ROLLUP: Under Attack - Crypto, Freedom, & Privacy

WRU 4th Week Of August ----- 🏹 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 https://%E2%81%A0https//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%E2%81%A0 👾STADER LABS | ETHX LIQUID STAKING https://bankless.cc/Stader ----- TIMESTAMPS & RESOURCES 0:00 Intro 5:14 MARKETS 7:22 L2 Economics https://dune.com/niftytable/rollup-economics https://twitter.com/0xbreadguy/status/1686040103989190656?s=46 14:39 Why Did We Dump? https://watcher.guru/news/wp-content/uploads/2023/08/TOTAL_2023-08-18_09-54-05.png 16:50 Arthur Hayes Article https://cryptohayes.medium.com/kite-or-board-64bc45d49931 21:03 Mantle DAO staked 40K ETH https://twitter.com/LidoFinance/status/1693578509413654990?s=20 24:12 Tornado Cash Case https://home.treasury.gov/news/press-releases/jy1702 https://www.coincenter.org/new-tornado-cash-indictments-seem-to-run-counter-to-fincen-guidance/ https://twitter.com/NeerajKA/status/1694474067678822410?s=20 https://twitter.com/sethforprivacy/status/1694434785454698979?s=20 https://twitter.com/sethforprivacy/status/1694434807004991545?s=20 https://twitter.com/sethforprivacy/status/1694434795646808118?s=20 https://twitter.com/jchervinsky/status/1694423912321274148?s=20 https://twitter.com/ameensol/status/1694396049430118521?s=46&t=2ZINVXJQKx6xO_6Wiiu_2g https://twitter.com/ameensol/status/1694396049430118521?s=46&t=2ZINVXJQKx6xO_6Wiiu_2g https://twitter.com/ameensol/status/1694736128220483629?s=20 45:45 Coinbase Tornado Cash Lawsuits https://twitter.com/billhughesdc/status/1692256433818001792?s=46&t=LKBC7Qtm18FnZ380xCF2pA https://twitter.com/billhughesdc/status/1692256433818001792?s=46&t=LKBC7Qtm18FnZ380xCF2pA https://twitter.com/iampaulgrewal/status/1692260842585350334 51:43 Friend.tech continue shaking with CT https://twitter.com/RyanSAdams/status/1693799871197622344?s=20 https://twitter.com/sassal0x/status/1693803825747107973?s=20 https://twitter.com/moonoverlord/status/1693364919637344535?s=46 https://twitter.com/AutismCapital/status/1693759402908815480?s=20 https://youtu.be/AVZlvnex4Gw?si=7m3COBp9iOe3HXqM https://twitter.com/ercwl/status/1694157222597521893?s=46 53:18 Is Binance in trouble? https://www.wsj.com/finance/binance-cryptocurrency-russia-sanctions-ddb948c3 https://twitter.com/Travis_Kling/status/1694042353797824764 58:19 Coinbase and Circle formally melding https://twitter.com/jerallaire/status/1693719963565969654?s=46&t=iahr7Lh5v08SSM_Ery-bGw https://twitter.com/jerallaire/status/1693719963565969654?s=46&t=iahr7Lh5v08SSM_Ery-bGw 59:05 Dencun Devnet! https://twitter.com/parithosh_j/status/1691927807230677133?s=20 1:01:08 EigenLayer Updates https://restaking.nethermind.io/ First Squad Block Proposed https://twitter.com/trustlessstate/status/1694511259020837036?s=46 Scroll Entering Beta https://twitter.com/Scroll_ZKP/status/1692194581918745066?s=20 Farcaster news https://twitter.com/dwr/status/1691480693443108864?s=20 https://twitter.com/dwr/status/1694020862545109272?s=46 OP Stack Encrypted Mempool https://twitter.com/project_shutter/status/1693986910795186647?s=20 Airdrops https://blog.connext.network/announcing-the-next-airdrop-be764b1c548 https://imgur.com/Je2IGRB https://earni.fi/account Starkware Stone https://twitter.com/StarkWareLtd/status/1693991491713261809 Fire Wallet Released https://twitter.com/_joinfire/status/1691847167382618455?s=20 Balancer Hacked https://twitter.com/Balancer/status/1694014645378724280 NFT Stuff https://twitter.com/punk9059/status/1693357671850688809?s=46 Bitcoin stuff https://www.justice.gov/usao-sdny/pr/former-employee-nft-marketplace-sentenced-prison-first-ever-digital-asset-insider https://www.bloomberg.com/news/articles/2023-08-17/sec-said-to-be-poised-to-allow-us-debut-of-ether-futures-etfs-eth#xj4y7vzkg https://twitter.com/EricBalchunas/status/1692314639235735836?s=20 https://twitter.com/CoinDesk/status/1693989173106266413?s=20 Releases https://twitter.com/RiscZero/status/1694047369028059218 Takes of the Week https://twitter.com/RyanSAdams/status/1694705374941560893?s=20 What are you bullish on? https://twitter.com/hildobby_/status/1694357014086815757?s=20 MEME of the Week https://twitter.com/BoysClubWorld/status/1694446626591363150/photo/1 Moment of ZEN https://twitter.com/Permissionless/status/1693355946779812009?s=20 ------ 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.

• 0:00Ryan Sean Adams?

  Where does this stop, David? Are they gonna arrest Tim Berners-Lee? You know, the creator of the internet protocols? How about Netscape, 1994, who designed HTTPS? Remember Marc Andreessen talked about kind of Crypto Wars 1.0 when he came on the podcast? He's talking about the battle there. I mean, are the developers of internet protocols responsible for how North Korea uses the internet? In order to do nefarious things that Treasury doesn't want? It's absolutely ludicrous. And I think that if Treasury or ever any government regulator in the US took this type of stance towards communication, we would have no Silicon Valley. We would have no free and open internet based largely in the US today. We would have none of this innovation and economic GDP growth. It would have been completely squelched.

• 0:48Ryan Sean Adams?

  Bankless Nation, it is the last Friday of August. David, what time is it?

• 0:52Speaker 01

  It's the Bankless Friday Weekly Roll-Up, where we cover the entire weekly news in crypto, which is always an ambitious endeavor, yet we persevere nonetheless into the frontier. How you doing, Ryan?

• 1:02Ryan Sean Adams?

  I'm doing okay, just okay, though. You know, this week felt like a gut punch. And we're gonna talk about some, the bad thing that happened this week in the show. There's also some good stuff, but I mean, getting the bad thing out of the way. Number one, the Department of Justice has arrested Roman Semenov. This is a US developer of Tornado Cash, an open source privacy developer. This one hurt, David. It feels like crypto continues to be under attack. Privacy and freedom are under attack. It's a big freaking deal. And we're gonna spend some time talking about it in the episode. That's the bad stuff, but we got some good stuff, too. What else are we talking about?

• 1:41Speaker 01

  Plenty of good stuff. The arrival of EIP 4844 draws closer. This is, of course, the one that scales up Layer 2s further than they already have. The friend.tech debate continues. Is it good or bad? Ryan and I did an entire show on that. We will recap it very quickly, but really talk about the big takeaways, which are that it's proof that we are ready to go mainstream. We got a mainnet debut as well. We got an airdrop to talk about and an exploit as well. Just a normal week in crypto. So make sure to like, subscribe, rate and review wherever you get your podcasts. Ryan, I don't know if you've checked recently, but on Apple Podcasts, we are about to hit 1,000 five-star reviews. So this is a call to action for anyone listening to on Bankless on Apple. Give us those five-star reviews so we can legitimize the Bankless Podcast and get that top of the iTunes investing in business categories.

• 2:25Ryan Sean Adams?

  Guys, some of this will be edited out, but maybe stay tuned to the bloopers after the show to to see how many times it took David to say 1,000. It is hard, though. It's hard to say.

• 2:38Ryan Sean Adams?

  Oh, man. You know what? We got to start here, though. This is pretty cool. From our friends and sponsors over at Safe, a non-custodial bankless crypto wallet that the feds can't take from you. It's called Safe, and they've got some account abstraction magic that they want the devs to know about. So what are they talking about today?

• 2:56Speaker 01

  So you've heard us talk about account abstraction, of course, how it's going to 100x the crypto wallet experience and kind of build the bridge that we ultimately need to get everyone else onto the world of crypto. So Safe is proposing their modular, open-source Safe Core protocol as the standard to move forward, to transition all of our wallets to being smart contract wallets. And they want you to check it out, especially if you're a developer. So Safe Core is unopinionated core standard, vendor-agnostic, high-component reuse, aka safe code, and also allows to maintain interoperability and smart contract diversity. So there is also a hackathon as well dedicated to building on Safe Core, happening in early September in Berlin,

• 3:38Speaker 01

  Germany, if that is your neck of the woods. So don't forget to register for that. And if you just want to check out Safe Core and to start building in the world of smart contract wallets, there's a link in the show notes.

• 3:47Ryan Sean Adams?

  Speaking of cool events, this one's not in Germany, David, but we're throwing a little party, a little shindig over at Permissionless. This is going to happen Monday, September 11th, from 7:00 PM to 10:00 PM in Austin, Texas. David, what are we doing here?

• 4:01Speaker 01

  So every once a year, Bankless manifests in real life. Could you imagine? That is the Permissionless Conference, of course. We've been talking about it endlessly on the weekly roll-up for Bankless citizens who did not catch it last week, or for whatever reason missed a roll-up. How dare you? We have thrown a party for you, the citizens. And it's Monday, the 11th at Permissionless. So the one time of the year the Bankless shows up in real life. Ryan will be there. I will be there. The entire Bankless team will be there. So you guys can meet all the magicians that make this show possible behind the scenes. Big shout out to the team. We're all gonna hang out, gonna get some drinks. 500 people is our limit. We're not there yet. So if you are a citizen, make sure you show up in the Discord or click the link that is only for citizens, as well as all the other podcasts, guests that you guys have listened to, all the people, panelists that we've invited

• 4:44Speaker 01

  to Permissionless. Anyone that's ever been on Bankless, that's also at Permissionless, will be there. I think Eric Voorhees signed up today. So he'll be there at the party, along with everyone else, you know, all the fam.

• 4:55Ryan Sean Adams?

  I'm gonna buy that man a drink for that debate with SPF.

• 4:58Speaker 01

  I will also buy, well, you can get Eric Voorhees. I'll get Dan Crad's drink. I'll get Dan Crad.

• 5:02Ryan Sean Adams?

  Yeah. Do you know what? Actually, I got a surprise for you, David, because all the drinks are free.

• 5:06Speaker 01

  Oh, that's right. We already are doing that. All the drinks are free. Kraken is actually buying Eric Voorhees a drink. Thank you, Kraken, for supplying the drinks.

• 5:12Ryan Sean Adams?

  Thanks, Kraken. Well, speaking of Kraken, let's pull up the Kraken price charts. Bitcoin price this week, start of the week, I think we're down from last week, but tell us the carnage here.

• 5:23Speaker 01

  Down 7%. Oof. Bitcoin has lost $2,000 off of its market cap, starting the week at $28,000, ending the week at $26,000. You know, last week, we were covering the prices during the dump. And I was like, oh, we almost never get to do this, because it always usually dumps right afterwards.

• 5:39Ryan Sean Adams?

  Oh, you're excited?

• 5:40Speaker 01

  Yeah, because we actually were able to cover the market action.

• 5:44Ryan Sean Adams?

  Okay.

• 5:45Speaker 01

  And so like I said, like, oh, yeah, so we're bodding him out right now. It's at 1740, or maybe 16, it was 1640. And I was like, okay, sweet, we're actually getting the market action. And then afterwards, there was a huge wick, all the way down to like below 1600. That's the Ether price I'm talking about. So no, we actually did not get the capture the market actions. But moving on to ETH price, 1740 is where it started last week, down 5.5% to 1640. Wick's down to $1,525. Whoa, that got real low.

• 6:20Ryan Sean Adams?

  We're gonna talk about that. We're gonna talk about that in a bit, why that wick may have been. But before we do, let's talk about a few of the other metrics here. ETH Bitcoin ratio, is that flat, up on the week?

• 6:30Speaker 01

  Up 1.5%. Yeah, so this was a Bitcoin sell-off that dragged the rest of the market down.

• 6:34Ryan Sean Adams?

  All right. And global crypto market cap, total market value of crypto. What's that sitting at, David?

• 6:41Speaker 01

  Yeah, almost 1.1 trillion. We did drop below a trillion dollars during the body of that work. Yeah, but we're back up.

• 6:47Ryan Sean Adams?

  I do not like that.

• 6:48Speaker 01

  10% above a trillion, yeah.

• 6:50Ryan Sean Adams?

  I don't like Bitcoin below 30K, ETH below 2K, and definitely market cap below a trillion.

• 6:56Speaker 01

  Hey, enough buyers kept us above, you know, above $1 trillion. So, thank you to buyers.

• 7:01Ryan Sean Adams?

  This is gonna be one of those...

• 7:02Speaker 01

  Shout out to buyers out there. I was a buyer last week. You were a buyer last week?

• 7:05Ryan Sean Adams?

  Yeah. Um, I was a buyer, I think, via proxy. Um, you know, one of the things that I do is buying.

• 7:13Ryan Sean Adams?

  Total crypto market cap above a trillion though, still. I think this is gonna be one of those bad news, good news episodes. All right, so that was the bad news. Prices are down a little bit. Let's get into some good news here. It's all on Layer 2B. Look at the activity, David. What are we looking at here?

