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The Chopping Block: Code, Chaos & Consequences — What the Balancer Hack and Rollback Debates Mean for Crypto’s Future - Ep. 941
00:59:08
The Chopping Block breaks down DeFi’s Black Friday carnage — Balancer v2 hacked, chains frozen, Stream Finance vaporized — and why even “safe” yield isn’t safe at all.
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- [00:00]
Steve
It does feel like the kind of one, two punch of reminding people that nothing in crypto is risk free. Right. We've kind of gotten a little bit fast and loose with the idea of like, oh, it's like the quote unquote, risk free rate in crypto. It's like there's no risk free rate in crypto because there's always risk, not a dividend.
- [00:15]
Tarun
It's a tale of two kwan.
- [00:17]
Steve
Now your losses are on someone else's balance.
- [00:19]
Tom
Generally speaking, airdrops are kind of pointless anyways.
- [00:22]
Steve
Unnamed trading firms who are very involved.
- [00:25]
Tarun
Polec eth is the ultimate possibility.
- [00:27]
Robert
Defi protocols are the antidote to this problem.
- [00:31]
Steve
Hello, everybody. Welcome to the shopping block. Every couple of weeks, the four of us get together and give the industry insider's perspective on the crypto topics of the day. So quick intros. First you got Tom the defi maven and master of memes.
- [00:40]
Tom
Hello, everyone.
- [00:42]
Steve
Next we got Robert, the crypto connoisseur and czar of superstate.
- [00:45]
Robert
Good evening.
- [00:47]
Steve
Next we've got Tarun, the giga brain and grand poobah at Gauntlet.
- [00:50]
Tarun
Yo.
- [00:51]
Steve
And I'm Steve, the head hype man at Dragonfly. We're early stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life Advice. Please see ShoppingBlock XYZ for more disclosures. So, boys, the people are hurting. It is a really rough market out there. It's been a few days in a row of just complete carnage in the markets. And Tarun, you were telling us that you hate doing these kinds of shows. Why do you hate doing these kinds of shows? The people need to hear from you, Tarun. Why do you not want to bring them your love and your energy?
- [01:20]
Robert
This is the show where Tarun is the expert on everything that's happening.
- [01:23]
Steve
I think people most need to hear from us.
- [01:25]
Tarun
I think. I wish it was recorded tomorrow, not today. Why would you know one day. I need the one day of a little less craziness.
- [01:36]
Steve
Okay, give us just a sense of what your day. Because today we're recording this on Tuesday. Tuesday, massive market wipeout. So I have to imagine there's a lot of stuff going on for you at Gauntlet. Give us a sense of what has today been like for you.
- [01:49]
Tarun
Well, I think a lot of it was just the market kind of repricing risk very quickly when they realized certain things were, like, less solid than they thought. I think the main, you know, I think we're going to talk about Both the balancer exploit and the stream finance exploit. And the interesting thing is they both had the same impact on users liquidity, but like for very opposite reasons. And I think the, the balancer one was like, it kind of shattered people's long term beliefs and the Stream 1 shattered people's short term beliefs. But they both kind of had the same outcome. So I won't front, I won't front run before you explain all of this. But I think the thing is they compounded, right? It's like people's near term optimism and their long term optimism both broke in a span of two days. That's kind of how I would say that. And that just means people were pulling money from the market aggressively. Now I think the other thing is like if you think about 2022, Luna was like April, May, Three Arrows was like around like a few weeks after at Celsius, like a month after or whatever. And then ftx was like 3 or 4 months after dominoes. So it's kind of. Yeah, I might be slightly off, sorry, long day. But like something like that. Like that. Right. So there, there's a gap and of course, you know, a little under a month ago was the, the big liquidation day. And I think this is the repercussions of that. Yeah, it was just. Yeah, the repercussions of that in some sense. So yeah, with that I'll let you introduce the stories because I don't want to, because. Well, save this for after.
- [03:31]
Steve
Yes, yes, yes. Before we get into the micro, I want to start with just the macro picture because I think it's important to just understand Bitcoin now has dropped below 100k. It's now sitting around 100k. It's holding onto that level, but it went below to 98k at one point during the day. Ether of course has drawn down, you know, just a month ago it was barely touching 5k, now it's at 3300. So ether is just getting destroyed. The Dats are doing terribly massive sell offs across all alts. So many alts are down 50, 60, 70% over the last month and a half. So it's been a bloodbath across the market. And what I'm seeing more than anything is this sense of confused capitulation is that I don't think people think that the environment has gotten that much worse in the last month and a half. I don't people think that the fundamentals have gotten that much worse in the last month and a half, but just the confidence in this market has Seemingly totally eroded in the span of just a month and a half. And so many people are speculating, okay, why is this happening all of a sudden? To Tarun's point? Some people are speculating that on October 10th now deemed 10:10 also called Black Friday, the single largest day of crypto liquidations in history. We talked about on the show that perhaps there was some destruction that took place on that day that was not disclosed and that we're now finally seeing. Right. So whether it was loans that came due or people getting positions getting unwound or paid back or something, one of the constant rumors that keep circulating is that different market makers are dead. So people are claiming that Wintermute's dead. People are claiming Cellini's dead. People are claiming that all these people are kind of zombies walking around, dead men walking. And there's one really bizarre drama that's been circulating or this rumor that's been circulating that that Wintermute is trying to sue Binance. I started going super viral and freaking out. Tons of people in the market later. And Evgeny both publicly denied that this was happening. But there was. There's just like all this craziness going.
- [05:30]
Tarun
Around and people are very willing to believe maybe we should have had him as a guest. That would have been funny this week.
- [05:36]
Steve
He's. He's been, he's been very active in trying to dispel the drama that's maybe next around it.
- [05:43]
Tarun
Maybe he's a good guy.
- [05:44]
Steve
Look, I mean, I'm obviously, I'm open to having him back on. He's a great. He's always an interesting person to chat about in markets like this. But people want a story. I think that's what I'm seeing most of all. People want an explanation of like what the fuck happened. And if there's like, okay, this guy, these two titans are fighting or they're. This guy exploded and his guts and internals are flying everywhere. But we don't really have a story yet, right?
