Loading summary
Transcript338 lines
- [00:00]
Justin Bons
If we look at things now, the most basic L1, like the most crappiest L1 number 200 in market cap, you cannot steal user funds. You cannot. Okay, you can do that on the top 20 L2s right now that make up like what, like 99% of the TVL like this is crazy. That's the reality right now. So like I'm asking you who's on the side of decentralization here?
- [00:24]
Houndan Lee
You started your sort of critique on roll ups generally on talking about incentives and how it doesn't make sense for a rollup to give up the position of being a sequencer.
- [00:32]
Justin Bons
Yeah.
- [00:33]
Houndan Lee
If you are a roll up today, do you really think it is in your interest to steal your users funds?
- [00:42]
Laura Shin
Hi everyone. Welcome to Unchained, your no hype resource.
- [00:45]
Podcast Announcer
For all things crypto. I'm your host, Laura Shin. Binance is the world's number one crypto exchange, trusted by over 290 million users. With industry leading liquidity, security and a wide range of digital asset products, Binance is the place to buy, sell, trade and earn crypto. Download Binance today to get started. The crypto world is buzzing. On October 1st and 2nd, 25,000 people will be at token 2049 Singapore, the largest crypto event in the world. Featuring headline speakers like Eric Trump, Vlad Tenev, Tom Lee, Ben Srinivasan and Arthur Hayes. Visit asia.token2049.com now to get 15% off tickets. With the code Unchained, I am here.
- [01:31]
Laura Shin
With Justin Bonds, founder and CIO of Cyber Capital and Houndan Lee, co founder and CEO of Codex.
- [01:36]
Justin Bons
Welcome Justin and Houndan, pleasure to be here again. It's always love coming onto Unchained, so it's going to be great. Thank you.
- [01:43]
Houndan Lee
Hey Laura, nice to see you. Nice to see you Justin.
- [01:46]
Laura Shin
So you guys, we are at this moment in crypto where fintechs and crypto are clearly converging on the same space. And we are seeing that stablecoins are likely to be one of the first big on ramps, which is why there's probably just so many stable chains that have been announced recently. Those would include Ark, Plasma, Stable and then the big one that really kicked off a huge discussion on Twitter was Stripe's Tempo.
- [02:14]
Podcast Announcer
After that announcement, Twitter was aflame with.
- [02:16]
Laura Shin
People debating the merits of new ventures creating their own layer ones versus building layer twos on top of Ethereum. That is basically why we are here today. This also touches upon a previous discussion that was had around Robinhood chain's choice of building a layer two on Top of Ethereum. So here to discuss are Haonan, who is actually building an L2 for stablecoin payments and just launching, who has a different view on how it is that these types of projects should be built. But why don't we start with kind of like the general view from each of you on how it is that you think companies should make this choice. There's probably certain cases where you think one choice is better than another. So who do you think should build an L1, how should a new venture think about this, who should build an L2, etc. Hanan, why don't we start with you?
- [03:17]
Houndan Lee
Yeah, I think, as always, that the companies that are built on first principles are the ones that win. And I think I would caution against any kind of motivated reasoning to back into a set of justifications to justify building an altel one in hopes of some sort of altel one premium. I think you saw movement shift from L2 to L1. There was like an 11% spike. It went way back down immediately. I think these types of valuation games, by trying to put yourself in the right reference class of assets, is this is an old game that's not interesting anymore. I think the future here is thinking about what really matters and how can we actually deliver value to users. I think if you perform that first principles analysis, you will arrive at a conclusion that we have arrived at which is the correct one. But you know, Justin I'm sure has a different view.
- [04:02]
Justin Bons
I actually, I will partially agree with you actually because I, I think we should start with first principles and actually that's why I have the position that I do. And what I thought was most interesting actually about the Tempo announcement is the reason why they said they were not building on an L2 because they value decentralization. They want a permissionless validator set. They don't want a single admin key that can steal user funds. They don't want a single server that can censor and front run transactions.
- [04:32]
Interjector
Right.
- [04:33]
Justin Bons
So I think the decision by Tempo was one from first principles where from a business and competitive perspective it makes no sense to wait for Ethereum to increase capacity when that's completely vague and there's no clear timeline on that. While simultaneously, if the other option is building on centralized L2s, then I'm glad they're either building out their own L1 or building on another L1 that can scale for the sake of decentralization, for the sake of credible neutrality, for the sake of what this whole movement is supposed to be about and what actually makes it valuable in the first place.
- [05:07]
Houndan Lee
So I don't want to put our viewers to sleep here and I'm happy to debate what Stage zero, stage one, stage two, roll up, blah, blah, blah. Right. I think the sort of TLD are here is there's a very clear path to decentralization for rollups. And it's built on a sort of technical base that is deeply lindy. You know, the bugs that they find in Geth these days are bugs at the go level. That means that look, the bug is so robust that the only bugs you can find are at the language level. Well, we will, we have the same sort of picture when it comes to this, you know, experimental new Altel one that's coming up. I don't know, I'm not convinced of it. You know, there's some smart people over there, but I think OSS and a long duration of, you know, being attacked under the most adversarial circumstances imaginable on the planet has made this code base so incredibly hard. Now you could say that's L1. What's that got to do with L2? Well, you know, the, the best L2 roll up companies are the ones that have figured out that really the key to winning this game is minimizing the diff between L2 and L1. And so, you know, optimism, for instance, where, you know, I'm biased, I used to be there, has the philosophy of minimizing the diff between op, Geth and Geth. And so in a sense you're inheriting that windiness, the robustness of that code base. And I'm just like deeply skeptical that some guy's going to one shot this and it's going to be amazing. I'm also deeply skeptical about the neutrality arguments here. You know, I think decentralization, neutrality sometimes gets coupled together as buzzwords. You know, if you are another fintech, do you really want to bet your business on a substrate controlled by your competitor? I just, I just don't really find that all that credible. And we can sort of say the words right and chant an incantation, but I think in a boardroom somewhere, somebody's going to make the cold, rational analysis and I think it's going to come in Ethereum's favor.
- [07:04]
Justin Bons
You make quite a few points here actually. And I think, I think it is worth digging into that claim a little bit more because you say L2s will decentralize and I just don't see a path towards that happening because decentralizing implies a lot of these parties Giving up on their power, giving up on their revenue. And it's, and it's a rule in, I think in history, for the most part, that people en masse don't tend to do that. The exception to that rule is incredibly so I think, you know, this audience is up to maybe us diving a bit deeper into sequencing based roll ups, et cetera.
- [07:40]
Houndan Lee
And I'm on your territory here.
- [07:43]
Justin Bons
Yeah, no, no, this is going to, this is going to be a great discussion. I'm appreciating the back and forth as well.
- [07:48]
Houndan Lee
It's productive. You are putting me on, on death's ground soon. I know this is your bread and butter here. I'm happy to do some of it. I think you'll outclass me on many of the specifics. I think, um, I think there's no need to sort of think about the roadmap in sort of a decade or two decades later. Right. I, I think let's, let's just examine a case now. Right, okay, agreed.
- [08:08]
Justin Bons
Okay. Okay, let's look at it. Now. Hold on, if I may just respond to that, like, because you gave me quite a few things to respond to before. Like if we look at things now, the most basic L1, like the most crappiest L1 number 200 in market cap. You cannot steal user funds, you cannot censor. Okay, you can do that on the top 20 L2s right? Now that, that make up like what, like 99 of the TVL? Like, this is crazy. That's the reality right now. So like I'm asking you, who's on the side of decentralization here?
- [08:39]
Houndan Lee
I, I, I'm not able to defend every L2 on the planet. You know, certainly they're, they're poorly run L2s, right?
- [08:45]
Justin Bons
What about the vast majority of them, including all of the dominant ones? Like, that's the ecosystem we're dealing with.
- [08:50]
Houndan Lee
Let me, let me, let me make, let me make my case here for a little bit. I think. Look, we don't have to think about some far off future where it's a shared sequencing scheme that some brilliant person has thought of and it's instead of compatible and all these wonderful things. Let's not think about that yet. Let's just think what happens at a stage one of decentralization for a roll up. We're talking about permissionless withdrawals. What does that mean? That means a user can always exit the L2 by submitting a transaction on L1. What is that? That is the right to exit. Now, Albert Hirschman talked about voice and exit as being sort of the most important checks on authority. And similarly here, even in the near term, we can have these properties that are a real check on sort of abuse at the L2 level. This is in a way that no L1 is going to be able to offer in a credible manner. And so I like, Justin, I'm happy to do the, we can do the whole deep dissection of the L2 roadmap and so on and so forth. I think for me, it's just, even in the near term, you can clearly see that there are properties that are going to be a real check on abuse for L2s. And by the way, maybe I'll seed our discussion in an interesting way because I don't want to do the whole. Right. I think folks have heard that content from you, Justin, and the ETH Maxis have said the L2 talking points and I don't want to just do that again. Right. I'll, I'll throw some, you know, I'll throw some controversial views in here. Right. I think certainly many of the L2s today that are, in my view, set up incorrectly and targeting wrong markets are parasitic to L1. I'll say that. Now, this is not, you know, I'm probably going to get canceled for this, right? And Justin, that's, that's probably one of your, Is that one of your views? Is that right? There's some common ground here. There's some common ground here. I think what is exciting to discuss is like, well, how does the future look like? You know, what, what sort of. Let's. I would love to go that direction if you want, Justin. I'm sure there's plenty of.
- [10:58]
Justin Bons
No, no, I think the future is interesting and I think for me that's very much about the incentives around change. And that's why I'm skeptical that, that this transition can happen. But before we go there, I'd like to just, just respond to some of the things you said as well. I don't want to lift all of the points uncounted here, but specifically you talk about the right to exit and having exit queues and it's like, well, that's nice, but it's kind of just like decentralization theater, right? Because if the admin key can instantly do an emergency change to smart contract, they can still steal all user funds and there won't be any time for you to do.