• 7:27Speaker 01

  Uh, we're looking at a growing area under the curve of the scaling factor, hitting new highs for the week at 5.2X Ethereum's. So, the aggregate scaling of all Layer 2s on Ethereum are 5.2X, the base Ethereum. Mainly thanks to ZKSync Era, actually. Interestingly enough, clocking in at 12.2 transactions per second, coming in at number 1. Followed up by, uh, so this is earlier than the week, followed by Base coming in at 8.6 transactions per second. Arbitrum, 7 transactions per second, and OP Mainnet, 5 transactions per second. So, really, honestly, like, shout out to ZKSync Era. The transaction volume has been absolutely insane. There is a decent supply of that, that is bots, but also there's a decent supply that's not.

• 8:12Ryan Sean Adams?

  What do you mean, bot?

• 8:13Speaker 01

  Uh, airdrop farmers.

• 8:14Ryan Sean Adams?

  Oh, bots, okay. Actual bots.

• 8:16Speaker 01

  Yeah, passing money around. And so, like, yeah, like, many, many people think like, oh, well, it's bots. It's like illegitimate, uh, illegitimate transaction volume. It's not, it's not real humans. It's real money. Like, that's, there's a half a billion dollars being pushed around in ZKSync Era. So, that's real, actual, like, stress testing of the protocol bots or not. There are actual, like, new, novel apps being built on ZKSync that real humans are actually using. So, it's a mix between bots and humans. Kind of a taste for the future.

• 8:44Ryan Sean Adams?

  Well, that's what you're gonna get when the transactions are so cheap, then the, then the robots can start affording it, right? So, it's all the cheap, cheap transactions or robot transactions. Base flipping Arbitrum and Optimism by daily transaction count. Wow.

• 8:56Speaker 01

  Yep, coming in at number 1 at the optimistic rollups, yep.

• 8:59Ryan Sean Adams?

  It's a big freaking deal. Look at this chart, just straight up. Have you been surprised by Base's adoption, David?

• 9:05Speaker 01

  Uh, I mean, as someone who's been playing on Friends all week, uh, no.

• 9:10Ryan Sean Adams?

  I mean, from a month ago to now, would you have predicted this chart?

• 9:15Ryan Sean Adams?

  Base in like a period of weeks outstripping Ethereum and then also the two largest optimistic roll-up chains that have been live for like two years? And Base beats it in two weeks?

• 9:29Speaker 01

  I have the benefit of hindsight right now, but I don't know, feels pretty obvious. That's why people have been excited about Base all along. Like a lot of the L2 Base contrarians have been like, why is everyone excited? It's just another like optimism fork, like it's nothing new. And then everyone, the, the Base, you know, bulls are like, what do you mean it's nothing new? It is the largest exchange, the largest US public company exchange with their own layer two, of course they're going to pump the hell out of it. And they have the marketing reach. Uh, and so we're seeing, I think the Base bulls, uh, take a victory lap here.

• 10:03Ryan Sean Adams?

  I would say it, uh, you know, a lot of things in crypto do not live up to the hype. I would say even among the people who are hyping it, Base has kind of lived up to the hype, at least, uh, to this point in time. Um, this is a post from Will Shehan, 1 million trades on friend.tech in the last, uh,

• 10:20Speaker 01

  Two weeks.

• 10:21Ryan Sean Adams?

  In less than two weeks. That's, uh, that's incredible. So would this be sort of Base's first breakout app? It's all friend.tech?

• 10:27Speaker 01

  Yeah, I would say so, yeah.

• 10:30Ryan Sean Adams?

  These are the Dune Boards, David. What are we looking at here? Um, this is fascinating, uh, roll-up economics. What, uh, what do you see in these charts?

• 10:37Speaker 01

  Yeah, this is just some great bankless candy right here. Uh, this is why we've been bullish on, uh, layer twos fundamentally is because their economics just check out. Uh, and so this is an economic dashboard from Nifty Table. Shout out to Nifty Table. Thank you for putting this dashboard together. Uh, they've got a newsletter at zeroxtrends.com if you want to sign up. So, okay, so on the top left, on-chain profit. This is how profitable these roll-ups are. Uh, and you can see like, kind of like why I was pointing like, yeah, sure, there's a bunch of bots on ZK Sync Era, but they're paying ZK Sync Era a ton of money. That's real revenue into the The org, bought or not, followed by base, this is for the month of August of 2022, followed by base profitability and then OP mainnet and Arbitrum.

• 11:21Speaker 01

  And so this is the transaction fees that the rollups are charging minus the cost of publishing transaction data to the Ethereum layer one is the profit. And that is what you are seeing on the left in ether terms and on the right in dollar terms. And then if you go scroll down, it'll kind of just walk you through the costs and also the revenue, just all the economics that make a make a roll up a roll up. And so as just, this is the June dashboard that basically articulates the economic case for layer twos. And as you can tell, they are extremely profitable. So in aggregate between Arbitrum, Optimism, Base and ZKSec era, all of them combined together, profited 3,000 ether so far in August, in the first three weeks of August.

• 12:00Ryan Sean Adams?

  3,000 ether in August, what would that translate to? 3,000 times?

• 12:05Speaker 01

  Almost $8 million, almost $8 million. Thank you to the US dollar chart on the right here.

• 12:11Ryan Sean Adams?

  What I, what I love about this, David, is, you know, in, in so many, I guess, crypto economic models that are obfuscated or, or hand waved away. This is like real tangible on-chain revenue and the business model for rollups for layer twos could not be more simple. What do they do? Ethereum is a wholesaler of ether block space, Ethereum block space. Rollups purchase that and they resell it for more. They are a value added reseller and then they make a profit on that resale. And that's how they generate 3,000 eth worth of value in one month. It's a really freaking simple business model. I mean, like a lot of technology here, a lot of work to get to kind of the network effect. But what, what do rollups do?

• 12:55Ryan Sean Adams?

  They take layer one block space, Ethereum block space, and they resell it for a profit. That's what they do.

• 13:02Speaker 01

  So Ethereum layer one is Costco and all of the rollups are your local grocery store that goes to Costco, buys the goods.

• 13:12Ryan Sean Adams?

  Restaurants.

• 13:12Speaker 01

  Unpackages. Yeah, restaurants. Yeah, your, your local distribution center, wherever that is. Yeah.

• 13:19Ryan Sean Adams?

  Ethereum is Costco. Costco of blockchains. Wow.

• 13:23Ryan Sean Adams?

  The new narrative watch, it's coming from Bankless. No longer ultrasound money.

• 13:28Speaker 01

  This is a graphic that I saw going through crypto Twitter last week that I thought was pretty cool. The current layer two landscape, I think this already needs updating because there's definitely some extra OP stack, OP stack chains that aren't in here. But these are all the layer twos that are deployed to Ethereum and then also the ones that are scheduled to be deployed, things like Scroll, Tyco, some other ones I'm not familiar with. So you can see just like the Stark X ecosystem, the ZK stack ecosystem, the OP stack ecosystem. And then like the ones that don't have shared code bases like Arbitrum, Starknet, Aztec, Connect, et cetera, Linear.

• 13:57Ryan Sean Adams?

  Where's Polygon? Oh, I see it. No shared code base up here, huh?

• 14:00Speaker 01

  Yeah, that should be changing soon. So the scheduled not live immutable ZK EVM, I'm pretty sure that is a Polygon ZK EVM. So the Polygon will have its own ecosystem. I don't know about the no shared code base between Arbitrum Nova and Arbitrum One. I thought that that was a shared code base. TBD on the accuracy of this whole thing, but this is like the spread of the layer twos. And there's a lot of them is the point.

• 14:23Ryan Sean Adams?

  There's a lot of them and each of these, this is kind of a new thing to take a look at, taking shape. Each of these, I think, will become superchains in and of themselves, networks of chains, I believe. So we'll talk about that a little bit more, maybe at the end of the show. David, some market news here. Let's get back to why there was this massive down a candle right after we recorded the roll up last week. Did we say something wrong?

• 14:48Speaker 01

  Bitcoin is at 26,000 at the time of recording and it dumped down to 25,200. Ether dumped below 1550.

• 14:58Ryan Sean Adams?

  That happened last Thursday.

• 14:59Speaker 01

  We call this a WIC or a flash crash.

• 15:01Ryan Sean Adams?

  Yeah. So it happened last Thursday, the 17th, I believe. Okay. So why? Why did this happen?

• 15:08Speaker 01

  So there were rumors that Bitcoin was dumped by Elon Musk from SpaceX. So thanks Elon. Turns out that was unsubstantiated. The actual reason was leverage.

• 15:18Ryan Sean Adams?

  It was leverage. Oh, we did one of those things again?

• 15:21Speaker 01

  Yes. Yes. A bunch of apes loaded up on leverage and then the buyers ran out and the sellers kept on selling and then we dumped. And then there was a cascade of liquidations. So over a billion dollars. Was liquidated on Thursday, both shorts and longs, which just tells you exactly how degenerate some of this, some corners of this industry is.

• 15:41Ryan Sean Adams?

  That's all it was? There's no conspiracy? There's no like big event?

• 15:44Speaker 01

  No conspiracy.

• 15:44Ryan Sean Adams?

  No news?

• 15:45Speaker 01

  Nope. It was just like, when apes pile in and too much leverage, this is what we get. So 835 million dollars of longs were liquidated, along with almost 200 million dollars of shorts.

• 15:56Speaker 01

  So you can blame the apes for that one. Thank you.

• 15:59Ryan Sean Adams?

  Candles like that, I don't remember when I zoom out, but because I remember, we do these every week, David, so I remember this happening probably like five or six times, candles like this.

• 16:08Speaker 01

  This is a regular celebration, just a cleansing of the apes. Yeah, it's like, oh.

• 16:12Ryan Sean Adams?

  It is, it is a cleansing.

• 16:13Speaker 01

  Yeah.

• 16:14Ryan Sean Adams?

  And I guess.

• 16:15Speaker 01

  They'll be back. Don't worry.

• 16:17Ryan Sean Adams?

  The good news is now you can buy lower if you're bullish on these assets. So, thank you, apes.

• 16:22Speaker 01

  This was the largest liquidation event since FTX.

• 16:26Ryan Sean Adams?

  Really?

• 16:27Speaker 01

  So, there's a fun.

• 16:28Ryan Sean Adams?

  That's pretty freaking big.

• 16:29Speaker 01

  It's not, not small. Yeah. Go back, go back one tweet, you can, you can compare the candles. Half as big, I would say, as, no, you had the right tweet. Half as big as FTX. So, FTX had maybe a double.

• 16:41Ryan Sean Adams?

  Is FTX way back here?

• 16:42Speaker 01

  That's, that's the FTX, yeah.

• 16:44Ryan Sean Adams?

  Almost an FTX worth, huh? And it's just leverage, apes being apes.

• 16:47Speaker 01

  Yep.

• 16:48Ryan Sean Adams?

  David, you know, I spent the morning reading a fantastic Arthur Hayes article.

• 16:52Speaker 01

  Oh, please, please download me. I didn't.

• 16:54Ryan Sean Adams?

  Yeah, I mean, you gotta read it yourself. I can't like put, put this man's words into, into my own, but

• 17:00Speaker 01

  Do your best.

• 17:01Ryan Sean Adams?

  I will give you the punchline. Let me give you the punchline. Yeah. All right. So he says this. "The Fed wants to cool US domestic inflation, but the more they simultaneously raise rates and reduce their balance sheet, "the more stimulus will be handed to rich asset holders."

• 17:14Speaker 01

  Haha.

• 17:14Ryan Sean Adams?

  Okay. Okay. So the more they do this thing, yes, the more they raise rates, the more they do the quantitative tightening thing. The key thing is, the more stimulus will be handed to rich asset holders. That's his thesis, and he justifies it through the rest of the article. One interesting stat here, David. Remember we were talking about how interest payment, how high interest payments are for the government, for the US government, because they've raised their rates, right? So the Fed has raised rates.

• 17:42Speaker 01

  They have a bunch of debt and they raise rates.

• 17:43Ryan Sean Adams?

  Yeah, the US government has to pay interest on all of their debt and they have a lot of freaking debt. And so now they have to pay.

• 17:49Speaker 01

  They bonked themselves.

• 17:50Ryan Sean Adams?

  Right, rather than like 1% or 2% interest, they now have to pay over 5% interest. All right, this amounts to a lot of money. So this is the federal current government expenditures, interest payments, right? And we talked about that in a previous, we talked about that in the previous rollout. So as of the second quarter 2023, the US Treasury will be handing out close to 1 trillion in interest payments to debt holders. 1 trillion, that's why rates are so high. And Arthur contends that this effectively becomes a rich person's stimmy check. Okay, because.

• 18:25Speaker 01

  An asset holder's stimmy check, right?

• 18:27Ryan Sean Adams?

  An asset holder's stimmy check, right? And who are the asset holders disproportionately? Obviously, people are wealthy.

• 18:33Speaker 01

  Probably listeners of this podcast.

• 18:36Ryan Sean Adams?

  I mean, people who are not living paycheck to paycheck, people who have some spare assets to invest, right? I mean, this is, we're talking about like the top 10% types of individuals. And so effectively, this 1 trillion dollars per year, David, it goes to them. And what are they going to do with it? This is what Arthur is saying. They're going to, they're not going to buy, they're going to buy more assets. Because what do they need most? You know, maybe some services, maybe some kind of luxury vacations, that sort of thing, maybe some college tuition. I don't know, but the rest of that goes into assets. That's why property values are rising. That's why asset prices continue to increase in this higher interest rate environment. And he calls this kind of the, the rich person stimulus check.

• 19:20Ryan Sean Adams?

  So what we end up getting here, David, is interest rates are up, but so are asset prices. And so wealth inequality continues to increase. It just feels like the pot is getting closer and closer to that boiling point. And what is the next era, the next phase of this? Well, actually, there was a Fed official from the St. Louis Fed who wrote a fantastic paper that I've skimmed, but I'm getting ready to read this weekend because, you know, it looks fantastic.

