SotN#7 - EXPLOSIVE, Special Guest: DARYL LAU (YFI TOKEN MAGIC, ETH PUMPED, DEFI RISK)

STATE OF THE NATION #7 - Tuesday, July 28, 2020 Watch on the Bankless YouTube Channel https://www.youtube.com/c/bankless The State of the Bankless Nation is.... EXPLOSIVE! The bankless boys discuss why. Plus a special guest... Daryl Lau https://twitter.com/daryllautk a YFI token governor! ----- GO BANKLESS WITH THESE SPONSOR TOOLS: 💸 ARGENT - BEST ETHEREUM WALLET FOR GOING BANKLESS https://bankless.cc/argent-SOTN (we love it) - open one today https://bankless.cc/argent-SOTN! 🌈 AAVE - LEND & BORROW YOUR CRYPTO W/O A BANK https://bankless.cc/aave - earn some interest! 💳 DEVERSIFI - DECENTRALIZED EXCHANGE FOR PRO TRADERS https://bankless.cc/DeversiFi - use this exchange! 💸 AMPLFORTH - MONETARY EXPERIMENT FOR BASE MONEY https://bankless.cc/AMPL-MINE - learn about this experiment! ----- Covered: TOPIC #1: YFI TOKEN MAGIC - w/ Daryl Lau TOPIC #2: ETH PUMPED TOPIC #3: DEFI RISK Announcements: Something big is coming next Monday! MINTING WEEK for Bankless Badges https://bankless.substack.com/p/claim-your-bankless-token-badge-801 (new Minting on Aug 1) We show: YFI chart https://www.coingecko.com/en/coins/yearn-finance (craziest thing I've seen) yEarn total locked value https://defipulse.com/yearn.finance yEarn Governance https://gov.yearn.finance/ Article on YFI by Daryl https://insights.deribit.com/market-research/yfi-a-tale-of-fair-launch-governance-and-value/ --- Episode Actions: Just one - Keep leveling up weekly https://bankless.substack.com/p/-guide-1-starting-with-bankless! Also...subscribe to Bankless YouTube https://www.youtube.com/c/bankless to watch State of the Nation every Tuesday! ----- Don't stop at the show! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Visit the official Bankless website for resources http://banklesshq.com/ Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState Follow DeFi Dad on Twitter https://twitter.com/DeFi_Dad ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

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

• 0:01Ryan Sean Adams?

  All right, everyone. Welcome to episode seven of State of the Nation. So what we do on State of the Nation is we talk about what's happening in the nation. I'm talking about the Bankless Nation, of course. We related to big picture stuff and then we drop some insights and action items. This show comes out on YouTube because we like to show the visuals when we can. It's all about the visuals, seeing David's face, seeing my face, seeing our special guest's face, being able to peek inside the graphs and some of the analytics behind the things that we're talking about. And we leave you with a list of resources in the show notes to check out. So this comes out on Tuesday. So it's Tuesday when you're watching this on YouTube. You get it earlier when you subscribe to the channel. Make sure you do that.

• 0:46Ryan Sean Adams?

  And then we release it on the Bankless podcast stream on Wednesday, so you can catch it via just audio that way. David, how are you doing today, sir?

• 0:58David Hoffman?

  Absolutely fantastic. The Bankless Nation has a lot of energy in it. And so it's been absolutely wild seeing that energy grow. And there's also just a ton of energy, not just in the Bankless Nation, in greater Ethereum, and even in the greater cryptosphere at large. Lots of energy to talk about, so lots of topics to get through. We have, yeah, like you mentioned, we did bring on a very special guest to help us dissect where some of this energy is coming from, but we will get to that later.

• 1:28Ryan Sean Adams?

  Yes, yes, the secret intro. All right, before we do, and before I ask you the question, David, so get your, get your answer ready, sir. We should talk about our fantastic sponsors. I want to start by telling you a little bit about Argent. So Argent is a smart contract wallet for Ethereum for all of these DeFi criticals, these money Legos that I personally use. David uses it. Everyone I know in the Bankless community uses this wallet in some form or fashion because it is just drop dead, simple to use. You get easy access to AVE, you get easy access to Compound, Pool Together, Kyber, token sets. You can do all sorts of things with it. It's secure and easy to use. So this is actually

• 2:10Ryan Sean Adams?

  A great entry wallet for your friends and family. This is like a Venmo type experience. It's all mobile. There's no seed phrase involved. You can even set up social recovery, which is key. It's non custodial, most importantly. So this thing is ultimately bankless. You can check it out at the link that we will include in the show notes, or you can go to argent.link state for a state of the nation special deal. So that's argent.link state and check that out.

• 2:41David Hoffman?

  AVE is a borrowing and lending platform on Ethereum, definitely responsible for a decent chunk of that energy that I was talking about. So if you want to supply collateral and earn an interest rate, AVE is the place for you. If you want to borrow assets to participate in yield farming, liquidity mining, all of that energy, AVE is also the place for you. And developers who are are leading the charge, you can check out their flash loans protocol, where you can borrow any amount of assets with zero collateral, so long as you pay it back in the same transaction. There's a lot of potential here with money Legos. There's the ideas and ideation that we can go to to think about how you can leverage this thing is endless.

• 3:25David Hoffman?

  So developers, check them out. You can go and find out all about AVE at ave.com. One of my favorite features about AVE is their stable interest loans, which is such an important thing to be able to replace the existing financial system with bankless financial systems. Stable interest loans help people think in the long term. They help businesses make business decisions, and they just will help the bankless nation go faster. AVE has just been climbing the charts with on on DeFi Pulse with value locked up in their contracts. So rip roaring success. So tip of the hat to them for for everything that has happened to their protocol in the last few months. So check them out at ave.com.

• 4:07Ryan Sean Adams?

  All right, David, we've got some exciting things happening just in the Bankless Nation that we should maybe start with before I ask you the question. We had Joey Krug podcast that we released yesterday that was absolutely fire. And I say that this all the time, but it's one of my favorite podcasts that we've done. We've got Eric Voorhees coming tomorrow. So that's going to be exceptionally interesting. Eric, of course, is, you know, he's came from Bitcoin, but he's non-trivial and he's very interested in things that are getting built in this bankless landscape. It's also Mint Week for the Bankless Badge. So Bankless Badge, if you've been keeping

• 4:47Ryan Sean Adams?

  track, is something that we issue to Bankless members, give some unique privileges and rights within the Bankless ecosystem. We'll include a note there. And then, David, we've got something, something coming next Monday, right? I, you know, I don't want to talk about this too much. Maybe you should take over from here. What's happening next Monday?

• 5:10David Hoffman?

  Yeah, so, you know, the crypto land is, has fertile grounds, right? The Bankless Nation is fertile, lots of green pastures. That's why we're so excited about this. There's lots of things that are potentially awesome things to do. And so we found one, we think, and so that's coming. A brand new wing of the Bankless Revolution is coming to the Bankless door.

• 5:34Ryan Sean Adams?

  I'm super excited. Next Monday is gonna be awesome. And you find out about it first because you are tuned in here on Tuesday, next Tuesday. Make sure you catch that episode. We will show the big reveal then. David, let me ask you the question. What is the state of the nation right now, sir?

• 5:53David Hoffman?

  The state of the nation is explosive.

• 5:56Ryan Sean Adams?

  Okay.

• 5:57David Hoffman?

  Which is, which is, you know, is kind of a dangerous word to say in the world of cryptography and smart contracts, but yeah, right now it's a controlled explosion.

• 6:07Ryan Sean Adams?

  Okay.

• 6:07David Hoffman?

  So hopefully we can continue to control it. I kind of see it as like a slow motion explosion.

• 6:14Ryan Sean Adams?

  Is it controlled explosion? Is that a demolition? Is that it?

• 6:19David Hoffman?

  Hopefully not a demolition. We're paving the roads with explosives. And so that's what we're doing. Hopefully, everything goes right. But you know, Ether has been in this long, drawn out bear market. It's been hitting this descending line over and over and over again. And it finally broke through it just on the 22nd of July. And there seems to have been this massive pent up energy in the ETH price. And it seemed to have been kicked off, like, like some people have been saying, by like, the DeFi mania, which got kicked off by comp. So, so people have been saying this for a while. The comp token, new paradigm of tokens, that all of a sudden, there's more of them. All of a sudden, there's liquidity mining. All of a sudden, there's yield farming. All of a

• 7:01David Hoffman?

  sudden, people get it. DeFi tokens go wild. Our previous State of the Nations were bullish, and then, and then exponential, and now it's explosive. I think that these State of Nations have been pretty damn accurate with describing what is coming.

