SotN #1 - BULLISH; DeFi tokens, Internet-era growth, Fee v Issuance Debate

Welcome to the State of the Nation a new video podcast where RSA & David Hoffman weigh-in on topics relevant to the Bankless Nation every week. Watch the video here. https://www.youtube.com/watch?v=Xj0FpDbx54Q&t=0s New episodes on Tuesdays. SotN #1 - BULLISH Tuesday, June 16, 2020 The State of the Bankless Nation is.... BULLISH! The Bankless boys discuss why. Covered: - Why DeFi tokens are the next pump narrative (but better than 2017) - How 100m ETH accounts is like the early internet - Do and David disagree on his Bitcoin tweet? We show you how: - To calculate returns on your COMP tokens ----- Tools from our sponsors to go bankless: Multis http://www.multis.co/ - bank your business without a bank (1 mon. trial https://multis.co/!) Ramp https://ramp.network/ - the fiat onramp for DeFi (mention Bankless!) Monolith https://monolith.xyz/ - holy grail of bankless Visa cards Aave https://aave.com/ - money lego for lending & borrowing ----- RESOURCES: 1) Look up COMP returns http://www.predictions.exchange/compound/None (credit Mika Honkasalo @mhonkasalo) 2) DeFiMarketCap shows COMP market cap https://defimarketcap.io/ 3) InstaDapp maximizer for COMP mining https://dsa.instadapp.io/recipe/comp-max

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

• 0:06Ryan Sean Adams?

  Alright guys, welcome to Bankless. This is the first time David and I are trying something new. This is the State of the Nation videocast. We're gonna be doing this every Tuesday, guys. David, it is great to see you on video, my friend. It's usually just your spoken voice, but this is the first time we're doing it live video on YouTube.

• 0:29David Hoffman?

  Yeah, it turns out you're a real person and not just a voice in my headphones. So yeah, we've always wanted to kind of amp up our YouTube content and get people watching what we are also looking at while we talk about it. And so this video format is going to allow us to go a little bit more in-depth about some subjects, share some images, and also just have like a more personal conversation. So I'm really excited about it.

• 0:55Ryan Sean Adams?

  Yeah, it's gonna be fun. I mean, we started doing this big picture type of stuff, like the topical events that were happening in the Bankless Nation at the start of our podcast, but it became like, it was a lot, right? And it deserves its own dedicated airtime and its own dedicated show where we can do deep dives. So that's what we're gonna be doing on the State of the Nation webcast, where we talk about what's happening. We're gonna talk about how that relates to the big picture in the Bankless Nation. We're gonna try to drop some insights and action items as we go, and we're gonna be publishing this every Tuesday on YouTube. We'll also probably roll this into a podcast episode too.

• 1:40Ryan Sean Adams?

  So you can catch it on YouTube and video. You can also catch it in the Bankless Podcast by subscribing. It'll be kind of the second episode of the week that we release, and I think it'll give us a really cool format for doing this sort of thing.

• 1:56David Hoffman?

  Yeah, the podcast that we were churning out were turning out to be like an hour 40 minutes long because they had like a 30 to 40 minute state of the nation and then an hour plus long interview or an hour plus long just you and me riffing on one such idea breaking these things apart I think is definitely the way the way that they deserve to be.

• 2:15Ryan Sean Adams?

  Yeah, all right. So let's do it. We get no breaks. I mean, this is we can't edit anything. So this is going to be raw. This is going to be live. But why did we call it state of the nation, David? What like why nation?

• 2:27David Hoffman?

  Because it is a nation. For those that read my recent article, a bankless nation, the thesis is that what we are building here is a new way of organizing ourselves across the world. And we as in humanity, we as in the humans, we are building a new nation that that works for all of us that has very strong correlates with the previous nations that we've known. And not just nation states, but the nations, the versions of nations that have come before it like religion. And the claim is that these digital nations, Bitcoin and Ethereum, are this new paradigm for organization, how humans organize around

• 3:08David Hoffman?

  each other. And I also think that the reason why we're calling it the bankless nation is because Bitcoin and Ethereum are likely going to stitch themselves together into one like cohesive unit. I've always kind of considered Bitcoin and Ethereum as like this binary star system that is rotating around each other.

• 3:26Ryan Sean Adams?

  They're brothers, right? Like older brother and younger brother.

• 3:28David Hoffman?

  Yeah, yeah, the mother and the father, the archetypes of the universe, right?

• 3:33Ryan Sean Adams?

  Yeah.

• 3:33David Hoffman?

  Like they they require each other. Like, there's no way that Bitcoin can have a fully sci fi future without Ethereum. And so it needs Ethereum and Bitcoin has a ton of liquidity and a ton of value, which is exactly what DeFi needs. So these things are going to become one cohesive nation, which we call the bankless nation.

• 3:54Ryan Sean Adams?

  Yeah, and it's bankless because that's the entire point of crypto, right? I mean, go all the way back to 2009 Satoshi's white paper, where he talked about a peer to peer digital cash, that word peer to peer. It doesn't, it's not peer to bank, it's not bank to peer, it's peer to peer, it's a bankless digital cash. So from the very inception, the entire point of this crypto movement has been to create a bankless financial money system, bankless nation, really, for the world. And I know in your articles, David, you talked a lot about the patriots and the uniforms of the bankless nation. I would consider both of us patriots, and we're wearing

• 4:34Ryan Sean Adams?

  our uniforms today, too. So I'm gonna have to get some more of these shirts, so that we always have them on Tuesdays.

• 4:42David Hoffman?

  People want them, people want them.

• 4:43Ryan Sean Adams?

  Yeah, I know, we gotta open up the storefront soon. So, before we dig in, David, we've got to talk about two of our sponsors. So I'm gonna talk about the first one, Multis. So Multis is a bankless way to run your business. Basically, doesn't require a crypto exchange, doesn't require a bank account. We've written articles about Multis on Bankless. Actually, in the next week or so, we're gonna be doing a video walkthrough live on this channel. It, under the, behind the scenes, it uses the Multi, the Nosis MultiSafe, so your funds are always secure, and it creates like a banking interface on top of a smart contract system, and allows you to run the entire thing without a bank. So, really cool sponsor,

• 5:28Ryan Sean Adams?

  great to have them. We'll include a link to them where you can sign up and get some special Bankless perks. Just check the YouTube notes.