• 19:46Speaker 01

  That's what Ryan does on weekends.

• 19:47Ryan Sean Adams?

  Seriously, I mean, they're spelling it out and he talks about this new era of fiscal dominance. Okay, that is the key phrase here and fiscal dominance occurs when the central bank must set up policies not to maintain stable prices, but to ensure the federal government can afford to fund itself in the debt market. What this means is the central bank is no longer in charge and the fiscal government spending is more in charge and they are going to have to print more money. This is following the trajectory of like Bank of Japan kind of thing. Anyway, the net of this is, as you could expect, more money printing, asset prices continue to rise, you know, the Fed and the US government really painting itself into a corner.

• 20:29Ryan Sean Adams?

  This is not like the 1980s when we raised interest rates there because our debt to GDP was something like 40% and now it's 130%. So that is maybe a taste of the article and, you know, as always, I found it tremendously insightful.

• 20:45Speaker 01

  Well, thank you for deciling that, brother. I feel bullish.

• 20:49Ryan Sean Adams?

  On what though?

• 20:50Speaker 01

  My takeaway is that I am bullish on assets.

• 20:53Ryan Sean Adams?

  There you go.

• 20:53Speaker 01

  Specifically risk on assets.

• 20:55Ryan Sean Adams?

  There you go. In crypto assets that aren't tied to fiat. David, what's this? What are we looking at here?

• 21:01Speaker 01

  Yeah, just something to add to the markets. Lido staked Ether, Mantle, formerly BitDow, which got funded out of this buy bit exchange. So this buy bit exchange was just printing money throughout the bull market. They realized that, hey, eventually the best case thing to do is to decentralize. So we're going to make BitDow. And so we had the centralized exchange that slowly evolved over time to what we now know as the Mantle ecosystem. Really cool story. Regardless, Xerox Mantle has staked 40,000 Ether from their treasury, the BitDow treasury, to stake Ether with Lido. So that is a big dub for Lido. 40,000 Ether into the Lido staked Ether supply. So congrats to Lido.

• 21:43Ryan Sean Adams?

  This DAO as well, the Mantle DAO, has a ton of Ether on the balance sheet.

• 21:46Speaker 01

  A ton of Ether, yeah. Forty thousand is not all of it. It's like a

• 21:49Ryan Sean Adams?

  Few hundred thousand?

• 21:50Speaker 01

  Minority of it, yeah.

• 21:52Ryan Sean Adams?

  Yeah, and they're investing a lot of this into the Mantle ecosystem.

• 21:55Speaker 01

  Mantle is a sponsor of Bankless, disclaimer.

• 21:58Ryan Sean Adams?

  David, what do we have coming up next?

• 22:00Speaker 01

  Coming up next, one of the Tornado Cash co-founders, developers was arrested and the other sanctioned. Oof, so bad day. We're gonna talk about these details and the significance of them and what they represent in the Crypto Wars 2.0, which does not seem to be ending anytime soon. Ethereum about to launch a brand new testnet. This is the Den Kuhn testnet, so EIP 4844 is on the horizon. Layer 2's, a bunch of new upgrades in Layer 2 week. The Layer 2 summer continues to go on. There's an airdrop to talk about that you need to claim. There is a new exploit that we have to talk about. So all of this and more coming up as soon as we talk to some of these fantastic sponsors that make this show possible, especially Kraken, our preferred exchange for crypto in 2023. If you do not have an account with Kraken, consider clicking the link in the show notes to get started with Kraken today.

• 22:43Speaker 01

  Kraken Pro has easily become the best crypto trading platform in the industry. The place I use to check the charts and the crypto prices, even when I'm not looking to place a trade. On Kraken Pro, you'll have access to advanced charting tools, real-time market data, and lightning-fast trade execution, all inside their spiffy new modular interface. Kraken's new customizable modular layout lets you tailor your trading experience to suit your needs. Pick and choose your favorite modules and place them anywhere you want on your screen. With Kraken Pro, you have that power. Whether you are a seasoned pro or just starting out, join thousands of traders who trust Kraken Pro for their crypto trading needs. Visit pro.kraken.com to get started today. You know Uniswap? It's the world's largest decentralized exchange with over 1.4 trillion dollars in trading volume.

• 23:26Speaker 01

  You know this because we talk about it endlessly on Bankless. It's Uniswap, but Uniswap is becoming so much more. Uniswap Labs just released the Uniswap Mobile Wallet for iOS, the newest, easiest way to trade tokens on the go. With the Uniswap Wallet, you can easily create or import a new wallet, buy crypto on any available exchange with your debit card with extremely low fiat on-ramp fees, and you can seamlessly swap on mainnet, Polygon, Arbitrum, and Optimism. On the Uniswap Mobile Wallet, you can store and display your beautiful And you can also explore Web3 with the in-app search features, market leaderboards, and price charts, or use Wallet Connect to connect to any Web3 application. So you can now go directly to DeFi with Uniswap Mobile Wallet. Safe, simple custody from the most trusted team in DeFi. Download the Uniswap Wallet today on iOS. There is a link in the show notes.

• 24:11Ryan Sean Adams?

  An open source developer of privacy technology was just arrested by the US government. Name is Roman. There's another co-founder who has not been located but was also sanctioned. David, this is really bad news in the Tornado Cash case. Not the first time this has happened, of course. We've talked about Alexei Pertsev, who was arrested, I believe, over a year ago by authorities in the Netherlands. But this is the first time the US government is directly taking action. What went on here? What are we looking at?

• 24:43Speaker 01

  So before we get confused, there are two Romans that we need to talk about. There is Roman Storm and Roman Semenov. Both are co-founders of Tornado Cash. Coincidence that their names are both Roman. Roman Storm, resident of Auburn, Washington, not too far away from where I grew up, and then Roman Semenov of Russia, both co-founders, creators of Tornado Cash, which is the privacy tool that we have previously, I have previously used to achieve privacy in crypto before it was sanctioned by OFAC. The Department of Justice arrested Roman Storm, and OFAC has sanctioned Roman Semenov. They were both charged with US federal money laundering,

• 25:25Speaker 01

  upwards of over a billion dollars in sanctions violations. So a quote from US Attorney Damian Williams says, "While publicly claiming to offer a technically sophisticated privacy service, Storm and Semenov in fact knew that they were helping hackers and fraudsters conceal the fruits of their crimes. The action taken against Semenov and Storm was part of the government disrupting the ability of North Korea to raise funds through illicit activity, and was aimed at protecting the integrity of our financial system, including the virtual currency ecosystem." So Brian Klein, who's a famous attorney, a pro crypto attorney, who has done some landmark cases in the crypto ecosystem. Is the attorney for Roman Storm.

• 26:05Speaker 01

  His statement is, we are incredibly disappointed that the prosecutors chose to charge Mr. Storm because he helped develop software. And they did so based on the novel legal theory with dangerous implications for all software developers. Mr. Storm has been cooperating with the prosecutor's investigation since last year and disputes that he engaged in any criminal conduct. There's a lot more to the story that will come out in the trial. So basically, Roman Storm has been living inside of the United States because a United States citizen, being a United States developer, a cryptographer, an open source developer. And so he's lived probably with this cloud of like, the Department of Justice really didn't like this tornado cash thing. But nonetheless, stayed in the United States as a patriot of freedom, I'd say.

• 26:50Speaker 01

  Understanding that this day might come, and sadly, it sounds like this day has indeed come.

• 26:55Ryan Sean Adams?

  Yeah, I guess a few, this is definitely a gut punch, as I said earlier, for all of crypto. And we'll talk about the kind of the reactions and implications, just a few points. So what you were reading from was partially a press release from the US Department of Treasury. They are the ones kind of authoring the full press behind this, and those were some of the quotes that you mentioned here. And so the developers are being charged for creating and deploying the privacy mixing software called Tornado. And so if you've never used privacy software before on chain, you of course know on something like Ethereum, your address is completely public, right? And so if that address is kind of linked to your name somehow, you have no way to like, maintain your privacy.

• 27:34Ryan Sean Adams?

  There's no SSL or HTTPS or secure encrypted communication for crypto, right? All of that metadata is kind of leaked. So Tornado is akin to almost using encryption, software for money. Sort of like, I don't know, David, if you or any listeners have ever used the Signal app before, right? So Signal encrypts all of your communications. This did that for money. You know, failing doing that on chain, people use sort of exchanges as a mixing service. This course is not completely private, but you could bounce your money into Kraken and Coinbase and then bounce it to a new address to sort of kind of pseudo protect your anonymity, but of course, it's not pure privacy protection.

• 28:18Ryan Sean Adams?

  It appears that these developers did not do anything more than deploy Tornado cash code. And

• 28:26Speaker 01

  And importantly, they are not being charged for anything more than that. They're not being charged for aiding and abetting. We weren't liaising with anyone. They are so far, as far as we know, they are only being charged for being builders of tornado cash.

• 28:41Ryan Sean Adams?

  Well, for deploying it. And then this is the other key point, not taking preventative measures to block North Korea from accessing. It's very clear that, you know, North Korea and this Lazarus group, they are unsaved reactors. They are stealing money from crypto hacks and bridges and that sort of thing. They did use tornado as a privacy technology and the charge is that these developers did nothing to block them. The question though is, how would it even be possible to block North Korea? Okay, remember, guys, you know crypto, this is code deployed to an immutable smart contract on Ethereum. You can't stop anybody from using it.

• 29:18Speaker 01

  Right.

• 29:19Ryan Sean Adams?

  How would you even do that? You can't do that.

• 29:22Speaker 01

  This is the big missing thing from this charge from the Department of Justice is they said they could have taken preventative measures without actually, they just are waving this idea around without actually providing any details.

• 29:34Ryan Sean Adams?

  Right. And so, I mean, what a chilling effect, right? For American privacy developers or privacy technology developers worldwide. And what a betrayal to me of American values. And where does this stop? I think that's part of the question that everyone is asking. So what if you run an Ethereum validator that processes one of those tornado cash transactions? What if you hold ETH, which is economic security, right? What if you tweet or do a show on crypto privacy? What if you write a tactic in the bankless newsletter on how to maintain your privacy on crypto and it mentioned tornado cash? I mean, like, where?

• 30:13Speaker 01

  That's, we did that. We did that.

• 30:15Ryan Sean Adams?

  I mean, so like, where does this stop, David? Are they gonna arrest Tim Berners-Lee? You know, the creator of the internet protocols? How about Netscape in, you know, 1994, who designed HTTPS? Remember Marc Andreessen talked about kind of Crypto Wars 1.0 when he came on the podcast, he's talking about the battle there. I mean, are the developers of internet protocols responsible for how North Korea uses the internet? In order to do nefarious things that Treasury doesn't want, it's absolutely ludicrous. And I think that if Treasury or ever any government regulator in the US took this type of stance towards communication messaging, the type of stance they're talking about for like money over IP.

• 30:58Ryan Sean Adams?

  If they took this stance for communications over internet protocol, we would have no Silicon Valley. We would have no free and open internet based, you know, largely in the US today. We would have none of this innovation and economic GDP growth. It would have been completely squelched. And you know what? When I read this press release, you know, it was one of the most kind of almost disturbing parts of all of this. There's lots disturbing about this was how they ended it, David. Let me read to you how they freaking end this piece. I'm actually highlighting. What is the goal of all of these sanctions, these arrests and sanctions? Here it is. "The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior."

• 31:39Speaker 01

  Get the fuck out of here.

• 31:41Ryan Sean Adams?

  Not to punish, but bring about a positive change in behavior. You know what this reminds me of?

• 31:47Speaker 01

  Yeah.

• 31:47Ryan Sean Adams?

  Freaking Dolores Umbridge, right? Like, that's what this feels like. It's just, it's for your own good. We're just trying to modify. What behavior are you trying to modify? Like stripping American citizens, global citizens of their ability to access privacy? Encrypt their money transactions in the same way we can encrypt our communication transactions? Incredibly disturbing. What are some takes from around crypto?

• 32:15Speaker 01

  Yeah, so Coin Center put out an article, which is something that they typically do whenever something bad happens as a result of government decision-making. And so they say, "The indictment claimed the defendant's unlicensed money transmission engaged in the business of transferring funds on behalf of the public." And also did so without registering with FinCEN. But also, they're pointing out, does the indictment state any facts? That the defendants engaged in any activities that actually qualify as money transmission under the relevant law? That's probably what Brian Klein, the lawyer, is going to argue is that they are, one side is saying, hey, you engaged in money transmission. And then the lawyer is going to be like, can you point to the time where either of these developers actually custodied or took control of any money?

• 33:00Speaker 01

  Because you can't.

• 33:01Ryan Sean Adams?

  It was just code.

• 33:02Speaker 01

  It was just code. The implementing regulations of the Bank Secrecy Act define money transmission services as the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency funds or other value substitutes for currency to another person or location by any means. That's a bunch of legal speak. It's basically, was Tornado Cash ever a bank? Or was it code? Was there any trust in these individuals? Did these two individuals have any authority or power over the direction of these funds? Or was it just code? Interestingly, in 2019, FinCEN Virtual Currency Guidance, a paper released by FinCEN, interpreted the regulations and said that an anonymizing software provider is not

• 33:48Speaker 01

  a money transmitter.

• 33:49Ryan Sean Adams?

  Freaking obviously it's not.

• 33:51Speaker 01

  Yes.

• 33:51Ryan Sean Adams?

  Like, so, so what are they doing now here? Here's Naraj on this. What's he saying from Coin Center?

