Coinbase’s Secret Master Plan | Roundup

Transcript

foreign [Applause] s do you have currently open right now currently I only have three I only have three actually I'm not a big tab guy I don't understand the like fomo over having tab like I use this tool called pocket actually so like if I have something that I just want to like come back and visit I'll just pocket it and you know what I find is like to you hey 98 of the things I think I'll come back to I don't come back to it so yeah I think that's probably most like the the tab hoarders we'll call them they don't actually ever go back to the tabs no it's just an illusion of like you're

getting [ __ ] done but you're really not I signed up for a crypto podcast you're getting a uh you're getting a personal productivity a lecture tabs how are we doing partner how are we doing doing all right doing all right doesn't I was just saying I'm busy it doesn't feel like a bear Market certainly wasn't this active and just came back this week and it's just been just been really active I I don't remember being like this in 2019. 2019 was like dead right now it's not there yeah this is uh man Jesse had I love Jesse's quote in that podcast I mean obviously we'll talk a lot about coinbase here but he's like feels like there's a bear Market in

prices but on-chain activity is an all-time high and I just you know like creativity all-time hike yeah that's part of the episode so much stuff going on right now it's nuts there's like so much stuff happening in crypto it's so funny because I went out to dinner with um a couple friends like one's a doctor one works at Uber um one like a lot of them work in like web 2 like like SAS companies and like the Ubers of the world one's a doctor none of them think that anything's happening in crypto they're like yeah I mean we own some Bitcoin and some Ethan like I don't know I feel like nothing really happens in crypto anymore I was like oh man I am living in a totally different world than you guys okay

that's them right get worried when like the Uber drivers and like these Tech Bros start asking about crypto and which nfts to buy that's like a signal that we're toppy but like I think we just said something really cool in that episode of Jesse which was like even if you're even if you're in crypto I think there will come a moment where we just click it just clicks and we reach kind of this really big inflection point escape velocity whatever term you want to use and I think he's right in the sense that like we all of us here UI and everyone in this generation kind of live through the the rise of smartphones where it didn't exist and then it kind of went in like in a matter of years like it just penetrated that two-thirds of the world's population and it just exploded

a whole category of verticals like you have the app boom and bust everyone was building apps and then you had you went from like shitty like internet super expensive to LTE we've come such a long way and like massive empires have been built like you know what I mean Ubers of the world that like without a smartphone like it wasn't like really kind of a viable business model but somehow like as I was thinking about that like living through that didn't feel super impactful like it felt Inc incremental right and then it compounded to then this thing called the smartphone iPhone you can't live without you now have trouble sleeping without you get anxiety if you don't look at it like

constantly and I think we're like it's pretty impressive that that happened because you know we talk a lot about in this in podcasts about how transformational we think the crypto is going to be but I wonder like at what point are you gonna pinch yourself when that actually happens and I don't think we're far from that we've talked a lot about account abstraction um you know the activity in l2s it does feel like like I was reading this great book it's called Web Design actually let me pull it up let's see one sec oh the the big one to the big bulky book yes kind of like an illustrated book

honestly one of my how the internet happened and then this book unreal like you just go through like the first versions of websites to like it goes all the way to today which is like 2018 but still like I just went back to it and I didn't even remember like using like mini clip and on some of these websites and like it's really good to look back and like see how these things evolved the bottom line is as these things really transformational Paradigm shifts whatever you want to call them happen when you're living in the moment even though you're part of the industry when you're living and breathing it it doesn't feel like how you describe it app post mortem like it was like the biggest thing that could

probably will happen at this generation so anyways yeah I agree man I mean there's this great uh yeah so you talk about uh the mobile phone revolutions like one of the crazy things I think from that era was the iPhone introduced this infrastructure that then enabled you to build these apps and then the apps pushed developers and Founders to then build better infrastructure and um like you know you couldn't have Uber until you and Lyft until you had a map inside your pocket and you couldn't have you know Instagram and Snapchat until you had a phone inside your pocket and but when someone saw the phone in in a

camera they didn't think Snapchat and Instagram so uh it's cool like what better infrastructure can do and obviously I mean I basically want to spend a lot of this podcast talking about coinbase but uh and and that podcast that we did and uh your thoughts on that podcast and just their announcement over their L2 but there's actually this great I wanna I'll link to this piece by USB that I always reference which is the myth of the infrastructure phase which um they talk about the relationship between like apps and infrastructure so they and they track it back 50 years so they're like first there were there was messaging 1970 and then like email in 1972 that then inspired infrastructure that made it easier to have broad consumer adoption

of those apps of messaging an email and that was like The Ether like ethernet in the mid 70s uh TCP uh isps like internet service providers in the mid 70s then there's another wave of apps which were like web portals like AOL and Prodigy and then the web portals inspired us to build infrastructure like search engines and web browsers then there's another way of apps like Amazon which inspired us to build PHP and JavaScript and Java and you think about Facebook like we I brought up react the coding language like Facebook created react because they were um my understanding is that they were having trouble handling the ad Marketplace they were building so that was an app that required a better coding language of infrastructure so anyways I

think you see this playing out and I think that ties in nicely with this coinbase announcement which is one of the biggest pieces of uh of infrastructure news that I think we've ever seen in in crypto so we did this episode with um with Justin will with their team um and if you guys haven't listened to that I'd really recommend you guys listen to that before you listen to this and it should be the last episode on on Empire that that just came out yesterday basically I'll give I'll give the summary and then I really want to hear your thoughts so the summary is that coinbase just announced their own Layer Two um the L2 is called base it's built on the op stack which is different than optimism the op stack is open source code that powers optimism uh coinbase met the optimism team while they're

