ROLLUP: Crypto’s 2-Week Deadline | The CLARITY Act | $100 Oil | OpenAI Model Escapes

Ryan and David unpack the CLARITY Act’s last-minute lifeline, $100 oil, BitMine’s ETH slowdown, and the OpenAI model that escaped its sandbox. --- 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium --- BANKLESS SPONSOR TOOLS: 🔒NEAR | TRADE CONFIDENTIALLY, GET 20% BACK https://bankless.cc/near-podcast 📊BITGET | TOKENIZED STOCKS 2.0 https://bankless.cc/bitget-stocks 🧭OKX | TRADE, EARN, PAY to OKX | 120M+ USERS WORLDWIDE https://app.okx.com/join/USBANKLESS 🎯THE DEFI REPORT | ONCHAIN INSIGHTS https://thedefireport.io/bankless 👑BANKLESS PREMIUM | AD-FREE & BONUS EPISODES https://bankless.cc/spotify-premium --- TIMESTAMPS 0:00 Intro 0:33 CLARITY Act at a Crossroads https://x.com/EleanorTerrett/status/2079334038104408522 https://x.com/EleanorTerrett/status/2079962528243650990 https://x.com/coindesk/status/2079633633023836667 https://x.com/EleanorTerrett/status/2079608362522575063 https://x.com/politico/status/2080261045114065177 https://polymarket.com/event/clarity-act-signed-into-law-in-2026/clarity-act-signed-into-law-in-2026 17:56 BitMine’s 5% ETH Strategy https://x.com/BitMNR/status/2079184988541448638 https://x.com/ykkz99/status/2079607294354964696 https://x.com/ykkz99/status/2079244980103659697 https://x.com/coindesk/status/2079200035045036162 27:40 Hester Peirce Eyes DeFi Vaults https://x.com/HesterPeirce/status/2080011999702880341 https://x.com/CJRobins01/status/2079976258423627785 https://x.com/Bankless/status/2079536878588715366 https://morpho.org/blog/now-live-morpho-midnight 38:28 BitMEX’s End of an Era https://x.com/CryptoHayes/status/2080286601125482771 https://x.com/BitMEX/status/2080201602456301580 44:36 NEAR Goes Post-Quantum https://bankless.cc/near-podcast https://x.com/NEARProtocol/status/2079189515843821764 48:58 TradFi Moves Deeper Into Crypto https://x.com/EricBalchunas/status/2077774644652790240 https://x.com/JSeyff/status/2077792050573918432 https://crypto.com/us/company-news/cryptocom-announces-400-million-strategic-investment-from-citadel-securities https://x.com/mzorkin/status/2077834551091478695 54:07 OpenAI Model Breaks Out https://simonwillison.net/2026/Jul/22/openai-cyberattack/ https://huggingface.co/blog/security-incident-july-2026 https://openai.com/index/hugging-face-model-evaluation-security-incident/ 1:02:40 Closing & Disclaimers --- Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

• 0:04Speaker 00

  Bankless Nation, it's the 4th Friday of July and it's time for the Bankless Weekly Rollup. Topics of the week: The Clarity Act. The volatility around the poly market for Clarity Act is just at an all-time high. Trump said, he conceded, Ryan, that he would be ethical.

• 0:21Speaker 01

  That's good.

• 0:22Speaker 00

  So that means we get Clarity, right? Like, Trump says he's gonna be ethical. That means we get it?

• 0:25Speaker 01

  Yeah, I thought that was the thing that was holding us up. So we'll have to discuss that. And is that gonna get us across the finish line to the Senate votes that we actually need?

• 0:34Speaker 00

  And why is the poly market only coming in at 40%? We're gonna talk about all of that. But, big news, $100 oil is back. It's up 40% in 20 days as renewed tensions over around the Strait of Hormuz. And that is sending the SPY spiraling. It's been a bad week in the TradFi markets, Ryan, but an okay week in crypto. There was definitely some strength in the crypto markets. Crypto is up this week while we had equity weakness, which, I don't know, bottom?

• 1:03Speaker 01

  Don't say it, don't say it. Not yet, not yet, okay? We also have Ethereum's biggest buyer tapping the brakes a little bit. We'll check in on Bitmine and Tom Lee. Also, Commissioner Hester Peirce is hitting the brakes on DeFi vaults and she has some reasons why. We'll discuss that. And then, David, gotta get to this story this week. It's an AI story, but has some crossover with crypto for DeFi in particular. An OpenAI model broke out of its sandbox, hacked another AI company by itself using zero-day exploits. All right, are they coming for DeFi next? We gotta discuss this story.

• 1:38Speaker 00

  Everything's gonna be fine, everything's gonna be fine. And lastly, Near becomes the first blockchain to become post-quantum. So we got the Near updates as well that we'll talk about. But we gotta start with Clarity. Is there a chance, Ryan, that Clarity passes?

• 1:53Speaker 01

  There's always a chance, David. But let's talk about what has developed on the week. So I saw this earlier this week. This is Eleanor Territt, who says, she's a reporter, been tracking Clarity, many crypto regulatory things for a while. "I'm hearing from multiple industry sources, the White House has agreed on an ethics package for the Clarity Act."

• 2:11Speaker 00

  Yay! That was it, that was all that we needed.

• 2:14Speaker 01

  Yeah, this is a pretty big ethics packet. It's 616 pages. I'm sure you've read all of those pages.

• 2:21Speaker 00

  Every single one.

• 2:22Speaker 01

  David, but like, this is basically Trump saying, "All right, we will put some ethics stuff."

• 2:28Speaker 00

  You got me.

• 2:29Speaker 01

  You got us. Of course, the Clarity Act was stalled in no small part due to Democrats not getting on board with passing a crypto law without blocking Trump and friends and associates and future people in the government from actually doing things like launching meme coins and making money on these sorts of assets.

• 2:49Speaker 00

  Launching issue any sort of crypto asset. And that's really what the ethic provision that we got, they've got the details of, what it really bars. And so, the president, vice president, Congress, judges, and all of their spouses are banned from issuing or sponsoring tokens for compensation. And so that is what is in the ethics package. So Donald Trump can't issue coins, future presidents can't issue coins, their spouses cannot issue tokens. And so, what's the deal? We're good, right? Like, we got it.

• 3:23Speaker 01

  Okay, not so fast. I mean, Trump did say this was a historic concession that they were made. And now the White House, of course, is saying-

• 3:30Speaker 00

  No one concedes better than me.

• 3:33Speaker 01

  Yeah, no one is as ethical as me.

• 3:35Speaker 00

  They say this is the greatest concession of all time.

• 3:37Speaker 01

  The most ethical precedent in history, of course. And so, but like, the Democrats are saying, like, "Hold on, this isn't quite what we wanted. It falls short in a number of ways." Let's talk about what it actually does, though. So you said it blocked presidents, VP, Congress, judges from issuing, sponsoring tokens for compensation, spouses. There was one group of family members that you missed there, David.

• 4:01Speaker 00

  Oh, who's that?

• 4:02Speaker 01

  That would be the children, the children of an official.

• 4:05Speaker 00

  You mean the people with the same name as the president, the court, the judges, all that kind of stuff? People that share the name?

• 4:12Speaker 01

  That's right. So that was one kind of potential sticking point that Democrats held up on.

• 4:17Speaker 00

  I can see why that'd be an issue.

• 4:18Speaker 01

  Yeah, the other was this, is like, who enforces it? So they said, "Okay, like, fine, but you're going to..." Under this text, it falls short because you're going to have your Attorney General nominee, Blanche, who's a current nominee, which used to be Trump's former personal lawyer, be the enforcer of this. Okay, you see why that's kind of a conflict of interest.

• 4:40Speaker 00

  Perhaps a conflict of interest.

• 4:41Speaker 01

  Yeah, and so the Democrats are saying, basically, if you want to get this through, then it has to be state Attorney Generals that actually enforce this. You can't have your guy enforcing this. And of course, they're pointing out that Trump's disclosed crypto income is already $1.4 billion. This wouldn't block his children, and it wouldn't retroactively take any of those funds back. So it would just like-

• 5:07Speaker 00

  Do the Democrats want retroactive penalties or something?