• 33:57Speaker 01

  So Naraj is just also from Coin Center, just basically says the obvious. Roman Storm and Roman Semenov did not accept nor transmit user funds. They never touched users' funds. You know what's the other nefarious thing about this? Is that in the indictment, in the statement from the Department of Justice, they said that the majority of money going through Tornado Cash was illicit. But interestingly, they previously admitted that only 7% of money going through Tornado Cash is illicit. And that discrepancy between what they are saying in this document, saying the majority of funds going through Tornado Cash is all bad and nefarious. You can tell that they are just trying to work up a case here because of the fact that they previously said that they know that only 7%. So they're clearly working up a case here.

• 34:42Ryan Sean Adams?

  So that means, David, 93% was presumably not illicit.

• 34:47Speaker 01

  Yeah, that was some of my money, some of the other people's money.

• 34:51Ryan Sean Adams?

  For privacy on-chain, right? Which is, again, we don't have an HTTP... There is no privacy solution on-chain right now that can be accessible on Ethereum. And this was it. This was one of those. And there was not all scammers and tax evaders and terrorists and rogue states using this protocol. It's like regular people. They're stripping this function out. Because I just want to reiterate, for those who aren't familiar, we talked about this months ago when it happened. Any US citizen is actually not permitted. It's illegal for you to go use tornado cash right now. You cannot do it. It's an OFAC-sanctioned smart contract address.

• 35:29Speaker 01

  Yes. And again, going down to the base principles of why this is important is like the line, the classic line is like, "Why do you need privacy if you have nothing to hide?" Of course, I think bankless listeners don't need to have these arguments reiterated. Like, when I use tornado cash, it's not because I have a skeleton to hide. Like, I just want to hide my bad trades and my stupid NFTs that I bought on one particular address. And when I send you money, I don't want you to be able to see any of my hidden stuff.

• 35:54Ryan Sean Adams?

  Guys, it's just like, I think if you... There's somehow this norm that we don't have around financial privacy, but you flip it around messaging. Imagine if the government could open up every single email, every single message that you send to your friends, or your wife, or your family, and they had, like, read-access to all of that. That's what you have without privacy on-chain. I will note, too, this 7% of tornado cash's legal activity. Yeah, I was looking at estimates for, do you know, actual physical cash? What percent estimates, experts estimate of that is kind of illegal or tax-evading? Do you know what that number is?

• 36:31Speaker 01

  I'm gonna go higher than 7%.

• 36:32Ryan Sean Adams?

  It's 30% David.

• 36:35Speaker 01

  Oh wow.

• 36:36Ryan Sean Adams?

  Physical cash. Maybe we should outlaw, I don't want to give them ideas.

• 36:41Speaker 01

  They are trying to do that. They are also trying to do that. Okay, so Seth from privacy, another tweet from him says, the logic, so that he's quoting, he's got a picture of the document and says, "As discussed below, this is a statement from the government. The failure to implement AML KYC facilitated the ability of customers of the tornado cash service to transfer criminal proceeds between addresses on the Ethereum blockchain without being traced." And then importantly, Seth says, who's a lawyer, says, "The logic that non-custodial services must implement KYC AML is without prior legal precedent." There has never been any statement or precedent ever that non-custodial financial services have to enforce KYC AML.

• 37:21Ryan Sean Adams?

  So it's one of those, how do you find out this is illegal? It's like we arrest you, we show up to your house and arrest you?

• 37:27Speaker 01

  Yes, exactly.

• 37:28Ryan Sean Adams?

  There's not actually a law about this?

• 37:30Speaker 01

  Yeah. I will say, okay, so there's one new thing. So we've, as an industry of cryptographers, who are we, we are downstream, the cryptocurrency industry is downstream of the cryptographers that have come before us in the 80s, 90s and early thousands. We've already fought cryptography wars 1.0. Why are we doing cryptography wars 2.0?

• 37:49Ryan Sean Adams?

  Because, as David's saying, cryptography itself, like encryption technology itself, the thing that we take for granted every day, it used to be on the US munitions list. It could not be a technology that was export, it's illegal for citizens to use. We changed that with the birth of the inner. That's what you mean by crypto wars 1.0.

• 38:05Speaker 01

  Exactly. So we've done this before. Why are we doing it again? Well, because now we have the addition of cryptocurrency. So now there's this new form factor and the government thinks that it gets to have a second attempt of making cryptography illegal, or at least this particular implementation. So the addition of financial assets is the novel thing here. And this is where the torn token, the tornado cash token actually has a story to play here. So again, Seth from privacy focuses on one of the elements in the documents here and says that this is most assuredly where the court will focus on profit motives as there was a clear profit at stake for the founders indicted here. Without torn, I doubt that there will be any case at all made by the US government.

• 38:48Speaker 01

  And so inside of the document, there's a section that says, "In connection with the creation of tornado cash DAO, the tornado cash founders made a public announcement of the creation of a new token on the Ethereum blockchain called the torn token." And created approximately 10 million torn tokens pursuant to a formula created by Roman Storm and Roman Semenov, the defendants, approximately 30% of torn tokens were distributed to the three founders and to certain investors in the tornado cash service and including some venture capital firms. And so they were able to profit what off of what the Department of Justice is saying is promoting illicit illegal activities that violate FinCEN. And so that profit motive is a new variable in what is now Crypto Wars 2.0.

• 39:32Ryan Sean Adams?

  It's the strongest part of their case. If there was no token, this would, this case would be a whole lot weaker.

• 39:36Speaker 01

  Yes. And so this is why we are thinking that we are doubling down on this whole torn thing. But what did torn actually govern over tornado cash? Could it, could it have removed money from the pools? Could it have directed any money? The answer is unequivocally no, it could have not done that. There were some very small surface areas that tornado cash, the torn token governed over. One of them was the relayers. I think you could approve or unapprove relayers. I think that was the big one. But really, there was no material control over tornado cash. In fact, tornado cash governance broke not too long ago from an exploit. I remember, I remember, don't know if you remember that story, but basically tornado cash governance is now completely corrupt because of an exploit that happened.

• 40:21Ryan Sean Adams?

  They couldn't do anything about it. They didn't have control.

• 40:24Speaker 01

  Yet the pools still live on. So it's actually proof that the tornado cash token is completely adjacent to the actual details of the protocol.

• 40:32Ryan Sean Adams?

  Well, and how far back do you kind of go around that too? Again, Ethereum stakers, Ethereum validators have received some fractional proceed of a tornado cash transaction. So there's a profit there. Like, I mean, so do you make Ethereum illegal and validating illegal? I don't know where this road leads. This is Jake Trivinsky. I'm struggling to think of something, anything useful to say about this tragic mistake that is the DOJ's decision to treat privacy and speech as crimes. I'm blank.

• 41:03Ryan Sean Adams?

  Wow.

• 41:04Speaker 01

  Yeah, when Jake Chervinsky is blank, oof.

• 41:06Ryan Sean Adams?

  Yeah, when he runs out of words. The treatment of privacy and speech as crimes. Let's remember what code is and why we won Crypto Wars 1.0 is because encryption technology, code is speech.

• 41:20Speaker 01

  It's just math.

• 41:21Ryan Sean Adams?

  It's speech, right? And we have protection of free speech, at least in our Western liberal democracies, or I guess so we believe.

• 41:31Ryan Sean Adams?

  Jake continues, "Privacy is normal. Code is speech. The right to anonymity is essential to a free society. These are fundamental principles embodied in the US Constitution." He ends with this take, "In time, I'm confident they will be confirmed by the judiciary, even if today they were ignored by the executive." So he thinks we still have a case to make on the judiciary side. Do you remember when we first met with Jake? He said, "I think all of this ends with US, you know, versus crypto in some sort of Supreme Court case." Right? And he thinks that that's where we'll have to make our stand. And I mean, we're getting closer to that, I suppose.

• 42:09Speaker 01

  So a tweet that I put out in response to this is, "Cryptography is the language of truth. A stance against cryptography is a denial of reality. Arresting those who write cryptography is futile. It merely causes unnecessary harm while resisting the inevitable." And this is what I would say is emblematic of the friction between large-scale authority, coercive government, and I say coercive relatively neutrally, because like that's how a government works. And then also the rights and the power of the individual. Cryptography is just applied mathematics. And when you construct cryptography in many different ways, infinite different ways, one of those ways of construction, just like building blocks, just like adding some numbers together, you can get a system like tornado cash.

• 42:52Speaker 01

  Tornado cash is just math and is just deployed on a crypto-economic system called Ethereum. There's no politics about that. It is an expression of numbers and you cannot make that illegal. And the reason why the government is trying to make that illegal is because it's looking at that thing and it's so, cryptography is so powerful that it appears like magic to people. And so that disconnect of understanding, it's seriously just misunderstanding that is what is, allows them to have room to make this arrest.

• 43:21Ryan Sean Adams?

  I think, I think, I, I, I want to add to that take, right? Because you said it's a applied math and somebody might say, yeah, but you know, like nuclear weapons are just applied physics. I think the difference with cryptography is that it is a defensive technology only. It is not an offensive aggressive weapon. It is more like a wall that you build. And, and it is a tool for the individual. A individual person can have a piece of communication that cannot be decrypted by anybody. Like not even the NSA, not even Mossad, right? The full brunt of government power and spending cannot break an individual's ability to encrypt some communication and keep that secret.

• 44:03Ryan Sean Adams?

  It is a defensive technology for the people, essentially. And that's what's at stake here. And that's what makes it even more insidious, I think. This is Amin Soleimani. Just so you get a picture of who this guy is. Which Roman is this, David? Who are we looking at?

• 44:16Speaker 01

  This is Roman Storm at ETH Denver this most recent year.

• 44:20Ryan Sean Adams?

  Looks like a regular kind of crypto ETH dev. Standing next to you, like, I mean, I wouldn't be surprised if you've seen him around at conferences, David. Maybe without knowing it.

• 44:31Speaker 01

  Yeah, probably. It's a normal looking guy. Again, he's from Auburn, Washington. That's like 30 minutes away from where I grew up.

• 44:38Ryan Sean Adams?

  So what do we do about this? What do we do about this? This is Amin Soleimani, GM. I would like to talk to the manager. He, he thinks we should go full Karen on this and we should raise a ruckus. I don't know exactly what that looks like.

• 44:54Speaker 01

  Well, no, that's the picture that he's, that he's showing. He's like, how to file a petition removing someone from the OFAC sanctions list. So Amin is asking you, I'll go do this after we conclude here today, Ryan, to file petition. Say, hey, let's get Roman Semenov off of the OFAC list. Roman Storm is in jail. Roman Semenov is on the OFAC list.

• 45:14Ryan Sean Adams?

  Can you do that?

• 45:16Speaker 01

  We can file petition, sure.

• 45:18Ryan Sean Adams?

  What else can we do? I mean, we'll do that, but it just, that will go into, you know, I want to know like legal defense groups to fund. There's always like Coin Center and, you know, Blockchain Association doing great work. We've got to figure out some other calls to action here, but maybe this is related to this, David, because I know Coinbase has been working on this. Tell us about an update to this court case because it's definitely related.

• 45:43Speaker 01

  Yeah, it's related and also bad, also negative. So this is the lawsuits against tornado cash. So way back when, after tornado cash was added to the OFAC sanctions list, there was the mass dusting of people out of the tornado cash contract address, which, if you are a US citizen and you received any of this dust, that made you violate OFAC sanctions list because the law makes no effing sense. It doesn't account for the idea that a smart contract, if deemed illegal, can go touch you if somebody else uses the logic of that smart contract to send you money, which is exactly what happened.

• 46:18Ryan Sean Adams?

  It's like if you got an envelope with something bad in it and somebody dropped that in your mailbox, you would be legally responsible for that.

• 46:26Speaker 01

  Yes. And so there are a handful of people suing the Department of Treasury over this. And so this Coinbase is sponsoring one of them. Coin Center is sponsoring me, I'm the other one. And so this is not my case. This is the Coinbase sponsored case, where I think the TLDR is that the United States Treasury has won one of these lawsuits. Coinbase is going to appeal this, but the tweet here is the district court in the Van Loon versus Department of the Treasury, that Van Loon name, it sounds familiar, that'll be Preston Van Loon, who was one of the co-founders of Prismatic Labs. The related suit challenging the OFAC sanctions has held in favor of the US government on the merits,

• 47:08Speaker 01

  meaning that the Treasury wins and the sanctions designations are upheld. This tweet goes through the logic here, three main points. The tornado cash is an entity, so it can be designated under sanctions regulations. We, the crypto industry, want tornado cash to not be an entity. We want it to just be code because of how it is.

• 47:27Ryan Sean Adams?

  That's what it is.

• 47:28Speaker 01

  That's what it is. In an association composed of its founders, developers, and the DAO, a body of persons who have combined to execute the common purpose of developing, promoting, and governing tornado cash. So you can start to see where the torn token and the tornado cash DAO start to be a relevant variable here. So that's the first of three reasons. OFAC's determination, here's the second, that smart contracts constitute property under the applicable regulations is not plainly wrong, so the court will defer to that determination. In particular, regular contracts are property under the regulations, and so therefore, smart contracts are just code-enabled species of unilateral contracts.

• 48:10Ryan Sean Adams?

  How many things can you get wrong?

• 48:13Speaker 01

  I mean, like, you can make a smart contract that is a property. So an NFT, for example, is a smart contract, and I own NFTs. And so that is my property. But I don't own a tornado cash, even though it is also a smart contract or a system of smart contracts, because you need to take the thing in facts and circumstances. Like, calling something a smart contract doesn't tell you much about what that thing is. An ERC20 token is a smart contract, an NFT is a smart contract, a DAO is a smart contract, Uniswap is a smart contract. Literally, everything on Ethereum, other than externally-owned accounts, are smart contracts. So everything on Ethereum is a smart contract. Not everything on Ethereum is property. So we need to figure this one out. Treasury. So that's the second point.