• 5:35David Hoffman?

  Our other sponsor is Ave. You guys know all about Ave. It's a borrowing and lending platform, but it's also much more than that. It's a suite of services that started with borrowing and lending, and it has spawned into many new things. There are A tokens, which are tokens that receive the supply rate of all the assets on Ave. And what's more is Ave allows for stable interest loans. This is a very crucial tool in the legacy financial world, to be able to pull out a loan from somewhere without having that interest rate change under your feet. And so that's what Ave allows you to do. It allows you to plan out your financial future far in advance, because you know those interest

• 6:17David Hoffman?

  rates aren't ever going to change. You can check them out at A A V E dot com. Is that right? Com?

• 6:25Ryan Sean Adams?

  Dot com, yeah. And Mooltis, by the way, is M U I L T. God, what is Mooltis? Check the, just check the video notes. I think it's a dot co, though. You check the video notes. All right, David, what is the state of the bankless nation right now, my friend?

• 6:43David Hoffman?

  The state of the bankless nation is bullish, dude. So much is happening.

• 6:49Ryan Sean Adams?

  Is that going to be your answer every week?

• 6:51David Hoffman?

  Well, I mean, am I allowed?

• 6:53Ryan Sean Adams?

  Every week it's bullish?

• 6:56David Hoffman?

  Every week?

• 6:56Ryan Sean Adams?

  Yeah.

• 6:56David Hoffman?

  The reason why it's bullish this week is because of the DeFi tokens, really, is DeFi tokens. Aave, our sponsor, had a, has their own token, which I'm categorizing as a DeFi token, that has gone like 300% like in the last like six months. Maker just jumped up by like double on its listing on Coinbase. Comp just got added to Uniswap.

• 7:20Ryan Sean Adams?

  What's Comp?

• 7:21David Hoffman?

  Comp is the token, governance token of Compound. Now, Comp, unlike Aave or Maker, doesn't give you access to cash flows. But like, we all know that's coming, right? So it's a governance token. So, so like, it's, people are governing over Compound, which has cash flows. And eventually, it's, I'm thinking everyone else is assuming that in the future, they're just going to vote in cash flows for themselves.

• 7:48Ryan Sean Adams?

  It seems inevitable that there'll be a convergence, right? Right? So we published something in Bankless called like Voting in Cash Flows, which is basically what Comp holders are incented to do. If you're a holder of Comp, you want to turn that Comp token into a higher value Comp token. So what's one of the initial things that you're going to do? Is you're going to vote in cash flows so that you take a cut, a percentage, of all of the assets under management in Compound and have that accrued to the token. That seems inevitable to me. And it also seems to be the case, like, that's where we ended up with stocks. Right? So like, stocks were invented in the 1600s and the 1700s by the Dutch, right?

• 8:29Ryan Sean Adams?

  And they slowly converged into what they resemble today, where they are capital assets. So they can be essentially valued based on future cash flows, but they but they combine that and they also combine a governance a piece as well. So they're both part of this governance and the cash flows are both part of the same thing. It I definitely agree with you. It feels like there's going to be convergence here too, which is cool, because this means it's like the birth of a new asset class. I know Chris Brennitsky wrote that paper about Bitcoin back in 2015 or so. But this is a second asset class, right? That was sort of the Bitcoin is like a money monetary asset class. This is a second asset class. It's a capital asset with

• 9:13Ryan Sean Adams?

  everything, all of the cash flows settled on chain. So it's like completely transparent and brand new. Super exciting.

• 9:20David Hoffman?

  Yeah, absolutely. And harping on that, the point of voting in cash flows, like if you don't think this is going to happen, like the onus is on you to prove to why this isn't going to follow the same path as like as history, right? I can't remember who said it, but they they said something along the lines of like, the cryptocurrency industry is just relearning the lessons of finance that the human species has learned throughout time, but in a sped up manner. And now it's now it's the time for capital assets on Ethereum. Like now is the time for tokens that represent some sort of equity in these DeFi applications on Ethereum to start producing cash flows, which some are already doing and comp or Compound has been doing. And now there's this governance token called Comp that governs over the cash flows

• 10:05David Hoffman?

  of Compound. Like, it's just, it's just a direct line. Like, this is going to happen.

• 10:11Ryan Sean Adams?

  Yeah, totally. I mean, I feel like it feels like we're in the maybe the 18th or 19th century in terms of like traditional finance, where we're just starting the joint stock company, right? It's like brand new. We're just starting with lending, but it's all collateral backed. So there's no notion of of reputation. Everything has to be backed by real collateral. But I think we're accelerating at a much faster pace. So it's going to be really exciting as we like reinvent this parallel bankless financial system. But I want to ask you something on that. We're going to get into comp in More detail, I think, but some people have criticized this as like ICO mania 2.0, right?

• 10:52Ryan Sean Adams?

  All right, so I'm gonna, I'm gonna show comp market cap in a few minutes, we're gonna go through it. But it has quickly risen, just in like a day of trading, just yesterday, started trading on Uniswap. $900 million market cap, like it's almost a Silicon Valley unicorn, $1 billion company. This is a protocol, right? And it's worth $900 million. So people see that and they're like, oh my God, I'm having flashbacks to 2017 ICO mania.

• 11:23David Hoffman?

  For, for context, it's already above MKR in market cap. It is the highest, highest token value on Ethereum other than.

• 11:32Ryan Sean Adams?

  Right, all right, so people see that and they're like, not again, right? Like, so, like, what's your take? What's, what's gonna happen here?

• 11:40David Hoffman?

  This is why I'm saying I'm bullish, right? When, when all these tokens are accruing these insane evaluations, like right off the bat. And important distinction is that Compound and the, and the next lowest value market cap token on Ethereum MKR. They totally deserve it, or at least deserve something, right? At least in stark comparison to like the ICO mania, right? Like where the ICO mania was total vapor and it was an actual bubble that just needed the smallest pinprick to pop. Like the, there are real cash flows behind these things, like MKR has real income, Compound has real income. And so like, you know, it was easy to criticize the ICO tokens of 2017.

• 12:21David Hoffman?

