The Internet Is Under Attack. Is Crypto Next?

Transcript

Bankless Nation, it's the third week of October. We started with October. We moved to Redtober. Now we have entered Black October. [laughter] That's what they're calling it. Blacktober. The worst cyber security week ever. Two bugs in PHP. The NSA is telling organizations to go offline while they figure this stuff out. Uh I think something like 15 like critical vulnerabilities in different companies, web services, coding languages, I don't even know. >> The whole the whole internet is imploding right now as we speak.

>> Is crypto next or did crypto already go through this in March of this year? >> Are we next or were we the canary in the coal mine? >> How is crypto positioned is my question. In addition to that Armageddon that's going on, also Trump is planning to strike Iran again. I think our our bags are down as a result. Nonetheless though, David, I want you to tell me about a week of overperformance down the market a little bit. There are some tokens that picked up on the week. Zcash had a good week. Lighter had a good week. Venice gets an ETP in the European stock markets. I guess that's like an ETF. That sounds kind of good, right?

>> That's good. Yeah. Mhm. And we have the unexpected white swan for Bitcoin. a fusion startup announces their plan to alchemy gold. You can't, you know, we talk a lot of about Bitcoin trying to overcome the quantum hurdle. It's like, h, Bitcoin, you're slow. You're just slow and clumsy. You can't get over quantum. But, you know, Bitcoin can software update. You can't software update gold. So, if they figure out how to alchemy gold out of with fusion, like that's it. That's it for gold. I'm actually super excited about this story. I want to talk to you about this story.

[laughter] It's very interesting. It's It hasn't been done yet. None of this is priced in. So the white swan is on the horizon, maybe still many years away. But we got to talk about what the implications would be if every fusion plant became essentially a a gold mining gold. It's not a minor, it's a gold fuser. >> Exactly. >> All right. Uh October, we we had a a modicum of October this week where we had it had it for about 4 hours when Bitcoin got above $84,000. It hit $84,800.

>> Was that Wednesday? >> That was Wednesday. That was Wednesday. So for like half of Wednesday, it was looking good. We had recovered from red October. We were back into October. >> Then we get three negative news headlines that just took all of the wind out of the sales. One, US and Israel are apparently attacking Iran soon. Those attack reports got leaked this week. uh WTI uh uh and oil prices, Brent crude, are as high as they have been uh this entire time. $115 for a barrel of Brent crude oil. Uh yikes. Um >> that is not going to be good for inflation numbers.

>> That is not going to be good for inflation numbers. It's already not good now. It's going to be the longer this goes on, it it takes time for this number to work its way into inflation. Uh but nonetheless, like that's it's it's been higher for longer in this second phase of the of the oil prices than it has been in the first. >> You know what? It's not going to be good for Republicans at the midterms either because voters are going to be on their way to the polls and they're going to look at the gas price and they're going to be like, >> I'm I'm voting for lower gas prices, which means the Democrats Yeah. Iran state television reported that seven oil tankers caught fire after they were they struck them uh on Thursday, overnight Thursday. So that's last night. Uh Iran says stuff like this. I'm I'm sure the

number's not seven, but is we don't know if the number is zero either. So we're still trying to get that verified, but this is what causes insurance companies to be like, "Yeah, we're not ensuring that your your massive oil shipment through the straight of Hormuz. It's just way too risky." So that happened. In addition, I saw some more jitters in uh Asian stock markets. We talked about that a little bit last week. Has that just continued into the week? Yeah, we had Meta report earnings and like the they are doing the capex investment thing but at like a a normal amount overall there's just jitters about capex slowing down like AI the AI capex buildout just slowing down as people who are on leverage or on debt on margin

trying to do the buildout are slowing down their spending and so that's leaving organizations like Meta who are cash flush and have like a revenue positive business are going to be the last ones to really be pushing the AI capex bend up the hill. >> Yes. So it's I guess it's more continuation from the core we news last week which is like AI debt concerns and AI growth concerns, right? So that that's the second thing we got Iran oil prices. The second thing is the AI growth and debt concerns. What's the third? >> The third is the internet is just apparently exploding uh [laughter] >> as AI swarms just attack everything that they can get their hands on. We're still in a little bit of a fog of war. Uh so all of this kind of got we'll talk about

this in a bit, but like the NSA tweeted out like if your website uses PHP, you need to be standing by with your finger on the trigger for a software update because shit's going to go down. The Japanese prime minister tweeted out something to the same effect. Like the prime minister of Japan is had like 80 million views on Twitter on X. Uh, and so, >> uh, world leaders saying it, the NSA saying it via tweet. I mean, that's pretty unprecedented. I don't think we've seen times like that. >> Yeah. Well, that's the whole thing is unprecedented. People are calling it just the worst month in cyber security absolutely ever. We'll talk about that in a bit. Let's get into crypto though because crypto once again felt like it was moving up under its own steam before

all of this stuff happened, before like the three negative catalyst came. And I want to know what what I'm want to know is is crypto going to move up when it is finally left alone? I know you were talking to Mike this week. What what Mike have to say? Um Mike says we're in a good spot. I mean this is the early bull market playing out. We're still above the 50we moving average. Right? If you zoom out, you look at the seventh day even on the week. Uh Bitcoin is down maybe 1%, ETH down 1.5%. So it wasn't a bad week. I think one interesting thing from his report this week is sort of comparing Bitcoin and the NASDAQ over time because it has been true that since the Bitcoin bottom uh July 30th of this year, Bitcoin has far outperformed