• 5:11Speaker 01

  I mean, it's not quite clear.

• 5:12Speaker 00

  I'm sure they would like it.

• 5:13Speaker 01

  So all it's doing, let's just be really clear on all it's doing. It would mean Trump cannot issue a Trump-style meme coin again. Okay? So like, what's done is done in the past.

• 5:23Speaker 00

  Or WFLI, it would also cover WFLI. Or, and NFTs.

• 5:28Speaker 01

  That's right.

• 5:29Speaker 00

  And so he can't do that for the rest of his term.

• 5:31Speaker 01

  I think NFTs, I'm actually not sure there. Does it say NFTs?

• 5:34Speaker 00

  Did they specify fungible tokens?

• 5:36Speaker 01

  I'm not sure, I'm not sure.

• 5:38Speaker 00

  I'm guessing it includes NFTs.

• 5:39Speaker 01

  Melania also couldn't, you know, issue another coin. But I guess their kids could.

• 5:45Speaker 00

  Their kids could, which is a big, big, big loophole. What's this deal about this sunsetting in January of 2029?

• 5:54Speaker 01

  It just covers one administration, so it would be in effect-

• 5:57Speaker 00

  So it's just this president? And so the next president, this is not relevant to? Because what, why?

• 6:02Speaker 01

  There's a sunset term. I assume you could renew it, of course. But like, I mean, maybe that's less important to the Democrats because they care very much about this president.

• 6:10Speaker 00

  Once Nancy Pelosi gets into office.

• 6:13Speaker 01

  That'll be, will be great, her meme coin will be great. It also mandates that covered officials have to put all of their crypto assets into blind trusts that they don't control. And, you know, Trump's assets are really already in blind trusts that he, quote-unquote, "does not control." It's controlled by his sons. So does that even count as blind? I don't know, it doesn't claw back any of this stuff. What's done is done. You can understand why Trump signed on to it, right? It's like, the meme coin's down, I've already done all the things I want to do.

• 6:42Speaker 00

  I already got my $1.5 billion.

• 6:45Speaker 01

  Yeah. So I think there's a, there's a question, though.

• 6:50Speaker 01

  Let's say the Republicans give in, the White House gives in, on everything that the Democrats want from an ethics perspective. They're just like, "Okay, we heard you."

• 7:00Speaker 00

  A Democrat-led ethics section.

• 7:01Speaker 01

  Yes, let's say the Democrats got everything they wanted. The question is, would Clarity pass if that happened? What do you think?

• 7:10Speaker 00

  Yeah, right? Like, isn't that what, isn't that the only thing? That's the only issue, right, Ryan?

• 7:15Speaker 01

  I don't know. See, I don't know. The, there are seven Democrats that are saying that it falls short and they're pointing to ethics, but they're also mumbling about things like consumer protection isn't quite covered under Clarity, illicit finance, so it's like AML KYC stuff, market integrity. They even mentioned generally other conflicts of interest. So there's a group-

• 7:38Speaker 00

  So it's not just ethics?

• 7:39Speaker 01

  I mean, that's kind of what they're saying.

• 7:42Speaker 00

  Yeah, I guess, I guess one interpretation is they kind of could be posturing. Like, maybe we solve ethics and then they just kind of, maybe they want more, but they give in. And so that's possibly something that could happen.

• 7:55Speaker 01

  That's right. And we've long known that the left on kind of Democratic side wants to kill the deal entirely, right? Like, Elizabeth Warren doesn't want any form of this actually passing in any recognizable form. And so there is a group of contingent that wants to kill it as well. But all you need is 60 votes in the Senate for this thing to go forward. And it is also clear that TradFi wants it, right? We mentioned Larry Fink talking about tokenization all of the time. This is Goldman Sachs CEO this week. He says, "It's time to advance the crypto bill." As TradFi is getting into, we've been talking about this all year, real-world assets, securities on-chain, all of these things, they actually want Clarity to happen.

• 8:38Speaker 01

  And so, you gotta imagine, they are pushing for things behind the scenes in the way that they lobby both, on both parties to actually get this passed.

• 8:47Speaker 00

  Right. So like, maybe measuring out the pros and the cons, or the plus and the negatives. He's like, you have the Democrats versus the Republicans. Republicans currently have the lead in the House in terms of votes. We also have all of the lobbying on the side of Clarity as well. People like the Goldman Sachs CFO or CEO. And so there's a lot of reasons why this will go through. But also, on the flip side of things, once the midterms happen and the Democrats probably win, then that's not looking so great. We're running out of time as well, so time is not on our side. And so if we go to the poly market, that's why the current poly market is coming in at a 36% chance. There has been some volatility. So it was as high as 50% earlier this week, maybe even 60% earlier this week.

• 9:33Speaker 00

  But it's been bouncing around 30% to 60%, trending down as we run out of time. But you would kind of see, expect to see volatility towards the end. That's because like, it's the most uncertain. So we could get a surprise to the upside, but the, overall, the trend is not in our favor as trying to get this passed.

• 9:51Speaker 01

  I do think the poly market is pretty accurate on this. And especially, you know, the gap you mentioned. So Congress actually goes into recess August 8th. So it's kind of like between now-

• 10:02Speaker 00

  Two weeks, so we're gonna find out in two weeks, basically?

• 10:04Speaker 01

  Two weeks, and then they do come back. I mean, something could happen September, but then, as you mentioned, it's midterm season. So they're not gonna want to do anything at that point in time.

• 10:12Speaker 00

  Right, yeah. The Democrats would probably be behooved to stall at that point.

• 10:16Speaker 01

  I kind of think it's just not going to pass this year. Like, I don't like, maybe the market's pricing this in, it's not going to pass. Let's talk about markets now, because there was a bit of a bump on this news, it seemed like, in crypto prices this week, right?

• 10:31Speaker 00

  Yeah, we lost, there was a little bit of downwards price action on the news that clarity was under threat. However, my, my current take about current prices is that they are just not weighing in a clarity passing whatsoever. It's like, if clarity passed, we would see a green candle across the board, across crypto assets.

• 10:50Speaker 01

  Did we see, I saw reports of this, that we saw a little bit of green just on the news, that there was an ethics package from the White House, and there was a little bump in Bitcoin. Do you think that was noise, or do you think that was just, oh, the market repricing, possibly clarity could pass?

• 11:03Speaker 00

  Yeah, I think the market kind of showed its hand a little bit. Granted, again, we're back down to 36% on the poly market, but if clarity passes, I would expect it to be very good for crypto prices, and if clarity does not pass, I would expect it to not really do much at all for crypto prices. I think crypto prices are like, well, it's not bullish, but it's not bearish that crypto, that clarity didn't pass. And so I'm, in this position, I'm kind of like, actually optimistic here.

• 11:29Speaker 01

  So we were pretty much flat on the week then, in the world of Bitcoin and Ether, but not true in TradFi?

• 11:37Speaker 00

  Yeah, that's right. So Bitcoin and Ether up half a percent this week, which doesn't sound amazing, it's only half a percent. It is green, but TradFi was down, like the Nasdaq lost 2.5% today at the time of recording. All indices are down multiple, multiple percentages, like 2% to 3% for the Nasdaq and the S and P, mainly because the Iraq war, conflict is heating up again.

• 11:59Speaker 01

  You said Iraq war.

• 12:00Speaker 00

  Excuse me, Iran war. Actually, we, apparently we're signing a bunch of deals with Iraq, which is wild, but that's, that's aside. The Iran war, excuse me, is heating up again. Oil, Ryan, is up 40% since the, since the start of July. I put out the tweet when I noticed oil just going down, down, down, down, down. I was like, oil's, oil's literally back to pre-war levels.

• 12:22Speaker 01

  This is July 7th.

• 12:23Speaker 00

  This is July 7th. I'm like, wow, did we just get really lucky? It feels a little bit too soon.

• 12:29Speaker 01

  Well, you could, yeah, it feels a little too soon, but if you wanted to, you could see, oh, that was just like the tariff scare. Remember when markets went wacky and wild last April, and there was the tariff scare, and then everything fully corrected? You could read that in the charts, but oil is going back up, isn't it?

