ROLLUP: Google’s Quantum Warning | Trump’s Iran Speech | Ethereum Economic Zones | Drift Hack

Summary

Bankless Weekly Rollup: April 3, 2026

Main Theme:
This week’s Bankless Rollup delivers critical updates across macro, crypto, and DeFi. From Google’s urgent quantum computing warning for crypto, to Trump’s address on the Iran war and its economic impacts, to the latest DeFi hacks and major Ethereum ecosystem developments, David and Ryan break down what matters for the industry and where the risks and opportunities lie.

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[00:00–01:20] Setting the Stage—A Tense Week in Crypto

• Google Quantum Warning:
  Google dropped a major quantum computing warning, specifically targeting the crypto industry, indicating a dramatic advancement in quantum algorithms’ ability to attack blockchain cryptography.
• Trump’s Iran Speech:
  President Trump addressed the nation about the Iran conflict (“Operation Epic Fury”), delivering sobering news about prolonged hostilities and its effects on markets and global stability.
• Ethereum Economic Zones & Major Hacks:
  Ethereum unveils the concept of “Economic Zones” to unite Layer 2s. Solana’s Drift Exchange suffers a $300M hack—the largest in Solana’s DeFi history.
• Market Recap:
  Bitcoin’s worst Q1 since 2018 is offset by a tiny March bounce, while the overall crypto market is under pressure.

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[03:10–16:40] Trump’s Iran Speech—War, Markets, & Macro Repercussions

Speech Breakdown

• Trump’s speech (19 minutes) signals escalation instead of a resolution:

  “Right now we are on track to complete all of America’s objectives very shortly. We are going to hit Iran extremely hard in the next two to three weeks. We are going to bring them back to the Stone Age where they belong.” — David [05:00]

• Oil prices reacted instantly: Brent crude +10%, WTI +12%, impacting bond yields and raising inflation risk.
• Polymarket prediction markets price a sizable chance of U.S. boots on the ground by April 30 (~60%) and a 27% chance that conflict extends into 2027.
• Economic and political implications:
  • Higher oil → Higher inflation (CPI could reach 3.6%).
  • Pressures on US debt and interest rates (10-year T-bill yield returning to 4.4%).
  • Trump’s approval rating drops below 40%; Democrats’ odds to win the House rise to 86% (polymarket).

Notable Quotes and Context

• “He basically just gave a 19 minute speech about why we need to be in Iran for three more weeks.” — David [06:00]
• “Oil prices spike… CPI inflation will rise to 3.6%. Energy costs are going to affect inflation and of course that’s going to affect what the Fed does. That could spiral into lower growth in the US…” — Ryan [11:00]
• Powell’s warning on national debt:

  “It will not end well if we don’t do something fairly soon. This is not the Fed’s job, of course…” — Fed Chair Powell (Clip) [13:26–13:59]

Market Behavior

• Markets quickly absorb and compartmentalize shocks; reactions are less pronounced over time.
• "The longer that the market has to digest the news... the more it kind of comes normalized.” — David [09:15]

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[16:40–38:22] Google’s Quantum Warning—How Real is the Threat?

Quantum Paper Highlights

• Two groundbreaking papers—one from Google, another (the “Oratomic paper”) from academics—deliver massive improvements (20–50x) to Shor’s algorithm for breaking blockchain cryptography.
• Google’s explicit call:

  “We urge all vulnerable cryptocurrency communities... to join the migration to post-quantum cryptography without delay.” — Ryan [20:14]

Key Points & Threat Analysis

• EC-DSA Vulnerability:
  • Reduction: From needing tens of millions of qubits down to just 500,000 physical qubits.
  • Attack speed: With proper hardware, Bitcoin and Ethereum could be compromised in under 10 minutes.
• Wider Ecosystem Exposure:
  • Entire base layer (Bitcoin, Ethereum) and ancillary chains (Monero, Zcash) are at risk.
  • Monero privacy fully compromised if/when quantum attacks are possible.
  • Ethereum’s attack surface is even bigger—admin keys for stablecoins, DA layers, smart contracts.

Engineering & Coordination Challenges

• Transitioning to post-quantum signatures would dramatically slow performance and reignite blocksize/decentralization debates (e.g., “0.3 transactions per second” on Bitcoin post-upgrade).
• Dormant BTC (6.9M coins, including Satoshi's) are at guaranteed risk unless migrated/burned/coordinated via controversial hard forks.
  • “Four options: do nothing, burn, hourglass (slow the drain), or sidechain with escape hatch” — Google, summarized by Ryan [29:14]
• Ethereum’s relatively active governance and flexible upgrade path make it less vulnerable to coordination deadlock than Bitcoin.

Memorable Moments & Quotes

• “This paper… was specifically written for the crypto industry.” — Ryan [20:20]
• “If they had the appropriate hardware… it would only take nine minutes for them to go attack Bitcoin or Ethereum and yoink the keys.” — Ryan [22:04]
• “Bitcoiners are like, 'are quantum computers real?'” — David [33:25]

Debate in Crypto Community

• Anatoly (Solana): Practical scaling of qubits still unknown—may be decades away. [36:19]
• Michael Saylor (paraphrased): Don’t panic; devs will solve it in due course. [36:50]
• Ryan: “It’s hard for me to take the ‘don’t believe the FUD’ response seriously, because… this is existential for bitcoin.” [37:49]
• “Don’t panic, but prepare maybe.” — Ryan [38:22]

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[41:41–47:17] Solana Drift Hack—Largest DeFi Exploit in Solana History

Hack Recap

• $285M (50% of TVL) drained in 12 minutes via social engineering, gaining multisig keys.
• Intricate planning: Wash-trading fake tokens for volume, then listing them as protocol collateral.
• Major admin/control flaws:
  • Only 2-of-5 multisig required (too few signers).
  • No timelock on governance actions; instant deployment of malicious changes.

Lessons Learned

• “If you have admin keys that can drain all the funds, that’s not DeFi.” — Hayden (Uniswap), paraphrased by David [44:58]
• Better protocol design needed: Larger multisigs, timelocks, and social/technical precautions.
• Urgent need for social engineering defense—attackers are getting more sophisticated.
• “If you are a multisig signer, you should be paranoid about your setup at all times.” — Ryan [47:06]

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[47:20–52:42] Ethereum Economic Zones—A Step Toward a United Ethereum?

What Are Ethereum Economic Zones (EEZs)?

• Concept to re-unite L2s and mainnet into a single, synchronously composable ecosystem (“United Chains of Ethereum”).
• Unlocks shared liquidity, atomic transactions, and unified user/developer experience.
• Built via new technical specs, including ZK technology, ecosystem integration, and opt-in from major chains/L2s (e.g., Gnosis potentially returning as an L2).

Key Discussions

• “It does indeed feel like one chain… the dream is still alive.” — Ryan [49:56]
• “Is this main quest material or a technical sidequest?” — David [51:32]
• Cosmos tried similar “economic zone” architecture but lacked “money” (ATOM); ETH as native currency is a true differentiator.

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[52:55–56:28] AAVE V4 Launch—Evolving DeFi Lending

Core Upgrades

• Turns AAVE from separate pools into a single “liquidity hub” with governed “spokes” (specialized lending markets).
• Risk controlled via risk premiums and credit lines—hub acts as a central risk manager.
• Design mimics modern central banking (users interact with spokes).

Why It Matters

• Significantly increases liquidity and flexibility, setting AAVE even further ahead in the DeFi lending space.
• “AAVE is going into a platform model.” — David [55:11]

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[56:28–61:04] Crypto Meets TradFi—Super Apps, Tokenized Securities, and More

X (formerly Twitter) Hires Wallet Builder

• Benji Taylor (ex-AAVE wallet, ex-Base) joins X, signaling a push for a native crypto wallet/money super app.
• Phantom wallet enables direct bank wires and fiat onboarding.
• “Convergence happening where crypto wallets are becoming trad-fi friendly.” — Ryan [57:35]

On-Chain Tokenized Securities

• Apex brings MSTR’s yield-bearing Stretch product (11.5% yield) on-chain via Base.
• Market embraces digital asset–security hybrids.