working on eip4844 which is the Proto dang sharding uh proposal and coinbase is actually joining as the second core Dev team working on the op stack uh which I think is really cool they're to they're doing that to ensure that the op stack is a publicly as a public good for available for everyone uh to everyone for free and they're also going to contribute 20 of sequencer Revenue to fund public goods which is just like you know I tip the cap to coinbase from a competition lens it's super interesting because bass is actually going to compete with optimism and all the l2s eventually they see everything integrating together but not yet um so like I think you heard me on the podcast like it was a little tough for me to wrap my head around because optimism is helping coinbase here but

they're also competing with them which is just like I don't know just smiling at that after we stopped recording I was like it's very crypto um it was interesting to hear like before the L2 they debated a couple of other ideas like they discussed building their own L1 in 2018 and 2020 they discussed like building an ad Network they discussed um building this like identity product so it's cool to hear them go through like this product you know years of like product um uh feedback and stuff and finally they landed on this L2 I think it's called Uh bass so bass is the name of it it's going to be permissionless from day one it's in testnet right now mainnet come soon they're launching an ecosystem fund as well to incentivize development um and then from the business model perspective it seems kind of like you

know there's two business models here fees and Mev they're not enabling Mev right now transactions are just gonna come in in the order that they they come into the sequencer but so it seems kind of like a fee based business model right now and no token um but anyways I just like very excited that they're building this and would like to hear your thoughts on it yeah I think your summer is extremely well it was just good to have decimal which I but then met previously and really smart guys and um to be fair I gained a much bigger appreciation of the role that coinbase is playing in the industry like they're synonymous with with buying crypto in the US and I'll give them credit for

that I when I was buying my crypto back in the day super early it was coinbase and I think they played a huge role um irrespective of what Jim Cramer and the stock is done I think it it you'd be an idiot not to recognize the role that they've done as an on-ramp as a primary on-ramp for Americans mostly and most of like other in the UK and other places like incredible role that they they played um and it's also pretty remarkable that the company is investing and putting a lot of resources into contributing to the ecosystem um and Jesse kept mentioning like the the the plan the long-term Vision

three-part Vision that Brian laid out like in 2017 which it it sounds like they're entering the third one which is like creating like the App Store and the everything app for this web3 and becoming the Gateway for this web3 world for for everyone really one of the things that we talked about in the episode that I think is still TBD is like how does this actually what does this actually mean for coinbase business um you know and and they I think they pointed out right rightfully so that historically like they built the coinbase wallet which is a great product and the question was like are you basically cannibalizing your existing business by building all these things that encourage users to leave the

coinbase kind of centralized solution I think he came up with a great answer which I actually believe I don't think is like Kool-Aid which is look at the end of the day it's just a small pie right now that our primary goal to drive value is to bring like hundreds of millions billions of people into space and if you don't do that none of this matters realistically and I think they it's great to see that the organization like that is is willing to like reinvent themselves to some capacity um because I think by and large a lot of most like 98 of businesses crypto have found product Market fit yeah like ethereum has centralized like on-ramps have there's a lot of speculation in the space but a lot a lot about a lot of

projects or masking product Market fit with a token and you know that's okay like you don't have to find product Market fit immediately you don't have to find like business models immediately like social media went through this phase where all you all all Zuckerberg was focused on was like building the best social media platform and then and then you could layer on a whole other things but it started and ended with being the best social media platform and if you have an engagement then you can do a lot of things with that and I think coinbase like has that as an organization really really focused on we have to be the place where people come to to interact in this world and I think a large part of the rationale is if I'm them it was really interesting to see as you mentioned like the evolution of like why they decided

of all the things in their whiteboard to make this the number one priority from an engineering standpoint and I think this is a phenomena that you constantly see in crypto which is as an engineering team the question was you already allow withdrawals on L2 like optimism why build it like a separate chain using their stack and I think he didn't lay it out explicitly but my appreciation and just seeing how other people have reacted to this today is I think by control by building on the op stack you control a lot of things you brought up permission D5 like a permissioned L2 which is hey if institutions are going to play here and regulations come well I think you have a greater degree of control and ability to prioritize certain things

like kyc Insurance controlling who actually can interact in the L2 um you know they're calling it permissionless but I my hunch is that there's going to be some elements here that if you want to play in this base you're going to have to comply with some things and I think the second hypothesis that I have that I'll borrow from an unnamed person that I saw a chat was maybe they'll offload a lot of the tokens to the cell too assuming that some tokens become problematic to have in the main platform coinbase I don't know what you think of all that I mean the so the second part is so there's this qualified custodian regulation that's going into effect and like part of that regulation is gonna I

think we'll say that um qualified custodians Can Only Hold certain tokens so you could see this yeah the long tail getting kind of offloaded there I I would actually just actually go back to Brian you're thinking about focus and like Zuckerberg um and like Zuck focusing on The Social Network until like they mastered the social network and then they moved on to other things I there's this blog post that Jesse mentioned at one point in time the coinbase secret master plan from Brian and uh so I don't know if you've ever actually read this it's from September of 2016. before the 2017 bull market before everything ripped before all these people came into crypto September 2016 which keep in mind as you remember was only one year after ethereum went live and he lays out these