- [06:12]
Robert
Well, I mean, everyone sees the on chain and transparent things that occurred, especially going back to the beginning of October, which is prices crashed massively. Somebody was a massive 4 seller. Ugly things happened all at once. And we've been left wondering for basically a month now, who did those extremely ugly things happen to and where did it originate from? And so I think that's like this, the catalyst of a lot of these rumors, which is like everyone suspects a market maker had something horrific happen. It must have been a big market maker, right? It knocked down the price of pretty much all alts like 90% right. Really bad things happened and there still has not been an explanation or somebody fessing up to it or somebody taking blame or credit for it. And so, you know, I think that's just why people are still scratching their heads and like playing parlor games of trying to figure out like, oh, is it Wintermute that got screwed by Binance and now they're suing finance or is it, you know, you know, Captain Mustard in the parlor with the candlestick? You know, like we're all just guessing.
- [07:13]
Steve
Yeah, the, the unfortunate thing is that the only Market maker that crypto Twitter seems to know is Wintermute. So every story about Market Maker is always about Wintermute, never anybody else. And now we do know there are like, it's been disclosed actually that there were some big market makers on Hyper Liquid who definitely blew up, who definitely got ADL'd or lost tons and tons of money. But these are not like the big market players, you know, sort of the people who are providing all liquidity on Binance and on, you know, OkX and Bybit and so on there. We still don't know. Now to be clear, it's pretty normal in a market blow up that you don't actually know who got hurt straight away. Even in traditional finance, it takes time for these things to become clear. And of course everyone's incentive is to say, I'm fine. Nothing, nothing bad happened. Especially as they're going and trying to unwind positions, they're trying to go get loans or they're trying, you know, whatever it is they need to paper over liquidity or to try to, you know, make, make best of a bad situation. But I mean, the other side of this is the sentiment among builders right now is really terrible. And I'm seeing it also extending to new token launches. So huge amounts of bearishness about Monad, about Mega Eth. I'm seeing it also starting to happen to some of the new perp dexs is that people are just like, why would anything new ever launch? Why would anything good ever happen again in crypto? Like, everything's cooked. All this is worthless. So I'm seeing that sentiment really starting to come back in again. How, how are you guys, how, how are you guys talking to founders about this moment? Tarun, as a, as a founder, you were saying that a lot of people are approaching you asking you about this.
- [08:44]
Tarun
Well, I just think.
- [08:45]
Steve
What do you tell people?
- [08:46]
Tarun
I just think it's like, I feel like in, in the last seven years I've seen more than seven blow ups So I guess, like, you know, that's. That's kind of like a. A reason. I think, like, the main thing is a. A lot of people are not used to the very fast nature of how sentiment flips in crypto. I think, like, especially in other fields, you know, when sentiment flips, it takes a long time, whereas in crypto it can, like, compound really quickly. And I think this reminds me a little bit of like, NFT people in 2022, right? Like, they. They probably first ever use Ethereum or solana in like, April 21 or March 21, and then a year later they're just like, oh, the world is over. Right? And I feel like this cycle's equivalent of that is like, maybe the meme coin people maybe kind of like people who are kind of got in because of the dats and stayed for the chain afterwards. I don't know how many of those people really exist, but, like, there's certainly people on. There's people on crypto Twitter who love, like, pontificating about the impact of DATs on. On usage. But whoever they are, there's. They're just kind of like, they mainly came out of a wealth effect and then just kind of like counted their eggs before they hatched and then suddenly kind of got mad. But in reality, like, you know, a lot of crypto companies that have succeeded, have succeeded because they've just kind of been cockroaches. And, you know, I know Jamie Dimon used the word cockroach in the other way recently, which is kind of a duel to the crypto thing where he said, like, you know, and like a bunch of bank stocks went down on him saying this, but he was like, oh, yeah. You know, like, regarding a bunch of private credit failures that happened recently, he was like, oh, yeah. And like, you know, when the cockroaches come out, there's more, always more than one. But I, I'm using cockroach in the other sense, which is, you know, survival.
- [10:45]
Steve
Survive the holocaust right now.
- [10:47]
Tarun
Yeah, yeah, yeah, exactly. And I think the main thing to remember is survival always makes you stronger. Giving up at the bottom is always the easiest thing to do, but oftentimes the most hindsight regret. And so I think that's kind of what I just tell people is like, hey, it's bad, but things encrypted. Just as fast as things crash, things can go back. For instance, I could totally see the sentiment flipping by December, like this. This sort of feels a little bit. We like almost compressed cycle compared to compressed, like doom cycle compared to Last.
- [11:24]
Steve
Time where, like last time Trading advice?
- [11:28]
Tarun
It's not trading advice. I'm just saying it feels more compressed. You know we were having, I was bringing up the timelines of the, the, the FTX kind of wipeout and the weird thing is it feels like the wipeout this time was like less retail users who got locked in and more market makers. Right? It's like that, that's sort of the weird difference is like it seems like it. Yes, retail took losses, but they took losses in dats and meme coins and stuff. And then somehow the like leverage traders really took the losses this time. So there's something kind of different qualitatively and I just don't, I don't, I haven't, I need to sleep for a night. And then I can probably have a more divine answer for you.
- [12:10]
Tom
I mean I more or less agree with Tarun, which is like, I think this is like an excessive, unnecessary level of bearishness. Like historically, whenever there's been a market crash was it like the things that you know that hurt you? It's things that you know that just ain't so. And there's always some built up leverage in the system no one knew about, no one saw and it's like oh, then all the cockroaches come out and that's ultimately what causes this kind of cascade across any sort of market failure through history. Like 1010 felt like this very weird, like wonkish, idiosyncratic kind of event where it was like oh, people explaining like why ADL's were having it happening and like oh, it was like this specific asset on this specific exchange. But it wasn't like oh, there was this thing that was all this hidden up leverage built up in the system that no one sort of knew about. And then again if you. And obviously there are also like some macro headwinds like okay, gold's been selling off and like, you know, people maybe are expecting more cuts or more dovish fed. Like there are obviously some minor headwinds but when you zoom out, I think so many of the products and companies in the space that don't just rely on pure reflexivity and sort of selling infrastructure to people in a gold rush or relying totally on volatility to sort of sell trading platforms and trading instruments, those products are doing really well. I mean I think someone posted today on Dune the rain volume chart where investor in rain and it keeps going up into the right because people want to keep using stablecoins and paying for stablecoins and great, that has Nothing to do with anything else going on in the space. So I think you get, like in many industries, people kind of get tracked and they think, this is the playbook I'm going to follow. And if I follow this playbook, I am ordained to have success. And I think this is kind of a wake up call that you can't just sort of follow a particular playbook and be guaranteed success.
- [13:54]
Steve
I'd say the weird thing about this market, so if you remember 2022, when you had this sort of parade of terribles of terror collapsing, three arrows collapsing and then eventually culminating in FTX collapsing in 2022, it really felt like a morality tale. Right? It really felt like everything bad that happened there was almost like some sort of human attributable sin that you could point to and say, okay, this is where we've fallen. This is sort of the error of our ways. You can, you can point out who did some sin.