• 7:16Ryan Sean Adams?

  Dude, we'll get to that. Because last, last Tuesday, I feel like you called it, man. I feel like you called it. But we'll get to that. All right. So explosive. That's what's happening. But not explosive in a bad way.

• 7:26David Hoffman?

  Well, I'm leaving that on the table for what is, what is potentially explosive. But right now, like, values of things are going up, like, really fast. And it's so far, it's a good thing. We're, we're successfully controlling the explosion. But, you know, there's always risk. There's always risk.

• 7:41Ryan Sean Adams?

  Yeah, absolutely. And I think we'll get to the rest, too. But let's talk about some of that explosive behavior. Again, explosive, we think, in a good way. But we brought on a special guest to tell us a little bit more about a DeFi asset that I think is super unique, something we haven't seen before. And it's called YFI. If you've been tuned into Bankless Newsletter, even our podcast earlier this week, we talked about it. And we brought on Daryl Lau, who is a writer in the space. He's a researcher. And he wrote, I think, the best article that I read this week on YFI. He's also a, I don't know if you'd call this like a core governor of the

• 8:25Ryan Sean Adams?

  protocol. Daryl, how's it going? There, there he is.

• 8:30Ryan Sean Adams?

  Great to see you. Thanks for all your work in YFI. You know what my first question is? Is what is this thing called? Is it iffy? Is it gify? Is it YFI? Is it wifey? Like why? What are we calling this thing?

• 8:49Speaker 02

  So I personally been calling it wifey. Like I've got it wifey to like three or four people right now on calls.

• 8:56Ryan Sean Adams?

  Okay, it's wifey then. For the rest of the episode, David, we're going with wifey.

• 8:59David Hoffman?

  All right, I'm gonna have to relearn that.

• 9:03Ryan Sean Adams?

  Where should we start with this? You know, David, so like, should we just talk about like what it actually is? How it came about? Like what the products are?

• 9:12David Hoffman?

  Yeah, that's kind of what I struggle and why I want to bring Daryl on to help us describe this. Where is the beginning of this whole project? Like where does it start at?

• 9:24Speaker 02

  Yeah, so I guess it started in early this year where they launched Andre Conde, the developer. He launched this protocol where it's a yield aggregating, aggregate a protocol. So basically what it does is that it chases the best yields across the YDX compound and AVE. So let's say, let's say compound is giving like about 10% APR and AVE is doing like about 15% APR. Obviously, you want to move your funds over to AVE for that. So what the iron did was that it automated the whole process. I made it a lot easier. So yes, have to put your money inside and then you'll get, you'll know that you get the best yield possible at that time.

• 10:05Speaker 02

  So that was all part of the whole project, I would say. Then it worked, it worked quite well. It worked quite well, got about eight million AM. And then in, I think March, in March, there was this whole drama about Andre having holding the entire admin keys for everything. So like quite a few people on Twitter attacking him, saying that he shouldn't have all this stuff. And then he decided, and at that time, he didn't, he couldn't even afford the audits because they were quite pricey. I think it was like 50K to 100K at least. So he decided to like decentralize the whole thing, give burn that admin keys away and then from there he stopped, he stopped working on it because it was at a time the project, the whole product was complete like

• 10:50Speaker 02

  yeah, all the features you could ask for, it automated rebalancing, it had the best yields and had the most AUM cost for the other projects that are doing the same thing. So yeah, then in more recently in about the last month, he came back from self like he's decided to launch new products like Y swap, I leverage, I trade on all kinds of new DeFi products, all leveraging, leveraging on top of existing building, same money that goes on that exists today.

• 11:24Speaker 02

  Yeah.

• 11:24David Hoffman?

  So Daryl, Andre, some people are calling him the Satoshi of DeFi. Who, who is this guy? What do we know about him? Why are they calling him that?

• 11:36Speaker 02

  So I guess the, the comparisons with Satoshi of Satoshi and Andre now is because that Andre decided to do a completely fair launch. Like he didn't, he didn't mind any tokens by himself. He didn't have any token allocated for a team, for a team or any pre-sale or whatsoever. He just decided that I'm going to launch this protocol. Everyone has same rules and that's start basically. That's the start. Like anyone could, if you read the post at the announcement, you would have been able to start mining immediately with, by providing tokens. And there was nobody else that had a hit start, a hit from you, except if you read it earlier. So yeah, yeah, sorry.

• 12:17David Hoffman?

  Yeah. So this is one, one thing that we talk a lot about on, on bankless where like the, the compound token like went public in a way faster rate than what like a traditional company would have gone public on a public stock market, right? So there's one or two rounds of funding and then there's liquidity mining. And that liquidity mining is the way that in, instead of going public on the public stock market, it goes public on Ethereum via liquidity mining. But what, what Andre did with, with the wifey token is he just went straight public because he didn't have to worry about minting anything. He didn't have to worry about securities issues. He didn't have to worry about anything because he went straight to the liquidity mining first. And so that's why this is so incredibly elegant. He didn't mint any himself. He just went straight for liquidity mining for instant.

• 13:01David Hoffman?

  There was no instance of this token not ever being public. It was public first, which is absolutely insane.

• 13:07Ryan Sean Adams?

  And he also didn't take any for himself. So how can they blame him? And he said it was valueless, if I'm recalling correctly.

• 13:13Speaker 02

  Yep. So in his blog post, he put that the fair value for the token was zero because there was no sale whatsoever.

• 13:21Speaker 02

  Does no one buy it, earn it? That's why he said in his blog post.

• 13:25Ryan Sean Adams?

  All right. So you know what I think is a, an interesting thing for our audience to see is um the thing that Andre called valueless. Let's take a look at the value of it. So Daryl, so first of all, let me just say um in all the time I've been in crypto, I've never seen a chart that looks like this. You know, we've seen some pretty crazy charts, right?

• 13:51Ryan Sean Adams?

  So when you were talking about the, the announcement was made, was that on a Saturday? Saturday the 18th?

• 13:57Speaker 02

  It's on Saturday. Yeah.

• 13:58Ryan Sean Adams?

  Okay, so this valueless.

• 14:00David Hoffman?

  That's when I was camping.

• 14:01Ryan Sean Adams?

  That's when David was camping in the mountains. He missed all of it.

• 14:07Ryan Sean Adams?

  Yeah, never take vacation in uh in DeFi. That's, is that what we're learning from?

• 14:12David Hoffman?

  Yeah, I would have been a richer man, but it turns out.

• 14:13Ryan Sean Adams?

  Yeah, okay. All right. So, all right. So a valueless token, he said you've got to earn it. So people started earning it. But what they did, of course, some of them, a subset of them, um traded a market for this. And because Ethereum is a global permissionless system, they listed on exchanges like Uniswap and Balancer and that sort of thing, right? So we start at a price of $34, okay? And then, wow.

• 14:39Speaker 02

  Well, it actually started at $3.

• 14:41Ryan Sean Adams?

  $3, okay.

• 14:44Ryan Sean Adams?

  Okay, all right. So this is like the earliest CoinGecko reports is uh $34, but this started at $3. All right. So uh and then, and then we're traveling up here and then look at this, like this is just crazy, crazy, right? So we top out at least locally, one week later at $4,500. So if you're saying $3, right, we're talking over in a thousand percent gain in seven days?

• 15:15Ryan Sean Adams?

  Okay, like, if you showed this chart to anyone outside of like crypto, they'd be like, okay, that's a scam. What's the scam? So let me ask you, Daryl, what is the scam here? Is there a scam?

• 15:29Speaker 02

  I guess basically like a lot of people are talking about how the token was considered cheap comparative to the total value locked. So the whole point, the whole theory is that the, any token, any governance token should be able to command a valuation such that is higher than the total value locked protocol. Otherwise, it could be, otherwise it could be easily manipulated and anything like that. But at the same time, like, everybody wanted to get more Wi-Fi, so they kept depositing into the protocol. So prices kept going up, higher and higher. But yeah, it reached about a 400 million total value locked. At the peak, around 450, 400 million.