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[61:04–63:39] April Fools, Private Markets, and The State of Innovation

• Private Markets:
  • OpenAI raises at $900B valuation; SpaceX eyes $1.75T IPO—retail locked out until late-stage.
  • “Returns like that just aren’t existing as these companies IPO later in the cycle.” — Ryan [60:12]
• April Fools in Crypto:
  • Strong PSA: Project teams should never joke about hacks or lost funds (“Do not disturb markets with your April Fools.” — David [63:17])
  • “Use some sense, people!” — Ryan [63:35]

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Notable Quotes (with Timestamps)

• “We are going to bring them back to the Stone Age where they belong.” – President Trump (as quoted by David) [05:00]
• “We urge all vulnerable cryptocurrency communities… to join the migration to post-quantum cryptography without delay.” – Google (relayed by Ryan) [20:14]
• “If you have admin keys that can drain all the funds, that’s not DeFi.” – Hayden Adams, paraphrased by David [44:58]
• “Don’t panic, but prepare maybe.” – Ryan [38:22]

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Key Takeaways

• Quantum is a clear and present threat; migration to quantum-resistant cryptography must begin ASAP.
• Market shocks (war, oil, inflation) are being absorbed faster but systemic risks endure.
• DeFi protocols face both technical and social vulnerabilities—robust governance is non-negotiable.
• Ethereum’s vision of united chains may be back on the table if Economic Zones succeed.
• TradFi and DeFi continue to blur; on- and off-chain financial products are converging rapidly.
• In both governance and humor, caution and thoughtful design are paramount in crypto.

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For more details, listen to the full episode or browse the provided timestamps above for the topics most relevant to you.

Transcript

[David]

Foreign.

[Ryan]

Welcome to the first week of April. It's time for the Bankless weekly roll up. Google released a major quantum warning directed squarely at us, David, not you and me, but at crypto. Let's say they have an algorithmic breakthrough that just 20x'd progress towards cracking ECDSA E and some of the crypto signatures that underlie Bitcoin, Ethereum and basically everything we do here. How bad is it for crypto? I think it's pretty concerning. Some might call me a pannikin, though. We'll get into the paper and see what Bankless listeners decide.

[David]

It's certainly worse for crypto when we can't seemingly come to consensus about how big of a deal it is, which makes it an even bigger deal. It's like a little bit of a coordination problem, if you will. Meanwhile, back into the Trump side of things. He addressed the nation last night about the state of the Iran war, the state of Operation Epic Fury. In my. My take was that it was a 19 minute speech basically to deliver the bad news to the markets that we are in this for three more weeks. He said, we're going to talk about that all, all that and more. He said the Strait of Hormuz will just open up naturally. Gas prices will come down and stock prices will go back up, but not before three weeks from now, at the very least.

[Ryan]

We'll see if the market is reassured by that when we get into it. Also, did Ethereum just come up with a plan to finally unite all of the layer twos? They're called Ethereum economic Zones. We'll spell out what that means. AAVE V4 just released. What's new in that? Also the biggest hack, I think, in solana history. A $300 million hack. The drift Exchange. This is a perps exchange was hacked. What happened and what can we learn? It's all about the lessons we learn along the way, isn't it?

[David]

Before we get started, Ryan, can I tell you a fun fact?

[Ryan]

Yeah, if it genuinely needs to be fun though, I don't want any. You're like, not fun facts. Okay, this needs to be fun one.

[David]

It's fun because it implies good buying prices.

[Ryan]

Okay, yeah. Okay. It's a bearish fun fact. Yeah, tell me.

[David]

We just survived the worst Q1 in Bitcoin since 2018.

[Ryan]

Oh my God. This was it. Can I.

[David]

Can I give you another fun fact?

[Ryan]

Wait, how, like what was the percent down?

[David]

I mean, down 24% in. In Q1 and that was the worst

[Ryan]

Q1 we've ever had since 2018.

[David]

2018. Yeah, it wasn't that bad. 2018, like the market topped December 2017, and then it fell like I think 60% in. In Q1, 2018. I remember that Q1 very, very well because that was my foray into crypto. But my second fun fact for you, Ryan, is that bitcoin had five red monthly candles in a row, but March, which the March candle finished two days ago, eked out a green candle.

[Ryan]

Is that it? Is that. That's how you have.

[David]

The monthly candle for the month of March was green after five red monthly candles. Five red monthly candles in bitcoin is. I don't. I think that's happened a very low number of times, David.

[Ryan]

I got to say that that is a tiny green candle right there. That. That is a candle for green. Okay.

[David]

It's a tiny green candle, but it is green.

[Ryan]

The smallest green candle I think on this chart maybe, but. But it was green in March. That's good news. You mentioned in the intro the Trump speech that happened on Wednesday night. So he said he was going to address the nation. I think he gave some 24 hour advance notice.

[David]

Yeah.

[Ryan]

All TV networks have to broadcast it. What was the news? What did he say?

[David]

Yeah, so 19 minute speech about Operation Epic Theory, the war in Iran. After a week of just like posturing from Trump, two weeks even, about posturing, about negotiation talks, how negotiation talks are going well, talking about how he's kind of done with Iran and de escalation.

[Ryan]

Weird stuff. Like it was hard to know what was really going on, right?

[David]

Oh, no, I would say he was firmly posturing and signaling to the people in the market that, like, we're kind of wrapping this thing up.

[Ryan]

Yeah, right.

[David]

We're like, like we're, we're getting. We're getting.

[Ryan]

Yeah, but he was doing it Trump style. Like, I got a prize, you know, from the Iranians. Like, like some strange. It was, it was hard to know actually, to sort the signal through the noise. So is this the signal?

[David]

So then, yes, this is a very formal speech. So he's like, this is. This is the speech. These aren't my, you know, true social posts. This is a Mark Ruby.

[Ryan]

I prepared this.

[David]

This is the. This is the speech.

[Ryan]

Okay.

[David]

And so the market was going into this thinking, like, okay, this is Donald Trump, like tying a bow on this thing, kind of giving us the exit plan, wrapping it up, you know, concluding it. That was, I think, my interpretation of both market's anticipation, you know, Twitter's anticipation. Instead, I think what came out of this, my take is that the whole purpose of this talk was to drop this one line and I'll read that line. That I think was the whole point. Right now we are on track to complete all of America's objectives very shortly. We are going to hit Iran extremely hard in the next two to three weeks. We are going to bring them back to the Stone Age where they belong. I think the whole 19 minutes was basically to inform the public that we are in this for three more weeks. And the market reacted appropriately. Right after he said those lines, the oil markets shot up 10%. Brent crude went up 10%. WTI went up 12%. Futures, the Nasdaq and S P 500 futures dropped half a percent. He said a few other things as well. He said that the stock market didn't really go down all that much. He said that the stock market was, he thought it was going to go down more than it actually did. And so we're going to be down a little bit longer and then they're going to go back up like never before. He said after this three week period. As a direct quote. As a direct quote, that's right, yeah. Uh, and so this is, the market is currently digesting this as of right now. This is the morning after that speech. But this is my take is like he basically just gave a 19 minute speech about why we need to be in Iran for three more weeks.

[Ryan]

Wow. That line, we're going to bring them back to the Stone Ages where they belong. That's so Trump. Yum.

[David]

Yeah. Not the first time he said that.

[Ryan]

Geez. Okay, well, he didn't say we're going to leave in two to three weeks. He just said we're going to hit them hard in the next two to three weeks. And you think the market is interpreting that as we're also going to exit in two to three weeks?

[David]

No, I think the market was interpreting that we are going to exit like this week at the end of this league, we're done with this thing. And then Trump is telling them like, no, no, we got two to three more weeks. I think it's safe to round up to three on that scenario. But to your point, I think you're right, he did not say that we're out in three weeks either.

