The Daily Gwei Drive Thru #3 with Anthony Sassano and Eric Conner | Regulatory news, L2 season, DeFi

Transcript

hello everyone and welcome to another episode of The Daily grade drive through I'm your host Anthony sassano and I'm here today with Eric Connor to walk you through all the latest news in the ethereum ecosystem hey Eric how you going hey hey Anthony uh doing well I think it's been I think four weeks or something like that since we did the last one I've been traveling a bit but uh it should be settling into this every two weeks or so now but yeah no I've been good overall how about yourself yeah yeah I've been good I think a lot has happened actually in the last four weeks crazy enough um you know maybe not so much in the market action but on the regulatory side there's been a lot of kind of action and it kind of feels like we hit like a regulatory fun bottom right like maybe a

month or five five or six weeks ago now where we have a lot more positive regulatory stuff coming out there was these recent bills that got passed through the Committees I mean haven't been passed through the house yet or the Senate of course but passed through these kind of like subcommittees and things like that so there seems to be some real positive kind of bipartisan support of these crypto bills lately which is which is really positive to see but I think people are you know they're kind of asking why is the market not kind of reacting to this it's like well because markets uh can lag for a long time and people are also saying well the you know stock market is hitting all-time highs or going towards all-time highs and why is crypto still lagging It's like because it does right it's a riskier market um the information

asymmetry is pretty pretty bad generally and I think that people need to realize that these things take time to to catch up but yeah I mean if you kept up with all the regulatory stuff over the I guess last like last month yeah I have been yeah I guess last time we talked I think ethos about the same prices as now but we dipped all the way to like 1600 all the way up to like above 2000 and now we're back at this like we're stuck forever apparently like 1870 1880 whatever or whatever this weird number is that we're attracted to um yeah I have so I guess the dip was originally because of like the SEC lawsuits against binance and coinbase and everyone kind of like fearing that and they were like the SEC claim you know this list of coins were Securities

in their lawsuit which of course they're going to do because that's the SEC and they're trying to you know do a bit of a power grab on crypto that doesn't mean they are securities but the Market's still kind of panicked right and then we started you know we came back from that a little bit and then we started pumping when xrp Ripple of all things uh could have had a win in court against the SEC and what's called not a security and there's some nuances to that that you know I'm not a lawyer I can't really go into too much but I don't think that legal battle's over right now the SEC can appeal all this stuff but then we kind of shot back up so yeah I mean I think the Market's a little exhausted probably um right now just from this like up and

down regulatory yo-yo and I agree like usually when that happens like to me we've bought him in the bear cycle right now there's always that weird window between like bear and bull um where you just kind of sit there and like you and I call them crab markets right you're just kind of like crabbing lifted right on the ground and you know unless you're on high leverage getting chopped out I mean you can just kind of chill right I mean I think I still stand by you know since we've started doing these again I've been saying I think the bull Market's Brewing right it's about to start and the biggest is the macro environment right like inflation's down um you know much lower than it has been you know the fed's still raising rates a little bit but it seems like they're gonna be stopping pretty soon around

this level um the NASDAQ S P 500 or near all-time highs and I think what you said the most important thing is realizing that crypto's risks gone and usually there's a waterfall effect right so if we watch stocks break like all-time highs people start feeling good they've got extra money they go look for more risks they go look for more multiples and crypto usually is the benefactor of that like if you look at past Cycles like usually crypto bags stocks a bit on the up and then blows by it percentage-wise so I think we're just in that bit of a waiting game and this is where you know people get chopped out they get impatient and we're kind of flushing those last people out in my opinion um but yeah don't be fooled like if stocks break all-time high acrobiome looks good to crypto's going up there's

just there's just no other way around it yeah I think the chopped up aspect is pretty important because I put out a tweet where I basically said people are going to Fumble the bag now you know you've been holding crypto and then you're looking at stocks and you're like wow okay I'm holding this crypto it's not really doing anything but stocks are going up so they sell their crypto and go buy stocks but they do it at like the worst time right because as you said like you chop up these last kind of people and then we go up and then they kind of just like end up trading in and out of things like constantly so and it causes them to to lose and get as you said chopped up but the the Ripple thing I actually completely forgot that that happened between our last episodes and

it was such a you know such big news because like I think for a lot of people in crypto they're not huge fans of Ripple and xrp but they're less huge fans of the SEC so it was kind of like rooting for ripple to win uh that case because we don't want the SEC to win and I think overall the win is good for for all of crypto really and as you said there can be appeals and stuff like that but from my reading of it it really does seem like the SSC does not have very much uh very much left to stand on there and obviously it plays into their other cases as you said against coinbase and binance and people are pricing that in as well I think you know coinbase stock is is up quite a lot because people are basically saying well if the SEC can't

even beat Ripple how they're going to and they can't even classify xrp as a security how are they going to classify all these other things as Securities in order to win their cases against coinbase and binance binance is a bit separate because they've got other charges against them as well not just the Securities trading things um so yeah there was a lot of positive I guess reaction to that but at the same time as we're talking about the kind of prices and what they do it obviously shot up like there was a huge pump after that win especially on xrp I mean xrp went up ridiculous amounts within 24 hours for a cup of its size right for a market cap of its size and then all the other coins followed the ones that have been beaten down because they were listed in the in