- [11:35]
Houndan Lee
Typically, what's contemplated is it's a security council, right? And then, you know, whatever, it's 10, 10 folks who agree then yes, in that case that would be true. In Stage two, the Security Council would not even be able to freeze withdrawals, right? In Stage two, a smart contract has to detect a bug then.
- [11:51]
Justin Bons
But we agreed to talk about what exists now, right? And we're not at Stage two. We were talking about Stage one, I.
- [11:56]
Houndan Lee
Think like, I think, look, it's a progressive, it's going to be a progressive process, right? And I think certainly you can have critiques about, you know, Stage one roll ups. I think if an intellectually honest critique would also apply similar logic to how big are these validator sets for these alt L1s really? How do they compare to the Security Council sizes? So look, I think a lot of this is not that interesting.
- [12:21]
Justin Bons
Hold on, hold on, hold on, hold on. If we just use Solana as an example, okay, Solana's got about, I think around 1,400 validators compared to say Ethereum's 5,000. I would estimate around 5,000. Like, like that is a lot more than just like 5 people or 10 people as part of. Chosen as part of a. Permission like, like, like admin key. Like I don't just fear to conflate those.
- [12:43]
Houndan Lee
Stage two, you'll be happy by stage two, you'll be happy right? By stage two look like, you know, 30 day delays before you can do any upgrades. You can't pause withdrawals.
- [12:50]
Justin Bons
But now we're back to future promises, right? We're not talking about what exists now. I think.
- [12:57]
Laura Shin
I have a question. So what, what do you feel like is keeping, you know, these LTUs from moving to stage two just yet? Like how much longer do you think it would be? Do you feel like it's something that, you know, needs more years or is it like a timeline of months? Like what would you say needs to happen?
- [13:17]
Houndan Lee
I think what needs to happen is like people are, I think the biggest problem in roll up land traditionally, and I think Justin will agree with me here, is that people have approached these kind of like generalized rollups. Do you know what I mean? Where you do a roll up and what's the difference between this roll up and L1? Well, the gas prices are cheaper and they're going to try to do NFTs and gaming and DeFi and something about payments and 12 other things. I think historically that is really the approach that has failed because in a sense I think it is parasitic. What is it that you are adding to L1 other than your batch submission fees and traditionally, you know, pre 4000, 844, you know, perhaps you could say that is like a set of economics that matter. Post 4844 there's no way you can argue that this is, you know, an interesting economic accrual. So I think the future here needs to be just for the blobs.
- [14:14]
Justin Bons
Referring to blobs here, right?
- [14:16]
Houndan Lee
Yes. Shout out to Proto Lambda. My former.
- [14:19]
Justin Bons
Not everyone knows the code numbers or whatever, you know what I'm saying?
- [14:23]
Houndan Lee
Yeah, yeah it's the jargon. I mean that's why I want to get away from the boring stuff. Right. But like, so I think like what really matters is roll up should be focused on industry specific things like very narrow focuses, these strict verticals. Like for us it's stable coins.
- [14:40]
Interjector
Right.
- [14:41]
Houndan Lee
And so what is the value add there? The value add is we are able to focus on this specific use case obsessively. I wake up, I think about stablecoins, I I eat lunch, I think about stable coins. I'm in the toilet, I'm thinking about stablecoins. We're on the ground talking to people. We were in Malaysia talking to people. These are things that means that we can run a full product iteration loop very, very quickly and focus on one specific industry vertical which assuming we are not idiots, should give us an enormous edge when it comes to building things that are actually useful for people. Building things that can actually extend the usefulness of stablecoins and broaden the appeal of these systems. And so then what is our obligation then? Our obligation then as Ethereum L2 I think is to return real economics to L1. And you know, there's various schemes to do that but that's kind of how I see this future going. You know, highly specialized roll ups that really accrue value to Ethereum L1.
- [15:40]
Laura Shin
So why don't we. So obviously we went into all different kinds of issues there that I was going to ask specific questions about later on. So why don't we actually just take this moment to have Hanan kind of explain, you know you are building codex. This is this L2 specifically for stablecoins for businesses and it's obviously on top of Ethereum. So why did you, you know decide that that was the optimal structure for your project?
- [16:05]
Houndan Lee
Yeah, I think first observation is that most of the stable coins are on Ethereum and this one doesn't have an EIP number. Right. So maybe sounds less like high brow but I think that brute fact is extremely important and I think that's driven by a structural BD edge that the Ethereum community has over everybody else. Ethereum historically does not do bd. You guys know this, right? Who is there to call? There's nobody to call. Until very recently, led by leaders like Vivek Rahman and, and Ash and others at the Ethereum foundation, there's now some BD motion. Now the reason why Ethereum has had so much adoption even though until very recently there wasn't even a BD team is because of the enormous credibility and neutrality that Ethereum has. When somebody thinks Crypto first thought maybe Bitcoin, right? But look, you can't do some stuff on bitcoin. Like where do you go next? You go Ethereum for sure. Justin, like you know, your Solana bags aside, like, come on. Right, like the, the first name that comes to mind is definitely Ethereum.
- [17:09]
Justin Bons
The adoption of Solana has massively outstripped Ethereum over the recent years, Right. To be fair. And I think that's a consequence of the L1 not scaling.
- [17:17]
Houndan Lee
I think, I think Solana is wonderful. I think there's lots of really smart people there and I think fantastic things have happened.
- [17:23]
Justin Bons
But that's, I think it's possible due to Ethereum's failure from my perspective otherwise Ethereum would still just have the dominant position right now. We're now, most metrics are now in Solana's favor, right?
- [17:34]
Houndan Lee
Well, I mean here's one metric, right? I'm a stablecoin guy so I look at the stablecoin metrics.
- [17:39]
Justin Bons
Stablecoin TVL is on Ethereum side. Everything else is on Solana side right now. Mitric wise for the most part.
- [17:44]
Houndan Lee
Well, I mean, Justin, let me finish. Right. So yeah, I think like look, there's $160 billion of stablecoins on Ethereum and there's like 10 billion on Solana. That's an order of magnitude. So yeah, I don't think there's much of conversation here.
- [17:59]
Justin Bons
I would say 10 billion of. 10 billion worth of stable coins that can actually serve as money and can actually be used for commerce in a permissionless way I actually think is more valuable than 100 billion in either an unscalable system that is actually kind of pointless because. And useless because people can't actually use it or locked up in L2s that are, you know, centralized and you know, funds can be stolen and it's not censorship resistant. Yeah, well I would say that 10 billion is more valuable.
- [18:27]
Laura Shin
I mean like, do you, I mean don't you see that defi on Ethereum is much bigger? It seems like you feel like sure.
- [18:36]
Justin Bons
But it's very much A legacy of its past.
- [18:38]
Interjector
Right.
- [18:38]
Justin Bons
Like a lot of the TVL on Ethereum is very static and unoptimized. So you have this old system that's kind of riding on its laurels while the competitor comes along, is outpacing it in almost all adoption metrics. Yeah, I think Ethereum has been steadily losing.
- [18:55]
Houndan Lee
If you begin with the premise that Solana is wonderful and you need to say some things to make Solana sound wonderful, there are many ways to do it and I think you're doing an excellent job of that. I think though. But come on, look at the numbers, man. One is 10x, the other it shouldn't.
- [19:09]
Justin Bons
You're focusing on a single number, like revenue. Both protocol revenue and application revenue on Solana is higher. I would actually argue that's more important. But I've noticed that once TVL and stablecoin was the only network left on Ethereum, it became the most most important metric. But I mean, that's, that's okay.
- [19:28]
Houndan Lee
I mean, look, Justin, have a different opinion on that.
- [19:31]
Justin Bons
Of course.
- [19:31]
Houndan Lee
I'm a stablecoin guy. I was asked why. Why, you know, to. Why, why build on Ethereum? I, I think, yeah, for, for me, at least for, you know, my narrow domain. And again, you know, I, I eat, drink stable coins. Right. So I, I only do this. And for me the choice is very clear. And like, for me, like, I think.
- [19:49]
Laura Shin
But okay, but how, Like, I, I do want to ask, you know, because, because so we have seen the metrics from usage, size especially kind of more like user adoption apps like ux, those types of things, those metrics are at least on the upswing on Solana. So at this moment in time, it's definitely one of those things where, yeah, okay, clearly Ethereum was the leader in so many ways for a long time and now they have a credible competitor. And you were launching at this moment in time where there's this clear competition between the two. Like, why did you decide to throw in your lot with the more established chain, even though you know its future is a little bit more in question than it has been in the past?
- [20:36]
Houndan Lee
I think, again, like, I think the first principle analysis bears it out that, you know, Ethereum is the better bet. I think if I'm truthful about this, there's probably a social angle to this as well where, you know, like, a lot of my friends are in Ethereum and so on and so forth.
- [20:48]
Interjector
Right.
- [20:48]
Houndan Lee
But I think the first principles of analysis alone justifies this very clearly to me.
- [20:54]
Justin Bons
And it doesn't make. But this Analysis. If we actually have this, have this.
- [20:57]
Houndan Lee
Debate, let me offer the analysis and then I'll not do the usual, Sorry, what's that?
- [21:04]
Justin Bons
And then I'll counter the analysis.
- [21:06]
Houndan Lee
Oh, absolutely, absolutely. I expect it. I mean, yeah, 100%. So look, I think this BD point is really underappreciated. So all of most of the adoption on Ethereum is there, not because there's somebody from the EF picking up the phone going like, yo, use my chain. That motion historically does not exist. Right. The stop on Ethereum is because people are like, my God, I want to do something. In crypto, what's the most neutral, best place to do it? Everybody's first instinct is Ethereum. Now, what happens when you have a L2 that's focused only on stablecoins that also is working with, you know, Ethereum folks to really capitalize and to really listen to customers and really engage with customers in a way that previously is very, very difficult to do at the L1 level. I think that's like a very underappreciated piece of this and, you know, a big part of the story. Justin, you're smiling, which has me worried.
- [22:09]
Justin Bons
Okay, so, I mean, getting back to first principles, from my perspective, if you're a user, if you're a cryptocurrency user and you're deciding what product to use, you can use the Ethereum L1, which is slow and expensive.