[Ryan]

This is a polymarket on U.S. forces entering Iran by a specific day. And by April 30th, polymarket is showing on 18 million in volume. There's about a 60% chance that U.S. forces enter Iran. That means boots on the ground, does it not?

[David]

That's I, Yes, I think boots on the ground by the end of this month. Polymarket is giving a 60% chance.

[Ryan]

The probability on polymarket for US and Iran ceasefire by a specific date. 60% by June 30, 47% by May 31. So end, end of May, almost a 50% chance into the summer. December 31, a 73% chance. So I mean that's like a 20, a 27% chance that this isn't over by the end of this year.

[David]

All year. Yeah.

[Ryan]

Are the markets pricing that in?

[David]

I mean we can talk about the efficiency markets always price everything in every super efficient. Always time.

[Ryan]

That's right.

[David]

Like the growing conversation is around midterms, the midterm elections that are coming up later this year. So I think we have like just under six months before the midterms start to become are. Are here. And I mean who knows what Trump is thinking? I certainly don't, but it's, it's a to be argued that there's no way that Trump wants the Iran war at all to be proximate to the midterms.

[Ryan]

He doesn't want that. Now does Trump always get what he wants?

[David]

You know, we don't, we don't really know.

[Ryan]

Well, there's, but there's also a question of like once you, once you are in it. Right. You know, there are some forces that like he doesn't control of Hormuzza, he

[David]

doesn't control the universe.

[Ryan]

Exactly. Including the Straits of Hormuz. So looking at some charts, I mean this is volatile, so things are changing in a hurry. But Brent crude up by 10%. So this was directly after the oil shot up bond markets. The 10 year T bill note back on its way to $4 or sorry, 4.4% yield. Right. Remember we talked about, I think it's last week as those yields number, number those yield numbers tick up on the 10 year. That's more pressure on Trump. And you kind of saw them back in the tariff scare of last year. 4.6%. That started to feel very uncomfortable and Trump walked back his tariff language. So this is another pressure on him. Of course, crypto prices. What are we doing here, man? So Bitcoin down 4%. ETH down 6%. Hard to know if that is swirled up in all of this or what's going on. But now the S and P is trading kind of like neutrally. Is that the case?

[David]

Yeah. So S and P dropped, futures dropped by half a percent. And now at the time of recording the S and P is actually Flipped green, marginally green. So we are actually at the same time stock market prices, at least in the S and P as we were before the Trump speech. I have a take on this, which is that the longer that the market has to digest the news, the news being the war, the whole entire Iran war, the more it kind of comes normalized. And we saw this with the Liberation Day tariffs. Markets reacted violently at the very beginning. And every single time there was another Tariff Day tweet or, you know, posturing against China or announcement on further tariffs on China, the market reacted, but it reacted in a more muted fashion as time went on. And I'm seeing that with Iran here too. Like the market is reacting, but it's starting to shrug it off quicker and quicker and quicker. And we all kind of remember what happened with the liberation deteriorist. Like eventually the market just stopped carrying and then we went to new all time highs. Every single new crisis is facts and circumstances. So we can't really say that's going to be repeated. But with the S and P being green as of this morning, after Trump told us that they're going to strike Iran hard for the next three weeks and the stock market comes out green, I'm kind of interested in that pattern.

[Ryan]

I mean, I guess it's hard to know what the market is thinking, but there are some forces that have to impact the market which is like one of which is oil. And so if Strait of Hormuz is closed for longer, oil prices spike. Here's an analysis from the Kobiasi letter. As oil prices rise above 112 per barrel, our models indicate that if current levels are sustained. So if you have that oil price another two months, US CPI inflation will rise to 3.6%. So energy costs are going to affect inflation and of course that's going to affect what the Fed does. That could. Michael Nadeau makes the point that that could spiral into lower growth in the US and the possibility of a recession is actually up on the air from like 20% to 36 according to Polymarket. And you also have Lyn Alden who is talking about this. Some people ask me when I'll be chill about energy. She said, I'm looking at my oil quant guy and he's not chill. He has to become chill again. And he is the opposite of chill. Right now she is posting a tweet from Roy Johnston, who I presume is Lyn Alden's oil quant person. And he is talking about a scenario which he calls the air pocket scenario. Which as ply is restricted from the Strait of Hormuz. It's like a scarcity air pocket that affects different geographies after this.

[David]

That takes time to get there. That's what it takes.

[Ryan]

That takes time to propagate. Right. So it might take if, if, you know that happens right now, deliveries could stop on April 15th in North America, but they stopped far earlier in Africa and place it in Asia. And so this is like a, an air pocket that makes its way throughout the energy economy. So I don't know, it still seems to depend on the Strait of Hormuzzi. Some of these factors are not in Trump's control, but it seems like he's getting the narrative right, at least for the market. Right now they're believing him.

[David]

Yeah, yeah. And this all is going to show up in inflation. Like what does oil have to do with the bonds? Well, higher oil prices makes everything cost more domestically on our, in our neck of the woods. If things cost more domestically, that means inflation's going up. That means the Fed's going to hike interest rates. And we just had this clip, this statement out from Powell basically saying that the United States national debt is growing substantially faster than the economy and it's not sustainable. And so that goes into can the United States service its own debt? And so the cost that Iran knows that it's posting to America through the closing the Hormuz Strait of Hormuz is that we can't pay our debt. I actually thought this clip from Fed Chair Jerome Powell was actually pretty interesting. Let's go ahead and watch it. What's clear is that our debt is growing much faster.

[Ryan]

The federal government debt is growing substantially faster than our economy and that ratio is going up.

[David]

And you know, in the long run,

[Ryan]

that's kind of the definition of unsustainable.

[David]

The level of the debt is not

[Ryan]

unsustainable, but the path is not sustainable.

[David]

And so it's, it's really important that

[Ryan]

we get back to, we don't have to pay the debt down. We just need to have, you know,

[David]

primary balance and, and begin to have

[Ryan]

the economy actually growing better, growing more

[David]

quickly than the economy. It will, it will not end well

[Ryan]

if we don't do something fairly soon. This is not the Fed's job, of course, and I pretty much limit myself to those high level points which, which essentially everyone ignores. He limits himself to those points that everyone ignores. It will not end well if we don't do something fairly soon. He can't say more, but he's basically blaming deficits he's blaming fiscal on this and general overspending coming out of the federal government.

[David]

Yeah. So all of this is to say that there's a lot of evidence for why this war can't sustain itself over a long period of time. I think the speech that we got from Trump last night is like, I've got three more weeks. I've got three more weeks before this really hurts.

[Ryan]

You think that's him acknowledging I have maybe three more weeks?

[David]

I think he. Maybe not in that speech, but I think he knows that. He knows he doesn't have that forever.

[Ryan]

He doesn't know that. I mean, he knows that forever. He's probably seen these sorts of stats too. This is from Nate Silver, which is Trump's approval rating. It just fell below 40% for the first time. And you could see Trump's numbers on a trend down from the liberation tariffs and some of these other milestones. The government shutdown, Renee Goodkilled. The Iran war starts and it's been on a steady trajectory down, which is not great when you're in a midterm year. And this is showing up in probabilities for the election. So ever since, let's say, well, ever since November, but there's been a steady trickle up as Trump favorability goes down. The odds that the Democrats will win the House in 2026 are going up on polymarket right now. That's 86%.

[David]

The Senate on $4 million of volume, which isn't super high, but definitely not low either.

[Ryan]

Yeah. And the Senate is more up for grabs. It's about 50 right now. So there's some political constraints, there's some economic constraints and all of this is getting factored in. But so far I don't think we've really felt the shock in the markets. I mean, crypto prices is down and that aside, but I don't think the NASDAQ has gotten hit to the degree that some have thought it might. And it may still soon.