anything else and so is crypto largely. So about 40% compared to NASDAQ 1%. So decorrelated from NASDAQ and there are times in Bitcoin's history, what I have up here is a Bitcoin NASDAQ ratio chart. There are times in Bitcoin history where it's completely uncorrelated from NASDAQ and the QQQ and other times where it almost behaves like a levered NASDAQ option. Um, and so timing is everything here. Like when you zoom out actually and if you had purchased at the bottom of 2017 versus the NASDAQ uh you know so 2017 the beginning of 2017 before the

big bull run you Bitcoin would have appreciated about 7,000% versus the NASDAQ. Okay. >> Uh if you had if you had bought in 2021 kind of the bottom there you would have had an uh almost 900% appreciation versus NASDAQ. In 2025, you would have had a 310% appreciation versus NASDAQ and now we're up 40%. Right? So, we can guess that this will go higher. It looks like if we are in the early bull phase, Bitcoin and crypto at large will appreciate versus NASDAQ as it has in the past. Again, assuming we are in the early bull phase. So, that's the good news. I guess maybe some of the bad news though is if you were a top buyer. So say you bought Bitcoin at the top of

2017 and everything was super hot. >> You were basically from 2017 to now >> the exact same. >> You were just as good in NASDAQ terms. >> In NASDAQ, >> Bitcoin and NASDAQ performed at the same level at the top of 2017, you know, uh you you you would have been about equal. >> Okay. Well, if that's the worst case scenario, the worst case, if you just were the unlucky fellow who top ticked the 2017 Bitcoin price, >> you performed equivalently to buying the NASDAQ index. If that's the worst case scenario, that's not terrible.

>> Let's say if you bought the 2021 top in in Bitcoin, the 2021 top. Yeah. Right. Yeah. Right. >> Okay. So, you're you're actually 30% behind the NASDAQ at this point in time. >> Yeah. There was a lot 2021. >> Did you make it up later? But anyway, it it does show that of course something we've always known is that that crypto is a much more volatile asset class and it does totally make sense. I mean, it makes sense that some people just buy and hold forever. That makes sense to me, but it also makes sense to play some of these cycles. There's this big difference between buying the top and buying somewhere in the middle or the bottom of each cycle in terms of your net performance.

>> Yeah. Which is why we watch stuff like this because we can start to map where the bottom is and we are saying the bottom was sometime recently in the rearview mirror. >> Yeah. Well, I can't do that but my quant Michael NATO can. At least that's what I'm counting on. All right. >> Yeah. >> Uh David, do you see this? This week JP Morgan added Bitcoin to its famed uh report. This is the first time since 1999. Every year it uh releases the support. JP Morgan, biggest bank in America, one of the biggest banks in the world, uh, reports on all of the assets that are worth holding and which ones will overperform. And for the first time, it listed Bitcoin. It mentioned Bitcoin for the first time ever.

>> Yes. And not only mentioned it, but actually put it at the top of the heap. >> Do you see this chart? >> Wow. Wow. Wow. I actually didn't know that JP Morgan produced a famed report. I'm not a consumer of bank famed reports, but yeah, I [laughter] mean I I take the point that JP Morgan is a very big bank and probably a lot of people read this. >> Yeah. So, this is actually Michael Sailor uh synthesizing JP Morgan's report and putting this in in graph form. But in terms of all the asset classes that JP Morgan's long-term report outlook, return outlook covers, and this is when they say long-term, they're talking 10 to 15 years. So, that's long term for JP Morgan. They listed Bitcoin at the top 10% annualized performance over the the long-term 10 to

15 year period. Next to that was uh US real estate. So REITs that would be 8.2% stocks 7.5%. Bonds it's pretty bullish. Bonds 5.6% returns. Gold 5.5% and cash 3.2%. All right. So anyway it I don't know. >> 3.2% long-term returns in US cash. How did that work? >> [laughter] >> I don't know why everything else. >> Maybe this is why I don't read this report, but it is notable. I I I want to actually uh give you some of um uh Jamie Diamond's greatest hits in terms of quotes because this is remember >> CEO of JP Morgan, >> CEO of JP Morgan in 2017. This is what he said about Bitcoin. It's a fraud worse than Tulips. It won't end well.

You might say, well, that was way back in 2017. How about his more updated views? 2023 at a Senate hearing. Nonetheless, Jamie Diamond, I've always been deeply opposed to crypto and Bitcoin. If I were the government, I'd close it down. [laughter] This is him at Davos in January 2024, referring to Bitcoin. I call it Pet Rock. So, >> I mean, I also call Bitcoin Pet Rock. So, [laughter] that [gasps] >> pet rock, but now Pet Rock is in the lead in terms of investment for his own at 10%.

>> Yeah. to go next to your pet shiny shiny rock. Yeah, your gold. Bitcoin and gold. >> Uh Matt Hogan was psyched about this. He said this. First they ignore you, then they laugh at you, then they fight you, then they add you to their long-term capital markets assumptions paper and predict you'll be the best performing asset of the next decade. >> Here it is. Compound return of uh 10%. >> Nice. Nice. I mean, it's stuff like this that I think gives crypto investors the confidence who are listening to this podcast to see this report from Jamie Diamond, from JP Morgan, be like, "Okay, sick. Bitcoin is going to go up, you know, 10% a year for the next 10 years.

That's great. Let me go buy the shittiest altcoin that I [laughter] can." >> Yeah, exactly. I mean, well, crypto investors always on the frontier, right? They have to >> shitty altcoins. Don't you dare. Oh, this is a this is the downward trend line on ETHBTC that people have been watching it. For a few weeks, it was starting to break out. ETHBTC on this trend line. It went ETHBTC went from like down below 03 to like 033. It's not there anymore. It has it has fallen back down. This trend line continues to plague ETH BTC. ETH BTC is at 0293.