• 16:08Ryan Sean Adams?

  So this is the total value locked?

• 16:10David Hoffman?

  Before you talk about the total value locked, if you could go back to the price chart, you said that you've never seen a crypto chart like this. And I actually think that you're wrong. I think you have seen one crypto chart like this before, and that's Bitcoin. That's what, exactly, this is, this is so, it's so-

• 16:24Ryan Sean Adams?

  Not in a week, though.

• 16:26David Hoffman?

  Not, not, not in a week. That's totally true. And different timeframes, because like, what we're talking about is like, the token value started at zero because they didn't have a market for it. And then over, and so that's why this thing is so incredibly exceptional. Like Bitcoin also started at zero because, and that's why we're calling Andre, like the Satoshi of Ethereum, because it started in the same way where you can only earn it. There was no pre-mine. And that's why this token value started at zero. Because, and so like, the pricing of Wi-Fi has only come from people buying it on the secondary market and not any sort of like perceived valuation.

• 17:02Ryan Sean Adams?

  It's a great point. Like, I do think, obviously, the time horizon, this is super compressed. This is seven days. Bitcoin did not do that. But at the same time, Bitcoin did not have permissionless markets to list on, right? Like, it didn't, it, what, how could it list? It couldn't list, it couldn't list anywhere. There were no-

• 17:20David Hoffman?

  It first got evaluated by like, two pizzas.

• 17:23Ryan Sean Adams?

  Exactly. But now we're in DeFi world, and you list something like this without any founders, and immediately there's an exchange, permissionless. Don't have to ask anybody, don't have to pay an exchange fee, it's there. That's probably why price discovery happens a lot quicker. What do you think about that, Daryl? Is that, is that sort of the right analogy here?

• 17:42Speaker 02

  Yeah, I think it's perfectly fair like we started off with it's a little bit near zero valuation and then just pop up from there from free market valuing it so much higher than it should be.

• 17:53Ryan Sean Adams?

  And yeah. And you were saying it sort of traveled the the total value locked, right, which is become kind of a metric for relative pricing between various DeFi tokens. So explain this chart. Okay. We've got that Saturday. Let's see, the Saturday was the 20 what? Let's see.

• 18:15Speaker 02

  Twenty first.

• 18:17Ryan Sean Adams?

  Saturday was the 18th, right? So on Friday, there was nine million locked.

• 18:25Speaker 02

  Yeah. Right before the launch.

• 18:29Ryan Sean Adams?

  Okay. And then by Saturday, we've got 62 million locked. And then a week later, we've got 330 million locked. You said this topped out near 400 million locked. What? What's going on here? Why all this, this fund, all of these funds is, you know, starting to pour into the the Wi Fi protocol?

• 18:50Speaker 02

  So I guess at the start, very start of the Wi Fi mining, like when you're trading around 20 to $50, the APR you would get for it was about 500% at least. So areas of the areas of the piling in and still buying out Wi Fi, buying out Wi Fi to get the, in order to get some of the returns, which made the price go up even higher and the returns are going up even higher. So at one point it was about 2000% APR. At the very first or second day. So like when you saw the large price, the large price increased from 50 to 1,000, something. It was about 1,200, 2,000% APRs. So that I think if you break that down, break that number down, it's about 5% a day.

• 19:36Speaker 02

  If I'm obviously good. Yeah, 5% interest per day on your stable coins.

• 19:43Speaker 02

  Yeah.

• 19:44David Hoffman?

  And so this is just to distribute the YFI token, right? And this is how people got their hands on it. And so we see that massive explosive rise in assets locked in the urine finance protocol. But then it then it's also fell off. It fell off a cliff, so it hit almost 400 million and now it's back down to 100 million. So where did all that go?

• 20:07Speaker 02

  Look, basically, the whole distribution was based off 10 K tokens distributed 10 K tokens distributed in each pool for one whole week. So there were about those triples, those triples. And basically, the last, the last of the triples ended their distributions, distribution yesterday. So that's why the whole total value drop dropped quite a bit.

• 20:31David Hoffman?

  Okay, so let's go. Yeah, let's go into that a little bit more. So there were 10,000 YFI tokens in three different pools, 30,000 YFI tokens total.

• 20:41Speaker 02

  30,000 total, yeah.

• 20:43David Hoffman?

  30,000 total. And so, and these pools, you could liquidity mine these pools at different times, right? So the first pool would run out and I would start the second pool and then the third pool. Can you explain what these three pools are and why they came in the order that they came in?

• 20:57Speaker 02

  Yeah, so the first, very first pool is basically that using the YN protocol where basically you, when you provide liquidity tokens, you get a share token in return. So this share token is about somewhere around a dollar stable because it's based on the stablecoin. So then all you have to do is just stick that token into, stick that token into the governance contract. And that was it. So you get your mind some YFI tokens based on the time that you have stayed inside the protocol relative to the share of your tokens. So let's say if you had 100 K, for example, and the pool only had 1 million, you get 10% of all the YFI tokens at that time. So that was the first, that was the very first pool. Then I think the second pool launched like a few hours after that.

• 21:43Speaker 02

  Well, basically a balance of pool incentive program. So you, if you provided 98% die and 2% Wi Fi tokens. As a liquid provider on balance, so you would get the balance of the token for it. So that, as then you just think about the token to get a share of the Wi Fi tokens. So that that's cool and that's cool too. Then again, about two or three days, two days after that, those two pools launched. They launched the governance taking contract. So what, what it does is that basically they wanted to incentivize voting, voting on the platform. For governance decisions like the inflation schedule as well as the burning of thinking, which I can get into later. Essentially, they just wanted to incentivize voting.

• 22:28Speaker 02

  So what it did was that you have to, you have to supply liquidity to a balance of pool of 98% of the Y, YCRV token.

• 22:37Speaker 02

  And 2% of Wi Fi token. So then you get a balance of token and you stick it there. Yeah. So that, those were the three pools that were launched. And those are the three initial distributions of Wi Fi tokens for, yeah, for the whole of the decade.

• 22:52David Hoffman?

  So the way, the way I've been, I described this in my mind is like, this is like the tutorial of like some video game. Right. Where like your user is like going through these steps to learn how to use the system. And then they're also, and as they progress through the tutorial, they're getting like the equipment that they need in order to play the game. Right. And so the first step is to provide a stable coin liquidity to the, the urine protocol, which gets you the Yippee token. And so that's like, you got your shield, right? Like first step, you got your shield. And then you go into the next pool and then you supply the, the Yippee token to the balancer pool. And then that's the second pool of Wi Fi tokens that are distributed out of the 30,000, now there's 20,000. So now you've got like your sword.

• 23:35David Hoffman?

  And then if you're ready to move on to the next product, the, the final step in the tutorial, which is a learning how to govern the protocol, which is staking your Wi Fi tokens to the urine. Governance portal, so that now you have your armor. So you have your three things. Now you're ready to play the game. And then that's also how the Wi Fi token was distributed. And so it's like, it's both like fostering a community by showing them what they need to do in order to earn, because these three things also come about as to why this thing is valuable at all later, after all these tokens are distributed. And it's also showing like the community how to do the thing. And it's also distributing the Wi Fi token all at once. I thought it was genius. It's like the scavenger hunt on Ethereum where you have to go do all the things so you can get the Wi Fi tokens.

• 24:18Speaker 02

  Yeah, it was perfect. It started incentivizing users first and then incentivizing holders. And the third pool is just genius. It's incentivizing everyone to actually actively participate in actively participate and as well as reward them with all kinds of incentives like Wi Fi, CRV and other tokens.

• 24:39Ryan Sean Adams?

  So Daryl, we were talking about the market cap and the market cap right now is of of Wi Fi is based on a set supply of thirty thousand. Can you, that sounds like a fixed cap, right? So I guess maybe another Bitcoin analogy. But the difference is this can be changed via governance. Can you talk, I know you've been involved from the very beginnings in Wi Fi governance. Can you talk about why the thirty thousand cap? And some debate around that and how that sort of thing is decided?