[David]

Yeah, that was actually an explicit point that Trump was making, was like he explicitly said a number of times in his speech last night is like, we don't need this Strait of Hormuz. We've got our own oil, we've got wti, we got West Texas exists international. And then he also did the whole thing, it was like Europe, like, this is your guys's problem. You guys need to step in here. So. But he explicitly says, like, we've got our supply of oil, like our economy is going to be fine. And we also do see that in the global stock market indices is like the the domestic United States markets are doing much better than the international markets.

[Ryan]

So let's leave it there for the week. Coming up next, we got to talk about Quantum Is Quantum getting ready to come in and just wreck Bitcoin, Ethereum, all our cryptocurrencies, or is this just fud? David, are we being alarmist here? We got to get into the Quantum papers, the research released this week by Google and one other. There's so many details to cover. We'll talk about that when we come back.

[David]

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[Ryan]

Oh my God. Incredibly significant. I think calling it a Q bomb, a quantum bomb, is probably right. It's the biggest.

[David]

I just made that up on the fly.

[Ryan]

Well, everyone in crypto was talking about it. Mainstream news was talking about it. We have a lot of commentators outside who have weighed in. It was basically the news of the week, and deservedly so. I think we should start here with Justin Drake, some of his comments. He said today, he's talking about when these papers dropped. Today is a momentous day for quantum computing and cryptography. Two breakthrough papers just landed. Both papers improve Shor's algorithm, infamous for cracking rsa. Not Ryan, Sean Adams, the other RSA and elliptic curve cryptography. The two results compound optimizing separate layers of the quantum stack. The results are shocking. He said, I expect a narrative shift and further R and D boost towards post quantum cryptography. He goes on to say his confidence in Q day, which is the day at which some quantum computer can crack Bitcoin or Ethereum cryptography. 10% chance by 2032 and dropping for Justin Drake. So Google in this paper is strongly recommending that all of crypto take notice and be on notice and to upgrade to post quantum by the year 2029. In fact, that's what Google is doing internally.

[David]

Wait, so Google made an explicit statement towards the crypto industry?

[Ryan]

This whole paper, David, was specifically written for the crypto industry.

[David]

They're like, hey, crypto bros, this one's

[Ryan]

for you guys completely. And the, the, the knowledge.

[David]

Nice to be heard.

[Ryan]

Yeah, it is nice to be heard. It was nice. Like this is coming from Google, right? And you don't expect them to be as cryptocurrency literate as they were. Indeed. But this paper, I mean it's 30 to 40 pages. You guys can go through it, run it through your AI bots if you'd like, but it is directed towards cryptocurrency. They go through specific solutions and problems for Bitcoin, Ethereum and a list of other chains as well.

[David]

So what was the actual innovation?

[Ryan]

Yeah, I think that's, that's important. And the way Nick Carter frames this is, you know, Google, I think we reported a couple of weeks ago, did drop their internal quantum deadlines. They want to be fully quantum resistance by 2029. And that seemed to come out of nowhere. And the question is, like, what did Google see? Why did they drop these dates? Because NIST and other government agencies were talking 2032. By 2035, it seemed like we had more time than Google's, like, hey, guys, like, we're doing it by 2029. So what did they see? This is what they saw. The Google paper is talking about a reduction of 20x and an improvement in Shor's algorithm that could break Bitcoin. Ethereum's cryptography. When I say a 20x improvement, I'm talking about the number of physical qubits required to actually break ecdsa, which is the signature scheme for Bitcoin and Ethereum.

[David]

And physical qubits is like, this is the hardware requirement.

[Ryan]

Exactly.

[David]

So when we're building a quantum computer, though, I kind of think of qubits as like, just like the, the flop capacity of a cpu. Like, how powerful is this computer?

[Ryan]

Exactly.

[David]

And so if we have a reduction in qubits, it means the computer is simply not as powerful, but can do more powerful things.

[Ryan]

That's right. And previous estimates were it would take, you know, tens of millions of qubits to do this. Well, they just released an improvement to the algorithm, to Shor's algorithm that now make it take only 500,000 physical qubits. And so in a runtime of about nine minutes, if they had the appropriate hardware, again, those 500,000 physical qubits, it would only take nine minutes for them to go attack Bitcoin or Ethereum and yoink the keys. And also, this is not just limited to, you know, grabbing quantum vulnerable assets from Bitcoin or Ethereum or other chains. It also enables on. On spend attack, so they can intercept transactions before they confirm within the block time of something like Bitcoin. Within nine minutes, they could intercept a transaction. Say I send Bitcoin from myself to you. A quantum computer with this amount of hardware could go and yoink and intercept that. That transaction. So this breaks Bitcoin basically, and also breaks everything else. It breaks Ethereum, it breaks everything in crypto. If we had that level of hardware.

[David]

Right, if we had the level of hardware. Now, to my understanding, that is still the unknown thing is whether we can actually get to that level of hardware. Right now we have the best machines that we have today are like 1000 to 1500 physical qubits, and that creates 50 logical qubits. These are all these are all deep quantum scientific stuff.

[Ryan]

That's right.

[David]

But. And so like, but it's still an unknown if we can get to a meaningful level of logical qubits. Like, we're at 50, we need a lot more. But what this innovation does from this paper is it's just simply an improvement in the software, improvement in the algorithm. That means we don't actually need a whole lot more qubits. We definitely need way more qubits. But the amount of qubits that we need is now down because we have a more efficient piece of software.

[Ryan]

That's exactly right. That's the thing to underline is this is an algorithm improvement that reduces the amount of hardware required to go attack these systems. And so it is still an engineering problem. Actually, the, you know, like, I was wanting to ask this question of, like, how big of an engineering problem is it? Is this like, is this something like fusion, which, like, that's an engineering problem, but we have no idea how to solve fusion. It's always like 15 years away.

[David]

It's always theory, never practice. Yeah.

[Ryan]

Or is it?

[David]

And as I understand it, quantum is still theory, not practice. When it comes to qubits. We do have some qubits.

[Ryan]

We do. We have 50 logical qubits right now. And the question is, can we scale that up? And I don't think it's not like, it's not like fusion, like, which is just like, oh, there's a lot more research to do. This is purely an engineering problem. Now can we resolve the engineering problem? I don't know. But it seems more like AI scaling, which is you just throw more hardware at it, you just scale it up than it does fusion. It's almost like an analog is. In the 1960s, transistors worked. They were discovered. The question at that time was, could we pack millions on one chip? And that was the engineering problem. That's similar to what the engineering problem is now. So their conclusion, Google's conclusion, we urge all vulnerable cryptocurrency communities, which is all of us, to join the migration to post quantum computing cryptography without delay. Didn't mention, but the other paper, the oratomic paper, it's actually, they have a different architecture and a different style attack. There's a fast attack, which Google was talking about in a slower attack that would take days to go attack a key. But with the slower attack in their message, in their method, they improved Shor's algorithm by 50x. So in this configuration, it would only take 10,000 reconfigurable atomic qubits to attack. So there's multiple attack vectors and at some level the orator. Yeah, and the oratormic paper was even more concerning. So flashing red lights, you'd think.

[David]

Yeah, I think it's definitely a flashing red light for ecosystems that aren't addressing the problem. But Right. Brian, we're smart, logical people in crypto, right. We're addressing the problem, are we not?

[Ryan]

I'm not so sure. I mean. So let's talk about bitcoin. Right? So one of the big problems we talked about in the Justin Drake episode we've mentioned a lot is even if Bitcoin is able to adopt post quantum signatures, which would significantly slow things down from a performance perspective, and that's a problem in and of itself. In fact, the paper talks about this could be like a. The level of change that led to the hard fork that, that created bitcoin cash. Right. Because if you drop performance with new algorithms, then what are you? Are you a big blocker, a small blocker? There could be two sides to that debate.