- [14:24]
Robert
Was the sin greed? Because like terror was the origin of the dominoes in a big way. So is the original S. People got too greedy with hubris.
- [14:35]
Tom
Like the cockiest people were the ones who blew up.
- [14:38]
Tarun
Yeah, the hubris. Hubris was.
- [14:39]
Steve
Exactly, exactly.
- [14:41]
Tarun
Bill Clinton was at a crypto conference.
- [14:44]
Steve
That's right, that's right.
- [14:44]
Tarun
That's true.
- [14:45]
Robert
Bill Clinton was just bumping spf.
- [14:47]
Tarun
Yeah, exactly.
- [14:48]
Steve
It's like the meta narrative is that we got ahead of our skis, we believed in the impossible and we allowed ourselves to play God. And then you can't just rebuild a dollar without any collateral in it. Da da da da da. So everything sort of felt like it was our fault. Right. And there was some clear morality tell behind it. I don't see anybody in this market downturn being like, oh, tut, I told you so. Clearly you guys shouldn't have done this. And this is the reason why everything went so wrong. It's like maybe you can say, okay, there was too much leverage or oh, there's so much looping, there's too much unseriousness about the risk of some of these assets. And people have talked about that. But the things that blew up are not really the things that were necessarily at the heart of these things. Right. It's not like, oh, Athena blew up and there's your hubris. Told you so. You guys shouldn't have been relying on this. It was more like, oh, this random xusd. I didn't even know what XUSD was before hearing that it blew up.
- [15:45]
Robert
I heard about it.
- [15:45]
Tom
These are tiny.
- [15:46]
Robert
Yeah, I heard about it like a Month ago and I think it's not worth studying.
- [15:50]
Steve
Right, right, exactly. We'll talk about the microstructure of what exactly went down. But the same thing is adl. It's like we all learned a new term or not all of us, but for many people it's like there's a term that I just heard called auto deleveraging which is like what is that? And we have to explain this very complex micro market minutiae. This is why things went so badly. A lot of it feels in character very different than what 2022 felt like. 2022 felt much more like an indictment of the industry of risk practices, of the unrealistic expectations that we had in the industry. The thing that's so striking now is that fundamentals are actually really strong. You know, on chain metrics look really good. Stablecoin adoption continues to grow. That's like the big meta narrative that is, that is exciting everybody. It's continuing to happen. There's no inflation of, of narrative that's going on there. Like it's real, all of it's real. And like people are using these chains.
- [16:48]
Tarun
I mean, I'll give you an example. I went to a fintech conference last week, Money20 20 in Vegas and like literally every person there was saying the word stablecoin. I'm pretty sure 90% of them had never even used one nor totally knew what the word meant. But there was so much hype that all fintechs are going to suddenly become cheaper cost wise because they're going to have to. They can get rid of their correspondent banks and like use stablecoins instead. They'll become stablecoin. They all become. Yeah, yeah. I think like this is maybe an episode in the future of like do stablecoin issuers and neobanks just become the same thing? Eventually that, but like that was kind of, that's, that's kind of the pitch that they're all making to you. And that stuff is so divorced from. I don't even think those people knew what a perpetual future was like most.
- [17:33]
Steve
But even stuff is not divorced. Right? Like look at defi. Defi volumes and like perpetual, like they're working, it's huge. They're making tons of money.
- [17:41]
Tarun
Last year was shaking his head. But like I didn't realize that fintech is more of a scam than like a lot of other fucking industries. Like I met payment providers. There were vertical payment providers for like some particular field and most of it just turned out to be like there's some monopolist who like charges you to send them a bill and like, you pay this payment provider to pay, send the bill on your behalf instead of you sending yourself because there's some weird fee or regulatory thing. And I was like, this is just such a scam. Like, if it was on chain, there would be, this would never happen.
- [18:12]
Steve
That's true. So I mean, look, crypto, Crypto is like actually better. We're like actually delivering the better experience now relative to a lot of the stuff that we've been talking about for so many years. And now we can finally bring the receipts of like, oh, look, yeah, I'm.
- [18:25]
Tarun
Just saying, like this conference was going somewhere where none of these people had ever really. Maybe they had like a phantom wallet and bought a meme coin or used a stable coin once. But they like, the perpetual future was like, definitely not in their vocabulary. They were definitely very like, you know, didn't know anything about crypto, but were like saying the word stablecoin 500 times in a sentence.
- [18:46]
Steve
Totally, totally. So the thing that strikes me and probably what I'd reflect to people who are listening, who are feeling dejected or unmotivated or worried about their prospects in the industry. Like Tarun said, this shit happens all the time. If you're in crypto long enough, you will see the vicissitudes of fast money in, fast money out. The long term trend of crypto is obviously going the right way. I've never felt more vindicated about my decision to be like, yo, I really think crypto is going to be a big deal. When I got in this industry seven years ago, it's so obvious now compared to what it was like when the four of us came into this industry. This industry was a joke. When we first came into this industry, the four of us were people who were derided by our friends. They thought we were making bad life choices. They thought we were throwing our careers in the trash. And now it's like, oh, okay, Bitcoin's below 100k. Oh my God, it's flat on the year. Oh, no.
- [19:40]
Tarun
I remember getting sent a lot of emojis of, of, of like clown faces on March 12, 2020, when Bitcoin hit like 3K for like the one hour.
- [19:52]
Steve
During COVID you were getting clown emojis.
- [19:54]
Tarun
From your friends for like, for leaving, for leaving, for leaving.
- [19:59]
Robert
100 was down like 30.
- [20:00]
Tarun
Yeah, I know, I know, I know.
- [20:02]
Steve
That's what people would do is like bullying you. When Covid was like, I'm saying sorry down the world economy, that's sad.
- [20:07]
Tarun
Well, because they were just kind of like, oh, you quit for this? That's kind of the.
- [20:12]
Steve
All right, damn.
- [20:14]
Tarun
I think. Whereas now it's like less of that. I mean, I also just feel like people's attention spans are also like, lower now.
- [20:21]
Robert
You laugh at them though, because you've built multiple successful endeavors in the crypto ecosystem between Gauntlet and Robot Ventures.
- [20:28]
Tarun
Yeah, I know. It's not, it's not that I care.
- [20:30]
Steve
About the shot in Ford emojis now and like the.