• 25:14Speaker 02

  So right now, the thirty K cap is just basically from the distribution that's already happened. So thirty K, thirty K was the max limit and then it stopped there. So the discussion after that was how do you want to incentivize future books? Right now, if you, if you were to maintain the same schedule as before, they'll be giving out like more than fifty million dollars in tokens in a week. So that's not, that's obviously not sustainable. So basically, the community decided to vote for it, like what kind of inflation schedule makes sense? So yeah, I wrote the first, I would say the first proper inflation schedule. Where I decided to use a synthetic model, so about a hundred fifty percent inflation rate.

• 25:57Speaker 02

  And over a period of years, we had a trailing inflation. So the problem there was that synthetic started off the inflation schedule because very high because they wanted to attract users. And the difference between Wi-Fi is that Wi-Fi has already attracted all the users.

• 26:13Speaker 02

  We were attracted 400 in a without

• 26:18Speaker 02

  without much marketing, just the height of the returns. So really it wasn't about the attracting users, it was really about incentivizing users to stay on.

• 26:27Speaker 02

  So the the community like substrate and Delta Tiger, for example, who designed the original statistics invasion monitor policy. They decided to take a spin at it themselves. So they decided to work out around a 22% APR, 22% efficient rate, we should cap the supplier at 50K instead. So that's still being discussed on with the community, but I think I'm going to launch the on-chain protocol, on-chain vote for that soon.

• 26:52David Hoffman?

  Okay, so we've been talking a lot about the Wi-Fi token and how it's gotten distributed in the different mechanisms as to how that came about. But we, I, I think we kind of, we haven't yet talked about like what the urine protocol actually is, like what does it do? And so why is everyone so incredibly excited about this protocol? Like what is unique about the actual system that has been developed, which of course then finds itself in the valuation of the token? But what is the urine protocol? What does it do for its token holders?

• 27:23Speaker 02

  Look, there's basically two parts to this. Like for example, if you're a Wi-Fi holder, you would get complete, you would get the balance and governance of the protocol. And then there's also the fact that you can get a claim to the reward, to the fees distributed to the protocol. So while it has a bunch of different products launching, the first product was the iron yield aggregator. Then there's a few other products launching like the leverage stablecoin swap. And leverage stablecoin yield farming protocol and a couple more upcoming. But yeah, so these are all different products, all based off of existing D5 protocols.

• 28:01Speaker 02

  But Andre just made his own spin on things like a single, a single asset, asset AM, for example, that you can see in balance, you can see in bank or and a few other projects that are launched. So Andre took his own spin and it and launched it instead, I need to launch it instead.

• 28:18David Hoffman?

  So why? So go ahead. No, keep going. And then I want to ask you a question about Andre.

• 28:24Speaker 02

  Yeah. So Wi-Fi holders, if you voted in protocol, for example, you would get a claim to the fees.

• 28:31Speaker 02

  And that's about, I think it was about 60K in fees alone for the first week.

• 28:36David Hoffman?

  Wow.

• 28:36Speaker 02

  So that was about, yeah, so that was about 10% return on a token, which was like 1,000 at a time.

• 28:43David Hoffman?

  Okay, so there's this yield farming mania that's going on. And what the urine protocol does is that it creates this products to make it easier to yield farm. Right. It makes it more formulaic, more algorithmic, so that you don't have to like pull out your calculator and find out what is the best returns. You can just deposit your assets into the urine product and it will do that for you. And then, and then the Yiffy token is this governance token that slash cash flow ownership token. Because just like compound, just like balancer, it's a governance token that governs over the cash flows. And so what Yiffy is, is this token that is farming the farmers, right?

• 29:25David Hoffman?

  And so it earns the fees that some of the farmers are earning the fees as well. So like people like me, I didn't really participate in the yield farming thing, like, you know, kind of over my head. I'm kind of way too busy, but now I can just buy the the wifey token and I can farm the farmers. Right. And so like, there's this three tiers of things where people are submitting. There, there, people are leveraging long ether by depositing ether into compound. They're borrowing dye and then they're buying more ether. And then maybe they're also sticking that to compound and then they're earning the earning the comp token. And then those are just, that's like tier one, right? That's just normal, normal people like my friends doing this, like this is just the the basic activities on Ethereum. And then there's people who are doing this with the intent to actually farm comp, right?

• 30:10David Hoffman?

  Or the intent to actually farm balancer. And so they're going recursive, trying to find the best rates. They're borrowing back, even though they don't care about that. They're borrowing like tether, even though they don't care about tether, because they want to farm comp. Right. And these people are using their calculators to try and find out what the best yield is. And so that's like tier two, right? And now tier three is you just submit your assets into the Yiffy protocol, the wifey protocol, and it does it for you. Right. And you don't have to do your calculations, which is also fantastic, by the way, because then you don't have to pay for gas. Because the the wifey protocol just pays for the gas for you. So you're already making more money that way as well. And then like tier four is just the the wifey token itself, where you can just like buy the wifey token. You don't have to worry about all these things. Did I get that right?

• 30:55Speaker 02

  Yeah, that's perfect. Like Andre, when he first developed all the protocols, he decided that I'm making all this so to make my life easier. Like before this, everyone was manually doing, checking your competitors and stuff like that, changing, changing products, products depending on rates. So Andre just made this protocols to make his life easier. And if you want to use it, you can use it.

• 31:17Speaker 02

  That's basically his entire logic.

• 31:20Ryan Sean Adams?

  Can I kind of make a, I guess, a comment here or a couple, a couple of things that kind of pop into my mind as you guys are describing this? And David, I think that was a great explanation. That was like a deeper level than I think I understood it going into this. Well done, sir. So, okay.

• 31:36David Hoffman?

  One of my abilities.

• 31:37Ryan Sean Adams?

  Yeah, so two things. So two things here. First, I am like in awe, amazed that one developer from his garage, to use the analogy, was able to come up with a DeFi protocol incentive mechanism like this that works and grow it to 80 million in value in seven days. Like, that is the power of Open Finance DeFi. It blows my mind. And I think that's incredible. I think this is a, it's a real capital asset, right? At the same time, I'm somewhat terrified in a way. Okay?

• 32:20Ryan Sean Adams?

  And, and here's why. So Andre is a fantastic developer. But he also makes no secret of, he tests in prod. I'm looking at his, his Twitter handle right now. He's like, I test in prod. That's the one thing you shouldn't do with smart contracts, right? That's the one thing, like, test in prod? No, Maker Dow, you formally verify that shit, you know? Like, what are we doing? Okay, so he tests in prod. Okay, so that's the one thing. The other thing is, what David just described, Wild Genius, does something that I don't necessarily love, which is it chases yields, right? So yield chasing.

• 33:02Ryan Sean Adams?

  Is okay, that's an efficient market. However, to look at the real yield, what you have to do is look at risk adjusted yield. So it's very easy to see which of these various protocols are throwing off returns and to formulate a calculation, say, I'm gonna, I'm gonna go in that one because it's the highest return. However, it's hard to assess risk on that side of things. So one thing I worry about a little bit on the like more macro side of DeFi with all of these kind of lending protocols, which I love, by the way, is that we get into a habit of chasing yields. And then like we, we're not looking at the risk of these. Some protocols have more risk than

• 33:45Ryan Sean Adams?

  others and we get trapped, right? Something catastrophic happens and it's a great unwinding. And a lot of people who weren't aware of the risks are now pissed off and, and you know, kind of tainted by it. Yo, I'm not saying Andre's responsible for any of that. I think this experiment is fantastic. I think the way he approached it is absolutely fantastic. And I think it's net super positive. But what are your thoughts on that, Daryl?

• 34:12Speaker 02

  So I guess the first, the first thought about testing in Pro, yeah, that's what Andre's been doing since the whole time he's been building the whole protocol. Like even before in January, when he was testing out Iron Protocol, he decided to launch it entirely on mainnet instead. So he burnt about thirty to fifty thousand dollars in development costs alone because he wasn't familiar with how you could fuck mainnet and launch your instance of it. So he burnt quite a bit there, but just testing out everything in mainnet. And yeah, it, it, he always does put this game on risk saying that there might be risk involved. Don't deposit all your money inside,

• 34:50Speaker 02

  you might lose it all, which is, which is still, I'll say, good to see. Like, some people just say, trust me, trust me, all your money, I, I am hundred percent believable, but that's not true at all. Like, I don't trust everyone hundred percent of my money. Then for example, I would say, I just bring up an example from two days ago, I think. Two days ago, he launched this, he launched this pool where you can deposit your USDC. And you're supposedly get the best rates, supposedly you'll fund for you across all the other protocols. And he didn't even say anything about the APR, because he didn't want people to just randomly deposit money inside. But in less than an hour after he launched the protocol, there's about a million dollars inside already.