[David]

Yeah. So just to trace over that again, quantum signatures, post quantum cryptographic signatures, the ones that we need to upgrade to are beefier, they're heavier, they take more space, require more compute, they're slower. And bitcoin has already gone through its block size wars and these small blockers won, which is fine. Maybe that was the right choice for then we have to. What potentially happens now is that with even bigger transactions, bitcoin TPS is going to go from three transactions per second to if it go. If it makes the transition to post quantum at 0.3 transactions per second. And do we need micro blocks, man? Do we need to even hash out the big block small block war again?

[Ryan]

Right.

[David]

Maybe not. Because yeah, I could say it just like you just actually just don't need to transact on Bitcoin. You just need to hold the bitcoins. And maybe this also solves the bitcoin fee budget with 0.3 transactions. I think there's an argument for the small block side of things.

[Ryan]

If only that was the only problem. The other, I think the main problem as well, I don't know, they're all main problems is you've got 6.9 million bitcoin, a third of all supply that is vulnerable to quantum attack. Now some of that can be migrated except for the 2.3 million or so, which is 10 to 15% of all Bitcoin supply. That is Satoshi's keys and lost keys and keys that haven't been touched. And it's preserved.

[David]

These are assumed tokens that will never move because the owner is gone or dead or the private keys are lost. And so the only way that they will move is that these wallets are going to get exploited eventually by the incoming quantum computer. And then whoever has that quantum computer gains access to 2.3 million out of the 21 million Satoshi coins. And that is the guaranteed number that is available to the quantum computer. And then there's the 6.9 million again of the 21 million total bitcoins. That is bitcoin, that is vulnerable, that needs to be migrated. And we do not know to what degree that those coins are also lost, at least some.

[Ryan]

And so what do you do with the dormant coins? Actually, Google delved into this as well in their paper. And they're like, there's four options you guys have that we see. We are Google and we see four options. I should say there were other co authors on this paper, one of which was Justin Drake, interestingly enough. So the Ethereum Foundation, Justin Drake named. But anyway, they said the four options are you could do nothing, just let the quantum attackers take them. You could burn. You could take this whole dormant supply, figure out what, you know, get consensus on what coins are dormant, burn them all.

[David]

That would require a hard fork.

[Ryan]

Yes. You could do an hourglass approach, which is a scheme that they developed to limit the rate that dormant coins could be spent. So you slow the drain. Or this was also a Justin Drake idea. They called it bad sidechain, where you'd have this pegged sidechain. You'd put all the dormant coins on that. And then owners would have to submit some ownership proofs. And if they submitted the right proof, they could get their coins restored to them.

[David]

I see. So that is kind of. That is the burn, but with a escape hatch for people who actually do have the private key.

[Ryan]

That's right.

[David]

Yeah.

[Ryan]

See, I like that one. I would do that.

[David]

I do kind of like that one. But I do kind of like that one.

[Ryan]

I don't get to see that requires

[David]

the most coordination, which is the biggest challenge for bitcoiners.

[Ryan]

Yes. Now, CZ has. Has weighed in at least at this early phase. And he said this about, you know, he's number one, don't panic. Some people are panicking about quantum. Don't panic about that and its impact to crypto. Number two, what do we do with the satoshi coins? Well, if they don't move in a certain period of time, it might be better to lock or effectively burn those Addresses so they don't go to the hacker who cracks it. That's it, just, just lock them or burn them. And I was like shocked at how nonchalant this answer was from CZ.

[David]

It's just like burn 3 million bitcoins,

[Ryan]

that's a big deal, right? As property rights, you know, that is the reason that um, Bitcoin exists, I thought.

[David]

Yeah.

[Ryan]

They also talk about Ethereum, of course. So the, the TLDR for Ethereum is the attack surface is much larger than. Larger than Bitcoin. Right. And so it's like a harder problem

[David]

to solve because not only harder engineering problem to solve.

[Ryan]

Yes. You're not just dealing with execution ECDSA signatures, you've got data availability vulnerability. So the, the kzg, you know, ceremony that they did, that's all toxic waste. That's all a back. You've got admin accounts. So stablecoins, some of the smart contract keys for stablecoins have quantum exposed admin keys. So there's all sorts of things that you have to upgrade on Ethereum that you don't have to upgrade to Bitcoin. So I don't know if it's an order of magnitude of a larger task. I don't think it's quite that much, but it's probably like a 2 or 3x effort.

[David]

Engineering effort, you mean?

[Ryan]

Engineering effort and just like the work required to.

[David]

The work required. Yes. Qualitatively, bitcoin has a coordination and a consensus problem.

[Ryan]

Yes.

[David]

And Ethereum like some of these things like admin vulnerability for something. For example, 200 billion in stablecoins in real world assets controlled by quantum exposed admin keys. Well, the admins just need to do the thing.

[Ryan]

That's right.

[David]

And there's a lot of those examples. But it's a matter of just like, hey, you guys are the admin over this smart contract, you guys need to upgrade. And I mean they will because they have $200 billion at stake. And so while that's an engineering challenge, it's not really a coordination challenge in the same way that Bitcoin is. And so yes, broadly there is more to do on Ethereum, like you said, maybe 2 to 3x more to do. Maybe even I could go up to 5x.

[Ryan]

Could you?

[David]

But it's qualitatively a different kind of problem because there's less of a coordination and an agreement problem.

[Ryan]

You don't have to deal with a big thing which is property rights. What do you do with 10 to 15% of the supply? Like there's no, good answer for Bitcoin there. And actually the Google makes the same assessment. They said Ethereum has a broader overall quantum attack surface than Bitcoin. However, this is compensated by stronger community leadership in the Ethereum Foundation. Ethereum already has a roadmap for this. Bitcoin is kind of like eh, are quantum, are quantum computers real?

[David]

Are they real? Bitcoin is still in the probably not real up phase. Yes, they're like the, the bitcoin zealots, the laser eyed Maxis are like shut up, this is not a problem.

[Ryan]

Yeah, I can hear you.

[David]

Blah blah, blah blah blah blah blah blah blah.

[Ryan]

Yeah, we'll give you some like takes on the takes later. But they also mentioned some other chains. So zcash, they said it was likely like a first target. They mentioned stealth inflation attacks that are available also Monero. If you're on Monero, all of the private transactions could be yielded public like this With a quantum computer? Yes.

[David]

Are you serious?

[Ryan]

Yes. David. So all of your nefarious transactions on

[David]

Monero, every Monero is going to be revealed?

[Ryan]

Yes. Yes.

[David]

That's going to be interesting.

[Ryan]

Some chains are ready for this. Algorand is ready. They're already ready. So there you go. A boon for Algorand Solana. They said it's similar to Ethereum but they have less institutional inertia. They'll be able to implement it. They released proof that the 20x algorithm, Shor's algorithm improvement was like a real thing. Not by publishing the algorithm itself and how they did it. Because that would be too dangerous.

[David]

Yeah, because they're just giving the secrets. They proved that they could do it, but they're not releasing those secrets to anyone else.

[Ryan]

So they use a succinct ZK proof in order to prove that. So they didn't tell you how they did it, but they did prove that they do have a 20x improved, improved algorithm for, for shores for cracking this type of thing. Crazy.

[David]

Gotta know that China is like somebody go get that secret.

[Ryan]

Oh my God, that's a great point. Right? And I mean I think it's also a point that we are beyond the days where this is going to be released publicly. So yeah, there's like Quantum is a military weapon, isn't it? So if Google is releasing this quasi publicly, they're saying we have the capability but they're not showing you how. What are nation states actors doing about this like today? Because remember this technology allows them to spy on their neighbors. It's a military grade technology. So that is kind of the Scary thing. Nick Carter reminds us, you will not get a warning. The warning is what you are getting now. This is your warning. Once logical qubits start to meaningfully scale, you will go from cracking 5 bits to 256 bits very quickly. So Google's kind of being the good guy by telling us in advance. There might. That's not the expectation necessarily. One day you could wake up and the attacks are starting.

[David]

Yeah, I think that is the mic drop moment, is that this is the warning shot. This is the shot across the bow and we probably won't be getting any more.