  And there is a lot of parallels between the DeFi tokens that have like gone up 300% over the last, you know, X number of months. But the point is, is that these things are real, right? These things are generating real cash flows. And, and I remember Vitalik tweeted about this in 2017, 2018, after like the market cap of all crypto hit like a trillion dollars. And then the bubble popped and it started to deflate. He said something along the lines of like the next, the next bull market is going to be based off of real world fundamentals, like real, real things that are tangible. And that's what we are seeing here.

• 13:00Ryan Sean Adams?

  Yeah, absolutely. And as you're talking, David, I put this up. This is the DeFi market cap, which is one of my favorites. You know, better than coin market cap in some ways because it shows the actual like DeFi bankless.

• 13:14David Hoffman?

  Hit command a few times.

• 13:16Ryan Sean Adams?

  All right, so I'll blow that up there. So you could see Compound, market cap, nine point four or five million dollars today. And there's Maker, as you said. And, you know, this might not last, right? It's like, you know, very limited liquidity just on Uniswap. It's entering this, this price discovery phase. But I absolutely think you're right. This is going to be, this is different than ICO mania because in ICO mania, the tokens had no value accrual mechanism whatsoever. It was kind of like, like buy my token. We haven't even shipped a product. Maybe we'll ship a product, maybe we won't.

• 13:56David Hoffman?

  If you buy my token.

• 13:56Ryan Sean Adams?

  Right? And like, you know, how is the, how is the token valued? The answer is like fat protocol thesis, thesis, bro. It doesn't matter. It's just going to work itself out, right? And this time around, we might see some crazy value, like valuations and we might see some mania enter. I don't think we're at that stage yet, but at least it will be based on things we can fairly value as, as capital assets. Things that are real producing, actual real world value and actual cash flows. So to me, it's a lot different. The other thing is the, the distribution mechanism is a lot different.

• 14:37Ryan Sean Adams?

  And I know we want to talk about that, but the ICOs, it was, you know, very, the early ICOs very much retail mania. You've got to, you know, buy the token. In this model of sort of the DeFi token era, you sort of, you have to earn them, right? So, so Compound just released a mechanism for earning comp tokens yesterday. And we're going to talk about that, but, but do you see that as a, something different as well? Is that important?

• 15:04David Hoffman?

  Yes, and also no, right? So like, part of the ICO mania was that like you would contribute work to the protocol and then you would receive tokens as a reward. And the only problem with that is that like it was inside the context of the mania, right? And so like, and, and we really hadn't figured out the distribution mechanism. But the main thesis of the distribution mechanism is that you use the token to align incentives with your users so that you can grow your ecosystem, right? Like, the token was a community management tool where like it would attract users, attract the community. But it happened inside of the context of this absolute mania with zero fundamentals.

• 15:45David Hoffman?

  But like, the token these days are doing the same role that ICO tokens earlier claimed to do, but this time they're actually doing it, right? So like, if you want comp tokens, if you want balancer tokens, balancer token is like doing the same thing where like you get the token if you supply liquidity. But like, the work being done is, the, the type of work being done is much more valid, right? Like, for, for Compound, you submit capital and there's zero way to fake that. You can't fake capital. Their, their previous ICO tokens were totally gamable. But like, if you want to supply, if you want to get the comp token, you got to supply liquidity to the Compound protocol, which makes the Compound protocol better, which

• 16:25David Hoffman?

  makes more people use the Compound protocol, which, which just generates the whole, the whole feedback loop, the flywheel, that these tokens were claimed to have created in 2017. And so like, it's almost comical to me, like, exactly, the, how, how perfectly these new DeFi tokens are resonating with the original thesis of ICO tokens, but actually doing it correctly.

• 16:51Ryan Sean Adams?

  Yeah, I totally agree. And maybe we should walk through sort of an example of what, what comp actually looks like, so folks can see how this works. Because what you said is exactly right, David, that this is essentially a growth hack for these DeFi protocols. So what it's going to do is incent liquidity and juice liquidity inside of these. Inside of these money protocols, these DeFi protocols, and as we've talked about before, liquidity, that's the end game for everything. All of these protocols, even Ethereum and ETH, the asset itself, they're just liquidity monsters. The more liquidity you have, the more like a money system you become. So these things are chewing on liquidity. So can you see my screen, David?

• 17:35David Hoffman?

  I can.

• 17:36Ryan Sean Adams?

  Okay, so this is the the original COP medium post where they talk about distribution allocation of the COP tokens, how their governance tokens, about,

• 17:49Ryan Sean Adams?

  let's see, is it 10 million or so of these tokens? Yeah, I think it's a total of 10 million of these tokens are going to be created. Close to half of those are going to be reserved for users of the protocol. So that's what they just launched on Monday, a way to issue these tokens for users of the protocol, and by that they mean liquidity providers. But here's essentially what that what that means. It means that as you provide liquidity to the COP token, you get an increased return. And this is where it's kind of an action item, or it's something interesting for the bankless community to look into.

• 18:30Ryan Sean Adams?

  A friend of mine put together a predictions exchange, like a basically a calculator. So you can see how much COP tokens you can earn. And so if you if you go through this exchange, we'll include this in the show notes, if you go through this calculator, rather, you could sort of see how much how much you can earn in COP tokens by supplying the various liquidity numbers. So if if I supplied 1,000 DAI and I press calculate my annual COP returns, we can see right here, my supplying DAI to the Compound Protocol, normally you'd you'd earn

• 19:10Ryan Sean Adams?

  a supply rate of 1.09%, right? So DAI again is a stablecoin that's a bit better than what you might do in a traditional bank account for something that's like pegged to the US dollar. But those returns are juiced by the COP token that you're receiving. So you get the 1.09%, but then you also earn about $10 per year. Well, let's see here.

• 19:38Ryan Sean Adams?

  Yeah, you're in 1.21 comp on an annual basis in additional returns. And at the comp valuation, which again, as we've talked about, is, you know, it's just one day of trading.

• 19:51David Hoffman?

  Trading.

• 19:52Ryan Sean Adams?

  Yeah, it's trading, but it's currently trading at, you know, 919 million market cap with each token worth. I can't believe that I'm saying that, over $100. So anyway, your net APY return is going to be 12%.

• 20:12David Hoffman?

  So in addition to that 1% that you're getting from the compound protocol?