• 35:37Speaker 02

  Yeah, so that's, that's the amount of crazy I would say that people are doing now to yield chase. Like I just depositing a million dollars or something that doesn't even have the documentation really written up properly yet.

• 35:50Ryan Sean Adams?

  And if I'm, if I'm correct, I, I'd seem to recall, recall that that thing that he launched, the new thing, actually had a fatal flaw in it. That was discovered by a talented smart contract research analyst, which on the one hand, it's awesome that the community is like self-funding and self, um, like doing these sorts of audits, but on the other hand, oh my God, right? People putting a million dollars in this thing and it's not even audited and it's just, he pushed it into, into prod without testing. Wow.

• 36:22Ryan Sean Adams?

  You know?

• 36:23Speaker 02

  Yeah, this like we spotted, we spotted the vulnerability pretty early on, like when he first launched it. But at that time, there was already about 300K, 300 to 500K inside of, inside it already. So he thought of warning everyone on Twitter and everything, so that's the vulnerability that might. But at the same time, like when we found the volume, we already told Andre about it, so he just fixed it almost immediately. Like, by the time the tweets were out, he already fixed it. He just hadn't updated the UI yet. But it's like, the unlinked market already fixed.

• 36:56Ryan Sean Adams?

  So there's, there's a conversation here that I want to get into where one of the beauty, one of the beautiful things about the wifey token and the urine system is that, um, it doesn't depend on, it, it needs DeFi, it needs yield farming DeFi protocols in order to work, right? But it doesn't need any one particular DeFi protocol in order to work, like Compound could blow up.

• 37:17David Hoffman?

  And you know, Metastable could blow up and Balancer could blow up. But there could just be the new yield farming DeFi protocols that come and replace them that the Urin system could leverage, right? And so Urin isn't dependent on Compound. Compound can die and Urin can stay. Like Balancer can die and Urin can stay. And so one of the beautiful things about it is like DeFi itself can come and go, right? Like, we've seen different components of Ethereum like die off and be replaced. Like Ether Delta died and got replaced by Uniswap, right? And like, I think there's always going to be this replacement of protocols and churn over time as new innovations come. And the fantastic thing about Urin and the Wi-Fi token is that it will just be there

• 38:00David Hoffman?

  for these new protocols and it can freely plug in or plug out of these protocols as they come and go. So to some degree, you know, the contract risk of Compound doesn't actually impact the contract risk of Urin. However, there are parts of the Urin system that are completely dependent and can have to work and have to not blow up. Can you talk about which components of the Urin system? First off, obviously it's Urin itself, but like, I think also Curve needs to work and can't go away for the Wi-Fi tokens to work. Is that right? And can you kind of just go into what are the, what are the core dependencies of the Urin system?

• 38:42Speaker 02

  I guess for Smartcoin Darius side, for example, if, I don't remember, I don't know if you guys remember, but way back in, I think February or March, when there was this protocol called Deftos. So they basically, they basically fought Compound and there was this large vulnerability where they lost about thirty, forty million dollars, I think. So at that time, at that time when it happened, the IM protocol automatically stopped deposits into the system. Like, it didn't allow for any deposits into the system because it detected like a large, large amount of withdrawals and I'm there was on top of things to check it out.

• 39:19Speaker 02

  But if you talk about like risk adjusted, you would always be using the main protocols like YDX, YDX, Compound and AWE. So those are quite, I'll say.

• 39:33Speaker 02

  Quite good, quite good risk profile because they've been audited multiple times already.

• 39:39Speaker 02

  And I guess in call dependencies, iron doesn't really have much call dependencies. Like curve is just one interface to interact with Oracle. Like you could, or you could use the iron's main website itself to deposit and withdraw. Rather than using of, because it's just a popular interface to use.

• 39:59Speaker 02

  Yeah.

• 40:01David Hoffman?

  Fantastic. This is, this is so incredibly cool. One thing that this reminds me of is, is it feels like the Dow 2.0, right? Where like the Dow 1.0 was this system that could pool capital together. And like as a distributed set of governors could elect which protocols or which things to invest in. But like, at, at the time, it was way too early, right? There was like, people, I think people at the time of the Dow, I wasn't in Ethereum at the time of the Dow. But people were like, okay, we're going to invest in like equity in companies. And that's going to be part of the Dow, right? And like, that doesn't work, right? And they didn't even have a chance to try it. But like, it was very, it was very much skeuomorphic, right?

• 40:44David Hoffman?

  It was the wrong kind of system because it was just too early on Ethereum. But it was, it does resemble some of this early urine components where like, there's this pool of funds. And it's investing it into the greater ecosystem in order to get a return. And it's, the great thing is that it's got this formula to always make the same return. And it's, it's, it's a little bit like central in the sense that like, it's not a, it's, it's a product of products. Rather than just being one product, right? It's, it's like, it's, it feels like a very central token on Ethereum. Because the rest of Ethereum can come and go, like the edges of Ethereum can come and go. While the urine Dow can stay in the same place. And the reason why the urine Dow works is because there's actually things on Ethereum to do now.

• 41:29David Hoffman?

  Like in, in the 2016 Dow, there was nothing to invest in on Ethereum. Now the Dow model actually works because there's on-chain, you know, governance tokens. There's on-chain equity. Capital assets. This, yeah, on-chain capital assets, that's the right word. I know, I always use the word equity. I know that's not right, but it's good metaphor. But, and so like, this does feel like the Dow 2.0, like a re, a revamp of the Dow in a way that works. Is that a fair comparison, Daryl?

• 41:55Speaker 02

  Yeah, I would say that a Wi-Fi wired protocol is basically like proving how composable the entire define ecosystem is because it leverages off of everything you can see online right now, like it leverages off of compound, D Y D X, and builds up so much more things that you didn't know could exist prior to hundred, hundred years writing up something and definitely and just proving that it could work. So yeah, things can go and come and go, things can just die off. But why I'm pretty sure that Wi-Fi would stay just because of how composable it is and how central it is to the whole ecosystem.

• 42:32Ryan Sean Adams?

  So I want to, Daryl, this has been fantastic. I want to end with, with this. I'm going to share my screen one more time and let's take a look at the organic community here. These are, can you, you guys can see my screen? Yeah. These are, this is the governance board for Wi-Fi and the activity on here has absolutely blown my mind. Look at this one, 4.4, almost 5,000 views here on the issuance policy.

• 43:06Speaker 02

  That's about a good page views.

• 43:09Ryan Sean Adams?

  It's crazy. So

• 43:10David Hoffman?

  That's crazy because there's only four and a half thousand people that own the Wi-Fi token.

• 43:15Speaker 02

  Yeah.

• 43:16David Hoffman?

  Right now. That's crazy.

• 43:18Ryan Sean Adams?

  All of the, the, the, the tokens and projects that are doing kind of VC launches, they can't get a community like this. Like they would, they, they spend millions on, on sort of marketing and like B to B conversations and salespeople and slick stuff. And this is really what you need to pull a product off the ground. You need a grassroots, organic community. And to get that community, you have to reward them early and have a, have a founder's story and give them a reason to participate. And that's what I think is the magic behind, behind the Wi-Fi token, the Wi-Fi token.

• 44:00Ryan Sean Adams?

  Daryl, okay, so we actually put a governance proposal in here, didn't we, David? Somewhere?

• 44:05Speaker 02

  Absolutely.

• 44:05David Hoffman?

  Yeah, this is absolutely fantastic. It's going really well. So the governance proposal came as a result of like, we wanted to get Andre on the Bankless Podcast. And so I tweeted at him, Andre, come on the Bankless Podcast, and he didn't respond. And then 12 hours later, he sent out a text message saying, I've gotten a lot of requests for interviews. It's up to the token holders to determine if I go on an interview or not. Like, I live and die by the protocol. Like, the protocol determines what I do, which I think is a fun experience. Yeah, and so I immediately rushed to the governance portal and be like, should Andre come on the Bankless Podcast? Yes or no? We got 114 votes. I don't really know if he's going to force or request a actual on-chain vote with actual Wi-Fi tokens.