[Ryan]

All right, now I'll dampen that a little bit. There are some takes around crypto. This one's from Anatoly, founder of Solana. He did remind us that we still have no clue on how to manufacture and add qubits. So this getting from 5 logical qubits to 1400 qubits, we don't actually know how to do that. From an engineering perspective, we don't know if that scales yet. And it could be the case that there's some impossibility in the world of meatspace that just makes that very, very difficult or decades out.

[David]

Technically true. Not something to depend on.

[Ryan]

Kind of agree with you, but maybe you're being a pannikin, David, because this is the other take. It was a take from a former bitcoin developer, which is. And we also. We talked to you and I talked to Michael Saylor this week and we asked him about the Google Quantum paper. We did a recording with Michael Saylor and he took this view. He said basically like, ignore the alarmists. There's a lot of pessimists out there that want you to feel fud. And if you move too fast, sometimes the cure can be worse than the disease. Right. So everyone calm down. Don't panic. The devs will figure a solution out. This is Jonas Chaneli. He said, don't rush, avoid the fudge. Bitcoin devs, I know they, they acknowledge that, that quantum is a risk. They're looking at, researching it. Maybe it never materializes, but like, it's just. Don't be all alarmist and panicking about it. I.

[David]

It's hard for me to take the don't be a panic and don't believe the FUD response. Seriously, because this is. Is this not existential for bitcoin?

[Ryan]

It's pretty damn important.

[David]

Yeah, it's pretty important. Yeah.

[Ryan]

And so it's existential.

[David]

There's like a level of FUD that we all get on board with. Because these are, this is our industry here. And so to say, hey, hey, don't panic is like the building's on fire. Like sure, don't panic but like do rush for the exit.

[Ryan]

Don't panic, but prepare maybe.

[David]

And I don't mean exit bitcoin, I mean just like go to the solution.

[Ryan]

Yeah, we.

[David]

It's urgent.

[Ryan]

Brian Armstrong seems to feel that urgency so just this morning he posted going to start spending time on this personally. Seems like we need to solve it sooner, right? Rather than later. I don't know what the solve is actually going to be. There's so much here. This actually leaked outside of crypto Twitter as well. This is Chamath, co host of the all in podcast. He said I mentioned last year and the Crypto Bros Freaked out about it. But there's two things that are true about Crypto Bros. They're extremely technical and extremely belief oriented. Sometimes though the latter clouds the former. This paper from Google, it's just talking about bitcoiners.

[David]

These are just bitcoiners.

[Ryan]

It's quite reasonable and it raises some important technical questions. The crypto elders should start spending more effort organizing on a timescale that makes crypto quantum resistant and do this in the next few years with a conclusive roadmap.

[David]

I hate it when Chamath makes the point that echoes around the world. And he's right.

[Ryan]

What do we got coming up?

[David]

Coming up next, we're going to talk about the the biggest hack on Solana there, $285 million exploited from drift. And we're going to talk about the lessons learned from that. Then we're going to go on to ethereum and the EEZ, the Ethereum economic zones. And why might be Ethereum 3.0. You didn't hear from us though. And also the clearest evidence so far that X is working on a crypto wallet in their X Money super app. All of that and more. But first we're going to talk to some of these fantastic sponsors that make the show possible. Markets are reacting to a world that feels anything but stable. Inflation is sticky, geopolitical risk is rising, and capital is moving between crypto commodities, equities and currencies faster than ever. A universal exchange like Bitget is built for this kind of environment with a major app upgrade. Bitget now gives Tradfi its own dedicated tab in the navigation. One click gives you access to stocks, gold, Forex and other global markets all inside the same platform you already use for crypto. You can get 90% off trading fees on stock purps, you can trade gold and silver without the fee burn. One app, one account. Trade crypto and traditional assets side by side without bouncing between platforms. No scattered tools, no login juggling. Just a unified trading experience built for speed and flexibility. When gold is reacting to global risk, crypto is moving on. Liquidity and macro headlines can shift markets overnight. You need a platform that keeps keeps everything in one place. This is Bitget's universal exchange vision in action. If you're the kind of trader who adapts as the world changes, Bitget is built for you. Start trading crypto and TradFi in one place. Click the link in the Show Notes. This is not investment advice.

[Ryan]

Some exciting news. We are launching a new podcast to help people figure out the crypto cycle. How to navigate it the best crypto cycle investor I know, his name is Michael Naito. He runs the Defi Report. This is the guy that sent me a sell alert before the 10:10 price drop happened. His cycle analysis has been absolutely on point. I've been following him for years and this year we started recording weekly podcast episodes. Each one we get into his portfolio, what he's holding, the market structure, entry targets, fair market value of bitcoin and ether, and where we are in the cycle. There's new episodes that are released every Wednesday. They're 30 minutes, they're short, they're punchy. I think this crypto cycle is harder to navigate than most. So let's do it together. Go slowly. Subscribe to this podcast Search the Defi Report Wherever you get your podcast, YouTube, Apple, Spotify or find a link in the show notes. There's a new episode waiting for you

[David]

now on Wednesday, April 1. Drift Protocol, which is a Solana perp Dex was exploited for $285 million. One of, if not the biggest hack on Solana there was the wormhole hack a While ago in 2022 that was $325 million, but that was a bridge. Drift is a Defi app on Solana, so definitely ranks up there. 50% of Drift's total TVL was drained. How did this happen? The attacker somehow got a hold of two of the five multisig signatures through social engineering and they just were allowed to push a transaction through that I think some of the other multisig signers couldn't comprehend and so they just pushed them to approve which gave them control over the protocol. That's market creation, Oracle assignment, withdrawal limits, and also importantly, no time locks. And so once the exploiter had access to the sufficient number of admin keys. They basically had full admin control over the protocol. Weeks before they got access to these keys, they made this fake token that they had minted and wash traded for days and days and days and days so that they could create this fake volume that made this token perceived to be real. That allowed them, once they had governance over the protocol, to add this token to the Drift protocol. And they controlled the entire supply. And so once this token was approved as collateral, they could collateralize this token and then withdraw USDC, USDT, CB, Bitcoin from the protocol. All of this happened in 31 transactions over 12 minutes. That resulted in $285 million getting drained. The drift token fell 20% in the hours after the exploit was first reported.

[Ryan]

The amount of planning that went into this, and it was like the multisig signers were kind of like almost like hunted, right? So again, it took two of five on this multisig in order to have this kind of God mode ability to drain 285 million, which is 50% of Drift's TVL. And it was a sophisticated, very sophisticated group that pulled this off. So someone like the Lazarus group, maybe even indeed was them, I'm not sure. I haven't seen kind of the reporting on this. And that was the vulnerability. So they were able to trick two of Drift's five multisig signers to sign these transactions that they didn't fully understand. And that's how this hack happened. Unfortunately for users, like there's. I mean, the money's gone, right? So Drift hasn't come out with a way to renumerate users. So Drift was not a huge perps protocol in the scheme of all perps protocols. They were kind of like top 30, but they were the biggest, I think, on Solana, at least one of the largest on Solana. And as you said, I mean, this ranks as one of the biggest hacks ever, certainly the largest on Solana. This reminded me a little bit of the Ronin sidechain hack. Do you remember 625 million. That was in 2022. That was also a multi sig type hack. Social engineering compromised keys like these multisigs are. They are just hazardous for protocols to have in place. Right. And I mean, what are the lessons that we learned from this?

[David]

There's a lot of just kind of criticism on the Drift structure, the admin setup, the multi sig setup of Drift from some defi founders. So both Stani from AAVE and Hayden from Uniswap said something to the effect of Drift was Not defi. If you have admin keys that can do these sorts of things, like one single entity can govern this protocol in this particular way, that's. That's just not defi. Hayden said. People might accuse me of grave dancing for saying it, but we have to stop letting centralized things call themselves defi. An admin key that can drain all the funds, cefi. Otherwise, defi means nothing and the brand is destroyed. No admin key can drain any version of Uniswap for a reason. I think there's a point there to be taken of just the whole point of this thing is smart contracts and code. And that's the thing to aspire to. Granted, that's a very difficult thing to aspire to. And we've also learned other lessons in the inverse direction of things completely governed by code also have problems. So it's a little bit stuck between a rock and a hard place. I think the big lesson to be learned was the zero time lock, the zero second time lock, where new governance decisions, new admin changes go into effect immediately and don't give any sort of recourse. There should be, I don't know, 24 hours, seven days before some things take effect that would allow people to just raise a flag and be like, yo, this is not right.