the lawsuits against coinbase and binance um but you know as you said we came back down right now we've just been crabbing again and I think that's got to do with the fact that the and I say this all the time but like there's not any new money still coming in right it really is just the same money it's a what we call a PVP Market where everyone's just trading against each other and in that environment what ends up happening is that there's no follow through like pump happens because all the Traders are piling in like oh my God this is a new narrative let's trade this and then they're all taking profits because they're Traders right they're not going to just sit in the position um where and that's why you don't see a follow through because it's just Trader money it's not new money but when we

have net new money come in as you said when the stock market hits all-time highs and people start looking for more multiples and want to take on more risk that's when new money comes in and and obviously the existing players and the Traders they realize this as well because on their charts they have these lines that they draw and those lines start getting broken they're like oh okay well it's there's new money coming because there's follow through now we're actually going up from here so it all just feeds on itself right and it snowballs and it causes a bull market same is true for Bear markets it just depends on on the trend um and it also takes a lot longer than people would like for Trends to change as well the market needs to be convinced of things so that's what's kind of happening right now but yeah that whole

Ripple case that two and a half years since that case has been going on uh is a pretty big win for crypto overall yeah for sure it's funny it came at the hands of you know Ripple but you know it still doesn't really legitimize the project by any means but it was a general good win for crypto as a whole right so I guess we'll take that even though it was Ripple um but yeah you know the Market's funny right now I mean I think right now is the time prepare a little bit like get your staking rig set up stash them either way clean up your addresses like kind of just do some maintenance on your stuff right and kind of prepare and I would say the number one thing is like if you I mean if a bull Market's coming which I think it is

you know set some I mean unless you're still holding all your e through this next cycle set some cell targets right and I talked about this like a lot back in the Into The Ether days like the first big ease pump I wasn't prepared I didn't have any cell targets set and I kind of like missed the top which is fine right and I sold something lower but I didn't like play that how I wanted to right and last cycle I was prepared right I had like the percentage of ether I wanted to sell I had a plan I had targets and like I know I didn't sell it all at 4 900 but it doesn't matter right I was still like hit what I wanted to hit so it's a good thing because like you very quickly get caught up in the Mania right like if we start moving from

2000 to like 4 000 and people start losing their minds you you forget how fast it can go right like we wait like three years in a bear market for a very short amount of time a bull market so that's one thing to always kind of think about with an impending bull coming but it's funny right how it always it's a I posted a chart the other day the like all-time Bitcoin chart it literally does align every four years and it also always aligns with the happening now I don't think like The Happening like the actual event is the direct impact it's just that narrative around it right and bitcoiners are great at building that up and I think that'll kind of be it's all self-fulfilling in a way right like they start they have the happening narrative starts that media kind of starts picking

that up price starts kind of going up and then retail starts noticing and then they start the new money starts coming in right um and we're just not quite there yet I I think you know ethereum has better narratives with like fee burn and staking live and but retail hasn't caught on to that yet right we're gonna need like them to come in because of the graphs and then kind of stay for those narratives because in all reality like the only crypto narrative that really translates well right now is like the Bitcoin digital gold narrative as frustrating as that is we're still a little while away I think a lot of people will come in because of the inflation happening across the globe like that narrative will start to catch on for eth um and then people will get interested in like oh the fee burning

could be deflationary I know I can earn four percent if I stake this but um you know it's just funny how these Cycles happen like I haven't had any random friends or family text me yet and I always know that's like around the start and then if I'm getting like multiple a week and they're asking me if they should buy like cardano then I know just sell everything yeah I had a friend lost cycle who messaged me only Twice But at the May 2021 top and then November 2021 top and both times it was about ponzis so I don't know if that's gonna work next cycle but I'm going to be sure if he text you this yeah yeah I'll be sharing it for sure because he I mean he's been my friend for a long time since basically high school and I've talked to him about crypto a bunch but

it's kind of funny how yeah he messaged me those two times and it was basically the top each time uh so yeah maybe he'll be the the signal next cycle as well but you're right generally about those narratives because I think what happens is that say right now you're allocated to stocks or you're in cash and you think you're thinking you know when do I deploy into into crypto but you're thinking well maybe I won't deploy until the Harvard inning gets close that because then the narrative will start getting more heat and then we'll start going up and then it becomes as you said a self-fulfilling prophecy and I think that maybe it lasts for a little while longer that kind of hardening narrative but I think the more sophisticated players we get into the ecosystem like the actual institutional and tradify kind of money not the not the memes of

like 3ac and stuff like that people thought was smart money but they weren't right I'm talking like actual non-cryptonative money because these funds that came in they're crypto native money and they're still influenced by the crypto native narratives whereas the the kind of like ones that exist outside of it I think that they're influenced by a bunch of different uh kind of metrics and things and also if they're managing other people's money they also have to think about things differently and think about risk differently and have their models and everything like that uh but I think at least this cycle seems like the harboring narrative is something people are latching onto again and as you said it seems to want to line up anyway because I mean regardless of the harmony happening next year or not I still think next year is going to be a very positive