It's going to break at some point. like it has to break at some point >> break up >> break up to the >> Yeah, because it's like it's breaking down right now. >> It's being pushed down by it like once again just plagued by it. Uh I was hopeful it would break up just for the sentiment of like half of crypto Twitter. Uh but it doesn't seem like it's happening now. Uh I like I I kind of think that this is the range that ETH BTC is in. Somewhere between 02 and 04. >> Yeah. 024. Yeah. Kind of. Yeah, 02 is too low, but like >> I still I still take the other side on that. I think that it has suffered over the past 5 years for three reasons. Um, the first is bad narrative.

>> So, I think it's done a stupid thing and it hasn't positioned itself as a store of value. So, Ether the asset not being a store of value, it's just >> did it not position itself as a store of value throughout 2021 and two? >> Not good enough. No, it still depended some of our damn valuess. >> I mean, but you know, like it's just bankless. Uh, and I I think that it positioned in a way that was like sort of the ultrasound money meme. >> That narrative got messed up because people thought it was all about um fees >> to ether the asset. And that can't be the way. It's not the way Bitcoin is valued as a it's not the way Zcash is valued as a store of value. It shouldn't be the way Ether is.

>> And the community went all in on that. Also, L2s were side quests. We've talked about that. That's the second thing. The third thing is I just think there's fewer use cases of blockchain than everyone expected totally 5 years ago. And I think the use cases are finance and the big king use case is store of value. Now, I'll give you the contra on this. Um, I still think Ether the asset is one of the best positioned digital store values like moving forward on a go forward basis. And I think you could look at all of those weaknesses and say, "Okay, well, when the narrative returns and people realize the fundamentals of this thing, it actually is a pretty damn good store of value." Uh, and it has the key store value things like multi-ig,

safe infrastructure. Uh, it has privacy, you know, the privacy protocols like rail gun, zerox privacy, all of these things. It has some of the features of Zcash. It has a road map that's going to be quantum resistant. So, it has a lot of the fundamentals in place. It's just the narrative really hasn't hasn't kicked for it. And I think that's the thing that's uh that's actually holding it back. But at some point, >> it's going to have a run. there the there's a something um shot in Freud in me when I see the implosion of the internet and I'm like actually this is kind of what Ethereum was supposed to be like supposed to replace like the original vision of Ethereum with like a whisper and swarm and IPFS was like yo

the internet let's let's like rebuild the internet and now I'm watching the internet like crumble I know that's being dramatic I don't really know the scope of what's going on uh but like a part of Ethereum's like uh social contract contract was like we're going to like rebuild the internet on cryptography with hardened with everything super hardened and so like >> it's too big. It was too big of a scope and it it was never going to happen and I >> Yeah, but like now kind of the environment that it was built for is actually happening and so I do kind of consider that. At the same time, I I take your point of like it's actually like fundamentally it's in one of the best positions, but what about the the when you control for the market cap of it and so it's got a very very high

market cap, it's also well positioned, but it's got a high market cap. >> I mean I we'll be talking about gold a little bit later in this episode, but like what gold 20 trillion, 30 trillion, something like that and fusion could knock out gold. I mean there is a massive market for digital store value assets that can make it through this AI era I think >> and it's going it's not just going to be one I don't think I think it's going to be a portfolio of those assets and all I'm saying is I think Ethereum is positioned well one thing that the side quest for L2's actually did for Ethereum that is net beneficially I think is underrated is it very much enshrined the EVM as a standard you know and it's has now a large group of wellunded world

class developers working on the EVM and that wasn't necessarily guaranteed to happen 5 years ago, 7 years ago before the uh L2 road map, but now you have Coinbase hacking on it. Now you have like you like Monad, all of these teams, even Hyperlid, it's all EVM based. >> So the amount of uh dev firepower that's gone to the EVM, >> um is an underrated aspect of success of the LT road map. I think >> this is true. This is true. All right, next up we're going to get into the movers of the week. I got to talk to Ryan about what this Pearl thing is. Also, Lighter held its Q3 investors call yesterday. There's a bunch of tidbits of information to get out of that. We're going to talk about Zcash, VVV, and also this silent dino coin from the pre207

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Ryan, have you heard of Pearl? I have heard of Pearl. Yeah, it's been on my radar for a bit and I'm late to like actually diving into and re researching it because it's been one of the tokens of the Zeist of the last like two weeks. It's up 30% uh this week. I think it was up like even more last week. Uh Pearl, there's been a swath of kind of what I would call 2017 style coins, which are like let's take Bitcoin but fix it style coins. One of them is uh Quantis like Naval invested in it. Uh it's a quantum secure postquantum bitcoin. 21 million units. What does this drop? It's a store

of value. It doesn't try not to be anything other than Bitcoin except it's quantum secure. Quant quantis is that pearl is kind of similar. It strips out the Bitcoin proof of work and replaces it with basically AI inference. So you pay Pearl tokens for AI inference, but AI inference also secures pure the pure Pearl the blockchain. Uh so there's like a feedback loop there and it has been the best performing AI inference do you mean like basically like GPUs? >> Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. So the idea is that the same computers that like do inference also secure uh the Pearl blockchain >> as a byproduct. They can mine >> it feels a little bit like merge mining.