[Ryan]

Yeah, certainly, even if you have a multi sig, there are better ways to design it. It was only a 2 of 5, right? You could do a 5 of 7 or something like this. There's all sorts of time, time delays, all sorts of things you could have done. I think another lesson learned is the social engineering behind these hacks is getting crazy sophisticated. Right. So how they got these signers to actually sign, I don't know if that's completely known, but it could be like supply chain attacks where there's some kind of code library that they downloaded as a dependency has now infected their machine. I mean, if you're a multi sig signer, you should be concerned with your setup at all times and be paranoid about it.

[David]

You should have a setup that does not touch anything else other than doing it one job.

[Ryan]

Absolutely. David. There was something that big that came out of ETHCC this week that caught my eye. I want to tell you about it. Is that okay?

[David]

I would love to hear it.

[Ryan]

Okay. So there was a dream that was the United Chains of Ethereum. You remember this?

[David]

I had this same dream.

[Ryan]

That's what I thought we were kind of getting back in 2022.

[David]

Kind of what I thought was the whole idea.

[Ryan]

So I want to take you to maybe DEFCON 2024. When. Do you remember when Drake gave his first kind of lean Ethereum talk?

[David]

Yeah, the five year plan talk. Yeah.

[Ryan]

And so there was news like Justin Drake was getting on stage. He was going to present something. I was hoping it would be a way to unite all the chains. What I was thinking of calling kind of Ethereum 3.0.

[David]

Yeah, we were memeing before it was announced, we were meming Ethereum 3.0.

[Ryan]

Okay. And what we meant by uniting the chains was basically synchronous composability. So the problem with the L2 roadmap and L2 strategy in general was that every L2 felt like a separate country. Right?

[David]

Like it had its own borders, blockchain. Everything was a separate blockchain.

[Ryan]

It felt like a separate blockchain. Sure, that there was some shared security there, but like when it comes to liquidity. Oh, that's a separate liquidity pool. You have your L2 liquidity. You want to get that, you got a bridge.

[David]

18 different implementations of Uniswap. 18 different implementations of Aave. Like, no, no, no. One plus one equals three.

[Ryan]

It was a security alliance, like a very loose federation of countries. It wasn't a united chains of Ethereum. It wasn't kind of like no borders. Everyone shares the same liquidity. Okay, well, the dream might be back on the menu. We'll see.

[David]

But am I ready to be hurt again?

[Ryan]

Don't get your hopes up yet, but actually, I do think there's some meat on the bone here. So this is a rollout from Gnosis and also from Jordi. You remember Jordy, right?

[David]

Yeah, Jordy Bellina.

[Ryan]

Yes. So ZK genius. Anyway, it's called eez. It stands for the Ethereum Economic Zone. And the promise here is that it's a way for layer 2s to synchronously compose with layer 1. So all shared liquidity. Okay. Shared, shared fees, shared everything. So it seems seamless to be on. Whether you're on an L2 and the Ethereum economic zone or the L1, it all feels seamless. Shared liquidity, it's all unified. You can get atomic transactions through. And it does indeed feel like one chain. So the way they are doing this is through technical architecture and some specifications, sprinkling of ZK magic that's important for kind of fast withdrawals and to add

[David]

some ZK and then you're done. Yep.

[Ryan]

And then developer tooling and ecosystem integration. Some of these details are going to happen, are going to emerge over the coming weeks and the Hope there is that you get chains to opt in. So one chain that would be nice, which is currently in L1, is the gnosis chain. So Martin, the, I guess one of the leads for the Gnosis chain had said, if this works, the Gnosis chain might come back and might transfer from an L1 to an L2. And why? What's the reason? Shared economics. You get to tap into all of Ethereum's liquidity and this alliance can grow. So it's kind of a, you know, a sum type story. A sum is greater than the parts type story because every L2 that joins add some more liquidity and they all kind of share it together. So that's kind of the. The alignment Hope. I don't know yet. It's too early to see whether they can pull it off. But the dream is still alive.

[David]

Yeah, this sounds like just based and native rollups applied.

[Ryan]

Yep.

[David]

Is that what this is? Because I know Martin was big on native rollups. Is this that?

[Ryan]

Well, it's funny because Martin gave the talk at the same devcon I was talking about about native rollups.

[David]

Right.

[Ryan]

And so this is the manifestation of that. And he thinks now it's kind of possible maybe it's not quite native rollups in the way he talked about them as being completely homogeneous, but for all intents and purposes, it feels kind of like a native rollup. And the bottom line is united liquidity, united network effect, a much more coordinated ecosystem of chains. That was the original vision. And maybe this pulls it off.

[David]

I think the thing that I am still undetermined on the jury is still out on, is, is this kind of like closer to a main quest line for Ethereum that somehow Martin from Gnosis is doing instead of the ef? Or is this more of another, like, technical side quest, intellectual masturbation kind of thing that we like to do in Ethereum? Which one is it?

[Ryan]

It all kind of depends on traction, I think. Right. And some have said, like Zaki Manian from the Cosmos ecosystem. Where have I heard this idea before? We tried this in Cosmos in 2023 and it didn't work.

[David]

Cosmos tried everything.

[Ryan]

Yeah. Martin Koppelman says, to be frank, being in the same economic zone as Ethereum is more relev. Relevant than being in the same one as Cosmos.

[David]

So basically, that was always our argument, which is like, well, Cosmos didn't have money. Like, atoms were never money. Eth is money. And so that's a material difference.

[Ryan]

If this path catches on, it would be great because the EF can focus on scaling the L1, they can focus on getting Ethereum quantum secure. Right. And the community can focus on efforts to unify all the change. So maybe we get the best of both. But again, we'll have to see how this actually plays out in practice.

[David]

I do like saying the ETH is money words, because what would be, Ryan, the native currency of the Ethereum economic zone, you know?

[Ryan]

Right. Every, every united country, I suppose, has, has a single currency. So it would have to be ETH.

[David]

It would have to be ETH. It would have to be ETH. Speaking of things that make ETH money, AAVE v4 is now live on Ethereum. So we've been at AAVE V3 for a while. V4 has been in development, is now deployed. Some of the biggest changes is that v4 turns aave from a collection of independent lending pools into a single liquidity hub that has specialized lending markets called spokes for to plug into the hub. So each spoke has its own underwriting rules, collateral types, specializations, et cetera. And also the idea is that anyone can launch a spoke with DAO approval and all of the spokes just plug into the hub.

[Ryan]

So shared liquidity. But how does risk work? Like if some pool, kind of like, or some spoke, you know, the debt goes bad or something, it's a bad asset, something bad happens. Right?

[David]

Okay, so this is the toxic contagion model. So some spoke is like, let me allow for some terrible token to be collateral. What was the Sam Bankman fried to ftt? Let me allow FTT to, to be, to be collateral. Yeah, well first, I'll answer that question in a second. First, there's a risk premium different for tokens. And so in V4 if you Orion are collateralizing ether to borrow USDC and I'm collateralizing FTT, this the sandbank high concentration, low, low float token, AAVE will charge me as the FTT collateralizer a much higher premium than you for collateralizing eth, because ETH is money and FTT is a scam. And so first there's like one defensive layer off of that, that. Second, there are credit lines as like blast radius constraints. And so the credit lines are created by the hubs to govern the spokes. They set limits and conditions for borrowing. And so AAVE is the main risk manager of the hub. And they will govern over the size of the collateral, the size of the credit limit which constrains the damage any one spoke can do. So it is, it's a little bit of a trade off. It's not complete constrained, but it is balanced between the two ends of the spectrum.