Market um just just based on on a bunch of other kind of things that we've spoken about in the past there um but I guess you mentioned beef staking as well probably a good way to segment a segue into that it's been up only right it has not stopped it I mean the queue is still above 80 000 it was above 90 000 for a bit but it's still above 80 000 uh and it just doesn't really stop it hasn't come down that much uh and we have newer protocols coming online as well we had over the past few weeks geode uh finances on testnet Diva staking was announced I think they're on test net or mainnet at this point uh and there was also stakewise V3 opened up that they're testing it to everyone so there's more and more products coming online uh and

and also um uh the Golem have this new kind of foundation or something that's spun out of Golem called octant which is staking um the if that Golem has and then glm holders can vote to distribute that to like wherever distribute the rewards from the state to wherever so yeah we have all these kind of activity happening in the ethereum staking space right now and it just seems to be happening mostly in the background people are kind of not paying too much much attention to it I think it's become a stale narrative for people where they're like yeah okay he's taking you know people are staking more Ethan they're just not realizing that it really has been up only the restaking stuff has gone crazy I mean eigenlay every time they raise their caps just immediately filled now of course I'm sure that a lot of that has got to do

with airdrop farming is why people think that they've put the ether and they might get an airdrop one day but I mean it's an incentive at the end of the day this space runs on incentives so yeah all of that just combined together it's just making for a very crazy eat staking ecosystem um coupled with the burn still you know going strong still still burning eth and it's funny because I saw a tweet yesterday someone said you know if ethereum delivered the burn and the merge and each BTC is still kind of stuck in this range or not like um going to to Highs but I think that's the wrong way of looking at it if you look at it from a performance from last cycle to this cycle perspective each BTC went down 90 last cycle which was extremely brutal I mean that's just crazy people

10 BTC in uh to eat you at the top of course you'd have to buy the top but you'd have one big TC left right so it was it was a crazy draw down there whereas the max drawdown that happened from Peak to to bottom this cycle was 40 and it's only 28 ish percent right now so really the burn and staking and all the other thing all the other um fundamentals that have come to ethereum have really uh basically acted as a flaw in the bear market now I always say what do you think happens in a bull market where Supply is basically or you know most everybody's staked uh well not most of us apply but a lot of it is staked and there's so much burn going on there's always other reasons for holding eth so I think that people tend to look

at the short medium-term stuff and forget the the bigger picture the bigger long-term picture when looking at a performance but yeah the staking ecosystem is just so healthy right now yeah no I see that all the time actually kind of what you're saying people be like oh we we got fee burn and staking and there's 20 million stake but he's only had like 1860 still and I that's not like you said that's not the way to look at it what what would it be if that wasn't I mean we might be down at 1100 1200 right and it's kind of amazing that we only on the ratio retrace 40 I I actually didn't know the exact amount I thought it was a little bit higher than that but yeah that's amazing looking back to like last like button and I think it only went that low

um because of the 3ac blow up where they were puking all of that eighth onto the market and exactly it only lasted for a little bit actually right after that it just went right back up so so yeah yeah it's pretty much been stable yeah I know I mean I definitely think that's the way to look at it not like oh why isn't it that 10K because that'll happen in a bull market too right we'll see better performance rates in a bowl because there's less Supply to sell there's more eth locked up I mean locked up maybe not the right term but I mean we got used to that with like locked in defy right body like it's not locked um but yeah kind of going back to that topic I mean I think we're at 22 million East staked seems like we'll be uh

probably on our way to 30 pretty soon um with all the pending validators and it kind of blows me away I mean if back in the day I thought maybe 10 to 20 million would be staked something like that because at a point like the risk reward Factor isn't quite there like there's not that much risk I think there's more risk though Than People kind of realized right like just you know making sure your machine stays up that there was like a major client bug and like a majority of people were using that client um or you you do some things wrong or maybe there's just a bug in General on staking everyone kind of gets screwed right like there are still we've been running less than a year on this right well going back to phase zero we've been running like four years now something

like that three four years but you know the actual like my um withdrawals and all that recently hasn't been that long um and the merge so there definitely is some that's my favorite by the way on bitcoin Maxes they're like back in the day well the rich get richer there's no risk in staking and then the other day like uh vitalik on I think I'm bankless was like oh well yeah I don't know if I would be sticking all my because there's some risk and then the Bitcoin Max was like see what talk says like which one is it yeah those things uh it's shredding is fun right yeah and I love this schroding is fun 100 um but yeah I'm curious to see where we're going I mean I think as a solo sticker I would love for people to stop staking because my yield keeps going

down and my blocks keep going down every day um but I think I'm like I think I'm just creeping under five percent now with Mev boost on as a solo sticker um so I'm guessing that's trending probably towards four soon now in a bull market it'll get wild right because fees will be up and you could get a block I mean I've got a few Big Blocks but I'm sure people are going to be getting 20 38 blocks like daily right um I mean that even kind of happens now but like when things heat up a little bit but I think it's going to be pretty constant for stickers and he's going up so you know you're previously earned stuff's going up so um yeah where does it end I don't know maybe we get up to like 15 million or something I think this will be a strong