• 20:16Ryan Sean Adams?

  I think they may have totaled this, so it's the 1% plus the comp to give you a total annual return of 12.2%. I think they may have totaled it, but that's your total return. So it's absolutely juicing your returns and it's increasing the incentive to provide liquidity to this protocol. So it's an ultimate growth hack and that's just with DAI. So let's check out Tether.

• 20:42David Hoffman?

  And so each token has its own interest rate that it gives you in comp tokens, right? Or are they the same for dollars of capital?

• 20:50Ryan Sean Adams?

  Different curves, different, you know, drastically different amounts of comp tokens that you can earn. So if I put $1,000 in USDT, I click calculate. So USDT is regularly going to give me far more than DAI.

• 21:06David Hoffman?

  Interesting.

• 21:07Ryan Sean Adams?

  8.83%, but look at my APY.

• 21:11David Hoffman?

  Right.

• 21:12Ryan Sean Adams?

  And that's going, that's going down right now. This morning it was over 100%. So arbitrators are getting in there, like they're exchanging USDC for Tether and they're taking advantage of this opportunity. But that's a 99% return right now.

• 21:29David Hoffman?

  So this is also a way to like smooth out the differences in different pools, right? So like you are, I think, I think you get more comp for supplying Tether because there's more demand for Tether. And so this is a way for the compound governance system to like. Nudge capital to be supplied in a particular pair. Is that, is that correct?

• 21:48Ryan Sean Adams?

  Yeah, exactly. And it's also a way to compete, I think, with the crypto banks. So the crypto banks have many different advantages, right, including, you know, better user interface and in some cases, the ability to provide additional incentives. In some cases, their own loyalty tokens. And this is DeFi kind of,

• 22:08Ryan Sean Adams?

  you know, striking back against that and putting its own growth hacks in place to incent liquidity. And I think it's going to be absolutely, absolutely massive for all of DeFi. All the protocols are going to implement something like this.

• 22:21David Hoffman?

  Yeah, totally, totally. Crypto banks don't stand a chance.

• 22:25Ryan Sean Adams?

  Yeah, there, I mean, there's other, there's other stuff you can get into too, which I'm, which I'm trying to figure out at, at the moment, which is, you know, InstaDap is allowing you to actually take leverage on staple coins and further juice your returns.

• 22:40David Hoffman?

  Wow. InstaDap already has a tool for this. That's crazy. They ship that fast.

• 22:44Ryan Sean Adams?

  I know. So they just built it on top. So anyway, more stuff to figure out here, but we will include links to these interfaces in the show notes. So you can, you can see just how much APY, your annualized return can be by depositing some of these various assets into, into comp. And you could really see, I mean, I get why you're bullish, David. I understand it. It seems like this is a very bullish move for DeFi. And yeah, could, could, could be part of the next bull run for sure.

• 23:17David Hoffman?

  So not only that, like DeFi tokens are bullish in their own right, but also because of the way that market cycles work, right? If all these DeFi tokens have gone like 3X to 30X over the last six months, like that's going to rotate back into ETH, dude. Like if, if the, all the tokens on Ethereum went like collectively 3X in price, people are gonna, people are gonna rotate.

• 23:41Ryan Sean Adams?

  Well, that's how it worked in, in 2017, very much, right? And if you look at sort of what's the, the leading trading pair for comp right now on Uniswap, which is the only exchange, which is basically selling comp tokens. It's all ETH. It's all an ETH pair.

• 23:56David Hoffman?

  Off the top of your head, you know how much ETH is in that trading pair?

• 23:59Ryan Sean Adams?

  I don't. We could look that up. I mean, I know the vol- the volume's about a million a day right now. So not a ton, but um.

• 24:07David Hoffman?

  There's gonna be more. It's just gonna suck up a ton of ETH. It's gonna suck up a ton of ETH.

• 24:11Ryan Sean Adams?

  Yes, and not quite like 2017. So right, 2017, basically, all of the ICO raises sucked up ETH because you had to contribute in kind with ETH.

• 24:23David Hoffman?

  Right.

• 24:24Ryan Sean Adams?

  But but this has advantages in that it's it's still sucking up ETH as as kind of a trading pair. It's growing the Ethereum economy, certainly, and these are real assets. Now, that's not to say, uh, like, if you do a net present value calculation of comp tokens right now, like, if you work backwards to to get to the 900 million number, it probably doesn't make sense, right? Like, the, you know, the PE ratios, price earnings ratios have to be absolutely insane to prop up that valuation. So it's not to say that this won't get crazy and speculative. But the difference, as we said, is compounds are real, like, it's a real protocol. It's working. People are using it. And like, potentially, there's some real cash flows associated with this.

• 25:08David Hoffman?

  Right.

• 25:09Ryan Sean Adams?

  And.

• 25:09David Hoffman?

  And we can actually calculate it, which did not happen in 2017. We actually have numbers to go off of.

• 25:15Ryan Sean Adams?

  We have numbers to go off of. We have models. I think we're starting to understand this more. So, yeah, I mean, that's that's huge, I think. And you know what? Here's the other thing is, um, stocks don't have any room to talk right now because they are like.

• 25:31David Hoffman?

  Dude, it's it's the it's the Fed. It's it's not. It's not the company anymore. It's like, are they gonna print more money?

• 25:38Ryan Sean Adams?

  Okay, so is that what's going on with like the Robin Hood is like the new Binance, right? It's just buy all the all the the stock like shit ones I can, right? Like, so what what's happening? Are people like getting their their check from the Fed, their stimulus check from the Fed? And they're just like, oh, nothing to do. I'm going to Robin Hood. May as well like buy some Hertz stock, buy some carnival.

• 26:03David Hoffman?

  It's been gamified, man. It's no longer what it once was. It no longer is a place to. Find and discover value. It's a place, it's turning into a casino, which is what Binance was like. It is turning into something that is separate from reality. Like the stock market couldn't be more separated from reality right now. It's a, it's a decent amount of the stock market is at all time highs. And 50% of the United States have not, has not opened up for business. Like it's, it's disconnect, it's a huge disconnect.

• 26:31Ryan Sean Adams?

  I feel like, I feel like so, I feel like, you know, to the S and P is like, you're drunk, bro. Go home. Like we

• 26:38David Hoffman?

