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- [00:00]
A
Foreign. It is the last week of September.
- [00:07]
B
And God, last week of downtember.
- [00:10]
A
Yeah, I'm glad it's the last week of September.
- [00:12]
B
We finally, finally got some down in downtember.
- [00:15]
A
We did well. This was promised, so this is why I'm not worried. But the markets are definitely down on the week. I'm just going to be glad it's over. We can get into October. October and we can resume the bull market. Right? That's what the people are here for. That's what I'm here for.
- [00:29]
B
Did you see Peter Schiff's tweet today? He's like eth below $4,000 despite all of the dash buy pressure, marking ether officially into a bear market. Really Like Peter Schiff.
- [00:41]
A
Peter Schiff tweeted, actually bullish. He's usually tweeting about bitcoin, so I'm honored to be like a part of his shit posting. It's great.
- [00:48]
B
Bear market, like 2/4 of in consecutive down prices.
- [00:53]
A
I don't know. I guess so.
- [00:55]
B
Three weeks of down. Where does he get off, man?
- [00:57]
A
And also, does he not know it's down? Timber. We've always known that this was downtime.
- [01:03]
B
There's no buyer. Bear market. Market's in downtember. It just cancels out. Yeah.
- [01:06]
A
No victory lapping. We will not accept it. We'll be back in October. A few things to talk about today. David Vitalik getting bullish on Defi. He's got a blog post heard around the world. We'll talk about that. What else?
- [01:17]
B
We got Poly Market featured on South Park. Perhaps like a top 10 mainstreaming moment for crypto. You watch south park, right, Ryan?
- [01:27]
A
It's been a long time, but yes. Yeah, of course.
- [01:30]
B
Everyone does. I was a big fan of south park episode or seasons like 1 through 15, and then now I lost track. But they did. They did an entire episode on prediction markets and it was just all Polymarket, which is great tether raising money and insane valuation. So we're going to talk about the tether raise. What else?
- [01:47]
A
Gary Gensler makes an appearance. I really enjoyed this video clip. We're going to play it mid episode, but he's defending his record on crypto and he is squirming a little bit as the reporter calls him out.
- [01:57]
B
Was it cnbc either that.
- [02:00]
A
Yeah, cnbc, I think. Exactly.
- [02:02]
B
Yeah.
- [02:02]
A
And meanwhile, Paul Atkins doing the thing that Gary Gensler should have been doing this entire time, which is cooking up some more pro crypto regulation. So we'll talk about that.
- [02:12]
B
What was it? What was the premise as to why Gary Gensler was invited on cnbc. If he is like, who is Gary Gensler now?
- [02:19]
A
I don't know if he's like the.
- [02:20]
B
SEC commissioner, who is he?
- [02:21]
A
It's not office hours anymore, is it? It's just me. It's like reflections from Gary. They just wanted to bring him on and just castigate him, which I'm totally.
- [02:29]
B
Here for exactly what happened.
- [02:31]
A
And also, David, I want you to fill me in. There was a debate on crypto Twitter got a little ugly.
- [02:36]
B
There were some nasty things on crypto Twitter about layer two relations with securities laws.
- [02:42]
A
Yeah.
- [02:43]
B
Which I was not a fan of this debate. I thought we could have reformatted this debate to be much more productive, but it chose a less productive route. So we're going to talk about that.
- [02:50]
A
Yeah, it's. Should base be regulated like the NASDAQ because it has a centralized sequencer? So we'll talk about that. But before we get into it, we got to shout out our friends and sponsors over at zero G. What is zero G up to?
- [03:02]
B
Zero G is a chain, a layer. One that's dedicated to kind of like suppose supply, the entire supply chain of what it takes to make an AI. So the data for a model, training a model, inference of a model, the whole complete supply chain, everything that like OpenAI, Gemini, Google, all the AI labs, everything that they do, end to end, they do it in this closed black box fashion. 0G is that same like service, but as an open source blockchain. Pretty cool. So hyperscaled, like tons. It's got its own data availability layer, it's got its own storage layer. Everything that you need to build a LLM, build an AI in an open source way. So they're just kind of like pushing the frontier of open source AI, which I'm a big fan of. You can't really do AI stuff on Ethereum, obviously. It's just not scaled enough. That's not what it's for. And so they're, they're, they're doing what I think is the best of like extending the crypto ethos to a blockchain that can, you know, imbue crypto ethos into AI LLMs. I think it's pretty cool. There's a link in the show notes if you want to learn more. 0G AI is the URL.
- [04:10]
A
There's also a mainnet this week, right. Version three. Mainnet and token.
- [04:14]
B
Yeah.
- [04:15]
A
So some big things going on there. Speaking of tokens, David, tell us about bitcoin, the token. Where are we at on the week.
- [04:22]
B
$111,400 down 5% on the week. Ether, $4,000 flat down 13% on the week. So this was, this was the down timber we were promised. That was foretold.
- [04:33]
A
13%. That's pretty, pretty ugly. For Ethan, the week. Yeah.
- [04:37]
B
Yeah. I mean, I'm. I don't know about you, Ryan, but I'm here for the double digit moves. Yeah, you got it. Either way.
- [04:45]
A
You like the pain you're accepting. Yeah. You know, if you, if you're going to, if you're going to accept double digit up, you got to accept double digit down.
- [04:52]
B
Yeah, that's right.
- [04:53]
A
Just one of those, one of those weeks. We'll make it all up in October. Okay. If you were losing the faith though, here is Tim Cook, the CEO of Apple, who actually is saying that he owns both Bitcoin and Ether and hasn't sold. We'll play the clip.
- [05:10]
B
Do you own crypto? Any Bitcoin or Ethereum or do you play around with this? I do, yeah. I think it's reasonable to own it as a part of a diversified portfolio. And I'm not giving anybody investment advice, by the way. When, when did you get interested in it? I've been interested in it for a while and I've, you know, been researching.
- [05:32]
A
It and, and, and so forth, and so I think it's interesting. Okay. Well, that wasn't the most bullish clip we've ever played on videos, I gotta say. I mean, I took September.
- [05:42]
B
I don't go to Tim Cook to get financial advice. But I do appreciate that a guy who's on the frontier of one tech sector is looking at the frontier of another tech sector.
- [05:51]
A
I agree. Although he did answer that it was not a Tom Lee bullishness that, you know, you'd hope for. It was kind of hedgy, right? Like, oh, yeah, you know, people should own this as part of a well diversified portfolio. I think it's interesting.
- [06:02]
B
Yeah.
- [06:02]
A
Not quite as bullish as us, but fits the theme. For September.
- [06:06]
B
I want to hear Tim Cook give the bull case for eth. I want to hear it.
- [06:10]
A
Yeah, we'd do that episode. Tim, if you're listening, we'll schedule that total crypto market cap. Are we above or below?
- [06:17]
B
It's a sad number. Not that sad in grand scheme of things. 3.9 trillion. We're over 3 point trillion, but just barely getting into the markets. BlackRock makes now $260 million of revenue for BlackRock a year from crypto. I don't know where they are in like the revenue per employee. But BlackRock has to be pretty high. So all, collectively all the crypto products make BlackRock over a quarter billion dollars of revenue a year. Mainly the bitcoin and ether ETFs are the big ones. $220 million annually from the Bitcoin ETF, $42 million annually from the ETF. Of course they also have the Biddle Fund. Not as much revenue there and then they have, they have plenty of products coming down the pipe. All of this, however, is only 1.2% of BlackRock's total annual revenue. But like two years into making crypto products and crypto represents 1.2% of Blackrock's revenue. Like I'm not going to be sad about that. That's not bad.