like four he basically says I'm gonna have a loan I'm gonna outline where crypto is headed and how the world will come to have an open Financial system there's going to be four major phases and here's what we're going to do in each of them he goes phase number one we got to develop the protocol there's only a million people Max who are going to like be involved in that stage we've got to develop the protocol and that was ethereum like Bitcoin and eth get invented phase two build a crypto exchange that can reach 10 million people and in that phase this again 2016 before the market rips so that's what they did 2017 coinbase was like the go-to place to uh to buy and sell crypto so they built they did they they executed on face to build a crypto

exchange now reached you 10x the size I reached 10 million people phase 3 you 10x decides again 100 million people build a mass Market interface for crypto apps and six over six years later six and a half years later they have 108 million users man the man just nailed it like six and a half years that he just called a shot and and he crushed it and um and they built this Mass Market interface for for crypto apps and that's coinbase today and now we're going into phase four which is build the apps of open finance of an open Financial system where you 10 exercise again to reach a billion people and this coinbase announcement of building an L2 fits directly into that so I I think it's a

brilliant I I'm very long like I just I'm I think it's a brilliant brilliant um build by coinbase and I just like tip my cap to Jesse and to Will and Brian and the whole team um I think it's a game changer it's an L2 ready to bring crypto to 100 plus million registered users on coinbase evm equivalents gasless transactions apis account abstraction uh Native bridging professional RPC nodes from day one like boom you you just can't give tough to get better than that right now you know yeah look I mean a lot of this stuff is I reserve judgment because when I see it I think I'll have a better opinion on a lot of these things it nonetheless it is really encouraging to see coinbase move

in this direction contribute to the you're less you're less excited about this than that no Look at me now Look I'm an investor in our arbitrary and so the question is like I asked him and so look I have some bias I really care at this I know we're gonna we're bringing them on for well I reached out to Steve I reached out to Stephen um and so what do you think of this and I'll let him speak because I want to bring him on next next week or or when we do it I think I think we're in we're due for an uh an Empire pod on arbitrary there's a lot of cool stuff happening I was very curious to hear from a coinbase team what they thought about the existing L2 ecosystem just generally right and the rationale behind building on the OB stack which I wasn't really familiar

with I mean it's fairly recent they just kind of announced it right a lot of stuff happened behind the scenes but this was news to me but look netnet I think is still very positive right where we covered to some extent which I don't fully still understand is base acting as this bridge right it's not only about optimism it's just bridging everything really and so look I I don't want to just I don't want to come across I'm not excited about this I'm super excited about this primarily because I I hope and wish that other companies like coinbase like start doing more of this stuff like I know the Kraken I think has some grants and like supports some like core devs or Bitcoin and a few others like I'm not but still I think that this is

this is I think some one of the best moves of a coinbase of a company contributing to like an open source Network protocol like ethereum so um yeah let me let me make the business case here instead of just because I've seen a lot of Twitter posts being like this is great like shout out to Brian and coinbase like they're contributing to open source code and they're contributing to the community blah blah let me make the Wall Street argument here let me make the the revenue argument which is right now you have a bunch of l2s that make over a hundred million in Revenue a year on sequencer fees even in a bear Market with less than like half a million users you've got these l2s making a hundred million

dollars a year on sequencer fees now there's obviously there's probably a let's call it a 20 to 30 margin on that they probably pay like on 100 million in Revenue probably 70 to 80 million just settling those fees to the to the L1 but still it's a really large Top Line uh binance like BNB binance chain did over a million dollars in fees yesterday alone they have roughly the same volume as arbitrum in terms of transaction scale so that's uh they did 1.2 million fees if you uh baked that out for a year that's like 440 million dollars a year of Revenue in a down market and I think there's no reason that the base chain uh or base whatever they're calling it base can't do a similar amount just on on-chain

fees not including all the other stuff that they'll probably do like real world assets and like on-ramping and things like that that's almost half a million dollar excuse me half a billion dollars a year of additional Revenue in a down market so it was just it was one of the funny things for me was seeing Wall Street I think coinbase's stock was down like a one or two percent today this like Wall Street just has no idea how to approach they're so stupid I mean like there's no idea how to price and I I see something that will spit off an additional half a billion dollars a year in fees from this L2 and they see them competing the the commentary I heard was like they see

them competing with their own business I'm like man you guys are just really missing the force for the trees here yeah not only that but it's again this idea of you're going to onboard like you're gonna 4X your user base yeah my potential you like think of probabilities right but all the focus should be as the industry is really the next Bull markets can be predicated on like macro side and all the speculation side but but the the like the long-term thesis of the space I think starts and ends if you believe truly one thing that we can build killer products that people use yeah and love like hold it Not absent holding Bitcoin

not like as a macro head whatever but like web3 do you believe that people are gonna and this is where like a lot of people are really skeptical on like show me what people are using here even Jesse said look I try to use crypto every day I kind of use it four or five times a week um there's like admittedly like few apps that exist today that like people are using on The Daily like you know in my daily life like I'm not yeah or not yeah with account abstraction like Envision a world with account abstraction that just kind of removes a lot of the friction of of how you interact in this space and set up and manage your keys and all that