  Sleep it off.

• 26:39Ryan Sean Adams?

  Sleep it off because we, I feel like people in crypto have lived through this. We know what drunk looks like because we had 2017 where things were just stupid. It was just dumb.

• 26:51David Hoffman?

  Yeah. I mean, I thought, I thought ETH was going to, to 20,000 like in six months. But you know, it turns out I was drunk. Turns out I was drunk at that time.

• 26:59Ryan Sean Adams?

  Right. I mean, and it happens with all markets, but I mean, how does this end? Do you think for Robin Hood traders?

• 27:06David Hoffman?

  Dude.

• 27:07Ryan Sean Adams?

  Does the Fed just keep bailing them out?

• 27:09David Hoffman?

  Man.

• 27:11David Hoffman?

  So, so this is what I was talking about with Christian on POV Crypto Pod. The, if we were to witness a dollar inflation event, or perhaps dare I say a hyperinflation event, we would see exactly what we have seen so far. Like inflation shows up in the stock market first. And if they keep on printing money because, because like, you know, the, another Hertz went bankrupt. Like it's just going to blow up confidence in the whole rest of the system. While these particular stocks just moon because stocks are now a savings technology, not a way to invest in a company. It's just a way to preserve wealth.

• 27:54Ryan Sean Adams?

  But can't the Fed just continue to print the money like forever? Infinite quantitative easing? I mean, does that ever run out?

• 28:05David Hoffman?

  Yeah, yeah. After, after it blows up, sure. Yeah, but not before it blows up. Yeah, they can keep on printing money as, as long as people are buying the dollar. That's the thing is like there, they also have this interesting position where like, there is a global deflation of dollars, right? Like the world wants dollars. And so the dollars, it going up in value. And so when they print dollars actually means more. But like, it's not going to go up, the, the demand for dollars isn't going to go up forever, especially when they're flooding the market. Like the amount of new dollars in the world is staggering.

• 28:38Ryan Sean Adams?

  Yeah, I mean, it feels like that's the last thing that's, that's, you know, we, we talk about kind of debt and, you know, the 20 trillion in debt that the US is in, all of that. But the, the bigger debt, the debt that we are taking out right now is debt against the US's future status as a reserve currency for the world. Right? I feel like, you know, baby boomers, I love you. I love my parents. They're great. But like, it feels like that's the last thing that the baby boomers are taking is like on their way out. It's like, well, this is the last honeypot. We're gonna, you know, it's the reserve currency status of the US dollar. Now, I guess.

• 29:19David Hoffman?

  And I want to retire in luxury, or at least not in poverty.

• 29:24Ryan Sean Adams?

  Right, right. I, I guess the saving grace is that, you know, all of the other fiat central banks are doing it too. So maybe like everyone's, you know, playing the same game. And so it matters less that the US is doing this right now. But I think all of the economic theories, like if you look at modern monetary theory and the ability, like the, the idea that we can just continue to print money as long as we keep inflation in check. It all seems based on this assumption, they all make this core assumption that people, the, the population, the citizens of the world don't have another alternative. Like they don't have another non fiat alternative.

• 30:06David Hoffman?

  Right, right.

• 30:08Ryan Sean Adams?

  And what if they do?

• 30:09David Hoffman?

  And what if they do? Yeah. No, that, I, I've heard this from Bitcoiners over and over and over again, is, is Bitcoin isn't the bubble, it's the needle. It's, it's the thing that pops the bubble and there's no better way to inflate a bubble than money printer go burr.

• 30:24Ryan Sean Adams?

  Yeah, absolutely. All right. Bullish. You know what, David, we should talk about our, our second round of sponsors. So I want to talk about Ramp. So Ramp is a fantastic way to do fiat on ramp. So if you are a DeFi app developer, one of the biggest pain points you probably have is when the, the user goes and tries to do a transaction in Ethereum and. Doesn't have funds, doesn't have any ETH to pay for the gas. So Ramp solves that in like five minutes. One of your users can get access to Fiat right in their account, connects directly to their bank account. So it's super easy. It's a magic experience and it's one of the biggest pain points that DeFi needs to solve.

• 31:07Ryan Sean Adams?

  So check them out in the YouTube notes. Go to ramp.network for more info on Ramp.

• 31:15David Hoffman?

  The coolest thing about the Bankless Nation is that it knows no borders. And so if you want to store your money and your wealth on, in the Bankless Nation on Ethereum, you should absolutely get a, get an account set up with Monolith because Monolith will spin you up a smart contract wallet. And then they will also give you a DeFi Visa card. And Visa is basically accepted all over the world, but instead of using dollars in your bank account, it uses DAI in your smart contract wallet. So you can go from country to country when coronavirus is over and we're all doing that. You can go from country to country, place to place, hop on a plane and swipe your Visa card and it will still use the same DAI smart contract wallet on Ethereum because the Bankless Nation knows no borders.

• 31:59David Hoffman?

  So go to monolith.xyz and sign up and get your DeFi card today.

• 32:05Ryan Sean Adams?

  Very cool. All right, man. So that was topic one. Second topic we want to talk about. Yeah, big topic, big topic two. Let's move. So second one we want to talk about is crypto and the internet. So I know recently, David, we've been comparing crypto to nation states a lot. And you've got your second article coming out shortly on that, which has kind of a similar table as this, like with nation states. But there's another comparison we can, we can make, and that's comparing crypto to the internet protocol, the communication protocol. It was really interesting to me. So just last week Ethereum hit 100 million bank accounts.

• 32:51Ryan Sean Adams?

  I say bank accounts, but, but what I'm talking about is ETH addresses, right? So 100 million ETH addresses created on this new protocol, this new value protocol, this new settlement layer. It took the internet. Until about from nineteen ninety-one to two thousand and six to get to a hundred million websites. Now, I know that those apples and oranges, they're kind of different, but those numbers like feel significant. Anyway, right? Like you can, you can see sort of the network effect and the saturation of that. And so I was thinking a lot about the comparison of the internet as a communication protocol.

• 33:31Ryan Sean Adams?

  And that's really what it is versus what crypto is bringing and crypto is really, it's, it's part of the internet. Right? Like so crypto and the internet, they're not different things. What crypto is basically is adding another layer to the internet. So the internet was all about communication.