- [07:11]
A
It's also, yeah, if you think about the marginal growth, it's got to be like massive in crypto relative to its other product lines. Right. Because crypto has basically come from nothing, you know, two or three years ago to this. They also have the Biddle Fund, which of course is going to print them some money and they have an ETH staking ETF that's coming down the pike. James Seyfert said that he expects that in October, which is pretty bullish.
- [07:35]
B
So October, during October.
- [07:37]
A
Perfect timing. Well done. Also, David Bitgo filed for an ipo. I'm not sure that everyone in crypto actually knows the name Bitgo, but they've been in the space for a long time. Who's Bitgo?
- [07:49]
B
Bitgo is like the OG crypto custodian. Probably a crypto custodian. I think even before Ethereum was around. I think that's true. Filed for an IPO under the NYSE under the ticker btgo. And of course part of this process is you show your cards, you reveal your financials. So we are able to talk about BitGo's financials. $4.2 billion in revenue in the first half of 2025, which was a monster amount of revenue. I actually had no idea that a custodian could make that much revenue. Apparently this the story of custodianship and we're just, just learning this is like you make a ton of revenue but you have a lot of operating expenses, which isn't intuitive to me. So they had a $12.6 million profit so far this year in the first half of 2025 after making $4 billion in revenue.
- [08:33]
A
Somebody knows paper thin margins there.
- [08:35]
B
Margins, yeah, kind of crazy. I actually don't understand that. Somebody else who knows the Custodian business model probably knows why revenue is so high and net profit, net profit is so low. But nonetheless pursuing a dual class share structure. So class A for shares for public class B shares amongst some of the current owners like the CEO, et cetera, expected to be listed in Q4 2025 this year or early 2026. So just another crypto company going public in the most favorable time to ever go public in the history of crypto managing.
- [09:07]
A
Over 90 billion in crypto inside of BitGo and almost 50% of that is Bitcoin. And then this is kind of interesting. Sui Solana, XRP, like SU is 20% Solana, 5% XRP, 3.9% Ethereum is only 3% which relative to market share seems like really low compared to Bitcoin.
- [09:27]
B
Don't put your eth in a bank, dude. Put it in defi.
- [09:31]
A
All right, fair enough, David, fair enough.
- [09:34]
B
Productive on chain. Put it on chain.
- [09:36]
A
Yeah, you wouldn't want to hold it in Bitgo, I guess. I mean, I wonder if Bitgo is offering any kind of yield or anything the way Fireblocks does. Anyway, it's all part of the public filings I'm sure, so you can find out more. It's another good public stock offering of a crypto company. Speaking of big offerings, David, tell me.
- [09:54]
B
About Tether wants to raise at a $500 billion valuation. So they are trying to look for 15 to 20 billion dollars through private placement. What does Tether need money for? They're a money printing machine. Anyways, they're offering a 3% equity stake for somewhere between 15 and $20 billion for sale. Apollo has confirmed that the company is assessing funding from a select group of prominent investors, but no further details have been shared. That would put like Tether shoulder to shoulder with like OpenAI and SpaceX. Wow, dude. The theme of the 2020s are just gargantuan companies that are private. Yeah, that you cannot buy. Stripe is a big one. OpenAI Space X. You can get your hands on a SpaceX shares if you really try. But like still private company. Why do they want to raise? They want it for significant expansion beyond stablecoins, including ventures into AI, energy infrastructure, commodity trading, communications and media. Which is just seems like, okay, this is Tether's venture portfolio. So I guess they're just looking to raise $20 billion to be a VC fund, which at that size you can kind of do whatever man.
- [11:04]
A
They could do a lot. I mean they can do a lot. At 500 billion. The scale of this company is still like what, 100, 150 employees. So relative to the employee count of these other like OpenAI or SpaceX, I mean just quite a difference. Also this would make Chairman Giancarlo Devasini the fifth richest person. So I've actually not. Yeah. On paper. I don't. I guess they're all actually part of this individual. Right?
- [11:30]
B
I have not. I have not. But yeah, apparently large equity holder of Tether.
- [11:35]
A
Yeah, he. His net worth would reach approximately 224 billion making him the fifth richest person in the world behind model Musk, Ellison Zuckerberg, Jeff Bezos. I guess CZ maybe got knocked down. He used to be on the top 10 list. But you got two crypto people in the top 10 and none of them are Sam Bankman Fried, which he is.
- [11:55]
B
The chief financial officer of Bitfinex and a co founder of Tether. Yeah, I think Paolo sold a lot of his, not a lot, but a chunk of his equity stake in Tether a while ago. He owns like 10 or 15% of tether or something like that, which is just plenty.
- [12:13]
A
Top assets by Market Cap. Right. This would put a $500 billion valuation. It puts tether in the top 25 and notably David.
- [12:20]
B
Wow.
- [12:20]
A
Puts Tether above Ethereum. Okay, that's a flipping of sorts. Yes, it does, it does, it does. So if you're gonna go like look at kind of.
- [12:33]
B
Because it went down 14% this week. ETH is at $480 billion.
- [12:38]
A
Yeah.
- [12:39]
B
Tether at number two.
- [12:41]
A
The biggest assets that crypto has produced right now are Bitcoin number one, you know, 2.2 trillion. Tether number two at 500 billion and ether coming in at number three right now. 483 billion. Yeah. So okay, let me ask you.
- [12:56]
B
But Tether needs to tokenize its equity to be on Coingecko.
- [13:00]
A
Yeah. So it's not on chain. That's true. But let me ask you dollar for dollar, right? Considering they're about the same valuation, would you rather put a hundred dollars into Ether at this price or $100 into tether? Dude, and why is your answer Ether?
- [13:19]
B
Do you think USDT will ever flip Eth?
- [13:22]
A
I think that's conceivable. I mean there's going to be so many stablecoins in the, in the future. Right, but like, but that's the, that's the thing. If you're betting on Tether, you're, you're specifically betting on not all stablecoins. You're betting on Tether. Right. And this is a time where they have A massive amount of market share. Can they maintain it? They have the genius bill, but new entrants are entering. You know, I guess some people would say, you know, Ethereum has competitors too, but it feels much more differentiated to me. And yeah, it's a different, totally different asset, I suppose.
- [13:52]
B
Yeah, yeah, yeah. I don't know. I could see USDT flipping ETH in like many years.
- [13:59]
A
It'd be kind of nice to own both, but you can't, David, sorry, it's a private company. You can't.