Remember merge mining? >> Yeah. Okay. >> Yeah. It's merge mining with like AI inference uh and and Bitcoin. >> Still 21 million. The goal of Pearl is to be a store of value asset. >> Okay. [laughter] >> Yeah. I need to I need to uh get the team on the show and actually like talk to them about it more. market cap of this thing is um fully diluted I should say 4.5 billion >> small dude like pretty chunky pretty chunky >> sure but I mean there's just like market cap that's available in the market uh 750 million or so a lot I'm sure to be >> mind but yeah the current pearl everyone knows like okay 21 million units but it's being traded at a $4.5 billion valuation

>> what's what's the what's the Quantis market cap the FTV of Quantis right now >> um When I saw that, that was like in the billions as well. Is it? >> Uh, no. It's that red orange one. >> QTC. >> Yeah, the spooky October themed one. >> I don't know what's going on with Coin Gecko, but the the max supply is 21 million. It says that 21 million times the price is uh 1.9 billion. I don't know what the difference is between the market cap and the FTD. I don't know what that calculation is, but this is trading at 1.9 billion. So, there are two Bitcoin like clones that are trading in the multi-billions of dollars. That is not something I kind of ever expected in this.

>> Well, that feels like 2017, right? >> Pretty much. >> Yeah, it does. It does, but they're actually like holding up. Uh, okay. So, that's Pearl. That's what the the mover of the week. Congrats to all Pearl holders. You're up 31% this week. Uh, Lighter up 25% this week. Lighter had its Q3 investors call yesterday. Uh, some of the big headlines were uh they file they are going to file in November for both a DCM and a DCO license with the CFTC. And DCM uh is basically the a derivatives platform like a marketplace. And then the DCO is what allow is like their ADL rules. So it's their liquidation uh liquidation rules the the things that allows them to do uh basic derivatives clearing house related

activities. Uh so they're going to file for that in November. on the call there was a quote from Vlad where he said as soon as we have these licenses in place we'll be able to integrate it in different part of Robin Hood's US offering as it makes sense for their product both on the pers and options side of things. It would be nice to get the Robin Hood confirmation but like Vlad the founder basically saying like oh yeah once we get these licenses then we we are in the main Robin Hood US app which is as of anyone who's holding lit is kind of like one of the main entre that we're looking for in terms of catalysts. It's so cool that there's an earnings call for this. I gotta say, >> yeah, they do a really good great job.

Yeah. >> And it's uh what is um lighter right now in terms of market cap? It's in the low billions. It's like one to two billions single digit billions. Yeah. Uhhuh. >> It's refreshing to get a company and an asset you can buy in the low bit billions, >> you know, fully diluted 3.5 billion market cap, 900 million. It's just like the stock market these days, companies waiting later and later to actually IPO. Everything's staying private for longer. Even something like SpaceX was a private for like 12, 15 years, something like that. Totally. You can't get it until it's in the trillions.

>> Uh I wish there were more token businesses like this in crypto where investors could buy at um the lower market caps and in much earlier phases and they were public and open. They had earnings calls. This is a great model. >> Yes. Yeah. Yeah. We are here to drive value to our token. Every quarter we are going to talk about the work that we have done to drive value to our token and we're also going to give investors who are holding our token clarity about what we are trying to do. It's great. >> Yes. And it works when there's onchain revenue especially when there's not when it's like we don't know what the token does. It's a like utility token or whatever then it's like much less interesting. So I love this new crop.

>> Yeah. Yeah. The last quote uh that I really like from the call was uh spot per and options all margined together. That's kind of the the gold standard that lighter is really going for is just the one single derivatives platform with the spot market that all has one single unified margin account that's also a ZK circuit layer 2 on Ethereum. To me, it just kind of feels like the final boss of all exchange infrastructure inside of crypto or outside of crypto. Like you have to imagine that you're like the NASDAQ or the in the New York Stock Exchange and you're looking at like the powerhouse of Mac minis that lighter runs to do its circuit verification be like dude we have nothing like that.

>> That's a win for the LT road map as well. >> It totally is. It's not a win for Ether yet but the asset. [laughter] >> Uh the other company who does a phenomenal job of reporting data in public uh Venice. Uh Venice is the third best mover of the week up 20% this week. Uh one shares launched its Venice token ETP an exchange list a traded product uh backed by VVV. So it's a ETF in US terms. This is on the Swiss stock market. Um has a fee. Anchorage and BO are the custodians and has a little bit over almost $1.5 million in AUM. I think this is kind of funny because Venice is a token. It's a private company with a

token, but now it's on the stock market. And so, and this is like Venice's [laughter] like IPO moment. This is how they IPO. They IPO with the Venice token going into ETPs or ETFs that trade on on liquid stock exchanges. >> Dual. Everything's becoming dual track. Hopefully, that's the direction of travel. >> Totally. Uh Zcash up 14% on the week, but honestly, I actually kind of think the uh interesting story is Monero. Monero >> is that the dinocoin you were >> the dino the dino privacy coin with strictly inferior privacy asurances is at all-time highs. Uh not breaking all-time highs is like at previous all-time highs but like Monero and also Prawn are these tokens that no one really talks about or has in their

portfolio but have just been on a [laughter] >> Yeah, we're embarrassed about to have them in the industry but they are just monsters in terms of price performance. Uh Monero's up like 20% uh this week, but I mean this chart is just a absolute monster. >> Well, it came out of that era too of the let's fork Bitcoin but add one feature, right? And so it's like well forking Bitcoin same, you know, monetary schedule, you know, proof of work, everything else, but the one feature is sort of privacy, right? And so that's what Monero's been doing ever since, I suppose. >> Was was Monero a Bitcoin fork? I don't know if it was technically but you know that whole era that whole of the same Yeah. Monero is not a Bitcoin fork.