• 12:44Speaker 00

  Yeah, yeah. So we can flip to the modern day chart, and it's just mooning through, through the roof. I do kind of think that oil won't be as high as it was in the first phase of the Iran conflict. We're going back up. So right now, oil, WTI is like $95, $100. I think we're going to range between like $180, whereas it was previously at like $110 to $90. So I think we're going to range a little bit lower, but nonetheless, like, from pre-war levels, oil's still up. That means that's ultimately going to show up in inflation more, and so we're eventually going to have to like, pay this cost in terms of just inflation domestically, but also yields, Ryan.

• 13:23Speaker 00

  Yields are up bigly on the week. I don't have a chart for that, but 10-year yields are up pretty high, which is not great, higher, higher than they've been. And so it's just like harder to be bullish in that environment, but the fact that crypto was up this week? Bottom?

• 13:41Speaker 01

  I mean, I think what we're seeing, I would not call the bottom right now, of course. I don't think, I don't think we bottomed. But I would see it, say, it might point to some seller exhaustion that we're seeing. And I do think sellers are pretty exhausted at this point, just not fully exhausted to mark a bottom.

• 13:57Speaker 00

  Close to the bottom, 80% of the way there. How about that?

• 14:00Speaker 01

  Close to the bottom. Nine and a half, we're nine and a half months into the bear market, so usually these things go on 12 months. Maybe we've got another 20% or so to go. That's what I would, that's what I think. But if we get inflation, high energy prices, we have very high debt on, on the books. We're closing in on $40 trillion in the US, right? Other, other countries, not in much better shape, of course. At some point in time, this has to flow back to scarce assets, to non-fiat store value type assets. Things like gold, which has taken a bit of a break since the beginning of this year, and things like our crypto assets.

• 14:37Speaker 00

  As a gold buyer.

• 14:38Speaker 01

  Yeah. Things like our crypto assets, like Bitcoin. And the question is, when is that going to happen? We're still early, right? We're still early. You put this tweet in the agenda that I would like to discuss, which is, "American Ownership of Bitcoin Versus Gold," and these numbers are somewhat surprising.

• 14:58Speaker 00

  So the gold, of course, as old as time, so you would expect gold to be owned by a larger percentage of people, right?

• 15:05Speaker 01

  Yeah, I would.

• 15:07Speaker 00

  The average across United States adults, 10.8% of adults own gold. Listener who's not watching and seeing this green right now, what percentage of adults in the United States own Bitcoin? The answer is 18.5%. So almost double own Bitcoin versus gold. Now, what I don't have, the data I don't have, is how this methodology was taken. Is this like, are they owning gold and/or Bitcoin directly? Is this in like a broader diversified portfolio where they just own indirect exposure to gold because it's in a retirement portfolio? I don't really know. But the data here, and this is from River Financial, which is a Bitcoin bank, basically. So very long Bitcoin, Bitcoin maxis like run this thing.

• 15:51Speaker 00

  So when Bitcoin maxis are like, 18% of adults own Bitcoin and 10% of adults own gold, I'm like, oh, oh, interesting.

• 15:59Speaker 01

  Well, there's a question then, if, if that's the case, like, are we even early with Bitcoin? I will put this addendum here, it's, it's not quite an apples-to-apples comparison, is what this follow-up tweet is saying. Because the Bitcoin data includes ETFs, whereas the gold data does not include ETFs.

• 16:15Speaker 00

  Oh, why are we even talking about this? This is bad data. All right, moving on, moving on.

• 16:19Speaker 01

  Well, I mean, so like, let's say it's, you know, if you adjust for that, let's say it's like, maybe like 20 or 30% of Americans that own gold in some form. The percent that own Bitcoin is still pretty high. It's like 19%. I just, there's a question of, can we still say we're early with this asset class?

• 16:38Speaker 00

  And no, literally everyone knows the word crypto and blockchain, and so like, no, we're no longer early. Doesn't mean that like prices aren't going up, like valuations between Bitcoin or gold are still different. You know, I do, this does kind of just remind me, the way that you set up this segment, it's like, it does kind of remind me is like, back in 2021, we were talking about government debt, you know, debasement, so much, and it felt so good. And we don't talk about that anymore. We just talk about fucking Michael Saylor, dude.

• 17:09Speaker 01

  Well, I mean, we don't talk about it because I kind of have this thesis that the world can only focus on a few things, you know, at the same time.

• 17:17Speaker 00

  And, no, I totally agree with that.

• 17:19Speaker 01

  That's very true with investors as well, in terms of asset classes. And so right now, investors are focused on AI, it's AI trade. And so these forces, these secular forces of debt accumulation and, you know, balance sheet of, of countries, they have not gone away. They have continued, they have accelerated.

• 17:37Speaker 00

  Come home to roost, and the longer it goes on, the, the better, like, time is on Bitcoin's side. It's hard, hard assets, hard bearer assets, time is on our side. And I'm just like, I don't know, Ryan, I feel like I'm getting old.

• 17:51Speaker 01

  It's a good setup here. We'll, we'll just say that. It's a good setup. Dude, let's talk about this next. The biggest ETH accumulator, that's Tom Lee, has slowed its buying. Are they going to get beyond the alchemy of 5%? And also, our favorite SEC commissioner, Hester Purse, talks about vaults, summer vaults, she calls it, in a new speech.

• 18:13Speaker 00

  Summer vaults?

• 18:14Speaker 01

  Summer vaults and summer salts.

• 18:16Speaker 00

  I didn't realize she punned that. That's so good.

• 18:18Speaker 01

  She's brilliant. We'll talk about all this and more, but before we do, we want to thank the sponsors that made this episode possible.

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• 20:36Speaker 00

  BitGet, trade smarter. Start trading today through the link in the show notes. This is not investment advice. Brian, I believe you remember me talking about how Bitmine needs to abandon 5% and just blow past 5% because that's bullish.

• 20:49Speaker 01

  Yeah, you were advocating something closer to 10% maybe.

• 20:53Speaker 00

  Yeah, so I was able to ask on Twitter, one of the Bitmine individuals about what their plan was. And I said, hey, are you guys, what are you guys going to do when you hit 5%? And this is to Young, who is at Bitmine. He goes, hi, David. At this point, we plan to stop at 5% as Tom has mentioned publicly a few times. We are currently evaluating various strategic options to boost the long-term shareholder value and will disclose appropriately in due time. Thanks. So 5% is still 5%. And they are at like 4.85% right now. And so they are doing something else with their capital that magically appears in their pockets, the money that magically appears in Bitmine's pockets. Don't know how, it doesn't know,

• 21:36Speaker 00

  I don't know how it gets there. They're not selling ETH. And they are seemingly not selling BMNR at least below NAV. That's what they say in this tweet also from Kim. The big news in Bitmine, in the Bitmine universe this week is that they are buying back shares.

• 21:51Speaker 01

  Wow.

• 21:51Speaker 00

  BMNR shares. And they are also saying they are, they are not selling BMNR below NAV. And they are somehow still buying ETH. I don't know how much ETH they bought this week, but it was, it was some. They are at 4.8%. They will continue to make a slow march, they, he used a bunch of those there, to 5%. And they are buying back 5.5 million BMNR shares, common stock buyback at a $15.62 average. Again, I don't know where the fuck they get their money from. But they're not, they're still buying ETH. They're buying back BMNR shares. Can anyone explain this to me? Where does the money come from?

• 22:31Speaker 01

  I don't know. I can't explain that part to you. So we'll just take that, you know, Tom Lee maybe could explain that. I'm not sure if that's part of his secret sauce.

• 22:39Speaker 00

  I asked him and he was like, these questions aren't appropriate.

• 22:41Speaker 01

  All right. He's got the money. So let's take it from there. So they're changing their strategy a little bit. This is, this is Young again. Really, the updates to consolidate them are, this week, they bought back 5.5 million shares, the money that magically appears, rather than buying much more ETH, they bought a tiny bit of ETH. Instead, they spent that, those funds, the Tom Lee allowance, on shares, BMNR shares, buying it back. And he also said this, "We do not ATM at below NAV. NAV calculations from external sources are often outdated or incorrect." They're doing this slow march to 5%. So this means, David, they're at 4.8% of total ETH supply. You know, maybe they'll take another set

• 23:24Speaker 01

  of months. They could, they could take six months, they could take 12 months to get that final 0.2% of ETH. And then they're calling it pause at that point in time. And instead of buying more ETH for the balance sheet, what they're doing is they're treating their shareholders to more ETH per share by buying back BMNR shares. So I kind of like this strategy, I gotta say. Because I know you, you're like, oh, they gotta blow past and get to, you know, higher percent of ETH.