narrative for ethereum once retail kind of comes back because I think it's a little misleading to say oh the East locked and staking but in a way like if you're staking your eth I think most people are not and you see them in the execues not many people are like lining up to go rush out in a bull market to unstake right I think in a way way more than defy steak eats is much stickier as a stuck money uh than like value locked in D5 was yeah yeah I agree with that and I think that kind of Snowball Effect you were alluding to in a bull market where essentially the APO AP oh apy goes up because there's more fairies being paid there's more mov which means that there's going to be more e-staked which feeds into the narratives of oh look more atheists being locked up even

though it's not accurate to kind of say that I guess especially with lsts it's still going to be a narrative that people play on and then gonna it's gonna snowball and then you just keep getting so what ends up happening is that the API goes up more it gets staked uh and then more people buy a to stake it and then maybe the East price keeps going up right and then the USD denominated returns uh keep going up because as you said you you earn it in eighth but then you measure that Heath against US dollars so it could lend itself to a pretty extreme flywheel effect right where essentially you have um you know as you said like sticky eat steak uh sitting there and then more estate coming in and then that's not even talking about things like restaking right like eigenlayer or even like

Leverage staking where you can essentially just like do the recursive staking via these money markets and stuff like that obviously that's a lot more risk you're taking on doing that but in a bull market I think people remove the risk part of their brain a lot of the time because you know everyone's making so much money because everything's going up you're not thinking about risk you're not thinking about things going wrong like in 2021 no one was really thinking about what would happen in in a bear market and in 2022 like so much happened in that in that year that was just out of the kind of I guess some mind for so many people like no one predicted that Tara would collapse in three days there were obviously lots of concerns around Terror and how it looked like a Ponzi uh all the UST stable coin looked like a Ponzi

uh and that played out uh pretty much no one uh knew what FTX was up to we knew that SPF was dodgy and FTX team dodgy but we like I don't think anyone had any idea that he was doing what he was doing with customer funds right that was next level and then all the other kind of daisy chain leverage that blew up so in a bull market next time you'll see the same thing happening everyone will be like oh it's a super cycle We're not gonna get another bear Market again and that's why people remove the kind of risk part of their brain I mean uh maybe not the people that have been around for a while I know you and I definitely think differently about this because they've been around for a long time now but the newer people even the people that were around last cycle May forget

these these lessons here and that bringing it back to eat staking that might result in just a crazy amount of kind of risks that people take on for their e-stake now does that mean that it's going to harm ethereum as a network or ethereum as a chain if something goes is wrong I don't think so I think that ethereum the ethereum network has really great mechanisms in place to control that like the exit entry queue is a perfect one because people say oh what if there's a mass slashing event on eigenlayer and then all this eth has to be withdrawn from the beacon chain it's like well yeah it'll get withdrawn but the thing is is that they can't get withdrawn faster than the execute there is a limit so what ends up happening is that the secondary market price is in all of this risk so the lsts will maybe

trade at a discount because everyone's trying to get out right or or um the services are trying to sell what they have in order to cover their losses or anything like that so there's a lot of moving Parts here but in a bull market I think it distorts things because there'll be so much demand there'll be so much money flowing around that uh what ended up happening is that people will uh not I guess do a risk reward kind of analysis properly and we'll get some some crazy stuff going on but yeah it's hard to know where e-staking will actually go to as you said like will it go to 50 million 60 million each day 70. I think it's going to be generally lower than the other networks out there because it is used for so much more than a staking asset lsts do change this a bit and so does so

does restaking but at the end of the day eth is still going to be required to pay for gas fees so even if all the eighth is staked and doing other things uh and and um uh and doing like lsts and restaking there still needs to be a part of you know sooner to be some ease to pay for the gas fees right like you can't pay cash fees in lsts ultimately I mean you could people say oh you can abstract it away you can people can pay in whatever token they want but the ultimate settlement uh token for paying fees on ethereum is eth and you can't get around now that he's literally baked into the protocol via erp1559 you have to pay that base fee in eth so that also plays I think a big part into it um for for a lot of people

yeah definitely I mean and on the topic of like you know lsts I saw tweet earlier today about and this is like a fascinating topic and could be a huge narrative for D5 someday maybe not this cycle but maybe the cycle afterwards people kind of start to learn about this stuff um a lot of D5 collateral is being replaced by lsts and not um and not eth right so like coinbase V3 for example or complex compound V3 for example you can go you can lend your Lido wrapped eth as collateral and borrow against that I mean how cool is that you're earning four to five percent on your collateral as your bar so you you can go Lind or you know you post your collateral you're earning four to

five percent on it you can go borrow say usdc and I think the borrow rate's probably like three or four percent or something like that so you're kind of like of course they're different assets and you know there's a mismatch there but it's such a cool unique thing like it's not a very common thing in traditional Finance to be able to have a collateral that's earning you interests you know beneath the scenes right and like say say you're borrowing a position eth goes up you're earning all this interest plus the value of each going up so I kind of expect almost all like I don't really know why you wouldn't like wrap your East um if you were using ease as collateral and defy on viral against it right so I think that's going to be a big push as well and another reason we're seeing you