Yeah. Okay. But I get I take your point like a simple blockchain meant to do one thing. >> Yeah. Similar to Quantis, right? It's just like Bitcoin but just like one more feature. >> Just one more feature. Yeah. Yeah. Yeah. >> Uh okay. Let's talk about Black Tuesday. The worst >> Black October. >> Black October, I should say. The worst week for cyber security maybe ever. It felt like um actual Y2K or something. >> Yeah, it feels like we're doing Y2K. >> Yeah, but for real, you know, like not just the uh actually things seem to be breaking. So, so when did this start?

How did it come across your desk? >> The first tweet that I saw was from the NSA, not an account that I follow, [laughter] let me tell you. Um, but they tweeted out, "Effective immediately, all organizations using PHP for their systems are advised to be prepared for an update addressing two critical vulnerabilities. PHP is widely used for web applications. These vulnerabilities often provide a direct path to the server's file system or database." Basically saying, "Hey, if your website's running PHP, uh, you are extremely vulnerable and you need to have your finger over the trigger to do this update that patches this hole." Uh it kind of spiraled after that. The Japanese prime minister tweeted out an urgent request that I would like to act

on you to act on tonight talking about the PHP vulnerability. And that was just PHP. This topic is a bit above my pay grade. But overall yesterday was just a complete nightmare for cyber security. Uh Railway, NodeJS, Light LLM, GitLab, OVH Cloud, CLI, Open Clode. I don't know what these are, but these are all technical things that apparently all had vulnerabilities found. >> Just libraries, right? Open source code libraries. >> Sure.

>> Sure. >> Yeah. >> Well, I mean PHP alone though, so so much of the the internet is based on PHP, right? Like Wikipedia, WordPress's whole platform, I saw some estimates like 30 to 40% of all websites, you know, might have this type of a vulnerability if not patched. And the the crazy thing about this vulnerability is it's a vulnerability in sort of the the codebase itself, right? In PHP itself, most vulnerabilities we see are, you know, a vulnerability with a single app or a single, >> you know, um uh I guess website. This is just like everything based on it. And it's still a sophisticated exploit that kind of uh requires somebody to work with an AI in order to exploit probably.

But the exploit itself was found via a GPT 5.6 soul. So that is >> which is by the way the model from from OpenAI that you have in your Claude app. It's like the consumer version. >> Consumer grade in public. >> It's consumer grade. Yeah. >> Uhhuh. >> Yeah. So this was found via OpenAI. They have a patch the planet program. Uh it's a good thing they do. Working with AI security firm in California. They discovered some of these bugs. a couple months ago actually and so they've been coordinating quietly in the background uh towards this announcement with the PHP foundation foundation and everyone affected but 2 months it's been known by at least somebody that's a long lead

time for some black hat actor in order to frontr run that and once if they can attack a website or an app with this vulnerability they get some level of root access to the server so they could you swap out the website for a wallet drainer or for I don't know some sort of um malicious code that infects your computer. Like so it's it's a pretty big deal. >> Yeah. Yeah. Uh it it it just feels like we're in a big fog of war because we don't know what the white hats of the world, the open AI, like anthropic US government, NSA, what who are they talking to and how are they patching the world's most critical stuff? Because

like right now if you go on Twitter it feels like the world is on fire. But I I'm getting the idea that these organizations, you know, OpenAI NSA people have been knowing that this stuff like this is coming down the pike for a long time and they've been like fixing the worst of it and now it finally just actually the virus day actually comes. There's a pretty interesting uh call it copy pasta on X of a story. Who knows if it's real or not, but I think it does a very good job kind of illustrating the significance of what's going on. And so this is an account called uh it unhinged. Security called me today at 6:12 a.m. Patch every PHP server immediately. I asked what happened. Two critical vulnerabilities. Remote code

execution. No authentification required. Cool. How many PHP servers do we have? According to our inventory, we have 12. According to reality, nobody knows. We found one running WordPress. We have three running old internal tools. One under somebody's desk. Two inside vendor appliances. A forgotten employee directory from 2016 and a server named PHP old do not touch. [laughter] Naturally, that one runs payroll. Then we found a PHP 5.5 box. I asked who owns this one. The documentation said Brian.

Brian left in 2019. We called Brian. He said, "Oh, wow. That's still running." Excellent. By 8 a.m., leadership joined the incident call. CEO asks, "Can the hackers actually get in?" And the security team responds, "Potentially yes." CEO says, "Without a password." Security responds, "Yes." CEO says, "Then why do we need passwords?" [laughter] Which is not the lesson. Uh, [clears throat] finance asked if we could wait until the weekend to patch because downtime affects revenue. Security explained that the alternative was letting strangers execute code on our servers. Finance asked for a cost comparison at 9:17 in the morning. Somebody suggested temporarily taking the vulnerable websites offline. Marketing refused because their campaign is going

live. So for the next hour, the company officially decided to maintain a landing page for 20% off of webinar registrations is more important than preventing remote server takeover. We finally passed everything we could find. Then our scanner discovered another PHP server host name temp. PHP 2014 uptime 4500 days. Nobody knows what it does. Nobody owns it. Nobody can shut it down. But every time we block access to it, the warehouse stops printing shipping labels. >> Oh my god. >> Security has it classified as critical infrastructure. It is running PHP 5.4. The vulnerability has existed longer than half of our employees. The emergency patch took over 4 hours.