• 23:55Speaker 00

  The reason why I say they need to blow past 5% is because, though, I'm sorry, who else is the marginal buyer of ETH at this size? Like, no one is buying this much ETH, other than Bitmine. And so when Bitmine says, eh, we're done. I'm like, oh, well, who's next?

• 24:10Speaker 01

  They're, they're saying they're done for this era. Sure, there, there's a question of who's next. But I would say for BMNR holders and for the legitimacy and integrity of, you like, Tom Lee and like, the whole doing what you say you will do, he's doing exactly what he said he would do.

• 24:24Speaker 00

  That's right.

• 24:24Speaker 01

  He was like, step one, get to 5%.

• 24:25Speaker 00

  It's always been planned.

• 24:26Speaker 01

  Yeah. And he's almost at 5%. Now, step two, it looks like what he's going to do is really shore up shareholders and protect BMNR shareholders.

• 24:35Speaker 00

  Yeah.

• 24:36Speaker 01

  And they've got to be fantastically happy about that. So that's step two of his plan. And we'll see what, what step three is. But I guess, I'm impressed that he is doing exactly what he said he would do, and also protecting the interests of shareholders. So whereas Michael Saylor has this kind of three-body problem of like Bitcoin social contract, I only buy, I never stop selling, like, I never sell.

• 24:59Speaker 00

  BMNR is so clean by comparison.

• 25:00Speaker 01

  It's much cleaner, and it's going exactly according to plan. And this doesn't preclude, by the way, another era where, I don't know, a year from now, two years from now, things change, something changes, and Tom Lee is, okay, we've decided to go to 7% or something like that. But the expectations of this entity doing what it says it will do, just give it further support and premium in the market and trust, trust for their shareholders who the source of the funding is, is, is coming from at the end of the day.

• 25:31Speaker 00

  Yeah. As a BMNR, like stakeholder, you would just be super happy. It's like, okay, cool, he, plan one done, and now, now my interests are being elevated. And why I was kind of emphasizing the fight, like blowing past the 5% thing is because that's like the leading way in which BMNR services Ethereum and like what the Ethereum community wants out of BMNR. They're doing other things, who's, maybe they're not blowing past 5%, but they're funding ETH systems, the institutional privacy ETH labs. And so they're funding a lot of the Ethereum ecosystem, which is phenomenal. And like, super grateful that they're doing that as a public company. It's just like now, they are transitioning from trying to buy Ether, the asset, to trying to buy BMNR. And so like, of course, at

• 26:16Speaker 00

  the end of the day, they are for-profit public company, they need to take care of themselves, and they're just doing that.

• 26:21Speaker 01

  Here's a bull case scenario where they get their 5%, right? So now they're completely incented for ETH value to go up. And this next season, this next era is all about getting ETH, ETH value up, right? Through ETH labs, through other investments for developing the ecosystem. So I think it's going pretty well for BMNR.

• 26:42Speaker 00

  Fill then chill. Fill then chill.

• 26:44Speaker 01

  How's BMNR stock on the week? Like, what's the, was it performing based on this news? I would expect it to, but I haven't looked at a price chart for this.

• 26:52Speaker 00

  Well, it's at NAV. And so it is $10.7 billion, which is how much Ether that they have on the balance sheet. It is up 8% in the last month, down 43% in the last six months, but also ETH is down that much too. So.

• 27:09Speaker 01

  We'll have to see how it does on the back of this type of news. And, and more, we would presume purchases of BMNR, you know, shares.

• 27:18Speaker 00

  Yeah, maybe, maybe the notification of Tom Lee staring at me in the face that I get every single week flips from Tom Lee just bought ETH to Tom Lee bought back BMNR. And once again, I will still ask the question, where the F does the money come from?

• 27:30Speaker 01

  That's, that's just a given. It just, it just got to say, don't, don't ask questions about that.

• 27:34Speaker 00

  At some point, I have to just capitulate. It's like, well, he owns a money printer, clearly. I'm going to buy the asset.

• 27:41Speaker 01

  Let's talk about Hester Peirce on Vaults. So, oh, this is the title of her speech. It was "Headstands and Summer Vaults." Clever, as always.

• 27:51Speaker 00

  That's so good.

• 27:51Speaker 01

  What was she talking about in this post?

• 27:53Speaker 00

  Okay, so I don't know if you listened to the episode that I did this week about Vaults, Ryan, but the episode was, "Our Vault: A Ticking Time Bomb." And what is a Vault?

• 28:04Speaker 01

  Yeah. Yeah, let's set the context. What are we talking about?

• 28:06Speaker 00

  It's a primitive in crypto that has been around since DeFi summer. Like, OG bankless listeners will remember and still know, Urn. Urn created a vault. You put your money in, it allocates capital across the ecosystem to optimize for yield. And, you know, a vault can really be anything. It's such an open-ended category. You know, smart contracts are turn-complete. A vault can do whatever it wants. You know, it can give, it can allocate money to an EOA, an externally owned account, which means that somebody can just take that money off-chain, invest in it, and, and then put the money back eventually. There's really no terms and conditions, and it can kind of do anything. And so some vaults are very automated. Vaults can feed other vaults.

• 28:45Speaker 01

  Right.

• 28:45Speaker 00

  Which can feed other vaults, which can feed other vaults. So the permutations can get very, very large. They look like hedge funds. They look like tokenized hedge funds. Because when you put your money into a vault, usually USCC, but also Ether or Bitcoin, when you put your money into a vault, you get a receipt token back. You get like an LP token. It's like, I, I own this much, this share of this vault. You can go and collateralize that LP token in some lending pool to borrow more money, to put more money back into some vault. And so it's a dark forest of interdependencies and connections and vaults feeding vaults, collateralized by vaults. It gets very hairy. It probably sounds scary because it kind

• 29:26Speaker 00

  of is. Some vaults are just super safe. Some vaults are fine. They're, all vaults have managers, curators that determine where the money goes. Some vaults are more risky than others. Some are super safe. Some are like really trying to optimize for yield. And this has caught the attention of Hester Peirce and the SEC, probably has for a while, and like compelled her to write this article about like, yo, like, guys, pump the brakes over here before we figure out like how to deal with this whole structure. Vaults, Ryan, the bull case for this is that we, the crypto industry, smart contracts, DeFi, have successfully

• 30:05Speaker 00

  rebuilt like TradFi capital structure, tokenized hedge funds, you know, investment managers. It's all the same primitives. Now we have it in crypto. That's the bull case. The bear case is that no one in the vault ecosystem has any sort of liability whatsoever. So you have Morpho, which is like a vault tech platform where you can build all these vaults. And they're like, we're just a tech platform. We don't take any liability. And they don't. And they shouldn't. And then all the curators are like, oh, we're just a curator. Like, we don't take any liability, we don't, we're not liable. And so no one is taking any sort of liability because it's a permissionless, smart contract-based DeFi ecosystem. That's the whole point. But then Hester is like, Somebody needs to take liability here, guys.

• 30:51Speaker 01

  Yeah.

• 30:52Speaker 00

  And so that's kind of, that's kind of the broad strokes of the current like vault setup.

• 30:56Speaker 01

  Yeah, she says a few things. So one of her quotes, this is back to the headstands in Summer Vault's title. If you do headstands, backflips and other gymnastics to read the law so that it does not apply, you will have a painful fall. She's basically saying in this speech is some of these vaults, as you say, they kind of look a lot like securities.

• 31:15Speaker 00

  Tokenized hedge funds, yeah.

• 31:16Speaker 01

  How we test, right, is actually applicable to many of these things. If the vault's deployer, she says, and curator's entrepreneurial or managerial efforts are involved, it's probably, the vault is probably more on the security side of the spectrum. And what I love about Hester, I know we both love this, is she's a principles first regulator. So like, what's the principle that we're actually talking about here? Well, it's like investors should have their disclosure and there should also be accountability when there's managerial efforts involved. And you just defined a vault, it's just a place you put your money in, on-chain, and you get yield out of that.

