeness. As it turns out, the aspirations that Ethereum had for itself were far more complex than originally thought. Sometime around 2019, something flipped. A mountain of R&D and a handful of critical engineering breakthroughs turned a new page in Ethereum. Ethereum 2.0, or Serenity, now all just called Ethereum, had a clearly defined roadmap where the only thing left was testing and writing code. From 2019 to 2023, code was written and code was shipped. Ethereum went from a monolithic proof-of-work chain

• 10:55David Hoffman?

  to a modular, expressive proof-of-stake chain with networks upon networks spawning from its base. Promises were made and promises were kept. The most amazing thing about this arc of Ethereum is the commitment to the original vision that it set for itself in 2015. While the implementation details changed and the path itself was uncharted, the original destination for what Ethereum would ultimately become never wavered. Across its entire history, betting against Ethereum's trajectory and Ethereum developers has never worked out. With EIP 4844 shipping sometime late this year, probably by my estimation, Ethereum will have locked in a perfect track record of commitments. Keeping promises and sticking to a vision shows the outside world that the things being

• 11:36David Hoffman?

  built are being built with conviction, intent, and purpose. We're not crazies. We've been building towards the same vision for eight years now. You, mainstream society, just didn't understand it until now. Before this point, it was possible for the outside world to look in at Ethereum and see a bunch of confused monkeys running around in chaos. But now, one will look back and see a beauty in the chaos, as Ethereum ultimately progressed into the thing that the world needed it to be: a decentralized internet compute layer for value, a network for networks. And part two of the same section is Ether. Alongside the blossoming of Ethereum is the story arc of ETH. Sufficiently a shitcoin in 2015, ETH the asset has made commensurate progress alongside the protocol it runs on.

• 12:21David Hoffman?

  From highly inflationary and arbitrary 5 Ether per block in 2015, ETH is now a natively yield-bearing asset with algorithmic monetary policy. With real yield and no human intervention, it stands in sharp contrast to the monetary policy of the dollar and the farce that is the Federal Reserve. Other than MEV burn, which further adds to the monetary strength of ETH, no further upgrades to Ether's monetary policies exist. If there's one thing that big money likes, it's yield. And ETH's yield stands head and shoulders above the rest. ETH stakers receive yield, while ETH itself is simultaneously deflationary. United States Treasury bondholders get positive nominal yields, but negative "real" yields, "real" being the more important descriptor here.

• 13:06David Hoffman?

  Compare that to the global understanding that the United States Dollar and US Treasuries must decline in value in real terms in order for the world's financial system to hold itself together. You have a story for ETH's future that just writes itself. The evolution of ETH towards its throne of ultrasound money shows the outside world that there is something uniquely here in the crypto industry. Through cryptography and networks, we can create financial assets with never-before-seen properties. No, the story arc of crypto assets with strong value propositions does not stop at Bitcoin. We are not settling for digital gold. We're carving new frontiers. In ETH, the asset can neatly fit inside pre-existing mental models for how assets are valued,

• 13:48David Hoffman?

  while simultaneously being something completely different than all previous assets that have come before it. The summary of these two sections, Ethereum and Ether maturity, can be summarized by both the growing Lindy and the successful navigation of uncharted waters. When the time comes for society to turn its attention back towards crypto, they will see a protocol and its asset with a long record of coherent directional progress towards a vision that hasn't wavered since its inception. The legitimacy that this earns the Ethereum ecosystem will propel it to a crypto asset that is sufficiently safe for people to take a career risk on and start to recommend, quote, "looking into it at higher and higher levels."

• 14:29David Hoffman?

  This starts, of course, at ETFs, a ball that's already been rolling, which is the next section in this article. ETFs are here. The race for the ETF has begun. Like I said in my above regulatory section, all we have to do is wait. The arc of history is defined by technology. Gary can only hold the door closed against crypto ETFs for so long. Eventually, the power of the free market will get its way. It appears that the time is sooner rather than later. Once Bitcoin blasts open the doors of crypto asset ETFs, it becomes harder to stop additional assets from finding their way into their own ETFs. I'm making some assumptions here, but we'll get the Bitcoin ETF and the ETH ETF won't be too far behind.

• 15:10David Hoffman?

  If these things pair with the incoming bull market, the pipes of capital between crypto and the outside world will be the largest that they've ever been. This pairs well with the above regulatory conversation. By the end of this incoming cycle, the ticker symbols BTC and ETH will be commonplace next to Apple And Amazon for every major brokerage in the world. I want to pause here and read out this tweet from David Bailey that got tweeted out after I wrote my article, but I saw it through my Twitter feed and I thought it was super prescient. David Bailey, he's one of the owners of Bitcoin Media, Bitcoin Magazine, Bitcoin Conference, all that stuff. He says, "It's not just the insane inflows. The ETF is truly the definitive integration into our financial system.

• 15:53David Hoffman?

  You can own ETF shares tax-free in your IRA. Your bank will recognize ETF shares when you apply for a mortgage. You can borrow against ETF shares. You can margin ETF shares. You can lend out your shares and gain yield. If $100 billion flows into the ETF next cycle and the price of Bitcoins 10x, $1 trillion of ETF wealth will cause trillions of new credit within the financial system. Tens of millions of Americans will see their assets balloon in value." David Bailey is of course a big Bitcoiner, but his points are very, very strong. Just like how we use Ether in DeFi and then we put it inside of AVE and then we margin it and that Ether is staked and then we borrow the stables to go do something else.