Finding out what PHP actually runs took 11. The internet isn't held together with code. is held together with servers everyone is afraid to turn off. I think that does a good job illustrating the sticks, stones, and duct paper version of the internet that we have been standing upon for all of our time and kind of what I was referring to earlier which like you know Ethereum wants to like rebuild the internet in this more secure hardened very adversarial environment way. Now the internet is an ad adversarial environment. you know, you have to always like Facebook is getting attacked 10,000 times a second, but that was before AI. Like the level of adversarial nature of the internet is that's coming down the pike because of

AI agents and AI swarms is going to 10x. And you have to just like tip your hat to blockchains, which are code systems that are supposed to thrive inside of adversarial environments. Yeah, I think that there's the hope and of course we we we feel good on the week being in crypto being like ah the rest of the internet's affected but but crypto is fine that we have been sort of in a hardened environment that has been exposed to all of these attacks for so many years and you know we're we're more hardened we're more anti-fragile we're we're built to outlast them versus the rest of the internet which is a bunch of duct tape and poor IT guys trying to figure out what does but and try to keep

up with the world. But it's very clear that as these systems get more and more capable and honestly just have the time to sus through all of the code and libraries and find these exploits that these types of events are going to happen more and more. One AI researcher said it feels like March 1st, 2020 for cyber as of course the precipice of of COVID, right? When we were just like it was just starting to land in the narrative in in consciousness like what was happening. Oh, this is not a cold.

Like what? Okay, this is something different. This is something new. And so he compares it to that time period which is also part of the story this week. It's PHP exploits and vulnerabilities in this codebase that have been in existence since 2012 and just so obscure no one noticed. Next week, what might it be? Yeah, >> we're we're hoping it's not our crypto systems because we're [laughter] we're so hardened and great, but >> who knows what it could be. And that's why he's hearkening this to like March 2020. >> I did see a tweet that was like you here's what you need to do. You need to get a Starlink in case your internet service provider goes down. you need to have three months of cash in your pocket at all times. You need to go buy groceries. And I'm like, okay, whoa,

whoa, whoa, whoa, whoa. That feels a little too doomer for what we're going through in this present moment. Well, there is a question. This was a tweet from Madison Mills. What about um our our vaults? You know, the world's banks, for example. This is a scoop from her. Major US banks are detecting unauthorized thirdparty AI agents inside customer accounts, including some attempting to take actions that appear to be independent of user instructions, sources told Axios. The findings have alarmed banking executives who are racing to restrict access to their systems as AI moves at a velocity faster than financial institutions can respond.

So what will respond faster do you think sort of the hardened crypto ecosystem to these types of events or traditional banks? Because at some level they're up against similar types of of threats nowadays. I know crypto it's it's bearer assets whereas I don't know banks maybe they could just like restore the ledger from a backup or something. But I do think that there's something to this and I wonder how long it will be until we see some sort of AI agent heist from a bank and I'm kind of curious as to what that might look like.

>> Yeah. Yeah. Also, at the same time, uh AI agents inside of customer accounts, what if that's my muse? What [laughter] if that's my open AI do? How do they know that it's actually not me just telling the bank that, hey, uh send money to this person because that's what I need to be have done? like the the differentiating between good bots and bad bots is not possible. So where are we at the end of this? Are we like from a crypto perspective? Obviously the entire internet is going to need to go through months uh of hardening uh as these AI agents get smarter and saturate more and more places and that's going to be a rough process. So that realization is now hit. Uh what about crypto? Like

are you It's hard not to be excited about crypto because like we've already cho chewed glass. Like we're already over the chasm to some to some degree. Like the worst they could do a billion dollar hack. That happens all the time. >> Like I I don't know. I go back and forth on this because if there is an AI agent heist from like people's bank accounts, like there's you don't stealing money from bank account doesn't work very well because there's KYC everywhere. And so like like your the money can't go places. They can just they can literally just take it back.

>> That's not true with crypto. Like if there's a heist of crypto, which happens all the time, the money's gone. Uh at the same time, like our systems are more hardened because of that fact. Um I don't really know. I think I think I just need to kind of sit and watch and watch this one play out. But it's hard not to at least see why crypto fits the future of the internet more than all of these like paper and duct tape systems that we were like talking about a second ago. >> Yeah, I absolutely agree with that too. Uh, all right. Coming up next, David, we got to talk about the OC. They just gave crypto a big win. This comes in the implementation of the Genius Bill. The banks are pretty pissed. We'll talk about that. also a startup that turns mercury into actual gold via alchemy.

This is a fusion startup. [laughter] What's going to happen to goldless we never saw coming? >> Yeah. Uh, is Peter Schiff freaking out? I guess we'll talk about all that. [laughter] Before we do, let's thank the sponsors that made this possible. Bankless Nation, we've built something for you. Introducing the Bankless MCP. Chat GBT and Claude are great at a lot of things, but ask them anything beyond the basics of crypto about protocol mechanics, tokconomics, or just what happened last week in crypto, and the gaps will start to show. The problem is context. Bank list, on the other hand, has spent almost a decade building one of the deepest archives of crypto data anywhere. More than 2,000 podcast transcripts, 10,000 articles, and countless conversations with the people actually building this industry. [music] And now we've structured all of that