• 44:49David Hoffman?

  The yes-to-no ratio is like 95% yes, 5% no.

• 44:53Ryan Sean Adams?

  How can I tell? Can I see it here?

• 44:55David Hoffman?

  You would have to vote.

• 44:57Ryan Sean Adams?

  Yeah, oh, I have to log in. I did. I voted yes, by the way. I logged in and voted yes, because this was important to me.

• 45:04Ryan Sean Adams?

  I didn't vote no.

• 45:05David Hoffman?

  Yeah, so if you can speak for Andre, if he does end up coming on the Bankless Podcast, which, according to community sentiment, it sounds like he will be, if that's how he listens to the token. But can you comment as to why you think Andre wants to live and die by the token?

• 45:24Speaker 02

  I mean, it's actually, the token is like his baby, I would say. Like, he built the entire thing from scratch without much external help. Like, yeah, so it really is just like his baby. Like, he wants it to fully control his life, and then it's up to him.

• 45:44David Hoffman?

  Well, I hope he comes on. I think it sounds like he is, because 95% of people said yes. We'll see how that works out. I hope that we, as a community, I'm a Wi-Fi token holder. I hope we find a way to reward this man. Because he took none, no reward, and he definitely deserves something. So I think that's something I'm going to propose to the community.

• 46:10Ryan Sean Adams?

  Though, let me ask you, do we know that? So Satoshi definitely mined, right? So Andre did not take, but if I'm Andre, just being a rational actor, and I'm not saying like Andre's a different person than I am. I would not do things the way he did because he's like clearly doing this for altruistic reasons. But you don't think he liquidity mined?

• 46:31David Hoffman?

  Totally.

• 46:31Ryan Sean Adams?

  Maybe that's a question for the podcast.

• 46:33David Hoffman?

  Liquidity mined.

• 46:33Speaker 02

  He only mined about 200. I think he only mined 2 white feed tokens like he did earlier.

• 46:40Ryan Sean Adams?

  Really?

• 46:41Speaker 02

  Yeah, I only mined 2 tokens.

• 46:44David Hoffman?

  Oh my god. Yeah, you said at the beginning that like he's not like this wealthy crypto investor. He's not somebody that got rich off Bitcoin or Ether. So he didn't have like that much capital to deploy into his own system.

• 46:56Speaker 02

  Yeah, at the time like when Y and first launched, he broke, he was spending quite a lot of his savings just testing out Ethereum. It's testing out the entire protocol I made that, like I said, like, and he couldn't even afford the audits because they were so expensive.

• 47:09David Hoffman?

  Yeah.

• 47:10Ryan Sean Adams?

  All right, well, I take it back. I need to learn more about this Andre individual. Sounds incredibly interesting. I do hope he comes on the podcast and yeah, I would, I would log in and vote for a, for a reward for Andre. Certainly, I'm sure that he has tremendous community goodwill at this point, so that would probably have no problem passing.

• 47:30David Hoffman?

  Yeah.

• 47:30Speaker 02

  Yeah, so we're actually planning, we're actually planning for that. So like, one of the invasion schedules that we are passing through, about 75% tokens will go to the P providers, but 25% of the tokens will go to like a multi-segor now. And then from there, we're going to decide how much percentage you're going to stream back to Andre because he definitely deserves it. He definitely deserves some kind of developer funding or anything. But yeah, that's all we're planning on in the opens.

• 47:54David Hoffman?

  And I just think that's great because like, obviously, I think that's great because that's fair. But also at the same time, like it shows you that you can take, you can be like the Satoshi and you can take zero tax at the system. You can take zero founders reward and you can still get wealthy. Like if this does end up playing out, like I hope Andre makes like a million dollars. And a million dollars is half a million dollars, two million dollars, I don't know. But like, he can, he's still hopefully going to make a lot of money from generating this protocol. And the value that he returned to the community because he didn't take a founder's reward will be so much more. The total value created because of his actions is like 100x more than if there was like a VC backing this thing.

• 48:35Ryan Sean Adams?

  Totally.

• 48:36Speaker 02

  Yep.

• 48:38David Hoffman?

  Cool. Daryl, thank you so much for coming on the Bankless State of the Nation. We really needed the help in handholding, learning about the urine protocol. So, thank you for walking us through it and you have been a great guest. So, I appreciate it.

• 48:52Speaker 02

  Always happy to help. Just reach me out anytime.

• 48:55David Hoffman?

  Yeah, so if people want to find out more about you, like, do you want to share your Twitter handle? How can people reach out if they have questions?

• 49:02Speaker 02

  Yeah, just reach out to me on Twitter, @darlottk, @darlottk on Twitter. Then, I hang out a lot on the YN unofficial Discord and unofficial Telegrams. So, yeah, just tag me there anytime.

• 49:14David Hoffman?

  Fantastic. We will have your Twitter handle in the show notes, sir. So, thank you for your contributions.

• 49:20Ryan Sean Adams?

  Thanks, Daryl.

• 49:22Speaker 02

  Thanks, guys.

• 49:24Ryan Sean Adams?

  All right. Wow, that was insightful. That was a lot. Yeah. Dave, we should talk about our sponsors again, our second set of sponsors. So, why don't you start?

• 49:36David Hoffman?

  Yeah, so Ampleforth is one of our fantastic bankless sponsors. Speaking of things that have been explosive lately, Ampleforth is a new monetary experiment, which I just think is totally fascinating. It's one, I can't really think of any other M0 on Ethereum that's not Ether, other than Ampleforth, and that's where Ampleforth is trying to be. It's an experimental money, M0 on Ethereum. The way that it works is that as price changes every 24 hours, the token "rebases" back to closer to the value of 2019 US dollars. But in the same sense that, kind of in the same era as Bitcoin, it's non-dilutive, right?

• 50:19David Hoffman?

  And so, it will mint more or less, but into your wallets if you own them. And so, there's no dilution event. So, you will always own the same share of the ample currency, which is what makes it an M0, as it rebases up and down. So, the thing slowly tracks a dollar over time. It never completely tracks this dollar over time. It's not a stablecoin. But if I'm interested in how it becomes a DeFi-denominated debt, right? You will always be comfortable denominating debts in Ampleforth, unlike denominating debts in Bitcoin, because you don't know what Bitcoin's price is going to be in five, 10 years. But you know the Ampleforth price is going to be about a dollar in five to 10 years. So, that's why it's an interesting monetary experiment. So, you can check them out at ampleforth.com.

• 51:04Ryan Sean Adams?

  Very cool. We are in a 100 Gwei plus world and gas prices show no signs of going down. That's good from one perspective. It means Ethereum is being used a lot. But it's bad if you're trying to get a trade done. Diversify solves this. Diversify is a new class of next generation Layer 2 exchanges. It's non-custodial, so it's DeFi. It's secured by the Ethereum blockchain. They do some really cool things with rollups to do that. It's for serious traders. This, the experience with Diversify is similar to using something like Coinbase. So they can support 9,000 transactions per second.

• 51:46Ryan Sean Adams?

  They also have a governance token. That's very interesting. It's called NEC. It gives membership voting rights and it also gives discounts to Diversify traders. So take a look at that as well. NEC and Diversify started the original liquidity mining back in 2018. They've kind of perfected their exchange and their product and really excited to see you use them and for their success and to see Layer 2 DeFi exchanges thrive. Check them out at diversify.com. We will include a link in the show notes.

• 52:21David Hoffman?

  I've actually used the Diversify exchange and it is as lightning fast as advertised, right? And like the cool thing is, is like every time I make a trade, like I have to press a button on my ledger, which makes me feel good because it's non-custodial, right? Like I'm not just trusting somebody to do my order. I have to verify it first. So that just is fantastic. And like you said, it's like a centralized exchange experience, but it's also bankless, right? Because they will never, they can never do anything without your pressing of your ledger or your MetaMask or whatever. So it returns sovereignty to the user. So big fan.

• 52:54Ryan Sean Adams?

  It is like, guys, absolutely. David, speaking of sovereignty to the users, can we, can we talk about topic two?

• 53:02Ryan Sean Adams?

  Price. Let's talk about price. So what happened with price? And what price are we talking about? Our show notes just say, talk about price.

• 53:12David Hoffman?