- [22:21]
Interjector
Right?
- [22:21]
Justin Bons
So that doesn't really make sense. Right. It doesn't even have the capacity for mass adoption.
- [22:25]
Interjector
Right.
- [22:25]
Justin Bons
Just impossible. Or you could use an Ethereum L2, which means there, there's an admin key which can still use a funds, which means they can censor.
- [22:34]
Houndan Lee
Let's not go back to stage one, Stage two.
- [22:35]
Justin Bons
No, no, no, but this is important. But this is.
- [22:37]
Houndan Lee
Hold on. No, no, no, no.
- [22:39]
Justin Bons
This is what Today, Today, if first principle matters, you can choose between an unscalable system that's expensive and doesn't work.
- [22:45]
Interjector
Right?
- [22:46]
Justin Bons
Or you can choose between a centralized system that can steal user funds, consensus, et cetera. Or you can choose to use a cheap, fast, permissionless and decentralized system. When we say first principles matter and you're actually analyzing it from the perspective of a user, of course they'll use an alternative L1. If they actually care about decentralization, of course they will.
- [23:09]
Houndan Lee
Why then are there 10x more than 10x more billion stablecoins on Ethereum than there are on Solana?
- [23:16]
Justin Bons
Because people deployed more stable coins over there. Like you're focusing on this single Metric. And I already told you it's not the most important metric to me.
- [23:23]
Houndan Lee
I'm the stablecoin guy. Just, I'm a stablecoin guy. Right, okay.
- [23:27]
Justin Bons
The majority of stable coins are on Ethereum.
- [23:30]
Interjector
Okay.
- [23:31]
Houndan Lee
I don't think he can offer this like theoretical logical analysis that you think is airtight. And then I give you an empirical, I give you a piece of empirical.
- [23:39]
Justin Bons
Evidence and you go, you're cherry picking. No, no, you're cherry picking a single metric. I mean if you want to talk metrics, okay, sure. Ethereum. I mean this is also not, this is also not really a counter argument like to what I'm saying because what I'm saying is from a user's perspective, I think right now this is the choice.
- [23:54]
Houndan Lee
I think what you're saying is interesting. I think what you're saying, you kind of like you cut, you apply these adjectives that are like not really intellectually honest. Right?
- [24:06]
Justin Bons
You're like. Hold on, no, no, stop. If you're going to call me not intellectually honest. What did I say that was not honest? If you're going to start going there, go ahead. Yeah, okay.
- [24:15]
Houndan Lee
Okay. Well I'm sorry, I don't mean to add hominin here. I, I think like I'm just characterizing. I could.
- [24:20]
Justin Bons
What did I say that was dishonest?
- [24:23]
Houndan Lee
I think, I think, look, like the way you describe the theorem, you describe it as if it's like this terrible, terrible, terrible experience. And you describe Solanas as like twittering.
- [24:34]
Justin Bons
I didn't say terrible on a hill. I did, I did. A dislike.
- [24:38]
Houndan Lee
Come on. Like these are not.
- [24:40]
Justin Bons
And then these were factual statements, sexual statements without even rhetoric. If you play this back, you'll see what I just did there.
- [24:48]
Houndan Lee
Well, okay, so, so then you talk about roll ups in a way. You know, you started your sort of critique on roll ups generally on talking about incentives and how it doesn't make sense for a roll up to give up the position of being a sequencer.
- [25:01]
Justin Bons
Yeah.
- [25:01]
Houndan Lee
If you are a roll up today, do you really think it is in your interest to steal your users funds? You think like Arbitram over there is going to decide are you going to defend admin keys?
- [25:13]
Justin Bons
Hold on, hold on. Is this now going to be the debate?
- [25:17]
Houndan Lee
Steal all the funds?
- [25:18]
Justin Bons
I mean finally if you want to.
- [25:19]
Houndan Lee
Have that debate we can, it's just like look, like what do you laid out for you? Well no, I, I'm making the case that, look, I've laid out for you that there is a progressive roadmap to decentralization.
- [25:29]
Justin Bons
Okay.
- [25:30]
Houndan Lee
And sure it is a progressive one, but I can point to you very clearly at which point, what technical assumptions, what assurances can be given. Okay, these are good assurances.
- [25:39]
Justin Bons
Simply concede. Can you just. Today, for a user, they have a more decentralized, more secure, better experience on something like Solana.
- [25:46]
Houndan Lee
Can you concede that is a more than 10x worse place for stablecoins than Ethereum?
- [25:52]
Justin Bons
Yes, I can see that. Can you concede the other point and then we can both do a little conce. Concede thing here. I think that's.
- [25:57]
Houndan Lee
What is it you want me to concede, Justin? I. I don't. I don't want.
- [25:59]
Justin Bons
This is good. This is good.
- [26:00]
Houndan Lee
What is it you want me to.
- [26:02]
Justin Bons
Think that today for a user, if they want to seek out the, say, the best user experience from the perspective of decentralization, security and fees and speed, that they're better off on Solana than they are on an Ethereum L2 or Ethereum itself.
- [26:15]
Houndan Lee
I think if you are a stablecoin user, the best place for you is Codex. That's what I think.
- [26:19]
Justin Bons
Yeah, I think. Look, that's not an honest answer. Now who's being intellectually dishonest? Everyone can see through.
- [26:27]
Laura Shin
So. Okay, so why don't we. So how. Go ahead and back that up, make your case. We want to hear how you're coming to that conclusion.
- [26:36]
Houndan Lee
Yeah, so like, I think some of this decentralization talk is maybe besides the point. And I think, you know, what we are focused on is certainly, is certainly those properties and certainly we're committed to that roadmap of progressive decentralization. I think today what matters for users when it comes to stablecoins is that they function and work the way that, you know, Chamav Polyhapatiya believes they work. What I mean by that is the buzzword of stablecoins is that look like all this shit is seamless. Everything's super fucking smooth. Like really low cost. It all just works great. Like circle stocks at 40x revenue. Everything's fucking amazing if you're on the ground. I think you see all of the frictions and problems of stable coins today. And most of them are at the boundary between onchain and offchain. And so what we're focused on today as a first order priority is to eliminate that boundary between offchain and onchain. And so our first product avenue is a stablecoin liquidity hub that offers wholesale pricing between different types of stablecoins and between different types of fiat and stablecoins globally. And so what we want to build long term is that a stablecoin chain with this property that any fiat that comes in can convert into a stablecoin so seamlessly and so painlessly. It's the way Chamath imagines it in his head. And stablecoins can move around in this really wonderful and efficient way over time. We need to layer on other assumptions, other technical properties like atomic off ramps. Basically, when stablecoins get sent into exchanges today, sometimes they get stuck because they run the KILLIB checks after the money arrives. Why can't the QIB checks be run before? And if the QIB checks fail, why can't the transaction revert on the spot so the user's never stuck? Anyway, this is why I spend most of my time thinking about it.
- [28:23]
Justin Bons
Crazy idea. How about we just scale the L1 and then we get rid of all of this crazy complexity and trust Trade.
- [28:28]
Podcast Announcer
Offs Binance is the world's number one crypto exchange, trusted by over 290 million users globally. With world class liquidity, security and a wide portfolio portfolio of digital asset products, Binance makes crypto easy for everyone. Whether you're new to crypto or a professional, Binance offers a simple user experience. Learn with Binance Academy, browse hundreds of tokens and track your portfolio on an easy to use dashboard. For experienced users, Binance Pro provides industry leading services and bespoke trading products with some of the lowest fees and deepest liquidity in the market. It's no wonder over 200190 million users choose Binance for everything. Crypto Buy, Sell, Trade Earn Live Crypto Download Binance today and begin your journey into the future of finance. Disclaimer Binance is not available in certain countries, including the US. Check its terms for more information. Binance.com/en terms Eric Trump Donald Trump Jr Tom Lee Vlad Tenev Paolo Arduino Balji Srinivasan Arthur Hayes these are just some of the headliners at Token 2049 Singapore, the largest crypto event in the world happening October 1st and 2nd. Over 25,000 attendees, 500 exhibitors and 300 speakers will converge for an unmissable week. Token 2049 will take over all five floors of Marina Bay sand, transforming it into a pop up City with 1000 side events, non stop networking and immersive experiences all leading into the Formula One Grand Prix weekend. Ticket prices are rising this week. Visit asia.token2049.com and use code UNCHAINED for 15% off tickets.
- [30:17]
Laura Shin
Well okay you guys, I Want to actually just take this moment to talk about the Tempo thing because Justin's actually seemingly arguing more like Pro Solana. But what we have been seeing is obviously people are. They're going to be building new all to L1s. If we look at kind of how Matt Huang described their reasoning, he said they didn't want to be beholden to the tech specs of being an Ethereum L2 fast. Finality obviously was an example. And for finality from ethereum that's like 12 to 13 minutes. He said also they wanted multiple validators rather than a single sequencer. They're going to be creating what he called custom transaction lanes and custom gas pricing. So those are some of the different things. What did you think about their reasoning? And let's leave aside this issue about the neutrality thing because we can discuss that later. But let's just focus on the tech specs.
- [31:13]
Justin Bons
I actually applaud their decision. I think it's great. I mean personally I would have built on maybe a pre existing L1. I think that's probably the better look. And I'm not look, I'm a pluralist when it comes to crypto.
- [31:23]
Interjector
Right.
- [31:24]
Justin Bons
I'm not a maxi of any sort. There's many good blockchains out there. So I don't want to make this Ethereum versus Solana debate. That's not what I'm here to do. But I can talk about Stripe and I think what they're doing there I think is really interesting. And I particularly thought that it was quite the condemnation actually of Ethereum's L2 scaling roadmap. And it's the first kind of sign I think, of a company also really appreciating and valuing decentralization and permissionlessness. And I think that that is something we should applaud because I think this whole idea that, that like. I think I like to draw the analogy with like the early Internet where in the early Internet there were these things called Internets that were like these private Internet for companies, let's say, because these companies just weren't comfortable using a public Internet that everyone could connect to. That sounded very scary to them, rightfully so actually, but. But actually over time these companies started deploying Internet directly and started getting more comfortable. The idea of a public network that is permissionless, that everyone can access. And I see a similar pattern and a kind of journey of understanding that's happening with a lot of these institutionals as well. We're at first like, oh, this is scary. I want to control everything. It should Be centralized. It should be in the way that I understand things. But generally they'll start to embrace decentralized systems and permissionless systems. Because that's really where the value is. That's where the value adds is.