• 48:56Speaker 01

  The third, no First Amendment conflict here has happened, because the sanctions does not prohibit all expression, just an expression using one service.

• 49:04Ryan Sean Adams?

  The First Amendment is our free speech one.

• 49:07Speaker 01

  Yes. So they're saying that this is okay, because tornado cash is not a public place or forum. No problem here has been caused by a chilling effect on code developers, because it only limits transactions, not writing or otherwise interacting with the code itself, saying that when you type in the numbers in your keyboard, and those numbers happen to manifest into a valid transaction, that transaction is not speech, which we want it to be speech. It ought to be speech.

• 49:35Ryan Sean Adams?

  It seems very simple. Treasuring the US government does not want an HTTPS for money.

• 49:40Speaker 01

  Yep.

• 49:41Ryan Sean Adams?

  They just do not want that, right? That is not written anywhere in the Constitution that gives them the right. Just because something's digital, they think they can surveil it, they think they can access it.

• 49:52Ryan Sean Adams?

  We don't think they should. We don't think they can. It seems incredibly obvious to me. But they're losing this case. And so where do we go from here? So the Coinbase case is going to proceed. I think that's going to be appealed to a new court. You've got the Coin, you also have the Coin Center case, which you mentioned you were a plaintiff on.

• 50:12Speaker 01

  I am the plaintiff of, yeah.

• 50:14Ryan Sean Adams?

  You are the plaintiff on. So it's like David Hoffman versus Janet Yellen and Treasury. That hasn't proceeded yet. So that's going forward. So we're pushing back in the court system. But this court ruling was a pretty major setback in the actual arrest of open source developers is, again, another major setback here. So not winning.

• 50:36Speaker 01

  Paul Graywall, the chief legal officer of Coinbase, just says, "Rights are rarely secured. That is on a path that is always up and to the right. We will continue to believe the plaintiff's challenge to OFAX tornado cash action is correct." So they're not backing down. They're just going to appeal this and we're going to have another rodeo. The instances in which I've talked to two people at Coin Center, both Peter and Niraj from Coin Center, they've both said very positive things about the progression of my case. They think that they kind of revealed that Treasury actually didn't really understand what they were getting into. I can't really say too much, but positive sentiments, but we don't really know until the day actually comes and the ruling is ruled upon. So plenty of reasons to be optimistic about it.

• 51:19Ryan Sean Adams?

  Guys, we'll try to come back next week with some more substantial action items for you and places you can donate, things you can do. But definitely there'll be a place to contact your representatives if you live in the US. If you don't live in the US, look, I think the battle will be fought in your jurisdiction as well. And so look at the US as kind of a bellwether for some of these things, because if it's not there, it's coming to a jurisdiction near you. Wow.

• 51:41Speaker 01

  Onto more jovial notes. Friend.tech continues to shake with crypto Twitter. We, Ryan, put out a tweet saying, "Is Friend Tech good or bad?" Because people have opinions on this. Friend Tech is not universally loved by everyone. And so there's a bunch of division about whether the structure of Friends is actually something That we want to promote. We did an entire episode on this because I thought it was a pretty good conversation. So 45 minute episode that episode came out yesterday. If you just want the update on friend tech. But I think the TLDR is that friends has started to attract outside influencers outside of crypto phase banks Gracie Hardy from only fans Grayson Allen and NBA player disclosure the DJ duo is now on there. So now we are scaling some

• 52:25Speaker 01

  of our crypto platforms to definitely break into mainstream society. Autism Capital put out a take that is basically saying that all of the soul and spirit of crypto is lost and a friend tech proves it. Just another Ponzi scheme. That's another Ponzi. Yep. So like I said, if you want to listen to our takes about that, there's we have a full length discussion, both on YouTube and on the podcast. But I think the aside from all of that Eric Wall really sums this up best when he tweets out, remember when one app Crypto kitties took down the entire Ethereum blockchain in 2018. We just handled handled an entire Ponzi speculation on our friends like an F and breeze. Absolute progress. And this is him showing Brian Armstrong tweet out that base hit 16 transactions per second yesterday and not

• 53:09Speaker 01

  a single hiccup neither on base nor on the Ethereum layer one. So for those that have been here around since Crypto kitties progress, progress.

• 53:16Ryan Sean Adams?

  It's definitely worth celebrating. We don't have time to get into this story today, but there's still some question as to whether Binance is in trouble or not. Here's the Wall Street Journal, a headline Binance, the biggest crypto player is facing legal risks over Russia. So the question I think is, you know, Binance is facing all of this investigation with the US government. This one in particular that Binance was essentially serving OFAC sanctioned Russian oligarchs, not doing proper AML KYC and abiding by US regulation. And so Binance, of course, denied that claim. There's some other things in the works, though, too. I think Travis Kling signed that. I think Travis Kling sums this up pretty well. There's some

• 53:59Ryan Sean Adams?

  pretty wild action in the BNB token. The BNB token was down.

• 54:03Speaker 01

  Wild, wild negative action.

• 54:04Ryan Sean Adams?

  Yeah, wild. It's down bad. Let me just say this. This is BNB on the month. I don't know what's this down about 30%.

• 54:13Ryan Sean Adams?

  And Travis Kling says, not sure what's going on. Binance was sued by the SEC on numerous charges, sued by the CFTC, had three senior executives quit, had a billion dollar collateral hole in Binance peg BUSD, had Paxos force them to wind down BUSD, got kicked out of Canada, Germany, Netherlands, Belgium, about to be charged by the DOJ, strong evidence of massive money laundering, terrorist financing allegations, under investigation in France for aggregated money laundering, had their auditor quit and remove attestation. Like, I could go on, all right? And Travis does go on. So there's a lot that has surfaced. But I think the big question in my mind is like, who do you trust more? CZ, a crypto

• 54:55Ryan Sean Adams?

  banker, or the US government? And I don't know, that's a hard one right now. I can't tell. I can't tell whether this is like a mini SBF going on, because it's not quite like SBF, it can't be, or Binance would already be wiped out. Or is this Western government persecution of yet another crypto company? Like, I trust neither of them, David. I don't know.

• 55:17Speaker 01

  You know what? I opt out to DeFi. I will stick, stick my, continue sticking with the Ethereum layer one, and perhaps some layer twos, you know?

• 55:24Ryan Sean Adams?

  Wow, my, what's going on?

• 55:26Speaker 01

  I opt into ignoring all of these things, and CZ can just deal with whatever hole he is in. And if he's not in a hole, then congrats.

• 55:33Ryan Sean Adams?

  Well, the rest of this episode is all good news. Let me just say that. So David, what do we have coming up next?

• 55:38Speaker 01

  That is very, very true. The rest of this episode is absolutely awesome. Okay, so Farcaster on mainnet. You maybe didn't know that Farcaster wasn't on mainnet. We'll talk about what that means. No, not the Ethereum layer one. Which layer two did they pick? Everyone place your bets. Moving on from that, a new airdrop. Did you qualify? We'll find out. Some EIP 4844 updates. Circle and Coinbase strike a deal. And first squad staking block gets shipped to mainnet, gets verified. So much good stuff. So stick around for all the happy side of this weekly roll up, because we saved all the good stuff after the bad stuff, of course, because that's what you do. So let's go ahead and get into all that good stuff. But first, I want to talk about some of these fantastic sponsors that make this show possible, especially MetaMask portfolio, if you are in the

• 56:23Speaker 01

  ...setting up your bull market battle station like I am. MetaMask Portfolio is perhaps the place to get started. Go check them out. There's a link in the show notes. Are you a MetaMask user? Well, you're listening to Bankless, so of course you are. The wallet you know and love just got a whole lot better. MetaMask Portfolio is the ultimate one-stop shop for all of your crypto needs. It gives you a holistic view of your crypto portfolio across multiple chains and multiple addresses all at once. You can easily view and manage all your coins, tokens, and NFTs in one convenient place just by connecting your wallet. MetaMask Portfolio goes beyond just viewing your portfolio, though. Inside the portfolio, you can do all the incredible money verbs that make DeFi so powerful. You can buy, swap, bridge, and stake your crypto assets with ease. It's like having a powerful battle station for all your DeFi moves right at your fingertips.

• 57:07Speaker 01

  So if you're looking to do more in Web3 your way, MetaMask Portfolio is the answer. I already know that you have MetaMask wallet, so go check out your MetaMask portfolio. Learn more at metaMask.io/portfolio. Arbitrum is accelerating the Web3 landscape with a suite of secure Ethereum scaling solutions. Hundreds of projects have already deployed on Arbitrum 1 with flourishing DeFi and NFT ecosystems. Arbitrum Nova is quickly becoming a Web3 gaming hub, and social dApps like Reddit are also calling Arbitrum home. And now, Arbitrum Orbit allows you to use Arbitrum's secure scaling technology to build your own Layer 3, giving you access to interoperable, customizable permissions with dedicated throughput. Whether you are a developer, enterprise, or a user, Arbitrum Orbit lets you take your project to new heights.

• 57:52Speaker 01

  All of these technologies leverage the security and decentralization of Ethereum and provide a builder experience that's intuitive, familiar, and fully EVM-compatible. Faster transaction speeds and significantly lower gas fees. So visit arbitrum.io, where you can join the community, dive into the developer docs, bridge your assets, and start building your first app with Arbitrum. Experience Web3 development the way it was always meant to be: secure, fast, cheap, and friction-free. Coinbase and Circle are formally melding what was previously said. There's a middle ground called the center consortium of governance over Circle. It's no longer needed because Coinbase is taking an equity stake in Circle. So we're eliminating the whole center consortium. And so

• 58:34Speaker 01

  now Coinbase and Circle are banding together. Wow, that is a powerhouse.

• 58:38Ryan Sean Adams?

  And for those of you guys that don't know, Circle and Coinbase, they had this project together called USDC. You know, that old stablecoin?

• 58:45Speaker 01

  Well, no, now that that used to be just Circle's project. Now it is both of their projects.

• 58:51Ryan Sean Adams?

  There you go. That's good.

• 58:52Speaker 01

  Yeah. So USDC, it's on six different blockchains. Launching between September and October will be Base, Cosmos, Near, Optimism, Polygon, and Polkadot.

• 59:01Ryan Sean Adams?

  All the chains. Doing all the chains.

• 59:03Speaker 01

  All the chains.

• 59:04Ryan Sean Adams?

  David, is this good news for EIP4844? And give me a quick refresher on what, like, why I know that EIP by number?

• 59:12Speaker 01

  EIP4844. First we had 1111559. That's in the rearview mirror. That one's now called Ethereum.

• 59:19Ryan Sean Adams?

  That was the burn.

• 59:20Speaker 01

  4844. That was the burn. Okay, 4844. We have the Ethereum Layer 1 block space, which is what you know and love. But we are going to get blob space. What is blob space for? It is this first class, it is this place for rollups to submit their state roots to. It is going to be extremely cheap for Layer 2s, for rollups, to leverage so that they can be the best versions of themselves. It is basically the cheapest version of block space that is dedicated for Layer 2s to submit their state root to. And so it's basically going to take off the brakes of all Layer 2s. And so Layer 2s are all about to get orders of magnitude cheaper. And this is proto dank sharding, EIP4844. We have another order of magnitude beyond that called full dank sharding.

• 1:00:05Speaker 01

  But first, you have to get to proto dank sharding. Why is it called proto dank sharding? Well, because there's proto lambda. And Dankrad created proto Dank Charting.

• 1:00:14Ryan Sean Adams?

  Oh my god, this is so mainstream ready.

• 1:00:16Speaker 01

  Huge nerds. We don't need, well, eventually, all of this stuff will just become Ethereum, and we don't even need to talk about it.

• 1:00:21Ryan Sean Adams?

  It's just, all you need to know is it's cheap block space. Just like last EIP, that one 1559 that you mentioned, David, that was the burn. We're gonna burn our ETH. This one, rollups are getting real cheap. That's what's happening.

• 1:00:32Speaker 01

  Anyways, so that was the background for 4844. What's the actual news? The news is, there's a testnet. So the Dankun testnet is live. This is getting to be one of the last steps before actual Dankun gets shipped.

• 1:00:46Ryan Sean Adams?

  Feels like this year?

• 1:00:47Speaker 01

  My speculation, my, not anyone else's. Don't quote me, because I'm not an authority here. I'm just a podcaster.

• 1:00:53Ryan Sean Adams?

  He knows nothing.

• 1:00:54Speaker 01

  November-ish of 2023.

• 1:00:57Ryan Sean Adams?

  It's November! Yay!

• 1:00:58Speaker 01

  November is where I'm placing my bets. Yeah, so 4844 Dankun, that's what we're hoping for for November.

• 1:01:06Ryan Sean Adams?

  That'll be huge.

• 1:01:07Speaker 01

  Moving on, Eigenlayer. So Eigenlayer increased their liquid staking cap. So every time Eigenlayer updates their staking cap for how much Ether you can actually deposit into Eigenlayer, it immediately gets filled. They released a new cap. They raised their cap and to another 100,000 of Ether to be staked with Eigenlayer, and immediately it gets filled. So now, total in Eigenlayer, we have 100,000 staked Ether from Lido, 20,000 staked Ether from Rocketpool, 21,000 CB Ether, and then also 14,000 actual Vanilla, Virgin, 14,000 Ether from the Beacon Chain.

• 1:01:42Ryan Sean Adams?

  So every time they move the cap up, it gets filled like almost instantly. This is the restaking. We did an episode with Eigenlayer. They should absolutely check out. This is a very important primitive that we're creating. And this is like a vacuum cleaner for Ether. My god, it's just sucking it in.