• 33:48David Hoffman?

  Another realm.

• 33:49Ryan Sean Adams?

  Another realm, right? Another like property that the internet previously didn't have. So the internet is all about global distributed, permissionless, credibly neutral communication. Right? So we saw that in everything that was built on top of it, email and social media. And, um, you know, even like e-commerce, those sorts of things. But crypto is doing to value what the internet did to communication. It's a different protocol and it's layering that on top of the internet. And there's a lot of different, a lot of different parallels. I mean, do you see this too?

• 34:24David Hoffman?

  Yeah, yeah, absolutely. And it makes, it makes a ton of sense. And it fills a missing gap that the internet has always had, right? And there's even the web three movement, the web three movement is kind of nebulously defined. Uh, and I kind of, I, I, I, there's the internet of value, which can be considered web three. But also the web three movement is also about rebuilding the web two, which is like taking the internet, the old internet systems, the communication, digital media, attention, uh, economy and rebuilding it. In the crypto land, but using the crypto money systems at the bottom. And I'm really excited about that marriage.

• 35:06David Hoffman?

  But what you're talking about, Ryan, is like the correlates between every single thing that has made up the web two movement and how you can find an equal correlate in the crypto world for what it does. When we had Itmar from Argent on the Bankless Podcast, we talked about how like the Argent Wallet is kind of, it could be like the Netscape browser, but for crypto, where the Netscape browser, you know, the internet before the browser came around was this very dense and difficult to navigate system. And the browser made it usable and made it sexy to use. And that's really what we see like the Argent Wallet doing with Ethereum and DeFi, right? Like it makes the experience easy.

• 35:51David Hoffman?

  It's a sexy UI UX on top of DeFi, on top of crypto. And then you can make all these same comparisons for all these different, you know, actions that you've made here. And I think they, we say it's an apples to oranges comparison because it has to be. But it's the best, it's the best apples to apples comparison that we can also come up with.

• 36:15Ryan Sean Adams?

  Yeah, yeah, apples and oranges, you know, both are fruit, so you can compare them. That's what we're doing. I mean, but one of the big things, I feel like folks in the crypto space or in the blockchain space, one of the big mistakes they made early on is looking at the wrong metrics, right? They came at this thing from a internet world, from like a web one, web two world. And so even when they were like in the early phases, measuring success in networks like Ethereum, they were measuring it still in like, how many daily active users do you have?

• 36:50David Hoffman?

  Correct.

• 36:51Ryan Sean Adams?

  Right? Like, how many views do you have? Oh, I mean, there's only a thousand, only a thousand people using Maker. Like that's a thousand addresses, that's nothing. It's just, but those a thousand addresses, each of those addresses could be a bank account.

• 37:06David Hoffman?

  Right.

• 37:06Ryan Sean Adams?

  Essentially, that has millions, tens of millions in value in it. And like they were measuring.

• 37:15Ryan Sean Adams?

  The success of crypto by internet metrics when they should have been measuring the success of crypto by crypto metrics. So like the metrics are value, liquidity, volume. That's the real, you know, currency. That's, that's the real thing that you're, you're seeking. You're not seeking attention anymore. It's not the attention economy. This is like the, the money economy, the value economy. So it's different. So you have to look at everything in crypto with that orientation.

• 37:43David Hoffman?

  Absolutely.

• 37:44Ryan Sean Adams?

  You can't, you can't use the internet metrics in order to compare it, so.

• 37:48David Hoffman?

  Now, we do need people, right? Like, we do need daily active users some, to some degree. Like, if crypto and Ethereum and the bankless world ends up being just like, you know, 50,000 people and that's it. Like, that's not that great. Like, we do need those numbers.

• 38:03Ryan Sean Adams?

  It's not great.

• 38:04David Hoffman?

  But the way that, that we get daily active users is by getting, you know, volume, liquidity, money, total value. We get that first because those, getting, pumping those numbers up is what makes these systems operate better for a wider audience. And so it's gotta be the, the volume, the liquidity numbers that get up first because that's what attracts the daily active users. The daily active users doesn't bring the liquidity. The liquidity brings the daily active users.

• 38:33Ryan Sean Adams?

  Yeah, for sure. And I do think that we are starting to realize this. Like, like two years ago, I was talking about this and it was maddening to me where people were talking about like Maker being a failure because there are only a few thousand users on it and, you know.

• 38:48David Hoffman?

  Yeah, those people are probably still saying Maker's a failure, but.

• 38:51Ryan Sean Adams?

  Right, so, so maybe, but like, it's crazy to me because what you should be looking at, what we're starting to look at now is like, like DeFi Pulse. So value locked in DeFi, that's huge, right? And then like loan originations. So the, the way to look at the success of Maker is how much in loans did it originate? Oh, wow, you know, turns out it's already originated like 2.4 billion in loans.

• 39:15David Hoffman?

  Right.

• 39:15Ryan Sean Adams?

  It took LendingTree, like peer-to-peer lending, like.

• 39:20Ryan Sean Adams?

  You know, five years to reach 250 million, right?

• 39:24David Hoffman?

  Like, whoever like asks Wells Fargo, how many daily active users do you have? Like, that's just a nonsensical question.

• 39:31Ryan Sean Adams?

  It's a stupid.

• 39:32David Hoffman?

  How many times do you open up your bank account? Like, hopefully, not very often.

• 39:37Ryan Sean Adams?

  Yeah, it's a, it's a very internet, like Silicon Valley, like, question. And we need to be starting to look at this through the lens of finance. So I think we're doing that more, but man, two years ago, it was a mess. And hopefully, people continue to look at this as a protocol for value and not, you know, not a protocol for attention and communication. It's totally different.

• 40:01David Hoffman?

  Absolutely.

• 40:02Ryan Sean Adams?

  All right, man, anything to add to that? Or should we discuss topic three?

• 40:06David Hoffman?

  Let's, let's move on.

• 40:07Ryan Sean Adams?

  All right, so we've, we've not discussed this. All right, so I put out a tweet last week, a week and a half ago or so. I said, and this is a little snarky, you know, Twitter's fine. What's the security cap on your blockchain? I mean, supply cap, same thing. So what I was saying there is basically there is this relationship that Bitcoiners do not acknowledge between the, the fixed cap of their issuance policy of 21 million and that also being a security cap. So if you, you fix the issuance of your monetary policy, right?