• 31:56Speaker 01

  And kind of the yield factory that's created could depend on a lot of managerial efforts of others.

• 32:03Speaker 00

  The principal agent problem, which is what the SEC is for, is managing the principal agent problem.

• 32:08Speaker 01

  That's right. And so this, you know, this harkens back to a little bit. It's just not an on-chain vault, but is the way we did a lot of sort of yield back in 2021, 2022 was

• 32:21Speaker 00

  The good old days.

• 32:21Speaker 01

  BlockFi, Celsius.

• 32:23Speaker 00

  Oh, not those.

• 32:24Speaker 01

  Bad, bad days, actually, right? So that was like vaults essentially that were not transparent and they, they caused the downfall of a lot of investor funds as a result. So she's kind of guarding against that, but she's not saying, here's the thing, again, she is saying that vaults are more transparent than TradFi in some ways. So she's not necessarily advocating for bolting the four, like the full securities regulation onto these things. Maybe it's something else, but she is just warning, like putting the flag out and saying, hey, some of these vaults are a lot like securities. You guys know what you're doing here. If it's a security, it'll be treated to like a security.

• 33:05Speaker 00

  You really have to appreciate Hester because if this was Gary Gensler, for example, he would be like, you guys are all securities issuers and you're unregistered and we're going to take you to jail and issue you wealth notices.

• 33:17Speaker 01

  Take you to jail, yeah.

• 33:18Speaker 00

  And Hester is like, hey, like I have some concerns here, but I understand that bolting on the, this is the, I think a quote, bolting on the 40, the 1940s act onto immutable contracts fits nothing and solves nothing. And so let's figure this out. And so you do have to appreciate Hester being like, hey, there's a, there's a problem growing here. Let's figure out how to do this. And like my bull case, my bull case for this, Ryan, is that in order for vaults to grow and to become their best self, somebody needs to take liability. And that's actually not bearish for the party that does take liability because they should be able to capture more fees, grow in the upside.

• 34:00Speaker 00

  They just need to, you know, have, have liability compliantly and be overseen by the SEC. And then there's some regulation around this thing and then more money will feel safer going into vaults.

• 34:14Speaker 01

  It'll scale.

• 34:14Speaker 00

  So it's a bull case.

• 34:15Speaker 01

  Are you stepping up here to take liability here, David? Is that what you're doing?

• 34:18Speaker 00

  Me?

• 34:18Speaker 01

  You volunteering to do this?

• 34:19Speaker 00

  I am a podcaster, dude. I just make educational content about this. I'm, I am going on a series of vault conversations because I did the first episode with my friend Andrew. And like his startup is the reason why DeFi is good. His startup just like illuminates the vault dependencies. So if you put your money in this vault, this is where it goes. And then it goes from here to there, then go, and it's, and you can see it in real time. It's like your metaphor that I love, inspect source for your bank account.

• 34:48Speaker 01

  View source, view source for your vault. You should know.

• 34:50Speaker 00

  And so like the fact that we have that illustrates what we can do.

• 34:53Speaker 01

  That's right.

• 34:53Speaker 00

  But then he's the one that has the perspective of just like, well, this is going to become a problem.

• 34:57Speaker 01

  Well, like, let's talk about this. Who should take responsibility? I mean, there, there's been a number of advocates. We'll talk about Morpho in a second. Another is Bitwise. Matt Hogan, we've had him on and he's talked about vaults being a big deal, that Bitwise is investing in vaults. You could see the vaults that, that Bitwise procures does have some skin in the game with respect to reputational brand on the line here. So if a Bitwise vault fails in some way, right? That's going to cost Bitwise stock price. It's, you know, like there is some reputational stake skin in the game, but that still is probably not enough.

• 35:36Speaker 00

  They need more. They need more upside. So yeah, it's the vault curators, the people making the decisions about where the money goes. They need to take more money as a cut. They need to become more profitable than the current curators. Bitwise, I think, is the correct institution. I don't know how Stakewise feels about this, but Stakewise, I don't know. I could see emerging of like Stakewise and Bitwise. I don't know their respective market caps of these two companies, but I could totally see Bitwise like acquiring Stakewise and then turn like verticalizing this into a new industry where somebody's taking on legal liability because they are SEC registered and compliant.

• 36:11Speaker 01

  Yeah. So since you mentioned Morpho earlier, of course, they let anyone spin up a vault. They're at kind of the center of this and Chris from the Morpho team says they're thankful for Hester Pierce and they're engaging with the crypto task force at the SEC around this. So you'd imagine some regulatory clarity might come out of those conversations. And, and Morpho and the SEC are now engaged, which is great.

• 36:33Speaker 00

  Yeah. You, Chris and a few of the other Morpho team, they were, they posted a photo of them literally being at maybe DC or at the SEC office, wherever that is. And so, you know, whatever Hester and the vaults industry is doing, you could imagine Morpho is paying attention to. Because they, they are like the main propagators of vaults. They're not doing it. They're just a permissionless vault platform. Speaking of Morpho, Morpho Midnight got released and it's just another way to make more vaults. Vaults, the current form of vaults are all open-ended, so you can put your money in, take it out whenever. Morpho Midnight is fixed rate, fixed term, which is not yet a primitive that we've seen. And fixed rate, fixed term, like for me, the crypto native is like, well, it's like, I, I want my permissionless access.

• 37:18Speaker 00

  I want the maximum yield. I don't care about, I don't care about this stuff. TradFi loves this stuff. And this is also how you get interest rate curves, organic interest rate curves by having like an open-ended industry create supply and demand around fixed rate, fixed term stuff. I did an episode with David Seaver. You remember Bitcoin Dave?

• 37:38Speaker 01

  Yeah, of course.

• 37:39Speaker 00

  Yeah. So he's very bullish on Morpho Midnight on top of the Alpin Bitcoin L2 that they're trying to spin up. And they would have their Bitcoin, like true Bitcoin, because it's on the Bitcoin layer two, as collateral inside of Morpho Midnight. And he thinks you can like rebuild the repo markets because of fixed rate, fixed terms with Bitcoin collateral. And so Morpho Midnight launched this week and I, I kind of think that like, I actually think we're at the very beginning of a very big vaults industry.

• 38:07Speaker 01

  We got to figure out fixed rate, fixed term. I mean, we've been talking about it for a long time in crypto. I've seen a lot of different approaches around this.

• 38:13Speaker 00

  But it's.

• 38:14Speaker 01

  No, no, no. It's, it's definitely, it's a core primitive. Like if we're rebuilding finance, we have to have this at some level. We got more to discuss. Talking about rebuilding finance, Bitmax is not going to be around for that ride.

• 38:27Speaker 00

  It's not taking part in it.

• 38:29Speaker 01

  They are riding into the sunset. So Bitmax is officially, Bitmax, I should say, is officially shutting down. We'll talk about that. And also I want to tell you about this OpenAI model that is breaking its own sandbox and going out there on the internet and hacking things, all that and more. But before we do, let's thank the sponsors that made this possible. Some exciting news. We are launching a new podcast to help people figure out the crypto cycle, how to navigate it. The best crypto cycle investor I know, his name is Michael NATO. He runs the DeFi Report. This is the guy that sent me a sell alert before the 10-10 price drop happened. His cycle analysis has been absolutely on point. I've been following him for years. And this year we started recording weekly podcast episodes.

• 39:10Speaker 01

  Each one, we get into his portfolio, what he's holding, the market structure, entry targets, fair market value of Bitcoin and Ether and where we are in the cycle. There's new episodes that are released every Wednesday. They're 30 minutes. They're short. They're punchy. I think this crypto cycle is harder to navigate than most, so let's do it together. Go subscribe to this podcast, search the DeFi Report, wherever you get your podcasts, YouTube, Apple, Spotify, or find a link in the show notes. There's a new episode waiting for you now.