know a lot of staking like if you are someone that's wanting to bargain sure eat You're Gonna Go stake it earn on it and then borrow against it right so that'll be a big kind of interesting narrative I think really something that's just unique to ethereum another like cool like new Financial component that's you know not necessarily invented on ethereum but just pot only possible out there I mean it truly is like one of the most unique assets in the entire world now right like given all these kind of things we're talking about and you know on that I it's funny the Gin Spartan has like this three-year D5 bear Market meme which is inspiring like any day now I think I think it's like uh right he always I think it's a little

sicker yeah I think it's like August or September basically when it when it's off yeah so what's funny is like just like that these Cycles do line up with stuff like this right and like memes and self-fulfilling prophecies do play a role and like we're starting to see some defy coins moved up move up I took a few D5 positions for the first time in many years at this point it seems like many decades um and like a small portion of my portfolio like very small but I wanted to play because I there are some graphs there I think that looked a little Prime to um do well against Eve and but it's funny like if D5 does start taking off in its own little bull market like right at the end of this three-year Bear meme like it would be so fitting for crypto

um but I I think we're gonna see a comeback of deep valley like the original D5 bull was propelled in a way propped up by farming which wasn't sustainable right these protocols were just essentially printing off tokens trying to track liquidity and now it's more about the quality of the protocol um you know what features they offer it's pretty basic now because everything's kind of like settled in the code's been verified a lot more like it was like the wild wild west back then right I think we definitely could see the um a prolification of defy again and just like that usage going up and you know kind of see a second little D5 height bubble like I don't I'm more confident of course in eth going up like

I don't want to sit here and say oh comp's gonna go up 10x in the next like I don't know right but I do think you know Defy is ending getting to the end of that like bear cycle and how the you know the coins themselves like you know I'm not a fan of like I call them worthless governance tokens but it almost doesn't matter right like people retail everybody just sees them as like ownership and like if if D5 takes off just because like comp or uni have not much use other than governance they're still going to go up right like people don't it's it's really you're you're mid-curving yourself right if you're thinking too hard about oh this token doesn't really have a use even though like C5 might go through a bull market but uh that's a sector um I mean I'm always interested in of

course but I kind of have a new eye on mm-hmm yeah and I think the probably quintessential example of this is mkr right it's one of those tokens that has been beaten down for a very long time for various different reasons even though maker as a protocol has been growing I know that the I put this tweet out the other day the purists Among Us like the eth ogs were really disappointed with maker over the past couple years because it it kind of shifted away from that that vision of a truly decentralized stable coin to being basically the bridge between the old world and the new world you know really integrating the real world assets starting with things like usdc but now doing other things like treasuries and stuff like that I think that's the right path for them to take and I think that

they're one of their only protocols actually making real money as well uh as you said like these things are governance tokens but they also have the ability to capture some sort of dividend eventually um and it just depends because with me with mkr in particular I actually saw some proposals put out there that I think they want to turn it into like a staking token and they also want to do a split on it like I'd have thousand split or something where essentially I think it's what thirteen hundred dollars right now also it would be like a one one cent or something 1.3 cents which would be which would be pretty pretty crazy because we all know how unit bias yeah I I I want to do that for ease but I would never get through it but yeah yeah sadly not but uh but yeah so there's a lot of

that going on but I guess those are like the ogd5 protocols right the ones that have been proven tested the ones that would be more interesting to the traditional Finance world because they're more interested in things that are low risk right and then and things that have been around and test tried and tested and have not just died off but there's also a Resurgence I think in newer D5 protocols over the past you know six or even 12 months that aren't just kind of modifying things a little bit but trying to do radically different approaches to to defy so one of the themes is like oral class protocols so there's one that came out recently called Azure finance that is trying to do oral cool less money markets which is which is pretty ambitious right um there is a new amm um uh that I that

I know of they're trying to do like radically different amm design like just very different you knew so I'm not just trying to Fork uni stop and add a few bells and whistles uh there are other things like LST Centric borrowing protocols like our gravatar protocols so you basically put your LST and it's like it's like liquidy but for lsts and you mint this gray stable coin against it so there are a lot of things happening and it actually feels like a real D5 2.0 instead of what we had which was just ponzis um you know with the with the original thing that was called D5 2.0 so I think defy you know as you said like is in a really great place right now it seems to be coming out of its deep bear Market not just the tokens but I think generally people got bored of D5 for a

bit because nfts kind of became the thing and then our ones as well the L2 type is pretty pretty big right now too but I think defy also plays into that because a lot of these defy apps they work a lot better on an L2 because it's more scalable and faster and there's more there's a bigger design space there so yeah I'm definitely paying attention I haven't taken any D5 positions besides some Angel Investments to be honest um you know I kind of look at mkr and I'm like I've been burnt too many times on that token I kind of want to buy because it feels different this time but at the same time like I measure everything against eighth and I'm like realistically how much is it going to go up against eighth right am I going to make a 10x against each for example I I don't think so maybe I'm

wrong but yeah that's how I kind of look at things yeah that's the yeah same and that's the hard thing like usually I just hold on to my youth right because like that you you have to look at it against eth right because I mean most of the stuff I'm if I'm investing I'm taking it likely out of my East stash but yeah no it's a very good point too on like newer experimentation and D5 I definitely think we'll see that like like for example unusual of course like V1 of their amm wasn't the end-all be all right they're already on like before and they've got uni swap X and like there's big improvements that could be made to amms like huge improvements uh you know we still have the issue with like low liquidity in people aving any sandwich attack like there's so many