- [14:03]
B
What do we got to. Anyways, coming up next, Polymarket on South Park. South park actually does just a great job explaining what a prediction market is. Obviously they had to because the whole episode is about prediction markets. So we're going to talk about that. And then Gary Gensler speaks. He's back being an influencer on cnbc, but he's in a little bit of a hot seat. So we're going to go just have some schadenfreude moments while we watch this clip. And then the White House is gearing up to sign the infrastructure bill by the end of this year and Paul Atkins has a few more pro crypto regulations up his sleeve. So we're going to get to all of that and more. But first, a moment to talk about some of these fantastic sponsors that make this show possible, starting with Uniswap. It's a browser wallet, it's a mobile wallet. It's also a blockchain, I think the fastest blockchain that exists, making it the best place to defy. Let's go hear from Uniswap. Right now, Ethereum's layer 2 universe is exploding with choices. But if you're looking for the best place to park and move your tokens, make your Next stop Unichain first. Liquidity. Unichain hosts the most liquid Uniswap v4 deployment on any layer 2, giving you deeper pools for flagship pairs like ETH USDC. More liquidity means better prices, less slippage and smoother swaps. Exactly what traders crave. The numbers back it up. Uni Chain leads all layer twos in total value. Locked for Uniswap V4. And it's not just deep, it's fast and fully transparent. Purpose built to be the home base for defi and cross chain liquidity. When it comes to costs, Uni Chain is a no brainer. Transaction fees come in about 95% cheaper than Ethereum Mainnet, slashing the price of creating or accessing liquidity. Want to stay in the loop on uni chain. Visit unichain.org or follow @ Uni Chain on X for all the updates. When you research a new protocol, you shouldn't have to juggle 12 tabs just to get the full picture. Market data on chain activity, social sentiment, developer updates. They're all scattered across different platforms. Surf brings it all together. It's the first crypto AI platform that combines institution grade research with on chain execution in one interface. From discovery and research to action, Surf gives you a full end to end experience. Instead of bouncing between Dune, Defi, llama, Twitter and GitHub, surf gives you the story behind the data in seconds. Whether you're evaluating a protocol, tracking positions, monitoring whale moves or exploring the next narrative, Surf upgrades your workflow so you can spend less time piecing things together and more time making informed decisions. Check out Surf today and experience crypto AI that actually works. Sign up now and use code bankless to get a seven day free trial to Surf Pro. Click the link in the description for more information. Degen started as a tight knit community on Farcaster and organically grew into one of the top meme coins on base. What began as a simple idea tip anyone who joins the fund sparked an economy that turned into a movement. The community runs the show from the logo and the lore to funding and building ambitious ideas. Together, over 1 million degens now power each other with their generosity, creativity and ability to get things done. At the center is the Degen token. It rewards engagement, fuels tipping and drives the marketplace for builders and fans. That same energy gave rise to Degen Chain, a fast, low cost layer three for new projects. And now the Degen app. The easiest way to connect, earn and participate in decentralized social media. With a built in wallet and real token utility in Degen, the hat stays on. Join Degen and get on the app waitlist@www.degen.tips. season 27 of South Park. Episode number five named Conflict of Interest. It's an entire episode about prediction markets. Let's go actually hear what a prediction market is from the three four kiddos. Kenny. I've forgotten their names. Stan, Kyle and.
- [17:25]
A
That's good.
- [17:25]
B
Cartman and Cartman. Yeah, let's go hear them explain what what a prediction market is.
- [17:30]
A
What are you guys talking about?
- [17:31]
B
Prediction market app, dude. You know online peer to peer betting? Yeah, it's social platform betting. People can make any bet they want and then other users take them up on it.
- [17:38]
A
Really?
- [17:39]
B
Yeah, it's pretty sweet dude. People bet on anything, even stuff. Here at the SKU team.
- [17:43]
A
Will the Girls soccer team win on Friday? Will there be a snow day this month? Will Kyle's mom strike Gaza and destroy a Palestinian hospital?
- [17:48]
B
Will school lunch have tater Tots next week?
- [17:51]
A
That's great. There's another clip too, right? This one?
- [17:54]
B
Yeah, we're watching.
- [17:55]
A
Let's play it this way. You watching FAT News? They're called prediction market apps. Controversial online betting that's found a loophole around normal gambling laws. And of course, the number one trending bet on the apps. Will President Trump and Satan's baby be a boy or a girl? That's right.
- [18:15]
B
Prediction market apps are going crazy right now.
- [18:18]
A
Betters on polymarket are at nearly 60%.
- [18:20]
B
The demonic butt baby's gonna be a girl.
- [18:23]
A
That's great. Wow.
- [18:26]
B
If you had no idea what a prediction market was and you are just a normal fan of south park, you're like, oh, that's kind of cool. That's pretty cool.
- [18:35]
A
They called it a social betting platform.
- [18:37]
B
Yeah, that was interesting. They added the word social in there. I mean, there is a very strong social element on Polymarket. There's like the comment section, people talking shit about each other. Yeah, it was pretty social.
- [18:49]
A
I actually think of all of the things, right, so, like, sure, south park did a good job explaining that, putting it in context, making it hilarious, whatever. But also of all of the things that crypto has produced, I feel like prediction markets are one of the easiest things to understand, right? Because they're like everyday events. I mean, who's going to win, what's going to happen? What's going to happen this or that. And many of the options are binary or they have some sort of outcome that could be devised.
- [19:20]
B
Well, everyone's grown up and made a bet with a friend. It's like, hey, I bet you that this is going to happen. Everyone's done that.
- [19:27]
A
It's funny, though, that they call it a loophole, right? It's a gambling loophole because there is a strong element of gambling, too, but it doesn't have to be gambling, right? It's like, are you gambling, are you speculating or are you investing? Right. It depends how you approach these things. I think there's going to be a certain portion of the population who's just straight up gambling or speculating, and then there's going to be another portion of actual professionals who do prediction markets for a living, and they trade them and they're informed with their takes and they take calculated bets and they win more than they lose. And they make a goal of it, they make money on it, right?
- [20:08]
B
Yeah, yeah.
- [20:09]
A
So it's all these things.
- [20:09]
B
I mean the difference between gambling and not gambling is skill. Is it skill based knowledge? Yeah, like roulette, not skill based. Blackjack act like skill based up to a point, like up to 49% chance of winning. But like prediction markets inherently skill knowledge base. Like there are, there are people who are good and there are people who are bad and there are people who are informed and there are people who are uninformed. And that makes it not gambling.
- [20:35]
A
It's also the reason you do it too. Right. I could participate in some prediction markets just by way of entertainment and that might be more entertainment, slash gambling. Whereas other prediction markets where I have some sort of special knowledge or I really like want to research, I could.
- [20:50]
B
Be in Kane versus Hoffman 2025.
- [20:53]
A
That's special knowledge.
- [20:54]
B
There was album alpha there.
- [20:55]
A
There was alpha there. That was fantastic. You should do that again. David. Did you guys talk actually you have a podcast you did with Kane Warwick?
- [21:03]
B
Yeah, yeah, me and Kane did a 30 minute podcast.
- [21:05]
A
Did you talk about a rematch or.
- [21:07]
B
He is fighting. Who is he fighting? He's fighting somebody in. In a boxing match soon actually.
- [21:14]
A
Oh my God.
- [21:15]
B
Bitlord. Bitlord. The. He's a traitor. He's like this British or Australian trader guy.
- [21:20]
A
So Kane has kept this up. He wasn't just one and done. He got it.
- [21:23]
B
Kane is very competitive, lost his first round and so he needs to get a victory under his belt.
- [21:31]
A
So for people who don't know bankless lore like David, David Hoffman fought Kane WARWICK DEFI FOUNDER SYNTHETICS founder I lost.
- [21:40]
B
$6,000 on myself on my polymarket about four hours before I fought Kane.
- [21:46]
A
Yeah, yeah, that was, that was polymarket's true mainstream moment, I have to believe.
- [21:51]
B
And overall there's just this conversation that's kind of murmuring up on crypto Twitter. I don't know if you're paying attention to it of like this notion of live financ entertainment. I don't know what the right title for this whole thing is, but it's. It's like live betting on finance related things. And so Poly market is like related to this. Like think about a combination of somebody live streaming a poly market or something related and then there's poly market embedded there. Or what we're looking at on the screen here is like some bar in South Korea has a projected perps trading platform up on the screen and that's the entertainment is like somebody is up there making trades. There's a competition here and people are just betting they're Making they're taking leverage bets on some perps platform and then I don't know what's like maybe at the end of the hour whoever has more money wins. And this is entertainment for people. And this is also related to pump funds live streaming platform as well. There's just like a growing trend towards live, live streaming, finance, gambling, entertainment. And that's becoming like a pretty strong like movement that people are paying attention to.