• 1:01:56Speaker 01

  Yeah, and the cool thing is, the funny, actually, maybe it's not that cool, is that, what is this Ether doing? Nothing. It's just waiting. It's just waiting to get restaked. Yeah, so this is just showing demand for Eigenlayer restaking to get restaked somewhere. So all of this Ether is just like waiting for some networks to spawn. This is the first step. This is like Eigenlayer loading up the engine so that it can actually point its economic security, which is restaking, to any of the restaking networks that come online.

• 1:02:24Ryan Sean Adams?

  I swear, we will just stake, put our Ether into anything. You know what I mean?

• 1:02:28Speaker 01

  Why are people doing this? Why are people adding in?

• 1:02:31Ryan Sean Adams?

  Airdrop and yield.

• 1:02:32Speaker 01

  Because it's airdrops. It's an airdrop, dude.

• 1:02:36Ryan Sean Adams?

  What's this, David? First squad block. What are we looking at? It's a tweet from you.

• 1:02:39Speaker 01

  So this is squad staking, DVT, Distributed Validator Technology, out of Obel, something that me and Ryan and many others in the Ethereum staking world are very, very excited about. Has been an idea for a long time. It's been on testnet for a long time. But now, we had the first ever squad block proposed from EtherFi. Congrats. So they use Obel and Dapnode. So what is squad staking? Distributed validator technology? Say you and your friends don't have 32 ETH, but you want to stake your ETH together. So you guys all run your own node. You each put your Ether on your own node. One of you guys has the leadership position and everyone else signs off on that. And so four nodes, or five nodes, or three nodes can come together.

• 1:03:21Speaker 01

  And the one leader node can build a block and sign it, and then all the other ones can check it. It's basically a multi-sig for ETH validators. It's very, very cool. It opens up a ton of cool new use cases. Okay, moving on. Scroll. Scroll is entering its beta phase. So after launching its support via testnet, this is the final stage before Scroll mainnet. So Scroll also does not have too many steps before mainnet. And so there are some ZK-EVM upgrades, there are some bridge upgrades, there are some infrastructure upgrades in this update. So over 100 projects have already integrated with Scroll to date.

• 1:03:53Ryan Sean Adams?

  That's big.

• 1:03:53Speaker 01

  In their final stages before releasing a mainnet.

• 1:03:57Ryan Sean Adams?

  Another ZK-EVM layer 2, right? So would you say this is one of the big three? So we got ZK sync, we've got Polygon, ZK environment, and then Scroll would probably be the third? I mean, there's others.

• 1:04:10Speaker 01

  Scroll would be the third, and then Tyco I would kind of put as a distant fourth, but definitely mentionable.

• 1:04:15Ryan Sean Adams?

  Definitely, you know, big four, maybe. David, Farcaster. We've had Dan Romero on the podcast talking about Web3 social and Farcaster. Decentralized Twitter? Can you imagine that? That's what Farcaster is.

• 1:04:28Speaker 01

  Yeah, without the bots, yeah.

• 1:04:29Ryan Sean Adams?

  They deployed somewhere. You said to mainnet. What mainnet did they deploy to?

• 1:04:33Speaker 01

  We'll get there. I'm going to tease this a little bit first. So Dan Romero tweets out, "A step closer to 100% permissionless Farcaster," because he is retweeting a tweet talking about Farcaster hubs. So there's 30 Farcaster hubs. So this is like the different ways of viewing the Farcaster protocol. The Warp Cast runs four out of 30 of them. The rest are independently run and not subsidized, so economically sustainable. If Warp Cast, the main canonical app of Farcaster, disappeared tomorrow, the network would keep on running. Next up, Dan teases Ethereum Layer 2 mainnet migration and turning off the gating to signups. So moving on to the next tweet,

• 1:05:13Speaker 01

  what Layer 2 did they choose? Optimism. They chose optimism. Optimism mainnet is now going to be the home of Farcaster. So you have the many different apps that make up the Farcaster ecosystem. That's Warp Cast, that's Jam, that's Yap, all the other apps that look at the Farcaster protocol. You have ENS as part of the stack, but then everything is ultimately going to settle down to an NFT on Optimism mainnet as the base case for people's keys. And so that is the complete Farcaster stack built on Optimism mainnet.

• 1:05:46Ryan Sean Adams?

  Very cool.

• 1:05:47Speaker 01

  Oh, by the way, I have 30 invites to bankless citizens who want to come on Farcaster today. I've actually, I've replaced Ryan. I've replaced Twitter as the little spot on my home screen on my iPhone. I flicked Twitter out of there and I put Warp Cast there. And so I'm hanging out in Warp Cast a little bit more. And let me tell you, the absence of bots there is very refreshing.

• 1:06:10Ryan Sean Adams?

  Nice conversations too. The absence of toxicity.

• 1:06:15Speaker 01

  There's no Solana people on Warp Cast.

• 1:06:19Ryan Sean Adams?

  You should retract that, David. You need to apologize for that one. That was too much. I don't know. The comments will tell you. What is this? A shielded mempool on Optimism. What does this mean?

• 1:06:32Speaker 01

  Yeah, so I wanted to really put this one in the agenda because of the era of privacy that is going around as a theme of this episode. So part of the explanation as to why fighting privacy is futile is because we have other technologies like an encrypted mempool that is now coming to the Optimism mainnet and will also eventually be on the Ethereum Layer 1. What does an encrypted mempool do? So if you don't want people to know what the contents of your transactions are before they get included as a transaction into the blockchain, you need something called an encrypted mempool. So Shudder has built a shielded mempool using threshold encryption for the modular OP stack. So this is what they are releasing into the wild today. This is a grant recipient from Optimism's retroactive public goods funding

• 1:07:15Speaker 01

  efforts. So Optimism might be a shielded mempool, an encrypted mempool on its horizon, which is extremely cool and very privacy first, very individual first. And so something that we definitely could need in this day and age.

• 1:07:27Ryan Sean Adams?

  Yeah, I don't know. It sounds highly illegal to me. It sounds like this should not be allowed.

• 1:07:32Speaker 01

  Okay, Mr. Fed.

• 1:07:35Ryan Sean Adams?

  I mean, this is great, too. This is another example of, I think, Layer 2's kind of pioneering the frontier.

• 1:07:39Speaker 01

  Taking the reins.

• 1:07:41Ryan Sean Adams?

  Yeah, I can adopt it later. And this certainly helps minimize MEV and increase privacy. Airdrops. Hey, it's airdrop season, I guess. Announcing the next airdrop, a new chapter in cross-chain innovation. What is this?

• 1:07:56Speaker 01

  No, no, no. Not announcing the next airdrop. Announcing next airdrop.

• 1:08:01Ryan Sean Adams?

  Well, they said the next.

• 1:08:02Speaker 01

  Okay, so this is next from Connects, which is one of the probably the earliest and most sophisticated bridges, a cross-chain rollup bridges on Ethereum. So you can check out if you want to qualify for the Connects airdrop here in the blog that we will link in the show notes. There's a bunch of different criteria. It's too long to read out. But you can also, interestingly, what's cool is you can claim next on Arbitrum or Optimism or Polygon or Gnosis. Why do you have that ability? Well, because Connects is a cross-chain bridge, so it knows what chain you claimed it on, so it doesn't matter. It's part of the obfuscation and blurring the lines of all of the chains.

• 1:08:38Ryan Sean Adams?

  This airdrop begins on September 5th, 2023. If you don't want to mark that in your calendar, you know what you should go do is you should go to Earnify, okay? So this is earn.fi. This is a bankless application that is provided for free. There's a premium subscription.

• 1:08:53Speaker 01

  When we say this is a bankless application, we mean, this is our application. This is our app.

• 1:08:58Ryan Sean Adams?

  Yeah, it's, you know, the airdrop hunter that we talked about last week, guys? This is, this is the sequel to that. This essentially notifies you when you receive an airdrop. So if you type in your ETH address here or connect to your wallet, then you will know immediately if you, if you have a opportunity at, for next tokens awaiting you.

• 1:09:18Speaker 01

  And not just the next airdrop, Ryan, but I was checking my email for the, you know, once per month I check my email. And I actually was notified that one of my wallets, I have not claimed the Arbitrum airdrop. And so this is a PSA for everyone out there. Arbitrum expires in one month. So if you have not claimed your Arbitrum airdrop, you need to claim it in the next one month. Now, like, some of you are like, Arbitrum airdrop happened forever ago. Why are you bothering to tell me this on the rollup? Well, because we know that there's 1.8 million dollars of bankless citizens and/or Earnify users who have not claimed their Arbitrum airdrop.

• 1:09:57Ryan Sean Adams?

  Guys, what are you doing?

• 1:09:59Speaker 01

  Okay, and so now if you think that like, oh, no, that can't be me, I've already claimed my Arbitrum airdrop. Have you checked all your wallets? Because you can qualify for the Arbitrum airdrop in like seven different ways.

• 1:10:10Ryan Sean Adams?

  Yeah.

• 1:10:11Speaker 01

  And so the only way that you can actually, like, I, the reason, I didn't know that I had this airdrop. And then I checked my email and Earnify said like, hey, you have $8,000. You need a claim, bro. I'm like, oh, thank you, Earnify.

• 1:10:22Ryan Sean Adams?

  They say, bro, I should say, you idiot.

• 1:10:25Speaker 01

  You idiot.

• 1:10:26Ryan Sean Adams?

  Claim up.

• 1:10:26Speaker 01

  Claim your Arbitrum airdrop.

• 1:10:28Ryan Sean Adams?

  Oh, man, well, those have gone up in value, to be fair, but yeah, there's a lot of opportunity out there. So we're just trying to keep you looped on this. You know, there's a, there's a link in the show notes to Earnify, but check that out. I think it's going to continue to be airdrop season. Now we're getting into later two airdrops.

• 1:10:44Speaker 01

  Yes, I hinted at this in previous rollups, until I'll just call that back. I said that, like, I know for a fact that one of our portfolio companies, Ryan, is withholding its airdrop for more opportune parts in the market, more bullish sentiment in the market. That was Connect.

• 1:11:00Ryan Sean Adams?

  Oh.

• 1:11:00Speaker 01

  That was Connect.

• 1:11:01Ryan Sean Adams?

  Hey.

• 1:11:01Speaker 01

  So I think airdrop appetite, therefore, if that is a signal to, it will be back.

• 1:11:07Ryan Sean Adams?

  I think it's a signal. Starkware's got some tech here and it's open source. We like open source. What are they releasing?

• 1:11:13Speaker 01

  They are releasing their open source prover called Stone. So this is a very core component of decentralizing a ZK rollup, a layer two, is making the prover accessible so that anyone can produce a proof. Everyone can be a prover. And so that is a very important, critical part of every single rollup.

• 1:11:31Ryan Sean Adams?

  This is what Arbitrum just did, right?

• 1:11:33Speaker 01

  No, that's fraud proofs. This would be correlated to a ZK seeing Boojum or Polygon's Plonky. This is Starkware's Stone. And so this is their ZK stuff. Fraud proofs are specifically for optimistic rollups.

• 1:11:46Ryan Sean Adams?

  Yeah, I know it's fraud proofs, but it's

• 1:11:48Speaker 01

  Same niche.

• 1:11:49Ryan Sean Adams?

  Similar idea, right?

• 1:11:50Speaker 01

  Similar idea, yeah.

• 1:11:51Ryan Sean Adams?

  It's like, yeah, we're proving our ZK spooky math, aren't we?

• 1:11:54Speaker 01

  Yes, exactly right. For any of the people who are in the San Francisco area or who are going to the Starknet Summit on August 35th, Bankless Citizens, we have a 50% discount to tickets for you. So if you want to go to the Starkware Summit, make sure you show up in the Discord and we'll get you the discount code for tickets.

• 1:12:11Ryan Sean Adams?

  You know, all these projects we just mentioned, Obol, Eigenlayer, Scroll, Starkware, they're all going to be at Permissionless too. Some of them might be at the party that we mentioned at the outset.

• 1:12:20Speaker 01

  Oh, they will be. Everyone would be at the party.

• 1:12:21Ryan Sean Adams?

  Good time to catch them. Fire now has a wallet. Fire is a very useful extension that I now use. It basically

• 1:12:28Speaker 01

  It should be on your tool belt.

• 1:12:30Ryan Sean Adams?

  It really should, because so you pair it with MetaMask and it checks a transaction to see if the transaction is kind of like a phishing attempt or a scam or not. And it tells you exactly what the transaction actually is before you click the button.

• 1:12:44Speaker 01

  Like in words, in human words.

• 1:12:45Ryan Sean Adams?

  Anyway, that's a useful extension. And now they also have a wallet. I've not tried this out, but if it's anything like their extension, I'm sure it's pretty good. So there'll be a link in the show notes where you can go check that out and see if that's a wallet you can pair with MetaMask and some of your other wallets. David, there was an exploit this week on Balancer, though. It wasn't that bad, but just give us the TLDR.

• 1:13:06Speaker 01

  So about 1.4% of Balancer's TVL was at risk. Only certain pools, boosted pools, were affected. So some of these pools were paused to mitigate risk and they will remain so. So if you have been supplying liquidity to Balancer in boosted pools, you should remove your liquidity. And so

• 1:13:26Ryan Sean Adams?

  It's probably too late for that, isn't it?

• 1:13:27Speaker 01

  It's a little bit too late. So This is also part of this conversation. Shout out to Balancer in the way that they communicated this exploit. They identified the exploit. They took precautionary action and then they broadcasted, hey, there's a vulnerability. You need to exit these vulnerable pools without saying what the vulnerability is. So it doesn't set any black hat hackers off on a, well, it did, but they didn't give them the cue, the hey, go look.

• 1:13:54Ryan Sean Adams?

  Treasure map, huh?

• 1:13:55Speaker 01

  Exactly. They didn't give them the treasure map. So overall, this has been like one of the best handled exploits that I think we've seen. They even built a UI while they announced the exploit to go check if you were in an infected pool and a button to go with.