jazz and then you just kind of remove that stress from your life and then you just focus on hey look I want to like interact and and play these games like you know eluvium or go on a walk and you step in and or you know you name it right um I think I think this is the cycle this is the time where I you and I have seen them like they're they're we've had these people on the podcast that they're focused on building beautiful really engaging um front-facing consumer applications yeah so here's a I've I've three arguments if I was talking to like a traditional investor

about this that's not like oh coinbase is really doing good for the community one argument why this is powerful is because the fee thing that I just mentioned the second is real world assets um if you believe that real world assets will come to crypto this is now the obvious place to do it right given base chain has account abstraction coinbase coinbase says kyc AML data for 100 million users they can now really easily launch Real World assets on chain restricted to just approved wallets or just accredited investors whatever it may be and that would really easily let you put Securities on chain so like that's the second thing that I think is just really exciting about this and then the third thing would be um I mean we

just uh you missed this episode but we had a staking episode that will go live on Monday I think it is with the uh with rocket pool and actually the lead the guy who runs uh staking John the guy who runs staking at uh at coinbase so CBE is going to be pushed heavily on base and um this is just another like big Revenue winner for coinbase there is to make try to make cve the de facto uh liquid staking derivative for eth so like pushing CBE real world assets um and multiple hundreds of millions in fees I I don't know I'm just I think that's a great move for more space yeah definitely uh I'm gonna ask you a question which I'm still thinking

through one why wouldn't this work like in one year from now we look back and because you know like the coinbase nft marketplace was a total flop it didn't get any fraction um and so the question to you is why would base not work two what does that do to the other l2s in the space including optimism um right now coinbase is the only it's a very centralized L2 it is it it is a centralized L2 coinbase is the only sequencer eventually they will decentralize the block building um and you asked this great question

near the end of uh of Jesse about like decision making and like how decisions get made right now it's a it he he gave the I think PR friendly answer but like right now they're the only sequencer on the chain and eventually they'll decentralize the block building but they haven't yet and so if I was building um and I was like very Pro crypto native and I like I'd probably build on through unlike optimism or I'd build on arbitrum the counter argument of that is usdc look at what happened there right like you know at the very beginning people were like so against it and a big cohort was like God even I remember

trying to onboard it as collateral and maker during March 2020 like and for a long time people were like this is centralized like there's there's dye like this is counter of the ethos and then now it's just become like the number one stable coin right what okay let me ask you this what does if you're building a D5 application what does launching in polygon or on polygon versus launching on Solana give you that like traditional non-crypto stuff doesn't give you like if I launch a fintech app versus launching up Dex I'm trying to lead you into an answer that I want you to give but maybe I'll

just answer my own question which is girlfriend it gives you instant liquidity it gives you a boatload of you like launching a fintech app you start at zero you got you got no users you got to go run a bunch of Facebook it's a beautiful thing go acquire those users when you launch on Solana or on arbitrum or on optimism or on directly underneath you've got baked in users from day one and I'm like I'm I hear myself getting too too excited about this the issue but the retention piece is is harder because the barriers to exit and entry are so low they're great okay so what I'm trying to get at though is that you know your point

108 million registered coinbase users to tap into and when I heard Jesse say that they were thinking about the ad Market the admir what why were they thinking about an ad Market because they've got 108 million C5 users and then you've got all these bounders and devs over here and there's a disconnect so what the AdWords it would have connected uh projects with 100 million users so I'm like if I'm debating where to build I'm like oh man coinbase is clearly thinking about ways to get my project in front of those 108 million users which would excite me a lot yeah that's a great point that you bring out the ad Network because during the episode will really kind of mentioned

the sequence because Jesse was like I had all these ideas including an ad Network and will said you're not wrong on any of them it's just sort of the sequence was off and I think you're absolutely right which is you have you build base first then do everything else yeah um but you're right I mean it's going to be really interesting uh I haven't seen which protocols from day one like are going to be on base but I think it's the majors and I wouldn't be surprised if it's like the comp compound Ave unit Swap and a bunch of others but yeah I mean the Allure of because they we always we to some extent talk about aggregation Theory here uh and you know whoever who controls the user has commands a lot of power

um and in this case like BNB as an example right like binance has launched their own chain I guess this is a good analogy and they like there was a time where B and B as a chain had way more transactions like uh pancake swap had more users um and transactions and unit swap at some point no activities like kind of dwindled a bit but just goes to show how how it's so powerful like binance is the number one Exchange in the world a number of users and you know volume launching their own chain was something that they did and since he's a smart guy in the attraction that you got because they own the user it's just so easy right they're going to push all the users to

go to base as opposed to withdrawed art from or polygon or Solana or whatever right and not only that but the app ecosystem I think they're going to curate and and create a safe environment and actually a one where they're going to probably support a lot of projects so I'm really excited you know um to see that I think a lot of times you know when I talk to new users and do the education piece of crypto they're like I need hand holding I need someone to tell me these are the apps that you you know the suggested apps when you buy a smartphone there's certain apps that are pre-loaded and I think in this case coinbase is also going to do that in web