[Ryan]

Yeah, I mean, I think this is a big deal now. They're starting small. I think there's some limits on how much can be added to AAVE4 right now, but I'm sure they'll take those limits down as security is proven and time goes on.

[David]

It is worth highlighting that the explicit intent is that users never really interact with the hub directly. They interact with spokes not dissimilar from the layer 2 model. Remember when we were saying users go on the layer twos? This kind of, to me, Ryan mimics central banking, where you have the hub, the central bank that governs the spokes, the commercial banking layer, and it determines the interest rates, you know, who's got the money, all this kind of stuff. And so users go to the spokes, the spokes are the commercial banking layer, and then the spokes are governed by the hub. And so this is AAVE going into like a platform model.

[Ryan]

Yeah, it's kind of cool. I mean, this is a big network effect game. Right. And so AAVE is leaps and bounds ahead of their nearest competitor. And it seems like a plan like this, they'll. They'll remain so if, if they can execute on this. David, it looks like X is clearly working on a crypto app. Maybe call it a money super app. We have Benji Taylor who just announced he is joining X. He's got a photo here with Elon Musk. This is Benji. If you don't know who Benji is.

[David]

I do. I do not know who Benji. Who is Benji?

[Ryan]

This is the guy that built the wallet that got poached by aave. So he built a crypto wallet that was purchased by AAVE and they've rolled it into a consumer product. Then he was poached by base. Oh yeah. Then he, he was poached by Base. They building wallet stuff there. So it's all crypto stuff, all wallet stuff. And now he is working for Elon Musk and X.

[David]

So he, he just, hey, do you have a wallet that needs built for your money app? I can build that for you.

[Ryan]

Exactly. And I'm sure X was like, hey, we need some talent to go build us a crypto money app wallet. And so they go, when they picked up Benji, that's a sign of things to come. Meanwhile, you have Fantom and some of our crypto native wallets coming steps closer to building their own money super wallets starting today. This is phantom. Anyone in the US can fund with bank transfers or Apple pay directly to a Phantom wallet, send and receive wires. That's a bank feature in a defi wallet without phantom fees. And then Phantom has a debit card. There's another convergence happening here where crypto wallets are becoming a bit more trad fi friendly.

[David]

Yeah. Yeah. I mean, especially when we got the doors blown open by the CFTC and the SEC about financial super apps. Like did we have the green light? And now the race is on to build the Phantom super app.

[Ryan]

Absolutely.

[David]

Something that caught my attention this week. Apex is now building on base Apyx. We learned about this, actually through our conversations with Michael Saylor. We've recorded with Michael Taylor yesterday that that episode's gonna come out in a week from Monday. So premium subscribers get it like 10 days earlier. So if you want. If you wanna go listen to the episode, you can subscribe to Bankless. Get that in your podcast feed. Aprex is bringing strategies Stretch product, their yield bearing 100 pegged equity instrument that spits out, I think 11% yield right now. 11.5.

[Ryan]

Yeah.

[David]

And it's putting that on base. And so we have strategy which buys Bitcoin, puts it into its equity holdings behind MSTR issues another equity instrument called Stretch.

[Ryan]

Fixed income instrument variable because it flexes up and down.

[David]

Yeah, it used to be 8, now it's 11.5. It's got $6 billion of AUM right now because retail just love this product. And then we have Apex tokenizing that equity instrument and putting it on base.

[Ryan]

Okay, so we took a digital asset, we converted to a security, then we took that security and we tokenized it and we put it back on chain.

[David]

Yeah, we issued another security in between those steps. You missed one of those steps.

[Ryan]

Innovation. I mean, if this is what the market wants, right.

[David]

Defi loves yield. Stretch is yield.

[Ryan]

Best of breed. Best of all things.

[David]

I don't hate it.

[Ryan]

The market will figure this out. David. You know, OpenAI just closed $122 billion raise and the valuation was almost $900 billion. This is a company that, I don't know, just released a product, what, like three years ago? Fastest growing product in history. 2 billion revenue per month, growing at 4x4x faster than when they raised at 157 billion. That was the last time they raised. These private valuations are gargantuan. So this is still a private company. There was some other news on the week that SpaceX, they are targeting a June listing at a $1.75 trillion valuation. Now, this would be an IPO. Okay, so a company goes from zero to $175 trillion completely privately and then it IPOs to dump on retail. No, I'm sure it's a great company but like after all of the upside has been achieved privately, it's hard to

[David]

get excited about $1.75 trillion valuations.

[Ryan]

It's cool. This is also such an indictment of our public markets today in the US which is the vast majority of the growth. The most exciting companies, the decacorns and future unicorns are now happening privately. And retail does not get accessed because of accredited investor laws. So Amazon Contrast that 1990s Amazon, if you bought at IPO, at IPO and held all the way to now, that would have turned, let's say you had $1,000, you did that 1,000 into $2.88 million. Okay. Almost a 3,000x return. Returns like that just like aren't existing as These companies are IPOing later in the cycle. So cool. And also I'm pretty frustrated by that.

[David]

You're saying Ryan's a little butthurt.

[Ryan]

I couldn't get in either of these companies.

[David]

Ryan, I've got some breaking news for you on the backs of the OpenAI news.

[Ryan]

What's that?

[David]

That this happened just a moment ago. OpenAI has acquired TBPN.

[Ryan]

Oh really? The media company?

[David]

Yeah. Just. Just got announced the me. The. The media company out of la. Yeah.

[Ryan]

That's crazy.

[David]

Yeah. What are they doing with. With them? I mean obviously it's a very cool media company to own. Yeah. I don't quite see synergies between TBPN

[Ryan]

and this isn't like a remaining, you know, April Fools.

[David]

Leftover April Fools. The date on the blog post on OpenAI.com is April 2nd.

[Ryan]

We're safe then. If it's April 2nd, we're safe.

[David]

It's a bad April Fool's joke if it's April Fools.

[Ryan]

Let me tell you man, there were some good ones. Like I enjoy April Fools. I just like it. It's fun. Metamask had a good one. They had, they released metamask tradfi mode which you can activate on your wallet and like 6pm banker hours only. I thought that was pretty clever. Did you see anything that was good?

[David]

Well, we, I think Brian, we do a bang up job with our April Fool's jokes. We have a history of pretty good April Fool's jokes. We, our April Fool's joke this year was that we issued, we did an IPO on Canton network which is like just believable enough that it got enough people like I like some guy was in the reply saying, like, I sent this to people in a furious rage. No way.

[Ryan]

Really?

[David]

Yeah. Huh. Yeah.

[Ryan]

I remember some of our previous ones. Like, one time we announced that Bankless was acquired by Wells Fargo, and my inbox was full.

[David]

We lost 1% of our email subscribers. We lost community that day, furious at us.

[Ryan]

Well, that does bring the question of, like, can you push an April Fool's joke too far? I think there were some crypto protocols that maybe did that. What, you tweeted about this hyper bridge?

[David]

Yeah. I'd never heard of this before, and granted, this is a victory for them, because now I've heard of them before, but they are a bridge, I think, to hyper liquid. They are bridge. And they tweeted out, we've been hacked. We're working hard to fix this. If you're a terrible April Fool.

[Ryan]

If you are a crypto protocol, do not tweet on April Fools.

[David]

There is a unspoken but should be spoken rule of if you are a crypto protocol, if you're a crypto company, you do not make April Fool's jokes that are related to customer funds.

[Ryan]

Yes.

[David]

Or move the market. You do not disturb markets with your April Fool.

[Ryan]

Use some sense, people.

[David]

Use your. Yeah, God damn it, people. Jesus Christ.

[Ryan]

All right, well, we got to end it there. Of course, you know, April Fools is risky. So is crypto. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the Bankless journey. Thanks a lot,

[David]

Ra.