- [20:32]
Tarun
No, no, no. But I, I do think there's kind of this thing where like it is a lower risk thing in some weird ways to go into crypto full time than it used to be. And like, that seems to be marching up, like the risk level keeps marching.
- [20:47]
Steve
That is true. That is true. I think if you came into this industry and you were like, hey, crypto's really safe now. You've got all these big companies in the game, you know, it's like super prestigious and, you know, whatever. Maybe, maybe it's a very different experience for those people because they didn't feel like they were taking a career risk and now they're feeling a bit punched in the teeth having this crazy volatility going on and prices whipsawing and so on. And I feel that honestly my number one advice would be if you're working in a startup or you're yourself building a startup, you're a founder, just keep going. Ignore prices, check prices less often. It doesn't really matter. Doesn't really affect what you should be doing day to day. Unless you're curating defi vaults, in which case you're competing with tarun for the most part. What's going on in week to week price action just does not affect your decision making. It probably doesn't mean you should tighten your belt. Probably doesn't mean you should be more cautious around spend because markets are going to equilibriate and venture financing and all that other stuff, it's going to come in line with public market prices because it always does take some time, but it eventually does. The main thing is just that the fundamentals are there for pretty much everything. There's nothing I've changed my mind about in the last two months about the trajectory of crypto. Still bullish on defi, still bullish on prediction markets, still bullish on stablecoins. All the stuff that I believed before, I still believe all of it. So as an investor, my thesis has not changed one iota because of what happened the last couple Months.
- [22:14]
Tarun
I mean, actually, I think the prediction market thing is the funny thing, because I honestly today didn't open the news all day to look at the mayoral election. I literally only looked at polymarket all day.
- [22:25]
Steve
Right, right.
- [22:26]
Tarun
And like, I feel like, you know, I just think about like December 2024, where everyone's like, oh, prediction markets are all dead. No one's going to use them again. And then I was like, I feel like there's something also about this time versus 2022, where like, you didn't feel like there was some moral bad that occurred, you know, like. Or like moral or ethical bad. It feels like people got drunk gambling more than like morality, if that makes sense. Like, at least that's kind. That's kind. May. Maybe that's like, may. Maybe that's you. You could view that as a form of jadedness or a form of just like. Well, this is like, comparatively, there's. It's not really that. That crazy.
- [23:07]
Steve
Right? Okay, so let's talk micro. So one of the big stories this week has been the hack of Balancer. So Balancer, it's a multidimensional automated market maker. So it's basically this automated way that you can trade different assets in one big combined pool on chain. Now, the thing that got exploited the contract was Balancer V2. It's actually not the newest version of the contract. It's quite an old contract. It's an og, very og, very OG contract, but it's been very highly vetted. Four to kajillion times. One of these things that people did not assume that there were going to be any issues with it because of how many eyeballs have been on this contract. It's part of the reason why it has rattled so many people. So in total, over $120 million was stolen out of Balancer across multiple chains. So this is one of these contracts that's been forked and remixed and put onto multiple different assets, or, sorry, put on multiple different chains with many, many different assets. So on ETH 70 million was hacked. Base 3.9 million, Polygon 120,000, Arbitrum 6 million, Sonic 3.4 million, OP300K and Barachain, which was, I think the single largest outside of Ethereum, had $12.8 million. Now, different chains had different responses to this hack. So one of the things that we saw was that many chains, especially some of these smaller chains, they ended up freezing the attacker in place in some way in order to prevent them from running off of the funds. So bear chain actually shut down the entire chain. So Bear Chain was relatively unique because Bear Chain has some of these defi primitives baked into the chain itself as first party primitives. One of those is a Balancer fork. And because of how deeply it was going to affect everything within the Bear Chain ecosystem, they shut down the chain and within 24 hours, I believe they froze the attacker's account, moved the funds from the attacker into some protocol vault, and then, you know, whatever. They kind of. They kind of turned everything back on, try to minimize user harm. So Bear Chain is now back up and running, but they completely shut down the chain. You saw Sonic actually froze the attacker's account and zeroed out his balance. Polygon, it was reported that Polygon started censoring the attacker to prevent them from being able to move with the funds, but the chain continued operating as normal. So you had a lot of different things happening from these chains that people started discussing about, hey, what does this mean for decentralization? What does it mean for Code is law? This idea that you should be following the code, you should not be having these abnormal state transitions just because something bad happened. And the big thing that scared people was the size of the hack. But also how many people assume that this is one of the most battle tested contracts in Defi. Now, you know, it's not Uniswap, obviously way, way, way smaller than something like Uniswap, which is the majority of how spot trades on Chain. But Balancer is an og and having a protocol like this gets hacked really shook a lot of people's confidence. That, you know, is the core primitives that we have behind Defi. Are they as battle tested and robust as we once thought that they were? You know, I want, I want to covet all of this with saying, you know, again, Balancer V2 much, much smaller than Balancer V3 and a very old contract. So this is not where the majority of value or the majority of work in Balancer has gone. But it's still a big blow in Defi to have an event like this of so much funds getting hacked and lost. So over 70 million remains with these attackers and TBD on whether or not there's going to be any recovery for the people who are lping into Balancer V2. So reactions on the Balancer hack?
- [26:29]
Robert
Yeah, this one, this one stings a bit. Just because this is code that's been around a long time, that has seen a lot of eyeballs. Right? This is not untested. This is not something that people had expectations that it was beta, that it was like, use at your own risk, that had 50,000% APYs because no one knew how it worked yet. This is an old system and it just goes to show how complicated solidity can be, how complicated the administration of different protocols can be. I think more than anything, this should be a wake up call to the newbies, not the users, but the developers and the founders that haven't really gone through the scary times of protocol security as much as a lot of people used to. If it can happen, the Balancer can happen to you. And so please, everyone who writes code that manages money and assets, please, please, please, please, please, please, please learn from Balancer and that this is a team that always was doing it right and they still had a vulnerability that was exploited aggressively.
- [27:34]
Steve
And so, so part of what was scary about this exploit, so two things. One was that this is like, this is not like Edge Casey code, right? This is like the eth pool. Yeah, the eth pool is the one that got exploited.
- [27:46]
Robert
The heart of Balancer.
- [27:47]
Steve
Exactly. It's like the heart of Balancer. It's not like, oh, in this very, very weird situation, there was like an Edge case that allowed it to get exploited. The second thing that's also kind of scary about this is the attacker. You can see in the smart contract in the transactions that there were transaction logs that the hack outputted that were like, starting attack, breaking invariant. Invariant ended. Now entering into second phase of attack, which really looks like Vibe coding. It's like the kind of thing an AI would output. Like, we've never seen an attack that has logs like this before, which implies to many people that they think this might have been the first Vibe coded defi hack.