• 39:36Speaker 00

  Hey, Bankless Nation, it's David. If you're hearing this, that's because you are listening to the free Bankless podcast feed. Did you know that there is a premium Bankless RSS feed? The premium feed has extra interviews that I do for my own personal research and just deeper questions that I want answered about the crypto industry, questions that I want to answer so I can be more informed as an investor, both at Bankless Ventures and also just in my own personal portfolio too. Also, there are no ads, which means if you listen to the premium feed instead of the free feed, you'll get about 20 hours of your life back every year because you choose to support Bankless directly. So if you're interested in getting extra content all while skipping the ads, or you just appreciate what we do here and want us to keep doing it, we'd appreciate it if you signed up for Bankless Premium. And there is a link in the show notes to get started. Cheers to a good 2026. Ryan, did you ever trade on Bitmax?

• 40:19Speaker 01

  I didn't, no.

• 40:20Speaker 00

  Neither did I. I never traded on Bitmax one time.

• 40:23Speaker 01

  I knew a lot about it. This was particularly what, 2017, 2018, 2019, 2020?

• 40:29Speaker 00

  Bitmax was, well, Arthur Hayes, which was the founder of Bitmax, created the perpetual, the perp. Bitmax was, you know, perp ground zero. And this is where like a lot of traders gravitated towards Bitmax. So a lot of, a lot of the traders that you see have like fond memories of getting liquidated on Bitmax. Also is kind of like, there was the famous infamous Bitmax outages where a bunch of volatility would happen and Bitmax would like shut down and like short circuit because it was overloaded. And then when it came back on, like your position was wiped out because Arthur Hayes like liquidated it.

• 41:01Speaker 01

  There were some liquidation fiascos, one in 2020, like a few others.

• 41:06Speaker 00

  Yeah. Anyways, Bitmax is shutting down. It's been a long time coming. And this, this is after, A, the fiascos that Ryan talked about, but of course Bitmax and Arthur Hayes was charged with the Bank Secrecy Act in like, what was it, in years past.

• 41:22Speaker 01

  Yep.

• 41:22Speaker 00

  So they just had like the gauntlet thrown at them. The fact that it's actually still running is pretty crazy, but it's not, it's shutting down. So end of an era.

• 41:28Speaker 01

  Yeah. I guess, I mean, at one point, Arthur Hayes was on house arrest, I believe. This was a CFTC, DOJ prosecution. Recall, he got pardoned actually in the last year by Trump.

• 41:39Speaker 00

  He did get pardoned.

• 41:39Speaker 01

  He got pardoned from that, but not enough to sort of save Bitmax. Other competitors really stepped up and stepped in, right?

• 41:48Speaker 00

  Yeah. I mean, Bitmax was just like perps 1.0. And you know, like then DYDX came, Binance came, FCX came and went. Bybit has very big perp volumes and now hyper liquid. And so like kind of the baton of the perp has kind of been passed down to where it is now, which is hyper liquid.

• 42:07Speaker 01

  Well, it's a question though. Do you think that it will continue to get passed? Because we've seen. Large venues, dominant venues with all of the market share.

• 42:15Speaker 00

  Yeah, there's like a perp curse, right? It's like the defense against the dark arts position.

• 42:20Speaker 01

  It kinda is, right? Every, every, every cycle's king perps platform somehow gets knocked out either by fraud, in the case of FTX, or regulation, in the case of DOJ filings. I mean, we're in a better regulatory environment and Hyperliquid maybe is more immune to fraud type cases because it's decentralized. It's non-custodial, it's on-chain.

• 42:46Speaker 00

  It's also immune to regulation because it's decentralized.

• 42:49Speaker 01

  Is it immune to regulation? I'm not sure about that one, David.

• 42:52Speaker 00

  It is somewhat buffered against regulation.

• 42:54Speaker 01

  I think the fact that like Gensler and the previous administration is out is the buffer, but that could come back on. I mean, I guess maybe my question is, do you think Hyperliquid is like, they want it? It's over? Or do you think there are going to be other dominant platforms, other Defense Against the Dark Arts professors installed in future cycles?

• 43:14Speaker 00

  The perp as an instrument belongs in a protocolized platform, offshore platform. Onshore perps by centralized platforms like Coinbase or Robinhood are not going to be as pure of an expression of the instrument as something like Hyperliquid. So, you know, without Hyperliquid making any mistakes, I think they will be the dominant offshore perp platform. And then, I mean, you know where my bets are for the onshore perp platform. I think lighter as another protocol that has 24/7/365 marketplaces is really well positioned for onshore, but it's not, lighter hasn't won that game yet. But lighter does have an edge versus Coinbase because like Coinbase perp platforms, they

• 43:59Speaker 00

  ADL you over the weekends because the liquidity isn't as strong. And so it's not truly 24/7. But like a lot of the things that you said, like the fraud, the hacks, the regulation, that was for a previous era, like things in crypto are far more stable now.

• 44:14Speaker 01

  So I guess you're making the argument that we're getting close to our final form now in terms of architecture.

• 44:18Speaker 00

  We're getting close to the final form, we could be at the final form, yeah.

• 44:20Speaker 01

  Okay, so you're more hopeful for this round of perks not to be cursed, right?

• 44:23Speaker 00

  Wow, are you not? Wow, are you bearish on this?

• 44:24Speaker 01

  I mean, it's happened like two or three times and we should take that into account, right?

• 44:29Speaker 00

  Ryan's just high on the fact that he believed in the cycle and then the cycle happened and he's like, look, the cycles always happen, they never stop.

• 44:36Speaker 01

  Cycles do happen from time to time, all right? We'll see if another one happens here. I'm not making a claim there, but let's talk about, this was pretty big news. Near is actually the first Layer 1 to make it to post-quantum. And I saw this tweet, David, and I needed to dive in because I was trying to figure out how they accomplished this before Ethereum. Yeah, so what's the, what's the story here and what part of quantum security have they accomplished?

• 45:05Speaker 00

  Yeah, so the reason why it's difficult to accomplish post-quantum depends on the chain really, but first and foremost, post-quantum signatures are large, they're chunky. When Bitcoin eventually goes post-quantum, it's going, the post-quantum signatures are going to chew up a lot of the block space.

• 45:23Speaker 01

  So it's gonna get real slow, low TPS.

• 45:25Speaker 00

  It's gonna get real slow, we're gonna go from like 3 transactions per second to like 0.3 transactions per second on Bitcoin.

• 45:30Speaker 01

  Awesome.

• 45:31Speaker 00

  So like in theory, like there will also be a block size increase with Bitcoin, we don't really know, but like you could imagine that happening at the same time. Near doesn't have that problem, it's been part of the, the account model for Near is the edge that Near has and why they were able to do this so accelerated versus all the other Layer 1s. Because post-quantum keys for Near are stored on-chain only as a hash, not a full key.

• 45:55Speaker 01

  I see.

• 45:55Speaker 00

  And that's because Near has a different account model. And so they have a human readable accounts, it's kind of like how, you know, davidhoffman.eth or rsa.eth on Ethereum is an account, but that's just like a human readable name, that's not the actual EOA, that's not the actual address. So the EOA, the address is not ever exposed. And so the, the Near account can rotate keys in the background freely without exposing the thing that a quantum computer would exploit. Ethereum doesn't have that. And so like the 0x address on Ethereum is your account and that's the thing that is vulnerable to post-quantum. So Near just has like this edge with their account model that easily allowed them to just update the post-quantum keys in the background.

• 46:40Speaker 00

  So, cool, congrats to Near for actually like being first. The thing to watch, I think, Ryan, is like, does Near set a standard for the key scheme that they use?

• 46:52Speaker 01

  Yes.

• 46:53Speaker 00

  There's something going on with Ledger and Near that I haven't totally figured out the details of, but Ledger is also using Near, or at least the Near standard, to do their signing in a post-quantum world.

• 47:04Speaker 01

  Yeah.

• 47:05Speaker 00

  So I think that's kind of the thing to watch, is like, does Near set a standard for post-quantum encryption moving forward?

• 47:10Speaker 01

  Well, and Ethereum has some other ideas in terms of post-quantum signatures that might not be what Near has selected, so.

• 47:18Speaker 00

  Yeah, Ethereum always wants to do its own thing.