things like the inefficiency of like V2 they try to solve MP3 but V3 is not really great for unless you're like a crazy sophisticated LP like kind of running Bots that so there's is a lot of improvement that can happen even things like you know like cow Swap and you know we a lot of improvements that happen to help you know people get better prices and not get front run and all that stuff so I do think we'll see a lot of that happen one of the cool things I saw the other day was um curved launch their stable Point curve USD and they have like a pretty cool mechanism on liquidation so I think even things like that people thought would just be how they are like oh so occur for example you could sell like a band of liquidation so on like say maker you

borrow against your ether to say all your liquidation prices like a thousand each or whatever thousand bucks and it'll just like liquidate you there on curve you can like set these bands and it'll slowly liquidate you across these bands right it's your collateral and if it goes back up it goes back up it'll re-buy for you so you if it kind of goes back and forth in those bands you could get wrecked on like slippage and stuff like that um but it's cool because there's not just like one price where you get liquidated you could hang on and then if each goes back up so you know it's just stuff like that you know improvements upon and again those are things kind of only possible on ethereum right like of course in the traditional world you can get like liquidate on collateral in your account but they can't like

programmatically do these bands of liquidation rebuy for you like that stuff doesn't exist it's literally only possible with smart contracts so um yeah you mentioned like layer twos one of the funniest narratives you know you and I have kind of been saying this for a while I had a tweet I retweeted about polka dot three years ago and I said they'll come crawling back to ethereum in five years so there's two more years left there but we're slowly seeing um chains that were we would call them quote unquote alt layer ones starting to crawl back to ethereum say actually we're going to go to Layer Two route and use ethereum as our layer one um what do you think about that you think that's going to be well I guess first I'll ask do you think the layer one the alt layer one Wars are done or

will we see that another cycle um are they all going to just kind of come crying back as layer twos and rebranding it going that route or kind of how do you see that all plan out of this cycle mm-hmm yeah so it is a kind of relatively new trend that we've seen play out and it's something as you said we've spoken about for years that these l2s sorry these l1s would transition to L2 we saw cello do it recently and they've been around for quite a while they're not just a new L1 they've been around for a long time remember watching a presentation from them in 2019 at dapcon uh so they've been around for ages right um but then you actually have we had um their founder on the podcast forever ago probably around 2019. yeah yeah yeah so it's not just like a recent kind of

phenomenon it's a pretty long term thing Palm Network which is this nft like layer one that consensus launched at the time and but when they launched it I'm like why isn't this a layer two so they've done that and I think there are a few others in the works as well that I've kind of heard Rumblings about wanting to transition but I think when you look at the kind of L1 space as a whole you can kind of split them up into different things right there are the l1s that really should never have kind of been created as an L1 to begin with they just make much more sense as an L2 and these are things like the evm compatible l1s right they just make zero sense as an L1 but in saying that at the time the infrastructure was not there for them to

spin it up it's only recently that we've gotten things like op stack for example where people can easily spin up an L2 um that people are now are now doing that so I don't necessarily blame people for building these things if they wanted to build something that was more I guess like better than uh or more scalable than ethereum because side chains were accepted as a ethereum scaling solution for for quite a while there probably till like at least 2019 before we changed because we started getting uh some roll-up stuff happening I remember optimism in 2019 started making noise about Roll-Ups as a successor to plasma so it was a there was a different kind of like narrative back then but yeah the last couple years it has shifted squarely into Roll-Ups right and and now that there is really it's really easy for anyone to deploy their own roll up

you see these chains that have pretty much been failures as our ones to be honest I haven't really gotten much traction saying okay well we're going to transition to a layer two for various different reasons and one of those reasons is to tap into the ethereum ecosystem obviously to tap into all of that activity all that money there it doesn't necessarily mean that they're going to succeed at that there's going to be plenty of l2s that fail to get any traction just like there's been plenty of l1s that have failed to get traction um but I I do like the trend uh in saying all of that the L1 wasn't a not over in terms of the I guess like fact that there are people out there who just don't like ethereum or the l2s right they just don't think that the ethereum road map or the Rob Centric road map or

ethereum design is the way to design and scale the blockchain which is fair I mean you can have differences in opinions that's totally fine and I think the biggest communities around this ironically enough you mentioned polka dot I think they're one of the biggest around this as well I think that they have a very specific vision of what they want in L1 to be and they're building towards that so I don't know if we'd see them kind of come over as as an L2 it just wouldn't make much sense for what they're trying to do um same with Solana for example I feel like you know they're always going on about being able to do trans actions at the speed of light and being able to replicate the database across the world but if you want to do that like you have to do that as an L1 it's not really

going to translate very well to an L2 you could bring the Solana kind of I guess some svms line of virtual machine over to ethereum and and as an L2 and create an L2 around that and use the Solana execution environment as an L2 but as a network itself I think you know Solana can't really transition to to an L2 and Cosmos as well same thing uh it's kind of funny with Cosmos though where they had this vision of like app chains right like app chains building and then being connected by the cosmos Hub and I think the vision was correct the implementation was wrong because what they tried to do was have all these chains be Sovereign and essentially what that would mean is that you would have to secure them by the token that was issued by the um the chain Itself by the