  Talk about price. Yeah. So how can we not, right? So Ether is at $320 right now. When the last state of the nation, it was at, what was it at? 235, 245, right? And Ryan, you made this joke. We were talking about how like DeFi tokens have absolutely mooned. And one of our topics of the last state of the nation was like the ratio of the aggregate market cap of all tokens on Ethereum, all ERC20 tokens on Ethereum to Ether. Like the total market cap of all tokens surpassed the total market cap of Ether.

• 53:45Ryan Sean Adams?

  Yeah. And then you said something. You said something.

• 53:48David Hoffman?

  Security concerns. We're talking about security concerns. So Ether protects Ethereum, but now the things that it protects are higher than the walls that are protecting it. So it's a risk. And so we were talking about like, does this invalidate the FAT protocol thesis? Like, what is Ether going to track this thing? Like, is this insecure? And what I said was that, you know, like, sure, we can talk about the invalidation of the FAT protocol thesis, but that just goes out the door the moment Ether like moons to $300.

• 54:18Ryan Sean Adams?

  I've got a chart up. I showed a chart.

• 54:20David Hoffman?

  Yeah, go for it. And Ryan, you asked me like, okay, so when does that happen? And I go tomorrow. And I was three days ahead of schedule. I was three days ahead of schedule.

• 54:30Ryan Sean Adams?

  Yeah, okay, so.

• 54:30David Hoffman?

  I was not purposely doing that. I was accidentally right. Let it be clear.

• 54:34Ryan Sean Adams?

  I don't think you should be modest, David. I mean, all of your predictions on state of the nation, to my knowledge, have come true so far. So why be not modest about it? I mean, you just call the plays and then it happens. This is, price on Tuesday, when we published was 236. And then maybe you're moving markets. Maybe that's what you're doing. Because then we, a week later, 322. And you totally called it. Even, oh, close to the number, right? I think you said from 230 to like 300 or something like that in the last state of the nation. So, well done, sir. I look forward to really reading the prospectus for your new hedge fund that you are initiating.

• 55:15Ryan Sean Adams?

  Be exciting, but yeah, look, it's been a good week. I mean, we've been talking about this for a while on bankless in general. So what we saw, if we just kind of like, like zoom out, or I still have the chart here, right? Let's look at the three month. So yield farming is only two months old right now at this point, right? And that's been a sort of a new template, a new catalyst for the entire DeFi ecosystem. That started around May, right? And then what we saw from May until like June was DeFi tokens absolutely take off and basically leave Ether in the dust. So people were saying things like, well, does that mean Ether is just, just used for gas? That it's not, it's not correlated to the success of DeFi.

• 56:01Ryan Sean Adams?

  We could have DeFi worth, you know, a trillion dollars and little Ether is worth 16 billion still, you know, hovering at 200 per ETH. And then, you know, that was the conversation for the past two months. And now we're starting to see a bit of a rise that we've been talking about for a while. I do think that the bankless thesis is pretty bullish on ETH as a monetary asset, as the reserve currency for this entire DeFi experiment, as the, the, the lowest layer in the protocol sync thesis, the economic bandwidth for this space. If you've never heard those terms before, you've got to check out bankless material and take a look at the guide and read up on those terms.

• 56:46Ryan Sean Adams?

  Listen to those terms because it's kind of a core part of the thesis so far. It was good to see. I had a lot of fun with this one, David. So it started, so every, every, every time the price went up $10, I just tweeted out like, the price at this is hilarious because I do think it's hilarious. Even the price now to me is not commensurate with the value that Ether is bringing, the growth of DeFi, or even like the relative, the value relative to Bitcoin. I think it's all under price. I just kept doing it every 10, every $10, every $10. And you could just dig into this. Look at this.

• 57:25David Hoffman?

  Oh, man.

• 57:25Ryan Sean Adams?

  So here's 283.

• 57:28Ryan Sean Adams?

  I missed this.

• 57:29David Hoffman?

  I missed this.

• 57:29Ryan Sean Adams?

  You missed this? Oh, it's fun, man. I was just like, you know, and people said I had a bot. I didn't have a bot. I was actually looking at things. It started with this, though, and that's kind of the core tenet when you dig enough.

• 57:43Ryan Sean Adams?

  Staking plus DeFi is going to put more demand on ETH than ICOs ever did. This is about the scarcity thesis of ETH, right? And I mean, you wrote a fantastic article about that, but that, I think, there's some market validation that maybe this is coming true.

• 57:59David Hoffman?

  Yeah, absolutely. And like, absolutely, the DeFi narrative caused this price increase. And I think Eric and Anthony on the ETH Hub podcast called this a long time ago, where they said that the comp token may just kick off a bull market. And I think that that is exactly what happened. And it wasn't necessarily the comp token itself. It's not just about comp token, although that comp token is a core component of this. It's the token model, right? The governance token model that governs over the cash flows of these protocols are valuable tokens. And like we've talked about with Chris Bernitsky, like we talked about with Dan Elitzer, we can evaluate these things on the ways that we've always evaluated capital assets throughout time. Now, like, DeFi has gotten to that point. So that's bullish.

• 58:43David Hoffman?

  And then the liquidity mining of people really striving to provide work to access these tokens created their own mania. And then now this mania has just topped off with the urine protocol, which is still nascent, right? But like, it's all coalesced into, you know, this DeFi mania, this growth of, this growth of DeFi, which is just growth of finance, this new finance, this bankless finance. And finally, it's being reflected in the Ether price. Like, Ether price is always going to be a lagging indicator of what's going on on Ethereum. And now, after the DeFi tokens have mooned, now it's Ether's turn. And more importantly, actually, I'm going to share my screen. More importantly, we have had this massive drawn-out bear market.

• 59:30David Hoffman?

  Where the ether price has just been suppressed, suppressed, suppressed over time. I'm not in the right timeframe. Let me zoom out. I am not a charter, so hold this with a grain of salt, but other people that I listen to and know are charters. And they have all been looking at like this line, and maybe their line is placed differently, but they've all been looking at this line. And this line is also present in Bitcoin, right? And so like, you know, here is 20, the top of 2017, you know, two years ago. And over time, like this line has just been bullying the ether price up until like the 20th of July.

• 1:00:02Ryan Sean Adams?

  Wow, look at that.

• 1:00:03David Hoffman?

  Boom, we ripped right through it, right? And so I'm not a charter, I'm not a savant, I'm not a guru, but like, quote unquote, out of the bear market. Like, bear market's over.

• 1:00:13Ryan Sean Adams?

  Wow, you're calling that.

• 1:00:15David Hoffman?

  Yeah, bear market's dead. Bear market's dead. And so like, it's really a matter of like, does that mean, A, does that mean the bull market started? And if, you know, if, if yes, does that mean it started today? Or is this going to be a long, drawn out? Because if you go back to the Bitcoin price coming from 2013 to 2015 to 2017, that was a two-year crescendo before it really started to get bubbly, right? So like, what's that like? I don't know, but like, but bear market's dead.

• 1:00:42Ryan Sean Adams?

  I mean, we've talked about this being 2016, right? Which, which was basically how Bitcoin and Ether were sort of viewed then. It was a long, grueling bear market in 2016. Coming out of that, there were signs of life. It wasn't a full-on bear, a bull market yet, but there were definitely signs of life. This does feel, again, we keep talking about like 2016. Say another thing, maybe it's early actually 2017, because you asked last time, I say to the nation, have I gotten any texts yet? Yes, the answer this time is yes.

• 1:01:13David Hoffman?

  Getting texts.

• 1:01:14Ryan Sean Adams?

  I got, I got two, right?

• 1:01:15David Hoffman?

  Yeah.

• 1:01:16Ryan Sean Adams?

  So somebody's like, hey, let's go for beers, you know, my portfolio is like, you know, and he gave details of portfolio like 2% XRP, like 5% EOS and like, you know, 40% ETH and like, you know, another 30% Bitcoins, something like that. He's like, how would you revise this?

• 1:01:31David Hoffman?

  Pretty good as far as normies go.

• 1:01:32Ryan Sean Adams?