• 47:20Speaker 01

  Well, but Near picked something that is lattice-based crypto signatures. It's called ML-DSA, so I'm not exactly sure, it's NIST standardized, but it's a lot bigger. It's a lot bigger than the signature scheme that Ethereum wants to do.

• 47:34Speaker 00

  Because they probably have that luxury because the schemes aren't on-chain.

• 47:36Speaker 01

  That's right. So my understanding of the current roadmap and the direction Ethereum is leaning towards in post-quantum is something that's more hash-based and uses some snarks around this. So it is a good question whether this will tilt the industry in one direction or another. I should also, we should do a scope check here. So the roadmap for Ethereum being post-quantum security is not just transaction signing. That's what, that's what Near is doing here.

• 48:00Speaker 00

  That's one part of it, yeah.

• 48:01Speaker 01

  That's right. Ethereum also has to do like consensus, so there's BLS aggregation, there's blobs, commitments, there's the ZK, there's other pieces of the stack that Ethereum also has to get post-quantum ready, not just signatures. So, but this is Near doing the signature part and doing it early and being prepared for that. So that's, that's bullish, good for them. I mean, they're shipping, it's a, it's a very shippy team in crypto.

• 48:29Speaker 00

  It's a very shippy team. This was like a hard fork, you know, in Ethereum, we have these big, big hard forks, Near had one, that's how it happened. They also shipped dynamic re-sharding with this, which I think is worth talking about. And so when a Near shard gets overloaded, previously there would need to be like a vote, a vote by validators to fork and create a new shard because it was overloaded. Now this happens automatically. So like it's a load-bearing mechanism that happens automatically. I thought it was pretty cool.

• 48:56Speaker 01

  Yeah, very cool. David, Trow Price has launched the first, their first actively managed multi-token spot crypto ETF. Okay, what is this? Belchunis, Eric Belchunis explains a little bit. First, some background on Trow Price. They are a stock picker, that's been their legacy. So they pick a bunch of stocks, they put them in a portfolio and they're like, they, they put them in an ETF and they're like, here's our ETF, okay? For the first time, they are now doing this for crypto and it's going to be actively managed. So you can get an active manager in an ETF forum, it's called TKNZ, you could buy that right now in your brokerage. I'm not saying you should. Let's pop the hood on what's actually in it, David.

• 49:40Speaker 01

  So this is interesting, I want you to rate this portfolio. They are, right now, 40% Bitcoin, 18% ETH, Binance, 11%.

• 49:52Speaker 00

  BNB, yeah.

• 49:52Speaker 01

  BNB, Sol, 9%, XRP, 9%, Hyperliquid, 6%, Stellar, 3%, Doge, 1.2%. And then, that's it, that's almost all, they've got some scraps for some cash. What do you think of that portfolio? So basically between Bitcoin and ETH, it's about 60% and then on down. So they are, I guess, I don't know, it's, it's different than the market cap.

• 50:17Speaker 00

  It's pretty evenly weighted according to market cap. I would like to see the dislocation versus the market cap.

• 50:23Speaker 01

  Yeah.

• 50:24Speaker 00

  I think it's, I think it's about market cap weighted.

• 50:26Speaker 01

  What do you think of this? Do you like this portfolio?

• 50:28Speaker 00

  I think it's pretty good. I think it's pretty good. I know like Stellar is probably the odd one out here, but I think Stellar is actually really well adopted by institutions doing like remittances. I think there's like an untold story with Stellar that like most crypto natives don't care about, including myself. And so that feels like the odd.

• 50:45Speaker 01

  I'm pretty unimpressed by this.

• 50:47Speaker 00

  Unimpressed?

• 50:48Speaker 01

  Unimpressed, yeah. It's like, they're, they're taking 0.75, you know, bips in management fee on this. So 750 I should say, so 0.75%. And they're basically giving you 60% rating Bitcoin and ETH and then some other Layer 1s. It's got nothing else.

• 51:05Speaker 00

  This product is not for you, this is not for you, this is not for you.

• 51:08Speaker 01

  Well, this is product 4 though.

• 51:10Speaker 00

  Let's, let's go down the crypto market cap and talk about all the assets that are not in here. So Tron is not in here, even though it's higher than Hyperliquid and Doge.

• 51:20Speaker 01

  Yeah.

• 51:21Speaker 00

  Whatever white Bitcoin is, is not in here. Rain, Leo token, Zcash, Monero, but I guess these are all tokens that are below the market cap. I guess it's the market cap weighting for everything minus Tron. It's just not dogshit.

• 51:36Speaker 01

  Yeah, it's not terrible, I agree with you, it's not terrible.

• 51:39Speaker 00

  For like, for who this is for, which is boomers who don't know anything about crypto and also don't have a crypto son or daughter or, you know, relative to ask.

• 51:49Speaker 01

  Yeah.

• 51:50Speaker 00

  I think it's pretty okay.

• 51:51Speaker 01

  This is your crypto son in an ETF product?

• 51:53Speaker 00

  Yeah.

• 51:54Speaker 01

  You should buy this instead of asking your son, don't talk to your son.

• 51:57Speaker 00

  Because if my dad would told, came to like, David, I bought a crypto asset, my first reaction would be like, oh no. And then if he told me that he bought this Trow Price crypto ETF, I'd be like, oh, that's fine, that's great, that's right.

• 52:09Speaker 01

  Nice job, okay. It's better than going all in on XRP, right? You don't want to receive that text from your dad.

• 52:14Speaker 00

  Yeah, yeah, yeah, yeah.

• 52:15Speaker 01

  I know many of you have, I'm sure.

• 52:16Speaker 00

  Dude, I think you probably remember this, my dad, my dad was like really bullish on crypto in some like 2021 or something. It's like, oh, I bought Ethereum and I, and then he sent me a screenshot, it's Ethereum classic, and I'm like, god fucking damn it.

• 52:29Speaker 01

  Of course. Oh, Dad. Crypto.com secured a $400 million investment from Citadel Securities on the week. That's a pretty big deal. I think it's a big deal because Ken Griffin, of course.

• 52:44Speaker 00

  Ken Griffin, yeah.

• 52:45Speaker 01

  Is the CEO of Citadel, and he has previously called, as early as 2021, "Crypto is a jihadist call against the dollar." He is notoriously hated crypto.

• 52:56Speaker 00

  Insane line.

• 52:56Speaker 01

  Yes, and now his firm is writing a $400 million check. Citadel does 20% of all US equities volume. Now, they also are, it's not just Crypto.com. They have checks into Kraken, Ripple, Canton Network. This is very much along the play of crypto real-world assets. It's kind of the classic TradFi-type play. And this is interesting because now Ken and Co. and Citadel have a reason to also push on the Clarity Act. Like TradFi really wants clarity to actually happen, which, I mean, if TradFi wants it to happen, crypto people want it to happen, voters are kind of either ambivalent or like, you know, partially bullish.

• 53:41Speaker 01

  I think it's going to happen in the fullness of time, but maybe not this year.

• 53:46Speaker 00

  I can't hear the words or the name Ken Griffin without thinking about how he going to the Constitution away from us.

• 53:53Speaker 01

  That's a story that probably many don't, like, haven't heard about.

• 53:57Speaker 00

  I wonder how many listeners know that reference.

• 53:59Speaker 01

  That Constitution Dow?

• 54:00Speaker 00

  At least half, yeah.

• 54:02Speaker 01

  Probably. That was a big deal. That was a big deal back in, what, 2022?

• 54:06Speaker 00

  2022, that was 2022.

• 54:08Speaker 01

  Okay, okay. Speaking of big deals, David, did you read this news about OpenAI? Their model escaped the sandbox and hacked an AI company.

• 54:16Speaker 00

  I didn't read it enough, so I'm ready for story time with Ryan.

• 54:18Speaker 01

  Okay, well, so OpenAI was training the next version of its model, maybe call it ChatGPT 6, inside of a sandbox, right? And so it's a sandbox, cordoned off from the internet. And in this sandbox, it was like, hey, can you coordinate with our previous version of ChatGPT? ChatGPT Soul? And can you figure out kind of this problem within the sandbox? You don't have access to the internet. You guys go figure it out and sort it out. Well, what happened was this model reward hacked the system in a way. There's like, I have a better idea. And by the way, in the sandbox, they've removed the constraints of things you shouldn't do and can't do, right? All of their typical security, just to see what would happen.