project itself and then you could optionally connect to the cosmos Hub in order to do bridging and things like that whereas with l2s you don't have that right you can have your own token but you basically just go settle to ethereum and and it's not really a choice you know you have to settle ethereum I mean you can choose to settle your data on there or on another uh kind of data availability solution but to be a roll-up for example you settle everything to ethereum layer one and that becomes your bridging infrastructure and you tap into all the money and everything like that so yeah there are differences in the l1s but all of the evm compatible ones or at least most of them um uh I I expect them to either lose market share to the l2s or to transition themselves and I I would really love to

say like BSC transition right or even like trying to transition for example because both of these things actually funny enough do have a lot of usage BSC does I mean it's more of a casino chain but I guess that's that you know I don't have a problem with that I mean a lot of crypto is speculative and if that and that's something that people do on binance anyway such as an extension of that um whereas um Tron actually has a lot of stable coin activity on it because of the cheaper fees so if they just transition to a layer two uh it would work the same way if not better now the last thing I'll say on this is that I think what's going to cause the transitions to accelerate is if the native tokens of these projects start performing better once they transition to a layer two

because at the end of the day it's all about financial incentives so if people see if these other projects see wow okay being in L2 is actually good for our token their Community is going to start telling them hey transition to a layer two and then eventually I think that a lot of them are going to do it just just for that and not even consider all the other benefits of doing it just for that Financial benefit fit so so yeah but generally the um the L1 was uh amongst those are ones that I mentioned definitely not over um and I think that uh it's over in the sense that I think ethereum won but it's not over in the sense of these things are still going to be around and I don't think they're going to transition to an L2 yeah I definitely agree with that and

like I I think we'll see a little bit of course last cycle a lot was hey we're at ethereum better come buy our token and went crazy right and that was like the narrative for non-etherium chains there'll be a little bit of that this cycle still I don't think as much as we saw in the past but I agree like that'll some of those changes will always exist as layer ones and we'll always have those quote-unquote Wars kind of going on of what which stack is better but we'll definitely see I mean this this cycle 100 is going to be the layer two cycle right from from the hype of people buying the tokens of the layer twos to teams saying hey look we're a layer two come buy our token um which so I agree with you there'll be pressure from you know token holders or

the governance of these chains or the teams that are running them to kind of do that transition um but in reality like once stuff takes off like we're finally in a pretty good position to say hey look at during this scaling go pick your favorite Layer Two right and like the only thing this cycle is we're not fully there yet from like a decentralization aspect or from almost truly risk-free aspect of these layer twos and I'll give a shout out to their two beat l2b.com they do a great job at kind of like it's kind of like D5 pulse was I almost said D5 polls back in the day I think D5 pulse still exists but I haven't heard anybody it is but they changed to like just being a message board I think it got sold um so it's interesting yeah they fight llama is

kind of like the replacement of D5 pulse these days okay yeah I hadn't been there for a while or even heard it mentioned so it's a lot like that where it shows you the value but they do a great job of like educating um you know kind of like risks they have like five I think like highlighted risk and like what each what each layer two has done and like where the risks are so and we're still there's a lot to do on like the technology side of improving that for layer twos right but at least we can say like hey you know the main Chain's full you can go over to arbitrary optimism whatever I mean gosh you go Layer Two beat down there I think there's like 35 on there or something like that um and we can push people there um and they can do probably like lower

transaction cost things like like remember back in the D5 days if you were doing like a 200 trade the fee was like 50 bucks to trade on any swap so you're down 25 on your trade now one of the interesting things maybe we just won't see the big push until you know people come in and fees really start going off on layer ones but we've seen this like weird like micro cap stuffed meme coins over the last couple months people chasing like you know sub million dollar like micro cap coins and like the rise of like deck screener and people just launching literal meme points I mean one of them that's gone to like hundreds of millions is like Sonic Harry Potter and Inu or whatever it is like it makes no sense but I mean that's why I love crypto

right I mean it does make sense because it's just a stupid meme that took off but we're still seeing all of that happen on the layer one side and I'll go look and like people are making like a hundred dollar trades losing 10 bucks five ten bucks on transaction fees I'm a little amazed that that stuff hasn't really moved over yet but I'm guessing it's because right now it's more the people that the Crypt of native people like probably have bigger stacks and they're just chasing stuff they don't really care about the fees once like retail comes in with only a couple hundred bucks to play with and they want to jump into meme point for you know 10 15 bucks then they're going to want to be on Layer Two but you still kind of have this fragmented liquidity right interestingly enough this micro cap

stuff has all been happening on uni swap V2 that's where a lot of the liquidity has been but you know it's tough like when the liquid the teams launch whatever they put their liquidity on the main ethereum layer one uni slot V2 if you want to go trade on arbitrum or optimism or whatever on any swap that the liquidity is not there right so everyone kind of like stays housed where the original liquidity was launched so hopefully we see that transition you know and a lot of activity is happening over on arbitrim of course and and optimism and ZK sync and all these I think total value locked in um player two surpassed 10 billion just the other day so like we're getting there right but I don't think we'll see the true