- [32:46]
Laura Shin
Because if the system is not just in like, it's interesting to me that you're saying, you know, they're, they're heading in that direction, which is actually what how Nana is saying about the L2s. So, you know, you're, you're not okay.
- [32:59]
Justin Bons
With Stripe is actually doing it and L2s are just saying it.
- [33:02]
Interjector
Right.
- [33:03]
Laura Shin
What do you mean by that?
- [33:04]
Houndan Lee
Well, there's no change.
- [33:05]
Laura Shin
Yes. Tempo is literally starting with a permission validator.
- [33:10]
Justin Bons
I mean, you're asking me? Oh, sorry, it was a permissionless validator.
- [33:13]
Laura Shin
Say that starting with a permissioned validator set, they will move to permissionless.
- [33:18]
Justin Bons
Okay.
- [33:19]
Laura Shin
And so it's not permissionless from the get go. And I mean, I mean, you're asking.
- [33:24]
Justin Bons
Me to comment on a blockchain based on just like, like a 2000 word article or something.
- [33:29]
Interjector
Right.
- [33:29]
Justin Bons
So I don't really have much to go.
- [33:31]
Laura Shin
I know. Well, none of us.
- [33:31]
Justin Bons
I'm just running with it.
- [33:32]
Laura Shin
Yeah, we're just going with what they said.
- [33:34]
Justin Bons
I mean, generally, the way that I'm seeing it is generally speaking, look, if it's permission, then I'm going to say this is bad. I'm going to be consistent here. I think they should use a permissionless validated state. I think that's what crypto is all about. So.
- [33:45]
Laura Shin
Right. But they're saying that they will move to that. And so they have this like roadmap to get more decentralized. And how Nan is saying that the L2s have a roadmap to become more decentralized. So why is it not okay for Ethereum L2s to be working toward the decentralization? But it is okay.
- [34:03]
Justin Bons
It's not okay for both. Honestly, it's not okay for L2s to say we will promise decentralization in the future. And it's not okay for Stripe to say we will promise decentralization in the future because we have decentralized options now. We always have.
- [34:16]
Interjector
Right.
- [34:16]
Laura Shin
Well, okay, but one question, which is.
- [34:20]
Podcast Announcer
You know, the history of literally every.
- [34:22]
Laura Shin
Blockchain, including bitcoin, is that it started centralized. You know, we all know the first however many blocks of the bitcoin blockchain, there's only like, you know, two or three people mining it. So, you know, this is kind of just how a lot of these blockchains I understand that.
- [34:40]
Justin Bons
But like there's a difference here, right? When something is small and just starts out every. You're right, every blockchain starts out centralized. I like saying that as well because it's 100% correct. And then you have this gradual process of decentralization. But we're talking about networks that are worth tens of billions of dollars, that have been around for four plus years. I don't think you can keep using that excuse. I'm just going to call out incompetence and just them not actually caring about those principles and putting them first. Even worse. This is actually a case of perverse incentives. It's not a coincidence that the top 20 L2s are all centralized. It's not a coincidence. They're just following their incentives. And that's the same reason why these systems won't decentralize as well. Of course base is not going to decentralize. Of course they're not going to give up on 100 million plus of revenue in the process. It's nonsense. And it's also that's why Ethereum's in such a messed up situation right now. Because if it did actually scale, you would put half of the Ethereum ecosystem out of business because optimism would go broke, Base would go broke, it would all just go bankrupt. That's why there's such a strong incentive to actually never scale the system.
- [35:43]
Houndan Lee
I mean, Justin, optimism will never go broke because Andreessen's there. But I hear you, all of that. I think we can do a ren another round of that if we want. But I think you said something else that's really interesting, which is the corpo networks. You know, you said, look, the sort of prehistory of the Internet is that you had all these companies who decided, look at this shitty open Internet thing, right? It's kind of shitty, it's got these problems, kind of chaotic. Let me make my own one, right? They call Bill Gates called this the information highway and.
- [36:17]
Justin Bons
The incident of the future.
- [36:18]
Interjector
Right?
- [36:19]
Houndan Lee
I guess that's where I'm going, right? I think that's what you're seeing in stablecoin land today. Again, I'm a stablecoin guy, right? So you've got stripe, you got circle, you got other players who are looking at something like Ethereum and going, well, my God, we ought to have the information highway for stablecoins. And they're thinking the same way that Bill Gates thought back in the day. Now what happened to Gates here? So Gates wrote these ideas in a book and that was the first edition of the book. By the time the second edition came out, he was conclusively proven wrong. And so they had to pulp a bunch of these books and edit the language such that Bill had always thought that it would be this open Internet concept. Bill aside, what is the point here? The point is that open systems win, neutral systems win. Why is it that the open Internet won over Microsoft's, Microsoft's like, information highway? Well, if you're somebody building like, which one would you rather build on? Where do you think your property rights are more secure? Where do you think, like, neutrality actually means something? It's not just a puzzle.
- [37:23]
Justin Bons
That's why fragmenting the Ethereum ecosystem was such a big mistake, because now it's no longer unified.
- [37:29]
Houndan Lee
I think the future of rollups needs. Rollups must add value to L1. The rollups that add value to L1 and, and the ones that, you know, are able to play in this new paradigm are the ones that are going to be extremely, extremely successful.
- [37:42]
Justin Bons
The way that I see focus, say when base pays, say $1 out of the $200, you know, it, it makes back to the L1, right? So only a fraction, a fraction of the usage goes back to the L1. If I compare that to a system that actually scales while preserving decentralization, right? Like, that means all of those fees goes back to the L1. So if you project that out in the long run, if you take all of the fees that would go to L2s are now going back to the L1, right? If you project that out in the long run, the blockchain that scales the L1 will have a greater security budget. It will become the more secure, it will become the more decentralized blockchain. So Ethereum is really setting itself up for a path for failure economically here because it's outsourcing execution to private L2s and it's only getting a fraction of those fees back. While competitors are able to maintain a single composable state and keep all of the fees themselves, which are then utilized for improving decentralization and scarcity over the long run. That's what makes other systems superior, including from the decentralization, credible neutrality perspective. If you project things out, if we start talking about the future, which you do, keep bringing it back to that. And I'm happy to have that conversation.
- [38:55]
Laura Shin
Yeah, yeah. So let's, let's do one thing because we started with neutrality and then you kind of said like, you know, you brought, or you brought up the, you know, scaling issues, the, the parasitic issue about the lta. So let's, let's kind of put a bow on the neutrality thing and like finish that up and then we'll move to these other descriptions. Because I just wanted to ask you, you know, so Justin, like obviously we, we were talking about Tempo like you know, you keep, you keep mentioning a Solana or it doesn't have to be solana, but any L1 that is, you know, capturing all the fees and we'll use that to scale. But you know, Tempo, they are claiming that they are going to become a neutral platform with respect to stablecoins. And I even heard like Zach Abrams on Bridge of Bridge on Bankless calling Stripe a major contributor, which, you know, he works there now. And I don't know how many people who are outside of Stripe would consider them a major contributor to Tempo versus you know, I think people think Tempo is Stripe's blockchain. So I saw Anthony Sasano tweeted at Matt Huang, how is Tempo going to be neutral when it's backed by Stripe? Why would Stripe allow competitors to use their chain to grow? So let's just talk about that. How do you think they get over in this period when they're not decentralized yet? How do they get people on board and using their chain at this time when they are much more in control of that chain than, you know, than they would, then they would be in a truly decentralized system.
- [40:30]
Justin Bons
If they choose to decentralize in the future. So you actually apply a permissionless validator set and where anyone can join, then the problem takes care of itself, right? As long as this token itself is sufficiently distributed. I mean that's, that's the whole point. Like a private corporation can launch a blockchain and profit off it and then, and then the system becomes decentralized and eventually comes out of their hand. I would also say it would be good if they implement stakeholder governance. I'm a big fan of on chain governance. That's something that Ethereum lacks. I think that's a big problem. It's not the subject for today's debate, but I think if they add something like stakeholder governance, they have a sufficiently distributed token. They make it truly permissionless and truly like think about how making the system more decentralized. A lot of ifs there, granted. But then the problem takes care of itself. Like it's okay that private Corporations launch new L1s and compete in the free market. That's how we create solutions. If some of the dominant blockchains are failing us and I think that's a great thing.
- [41:26]
Houndan Lee
I think the smart move for Stripe will be to act as neutrally as possible for as long as possible. Have try to get all the flows on the chain and then by then it's too late. Then they capture everything.
- [41:41]
Justin Bons
I actually agree with you and that's why I see a similar path to Altos.
- [41:44]
Houndan Lee
Yeah, well, I think there's a difference, right? Like we're not, we're not striped, you know, we're not striped. We don't have a payments business as well. I think, I think the reaction you're seeing in the market, you know, when you talk to payment service providers and other folks, other fintechs is, you know, people are a little wary of this for good reason. Right. I don't think the team is like malicious or evil or anything like that. I think it's just that people, it gives people pause. Like, should I really be on a substrate that is fundamentally kind of. But hold on, it feels a bit.
- [42:21]
Justin Bons
Like you're sowing doubt here because like we can verify ourselves. If a system is permissionless and decentralized, we can just check, we can look at the code, we can analyze the network. So it's like certainty around design.