- [22:55]
A
What do you think of this? How does this make you feel watching this?
- [23:00]
B
I mean double edged sword? I feel it's, I feel definitely strong that it is the future. Yeah, like zoomers are into this for sure. This is like zoomer coded for sure.
- [23:11]
A
One benefit I think is it makes everybody much more financially literate, doesn't it? I mean like looking at candles like you're trading in this way. Right. Everyone's getting financial literacy by route of degeneracy. So maybe that's positive.
- [23:26]
B
That's how I did it.
- [23:28]
A
Well done. That's how many people did it.
- [23:30]
B
So my version of degeneracy was putting my entire net worth into ether in 2018. By today's standards. That's just not degenerate at all. That's just responsible.
- [23:43]
A
Well, speaking of being responsible, Mr. Responsible here, Gary Gensler has been the most responsible SEC chair we've ever had.
- [23:51]
B
So responsible, so incredibly responsible.
- [23:54]
A
This is just entertaining. So he came on CNBC and the reporter who was interviewing him really held his feet to the fire. I'm just going to play the clip because I think you guys will appreciate this. This is Gary.
- [24:05]
B
The community is ecstatic not to have you there anymore and to have him, to have him there right now. What you did around securities and enforcement actions and looking back on it, I mean, do you think that was the right call? Yes, I think because look, now we have this like burgeoning industry and there's so much more innovation and leadership in the US And a lot more capital coming into. There may be more capital in terms of, in terms of the interest in the public. The public is interested, I get that. But I took an oath of office. I also ran a law enforcement agency and my predecessor, Jay Clayton, a very fine individual, ran the sec. He's now the head of law enforcement agency again up here in New York. Was bringing many cases in this field, you know, was bringing over his tenure about 80 to 100 cases. Over my tenure we brought about 100 cases. We were consistently trying to ensure for investor protection. And in the midst of it, we had a lot of fraudsters. Look At Sam Bankman Fried. And he wasn't alone. And so investor protection. So when I look at the field that trades mostly on momentum, mostly on, frankly, hype for investors, you think this is dangerous, what they're doing. I think that for investors, everyday investors, the 5 to 10% of Americans who invest in crypto, and it's hard to get the real, you know, but that it's a highly speculative, very risky asset. And most of these tokens put aside Bitcoin, but most of the other tokens are not tied to any fundamentals. And there's 5 or 10,000 of these tokens token. So usually over time, you find new equilibriums. Like Warren Buffett would say, what, you know, what are the goods, what are the revenues, what are they selling? And so forth.
- [26:12]
A
There it is, David. Gary Gensler defending his record. He would give himself an A or an A plus, I think, for his performance as SEC chair.
- [26:20]
B
I love how he cites SBF as the reason why crypto is full of frauds. And SBF was the one person who got a meeting with Gary Gensler that didn't walk out with a fine.
- [26:30]
A
Right? Yeah. It's unbelievable. I guess he's. I mean, I love that the reporter asked him straight up and, like, do you think that what, you know, Paul Atkins is doing is, like, unsafe? I mean, everyone seems to love it.
- [26:44]
B
They're like, ever since you left, things in crypto have been great.
- [26:50]
A
And like, you know, the world didn't end right, as Gary said it would if we did all of these things in crypto.
- [26:56]
B
So the big thing that I take away from that is like, oh, he's just so paternalistic. He's such a nanny stater. He's like, yeah, there's no revenues, therefore it's my responsibility to not allow the public to have opinions on these things. Get with the times, Gary.
- [27:11]
A
Yeah, I feel like I'll never, never understand, but I don't think history will judge his tenure as SEC chair very favorably. Like, in comparison to just like Paul Atkins gets there, the SEC has a turnaround, things go on. Chain America's financial system gets an upgrade. I think the history books will see this as a good thing. And Gary Gensler is just somebody who was just throwing sand in the gears for absolutely no reason.
- [27:35]
B
It's a huge narc.
- [27:37]
A
Speaking of this, SEC plans to introduce innovation exemption for crypto firms. So this is Paul Atkins on Fox News. What is this, David?
- [27:47]
B
So this exemption allows some qualifying firms in crypto, so you have to qualify it, and in some cases, non Crypto companies too, to launch on chain products more quickly. So you just get to bypass some regulatory requirements that might not fit new technology. Something that we've been asking for the SEC for years now.
- [28:05]
A
The.
- [28:05]
B
The idea of like a regulatory sandbox or the concept of a regulatory sandbox comes to mind. So just temporary relief. Temporary, so not permanent. From older securities rules. Older securities rules says the Howie tests come to mind. Ryan. The thing made in 1930 about orange tree groves.
- [28:21]
A
Yeah.
- [28:22]
B
While the SEC develops some crypto specific regulation. So it's kind of like a stopgap would be like, hey, old anachronistic laws don't apply to you guys for a temporary period. And also during that temporary period, it's our job to come up with better laws. So the final scope will depend on a public comment period and a forthcoming rulemaking procedure.
- [28:43]
A
Yeah. So they'll just do this via rulemaking, which is within their authority. Right. They could always do this. And now it seems like Chair Atkins is signaling that they are going to do this. This has remained a really good idea just to have a sandbox. Do you think this means, David, that we don't have to have VPNs and go to different countries in order to pick up our airdrops?
- [29:03]
B
Our airdrops was the last airdrop that you claimed. Actually.
- [29:07]
A
It's been a while. It's been a while. But I don't see tweets on like Twitter. I don't see screenshots of VPN blocks the way I used to. So the walls have got to be coming down. There is some rumor because. So we have a favorable SEC chair, of course, but we don't yet have a chair of the cftc. Like that position has been vacant. And I think the hope is that crypto would get a crypto favorable CFTC chair. What's been the hold up so far?
- [29:39]
B
I don't know.
- [29:40]
A
You don't know? Actually. Okay, so we did an episode with Summer Mercenary and your Internet cut off before we actually talked about this.
- [29:48]
B
Did I drop at the alpha?
- [29:49]
A
Yeah, you dropped. You dropped at the alpha. So there was conversation. It seemed like the contender for the CFTC chair was Brian Quintenz, who is crypto favorable. Previous bankless podcast guest. He does.
- [30:00]
B
Previous CFTC commissioner.
- [30:01]
A
Yes. And he is head of policy A16Z crypto. Anyway, there's been some back and forth between him and actually the Winklevoss twins from Gemini who were apparently behind the scenes. This is all DC gossip.
- [30:16]
B
Who are on Trump's nomination. Trump's bench of supporters yeah, Bench for.
- [30:21]
A
Crypto supporters, also big donors, this type of thing. And there's talk that they were actively blocking Quintenz from getting the nomination. Like, you know, Quintenz had gone in front of the Senate, you know, it was just like up for a confirmation hearing. And you know, now the White House, something that hasn't happened before, they withdrew his nomination. So.
- [30:41]
B
Because Winklevi were like, read about it.
- [30:45]
A
That's what it seems like. And so there's back and forth again. This gets into kind of gossip mode, rumor mill mode. So I don't know all the details, but. But that position, the net of it is the position is still empty today. Except, David, you uncovered a rumor this week that there could be a possible solution to this. What's this?
- [31:03]
B
Yeah, yeah, I saw. Well, I saw this tweet circulating around that there are. There's a rumor that the White House is considering Paul Atkins for the CFTC chair. Now that should be a record scratch moment. Paul Atkins is the current SEC chair and we. And we love that fact. So the idea that the White House is also considering Atkins for a CFTC chair, it's like, you can do that. How many chairs are you sitting on right now, Ryan?