3. some some apps by default save trusted apps um and I think that's what's needed for a large number of users like the 80 90 of users in their first time should probably go through a hand-holding exercise and in a safe environment then if base can do that then great right like I'm not you know um to be fair all the L2 gurus out there you know you look at Poly when we talk about decentralization it's always easier to say hey wait a minute it's going to be controlled by coinbase I'm

like yeah guys but let's talk about the sequencer of all the other l2s and fraud proofs are there fraud proofs in optimism who controls a sequencer there are reords and polygon this Tech is not perfect right so I'm just you know we should I'm really optimistic about all these all these things but you know the tech is still fairly un you know nascent we'll get there yeah yeah I mean most l2s have this centralized sequencer run by the foundation of the lab rat person and yeah they have a road map to decentralize uh eigenlayer episode go

talk to that we just told the guy Hey listen how's this going to work a committee of people okay great so okay so it's Central so all right let me let me ask you this um so you've got this decentralization uh no I don't want to just throw shade it again I can put whatever you have this little app chain thesis um which is which is like primarily been a cosmos dominated thesis and um I'm curious if you think that bass is the start of like the app chain thesis becoming possible on ethereum as well but I don't know what that means right let me let me here let me I'll just here's where the frenel's twos is that

like an app chain than no right because you're still using the base chain like I when I think of app chain it's like a totally different architecture like I'm speaking at out of my it's like monolithic versus like you mean like it's a different architecture I think when you talk about app chain thesis versus an L2 still settling in an L1 does that make sense yeah it does make sense maybe the distinction doesn't even matter right but yeah yeah I think yeah I guess like to put it in concrete terms you have a team that was pretty

important in ethereum called dydx that decided to leave that decided to go and build their own chain and they picked Cosmos yeah so Cosmos SDK tendermint consensus bft is fairly fairly battle tested people should go and listen to the episode with Zaki and uh what's we did a cosmos episode Jack Jack and Jack yes sorry Jack um and yeah dydx left ethereum and they decided to build their own chain because they just said look ethereum right now is unusable and we can't really it's not like it's not viable for us and so they didn't just legal Theory and they left

an L2 they left starkware yeah totally like they abandoned ethereum then they just went to Cosmos build their own chain to control a lot of parameters and look I think the question that we should kind of revisit over time is are we going to see these teams come back and build on base and abandon their Pro and abandoned their um you know what I mean like it I guess the question is if dydx were to do this over again this exercise of of the pros and cons of staying in ethereum maybe even building around L2 or going to Cosmos and building their own chain it would be interesting to see how that would play out with Bass Live um

I don't know if it changed the calculus but maybe something we can ask Antonio or from dydx or some other people that thought about this yeah yeah um I don't know any other thoughts on coinbase no no I don't I don't think so uh timing wise you'll probably know this better than I do but it sounds like relatively soon I.E next month the launch beta well no there has no time there it doesn't now you can bridge over you can go to base.organ bridge um got it test not ask that's over you got it okay yeah no and no token so guys there's no base token don't be scammed

oh oh you know what I realized you know I this is so dumb of me that I didn't it's probably obvious to everyone else except for me so coinbase's ticker is coin base eventually there'll probably be a base token so you got coin base base was this was this super obvious to everyone maybe I just put that down as well all right base token is dollar sign base then you got dollars on coin we got a dollar sign coinbase yeah true true they we asked him if they were gonna launch a token they've been fairly clear and binary here that there won't be a token but again they leave the ovector open I think that over time if there's a committee and the committee decides to launch a token then you presumably could

see a token but but folks please don't be scammed there is no base token don't beat LED otherwise and don't give your coins some scammer out there that is telling you to like claim a base token there is no basis yeah why do you think they only had one sequencer from day one like why didn't they just like surely they could have had more folks get involved from day one my assumption is that they were probably very quickly um add more people that are in their institutional validator sets like they acquired bison trails to allow in a large Enterprises to run their own validator right so I am thinking that they're probably gonna tap into that Network to decentralize the sequencer um

can can I my okay yeah and then I guess on the no token people's probably biggest question there is like okay well if you don't have a token like how are you incentivizing the validators my understanding is that they're are no Val this could be totally off there are no validators the signed transactions will be sent to coinbase who sent who centrally manages the sequencer in the state they periodically checkpoint the state back to mainnet using the optimistic roll up eventually we want to have validators but but not yet is that your understanding of it that is my understanding but okay okay yeah the the key there is the fraud proof I think

I got to dig in I I don't I'm gonna talk out of my ass if I keep going here I need to yeah so please uh YouTube commentary whatever we just said yeah yeah I would love to know we're entering on territory uh pull back you know 20 all right you know what's funny so like Mike uh so we have this plot we have another podcast at blockers called bell curve and it's like I don't know what that is we don't talk about other episodes I left I left we're allowed to we're allowed to uh I've abandoned I've abandoned that ship but this season is on app chains and next season's on on Mev and so Mike has been spending his weekends uh like studying Mev basically like I was I was actually out bowling on Saturday and

uh he's sending me all these like videos and stuff of Mev I was like not not the time buddy but um he's like yeah I'm locked in I'm like learning about Mev and then as the text kept coming it was like you know what like Mev is reminding me I need to like go back and re-learn how ethereum works at like a core level and I I don't know actually reading about this like uh coin like seeing what coinbase is launching I was like wait so you don't have a token who validates the valid how do you incentivize and I was like oh man might be good for a um a refresher on like how this stuff all works I don't know if you ever find yourself in in that boat yeah what do you think I do on the weekends like I don't go bowling dude