  Right, yeah, not bad. So, you know, so there's that. I also got a text from a friend. This is, this is really cool. He's like, you know, I wanna, I wanna buy this thing. It's a New York C20 token. How do I do it? Right? It was popping. He's like, how do I do it? He's Coinbase. We talked about it before. And actually, within like 30 minutes, he figured out how to move his ETH from Coinbase to MetaMask and complete a transaction on Uniswap and buy a token. And he bought at a time like right before it moved. So now it's like prices up, I don't know, double since, I mean, he is DeFi for life.

• 1:02:14Ryan Sean Adams?

  Like, I don't think he's going back. So the learning curve, I mean, people say it's steep, but it's a lot less steep than it was, I don't know, two years ago. People can, you could figure out how to use, how to secure your private keys and, you know, figure it out in a couple of hours. And you have, here's the thing, it's like that entire time when we were talking to Daryl about YFI, and you were like, you went on a camping trip and you missed it. All of the people who don't know how to use these tools right now, they don't even know this conversation is happening. Like, you have to be here. You have to have been putting in the time to level up to actually understand these assets

• 1:02:57Ryan Sean Adams?

  in order to get exposure to an opportunity like YFI.

• 1:03:02David Hoffman?

  Yep.

• 1:03:03Ryan Sean Adams?

  If you weren't here, if you weren't playing the game, like, you just, you, you didn't get that opportunity. That is why we talk about leveling up. It's not like, you know, it's not like a step gain from week to week or month to month. It's like you're investing this time, and then suddenly something happens, some catalyst, and you were there at the right time and you had the right information.

• 1:03:26David Hoffman?

  And you have the skills.

• 1:03:27Ryan Sean Adams?

  You had the skills. You could sort the BS from the like actual, you know, assets that, and then, and then you made the move. You, you only had that ability because you had put in the time to, to, to level up or the past, you know, months. I'm sure Daryl. I mean, he's been in the space for for a while doing that with absolutely no return. And then suddenly he's like, this thing could be big and I know it's big and I'm using it. And then bam, like he knew how to liquidity and he was there. He was there.

• 1:03:56David Hoffman?

  Yeah. And this is just a leads into the conversation of of user self sovereignty, right? Like you are learning the skills as an investment into yourself, like the the value of your own person is your greatest asset. Right. And learning these skills, learning how to operate in the decentralized finance future. Like A, it's a long, it's a long bet that DeFi is actually real and actually going to be a thing. That's but we're assuming everyone listening to this has already taken that bet, right? Like, we all believe that's real. And so now it's just a matter of honing your skills, learning how to be think critically, learning how to evaluate DeFi risk, contract risk, and communicate that, and then also take the opportunity when it presents itself.

• 1:04:35David Hoffman?

  Like, and and this is going to come because you have invested your time and energy into the space in order to figure this out. Right?

• 1:04:43Ryan Sean Adams?

  Totally. That's the reward on the other side of that. We talk about that a lot. Okay, so last thing, David, we've gone on for a while. These shows just keep getting longer, man. Should we should we start closing down? How long are we in here?

• 1:04:56David Hoffman?

  Yeah, we are in to this for about an hour.

• 1:05:00Ryan Sean Adams?

  Okay, all right, all right. So let's let's kind of wrap it up. One thing I just want to say, and this can be a show notes thing to take a look at, is just to reemphasize the risk that we're talking about here. Some of the the least risky assets you can purchase in crypto are probably going to be like Bitcoin and Ether, like core protocol type things that have established

• 1:05:23Ryan Sean Adams?

  records, but even those are incredibly risky, right? When we talk about something like YFI or yield farming, you start to get into a place where you're compounding risk, not just risk on Ether. Yeah, you're just stacking your your money Legoing your your risk, right? And people need to be aware of that when they go into these systems. It is the Wild West out there. We do say you can lose everything. Very important that people are aware that something could go wrong. Andre, one developer. could have a bug in his code that causes the price of YFI to collapse or the the thousands of dollars you put in liquidity to just evaporate into nothing. It's risky.

• 1:06:04David Hoffman?

  Explode because the state of the nation is explosive.

• 1:06:07Ryan Sean Adams?

  Yes.

• 1:06:07David Hoffman?

  This is why we chose this word.

• 1:06:08Ryan Sean Adams?

  Wow. Yeah, you know, full circle here. And so there is, there is some good news, though, I would say is there are ways to hedge against that risk. Nexus is one. We're actually doing, putting out a tactic on Nexus today about mistaking with Nexus. And it basically ensures against one type of risk. There are several, but their one type of risk is smart contract risk. I saw with Nexus, they are insuring about 0.4% of all of the value locked in DeFi. Okay, so still super small. I mean, this is millions, this is millions of dollars right now. But all of the value locked in DeFi, only 0.4% of it is

• 1:06:51Ryan Sean Adams?

  insured by Nexus. And of course, things could also happen to Nexus. Ideally, we'd, we'd have multiple providers of insurance in this space.

• 1:07:00Ryan Sean Adams?

  All that to say, before you get in the stacking protocol, smart contract risk and start chasing yields, know what you're getting into. If the reward is high enough, okay, maybe it makes sense. But I mean, Vitalik said this, right? If, you know, if you're making a 3%, you know, earnings on something like DAI, then you're basically assuming that DAI doesn't have a cataclysmic event in like, for decades, basically. And is that a good return for the amount of risk that you're taking? So, so question that. Insurance can help and take a look at Nexus and the tactic that we're putting out about that. Anything else you want to say on that, David?

• 1:07:38David Hoffman?

  Yeah, the main, to some degree, DeFi is speculation and gambling to some degree. Like, it's also finance. And it's also like this new paradigm that we're all hoping comes, it comes about, but like, it's speculation that it comes about, like it's risk that it comes about. And to some degree that it's also gambling that it comes about. And the first rule about playing poker and the first rule about gambling is that you always Position yourself so that if you get wiped out, you can still play. Like if you lose the hand, you can still play. And so that's that, I think that is a, a rule of thumb that everyone should follow. Like if you buy a bunch of Yiffy tokens, Wi-Fi tokens, are you investing your entire net worth into it? And then if something goes wrong, are you effed?

• 1:08:22David Hoffman?

  Or are you responsibly investing a amount that you can lose? That leaves you able to stay at the table. Like always position yourself so you can stay at the table. Or otherwise it'll just be bad. It'll be bad.

• 1:08:34Ryan Sean Adams?

  David's totally right on, man. And there are multiple tables. You've got your traditional world table. Then you've got your entering crypto table. And then within crypto, there are levels of risk.

• 1:08:43David Hoffman?

  Right.

• 1:08:43Ryan Sean Adams?

  Right? So, you know, ETH is less risky than Yiffy.

• 1:08:47David Hoffman?

  Yeah, one more, one more comment on that. Right? So some of these, some of these listeners, maybe this is their first cycle. This is, I have not yet completed a cycle. I came in, in June of 2017. And so I feel like I can, on the horizon, as we go full circle into these crypto cycles, I feel like I can see on horizon where I started in the last cycle. Some people haven't yet gone a full cycle. And let, let it be known that when prices go up and you check your block portfolio and you're twice as rich as the day before. Like your mindset changes, your psychology changes. And you need to account for that and be cognizant of that. Who you are changes in a bull market and your risk appetite will change. And you need to watch yourself as that changes.

• 1:09:30David Hoffman?

  And so be responsible, be introspective, be mindful and make sure that as the bull market goes on, that you don't succumb to the mania and you stay rational. It's going, and it's not easy, is not easy. When you see your block portfolio double in a day, you think you're a genius, but you also, you're not. So you have to be mindful, you have to be cognizant, you have to be aware of your own psychology, know who you are, know your limits, be responsible because you have to stay at the table.

• 1:09:59Ryan Sean Adams?

  Well said, sir. We, we need to do a tactic sometime on dollar cost averaging out. I think, I think people could benefit from that as this, as the bull market continues. This has been state of the nation. Explosive is the word. That's the state of the nation today. Guys, this is episode seven. Again, it comes out Tuesdays on YouTube. Make sure you subscribe. You get this and other videos. Last thing I'll say about risk, of course ETH is risky, Bitcoin is risky. All of the tokens we talk about are risky.

• 1:10:29David Hoffman?

  Wi-Fi is super risky.

• 1:10:32Ryan Sean Adams?

  Yes, ultra risky. Don't lose more than, don't put in more than you can afford to lose. But we are, we're headed west and we're excited that you are on the journey with us. State of the nation signing off.