• 1:14:10Ryan Sean Adams?

  Wow.

• 1:14:10Speaker 01

  So like shout out to Balancer. Well done. Congrats on only having a 1.4 TVL vulnerable exploit. I guess that's worth congratulations for. So I don't think any money was affected. I don't, I haven't heard of anyone actually losing money. So narrow escape from Balancer, really good protocol. We love the Balancer team. Shout out Fernando.

• 1:14:31Ryan Sean Adams?

  Yeah. They're OGs. They've been around for a while. So yeah, doing a great job.

• 1:14:37Speaker 01

  Really quick in the NFT landscape. Congratulations to Miladies for being number three out of the 10K PFP projects category, only behind punks and apes. Miladies, wow. I do not own a Milady. It's not really my vibe, but wow, here they are.

• 1:14:53Ryan Sean Adams?

  Oh, those are them, huh? Okay. I've seen those all over the place.

• 1:14:55Speaker 01

  Those are the Miladies. Yeah. The like the weird corner of, of, I don't know even how to call it.

• 1:15:01Ryan Sean Adams?

  This is weird that I'm seeing the SEC in the good news section here, but the SEC is set to green light an Ether Future ETF. All right. It looks like that's going to happen. We haven't had one of these before. We have the Bitcoin Futures ETF. Now we get an Ether Futures ETF. This is Eric B. from Twitter. He says, this is not surprising to us. We said they would approve an Ether's future early on in the race. Nice to be validated. What does this mean for Spot? Hard to say beyond it shows that things can change. It's nice things can change. Even Grinch's can increase.

• 1:15:33Speaker 01

  Increase the size of their hearts. Wow. You just felt Gary Gensler at Grinch. Nice.

• 1:15:37Ryan Sean Adams?

  Yeah, that's the worst thing I've ever said about Gary.

• 1:15:39Speaker 01

  There are 12 companies with applications for an ETH futures ETF, ProShares, Volatility Shares, Bitwise, Roundhill among them. The SEC is not supposed to play Kingmaker, but I'm not the SEC.

• 1:15:53Ryan Sean Adams?

  No, you're not.

• 1:15:54Speaker 01

  If you are going to partake in this game, I recommend Bitwise. They are crypto natives. They are one of us. Who the hell knows anyone from ProShares or Volatility Shares? That sounds like some boomer shit. So if you're gonna buy some ETH futures ETFs, do it through Bitwise. They're our friends.

• 1:16:09Ryan Sean Adams?

  Wow. We just criticized Gary for being a Kingmaker, and here's David from Bankless.

• 1:16:15Speaker 01

  I know. I'm not Gary. I do not play. I don't have. I'm not beholden to his rules.

• 1:16:20Ryan Sean Adams?

  Speaking of not being beholden to the rules, you like that segue? Here's SPF. Here's a picture of him. He's pleaded not guilty for fraud and money laundering charges because of course he would. He's also on bread and water. Do you know that? So he's a vegan in prison. They won't comply with his diet. So he has just been on bread and water. I saw this in normie mainstream news. I didn't even see this on crypto news. So there you go. The more you know.

• 1:16:46Speaker 01

  As a consumer of nutrition content, bread and water is not a recommended diet.

• 1:16:51Ryan Sean Adams?

  David, he's in jail. All right. That's a.

• 1:16:53Speaker 01

  Not a recommended place to be.

• 1:16:55Ryan Sean Adams?

  Well, thanks for these pro tips from Bankless. All right. What do we got next?

• 1:17:00Speaker 01

  Coming up next, we got Vance Spencer's Smell. We had an episode about S-M-E-L-L, the fang of DeFi, Synthetix maker Etherlink Lido. And we got a question from the nation. David, Ryan, what would you add? What about the other tokens? So we're gonna add some letters to Vance Spencer's smell.

• 1:17:20Ryan Sean Adams?

  Keep it. Don't cut it.

• 1:17:22Speaker 01

  And then of course, what we're bullish on. And we did a very cool episode on Superchange, which I think is gonna be related to what Ryan and I are bullish on. So all of that is coming up and more. But first a moment to talk about some of these fantastic sponsors that make this show possible. Introducing ETH X from Stater. ETH X is a liquid staking token designed to maximize rewards all while securing Ethereum. With Stater, you can run an Ethereum node with just for ETH, which is 80. 5% lower capital and 35% higher returns versus just solo staking. Stater has a multi-pool architecture with both permissionless and permission node operators to enable decentralization and scalability. Stater has extensive experience in building liquid staking solutions on six proof-of-stake blockchains and is trusted by over 70,000 stakers. Stater has partnered with over 40 leading protocols on these chains to bring DeFi

• 1:18:06Speaker 01

  utility to their liquid staking tokens. Stater is actively building integrations and partnerships across Ethereum to bring the same great DeFi utility to the ETH X token. While smart contract bugs are always a risk in DeFi, the ETH X smart contract has received three independent audits and has a million-dollar bug bounty with ImmuneFi. Go to staterlabs.com/eth/stake to access the Stater staking protocol today. Mantle, formerly known as BitDow, is the first DAO-led Web3 ecosystem, all built on top of Mantle's first core product, the Mantle network. A brand-new, high-performance Ethereum Layer 2 built using the OP stack, but uses Eigenlayer's data availability solution instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle Network's gas fees by 80%, but it also reduces gas

• 1:18:49Speaker 01

  fee volatility, providing a more stable foundation for Mantle's applications. The Mantle Treasury is one of the biggest DAO-owned treasuries, which is seeding an ecosystem of projects from all around the Web3 space for Mantle. Mantle already has sub-communities from around Web3 on-boarded, like Game7 for Web3 Gaming and Bybit for TPL and Liquidity and Onrants. So if you want to build on the Mantle network, Mantle is offering a grants program that provides milestone-based funding to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first DAO-led Layer 2 ecosystem, check out Mantle at mantle.xyz and follow them on Twitter at @zeroxmantle.

• 1:19:25Ryan Sean Adams?

  Questions from the nation this week. This one from Art Democrat Bankless Citizen. Art Democrat's gonna be at the party, I'm pretty sure.

• 1:19:31Speaker 01

  Art's coming to the party. We know Art.

• 1:19:33Ryan Sean Adams?

  You met him in real life.

• 1:19:35Speaker 01

  Yeah, he was at our party in France. He's been to more Bankless parties than you have, Ryan.

• 1:19:39Ryan Sean Adams?

  Good job, our Democrat. It's a great question here. So we were talking about smell before the break. That actually stands for Synthetix Maker Ethereum Lido Chainlink. So Vance Spencer said that he was bullish on all of these tokens. We did an episode earlier this week on why the case for them. This is our Democrats question. What would you add to the smell cohort, David and Ryan, based on the the current crypto space outlook? And why? Why would you add these letters, these acronyms? So yeah, what's your answer to that?

• 1:20:10Speaker 01

  I think the two obvious low hanging fruit ones that come to mind is Uniswap and Aave. We talked about Uniswap in the Vance Spencer episode. He said that he's not convinced that liquidity inside of Uniswap is all that sticky. He doesn't see a large moat around Uniswap, and I take that point. Uniswap LPs are losing money, and everyone knows it, and they probably know it too, unless they have just like been ignoring reality. Yet, they are still keeping their money inside of Uniswap. And so maybe we don't understand the moat, but there does appear to be a moat, or at least no one's really leaving liquidity out of Uniswap. Uniswap has over 85% of all on-chain trading volumes going through Uniswap.

• 1:20:53Speaker 01

  It's pretty dominant. And so maybe we can explain the moat. I think there's a base, there's an argument to be made that it does exist. And all that needs to happen is a few select innovations on Uniswap's own application layer, in my mind.

• 1:21:06Ryan Sean Adams?

  So you like Uniswap?

• 1:21:07Speaker 01

  I like, I think it's it's extremely valid contender to be considered part of the Fang of DeFi. Like, come on, it's Uniswap, bro.

• 1:21:15Ryan Sean Adams?

  You smell, you smell then. What else you got?

• 1:21:17Speaker 01

  Give me another. Aave, Aave would be the other one. A. Compound is pretty stagnant. Aave is updating. They did have that governance flip, governance fumble with the whole CRV. But I mean, they're really the only ones I would say that are progressing forward meaningfully. And like there's, of course, there's a conversation of is governance going to work? Do we need more governance free primitives? But I mean, between the market cap of AVE, it is a blue chip. I mean, everyone uses AVE. And so smell plus U plus A, you smell a, you smell a.

• 1:21:52Ryan Sean Adams?

  You smell a.

• 1:21:53Speaker 01

  You smell a.

• 1:21:55Ryan Sean Adams?

  Do you know, I guess what I would add is I think Vance is focused on DeFi, which is cool, but there's another area of focus.

• 1:22:05Speaker 01

  The layer two tokens?

• 1:22:06Ryan Sean Adams?

  Yeah. So I.

• 1:22:08Speaker 01

  O P R, Polly.

• 1:22:10Ryan Sean Adams?

  Yep.

• 1:22:11Speaker 01

  All of these.

• 1:22:11Ryan Sean Adams?

  Can we make an acronym for this? We probably can. I mean, all of them, like, you know, I'm more bullish on some than others based on kind of their, their fully diluted valuation where I see kind of the organic growth. I hazard to share that here though, because we love all of our children equally. But maybe someday we'll do an episode kind of comparing these different ecosystems. Very bullish in general on layer two. So there might be some other initials to, to come up with. And, you know, David, David wants his competitor for smell. So I can hear him click anyway. He's trying to figure out how you get.

• 1:22:44Speaker 01

  I got it.

• 1:22:44Ryan Sean Adams?

  An A. What do you got? What do you got?

• 1:22:47Speaker 01

  Spaz.

• 1:22:50Speaker 01

  Scroll polygon arbitrage on ZK sync. Oh, I don't have the O for optimism. Spazo.

• 1:22:56Ryan Sean Adams?

  Spazo. There might be something better there. I mean, that's basically all of the, all of the big ones, right? So anyway, that, that's not what Vance's portfolio is, but definitely bullish on some L2 stuff these days for myself. And I know you are too.

• 1:23:11Speaker 01

  Another question. Nick, how worried should we be about banks gobbling up ETH and BTC through ETFs? Feels like a step backward if the majority of folks that own either of these assets actually own them through a bank instead of their own. I've got my answer to this. You want to take it?

• 1:23:26Ryan Sean Adams?

  Oh, really? Yeah, I'll, I'll start with my answer. So my answer is, you know what it feels like? So great question, Nick. You know what it feels like a step backwards? Logging into your fidelity count.

• 1:23:37Ryan Sean Adams?

  Logging into your E-Trade account, okay? So like, that's where you have to purchase these ETF assets. They're not programmable. You can't do anything with them. You could just look at them in like side the Fidelity price tracking app. So I would contend that it's net accretive to crypto because I don't think that the value is actually going to reside there because it's an inferior product and it's an inferior set of rails. It's in TradFi. It's in the old banking system and these are crypto native assets, right? So you want their tokenized form. So you can do things with them. You can re-stake them. Like you can, you know, stake them for the first time, you know?

• 1:24:21Ryan Sean Adams?

  Use them in Lido, use them as collateral for loans, like freaking, like there's so much more you can do with them. I could send it to you. If I wasn't an American, maybe I could get some privacy for my, you know, crypto native assets. So I don't think TradFi will be competitive against any of that and we'll just slurp all of their liquidity and then we'll, now, I'll make one exception though. I don't necessarily think that holds true for Bitcoin. I think it holds true for Ether. I don't think it holds true for Bitcoin. Why? Bitcoin does not have a fully developed set of use cases in DeFi inside of its ecosystem.

• 1:24:58Speaker 01

  Doesn't have any developed use cases.

• 1:24:59Ryan Sean Adams?

  I think it is potentially more concerning for Bitcoin, although I'm still not overly concerned, but.

• 1:25:06Speaker 01

  I'm not concerned about that.

• 1:25:08Ryan Sean Adams?

  Yeah, what's your take on that?

• 1:25:09Speaker 01

  Yeah, my take is that one of the lines that I liked about how just the wheels of history turn is that science progresses one grave at a time. It's a little bit dark. Some people are never going bankless. Some people are just.

• 1:25:22Ryan Sean Adams?

  Some people need to die.

• 1:25:24Speaker 01

  Some people are just always going to have their assets inside of their centralized brokerages. They are not, they don't care to become a crypto person. Maybe their financial advisor recommends them like, hey, let's allocate 1% of your savings to crypto just because you don't have any exposure there. And because it's inside of your Fidelity account, we can just buy Ether or Bitcoin inside of your Fidelity account. And then these people will go and retire and they will go and be sipping margaritas on the island, on an island for the rest of their life and they'll never become a crypto person. At least they're pumping our bags.

• 1:26:01Speaker 01

  And so for all the people that are going Bankless that bought Ether earlier than they did, fine, fine.

• 1:26:08Ryan Sean Adams?

  I love the back half of this episode, by the way. The first half of this episode is all about crypto values and like, we're fighting for privacy and all these meaningful things. And the back half is like, we got some bag pumping. We're excited about that, huh?

• 1:26:19Speaker 01

  Yeah, that's, that's what Bankless does is we actually, never mind.

• 1:26:25Ryan Sean Adams?

  All right, I take it that week. This one from me, although it's not my PFP. The SEC wants to make every crypto asset a security. FinCEN wants to make every crypto person a money transmitter. The IRS wants to make every crypto transaction a tax event. America, please save yourselves from your regulators. I felt this one strongly this week. What I think that they don't understand, they refuse to understand is because they're, I think these institutions, organizations, there's always a book you referred me to about kind of the, you know, nation state apparatus.