- [42:35]
Houndan Lee
You know, I think maybe you're fixating on like some of those nouns. I think like end of the day, if you are a competing fintech, do you really want to build the future of your business on a substrate that is adversarial to you? I think the answer is no. And I think, by the way, I didn't cherry pick this example. You found the history example, right? You said corporate corpo Internets and sort of prehistory of the Internet. It's the exact same thing. The analogy fits perfectly. You've got these companies who obviously everybody wants to own this layer, right? It's incredibly valuable. They think the existing open neutral version kind of sucks and they think they can do better things.
- [43:17]
Justin Bons
Hold on.
- [43:17]
Houndan Lee
Really override.
- [43:19]
Justin Bons
You're missing the moral story.
- [43:21]
Houndan Lee
Let me finish this point, right? What really is going to be the deciding factor is where do people feel like they have more secure property rights? Where people feel like they can leave assets and feel safe. And I think the market test here is very clear and Ethereum is clearly winning on that front. Justin, please go ahead.
- [43:42]
Justin Bons
Yeah, this is saying Ethereum is winning is not, not exactly an argument, but it's, it's. Sorry.
- [43:48]
Houndan Lee
Well, it was. Well, it was prefaced by evidence.
- [43:52]
Laura Shin
So I mean, maybe honestly, if I.
- [43:54]
Houndan Lee
Were to your thumb cut off, like.
- [43:56]
Laura Shin
The way that I'm looking at this, I feel like what, you know what, to my mind, what Hanan is saying makes sense in the long term, but I feel like at this moment in time we are probably going to see all these like corporate chains that are going to not only launch but like flourish from some time. Like if we look back at aol, you know, that's probably the main example from that era. But yeah, is AOL used today? You know, it's like when you see somebody using an AOL email address, don't you kind of like give it a side eye? Like you're like, what? So I feel like, yeah, your argument makes sense. But the question is really, you know, will Codex survive that period when the intranets, the, you know, crypto equivalent of the intranets will be dominant? That to my mind is.
- [44:44]
Justin Bons
Well, but it's also somewhat missing the point of the, of the moral of this historical story.
- [44:50]
Interjector
Right?
- [44:50]
Justin Bons
Because the Internets didn't win. It's the Internet that won. It was these private companies that were actually wrong about the future of the Internet and that it wasn't all about creating these silos, fragmented, permissioned, centralized, private Internet, that the future was actually in a permissionless, single, cohesive Internet. And that's why this analogy, this historical example, support this idea around having a scalable, decentralized L1 as opposed to centralized L2s.
- [45:23]
Interjector
Right.
- [45:23]
Laura Shin
Well, but so Justin, like in your world, are you saying that you think stablecoins should just live on Solana because like, you know, payments, that's just a different ball game.
- [45:34]
Justin Bons
You know, coins will naturally gravitate towards the best product. And I'm arguing that blockchain is faster.
- [45:40]
Houndan Lee
Interesting, interesting question.
- [45:42]
Laura Shin
How do you, how do you process payments that are, you know, payments that, that's a very high throughput type of product. So how do you do that at the same time, you know that like a trump meme coin is launching on Solana on the same chain?
- [45:56]
Justin Bons
Like, well, Solana has local fee markets, right? So that, that helps deal with that problem.
- [46:01]
Houndan Lee
I think what you said earlier was really interesting. You said, you know, the stable coins will go where the best product is. That's what you said. Billion dollars of it's on Ethereum. Right. So I, yeah, I don't know what to say to you.
- [46:12]
Justin Bons
I think the ms, it was, it was higher during the last bull run. Like this is a legacy of Ethereum's past, right? And, and if you actually look at where the growth is happening, it's not where Ethereum is, right. Recently out into the future if you project things out. Of course I have. And there's been more activity on Ethereum, granted. But like the point is, I mean.
- [46:34]
Houndan Lee
Again, all these facts, I don't think that's going back to your talking point.
- [46:39]
Justin Bons
But I don't think that a centralized system. A centralized system is not a superior system. That's not first principle.
- [46:45]
Interjector
Right?
- [46:46]
Houndan Lee
Just. Do you know, do you know who Marco Rubio is in the U.S. like, sure. There was a presidential debate where he just kept doing these talking points he prep. I feel like you're doing that a little bit where you know, you've got this set of talking points against, you know, various characters in crypto and I mean, look, I don't think you can brush aside the evidence here. Like you've got. There's 10x more of it there and I think that's very difficult. I've seen it.
- [47:08]
Justin Bons
There's so many times that yes, Ethereum currently has more stablecoin activity. It's more dominant in regards to stablecoin right now. But I'm saying that the competitors will out compete it in the long run because of the fundamentals that are seeing. The fundamentals that I'm seeing is that a fast, cheap, permissionless and decentralized system is better than a fast, cheap, centralized system. Okay, very simple argument. One that you're unable to concede when it's just the pure fact of the matter. Can you just concede that?
- [47:39]
Houndan Lee
What is the point? You want me to concede that a.
- [47:41]
Justin Bons
Centralized, fast and cheap system is worse than a decentralized, fast and cheap system. System.
- [47:49]
Houndan Lee
Right, of course, of course I concede that. Of course I conced. I think where you lose me and.
- [47:54]
Justin Bons
When users have to choose today that's currently the case for L2 scaling. Concede.
- [47:58]
Interjector
Right.
- [47:58]
Justin Bons
Can you concede that?
- [47:59]
Houndan Lee
Justin, where you lose me is when you talk about the prehistory of the Internet and somehow you cast Ethereum as Bill Gates when clearly Bill Gates here is strike. Right? Like, yeah, I'm not the open. Who is the analogy for the open Web that it's clearly Ethereum. This is again, until recently there's not even. They don't have a bdt.
- [48:21]
Justin Bons
No, no, no, no, no. You're confusing me now. Talking about L2 versus L1. We're talking about a bespoke centralized.
- [48:29]
Houndan Lee
Laura's asking about public systems.
- [48:31]
Justin Bons
Right, like you're confusing the argument here. That's not. That's not Laura.
- [48:35]
Houndan Lee
Laura asked you about. Laura asked about Tempo and your views on Tempo and you know how it Compares to the other sort of incumbents in the space. And I mean, I wouldn't cast 10 though.
- [48:46]
Justin Bons
I mean you wouldn't like. No, of course I would wait until it becomes more mature. I would wait until it fully does its permissionless validator set. But I applaud the company for not wanting to build a centralized system, for actually wanting to have a path, a viable path towards decentralization instead of just saying trust me. Because that's what Ethereum is all about right now. It's trust me, bro. And in my over decade of cryptocurrency experience of being a researcher, that's a very bad idea to trust.
- [49:17]
Houndan Lee
I think we did the stage one, stage two, we did all this, right. I don't know if the viewers want to hear it. Let's talk about it if you want. But I just need to, I just need. Laura, maybe just assert one thing so that, you know, folks aren't upset at me. Like we categorically reject that there is not a path to decentralization when it comes to altitudes. And I think, Justin, you see it differently. You see, you see it differently. And I think, I think we should move on. I think we should move on.
- [49:42]
Justin Bons
Because you don't want to talk about it. I mean let's, let's.
- [49:45]
Houndan Lee
I'm happy to talk about it. I just, we went through, I went through, you know, all the stages with you.
- [49:50]
Justin Bons
We haven't, we haven't actually staged what are the sequences, roll ups. We can talk about these things if you want. We haven't actually talked about. You just claim that it will decentralize trust. Trust me, bro.
- [50:02]
Laura Shin
Okay, go, go ahead. You, you can't we go ahead and lay out your, your kind of view on how that will happen, Hounden and why it hasn't and then just you can respond. But then I really want to move on to some of the other issues like the finality issue, fragmentation, privacy. There's a bunch. So go ahead. But just how Nan can start and then Justin response and then we're going to move on.
- [50:22]
Justin Bons
We can make it a quick back and forth if you prefer. Up to you.
- [50:26]
Houndan Lee
I think it's really boring for a viewer. No, no, no, no.
- [50:29]
Justin Bons
Because your whole list on this plane.
- [50:31]
Laura Shin
No, no, no, I don't think it's fine, go ahead. People are interested in decentralization, I think so go ahead.
- [50:38]
Houndan Lee
I think there's a very clear path, right. I think again in stage one already there are certain properties that are extremely useful.
- [50:46]
Interjector
Right.
- [50:46]
Houndan Lee
We're talking about the right to exit and the right to exit is a key check on the behavior. Yeah, yeah. And in stage two, look like you got like 30 day delays before doing any kind of upgrade. You can't pause withdrawals. Smart Contract has detective Bug, then it pauses deposits and withdrawals. Security Council can only resume withdrawals. Right? They can't freeze it themselves? I mean, I don't know. Like that's pretty good. I think at that point we're pretty good. Right?
- [51:13]
Justin Bons
You're just basically arguing admin keys are good. That's what I'm hearing right now.
- [51:17]
Houndan Lee
No, I don't think I said that. I think I categorized that.
- [51:20]
Justin Bons
Security councils are good. It's Right. Well, no, Security councils are just a way to.
- [51:25]
Houndan Lee
I was describing, Justin, I was strictly. I was describing to you the properties of system at different stages. Decentralization and the guarantees that they offer.
- [51:33]
Justin Bons
Okay, can I explain why? I don't think that will happen. So take bets.
- [51:37]
Houndan Lee
They're going to say that the roll ups, you know, their incentives against them.
- [51:41]
Justin Bons
Have to sacrifice all of their revenue.
- [51:43]
Interjector
Right.
- [51:44]
Justin Bons
In order to truly decentralize.
- [51:46]
Interjector
Right.
- [51:48]
Justin Bons
Do you really? I'm not sure.
- [51:50]
Houndan Lee
I'm not sure that's the case. I. Justin, like, I'm not sure.
- [51:54]
Justin Bons
How is it decentralized data staking a cut? Are you serious right now?
- [51:59]
Laura Shin
Yeah, I mean, probably the phrasing, like all of it, like is like so.
- [52:06]
Justin Bons
I mean you would need a valid. You need a decentralized set of sequences maybe, or its own validator set. Like that's how you'd achieve like a real form of decentralization. I mean they're not going to burn the admin key.
- [52:17]
Interjector
Right?