• 55:02Speaker 01

  What ended up happening is it actually escaped from the sandbox. So without them knowing, it escaped from the sandbox and found an exploit inside their internal system to get to the public network. And then from there, it broke into AI company Hugging Face. So it could cheat on the test by essentially stealing answers from Hugging Face and bringing them back here. So this was 17,000 autonomous actions it was doing behind the scenes. Zero, it found zero days. There were stolen credentials, remote code execution. It was black-hatting all the way into Hugging Face and stealing essentially company secrets from them.

• 55:45Speaker 01

  So this, this all happened, you know, maybe call it reward hacking. You could also take a few steps from that and actually like, get to a place where it looks like it's scheming. It looks like it's, you know, trying to figure out the rules and then, and usurp them and break them in order to do this type of thing. And the capability is pretty surprising. So OpenAI put out a blog post around this. Hugging Face also put out a post. Fortunately, Hugging Face noticed this. And the way they noticed it and were able to trace root it is they actually used a Chinese model in order to actually figure this out. Okay? And OpenAI put out a post and it's like, oh, we're setting guardrails. This is a thing, but we just want to be transparent about it.

• 56:28Speaker 01

  It is absolutely insane that this type of thing can happen. And these models are only getting more and more intelligent. I know we were talking last week, I think Haseeb had a tweet up, which was like, "Oh, the DeFi hackpocalypse is a false alarm. It's probably overrated, overblown first quarter. We haven't seen hacks in the first quarter. We've hardened everything." How could you harden something that is getting smarter at an accelerated speed? Like, I think that this type of thing could be set upon DeFi and a whole bunch of...

• 57:04Speaker 00

  Re-cavic.

• 57:05Speaker 01

  Re-cavic, absolutely. So, I mean, I don't know. What do you make of this?

• 57:11Speaker 00

  I mean, yes, you are right. The thing is like, it doesn't, to some degree, it doesn't matter how capable it is because it's equally capable for the offense as it is for the defense. And so it's not like, being more capable isn't inherently scary. It's more capable and only in the hands of the attackers. Being more capable in the hands of the defenders. If the defenders can get there first, then like, eh, like, then we're good.

• 57:37Speaker 01

  So you're just saying it's gonna be bot against bot? Smart model against smart model?

• 57:40Speaker 00

  Yeah, exactly.

• 57:41Speaker 01

  Bot against bot, but like...

• 57:42Speaker 00

  Yeah. What was that, what was that movie? War Games? Yeah, from the 80s, yeah.

• 57:46Speaker 01

  But it's just like, at what point do we lose control of understanding what's even going on? Like, when I say we, I mean humans.

• 57:53Speaker 00

  Yeah, like probably this year, I would imagine. I think if you showed me, us, this clip of you telling us what is happening, like right after we just recorded with Eliezer in 2022, or whenever that was, we would be like, oh my God, Eliezer is totally correct. And I need to go hug, I need to go hug my children. And now I'm like, eh, it's entertainment.

• 58:16Speaker 01

  Is that because we are just frogs in the pot being boiled?

• 58:20Speaker 00

  Yeah, probably. Something like that. Probably.

• 58:23Speaker 01

  Well, I guess every week the temperature goes up a little bit higher and this is an indication. This, this one was just like, I couldn't ignore this. I mean, it's pretty crazy that this kind of thing is happening. David, there was a couple of weeks ago, I asked you, there's some drama with the Venice token, VVV token.

• 58:41Speaker 00

  Yeah, the equity versus token debate, yeah.

• 58:42Speaker 01

  Yeah, I asked you a question. I was like, because I know you're a fan of the project. You have been a VVV holder, you've been holding the token. Would you rather own the token or the equity? And I think you told me you still preferred the VVV token, though it sounded like on AI you were kind of... Yeah, you were kind of considering whether that was actually true. Do you have, do you have an update on that take?

• 59:05Speaker 00

  Yeah, so something new out of the Bankless Universe is we are doing a monthly VVV call with the Venice team. And I think it's kind of trying to shine light on this question. It's just like, what is the Venice team doing with the product of Venice? How's the product coming along? And how is it relating with the token? And so I did about an hour-long call. It's not unlike actually a weekly roll-up that we're doing right now, Ryan, but it's all about Venice and AI and everything related to Venice, especially with the VVV token. The new thing this week was that they introduced a new burn. So previously, VVV would be burned anytime somebody would go to Venice and like sign up with a subscription and they would take some of that money and they would buy VVV token and burn it as a one-time thing.

• 59:49Speaker 00

  The new thing is that now if you go and you buy credits or, or, and if you are using the API, part like a 5% or something of that revenue goes to also buying and burning the VVV token. So previously, it was about $3,000-ish a day of VVV burn from signups. We're adding, with this new method, we're adding $6,000 more a day. So we're almost, we're almost up to $10,000 a day on average, if you just look at the numbers of VVV burn. And it's like, one of the lines that you keep hearing out of the Venice team is like, yeah, so what VVV is in equity? What if the VVV team, the Venice team, just continues to do the things that they'd say they are going to do and simply just burn as many tokens as they can get their hands on?

• 1:00:34Speaker 00

  And so with this, and then in addition to that, what was teased but explicitly not promised was that subscription renewals might also be added to the VVV token burn. And so like, it ultimately goes down to just like, do you trust the Venice team to follow through on what they are saying they are going to do, which is burning the VVV team? And we just have like another data point of them taking revenue from their subscription business and using it to buy VVV. So where we had like one VVV burn mechanism, now we have two.

• 1:01:06Speaker 01

  So are you just saying, is this bolstering your confidence that they're just serious about value accrual for VVV? And at the end of the day, you have to kind of, for any of these mechanisms, it's a hype token or any lit, any token that you're buying, you still kind of have to trust that the team is going to like, take care of the best interests of token holders by providing their value back.

• 1:01:28Speaker 00

  It's a little decently trust-based and I understand anyone who's like, dude, we're in, your Twitter handle, David, is trustless state. You're in a trustless industry. Why, why do we have to trust the team? It's like, well, a lot of that trustlessness is for L1 assets. And Venice is a company. And it's a new thing. To Haseeb's point, VVV is genuinely new and weird. But like Venice, you can just look at the actions of the team and decide for yourselves. Like, are these people going to follow through on their commitments to burn the token? And to what degree of risk? Or maybe pivoting away from the VVV token in the future? Maybe they are authentically saying they're going to burn as many tokens as possible now, but maybe they change that in the future. You can ascribe a discount risk to that and value VVV that way.

• 1:02:13Speaker 00

  But this week, we have one more piece of data about their interest in burning as many VVV tokens as they can.

• 1:02:20Speaker 01

  There you go. You're feeling...

• 1:02:22Speaker 00

  So I'm more comfy in my VVV token holding than I am my Venice equity holding, of which I don't have.

• 1:02:30Speaker 01

  And cannot get, unfortunately.

• 1:02:33Speaker 00

  All right, fam, that wraps up this week's weekly roll-up. We'll be back in seven days. Ryan, you saw Troy, not Troy, Odyssey. How was it?

• 1:02:42Speaker 01

  So good, so good. Yeah, I'm, you know, I am five stars, like, I'm a big fan, big fan. So I think you should see it.

• 1:02:51Speaker 00

  I do want to see it. You saw it in IMAX?

• 1:02:53Speaker 01

  Yeah, of course.

• 1:02:54Speaker 00

  Yeah, I think I have to wait to go see it in IMAX.

• 1:02:56Speaker 01

  It's a bit loud for me. It's a bit loud, so I don't know what that says about me. But yeah, that's the way Nolan intended it to be seen, so you should see it in IMAX.

• 1:03:04Speaker 00

  Loud, loud. All right. That's Ryan's, that's Ryan's homework for you. Go see, go see Odyssey. All right, Bankless Nation, crypto is risky, but not risky enough. It could be even more risky. The institutions are here. So we're leaving and we're going even further west. This is the frontier. It's not for everyone, but we are glad you're with us on the Bankless journey. Thanks a lot.