- [28:24]
Robert
Possibly.
- [28:25]
Steve
Now it's not. It's not.
- [28:26]
Tarun
It could also. Okay, so, so there's, there's two parts to this. I feel like there's one that's slightly more sensationalized, which is like the. There is full discovery, like, of the exploit via, you know, just like querying a language model repeatedly. But then there's a question of, like, if I have an idea for an exploit, having it write the code and improve it. And the latter actually still requires the person who is asking it to be like an expert in the contract code and have enough of an understanding of the behavior of the system. Whereas the former is like, anyone could do it, right? And it could be like, hey, find me an exploitant balancer, right? Like, that's your query, right? That's sort of the doomsday case and all. I'm Saying is I think everyone jumped to that and I don't think it's like 100%.
- [29:10]
Steve
We don't know. Nobody's. We don't know, we don't know iterations of GPT5Pro to see if it could find a bug and Balancer.
- [29:17]
Tarun
Yeah. Well, I will say a lot of people since this have been trying to figure out if they could doomsday, one shot, doomsday. And I think I have seen a lot of failed attempts at trying to replicate from that. So I think like there is a little bit of not saying it won't happen in a year. I just think like we're, we're kind of a little before the horizon.
- [29:40]
Steve
Yeah. So overall thoughts on the hacked room?
- [29:42]
Tarun
I mean, kind of crazy because it's such a highly looked after contract. Like you know, had tons of audits, tons of people integrated in their consensus. Like the Barachain case, right. Where it's like basically touching the validator and set. Kind of viewed as sort of a work workhorse in the sense that like Uniswap V2, like philosophically I would say Balancer V2 went a direction that was like Uniswap after V2, Uniswap V2 was like, hey, we're actually going to make LPs actively manage. And I think there was a while where people were really like, no, no, no, no. We really want to have full passive liquidity where like someone can LP and not have to constantly be adapting their strategy. Now I think the world has obviously moved past that. But at that time Balancer was like, we're going to keep supporting that. And Balancer V2 was like the workhorse contract for like tokens with a low float that people were launching. And as an alternative to Uniswap V2, it would have a few new features like better reward distribution and better curves for pegged assets. Or approximately not pegged is the wrong word, but assets that tend to trade close to a target, like a staking derivative. And so I think it was kind of this workhorse contract that I think a lot of people have a lot of respect for it because it survived and it did have billions of dollars in overtime. And I think a testament to how trusted it was, was one of the largest losers of funds who lost around 42 million of the 70 million was a very famous address in Ethereum history which is the seven sisters or seven siblings addresses. And they're sort of like on chain have these billion dollar addresses or near billion dollar addresses and multiple of them and they have survived every crash, right? Like when Maker was crashing on March 12, 2020, they were the ones bidding in the MKR auction to make Maker solvent. They bought like they were the largest buyer, right? So since the Ethic ico, I think they have been kind of one of the largest liquidity providers in defi period. And they even got hacked and they've avoided a ton of stuff. They've basically been untouched. And the fact that they got hit is a sign that even the people who've been providing liquidity in Ethereum before Uniswap, like Ethic, ico, Ether Delta era, even those people got hit on this, which is sort of. That's where the psychological damage, I think, to what Robert was saying is true is it was. There are a lot of people who really did not think that this was possible.
- [32:31]
Steve
So I think what a lot of this market mayhem in addition to this, the Balancer hack, it does feel like the kind of one, two punch of reminding people that nothing in crypto is risk free, right? We've kind of gotten a little bit fast and loose with the idea of like, oh, it's like the quote unquote, risk free rate in crypto. It's like there's no risk free rate in crypto because there's always risk. And whatever you're doing, you're touching a smart contract. You've got capital on chain, you're in some delta neutral position. We'll talk about the notion of being delta neutral shortly. All this stuff, it does compound. Now that's not to say that, okay, the right answer is, okay, say fuck it to all of this and just go put your money into treasuries or even to just, okay, hold pure eth, don't even stake it and just lock it up in cold storage. But it does mean that, hey, this stuff is risky. It's still frontier technology. Now that being said, I do want to contextualize it. This is not all of Balancer. This is not even all of Balancer V2. This was only the Balancer V2 pools that had ETH in it. So if you had three non native assets in your balancer pool, it was fine, is my understanding. So this was like an edge case within Balancer. Not an edge case, but one case within Balancer v2. Balancer v3, totally fine, doesn't have this bug. So it's unfortunate. But it's one thing that we see with software, right? It's like we saw this with Spectrum Meltdown. We keep seeing things like this. We saw this OpenSSL is that these things that we consider to be the backbones of technology, we find bugs with them routinely. And so I think this is actually one of these things that I actually do increasingly have confidence that AI is going to improve rather than make worse. Is that, yeah, okay, it's possible that AI maybe somebody vibe coded an attack, right. And this is I think a wake up call to people is that, okay, let's get some money together and let's go get fucking GPT5 or Claude or whatever to run through every major contract and just throw money at the problem of trying to defend and make sure that there are no vulnerabilities that we can find. Because if an attacker can find these, then so can defenders and defenders ultimately have more money than attackers do. So if it really is just a function of everybody points their lasers at these contracts, they point their AIs and their AIs do the work, then it's purely a function of who's spending more money. And if attackers have less money than defenders, which in general they do, then I think actually what that spells in the long run these attacks are actually going to get less frequent. And that's what we've been seeing over time, is that over time the number of hacks in DeFi have been going down, down, down. With every passing year more and more we see private key vulnerabilities of people getting spear phished, people basically getting tricked into leaking their private keys or something like that, as opposed to the smart contracts themselves getting attacked. That's why this was so surprising. But it's also in line with the trend, is that this happens less and less and less frequently with every passing year.
- [35:23]
Tarun
I mean the other thing that was interesting is the attacker was very diligent about OPSEC on making sure they were very hard to identify. I think they spent many months dripping very tiny amounts of eth from tornado cash to do it.
- [35:40]
Robert
And that's not a very vive coded thing.
- [35:43]
Tarun
Exactly. Yeah, yeah. This is why I think like if they vibe coded to like check their code or whatever, that's why I'm not like I don't believe this. Like oh, search break balancer was the end all thing.
- [35:56]
Robert
Jarvis, please write the code.
- [35:59]
Tarun
I'm not saying that won't happen in like a year for. I'm just saying I think right now we're just like a little boring.