- [31:30]
A
Yeah, that's right. That's right.
- [31:32]
B
Are you sitting on one chair?
- [31:33]
A
I'm sitting on one chair.
- [31:34]
B
Paul Atkins to sit on two chairs. The CFTC chair and the SEC chair. I don't know if you can do that. But the way that Paul Atkins leading the sec, I would be happy to endorse that same leadership of the cftc. And also, you know what this backs asks a bigger question. Can we just combine these two things? Why are they separate? Let's just. Let's just create one large financial markets oversight agency which is combined the SEC and CFTC's roles anyways. Let's make things more efficient. They fight with each other anyways. Just make them the same agency.
- [32:10]
A
Yeah. Especially related to crypto policy. I mean, that would advance the agenda like quite a bit because that would stop the infighting almost immediately.
- [32:19]
B
Yeah.
- [32:20]
A
It is unclear, apparently, legally, if you can do this. It's definitely unprecedented. But it's not clear that you can't do this. And who is Donald Trump if he's not just somebody who breaks with convention from time to time?
- [32:35]
B
Honestly, it fits the bill of Doge's mandate of making government smaller. Like make. Combine.
- [32:42]
A
Combine the things.
- [32:43]
B
This is what Elon Musk loves to do is like, you know, don't optimize something that can be eliminated. Yeah, just eliminate two Agencies replace them with one agency and we have a smaller government.
- [32:53]
A
Well, you probably can't do a full replacement just because there's, you know, it's hard coded in the law. Various things the cftc, you know, has rule over and various things that the SEC has ruled over.
- [33:02]
B
If this, then that statement that if it said it's cftc, it's now the finance markets regulatory.
- [33:07]
A
I think it's in that spirit. And again, this is all complete rumor mill stuff neither David nor myself know. But like, at some level, I wouldn't be surprised if I saw this headline in the next, you know, couple of weeks that Paul Atkins is also the CFTC chair.
- [33:20]
B
The Democrats are like they're consolidating power.
- [33:24]
A
Yes, yes, true, David. Speaking of that, we want to get both the Democrats and the Republicans on the side of the Clarity Act. Well, it's actually not called the Clarity act in the Senate. It's called the Market Structures Bill. I don't think it has a name yet. Hopefully they give it a good name. The White House is saying it hopes to have this infrastructure bill, which would be along the lines of the Clarity act, which designates what's a security and what's a commodity with respect to crypto by the end of the year. So this is Patrick Witt, executive director of the White House. He said we're unblocking what we can, we're serving as a referee when there's kind of an impasse, and we're weighing in where necessary, doing as much as possible to push this out. I don't know, we should actually look at the poly market on whether market structure happens by the end of the year.
- [34:13]
B
Polymarket is reporting 40% chance. Not that much volume, though. That's $16,000.
- [34:20]
A
Yeah, that's not that much volume, but I will say 40% is actually better odds than I thought. I thought that this would be lower. Yeah, I think it's gonna be hard to get more legislation through on.
- [34:30]
B
Is this Trump just saying, hey, get this to my desk? The same thing that he did with the Genius Act?
- [34:35]
A
I think so. But, you know, are the senators as motivated to do that now in today's climate? And probably the answer is no.
- [34:42]
B
I was chatting with Austin Campbell a while ago and he was very bearish on the Clarity act getting passed as it stood because he thinks it was just too large. He thinks that it really needed to get unbundled and passed in like smaller bundles, more narrow bundles, because there's just too debate about. And that was like six months ago.
- [35:01]
A
Yeah, and you know, the Democrats, of course in the Senate, I'm sure they'll try to stick things like, you know, conflict of interest type things, try to prevent Trump from doing, you know, meme coins and sandwiches, which I am fine with. Yeah, you're fine with. But like will Trump sign that and will the Republicans sign on for that? Right? So hard to make everybody happy in Congress. David, what do we have coming up?
- [35:23]
B
Coming up next, we're going to talk about Vitalik being bullish on Defi, formally trining that position, that opinion into an article. So we're going to talk about that. Will Synthetix give Ethereum layer 1? The Ethereum layer 1 its own hyper liquid? There's a thing called an optimistic execution engine that Synthetics has created. I want to tell you about that, Ryan.
- [35:44]
A
Oh cool.
- [35:45]
B
And I'll quote myself on the episode that I did with Kane when we talked about this, I was like, well what the fuck are we doing with the roll of centric roadmap then anyways? And then debate on Crypto Twitter. The the best place to have this debate should base be regulated as a securities exchange because crypto Twitter totally knows. So we're going to talk about all that conversation and more. But first a moment to talk about some of these fantastic sponsors that make this show possible, starting with Frax and the Frax Stablecoins. It's got some of the best yields in Defi. It's also got the Fraxel layer 2, which is like the decentralized banking layer but as a change, pretty cool. Let's go hear from FRAX right now. In the Wild west of Defi, stability and innovation are everything. Which is why you should check out FRAX Finance, the protocol revolutionizing Stablecoins, Defi and Rolex. The core of FRAX finance is Frax USD, which is backed by BlackRock's Institutional Biddle Fund. Frax designed Frax USD for best in class yields across Defi t bills and carry trade returns all in one. Just head to frax.com then stake it to earn some of the best yields in Defi. Want even more? Bridge your Frax USD over to the fractal layer 2 for the same yield plus fractal points and explore fractals diverse layer 2 ecosystem with protocols like Curve Convex and more. All rewarding early adopters. Frax isn't just a protocol, it's a digital nation powered by the FXS token and governed by its global community. Acquire FXS through frax.com or your Go to Dex, stake it and help shape Frax Nation's future. Ready to join the forefront of DeFi? Visit frax.com now to start earning with Frax USD and staked Frax USD. And for Bankless listeners, you can use frax.com rich bankless when bridging to Fraxel for exclusive Fraxel perks and boosted rewards Imagine a world where traditional finance meets the power of blockchain seamlessly. That's what Mantle is pioneering with Blockchain for Banking, a revolutionary new category at the intersection of TradFi and Web3. At the heart is you are the world's first money app. Built fully on chain, it gives you a Swiss IBAN account blending fiat currencies like the Euro, the Swiss Franc, the United States Dollar or the Renminbi with crypto all in one place. Enjoy real world usability and blockchain's trust Trust and programmability transactions post directly to the blockchain compatible with Tradfi Rails and packed with integrated DEFI futures. UR transforms Mantle Network into the ultimate platform for on chain financial services, unifying payments, trading and assets like the MI4. The Meath Protocol and functions FBTC backed by developer grants, ecosystem incentives and top distribution through the UR app reward stations and BYBIT launch pool for MNT holders. Every economic activity in UR drives value value back to you, embodying the entire stack and future growth of this super app ecosystem. Follow Mantle on X at Mantel Underscore Official for the latest updates on Blockchain for banking. That's x.com/mantle underscore official introducing Kgen, aka Verify, the world's largest verified distribution protocol or VDP. If you're trying to grow a real protocol or app, you need real users doing real actions. If it's not Verify, it's just noise. At the core of verify is Poggy KJN's identity and reputation framework. It helps you reach humans, not bots. Improves what your users actually did so your budget goes to the right people. With Verify, you can run verified user acquisition with confidence, keeping people coming back with retention tools like loyalty rewards, quests and achievements, and even power AI training and evaluation using trusted verified user groups, ensuring your models learn from clean data. And when it's time to reward your community, there's the K Store, a global rewards marketplace where users can redeem perks that connect range directly back to your app. Put simply, when growth is built on real users, you grow faster. And that's exactly what Verify delivers. If you're building a Web3AI or gaming request a demo to grow your protocol@www.cagen.IO demo. That's www.kgen IO/demo.