effects of like how awesome it is going to be to have scaling until stuff starts popping off and your users coming in and gas is you know 200 Quade daily mm-hmm yeah I think one thing that a lot of people seem to miss and it's not just like people on l2s or l1s it's just generally in this ecosystem is that the money is where the activity flows to right like and big money does not care about fees right they are fee insensitive really uh I mean there are different types of big money there's obviously the ones that do a lot of transactions and obviously they're going to be a bit more sensitive to fees than others but if you're got tens of millions of dollars on on layer one and you're doing a transaction you know every other day or a few transactions every other day like you're not going to

care about even paying thousands of dollars in gas fees because most likely you're making more in you know in in profits than you are in paying those kind of gas fees and it's just a business expense at the end of the day for a lot of these kind of people if you have that much money you probably registered as a business um and you can claim against that to claim the fees against that so liquidity rules everything as you mentioned right there's liquidity for these things on L1 there's always the network effect there and to move that across to l2s is you know maybe not as difficult as moving it across to other l1s but it's still difficult and it's still going to take time and it's still going to take kind of that incentive to go to these l2s I think one big push

that's going to happen is when bass launches you know and that's actually happening in the next week apparently they they said earlier or early August so it's already live for developers but it'll be live for users um and I think coinbase is obviously going to push a lot of activity there a lot of people there and they're going to to make sure that there's liquidity there as well I'm sure they've got Partnerships with different different people out there so that's going to push things there and the interoperability stuff as well is coming along nicely there is obviously a lot of bridges and they have their own different risks and things but there are other ways of doing interoperability and sharing liquidity um but yeah as you said there needs to be that that big push that big incentive there and at the end of the day the gas

fees are that push I think that what we could potentially see this time around is that instead of people leaving ethereum L1 and going to these other l1s just bridging across um you know especially the evm compatible ones they just go to the l2s instead right especially post erp4844 where for those who don't know know not only does it reduce the fees of Roll-Ups it also separates the roll-up fee Market from the normal L1 fee market so if gas fees Spike normally on L1 it does not affect the l2s because they're The Blob transactions which they'll be storing their data in is different to the um the rest of the L1 so essentially your fees will maintain be maintained at that low point on these l2s regardless of what L1

is doing which obviously is is awesome right it's it's awesome because there's not going to be that Spike where it goes like 200 gray and the l2s also go up because they're sharing the same fee Market which I think is very smart that's something that I actually um it's been talking about for a while was called multi-dimensional erp1559 which is splitting out the different kind of fee markets for different transaction types I I think that Solana actually has something like that implemented on their Network where essentially they have uh they're split up fee markets and it's a really good idea but the way for ethereum the way it works is that like ethereum layer one is not being scaled for end users anymore it's being scaled for layer twos and that's why we're splitting out that fee Market there so once all that comes together I do think that we can see some

pretty incredible adoption of L2 up next year potentially as the market market heats up uh so so yeah I'm very much looking looking forward to all that yeah I think what you just said is a very important point that people need to understand more is we're no longer scaling like you said ethereum layer one for users we're scaling it for Layer Two where the users will go right eventually the layer one will just be the settlement layer for large transactions for layer twos or just whales that just don't care or make huge trades or huge D5 moves or whatever um but yeah I mean it's happening it's coming I want it you know one of the best things you mentioned coinbase is coinbase being open to these layer twos like the other day I was on I had some funds on arbitrum I

wanted to move to the main layer I just used coinbase just sent it over to my wallet on coinbase straight off to layer one and like yeah I could use a bridge you could wait but it was quicker just that you know coinbase has some support they've got the pool to eat they don't really care what where users are moving it um so just having that you know even as a power user was nice but as uh you know a retail user coming on maybe hasn't used it much and doesn't want to go deal with Bridge transactions and stuff coinbase makes it easy to just kind of like on and off to these different layer twos um yeah and I'm excited to see the launch of base and I mean you know the price narratives will be about Layer Two but like for those of us that have been

around for a while it'll be way better just to see this stuff actually like working right and scaling ethereum um and finally not have the endless annoying Twitter comments of oh do you remember going to be used worldwide if trade fees are 50 I mean if I had a dollar for every time I'd got one of those last cycle my Lord but yeah exciting times ahead as always yeah definitely and uh yeah I think the the rest of the yeah will probably be more of the same I guess generally for everything we've talked about um but yeah next year definitely feels like it's it's shaping up to be a really positive year but I think by the next time we do another episode bass should be live for everyone so that'll be cool to talk about but yeah I think that's

going to be it for for today's episode I think we covered everything we wanted to to cover so I hope everyone enjoyed it as usual we should be back in two weeks from now not not four weeks again um but yeah we didn't we didn't rug we didn't rug this time this is the third episode where we've maintained the uh the Cadence here which is nice yeah the devs are back they're the devs are cooking yeah the devs are cooking that's it that's it all right well yeah everyone please uh like And subscribe uh to the channel there if you haven't already and we'll be back in a couple of weeks thanks everyone