• 16:36David Hoffman?

  The core primitive building block in TradFi is the ETF for that stuff. And so of all the reservation demand that you see Bitcoin and Ether, mainly Ether in DeFi, you will see a similar comparable level of opportunity for reservation demand now inside of the TradFi. Like the ETF is the building block, the money Lego that's needed to unlock credits, what David Bailey called trillions of dollars of credit because of, you know, the fractional system that is TradFi. I thought this was a super important take to illustrate the power of the ETF and what it unlocks for us. Getting back into the article, the next section. "The cycles are diminishing anyways. Bitcoin returns over the cycles have always been suppressed.

• 17:19David Hoffman?

  If you were insane enough to buy Bitcoin in 2010, congratulations, because the rise to the 2011 top was the steepest, sharpest gain in Bitcoin price that Bitcoin has ever had. Every subsequent cycle has taken more time for lower returns." Obviously, it works this way. One of society's biggest talking points are that crypto assets are too volatile. Well, every cycle, crypto assets become the least volatile that they've ever been. While simultaneously, importantly, the traditional equities and bond markets are the most volatile that they've ever been in three decades. Trad markets merely adopted the volatility. Crypto markets were born in it, molded by it, and now our markets are evolving into

• 18:01David Hoffman?

  stability, where trad markets are decaying into volatility, thanks to the hands-on nature of the Fed. With the easing of regulatory pressures and the attraction of sustainable, non-speculative adoption of crypto networks due to the maturity of network infrastructure, a lot of the volatility of crypto can be dampened simply due to adoption. The larger the boat gets, the harder it becomes to rock. And the conclusion of my above-infrastructure section is that our crypto boats are ready to scale to whatever size society needs them to be. The arcs are ready. It's time to board them. Crypto civilization grows. Crypto will always have its Wild West. There's no putting the genie back in the bottle.

• 18:46David Hoffman?

  Once you give society permissionless finance, then the West-facing frontier cannot be stopped. Thanks to the ERC20, anyone can mint a meme coin. But now, thanks to the OP stack, the next market cycle, anyone will be able to mint a meme chain. Hold on to your butts with that one. But now, with this cycle, we're going to see the civilizations in the East establish the safety and security of civilization. The East and the West stand in opposition to each other. Those who seek freedom and adventure, they go west in order to escape the tyranny and the oppression of civilization. But some people want the safety and security of civilization. Mainstream adoption requires roads, plumbing, laws, and policemen.

• 19:30David Hoffman?

  The margins of crypto will march west, but the body of crypto will evolve into a predictable, dependable, regulatory-approved environment, where the less adventurous feel safe exploring. Parts of crypto will start to be considered sufficiently safe and secure that Web 2 normies will feel safe living there. Smart contract wallets with account recovery, highly battle-tested apps, high-traffic L2s, Base, for example. These things will become the civilization of crypto and will be a place where the less adventurous can still feel safe participating in crypto society. But for everyone reading this article or listening to this verbal article, being here, crypto civilization, will be a choice.

• 20:14David Hoffman?

  We'll know the secret paths to the more hidden corners of crypto, where tokens manifest and D-gens play. For better or for worse, we will always have the Wild West of crypto. And that is my take for this week. These are the reasons why I think, again, I don't actually think that this is the last cycle. There's always going to be volatility. There's perhaps iterative cycles after this. But the point is, is that with our protocols becoming mature, our regulatory environment eventually turning favorable. Like, you only have to fight the regulatory battles once. Once you're through them, you're good to go. You got the thumbs up and people are free to play. Same thing with our protocols. Once our protocols are mature and they can do all of the things that we want to do on them, that battle is now fought.

• 20:57David Hoffman?

  Now Ethereum, Ether, these protocols and assets are hitting their final forms. So there's always going to be progress to be made. But when I say that this is the final cycle, we're in the cycle where we actually will have the means to do anything that we want to do. And all of the real use cases of crypto, we will find them and they will be sustainable. And if we don't, then crypto is just going to become forever a weird corner of the internet. But I refuse to believe that that is the future of crypto. I hope you enjoyed this take of mine this week. I am thoroughly enjoying writing more. I already have two articles written that will come out next week and the week afterwards. The next one is all about off-chain signed orders versus on-chain DEX transactions. And that one, I think... It's probably one of the more creative articles.

• 21:42David Hoffman?

  I'm going to do a little bit of voice, not acting, but you know, it's gonna be some acting going on in there. And then also not too far beyond that, we're going to talk about bull market archetypes and character classes. And how to set up your bull market battle station to navigate the incoming bull market. If you want me to talk about something, if you want me to drop a take about something, a topic that's floating around in your mind, hit me up inside of the Bankless Discord where the Bankless citizens play. I've got my own channel in there called Ask David Anything. So if you want me to drop a take about a particular corner of crypto, that is the place to do it. Always interested in hearing what the Bankless Nation is thinking about. Bankless Nation, you know the deal, crypto is risky, you can lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we are glad you are with us on the Bankless journey. Thanks a lot.