- [52:17]
Justin Bons
So like therefore you need some sort of consensus in order to still be able to allow for upgrade. That's part of the dilemma that you.
- [52:24]
Houndan Lee
Have with L2s, I think, you know, when these code bases are hard and when like the products, the product features are solid, burn the admin key. There's no need for the admin key anymore. But in the interim you must be pragmatic and make sure that we do use things that are useful for users.
- [52:40]
Justin Bons
That is kind of insane. Like that doesn't work, right? Like cryptography keeps evolving. Like quantum is 10 years away. Like saying, just burn the admin key. There's a reason why no single L2 has done that. Why has. Why don't L2s just do that? If you say that like it's nonsense. Incentives don't line up. Reality doesn't line up with that.
- [52:59]
Houndan Lee
I think Laura was pointing out the hypocrisy of this. Right. Like you're describing, you were talking about Tempo and you know, there's a, it's, of course it's a progressive thing. I mean, think about us.
- [53:12]
Laura Shin
To add on that point, Justin, a lot of the criticisms that you're making of the LTD twos used to be levied by Ethereum people against Solana. So it's, it's kind of funny. Like there's like, you know, are you, were you criticizing Solana back in the day when they were much more centralized?
- [53:30]
Justin Bons
I was actually one of Solana's biggest critics back in the day.
- [53:33]
Laura Shin
Okay, okay. So you do understand that there's an evolutionary process that a lot of these chains go through from.
- [53:39]
Justin Bons
And the way we predict that evolutionary process is by looking at incentives. And if you're looking at a mass system and the incentives are perverse, then I'll predict that it won't decentralize. And that's exactly what's happening with ethereum today. We're four years in, just 20 living.
- [53:55]
Houndan Lee
I've given you my view on how I think the Rob ecosystem should evolve. I think, yeah, we're going to move.
- [54:01]
Laura Shin
On because I don't want to miss these other topics. So let's go on to this finality issue because I do think that this is important for payments. As we mentioned, if you're a stablecoin L2 on Ethereum, then finality takes like 12 or 13 minutes. So especially in your case where you are targeting businesses, I'm sure you get questions about that. Why do you feel like being an Ethereum L2, given that fact, is still the best product that you can offer to your customers.
- [54:36]
Houndan Lee
I think it's not a first order problem we encounter today when it comes to our users. I think the first order problem we encounter when we speak to our users is that stablecoins are offering a markedly better experience for them than whatever they're using currently. So whether or not the finality is this or that, it is sort of a second order thing. But then most important.
- [54:57]
Laura Shin
So you are operating what is essentially going to be a kind of app chain on Ethereum and your ability to offer certain technical benefits to your customers is going to be limited by Ethereum's roadmap. So how do you account for that as well?
- [55:15]
Houndan Lee
I think first of all, there's a concentrated effort in Ethereum to solve some of these finality issues. I think we see a great deal of progress there. I think some of this finality stuff is a bit overblown. I'm certainly an L2 offers instant confirmation. It offers a kind of game theoretic finale immediately and for many users that is sufficient. So some of this talk about finality finale finality to me seems like some ex post reasoning about how to justify building an Altel one. Candidly, that would be my view. Now there are of course cases where finality does matter. I think if you're bridging stablecoins from one chain to another and folks have to underwrite the risk of, you know, things being not quite completely final, of course that matters. Now that can be smoothed over in a number of different ways.
- [56:05]
Interjector
Right.
- [56:06]
Houndan Lee
One way is capital. And so again, I think the whole category of these issues is not a first order issue. I think if you put a team together, you said, I'm like, how can we make stablecoins more useful for as many people as possible? This would be on the list, but it certainly wouldn't be at the top. Yeah, that's kind of how we think about it.
- [56:24]
Justin Bons
I mean, that type of finality is completely unworkable as far as I'm concerned. I think the most recent example that I thought was really interesting was hype and clobs. And I think that's shown us that there's a massive demand actually for large, fast central order books. And that's only possible if you have extremely fast finality, like what some of the fourth and fifth generation blockchains are now achieving. So I think if you don't have that type of finality, the idea of a central limit order book ever being competitive on ALTU is just doesn't really make sense.
- [57:00]
Interjector
Right.
- [57:00]
Justin Bons
So yeah, I think that's really a deal breaker for what is currently the number one use case in terms of revenue. Well, I'm happy to move on from there.
- [57:08]
Laura Shin
Yeah, let's move on because I think the fragmentation issue is another big one.
- [57:15]
Podcast Announcer
Just because, you know, at the beginning.
- [57:17]
Laura Shin
Of the show I mentioned, you know, like Arc and Tempo and plasma and stable and I mean, it's just like. And now there's codec. So, you know, how do you, how do you think that it's possible for us to prevent fragmentation? This just creates so much hassle for users. There's a lot of, you know, money and time spent on swapping stables and it creates, you know, even like risk. Right, so talk a little bit about how you feel like that can be resolved.
- [57:47]
Houndan Lee
First of all, Codex is actually the only stablecoin chain on Ethereum. So with respect to the Ethereum ecosystem, there's no fragmentation whatsoever. Now Certainly there are many chains across other things. Right. And of course I see what you did there.
- [58:01]
Justin Bons
I respect it.
- [58:04]
Houndan Lee
Justin. I got to do my job. I got to do my job. Yeah. So certainly there is, there's fragmentation across these chains. You know, there's plasmas, arcs, so on and so forth. And I think if you peel under the first layer of underneath the buzzword, you'll actually see that these guys are pursuing very, very different strategies. You know, I won't name names. One is sort of bundling a chain with a Neobank app.
- [58:29]
Interjector
Right.
- [58:29]
Houndan Lee
Another is basically running a kind of bear chain playbook, but skinned as a stablecoin thing. You know, we are focused on these like real payment flows on the ground and like dealing with the banking, the licensing and doing all this gunk and making sure stablecoins are more useful. And so like, candidly, when we go to market, we don't bump up against the other stablecoin chains at all. We're just told we're doing totally different things. Now, of course, on a VC deck or something and somebody's got stablecoin chains, you're going to see four logos and yeah, they, they look side by side and they do the same thing, but not really, they really don't. And so like on the ground, you know, we're growing forex month on month charts are all going up. We don't really bump up against stablecoin chain competition in the parts of the market we play. And so like, what is the end state here? I think the end state is the buzzword goes away. The stablecoin chain buzzword goes away. And better language is used to describe these different companies who are actually doing very, very different things.
- [59:31]
Laura Shin
Well, Justin, do you want to respond? Anything there about fragmentation?
- [59:35]
Justin Bons
Yeah, yeah, I think fragmentation is a massive issue. And this all ties into the kind of economic critique that I made earlier because it's. And also the ux. Right. Like I think the two main reasons why I think Ethereum was so successful initially was one due to programmability. That was a huge breakfast unleashed innovation, I think, on the cryptocurrency space. And number two was that you had a single composable state. And like that, that having that single composable state is incredibly valuable because the network effects of that just compound.
- [60:08]
Interjector
Right.
- [60:08]
Justin Bons
Because you could have say a stablecoin over here on that L1, and so you have a lending protocol over here and you have say a exchange over here. And these can all kind of interact very quickly and seamlessly with each other. You lose that you very much lose that atomic composability. You lose a lot of the seamless UX when you move over to this type of quote unquote L2 ecosystem. And I think that's, that's a terrible trade off to make and I think it's incredibly confusing to users that you have. Oh, here I've, in my world, I've got USDC on Optimism and I've got USDC on Arbitrum and I've got USDC on Codex and, and, and oh, if I want to move it from one to the other, I need to use a bridge and then oh, but I can't use this bridge and I need to have take this security risk. I need to click on this and I need to click on that. I need to understand this. It's a nightmare compared to just scan QR code. That's how it's supposed to work.
- [61:05]
Houndan Lee
Well, like I bet the base guys are like, I don't know what just is talking about because I bet I can do the scan QR code and pay.
- [61:11]
Justin Bons
Yeah, because, because they want to run just to stay.
- [61:14]
Houndan Lee
I think that I'll steel man your argument. I'll steal man your argument. Right? Your argument is like, look, you have all these rollups who are kind of general and like doing everything and like you're fragmenting the use base. I think there's some truth to that. Yeah, there's some truth to that. I think that's why I tell you the future of rollups cannot be that. Future roll ups must be specialization. It must be specialization.
- [61:34]
Justin Bons
I can actually meet you halfway here. This is actually quite interesting that you say this because I meet, I can meet you halfway because I, I, I don't actually dislike L2. Like, I'm not against L2s. I'm against. I know that maybe, maybe I am, maybe I'm not. But like, but like I, I don't dislike L2s. I dislike that the L1 is scaling. So in my ideal future, all L2s are specialized, right? Because, because L2s are kind of providing these, these niches that that actually would maybe make sense. That, that maybe. Right, so like I agree with that. But the problem with Ethereum, but the main problem with Ethereum is they said no L2s. We're off, we're outsourcing all execution and everything to L2s. And that L2s is supposed to be this general purpose. Now that was the big mistake. If only Ethereum failed, then I'll be very happy with any L2 right. That's not the issue.
- [62:30]
Houndan Lee
Let's talk about the future.
- [62:31]
Interjector
Right.
- [62:31]
Houndan Lee
So I think we have common ground here, which is. I think the future is specialized rollups. Rollups are extremely specialized in doing one specific thing. And I think in that configuration, I think Ethereum is unstoppable because you have this sort of neutrality of Ethereum, you have legitimacy.
- [62:50]
Justin Bons
It's extremely fragmented. If the Ethereum can't do general purpose itself.
- [62:54]
Interjector
Right.
- [62:55]
Justin Bons
Because now I transact over here, I lend over here, I exchange over there. That sounds terrible to me. That's not a good solution.
- [63:03]
Houndan Lee
Yeah. Justin, I think, I think you exaggerate many of these difficulties. I think certainly, certainly the sort of.
- [63:11]
Justin Bons
Where we agree, everyone can look at what I'm saying. I'm literally not exaggerating.