• 40:50Ryan Sean Adams?

  By definition, you're also fixing the amount of security budget that, that you're providing. So it's a little, you know, snarky, like, you know, I, I think I was maybe triggered by somebody who was celebrating fixed cap as like the best thing without looking at the trade offs of fixed cap. But then you jumped in, you were like, oh, bad take, Ryan.

• 41:14David Hoffman?

  I said, I said, oof, don't like this one.

• 41:16Ryan Sean Adams?

  Yeah, yeah, exactly. So, so tell me, why don't you like it? So what's? Let's talk about it.

• 41:22David Hoffman?

  I think it's because maybe I'm taking it literally and maybe you don't mean it's quite in such a literal sense. But like the the security of a blockchain doesn't doesn't come from its issuance, right? Not just that, it can. However, if you take it literally, like when Bitcoin reaches maturity and has 21 million and is capped and not issuing anymore, like it is still going to have people paying for its security. So like the security, where you get security doesn't come from only issuing issuing the currency.

• 42:02Ryan Sean Adams?

  It also comes from transaction fees. Is that what you're saying?

• 42:05David Hoffman?

  Yes, it also comes from transaction fees. And we also are going to see that dynamic play out in Ethereum as well, right? And so in Ethereum 2.0, when they're starting, when there's a bunch of total transactions per time and those transactions are being burned in EIP 1559, those transactions, those that are paying the fees are going to burn Ether, which makes it more scarce, which means that when we issue Ether, that Ether is more valuable, which increases the security. And so it's there's there's a yin and a yang here. There's like the issuance and then there's the fees. And you also get security from fees and fees are really, really important in the long term security.

• 42:49David Hoffman?

  Because if you are only relying on issuance, then the value of your asset is going to go down, which means you have to issue more to make that make up that same security, which means you have to issue more, which means you have to issue more, which then just totally ruins the whole value of your of your asset. And so the more you can actually get security from your fees, the better, because that means you actually have to issue less.

• 43:15Ryan Sean Adams?

  All right, well, that's a little disappointing because I thought we were gonna like disagree on this or something, but um yeah, I um. Yeah. Yeah. Yeah, so exactly. I mean, I think the tweet wasn't a a complete thought on that, right? It wasn't, um, you know, it didn't didn't say, but if your network successfully transitions to receiving, you know, security budget from transaction fees, then everything's okay. Which is like the addendum to that. Um, I do, I don't, you know, I think you share this, but I don't know. Like, do you share the concern that? So, um, what what Bitcoin is doing, it's got to cross this chasm, right?

• 43:55Ryan Sean Adams?

  And people like Hasu and the Bitcoin community have talked about this. By the way, we're having Hasu on the podcast, um, tomorrow. We're gonna put that out next week. So catch that, guys. We're gonna talk about this issue. But but so he recognizes the issue here is Bitcoin, because of its monetary policy, has to move from a security budget that's paid for by issuance. So the memetic power of the Bitcoin is is gold meme, right? That's like really strong for for Bitcoin. So it's got to move from a a security budget that's paid for by that in all of its strengths to a security budget that's paid for just pure demand for its block space. And what can you do with Bitcoin block space right now?

• 44:41Ryan Sean Adams?

  The thing you can do with Bitcoin block space primarily is move Bitcoin. Like, that's that's it. And so if everybody's holding, no one wants to move a lot of Bitcoin, right? Or like, I I'm not saying that there uh that Bitcoin's economic, like its security budget will collapse to zero. Just that it's very likely with that sort of a monetary policy and issuance policy that it will be exceeded by another network that doesn't make those Right. trade offs, right? Right. Because if you look at Bitcoin, if you look at Ethereum right now, it it feels like it's on a trajectory for a flipping in terms of block space demand, like Ethereum blocks are more useful.

• 45:25Ryan Sean Adams?

  I mean, why? Because you can put stablecoins on them. You can, you know, run compound transactions. You can vote on, you do tons of things with them. And, um, you know, its block space might be in higher demand than than Bitcoins. It's kind of, you know, playing to its strengths. Anyway, I I just see that as a Mostly unacknowledged trade off in the Bitcoin space when they're talking about the virtues of fixed supply.

• 45:50David Hoffman?

  So even the most avid Bitcoiners will say like either Bitcoin works completely or it doesn't. And there's no, there's no middle ground. And that's to say like either the transaction fees become enough or they don't. And what worries, worries me is like the communicated narrative, the communicated value proposition is that you can buy and hold Bitcoin forever. And just store it and, and that'll be enough for you. But it never ever talks about like, and you need to like have block space to ban. Nowhere in the Bitcoin narrative is there room for

• 46:27David Hoffman?

  that room for increasing the demand of the block space. Bitcoiners just kind of assume that the, the block space will be in demand if the asset is, is valuable, which is like, it's an, it's an okay assumption so long as we are aware that we are assuming it. And the difference between Bitcoin and Ethereum is like Ethereum reprioritizes things. It says that we are going to put security first. And we are going to do our best to make our block space in demand. And so that we are, it don't matter what, there is no, you know, binariness in the success of Ethereum. It will rise or sink to the level of its success.

• 47:06David Hoffman?

  And so that, and Bitcoin, it does this hard, it's hard, hard plant of the flag and say 21 million hard cap. And people are going to love that 21 million hard cap so much that it is going to ultimately make the system extremely successful to the point that it memed itself into existence by generating enough fees. And Ethereum is doing the opposite where it says, we are going to make our blockchain so incredibly secure that everyone will believe in its existence into the future, no matter what. And then that will create value in the asset. And so we're doing these same things, but like for me, the existence of Ethereum into the long-term distant future seems more secure because that is what the goal of Ethereum is. And I think that is the right priorities.

• 47:51David Hoffman?

  Whereas Bitcoin, you kind of have to take On faith and ingrained ingrained in the in the social contract of Bitcoin is that you don't talk about how it couldn't fail. Because that also increases the likelihood of it working. So it's a responsibility to do that.

• 48:07Ryan Sean Adams?

  If you doubt, you decrease the security of Bitcoin.