I would I would run your show yeah do you have bowling shoes are you are you the kind of guy that shows up with this like bag was it ball and his bowling shoes I just had bowling shoes like when I was skiing you want to have your boots I'm not just the fact that you're not even telling me this it's just that you're you're you're pleading the fifth but you're at me you're admitting guilt by by like cleaning the cloud I have I have big feet and when I have put on those I mean I put on Chase is like what are you six five dude six four yeah six four you def oh you're claiming that you see this is the cop battle you're claiming that you have bowling shoes because somehow when you go bowling they never have your sides so this is like a flex

I'm calling you on this Flex god dude let's go I'm Gonna Keep you focused and you have bowling shoes good Lord folks I'm leaving Empire I cannot fundamentally deal with something more more of the stories we're going bowling or prevention list that's uh but yeah we're putting an Ethan on the game hey everyone quick break from Empire to tell you about another blockworks Channel that I know you're gonna love I've been in crypto full-time for five years and have always struggled with one thing which is keeping up with the next big Trend as soon as I wrap my head around Mev Rhonda app change as soon as I wrap my head around napkins we're on to liquid staking derivatives I'm sure you've been there blockworks research

has solved that problem for me our team puts research data governance proposal updates models and more into one really easy to use platform so I can always stay ahead of the curve if I don't understand something for example I just pull up the platform I can search for an L1 I can search for a protocol pull up the platform at blockworks research.com I searched the term there's always an amazing amount of insight in a really consumable way right now you can subscribe to the platform it's 2500 bucks a year or 900 bucks a quarter hopefully you can make more than 208 dollars a month by using the platform if you can't you're probably in the wrong business but if you're not ready to subscribe to the platform today you can

subscribe to the research team's free newsletter you can follow their Twitter handles today links in the show notes trust me once you do that you're going to want to subscribe to the platform if you are ready to subscribe right now I got you guys with a little hookup Empire listeners get a 10 discount for the first 50 people who use the code Empire 10 got your back check out the links in the in the description to find out more now let's get back to the show all right so all right moving past that there was um yeah moving right along this is uh I want to talk about polygon actually yeah uh there were two polygon things that happened

this week one is um polygon laid off 20 of the team which was I think about 100 positions so I think they had about 500 employees they laid off 20 um per sandeep's tweet uh everyone received like three months of severance Etc um so like that was one thing is polygon laid off twenty percent uh then also I really haven't looked into this reorg or what it was um but I'm sure I'm sure the blockworks teams dug in I just need to read about it but Hayden Adams of uniswap tweeted out he goes polygon needs to make moves publicly to solve its reorg problem 157 block reorg which is about five minutes of History yesterday and 120 in

December is bad it can break Bridges centralized exchanges Etc maybe we need a consensus algorithm change or a social consensus based hard for to slash the validators and then jonty who's one of the co-founders of polygon tweeted this is in progress in two parts the first is already in the main net since January um yesterday's reorg was caused due to a bug which will be fixed soon and obviously Emin from Avalanche tweeted out the solution that makes the most sense as an avalanche subnet you don't you don't say and uh so I'm just I'm just curious what you make of it seems like it seems like all things were very Rosy at polygon because they were winning a bunch of Big Brand deals that you know got a bunch of headlines and now people are maybe

realizing that things are a bit more chaotic over there than folks realized yeah reorgs are real and they've happened before um this is always something that I was thought thinking about while people were in the ethereum community are giving Solana a hard time for outages that seem to happen every month in a kind of regular Cadence but um yeah look at this is an invitation for someone to polygon to come up and step up and talk about this stuff um I admittedly don't interact much in polygon for this reason um like I've done some stuff but if you track like my activity on chain in my footprint is fairly

Limited historically important to what I've done in polygon but again uh I just feel more comfortable in a different type of L2 an optimistic roll up um arbitrum or or um or optimism yeah just uh I just thought it was a deep the security the security guarantee like it's just it's just different yeah it's a different note I thought it was a it was a reminder that what everyone built what folks are building here is deeply Technical and you can have the best Biz Dev in the game but if your blockchain's missing transactions and you have to reorg twice in three months like that's an issue so yeah so this is interesting because we had Camilla and um and uh talking yeah talking about like

she's at serotonin and they focused a lot on like you know convincing big Brands to enter the space and other issue nfts largely nfts right it's like Reddit and you know all Tiffany's of the world and Nikes and whatever and my question with them was like how much are these corporates in their RFP list valuing like ranking security decentralization security and it was like nah not really like you know I think that they're just going where the users are and this is where BD becomes important like it's sort of like a reflexive in some capacity like a polygon has a lot of users then like if reorix happen but they're not losing users then I guess like the brand just kind of overlooks that

I do think that over time like this needs to be addressed and if it's not then it really just hinders the long-term viability of a polygon really delivering um to a lot of the expectations that these brands are they just go elsewhere right they'll deploy elsewhere um the nice thing about the space is that like I think what you've seen is a lot of Brands just migrate over to different chains it's fairly easy and so um look I I think we should focus on this I think we should have Sundeep or someone from the uh polygon team come on and talk about this and what their long-term strategies to kind of fixes and address this issue yeah yeah it was a bad week for them with the reorgan layoffs what I did get is um why no not so like when Solana has an