- [63:15]
Laura Shin
Well, you know, I would be interested to hear, Justin, so. Yeah. Because like, it feels like when I listen to how what he's talking about is almost like this app chain, sort of like Cosmos ish world. So Justin, in your ideal world, how would these issues be resolved?
- [63:34]
Justin Bons
Well, in my ideal world, which does exist on some blockchains, I suppose, it's the L1. And actually this is, I mean, my, my ideal world would basically be Ethereum pre2022, maybe as well. Like, I was a big Ethereum fan as well.
- [63:48]
Interjector
Right.
- [63:48]
Justin Bons
But back when I was a Solana critic and an Ethereum supporter, right. Like, Ethereum was the largest investment in my fund since like, like 2016 when we founded it. Okay. So it's like I do have that background and I do have that, like, appreciation. So like, in my ideal world, that, that is what I'm talking about. If you're an application, build on the L1, you can be seamlessly composed. Let me just answer the question. Build on the L1, have a seamlessly composable system that is maximally secure, maximally decentralized, and maximally permissionless.
- [64:19]
Laura Shin
Because I actually think he straight offs go away posable. Explain what that looks like.
- [64:24]
Justin Bons
Yeah. So for example, if I have my wallet, my phantom wallet, if, if I may, since Stripe hasn't released their wallet yet, or Stripe Wallet, let's go Stripe wallet. To stick with the theme, okay? And then I say I want to swap. I want to swap an asset. So I click swap. And then a fraction of a second later, it's confirmed, it's finalized, I paid a fraction of a cent, and it's, it's extremely reliable. Like, that's how it works today.
- [64:51]
Interjector
Right.
- [64:51]
Justin Bons
And I can do that across all use cases, pay a tiny fee. Without congestion of extreme reliability. That's what Ethereum is competing with. And it can't actually compete on the UX level. It can't compete on the level of security, it can't compete on the level of economics as I've already covered. It can't compete on many levels. Yeah, sorry, I'll let you respond here.
- [65:10]
Laura Shin
So you. So in your. So but just to understand, so in your world you think every single use case exists just on the L1, it's all interoperable and it will scale indefinitely without, you know.
- [65:23]
Justin Bons
Well, because. Yes, because demand is not infinite.
- [65:25]
Interjector
Right.
- [65:25]
Justin Bons
And we keep increasing capacity. So my belief is that we can actually demand will stay below capacity and we just keep increasing capacity over time. As soon as we hit capacity, then we hit capacity.
- [65:35]
Interjector
Right.
- [65:35]
Justin Bons
But I do think there will be, there's some room for L2s in my world. I will say like I would say even in my ideal.
- [65:44]
Laura Shin
Network extensions, you.
- [65:46]
Justin Bons
Can call them whatever you want but.
- [65:48]
Houndan Lee
But like the concentration camp. Yeah, yeah, yeah.
- [65:54]
Justin Bons
Or stripe one day.
- [65:57]
Houndan Lee
Here you go. Let's talk about one aspect of this which is I think you're advancing this vision of like general purpose, right? Yes. Like a chain, it's general purpose, can do everything. It's going to be fantastic.
- [66:07]
Justin Bons
Yes, can do everything. And that makes it the best.
- [66:09]
Houndan Lee
Have you worked, have you worked at one of these chain foundations that are attempting to do this?
- [66:14]
Justin Bons
I mean I've been a cryptocurrency full time cryptocurrency for over a decade with a team of researchers. Totally.
- [66:20]
Houndan Lee
But have you been in one of these foundations before?
- [66:22]
Justin Bons
If I. What do you mean by be inside exactly?
- [66:26]
Houndan Lee
Oh, you know, so like I was in one of these foundations, right. Where the mandate at the time was look, we're going to do everything, do defi, do NFTs, something, AI, something payments to Mouse. Mouse. I was there and I've spoken to colleagues in other analogous organizations. All the best, right? These are all the. I won't name specific names but like any name you, you know, like this is the dynamic. The dynamic is when you try to focus on 20 things you end up focusing on nothing at all. And when you try to focus 20 things there are also trade offs between these things. Let me give you one very.
- [67:06]
Justin Bons
Let me just.
- [67:06]
Houndan Lee
Okay, I let you finish. You're gonna have to let me finish. Let me edge. Let me give you one like one very basic example, right? Where are there trade offs across these use cases? Let's think about just one. The dominant product market fade in most chains Today is defi, right? So what are the political dynamics inside each of these foundations? For a defi guy, the defi guy is the big deal guy, right? Like this is the big deal guy. This, this is where the bread is butter and let's say until very recently, stablecoins, who cares, right? Two years ago, nobody cares about stablecoins. There's a payments guy payments the fuck, right? And what is it that these two guys want? What is the defi guy gold on, probably tbl likely, right? That's the measure of success, defi. And what is the metric that this payment guy might be trying to go for? Like, I guess, payment flows. What might be really good for payment flows? Well, one thing you could do is you could subsidize on off ramps using your token. It's like a very obvious thing to do, right? If you sit down for five minutes, you think, like, how might I help the stablecoin flows move more and faster? Let's pay. But the on off ramps are cheaper, so transaction is cheaper. Let's say you're the payment guy. You take this to foundation. What do you think happens? What happens is they laugh you out of the room because the defi guy is like, have you lost your mind? You want me to pay tokens to move assets off the chain? Like, you're an idiot. Let's never talk about this again. And it dies. So there are these like, very harsh trade offs across use cases. And if you attempt to do everything, you will do nothing particularly well. And I think that's why you're seeing things trend the way that they do. But this is somehow bullish for Solana, right?
- [68:52]
Justin Bons
Justin, if I may respond. Yeah, no, because you're. Out of all the things you said, you're probably the most wrong about this particular point. Because this whole idea that a core team needs to focus on lending or stable coins, that's bs And I already told you why. Because Ethereum's big innovation was programmability. All the core team needs to do is focus on scalability, decentralization and latency, right? Like they just need to make the L1 blockchain. They should have created as much fast, cheap and decentralized block space as they can. Hold on, hold on, hold on. They don't need to be distracted by all these use cases. This argument is kind of nonsense because the core team should just be focused on making the L1 better. Part of the problem with Ethereum is that they are distracted with other things such as L2s, like let private parties build L2s. They should focus on making the L1 better. That should be the mandate of any core development team in my view. And that's just really goes wrong.
- [69:47]
Houndan Lee
You managed to, you managed to mangle the L2 history as well as mangle like the existing dynamics in these chain foundations.
- [69:54]
Justin Bons
Like, I mean don't just think, why am I mangling?
- [69:57]
Houndan Lee
I'm about to, I'm about to justify it. Well, Justin, so is it your view that all the folks employed by the Salana foundation currently working on stablecoins should be fired?
- [70:07]
Justin Bons
I understand this question, to be honest.
- [70:13]
Houndan Lee
You said the L1 team should not be thinking about this stuff, right? Like theum evented permissionlessness and they don't need to think about any of those.
- [70:20]
Justin Bons
Has been hyper focused on building out the L1. So yeah, I think that's great. Ethereum hasn't. I don't know where you're going with.
- [70:27]
Houndan Lee
You're not answering the question, Justin.
- [70:29]
Laura Shin
Yeah, because Justin, you were saying they should only focus on.
- [70:32]
Justin Bons
It's some guy by the Ethereum foundation who, I don't understand his job and I don't know who he is and I don't know what he does.
- [70:38]
Houndan Lee
We're not talking Ethereum Foundation.
- [70:43]
Justin Bons
Foundation, yeah. You're asking me should this random guy that I don't know, should he be fired?
- [70:47]
Laura Shin
Well, because yeah, you were saying focus exclusively kind of on like technical scaling type stuff and not like the business applications. And so Hanan's just pointing out that the foundation does still also, you know, employ people who are looking at like specific applications.
- [71:04]
Justin Bons
And he's putting up in terms of BD, he's, he's just correct in terms of BD, you're actually 100 correct. But I'm talking about developmental focus, right? Like that the developmental focus needs to be on the L1. So this idea that to have a generalized L1 that therefore the developers get too distracted, they have to do stablecoin DeFi is simply not true because all they need to focus on is the box space itself.
- [71:29]
Houndan Lee
I didn't make an engineering argument. There are certainly engineering arguments. I, I gave you one that's actually just focused on incentives, which is like the simplest one, right? I think the one that's least bullshitty and like everybody can evaluate for themselves whether it's real or not. I think, look, I obviously, I don't think you're advocating for mass firings at the Solana foundation. So what I'm pushing you to recognize is that the reality of running a chain is more than maybe the Talking points you assert here, the reality of running a chain involves thinking through bd, thinking through who are the customers we want to face.
- [72:01]
Justin Bons
Just so we don't miss each other. I was. One second, just, just clarify.
- [72:07]
Houndan Lee
One second. Yeah, of course, of course. So I'm about to make that connection. So like how, how should tech be built? There ought to be a feedback loop, right? It's very, I mean it's. This is non controversial, right? You, you have an idea. No matter how brilliant you are, the idea may not be correct. It has to be tested by the market. Try to sell it. If nobody wants it, give it up, try something else. And so you need to run this feedback loop, this product iteration feedback loop. That is very difficult to do if you're attempting to do it across 20 things. And all 20 many of these 20 things conflict with each other. And then there are the political dynamics on top of that.
- [72:44]
Justin Bons
You should not. Development.
- [72:46]
Interjector
Right?
- [72:47]
Laura Shin
No, but he, what he's saying is that like you're saying they should just focus on the tech in a vacuum and he's saying if you're going to build something, you should talk to your users.
- [72:57]
Justin Bons
No, no, no, no, no. I think we're missing. No, no, we're missing each other a bit.
- [73:02]
Houndan Lee
What?
- [73:02]
Justin Bons
I mean, no, no, like I agree with that. That's why we're missing each other and we're good. And that's why I like things like Solana that are more user focused.
- [73:09]
Interjector
Right.
- [73:10]
Justin Bons
That provide a bit of ux.