- [36:04]
Steve
It is probably already happened. I would be my guess. I almost certainly it's happened before.
- [36:09]
Tarun
Yeah.
- [36:09]
Tom
But I think probably for something that's maybe more obvious versus ho Having this kind of esoteric rounding component or attack. I mean, I'm more or less agree with everything. I didn't really love the kind of finger wagging from some of the ETH heads about some of these new chains that froze accounts or did rollbacks. I'm like, dude, this is like obviously ETH did it. And I'm like, what's the alternative? For a lot of these chains that really have no community, it's like just let the kind of community get fucked. Especially for something like bear chain, like you said, that's so integral to the chain itself. I do worry that as always, it's not so much a legal precedent but more opening themselves up to civil suits of like, hey, you froze this account, you recovered these funds, why don't you do it for that? And I think that's always kind of the concern.
- [36:56]
Tarun
You do remember after the wormhole hack, the Oasis thing, right, where the jump sued in Britain or something and then was able to recover from a multisig that was owned by. So like there is precedent that can happen.
- [37:10]
Steve
What was this? I don't remember this.
- [37:13]
Tom
Yeah, this was like 2022. There was some upgrade, there was control by some multisig and they basically legally forced them to. I don't remember the specifics but I do remember there was some sort of court order in the UK to have. There was be some, some contract upgrade in order to like get some of the funds. You remember this? It was from Oasis which was like the original maker.
- [37:35]
Steve
Now it's ringing about. But what, what did they actually, what did they actually force them to do to like unfreeze their funds or something.
- [37:43]
Tarun
To freeze the funds of the attacker. I think, I think it was the other way.
- [37:47]
Steve
The funds of the attack.
- [37:48]
Tarun
Yeah, I thought it was the other way. They like they basically attacker was hanging out on Oasis. I have no clue why. I think they were just like this is posting liquidity.
- [37:57]
Steve
It was a weird, it was a.
- [37:59]
Tarun
Very we thing and it definitely involved like monitoring the attacker 247 and then finding the time they slipped up. Like it definitely wasn't. This was like clearly active investment. This was like the crypto on chain equivalent of like hiring a PI to tail someone until you found them at their most vulnerable point. That was sort of how I viewed that coincident somehow. I. Anyway, my point is there, there are these precedents that that could happen. On the other hand, isn't the point of an L2 that like I know people will say that it's not and there will be. I'm sure there will be some L2 that maybe one day has full sequencer, has full kind of avoidance of sensor really. But a lot of L2 censor. Right. They all have these kind of escape hatch things like base certainly does. And it's very explicit in the documentation. And so I don't know, I think the world can exist in two worlds. The real question though is like, do you need more than a handful of fully censorship resistant chains and then a lot of these censoring ones that are like, for users who don't really know like what they're getting and like it.
- [39:09]
Steve
Might be true that you have the rollbacks.
- [39:11]
Tarun
Yeah. It might just be that there's kind of this racemic thing where there's like the true censorship resistance and people with a lot of money maybe prefer that even if they have the risk, they're willing to tolerate that. And then there's the kind of I want more censorship because like, I don't really understand the thing and I would rather have the validators kind of do something for me. Right. Like I think I could see the world going. Like, I know philosophically, seven years ago I would have slapped myself for saying that. But like I kind of can see the world going that way. Like I. Tom's point earlier, like, I just don't see. I don't think we're undoing that.
- [39:49]
Steve
Yeah, it's a little bit Winston Churchill quote is that. What is it? If you're young and you're not an idealist, you have no heart and if you're old and you're not a conservative, you have no brain. Yes.
- [40:01]
Tarun
I kind of hate, I hate it. But there's truth to that statement.
- [40:06]
Steve
Yeah. Robert, what's your take on the freezing, rollbacks, all that stuff in response to a hack?
- [40:13]
Robert
Well, I don't put this in the Winston Churchill context. I feel like we've also talked about this on the show many times in the past.
- [40:19]
Tarun
Right.
- [40:20]
Robert
I think there's a conflict that arises between decentralization and centralization. I think over time the overall sentiment of communities is moving away from decentralization and is becoming much more tolerant of centralization and rollbacks in general. I think they, and I'm paraphrasing previous shows we've done here, but like the cypherpunk ethos that created cryptographic assets in the first place has mostly been forgotten by this generation of people that are trading meme coins, of people that are using applications without reading the code, of people that are just diving in because it's fun. It's profitable, it's the place to be. And so I think in general the pendulum is swinging away from relentless decentralization and towards pro rollback. And I just think that's a generational shift and I think it's how most people have grown up in general with the traditional financial markets and traditional banking system and all of this where it's like, oh, if bad things happen, undo the bad things, right? Like, why not undo the bad things without seeing the philosophy that takes the other side of this, which is like, oh, you want completely censorship resistant things? They can't change that. If you can't undo a bad thing, you can't do a bad thing as well, right? And so I just think this is a generational shift that's happening and it's happening in favor of pro rollback more and more and more and more. And if you ask this question in like five years, I think the overwhelming consensus is going to be rollback, fix the problem.
- [41:56]
Steve
So I actually don't agree that the cause like all these chains faced a ton of criticism yesterday when the hack came down. And so I think that sense that rollbacks are really bad and they're embarrassing and they're like violating some core spirit of crypto, I think that's all still there. The reality I think is that they're just way more small startup chains than there were five years ago. So this wasn't really an option where it's like five years ago there was nothing anywhere to bother rolling back except on Ethereum there was just no TVL anywhere, there was nothing else going on. And on Ethereum you just couldn't do a rollback. It was just not economically feasible. So to my mind, I think it might be a little bit true that people have come to crypto in the last few years. They're just less cypherpunky and they care less about those original ideals. I think people realize pullbacks are really disruptive. So turning off bear chain for a day, why is that bad? Just to name the obvious is that, well, the market moved a ton in the last day. It just literally has been melting down in the last 24 hours. And so when you freeze all of those lending markets and those AMMs and all these other things, that's really bad creates a lot of damage when you turn it back on and everything's mispriced and all of a sudden there's this huge spurt of MEV and a bunch of people get screwed. So I think people understand these are really bad things to do. And they're extremely disruptive and painful, especially when you do them in a kind of slipshod way. And I was making this point as I was arguing with some people online. Obviously Ethereum did this back in the day with the DAO hack. And in the sense it's like, okay, this is the original sin of Ethereum, obviously we'd never do that again. Now that everybody thinks that it was such a terrible thing that Ethereum did this, there is a hack so big that Ethereum would do that again. Now that hack would have to be enormously large. Right?