outage or a reorg or whatever or like if had an outage or like optimism had a reorg or something like that everybody would be talking about it and uh I didn't see anyone talking about this you know there's a big reorder it's 150 block reorg um I said nobody on Twitter was talking about it which I'm like I was probably too optimistic on coinbase stuff now I'm probably digging into polygon too much but like that tells me that there aren't as many people using polygon um and I think they've been winning a bunch of these brand deals but like crypto's a Bottoms Up game and you got to win the Bottoms Up game too you can't just you can't just go top down with it and you saw a lot of people make that mistake in 2017 trying to go super top down winning the big Brands and look

where they're at now so no it's a great point you know sometimes we are we're used to hearing these like BD can sometimes triumph over the best tech betamax VH has a prime example but I think that that analogy is though doesn't really apply in web3 where the only reason why you want to build something is because you value security and that's the number one priority decentralization otherwise to stick to web 2 guys like just don't even bother coming here unless you want to capture extract value like if you're a mark like a a brand that you want to be relevant if you want nfts and like acquire users fine but still in the long term if your Chain's breaking

like there's a lot of harm that's done and so I think ultimately this is why the case for ethereum long term today is probably the strongest thesis as a prevailing kind of network because it's so battle tested there's a Lindy effect and you know like if your Chain's not secure reoks continue to happen forget about it like it doesn't matter like this is why we've had a number of episodes this year talk about security because it is the most important thing there's other folks that don't believe that I truly believe that like if we don't nail security and we don't build confidence that these things are truly decentralized or permissionless or immutable

then like close shop and go back the web too otherwise it's a really inefficient web too crappy stuff you're never going to compete the only reason why you want to build this stuff is this is why I like D5 is such a killer use case because when you're settling billions of dollars you don't want to have counter you want to minimize counterparty risk that was my whole thesis for D5 early on it's like you saw Bitcoin people really valued being able to move large sums of money and and settle you know across border like their immense use case and defy the idea of settling billions of dollars or executing certain transactions with if then statements like programming money and removing counterparty risk

is is a cure use case and if that's it I think we'll still build tremendous amount of value that's not even reflected in the total Market gap of crypto now how that composite that is composed I've always thought that the percentage of defy encompasses of the total crypto market cap is grossly grossly undervalued just because that is today the like the killer killer use case of ethereum uh we can talk about nfts as a transfer of value I.E still defy like you're collecting but it's value so it's transfer value so it encompasses I'm I'm including that in in the the use case so yes really important reminder that you know we can't lose sight of of there's

still a lot of work that needs to be done it is as Jesse Walden first coined it I believe he's now at um variant uh investing previously at e16c but he really coined this term which is Progressive decentralization and I think this is the way things should work but I think the time eventually runs out if you know progressively decentralize uh and it is sort of like attention right because when you try to push it too far you might lose grip on product development and building like the question is okay polygon can progressively decentralize and speed that up but but that's not necessarily going to fix reorgs right that still is very much the core team right that needs

to focus that so yeah it's kind of a bit of attention decentralizing but also kind of building the product uh and the product still needs to come a long way for 99.9 of all the crypto um protocols out there yeah all right there's some other news of the week that I thought was noteworthy um one is uh gloy Capital shutting down um this is no uh gold uh no not gold uh Kevin yeah but is that how you pronounce it go I don't know galloways galleries I don't know how many calories galleries galleries galleries galleries what is what is that I don't know what that is what does it sound like Gallo is I think I used to trade these

guys uh galleries Kevin it's a French he's a French mathematician and political activist from the 1800s scalios now I need.net now I'm 20 years that I mispronounced it for so long he died when he was 21 years old so anyway I wonder anyways anywho uh galoys galleries however you want to pronounce it uh the rumors that they had their money dropped on FTX and sure enough it just uh came out and said that the fund is no longer viable they had half the assets trapped on on on FTX and they're shutting down so but I think it was fun was around like 200 million and they also there I mean it sounds like you trade with them I think they're a market

maker as well um and I don't know I just I was actually pretty sad to see this like Kevin who runs was one of the first to have identified and warned everyone in crypto about Terra Luna and like the out the wrist to like the algorithmic stablecoin and um it's just a bummer because like he's so he nailed it he nailed the risks before like most people saw it and yet he still got trapped on FTX and I think it's like for I hope people remember him for pointing out the Terra Luna wrist I'm sure he'll be back he's a super smart guy and I would also just say like I did see some people saying like well why did they have so much of their AUM on FTX I think that fails to understand the market

making business and like if you're gonna make markets you got to have your assets somewhere and FTX made sense for him so I don't know yeah um I feel bad for a couple yeah so I'm fortunate he said and intimated that this is not the end of what he was doing but I understand why he shut down the fun uh he returned I think it was like other half of his assets run FTX the other half he returned 90 to investors and I think even after that big haircut their investor still came out positive um so you know if that if that is true Kudos um and you know we we hope that we haven't lost a good soul in space and he'll continue and come back in some other capacity

so yeah um let's see what else happened uh what was interesting there oh no what was interesting there he sold no no no no he sold half of he sold his his stake and after the exit is did you just shush me he just he sold his claim that is stuck in FTX for 16 cents in the dollar and he basically said look this might take years and I'm not a bankruptcy restructuring expert so I'll just punch out pretty interesting because there were some claims trading at eight cents at some point yeah um and start contrast with Madoff in that case you brought her up you know creditors recouped 82 cents on the