- [39:26]
A
Vitalik is officially bullish on Defi. He says it here. He says low risk defy can be for Ethereum. What search was for Google? David, we did an entire episode on this article and gave all of our takes and went through the article. So we don't need to repeat that. If you guys haven't heard that, you can go catch that on the, on the feed. But what's, what's your summary of what Vitalik was saying here?
- [39:49]
B
The summary is that Defi has been proven to be not just theorized to be, but proven to be sufficiently like better returns risk to reward profile for the whole entire globe. So like losses, total losses in Defi over the last two years as a percentage of like deposits into Defi is something like 0.1%. So your chances of loss is very, very low. Meanwhile you can get like 6% APY on your dollars in AAVE. And not only that, but Ethereum is now connected to the rest of finance. And so people in developing countries, the, you know, the long tail of countries can use Defi appropriately. Sufficiently low risk, it's accessible to them and it's way better financial infrastructure than they would ever be able to assess in their local country. That's their main point. Has his main point about Defi. The other main point is that it's aligned with the values of Ethereum and so defi it, it adds value to eth, it adds transaction fees to the Ethereum blockchain overall is overall aligned with Ethereum and it can thirdly, third point, be the economic backbone that can afford Ethereum, a bunch of moonshot investments. And so that's where Vitalik makes a comparison with Google. Google's ad search revenue, gargantuan ad search revenue. Whereas Google gets basically most of its valuation and then afforded Google the ability to invest in things like Apple Maps or excuse me, Google Maps, Gmail, Gemini, like all these other things that were investments, like speculative investments that ultimate up being just complete moonshots and also just created the gargantuan valuation that Google has. So that's it. That's the summary of it. We did a whole entire episode. There's a lot more to unpack about it. There's a link in the show notes. You should totally go watch that episode.
- [41:34]
A
Yeah, I'll just add. That's exactly right. I'll just add some people are asking the question of like wait, Vitalik's just suddenly bullish On Defi. Isn't this like five to ten years too late? And the point we make in that episode, and just maybe to reiterate right now, is as people who've been watching Vitalik for a while, the guy has a really high bar for being bullish on some on something and like recommending and saying that it's ready for the world. And this is low risk Defi specific category of Defi. Things like collateral backed loans and stablecoins, things like basic swapping and trading on uniswap on Ethereum layer 1. This is him saying that this is now ready for primetime for any country, any society to adopt and the rewards far outweigh the risks. And we've done something good, we've done something net new and we've done something good and it's ready for the world. So his bar has been incredibly high on that score. And so this is, I think, a milestone for how Vitalik is kind of viewing use cases on the thing that he created, which is Ethereum.
- [42:41]
B
And he didn't explicitly say it, but he kind of implied it. He got right up to it and he said like Ethereum is defi. Yeah, like that is what we are doing here. And Defi will be the backbone that supports everything else, which I think you and I totally agree with.
- [42:57]
A
We do. That's why we did this whole podcast. That's why we're doing this whole bankless thing. Brian Armstrong seems to agree too. So they are continuing to roll out their Defi mullet, which is getting longer. Yep, nice.
- [43:08]
B
Which is ironic because Brian's bald.
- [43:11]
A
Nice polished Fintech. In the front though, you get the Coinbase Apple and on the back these yields from usdc. I believe this is coming from Morpho, which is primarily some of that low risk defi on Ethereum layer 1. Also base also other platforms, of course. But this is now in a much more accessible user interface than it ever has been before.
- [43:34]
B
Ultimately, I think this is going to be the reason why outflows come out of banks and go on chain. Yeah Is because first the crypto banks make it easy and then people are like, well, let me just skip the crypto bank and just do this myself. Not everyone, not your grandma, but like, you know, maybe you and me grandma and the listener, you know, in the Ethereum world, Synthetix is coming back to Ethereum with a perp Dex synthetics. Always been on Ethereum. It is now introducing a perp Dex. An Ethereum Perp Dex on the Ethereum layer one. When I say Ryan, a perp dex on the Ethereum layer 1. What flags in your brain? Is anything wrong with that statement?
- [44:11]
A
Well, it's hard, right? I mean, we've had perp Dexs before on Ethereum layer one that have actually migrated. DYDX comes to mind. They migrated to Starknet and then they further migrated to an independent Cosmos chain because Ethereum wasn't scaling. That's what comes to mind.
- [44:26]
B
Yeah. The idea of a perp dex on a blockchain that has 12 second blocks is just crazy because you need extremely low latency to trade. You can't just be waiting 12 seconds to get your trades through. That doesn't make any sense.
- [44:38]
A
Right.
- [44:38]
B
So, Ryan, I'm sure you're asking, well, how are they doing this?
- [44:42]
A
How are they doing?
- [44:43]
B
How are they doing this? So they're doing. They have a centralized server, a centralized order matching engine that bundles UP trades every 12 seconds and then settles it to the Ethereum layer one every block.
- [44:54]
A
Okay.
- [44:55]
B
Does that sound like a roll up to you?
- [44:56]
A
It does. Do they not call it a roll up? Is this no roll up?
- [45:00]
B
Because it's just completely trusted Centralized server for 12 seconds and then they just bundle up the transactions and make a single transaction on the Ethereum layer one.
- [45:09]
A
So you have to trust it for 12 seconds.
- [45:11]
B
Correct.
- [45:12]
A
But then after that it's good.
- [45:13]
B
But then after that it's good.
- [45:15]
A
I'm fine with that.
- [45:16]
B
I'm totally fine with that. And then you get centralized server latency speeds and you're just using the Ethereum layer one. And so when Kane was explaining this to me, I'm like, why haven't we been doing that for years?
- [45:28]
A
Are the gas fees, like, pretty expensive for doing these? For like all the bundling? I imagine that would have to be amortized over?
- [45:35]
B
I'm assuming that's amortized. I'm assuming that's amortized. Yeah.
- [45:39]
A
Okay.
- [45:39]
B
And probably just paid for by Synthetics. Yeah. So they're kicking this off. So you. The Ethereum layer 1 perp DEX, aka Synthetics, is doing a $1 million trading competition. Ryan, I'm encouraging you to sign up because it's only for KOLs. So there's only 100 KOLs.
- [45:57]
A
No one wants to do any. Like, I'm not a kol with any. In any trading.
- [46:02]
B
Okay. So. So there's going to be. Remember DJ Spartan?
- [46:06]
A
Yeah.
- [46:06]
B
He's coming back to trade.
- [46:07]
A
No way.
- [46:08]
B
He's coming back.
- [46:09]
A
Yeah. Okay. Wow. Okay. They're going to have some actual trader.
- [46:12]
B
And so there are going to be people who are Making opinionated trades. I think what you. And so if you blow up. If you blow up, you can get bought back in by your community. So the community can pay, like, give you more chips if they think that you should be back in. And so it's like partly, like a popularity contest. Here's what I think you should do. You sign up, up. All you do is smash 10x long e. And if you blow up, the bankless community's got you, dude. We'll push you back in, and then you just do it again. And you do it until it works.
- [46:42]
A
I'll let you do that, David. I feel like that's more resonant with your personality. This is really cool. This is at a time when the perp wars are really heating up. Right. You obviously have Hyperliquid, who's made a fantastic run, and then OCZ and Binance. It's kind of this asteroid platform that's taken some of the steam out of Hyperliquid. Seems like we're getting all sorts of different perps exchanges trying to draft off of what hyperliquid is doing this cycle. One question I have for you is how loyal do you think perp traders actually are to a specific platform? So I feel like every single cycle, we get a new class or a new group of perp exchanges, and the liquidity will just, like, go from one to another. I'm not sure that the loyalty is there. I think some of this capital is pretty mercenary. So.