• 48:11David Hoffman?

  If you doubt.

• 48:12Ryan Sean Adams?

  Don't be a doubter.

• 48:12David Hoffman?

  You can't, you can't doubt, you can't doubt.

• 48:15Ryan Sean Adams?

  Okay, so, so here's something interesting is right. So, um, I mean, we, we just talked about the digital nation analog, right? Where we compared crypto to mostly, we compared it to the nation state, right? You did, right? So what about a digital religion?

• 48:31David Hoffman?

  It, they're, they're both, it's definitely both. And there is a different and difference in balance, right? I would say Ethereum is closer to a nation state and Bitcoin's closer to a religion.

• 48:41Ryan Sean Adams?

  That's interesting, right? Because you do have many aspects of a religion with these digital nations, as we've called them. In particular Bitcoin, right? But you just, you just used words like you got to take it on faith, right? And there's definitely prophets. So we were talking on Twitter just last week. Gavin Adresen, like he, he tweeted something about Ethereum. He's clearly a fan. And we said, hey, Gavin, yeah. And he, by the way, for folks who don't know, he's one of the OGs. He's like, he was like.

• 49:14David Hoffman?

  The third guy, second, no, he was second.

• 49:17Ryan Sean Adams?

  Right. It's like Satoshi.

• 49:18David Hoffman?

  Satoshi handed off the kings of the kingdom to Gavin.

• 49:20Ryan Sean Adams?

  Right. He was like, he was like, you're the number one, like, you know, continue this without me. I've got other things to do. So, but, but. We said, Gavin, you should come on the like podcast, come on bankless, let's talk about bridging Bitcoin and Ethereum. The very first, you know, tweet after that, when they got the most likes from the Bitcoin community. Somebody goes, no, Gavin's not, not a Bitcoiner, like.

• 49:44David Hoffman?

  He's not a Bitcoiner anymore.

• 49:45Ryan Sean Adams?

  No, he failed the purity test, right? Like he's, he's out, he's ostracized. It's like, it's like the, it's like the church. It's like a religion saying like, you no longer believe the canon of acceptable beliefs. Therefore, you're, you're out.

• 49:59David Hoffman?

  You have to keep everything pure. You have to keep the faith pure.

• 50:03Ryan Sean Adams?

  You have to keep it so, so, but you know, that's both a, I think a weakness, but also weirdly a strength of Bitcoin.

• 50:11David Hoffman?

  Huge.

• 50:11Ryan Sean Adams?

  Okay, so.

• 50:14Ryan Sean Adams?

  So you're saying

• 50:14David Hoffman?

  A limit on its scale, however, you cannot scale the Bitcoin community that way.

• 50:19Ryan Sean Adams?

  Why? Well, because you need a whole bunch of people who are going to like be dogmatic enough to

• 50:24David Hoffman?

  Exactly, yeah, and then be the followers to believe in that. But I want to make a distinction because you don't need the Bitcoin blockchain and the growth of the Bitcoin blockchain can be independent from the growth and scale of the Bitcoin community. So the Bitcoin chain can still grow and serve the needs of the world. It's just the Bitcoin community can't scale because of how dogmatic it is.

• 50:43Ryan Sean Adams?

  Yeah, if I if I hold Bitcoin, I don't have to be a maximalist who believes all of these things, right?

• 50:49David Hoffman?

  You don't have to be a dead hell.

• 50:50Ryan Sean Adams?

  I don't have to be, I don't have to be, I don't have to be a dick.

• 50:57Ryan Sean Adams?

  I can like, but I can just hold it, right? It's like, it's like independent of that, but so, but you think that's interesting. Do you think Ethereum would be better off if it injected a bit more religion?

• 51:09David Hoffman?

  Yeah, um, maybe, perhaps, I kind of like Ethereum where it is.

• 51:15Ryan Sean Adams?

  But does that limit its, you know, here's, here's a counterpoint, does, but actually, does that limit Ethereum's scale?

• 51:22David Hoffman?

  I don't think so, because I think in the same way that nation states eventually assumed religion, that like the fundamentals of Ethereum will eventually take over the role of faith, right? And what you and I have been doing, and all the people that have been like ETH is money, ETH is money, ETH, ETH value go up. We have been trying to get the fundamentals based side of Ethereum to like be a little bit more religious. But at the same time, I would rather lead with fundamentals because fundamentals are facts and facts you cannot disprove. And so I put facts above faith all the time. And I think the, the, the, the doing that in your crypto nation is also the right way to do things.

• 52:04Ryan Sean Adams?

  Well, we'll see. I mean, I do think that these are these these kind of different visions and different experiments that are that are playing out. And, you know, Nassim Taleb has talked about the value of an intolerant minority. That's very much what I see in their ability, by the way, it just takes like one to 3% of the population to be an intolerant minority to like, bring about major change.

• 52:25David Hoffman?

  Right.

• 52:26Ryan Sean Adams?

  As long as

• 52:26David Hoffman?

  They're allowed, right?

• 52:27Ryan Sean Adams?

  Because they are allowed, they are steadfast, and they are immutable. They will not change. And in some ways, oddly, though I can't get there, like, because it's just not how I'm wired. Oddly, that's a weird strength for Bitcoin. And, you know, it's something I'm just in the process of wrapping my head around, but I gotta see how it plays out. David, I think we hit all three subjects, man. This has been a good first State of the Nation.

• 52:52David Hoffman?

  First State of the Nation. State of the Nation is bullish.

• 52:55Ryan Sean Adams?

  All right. So what are we doing? State of the Nation is bullish. We're going to be releasing this every Tuesday, sometime during Tuesday. And then when's it going to come out on the podcast? We're going to put it out Wednesday, Thursday?

• 53:06David Hoffman?

  Yeah, let's, we can do it, let's do it Wednesday, Wednesday morning.

• 53:11Ryan Sean Adams?

  That's great. That's it. That's it. State of the Nation, guys. Your one action item, we went over that comp opportunity. We will include that in the in the show notes, so you can take a look at how much you can make in comp tokens right now by depositing some assets. This has been Ryan Sean Adams, David Hoffman, signing off, State of the Nation, episode one.

• 53:33David Hoffman?

  Fantastic. Thanks.

• 53:35Ryan Sean Adams?

  Thanks.