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Cheers. Some exciting news. We are launching a new podcast to help people figure out the crypto cycle, how to navigate it. The best crypto cycle investor I know, his name is Michael Nato. He runs the DeFi Report. This is the guy that sent me a sell alert before the 1010 price drop happened. His cycle analysis has been absolutely on point. I've been following him for years and this year we started recording weekly podcast episodes. Each one we get into his portfolio, what he's holding, the market structure, entry targets, fair market value of Bitcoin and Ether, and where we are in the cycle. There's new episodes that are released every Wednesday. They're 30 minutes, [music] they're short, they're punchy. I think this crypto cycle is harder to navigate than most. So, let's do it together. Go subscribe to this podcast. Search the DeFi Report wherever you get your

podcast YouTube Apple Spotify or find a link in the show notes. There's a new episode waiting for you. Now, >> we haven't really talked about it much on bank list because it's a bit out of our scope, but there has been a pretty wild fusion and fision like kind of startup uh VC froth froth market like there's a lot of excitement in the fusion and fision space still very early like earlier than quantum uh quantum startups by a lot. Uh but like Sam Alman for example has invested in like a fusion or fision startup. Uh it's one of the talks talks of the town if you're into Frontier Technologies. There's this startup called Marathon Fusion that tweeted out that they are targeting the alchemy of gold. [snorts] Demonstrated

high rate alchemy trying to turn mercury into real stable gold. And like we know that this is possible. We know that it is possible to take mercury molecules and then turn it into gold. The reason why we don't do that is because it's like wildly economically inefficient as in it takes like 10,000 times the cost to produce the gold to uh to power that operation in the first place. Uh but with AI with frontier technology with more power we can actually just that is just turning this into an engineering problem.

>> Yeah. The uh the tweet from Marathon Fusion was they uh turned Mercury into real stable gold, beating CERN's record by a factor of 10. Okay. I'm the first thing >> set in 2025. So CERN, what whatever the hell CERN is, set that record in 2025. So a 10x in a year and a half. >> Yeah. Yeah. So the but the thing is of course this is a very this is a trace amount just kind of like very very >> tiny flooding the market. Yeah. >> But uh Nick Carter tweeted this out. He said, "This is gold's quantum FUD, but it's way worse because you can't software update gold." And so, Fusion had not really been on my radar too much with respect to okay, what are the threats to gold's uh monetary premium.

You know, other things had been in the past. For instance, people talk about asteroid mining >> and [clears throat] as space gets cheaper um that will certainly become feasible, but that still feels very much decades away, which is probably why Ray Dalio talks about gold and ex extols the virtue. If you're worried about debasement, uh, use gold. Why not Bitcoin, Dalio? He says, well, Bitcoin can be hacked. There's this quantum risk, all of these things. I wonder if Ray Dallio has considered the fusion risk, David, because [laughter] in looking into this, and again, this is at a high level. I think Nick Carter could actually be right here. This is not the first time I've said those words, by the way. uh not right now, but

we're talking possibly 2030s even where this technology starts to become real and the physics itself is real. So you can turn mercury into gold, okay, through a fusion reactor. Uh all you need it it produces this as a byproduct. Um so all you need is gigawatts of um fusion essentially. And the more that's all you need. Yeah, I've got that. I've got that in my closet actually. Gawatt of fusion.

>> But this is a real possibility. And by the way, Nick thinks this could be accelerated by AI. But if you had a midsized uh fusion plant, say midsize 1.5 gawatt, something like this, gatt hours, the same size as as some of our uh uh efficient nuclear plants. as a byproduct per year in addition to producing that energy and that power it would produce about three tons of gold. Okay? So three tons of gold as a byproduct. And if you scale that out and you said we had all let's say all of the nuclear plants that we use f uh fision on today and you said those we had the same amount only fusion plants. Okay, we

would be adding a meaningful amount of gold supply every single year to the market. So maybe like doubling the amount of gold supply in the market. And Nick is actually right. There's no difficulty adjustment on that. So if we unlock fusion, >> okay, for every gigawatt of fusion that we produce, we can actually produce gold as a byproduct. And as those gigawatts scale up, more gold supply will also scale up and we'll have more gold in the market. And this technology, while not ready today, could start to be a force in the 2030s. And certainly 2040s, like it seems very re reasonable. And

>> I know people say, well, gold is gold. Like it'll always be always it's lendy. It always has a monetary premium. I mean that was true of silver because of scarcity. >> Exactly. Okay. That was true of silver at one point in time and then the Spanish found silver mines in uh you know um >> uh in the new world. >> This is the one thing that punctures Lindy. The Lindy is the Lindy because of the scarcity, >> right? And it's not something that could be updated or patched, >> you know, the the way Bitcoin can by way of quantum. Anyway, it's not enough for me to kind of look at my portfolio and be like like, "Oh, sell my gold."

>> But it is a factor and maybe Dalio doesn't have to be concerned about it because it's not going to happen in his timeline. But I think if you're a millennial, if you're like 40 or under and you're thinking about you have a retirement timeline to port your portfolio totally. >> Yeah. Yeah. Three three things. There's one statement in their tweet that I think we should all pay attention to. quote, "We've reduced alchemy to a series of difficult but tractable engineering problems. With AI, engineering problems are now simple. You just need to throw AI at it and then with time you'll get it." The other thing is like asteroid mining is also real. How can you look at what SpaceX is doing with launching rockets and then

capturing them with chopsticks and being like, "Oh yeah, they're totally not going to go mine gold asteroids." These are two separate engineering problems that can flood the market with gold and gold is a long duration asset. As you've said, people buy gold for like long-term storage and so therefore and markets are forward looking. So all this engineering problem, all it has to show is some kernel of success somewhere and all of a sudden the market's going to start pricing that in. And this has happened in the past with like silver again, new world silver, the Spanish, you got a century of devaluing of silver when massive amounts of supply came on the market. I kind of think what this means

is that if you are thinking about store of value as a single asset, I think you've got that like I think that is the incorrect view of what store of value actually is. I think store value is a portfolio of assets both digital and physical that the state can't inflate or seize. I mean like nation states >> and it has to be a portfolio. I don't think you can go all in on gold or all in on silver or all in on Bitcoin or all in on Zcash. I think it's a mix with some expected value outcome for all of these different assets. That's my >> conclusion. I think you can go all in on Zcash for that. [laughter] >> You can.