- [47:31]
B
Yeah. How durable trader capital inherently is mercenary because it's like, I'm here to make a profit. That's what I'm doing here. Granted, somehow at the same time, Hyperliquid has been able to encourage, like, an incredibly loud, committed fan base. They do at the same time.
- [47:47]
A
Part of that is tokens, of course, and part of that is liquidity. I mean, liquidity is the moat. That's the big thing that you're getting out of this.
- [47:54]
B
Yeah.
- [47:55]
A
Oh, actually, you have an episode with Kane, Right? We talked about that earlier in the episode, but that's on the bankless premium feed.
- [48:02]
B
Yes.
- [48:02]
A
So if you want to get access to what Synthetix is doing with Eth layer one perps, upgrade your citizenship, become a bankless premium subscriber, and you'll get.
- [48:11]
B
That Alpha got on the premium feed a while ago. Okay, Ryan, are you ready to debate whether base should be regulated like nasdaq?
- [48:17]
A
Yes. What is the. Could you just tee up this debate first?
- [48:20]
B
Okay, so this. The context for this debate is all the blockchains are Gearing up to try and support as many tokenized equities stocks, real world assets as possible. We all know that that's the meta in front of us. Every chain is trying to position themselves for that.
- [48:36]
A
And then, and these things importantly are regulated. These are all securities equities.
- [48:41]
B
Yeah. At least the securities are like tokenized real world assets, probably also securities.
- [48:45]
A
Many of them are securities.
- [48:46]
B
Many of them, yeah. Yeah. And so now the architecture of these chains really matters because there is something in conflict about a centralized sequencer and securities trading securities. So if you are operating a centralized sequencer and securities are trading on your blockchain, does that make you a securities exchange and do you need to register?
- [49:10]
A
Yeah, essentially. Does that make you like NASDAQ or the New York Stock Exchange? Right. And like some of this is written in the, you know, 1930s, 1940s act securities law, which is basically, if you are an exchange and has the term exchange and you're exchanging securities, then you are a securities exchange and there's a whole set of regulations that applies to you. And so what is the question whether our blockchains are actually meet the definition of being a securities exchange?
- [49:42]
B
I think it's the difference between blockchains and layer twos. And is there a difference there at all? And so Paul Grewal, the chief legal officer at Coinbase Base, he put out this tweet which was like very clearly, like, hey, base is just a normal blockchain. Yes, it's a layer two, but that doesn't change its relationship to securities laws. And so in the second tweet, he says the SEC defines an exchange as providing a marketplace for bringing together buyers and sellers of securities. But layer twos are general purpose blockchains that operate as infrastructure. So he's, he's stepping away from the notion that base is a marketplace that brings together buyers and sellers of securities. He says they, they being layer twos, process messages as code, smart contracts and batch all transactions together, payments, calls, messages, while deferring any formal order interaction. Slash matching rules, which is an amm, a club, an auction to the app layer. The app layer's smart contract. So what he's doing is he's saying, hey, basis just a blockchain. We're just dumb code, just dumb pipes. We don't do any matching. And that's the clear distinction is Paul is saying we don't have opinions about matching. We are not matching buyers and sellers of securities. We are just a messaging data layer, a blockchain layer. And so he's trying to make that distinction between the AMM is the matching engine.
- [51:02]
A
Sure. Or the club.
- [51:03]
B
Or the club is the matching engine. And we don't have any opinions and we don't interact with the ordering of transactions.
- [51:10]
A
Yeah. He's saying that Base is just like aws. It's just kind of on chain infrastructure in the way that AWS is cloud infrastructure. Right.
- [51:20]
B
Yeah.
- [51:20]
A
Okay, so what's wrong with that argument? That seems reasonable. Is it contingent on the idea that so base is operating as a centralized sequencer? So it is not only, I guess, the infrastructure portion that it's running is the ability to order messages that happen on the chain. Is that the sticking point?
- [51:45]
B
Yeah. So the. The opposite side of this, which Max Resnick, a known securities law expert on Twitter was able, was. Was voicing that. So. So he tweeted out a centralized sequencer that can change the matching slash. Execution of orders obviously must be regulated, otherwise any exchange could set up a quote immutable matching engine program and run their own server provider in order to bypass all US securities laws. Basically, he's saying. I think what he's saying is that like, yeah, in theory, base could be more opinionated about the matching of transactions.
- [52:17]
A
Yeah.
- [52:18]
B
Right. Now, so this came in. He was retweeting a tweet from Jesse, who was saying.
- [52:24]
A
Jesse Pollock.
- [52:25]
B
From Jesse Pollock. Yeah. So he's talking about the nature of the base layer 2 sequencer. He says the sequencer collects users transactions, orders them on a first in, first out basis, computes the resulting state changes, and then batches them to the Ethereum layer 1. Basically the basic operation of have a sequencer. There's also a priority auction with Bass. And so Jesse kind of like left that out. But I think. I don't, I don't want to try and infer people's words, but like Jesse, what Jesse's saying is we are unopinionated about matching. So you can. You have the priority lane and so you can pay to get ahead. And then you also have a first in, first out after that. But all of that is just code.
- [53:06]
A
And also, by the way, there is the ability to force transactions and bypass the centralized sequencer as well. I mean, this is not the fast lane. This is the slow route, but you can do that in base code. But I guess what Max is saying is because you're operating a centralized sequencer and you can do things like prioritize your transactions, he's trying to link that to meet the definition of a securities exchange, because I think he's. This is where things get A little tribal. Because of course Max is now he's Team Solana. Right?
- [53:37]
B
Team Solana, yeah.
- [53:38]
A
So he's like, well, we have a layer one. We don't have a centralized sequencer. Our sequencers are all of the validators in our network. And he's trying to say like layer ones, like Solana or even Ethereum, Layer one would never be a securities exchange. Could never be securities exchange. Whereas these layer two is like base.
- [53:58]
B
And he's pointing his finger at base and saying, but they're a securities exchange.
- [54:02]
A
Or anything with a centralized sequencer. You could say, yeah. So okay, what, what's the take then here? Like who's right?
- [54:10]
B
Okay, well, my, my take is, I think it is good for us as an industry to like admit that we don't want pinky promises from centralized sequencers about how they are not going to be opinionated about ordering transactions.
- [54:25]
A
Right.
- [54:25]
B
So I agree with Jesse and Paul, again, if they are saying these things, and I'm always trying to be careful, may maybe if they were here, they would say things slightly differently. But if they are saying what I think they're saying, which is, is they are unopinionated about all ordering of transactions. They have this algorithm which is whoever pays the most gas. And then after that it's a first in, first out basis and we don't touch that. And those are the rules. But that's a pinky promise. We don't actually know. There's no like assurances that that is always going to be the case. And in theory they could change that. And so no, they are not matching the buyers and sellers of securities. So no, they are not, not a securities exchange. Because I'm a lawyer, I'm a securities lawyer, I know these things. And also as an industry, it would be good for us to not just accept pinky promises from our layer twos about how they are not going to in the future.
- [55:15]
A
Yeah, that's true.
- [55:16]
B
Be more opinionated.
- [55:17]
A
I mean, but you could imagine, let's say the SEC, through some sort of rulemaking or something does come up with a bright line test that basically says, hey, if you're at layer two and you're running a centralized sequencer, then you are a securities exchange and you have to come get this additional license from us. Right. If they created such a bright line test, they'd have to actually define what like a sufficiently decentralized sequencer set even looks like. What would that be? Who knows? Right. It could be something arbitrary. But let's say you have to have like, you Know more than three different sequencers outside of your centralized sequencer?