- [43:41]
Tarun
How much people talk about this, how much.
- [43:43]
Steve
Right, people talk about this with eigenlayer, is that if.
- [43:46]
Tarun
How much do you do? I'm just like, I'm curious.
- [43:49]
Steve
I think it was. If it was because you wrote a.
- [43:51]
Tarun
Blog post about this a long time ago. Here's how you. I'm curious how it's changed.
- [43:56]
Steve
I think that if a, if even a medium single digit portion of the amount of ETH in existence got hacked all at once, that Ethereum would contemplate.
- [44:06]
Tarun
A rollback single day.
- [44:07]
Steve
I think if you had 5% of eth, I think if you had 5% of eth hacked in one go, I think that probably Ethereum would contemplate a rollback.
- [44:15]
Robert
Sorry, but like, what, How. I mean, like, how would 5% even be hacked in the first place? Does it have to be like root to the validation process somehow?
- [44:22]
Steve
Potentially, yeah. Let's say, let's say some big vulnerabilities.
- [44:26]
Tarun
I think the easiest version, lst. LST contract compromise compromised might be, yeah.
- [44:30]
Steve
LSTC compromise, something like this. I don't know how much. I don't think Uniswap has that much TVL anymore. But you can imagine if there was enough TVL in Uniswap, I think Uniswap would be considered like sort of too big to fail.
- [44:41]
Tarun
Within Ethereum, a DAT address, a dad private key gets hacked. Actually that is much more feasible. That's actually kind of not that crazy.
- [44:49]
Robert
Custodians, they're all using.
- [44:52]
Tarun
Yeah, I'm just saying, like, maybe they do some. You know, I could kind of.
- [44:56]
Steve
I think there is a hack so large that Ethereum contemplate rollback still today. Now obviously much harder for that to happen. Not that many places where that much ETH does sit. Whereas for Bear Chain, it's like, you know, it's a new ecosystem. So it's pretty easy to find 5% of the TVL in one contract and just say, hey, we can't allow this to cascade and like break everything so there's less to lose when you're early on in ecosystem.
- [45:18]
Tarun
Right.
- [45:18]
Steve
So that threshold changes over time. To me, I think actually, like, it's in a way kind of timely in US Politics because there's all this talk about, what's it called, Posse comitatus, which is the rule that you're not allowed to use the military for civilian policing unless it's wartime, civil war type situation. But there's a threshold and that threshold changes over time. And it's up to the discretion of both the executive and the courts to decide what that threshold is of a degree of chaos or disruption or rebellion that rises to the level that actually it's okay for the President to go and call, you know, the armed forces into domestic policing or into domestic conflict. And we understand that there's a threshold. It's a threshold question, it's not a binary question. That threshold changes as you become more mature. But in the very early days of the American Republic, it was pretty, you know, there were rebellion, you know, Shays, rebellion popped up or this thing happened. It's like, hey, go get the Minutemen and bring them out and let's shut this thing down because they don't like the new constitution or whatever. So I think this is part of the continuum of ecosystem maturing. What we're seeing is a lot of not that mature ecosystems for whom it's a relatively low cost for them to freeze an address and right a wrong for many people in that ecosystem. And it's worth more to them than it is to the strength and the stability of that institution of, hey, we never do rollbacks, we never freeze accounts. So I think it's reasonable for each chain to make that determination for themselves. If Ethereum did a rollback over 70 million getting hacked, I'd be like, what the fuck are you doing? That's insane. You absolutely should not do that. Right. But I think it's a continuum, not a binary.
- [46:58]
Tarun
So one thing I will say is for those who are feeling dismayed if the cypherpunk stuff is gone, I do feel like the privacy chains are the kind of last bastion of the no rollback world in the sense that privacy chains with smart contracts are going to be very hard, if not impossible effectively to ever do this on. And I agree, I think that is.
- [47:22]
Steve
Do you remember the ZCASH hard fork when they.
- [47:24]
Tarun
No, no, for sure, because it was a validator bug. But I mean, imagine the validator code is correct, but the application layer, it's going to be very hard to actually conceivably roll back on, on a, on a hack there. And I think if you do really want to look forward like 10 years to what will persist. Cypherpunk values. I don't think it's the current class of chains. It kind of has to be the privacy chains.
- [47:53]
Steve
Like I could totally is holding onto its cyberpunk values.
- [47:56]
Tarun
No, I think it will to some extent. I think like obviously things like this MEV case completely held on cyberpunk value. It has, it has, but I think it's, there's like a limit to what it can do. Right. Like there are some parts of its infrastructure that will always have some kind of issues effectively. Right. Like the MEV thing is like effectively a form of like, hey, we're going extra consensus, but we're able to kind of like concentrate some, some power in some ways. Right. So, so, so there's, there's a sense in which I do really think the privacy chains have the last bastion and I think retrofitting privacy is very hard. You kind of have to, it has to be at Genesis because like adding at the end kind of as we've seen with a lot of chains, I've tried to add privacy features and get them adopted. It's kind of, kind of not been as, as good as successful.
- [48:51]
Steve
So we're running low on time and I want to make sure we cover this last story because I know it touches what you guys do at Gauntlet. So there was one of the other stories that came out today was the collapse of a protocol called Stream Finance. So Stream Finance, I'm probably going to butcher this, but I'm trying my best to explain. So Stream Finance is one of these like on chain strategy aggregator, curator type protocols. And one of their strategies, or maybe the main strategy was a protocol called xusd which basically did some kind of levered looping strategy that was off chain. I guess it wasn't totally transparent what they were doing. But there's some firm. What's their name? I can't find the name. Whatever. There was some firm that was responsible for actually doing the off chain strategy that XUSD was using to pay out yield on the quote unquote stablecoin. But it's really more like just basically a tokenized hedge fund. And apparently they lost $93 million through a quote unquote external fund manager. This is not an on chain exploit. This is more like they were doing something crazy and that crazy thing they were doing blew up and they lost a ton of money. And they only later told the people on chain that hey, guess what? Your money's not there.
- [49:58]
Robert
So it's argument number one for the genius act. Like I can't think of a better example than something that's like, I don't.
- [50:06]
Steve
Even know that you could call this a stable coin. Agree.
- [50:08]
Robert
This is the problem. You have people calling things stablecoins where it's basically a hedge fund and you call it a stablecoin.