- [73:12]
Laura Shin
Okay, okay, okay, you guys, we're so far over time and so now I'm going to give you literally one minute each to address just one other new trend that we're seeing. That it fits in this space that I'm just curious to hear your thoughts on and how it fits in this argument that you guys are having. Obviously this protocol native stablecoin thing has taken off. You know, we obviously have this huge competition about USDH which yeah, that was bonkers in 5 million different ways. You know, Mega Eth also announced its own. So this just adds to like the kind of fragmentation thing. And, and anyway, so I'm just curious to hear your thoughts on like why are we seeing this trend? Like is it, you know, do you feel like it fits in your position of like what you think would say is a good thing or, or do you think it's a bad thing and how. Nan, you go first, you have literally one minute and Justin, you have one.
- [74:01]
Houndan Lee
Minute and then we're gonna wrap shout out to Max. Congrats for winning I'll see you in Singapore. I think, I think these are. It's the market's getting sorted out. I think, you know, sort of it's not clear where the power lies and I think in different situations the power crews to a different layer. In the case of hyperliquid, I think it's very clear that the power is accruing at the hyperliquid level. And I think in different cases this power is occurring in different ways and you're seeing this kind of explosion of different variations of this game being played out. Chains are launching stables. Some stables are a chain like some wallets have a stable psps, might have a stable psp, might have chain. The roll up guys are trying to sell chains.
- [74:45]
Laura Shin
Are we just going to have this huge number of 5 million different stablecoins?
- [74:50]
Houndan Lee
I think long term a lot of this will get shaken out and I think that long term, I'm talking my own book here. I think long term the value crew is sort of dominant substrate where most of this stuff happens and I think that's how.
- [75:05]
Laura Shin
So you're one minute's up.
- [75:07]
Podcast Announcer
Go ahead, Justin.
- [75:07]
Justin Bons
All right, sure. I mean it's wonderful to see all this competition. I will just say, I mean I haven't followed the whole hype thing that quite closely, but it very much seemed like a very much an insider choice that they chose native markets over Paxos. But that's just my offhand opinion here.
- [75:24]
Houndan Lee
Just seems like it's actually not only.
- [75:26]
Laura Shin
Your opinion, but anyway.
- [75:28]
Justin Bons
Yeah, I've noticed. Yeah, yeah. So to me that was a little bit wild and it's kind of that example of like decentralization theater a little bit like, yeah, sure they had a vote, but in reality they're all buddies and they're just voting for their buddy.
- [75:39]
Interjector
Right.
- [75:39]
Justin Bons
Like, let's be honest here. Which is fine, I suppose. I mean it's their right to vote the way they want to, but.
- [75:45]
Laura Shin
So do you think that's the future for every chain to have their own stable coin and we just have this plethora of stable coins. Do you think this is a good trend or a bad trend?
- [75:55]
Justin Bons
If you're asking me, either or I would say good trend because I like free markets and I like innovation. I think I also agree that eventually this gets shaken out because the liquidity tends to concentrate around a few. But I think we're now during a bit of an explosion of new stable coins and that's great. I think, I think let the best products win. In terms you also mentioned by the way putting a stable coin like natively in the L1 or is that misunderstand? I think you're referring more to the hype thing there, right?
- [76:24]
Interjector
Yeah.
- [76:24]
Justin Bons
So yeah, I do think there are some dangers there if you implement it that way. But like I do. Yeah, but I do think like the, the decent that it was a decentralized vote or at least I know it was very, very concentrated. But I do think that's at least a very like good thing. And I think we need to do more of that in this space because I think giving stakeholders a voice is actually, I think that's really what this movement should also be more about. Because if it's all closed room decisions, then like what then then the whole chain kind of becomes a fast in a way.
- [76:54]
Laura Shin
All right you guys, this was very fun. It was wild.
- [76:58]
Podcast Announcer
It was a really good debate that.
- [77:00]
Laura Shin
You know, there were yeah good points made on both sides. So thanks to everybody for joining us. To learn more about stablecoins alt L1s, L2s, you can check the show notes at a time. And until then, thanks everyone and we.
- [77:14]
Podcast Announcer
Will catch you all later. Thanks for tuning in to the weekly news recap. Let's begin. SEC Approves faster path for crypto ETFs the US securities and Exchange Commission has approved new generic listing standards that will streamline the approval process for cryptocurrency exchange traded funds. The change allows asset managers to launch products more quickly if the underlying crypto has regulated futures trading for at least six months or trades on an exchange. Within the Intermarket Surveillance Group, which monitors for market manipulation, SEC Chairman Paul Atkins said this approval helps to maximize investor choice and foster innovation by streamlining the listing process and reducing barriers. The rule approved by the NYSE, NASDAQ and CBOA reduces the maximum approval timeline from 240 days to as few as 75. Baseway's native token launch the Coinbase backed Ethereum layer 2 is exploring the creation of a native network token after reaching key growth milestones at the Basecamp 2025 summit, head of Ecosystem Jesse Pollock said, we're in the early phases of exploration and don't have any specifics to share around timing, design or governance. Coinbase CEO Brian Armstrong added that a token could be a great tool for decentralization and expanding opportunities for developers. The announcement marks a shift from last year when Base dismissed the idea of token issuance. The network NOW reports nearly 1 million daily active addresses and more than 5 billion in total value, locked, second only to Arbitrum, speaking on Unchained analyst Ryan Yee said conservatively.
- [78:55]
Laura Shin
I think it could come out at.
- [78:56]
Podcast Announcer
A $20 billion FDV and probably run to 40 or 50, noting the potential for acquisitions and growth campaigns fueled by token resources. Native Markets wins bid to issue Hyper Liquids stablecoin Native Markets has been selected to launch Hyper Liquids first Native stablecoin following a high profile bidding contest that drew proposals from major players including Paxos, Bitgo, Frax and Athena. The team secured a 2/3 supermajority of staked hype tokens, Hyperliquid's governance asset, and will begin a test phase for USDH minting and redemptions within days, according to co founder Max Feige. The stablecoin will be issued on Hyperliquid's HYPEREVM network with reserves backed by cash and US Treasuries. Management will be split between BlackRock for off chain assets and Superstate for on chain reserves, with yield directed toward hype, buybacks and distribution growth. Kalshi partners with Solana and Base as prediction markets chase billions prediction platform Kalshi is joining forces with Solana and Coinbase's Base network to launch a new ecosystem hub aimed at funding builders, traders and creators through grants. We're backing off chain and on chain innovation, the company wrote on X, promoting the initiative as trading volumes climb closer to rival Polymarket. Kalshi recorded $875 million in August compared to Polymarket's $1 billion, according to the block. At the same time, both platforms are drawing investor attention. Reports suggest Polymarket is weighing fresh financing that could value the company at 9 to $10 billion, a sharp increase from the $1 billion valuation it secured earlier this year. Kalshi, backed by Paradigm, is also said to be close to raising funds at a $5 billion valuation, more than double its level from a few months ago. With the CFTC recently clearing Polymarket to relaunch in the US Competition in prediction markets is intensifying. Binance in talks to end DOJ compliance monitor early Binance is reportedly negotiating with the U.S. department of justice to end the three year independent compliance monitor imposed under its $4.3 billion billion settlement agreement, according to people familiar with the talks. The monitor, run by Forensic Risk alliance, was required after Binance admitted to violations of Anti Money Laundering rules and the Bank Secrecy act in 2023. If approved, the deal would ease federal oversight of the world's largest crypto exchange, though Binance would still need to adopt stricter reporting requirements and remains subject to a separate monitor from the Treasury Department's Financial Crimes Enforcement Network. The DOJ has recently ended monitor ships for several companies as part of a broader review of the practice. News of the potential change sent Binance's BNB token to a record high of over $1,000. Former CEO Changpeng Czao also updated his X profile to read simply Binance, removing the label X. Binance Circle expands to Hyperliquid Circle has launched a native version of its USDC stablecoin on the decentralized exchange HyperLiquid. The rollout includes Circle's upgraded cross chain transfer protocol on Hyper Liquid's Hyper evm, aimed at making USDC transfers more efficient across multiple blockchains. Alongside the launch, Circle confirmed an investment in Hyperliquid's native hype token with on chain data showing a $4.6 million purchase. The company is also weighing a role as a validator on the network. Circle wrote on X this launch is the first step toward enabling USDC deposits into Hyperliquids, Spot and Perpetuals exchange on Hypercore. If the platform shifts its $5.9 billion in USDC collateral into USDH, Circle could see a reduction of roughly $200 million in annual reserve income. Ethereum foundation creates AI team the Ethereum foundation has launched a new artificial intelligence unit known as the DAI Team, to integrate AI with decentralized infrastructure. Led by Ethereum researcher David Krappis, the group aims to position Ethereum as the settlement and coordination layer for autonomous agents that can transact and cooperate without intermediaries. A key focus will be advancing ERC 8004, a proposed standard that would allow AI agents to verify identity and reputation on chain, giving users more transparency when interacting with bots, Krappus said. The more intelligent agents transact, the more they need a neutral base layer for value and reputation. In related news, Google unveiled a new AI to AI payment system that includes stablecoin support, developed in partnership with Coinbase and over 60 other firms to power seamless transactions between autonomous digital agents. Monero hit by 18 block reorg the privacy focused blockchain suffered an unusual network disruption on September 14 when 18 recently processed blocks of transactions were replaced by a competing chain. The incident effectively erased more than 100 transactions and left them unconfirmed for about 40 minutes. Reorganizations or reorgs happen when two versions of a blockchain compete and the network switches to the longer chain. This can undo payments that users thought were final, raising the risk of double spending. Monero researchers advised users to wait longer than the usual 10 confirmations before treating transactions as secure. Some community members accused the mining group QUBIC of exploiting the system with a tactic called selfish mining, but its founder denied responsibility. Unchained is produced by Laura Shin, with help from Matt Pilchard, Juan Aranovic, Margaret Curia and Pam Majumdar. The weekly recap was written by Juan Aranovic and edited by Stephen Ehrlich.
- [84:54]
Laura Shin
Thanks for listening.