- [55:53]
B
Three legally independent entities. Yeah.
- [55:55]
A
Yeah. Okay, if that's the case, BASE could also just do that in the future too. I don't think that this is like.
- [56:01]
B
They are thinking about a network token.
- [56:04]
A
StarkNet already has decentralized sequencing going on, actually. Kraken, Zincchain, they're exploring the path towards decentralizing their sequencers. So they could all do that. So it's not like a gotcha for base, I guess. I don't understand that piece of it. It. But I also don't understand the like, why are we telling teacher? Like why are we going and calling teacher to just like settle our decision?
- [56:30]
B
They're a centralized securities exchange. They're processing securities.
- [56:36]
A
Yeah, I mean from like a base crypto values perspective. Yeah, right. Like, yeah. How much do we care? I care that a centralized sequencer is front running me. That's a thing I care about totally. Do I care that that the SEC labels them in exchange or not? No, not really.
- [56:53]
B
No, I don't care about that.
- [56:55]
A
Well, this is a take that people like Jake Trinsky have given as well. So Jake says this. Don't know who needs to hear this, but the second you start seeking regulatory moat for your chain at the expense of the competing chain, you're no better than the predatory tradfi incumbents we came here to defeat.
- [57:12]
B
I don't know who needs to hear that. Couldn't know.
- [57:17]
A
So there we go.
- [57:18]
B
He's not the only one. So, Dan Robinson from Paradigm, he tweeted out. I think it's bad form and a bad strategy to try and summon the regulatory demon to strike down your competitors over technical or ideological disagreements. Where will you hide when the demon turns around on you? You know who I don't want to go up against?
- [57:36]
A
Who?
- [57:37]
B
Coinbase's legal and lobbying arm.
- [57:40]
A
I know. I don't know why, like people are picking fights there. We gotta stay unified. It's us against the banks. I mean, we just had something against the banks.
- [57:48]
B
It's always us against the banks.
- [57:49]
A
Thank you. Thank you, David. We shouldn't need to say that. We're saying it. David, this is some cool news. You know how we've been talking about x402, which is this payment standard that Coinbase has helped pioneer, the Ethereum Foundation. Basically a standard that allows a machine to use cryptocurrency or stablecoins. Well, Cloudflare has announced that they are working with coinbase on the X42 standard. Do you know what Cloudflare does. Really?
- [58:18]
B
Yeah. It's like a condom for websites.
- [58:21]
A
Yeah, yeah, sure. Exactly. Is that right? Well said. Yeah, well said. They're just like an Internet gateway, basically. So they'll filter things out and they, I mean, they're pretty widely deployed off of, you know, like on most websites that you visit.
- [58:35]
B
I'm pretty seeing it. Yeah, yeah.
- [58:37]
A
And so they'll basically be like, oh, they'll screen out bot traffic. And so one of the things that they've been doing is, is there's like this robots Txt file inside of a website. And if a bot is detected. Right. Cloudflare will screen out the traffic before it actually pings the website itself anyway. So it's like it can block AIs. Right. That's a lot of power. And because Cloudflare is deployed across most of the Internet, it gives them the ability to actually incorporate this X402 standard and give AI as a way to.
- [59:11]
B
Distribution arm.
- [59:12]
A
Yeah, they could be a distribution arm. So Coinbase cryptocurrency X402 now Cloudflare.
- [59:20]
B
All right, our last bit of news of the week. Not actually crypto news, but I think you'll hear why it's relevant. Vietnamese banks began deleting more than 86 million bank accounts to fight fraud and enforce biometric identification requirements. This was orchestrated by the State bank of Vietnam, that's their central bank bank, and affected about 43% of all registered accounts. They were made inactive, unverified, or potentially used in fraudulent schemes. So those ones that were identified to be as such were flagged and then deleted. And so after verification, 113 million personal and then almost a million organizational accounts, like business accounts remained active. Out of 200 million. So bank accounts getting deleted.
- [60:04]
A
Yeah, it's crazy how this was done. So this was all part of a digital transformation initiative. It's like a five year digital transformation initiative. Yeah.
- [60:11]
B
Sounds scary. I don't like those words.
- [60:13]
A
It can be scary, right? It can be moving into the future, I guess. Crypto is a digital transformation of space.
- [60:20]
B
Yeah, but it's not an initiative, it's a revolution.
- [60:23]
A
Well, in this case, basically digital app. So all citizens have a digital app with a nation state id. And on your digital app, of course, there's biometrics. So I can look at your face and confirm that's David and authenticate that this is your face id. And now that same infrastructure, the digital ID app basically being used to. You need that in order to open a bank account anywhere in Vietnam. And not only that, you need authentication through that digital app in order to keep your existing bank account. Not only that, in order to send any money above 750 US I did the currency conversion. 750 US dollars. You need to actually give your biometric signature in order to send those funds. So it's a complete bank style. Like we can turn off your bank account and then nation state style, we can turn off your bank account, we can debank you, we can do whatever we want. We now have all the levers and of course they're doing this because they say there's all sorts of fraud, there's all sorts of money laundering going on. We want to verify all these accounts are real, like citizens basically. The problem is it's just pooling all of that power in the central government.
- [61:39]
B
Yeah. Like in theory, if every human on earth was good and we just didn't have evil, this would be fine.
- [61:46]
A
It'd be great.
- [61:47]
B
It'd be great. And like when I, when I use tap to pay on my phone all the time so it like looks at my face, it's like. It's that David Hoffman. Oh, that is David Hoffman. Let me like go ahead and okay this transaction. Granted that is staying inside of my phone. And thank God Apple has like privacy values. Yeah. But like there's elements of this. It's like a double edged sword, dude. Like I'm sure the UX is great and like I do want my identity to be verified in some way before my money gets sent like on a surface, that's great. But it's when the government does it.
- [62:18]
A
I think that's the point, David. I think there's like digital transformations without civil liberties and then there's digital transformation that preserves some civil liberties. And those two things are completely different.
- [62:29]
B
Yeah. Like some people say, oh, they look very similar. They look very similar.
- [62:32]
A
And some people say, oh, this could never happen in the US for instance. But I don't think that's true.
- [62:36]
B
I don't think that's true.
- [62:37]
A
We have all the components. We already have a national id, dude.
- [62:40]
B
What do you think Elizabeth Lauren would love to do? It's exactly.
- [62:43]
A
We already have like the laws on the books. The Bank Secrecy act is kind of this. It's unbanking authority. If you just widen that a little bit. We've got smartphones widely deployable. If we went through a digital transformation without civil liberties, we could do this in a few years, basically.
- [62:59]
B
Oh yeah, yeah.
- [63:01]
A
The only exit here is crypto. This is what I see for Vietnam, but this is what I see for any country, any citizen of the world. The digital transformations are going to centralize more of our finance layer, and crypto is the only thing that remains decentralized.
- [63:17]
B
Dude, thank God for crypto, man. Like, if we didn't have crypto as like, this exit valve and like, all of this stuff that is happening in the world, like AI and facial recognition and drones and like, whatever this is.
- [63:30]
A
It'S a dark place, right?
- [63:31]
B
If all of that was happening and we didn't have crypto as, like, a massive check on power, I'd be really scared.
- [63:37]
A
Yeah, well, still a little bit scared, but, you know, we're on the crypto side, so let's end with this.
- [63:44]
B
The nation state can delete my identity, but they can't delete my ethereum account. Out.
- [63:48]
A
There you go. Crypto is risky. You could lose what you put in. But we're 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.