- [50:17]
Steve
Yes. Now that being said, there's no real time redemptions or subscriptions into this thing, so it doesn't even feel like a stablecoin. There's a redemption queue and you get daily liquidity. So it really does feel like a hedge fund. But it ended up causing a lot of bad debt on other positions that were exposed to Stream Finance. So I think across Euler Silo Morpho There was about 284 million of total debt that was connected to Stream Finance. So there were some vaults that were exposed. A bunch of people got mad at a lot of these curators who had exposure to Stream. Now one of the big curators that had got a kudos for having no exposure to XUSD was Gauntlet Tarun. You guys, good job on avoiding xusd. But any reflections, Tarun, in the time that we have left on the learnings here from xusd, and again, in absolute terms, not a huge thing relative to some of the other curations and vaults and things that are out there, there's a relatively small fry. But the fact that it blew up and kind of slinked into the market with like, hey, guess what? We lost a bunch of money. And we're now telling you presumably they probably lost this money in October. That's what everyone's guessing. We don't actually know yet. They intrigued in some law firm that's going to go in and investigate this protocol. But yeah, reflections.
- [51:32]
Tarun
So I think every credit cycle has this like start. It's like a bear market. You start at a very higher quality credit and then it kind of grows and then all of a sudden there's like new lenders or new collateral that's like slightly lower quality. And then you know, that grows because there's overall market beta. And then, and then at some point, you know, one of those goes bust. And I think the interesting thing is the parallels in the normal economy, so unlike when Celsius and Blockfi happened, we didn't see a lot of these blow ups in traditional finance contemporaneously. But in crypto right now, like this, this thing looks Like a private credit fund in some sense. Right. It's like lending to a trading strategy that's off chain that turned out to not have like proof of reserves or proof of assets. Right. Like so and so. Then that sort of is a little bit like this first brands blow up or this telecom thing that BlackRock and others kind of invested in recently. And it feels like this is also correlated with an end of a credit cycle for both crypto and non crypto. But that's more a macro version of this. I think the interesting thing is vault started as a very precise definition. There was a notion of how do I unbundle protocols like AAVE and compound, where the supply side and borrow side could be separate so that you have more risk control over how they're matched, how like loans are priced and whether certain types of loans should be priced kind of higher. And I think over time, especially as the market got a little bit frothy, then we started have points farming vaults where you would put money in and you would not really get any real yield. You would only get kind of synthetic yield that you would then be able to kind of trade on Pendle. And that's your kind of like, okay, now what's the real credit worthiness of this thing? Then the next thing you got, and then people would take leverage on that. So you're effectively in some sense barring against a synthetic yield that may or may not come if the protocol doesn't launch a token. Okay, that's like a worsening of credit quality, but not so crazy in the sense that protocols like Pendle actually make it so that you do have a real price. It just might not have that much liquidity. And then you kind of moved into, okay, let's start having more of these RWA strategies, real world asset strategies that people take leverage on. And I think there's a wide spectrum of ways to do those. Right. Robert can also talk about this. There's ways to do that safely and there's ways to do that unsafely. Not so different from the do you want a tokenized stock to only be a derivative or do you want a tokenized stock to actually correspond to a real stock? There's a kind of similar thing. I think then the RWA part of the spectrum started getting pushed out. People started being like, hey, let me take this tokenized thing that I don't really know the cash flows of, but it's promising me X yield and borrowing. And I think that sort of is the direction that happened in a lot of protocols that are lending against this. A lot of the leverage in the system came from these lending vaults where people deposit a lending vault. The lending vault would buy this. Well technically they called it a stablecoin but it really was sort of tokenized hedge fund like XDOC when they sort of created they now that protocol had more money to go earn yield with. And I think that cycle crashed much more quickly than we saw last time with Celsius where people didn't really didn't know for many years. Years I guess technically. But yeah, it was sort of weird to see the form factor it came in. It was almost like this like you hit a lot of opaque leverage in things that were called sort of rwa like assets like tokenized funds off chain. And I think inevitably that does often happen. And I think there's sort of this interesting thing in that Asset management on chain comes in a lot of shapes and forms and sizes. And I think if you don't understand where the yield comes from, you are likely lending to the yield.
- [55:54]
Robert
You are the yield.
- [55:56]
Steve
So do you think the credit cycle is over? Is that what I'm interpreting you to say?
- [56:00]
Tarun
Not exactly. I actually think the interesting thing is compared to last cycle. So if I look at defi lending sort of 2020, 2021 and you guys can obviously give addendums. But a lot of the borrowing behavior was for yield farming. Like I have a bunch of eth, I want to borrow whatever asset I need to go yield farm at a certain rate. There was less of looping like strategies that are like the repo market in traditional finance where I have a yield bearing asset, say it's earning 5% yield and I can borrow against the asset for 1%. So maybe I could get 9% yield by borrowing against it 1x getting to 2x leverage and then paying a 1% borrow cost. So the repo market and the bond market is exactly like this. And remember 2020 and 2021 was pre Ethereum the merge. And so being pre merged there was no natural yield on eth. The only place where you kind of had yield was sol. And it was sort of at that time more nascent market than it is now where it's much more mature. And so there wasn't this demand to get leverage on yield bearing assets. And I think what changed between the 2021 cycle and this cycle is that there were way more yield bearing assets. They're just staking assets, defi assets hype. There's tons of yield bearing assets now and people want leverage on that. And so the market is bifurcated between people just borrowing against their asset for a loan like they need to use on chain and people borrowing to just lever yield. And those two parts of the market sometimes split and sometimes merge. And I think right now we have them kind of split but I inevitably kind of see a natural thing where their demand starts crossing again and again. This doesn't feel like a blow up like the way after three arrows or after FTX where like everything in the world was deep at the same time like there's, there's kind of a lot more stability than that time. Now I'm not saying it's good, I'm just trying to say I don't think it's totally over because in the same way you saw the perps market rebound pretty quickly, I kind of expect the same thing here on the looping side.
- [58:16]
Steve
We're pulling up on time but I don't want to end on such a sour note. Robert, give us reason to be optimistic about credit lending and everything going on in the on chain economy.
- [58:27]
Robert
Yeah, I mean usually we bounce back pretty fast after all these bad things.
- [58:32]
Tarun
Right.
- [58:32]
Robert
There's a lot of times when bad things have happened and everyone licks their wounds and they think a little bit more carefully and they get back at it and we return to growth and new building and fun. So don't get discouraged.
- [58:48]
Steve
Beautiful. Beautiful. Thank you, Robert.
- [58:51]
Tarun
Daddy.
- [58:52]
Steve
Okay, that is it. Thank you everybody. We'll be back next week. Keep your spirits up until next time.