dollar ninety eighty eighty so cents in the dollar took 10 plus years so but nonetheless um just 13 years memeable um but yeah in this case really interesting that he decided to punch out at 16 cents yeah um what else went on this week oh two arbitrary speaking of given credits on another L2 arbitrum had its first day with more transaction more transactions than ethereum L1 a lot of stuff happened that's big I mean all activities about them to l2s it's uh yeah yeah definitely yeah um I think that's it what else I think that's oh you're oh I I there's uh one other thing Tom emmer introduced this

cbdc anti-surveillance state act on Wednesday which does three things one is it prohibits the fed from issuing a cbdc directly to anyone two is it bars the fed from using a cbdc to implement monetary policy and three is it requires any fed cbdc project to be transparent to Congress and and the American people um so I think I mean doubtful this goes anywhere I'd say just a bill that being introduced but uh but like shout out yeah and I thought there's a really good two-shar tweet too sharp for multi-coin um who pointed something out that I hadn't thought of and he said a negative externality of A USC BDC is the total Destruction of credit markets why would you keep cash at a commercial bank if

you could just keep it at the FED but the FED doesn't make commercial loans so I just thought I hadn't thought about the relationship between a cbdc negatively impacting um credit markets in the U.S and yeah so yeah um the only other thing that I want to point out too because he's just got a lot of attention was Top Shot and there was a judge that um denied Dapper's request to dismiss a suit that allowed them to be investigated or like that certain pieces of top like top shots were securities um Dapper tried to contest that and try to dismiss the suit and

um you know quote unquote this is Dapper's response because a lot of people saying oh you know this just basically is saying that nfts are securities and like there are some memes out there that people are saying oh listen my you know here's my baseball card I'm not gonna open it because you know this is he's gonna come knocking on my door I think that was overblown so taking a step back I think this adapter statement they said importantly today's order only denied the defendant's motion to dismiss I.E their motion to dismiss the complaint it did not conclude that the plaintiffs were right meaning the top sheds are securities and it is not a final ruling on the merits of the case so you know it's a good reminder um that there's a lot of people out there in crypto that encrypted Twitter

that very quickly engagement Farm and make these statements um but it's important to like actually understand that you know this is not to say the Court ruled that it was the top shots were Securities it's just well in this case this it's funny to see how fast fake news spreads but do you want to know the original Source on this one it might be Bloomberg Bloomberg it came from the Bloomberg terminal says uh the Bloomberg Bloomberg had an article NBA Top Shot nfts are securities judge says in Landmark case so hopefully start so it started on the Bloomberg terminal then I went to DB uh tier 10K if you know that account and then and then it

just read like wildfire so I think I mean Bloomberg really botched this headline um stuff thank you uh yeah everyone I mean I think they just made a mistake but everyone's freaking out about it being classified as Securities and that's just not what this decision I know you guys are building like a media company for this reason maybe this is why you kind of decided to but it's actually like really frustrating and disappointing they're like if you're a legal reporter and you read through this case why would you write this headline it's not like it's just not factually correct am I missing something here like

if you were to write this headline for Block Works would you write it like that you couldn't write it like that because it's wrong it's fake news but here's what happened behind the scenes something came out something behind the scenes got filed so like that court case probably filed and Bloomberg Prides themselves Bloomberg because of the terminal business so people think that Bloomberg is like this big media business they make 90 of the revenue from the terminal business and they Pride themselves on being first to the news so like every media company has to decide where they win so like Bloomberg wins by being first to the news block Works does not win weed usually are not first to the news but we

have better insights and longer and more insightful takes than anyone in crypto at least I'm very biased but that's what so like you have to decide where you win and that's why Bloomberg so but when you are racing to the news you make mistakes and so but yeah and it was tldr in this case all that happened was the motion to throw out the case was denied um and I know I've been I've been uh I've been very critical of Top Shot and like think that calling a public blockchain that has kyc is like like that's just not shouldn't a public blockchain shouldn't have any kyc but anyways calling them Securities is totally ridiculous um it's a it's just I mean it's like you don't

call when I buy like my Barry Bonds card on eBay like and I think the price is going to go up like that's not that's not a security why is the top shot of security it just I mean it makes no sense but they're not calling it a security they're just the motion uh to throw out the case was denied so yeah interesting case nonetheless you know if and when there's actually goes to court and and you know one to follow of course for the nft community um so yeah we'll have to keep tabs on that Santi I gotta jump this is great um I forgot to plug permissionless at the beginning so I have to do it now which is this week we just had our biggest ticket sale day since we launched the event um yeah so that was uh it's been a

really big week for permissionless ticket sales uh tickets just increased in price again so they're now like hold on let me get these facts right I think it's like 440 bucks for permissionless ticket and we've been showing them since they were like 100 bucks so yeah last week was 394 today it's 4 41. they are gonna just continue going up in price so if you're thinking about going to permissionless get your ticket already did mine did we give you a did we give you a free ticket or do you have to pay you got to pay it no like we're not waiting wait what no come on no I'm speaking but I already upload everything else like I already got you can get a 10

discount you can get the Empire to see see folks how this how my co-host treats me this is coming from a guy that has bowling shoes in a bowling ball I'm tuning out this has been incredible we learned a lot about Jason I hope you guys enjoyed I hope you guys enjoyed we will see you guys next week we got a super interesting episode on staking the centralized kind of player with coinbase versus this decentralized player with rocket pool they compete against each other but they are both kind of come at the industry from the same view saying that Lido has too much market share I think you guys will really enjoy the episode and um see you guys Monday folks thank you folks have a great weekend thanks for listening

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