• 1:26:56Speaker 01

  Oh, yeah, seeing like a state.

• 1:26:57Ryan Sean Adams?

  Seeing like a state. So each of these institutions are trying to garner more and more control and they become kind of their own like autonomous slime molds. They're just zombies that are just seeking that. But the new thing they don't understand is that this is disintermediated. This is peer to peer. All right. So even when you look at kind of the, you know, treasury stance against these tornado cash developers, right? They keep thinking of them as custodians, as if they're institutions and they're not. This is peer to peer, peer to peer, digital money. It's a new thing, but it's also a very old thing. Peer to peer is how we used to do money. When like, we would barter with gold, when we would have physical, you know, cash and

• 1:27:40Ryan Sean Adams?

  I would give it to you and, or you would give it to me. And that record, that transaction did not have to be recorded by some nation state. It could be private. Okay? So we're doing something new, but we're also going back to something old. And in this old system, in this peer to peer system or now peer to contract type system, we don't need the institutions as much because why were the institutions put in place? They were put in place so that they could protect the people from large intermediaries who had more power. Who had the ability to manipulate, to information arbitrage, not be transparent. They were put in place to help the people.

• 1:28:22Ryan Sean Adams?

  And now these institutions are getting in the way of peer-to-peer transactions because they think we still need them in these cases and they're grasping at power. And I think that has to change, that has to invert. The way we think about these crypto transactions has to be more like the old peer-to-peer model, right? And less like everything is intermediated through a bank and can be controlled by a regulator. And the regulators have to come back to their mission statement of like, protect the people. And how do you protect the people? You give them access to privacy. So third parties like Facebook or Meta or Visa or Google can't prey on us and steal all our data. I mean, Google can scrape the blockchain and figure out what every transaction is right now.

• 1:29:06Ryan Sean Adams?

  Do we need protection against that from our regulators? Yes. What are they doing? They're stripping that away. That's the thing that has to change. And yeah, that's why I tweeted this out.

• 1:29:17Speaker 01

  Yeah, that book that I frequently referencing like a state, it gave me this one very big aha moment that made me appreciate a lot more about like how the nation state approaches crypto. And that is, it explains why there's this, always this antagonistic relationship between the nation state and Aboriginal societies. Because Aboriginal societies are nomadic. They don't have an address.

• 1:29:41Ryan Sean Adams?

  Decentralized?

• 1:29:41Speaker 01

  Yeah, they're decentralized, right? They don't have an address. They don't exist anywhere. They don't have a serial number. They don't have a social security number. And they're always on the move. So how do you tax them? How do you reason about them? How do they fit inside of like the rigid grid? Your machine. And so what the nation state is, they're not, the nation state isn't inherently racist, but it is oppressive towards Aboriginals. And then also there's probably some racist people that, you know, blah, blah, blah, blah. And so like this, it just doesn't compute. The relationship between Aboriginals and nation states, like they're, they're different languages. And this is the same thing that's happening with cryptographers and crypto systems. They don't understand us. They don't understand the systems. We don't speak the same languages.

• 1:30:26Speaker 01

  And so what do they do? They oppress, they silence, they coerce. And so this is, if the whole rule of law system works in our favor, we will be able to fight for that. But by default, it is an oppressive system that we need to fight against.

• 1:30:41Ryan Sean Adams?

  Agreed. Yeah. And we need to spend a lot of time educating. And I think that's what that's what a big part of the bankless podcast and the movement is, right? It's why we get politicians on here, even though sometimes those episodes are, you know, it's like, what is this person going to say?

• 1:30:54Speaker 01

  Generally enjoyed.

• 1:30:56Ryan Sean Adams?

  But they need, like, we need to engage. We need to talk to them. All right, David, what are you bullish on this week?

• 1:31:01Speaker 01

  So this will be yet another articulation as to why I'm bullish on the superchain. But this is a more narrow reason as to why I'm bullish on the superchain. There's this growing axis over there between the Ethereum attestation service, who I just did a podcast with, optimism, governance, this platform called Click, and also Farcaster is a part of this. Overall, there's this axis of infrastructure that's growing, that is helping establish identity in a little bit more of a roundabout way than I think people are typically used to. Like, WorldCoin, scan your eyeball, will give you an identity, right? Like, many, many identity platforms say like, hey, our platform gives you an identity. Whereas like optimism,

• 1:31:42Speaker 01

  governance, the whole OP stack system, Ethereum attestation service, and then all these attestation providers like Click, they're actually providing you an identity in a more roundabout way, more about like, they're showing the contour, the outside of your identity, they're showing the contours of your identity without actually trying to ascribe you an identity the way WorldCoin is. And so I think if people are trying to look at what the frontier of decentralized identity looks like, they would go look at this axis that's forming over in the OP stack.

• 1:32:10Ryan Sean Adams?

  I think-

• 1:32:10Speaker 01

  I mean, the idea is that that scales out to every single OP stack chain.

• 1:32:13Ryan Sean Adams?

  I think I agree with that. There's some cool things that we're seeing. That episode we did recently with Ethereum attestation service, okay, if you have no idea what that means, it's not out yet, but attestations are just, you know, a fact that you can claim about yourself, or somebody can claim about you. And it turns out that attestations actually form the basis of this thing, this social construct we call identity and reputation. And so it's very cool to see different ecosystems. In particular, I think, you're right, optimism is really pressing into this formation of an identity. And what's different about that in WorldCoin is it's kind of like, it's app-driven identity, rather than identity first, right? So there's like, the use case for, I think that's probably how-

• 1:32:58Ryan Sean Adams?

  Identity happens, it has to sort of, it's an emergent phenomenon, it has to emerge. You can't say, here's identity. Now everyone come and get your identity. Step right up, ladies and gentlemen, here's your identity.

• 1:33:08Speaker 01

  The only platform that does that is the nation state, and that's because they have a gun pointed to your face.

• 1:33:13Ryan Sean Adams?

  Yeah, they got, they got, they already built the economy of scale to sort of pull that out and make that happen. And so, yeah, I think there's some really cool identity experiments going on. So Ethereum attestation service, that episode is coming up soon. It's cool. It's public, non-token, it's public goodsy. And that's going to be a foundational basis.

• 1:33:31Speaker 01

  Non-token.

• 1:33:31Ryan Sean Adams?

  Tokenless.

• 1:33:33Speaker 01

  So that actually will come out a week after next.

• 1:33:37Ryan Sean Adams?

  Oh, yeah.

• 1:33:37Speaker 01

  On Monday.

• 1:33:38Ryan Sean Adams?

  Oh, that's mine. Don't steal mine. Don't steal mine. Okay. Oh, ask me what I'm bullish on.

• 1:33:43Speaker 01

  Brian, what are you bullish on?

• 1:33:44Ryan Sean Adams?

  I'm bullish about this, I'm bullish about this idea of a superchain, this, this kind of structure that we're forming. And it was part of, of the back of that episode that we just recorded with Ben Jones and Jesse Pollak from the base team, that's Coinbase base team. And it put, like, implanted this kind of, you know, image in my mind that I think has already been more present in yours, but I don't know, something about that episode really clicked for me. I think what we're going to have is with all of these layer twos, we're going to have federations of chains. We'll call them United States of chains, where each, each chain is kind of its own state, but they're all part of this confederation

• 1:34:25Ryan Sean Adams?

  where they have kind of a, an economic zone together and maybe a shared governance layer. So I think all of these layer twos are emerging along that path. So we'll have like the United Chains of Polygon, we'll have the United Chains of Arbitrum, the United Chains of Optimism, right? And that's what they call the superchain.

• 1:34:42Speaker 01

  You might as well just call that a superchain.

• 1:34:42Ryan Sean Adams?

  That's what they call the superchain. And there's, there's two levels to this union that I, it wasn't quite broken apart for me until that episode. The first is like the social level and the social alliance. And that's very much about governance and a shared tax system and a constitution that all of the chains subscribe to. And to me, that starts to look like very nation state like, or very like formation of the United States or the European Union like, where you have all of these separate nations agreeing to a shared Protocol, constitution come together to create an economic zone. So that's like this, and they, they have representatives, they have governance, right? That's where identity fits in, by the way. Uh, anyway, that is starting to form the social alliance. And then there's also a technical alliance here where we have shared standards, right?

• 1:35:27Ryan Sean Adams?

  And this looks very much like, um, internet, you like web one dot O technical alliances, right? So DNS, domain name services. This is a, um, a governance, sorry, a technical standards body, basically. There's all sorts of technical standards bodies that, um, form the, the internet. But they're basically more committee type driven, right? They don't have any kind of governance power. Anyway, what we're creating in these super chain structures is like, almost like a little bit of nation state and a little bit of technical standards body. And we're combining that together in a new experiment. I think this is the next frontier of, you know, biology, talking about the digital nation states? I think this is that. It's what we're creating are these digital nation superstructures. And what's really neat is-

• 1:36:10Speaker 01

  Hold on, I'm going to take some credit here. Okay. Ballage, Ballage takes the network state. He wants these things to go manifest in real life and buy land. The digital nation state, that's a bankless original.

• 1:36:21Ryan Sean Adams?

  That's true. That is a bankless original.

• 1:36:23Speaker 01

  That is us.

• 1:36:24Ryan Sean Adams?

  Yes, this is what we've always, this is what we've said. And this is, and, and so what, what's interesting is it sort of positions Ethereum in a unique place. In that I used to think Ethereum was, was more of a, um, digital nation state in itself. In fact, that was kind of the original episode we did about this Ethereum, the digital nation state. And that's true still, but also it's kind of a fractal. And it's, it's more emerging as kind of a birthplace for new digital nation state structures.

• 1:36:51Speaker 01

  While everyone was on the layer one.

• 1:36:53Ryan Sean Adams?

  Yeah.

• 1:36:54Speaker 01

  Because we didn't have layer twos.

• 1:36:55Ryan Sean Adams?

  Yes. So Ethereum is a birthplace for networks of network states. Um, this is really a cool concept, I think. Anyway, um, that's what's exciting me this week. Oh, and lastly, I think that's the structure that's actually going to scale us to a billion on-chain users. Like, I think we have it now. We didn't have it previously.

• 1:37:13Speaker 01

  I think we have the evidence because I look at what Base is doing, right? New people for the first time ever.

• 1:37:17Ryan Sean Adams?

  Oh, we didn't even say, you know, Base is almost up to, um, a million, uh, active-

• 1:37:22Speaker 01

  A million, a million active users. Right. Yeah, yeah, yeah.

• 1:37:25Ryan Sean Adams?

  That's crazy. In like two, two, three weeks.

• 1:37:28Speaker 01

  Yep. Yeah, it's I mean, it's just like fractal scaling, right? How do you? How do you get to 10,000? Or how do you get to 10 billion people as soon as you get 10 billion people on this planet? The only way you get there is fractal growth, geometric growth. And that is what is comprised inside of these like super chain phenomenons where we have permissionless forking of chains that all coalesce into an economic zone and share the spoils of each one's network effects.

• 1:37:53Ryan Sean Adams?

  There you go. There you go. Meme of the week, David, what are we looking at?

• 1:37:56Speaker 01

  Meme of the week. Shout out to the Boys Club Twitter. They produce some of the best memes about crypto. So this is the meme of somebody pressing multiple fountain soda drinks at once going into the same cup. And so on the left, we have weird unusable technology that's being mixed with volatile, confusing money. And hey, that's us. That's crypto. That's what we are. That's a great meme.

• 1:38:20Ryan Sean Adams?

  Guys, stay tuned for the moment of Zen as well. It's a song by Song of Dayman I think you're gonna really like. You gotta end with this, of course.

• 1:38:28Speaker 01

  Have you? Wait, have you listened to this song, Ryan?

• 1:38:30Ryan Sean Adams?

  Yeah.

• 1:38:31Speaker 01

  Okay, because you have a main feature in it.

• 1:38:33Ryan Sean Adams?

  Yeah.

• 1:38:35Ryan Sean Adams?

  Do you want to give a parental advisory warning?

• 1:38:38Speaker 01

  It says the F word a few times. In between Ryan and Adams, there's an F word. And it's repeated a handful of times.

• 1:38:48Ryan Sean Adams?

  Wow.

• 1:38:48Speaker 01

  Oh, wait, no, it goes Ryan S F word Adams.

• 1:38:51Ryan Sean Adams?

  Of course, you gotta get the middle name there. Guys, we're gonna get to risk in just a second, but first disclosures. David and I mentioned a few projects today. Full disclosure, we are angel investors to Opal, Scroll and Connects. We're also advisors to Optimism, a few other Layer 2s as well. Both David and I hold ETH. We're long-term investors. We're not journalists. We don't do paid content. There's always a link to all Bankless disclosures in the show notes or at bankless.com/disclosures. All right, crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:39:58Speaker 01

  Ryan, I don't know if you've checked lately, but we are approaching our 1,000th.

• 1:41:12Speaker 01

  1,000th, god damn it, 1,000th, 1,000th, god, what is going on, bro? 1,000th, 1,000th, can you say it? 1,000th. 1,000th, 1,000th, Jesus, dude. Okay, Ryan, I don't know if you've checked recently, but on Apple Podcasts, Bankless is about to hit its 1,000th. Now you gotta do it. Ryan, I don't know if you've checked recently, but on Apple Podcasts, we are about to hit 1,000 5-star reviews. So if any of the Bankless Nation wants to be that 1,000th. Oh, no. We are about to hit 1,000 5-star reviews. So this is a call to action for anyone listening to Bankless on Apple.

• 1:41:54Speaker 01

  Give us those 5-star reviews so we can hit 1,000, so we can legitimize the Bankless Podcast and get that top of the iTunes Investing and Business categories.