>> Yeah. >> All right. Shall we get into stable coins? Yeah, sure. >> This is not Sarah store of values. Uh, okay. So, the OC has finalizes Genius Act rules. Okay. Crash course. We passed the Genius Act. It's a law. The law takes effect January. If you think that you have been operating under the Genius Act up to this point, you are wrong. >> Really? >> Genius The Genius Act takes effect in January. It's always been this way. >> Okay. >> Uh and so the the OC has finalized its Genius Act rules. Uh and uh the banks are pissed. The banks are pissed.

>> Why? >> I don't know why they're pissed. They shot themselves in the foot by not compromising on clarity. Uh and because the proposed limits on stable coin rewards are gone are is unresolved. So the whole bank versus cryptofight over yield kind of remains in its gray area. Stablecoin issuers cannot pay interest on stable coins. They cannot pay interest on the uh the yield that they get from their T bills. They cannot pass that along. But they can do what they've already been doing, which is give stable coin rewards, which is a huge loophole, which is the thing that the banks were pissed about, which is why they tried to come back to the table after the Genius Act was established to fight in Clarity.

Clarity failed. And so we have the rules that create this loophole in the first place. So the banks did not just formalized the loophole. They formalized correct the uh the leaving the door open to Coinbase >> giving yield back to its customers. Let's say on USDC. >> Yeah. It says that they will assess arrangements like reward arrangements case by case. Uh existing programs have not got received blanket approval. Um but like the the status quo is ex is uh tolerable. It's like that the status quo is the status quo and so rewards are being paid and that will continue >> and you know this is a win for crypto because all the bank lobbyists are pissed. This is the American Bankers

Association. The genius rules undermine uh what we're trying to do. Banking advocates pushing back against OC's finalized rules. So if the banks are angry about it >> and they are rent seeeking then that means uh US consumers benefit and obviously crypto benefits as well. >> This is good for us. Yeah. Yeah. Yeah. Last few things. Alpen glow is live on Salana mainet. That's the the biggest software update to Salana probably ever. Uh finality goes from about 12.8 seconds to 150 milliseconds. Uh fault tolerance rises from 33 to 40% if you care about that. Um but it was a success. Went off without a hitch. Um now vote transactions aren't onchain which I think is kind of nice because that

always was annoying to me uh that they would put votes as transactions and count it as TPS. That's always [laughter] Uh but congrats to Salana for for I I I think this is like if Ethereum had his like uh there's no correl there's no cor I'm not going to try and do that. >> No, I think it's a different project entirely. I don't think Ethereum is trying to get to 150 milliseconds at all. >> Yeah, I was trying to say no. This is like Ethereum's merge or EIP559 because they're very very big upgrades, but still it's just not the same. It's just not the same. On the Ethereum side of things, Aerodrome and Velro merged to just Arrow. Uh so Aerodrome and Vel Drrome, two separate projects from the same team. One on the OP mainet, that's

Velrome, and then one on bass, which was Aerod Drrome. Um they I don't know why they did this cuz I I was a big drum holder. >> I always found it confusing. >> I don't know why they did this. I I was bummed because I I was a big drum holder cuz I really like the project and then they and I and then they were going to deploy on base. I was like sick. this is going to be a huge catalyst for my vel tokens. Uh and then they deployed aerodyome on vase and they just minted a brand new token. I'm like, wait, [laughter] what? What am I looking at? >> The good news is if you held those fellow drone tokens, they become arrow tokens right?

>> They become arrow. Yes. Okay. So, all if you are a arrow or holder, you will need to upgrade to a new token still called arrow. That true. Okay. If you're if you're an arrow or holder, you need to pay attention to something. Um, [laughter] but it's now just arrow. >> I'm reading this. All existing arrow and token holders will need to upgrade to the new token arrow. But specifically, I think you can redeem both for arrow tokens right? >> Yeah, but when a token is called the same as the other arrow. >> Okay.

>> It's all arrow now, but >> in [laughter] one token this entire time. >> Well, I mean, I hope we I guess enforce better norms around tokens in the future. I remember there was a time where we didn't really understand tokens or I I'm not sure but do you remember like Nosis I feel like was guilty of this in the past too where they just like issue a token every single time they do a new >> contract new token. Yeah. [clears throat] >> Yeah. Imagine if Amazon did this. Instead of buying like Amazon stock they had you know Amazon for shopping. They had Amazon for you know cloud and you don't get that all >> compounded together in one single asset.

>> Buys Instagram and then issues Instagram equity instead of Facebook equity. part of the reason that tokens have been so uninvestable and confusing. But anyway, this is good news. We're we're going back. We're going back to something that's much more normal and aligned with uh what investors want as far as outcomes. >> Yeah. So, congrats to the team. I know you guys have been working on this for for a long time. >> Uh that'll be it. Uh Ryan, I don't know. Uh the internet might not work a week from today. So, I don't know if I'll see you in a week, but if the internet's still working, uh, I'll see you for the fourth week of October weekly rollup.

>> That sounds great, man. I think it'll be fine. So, I'll see you then. >> Crypto is risky. The internet is also risky. You can lose what you put in, but we are headed west this frontier. It's not for everyone, but we're glad you're with us on the bank journey. Thanks a lot.