Are You Ready For The Merge? & Coinbase's MakerDAO Proposal | Roundup

Transcript

like i'm not trading around the merge or anything like that but i am kind of setting myself up to maximize profit around that's your distinction that's yeah and and here here's kind of what i'm doing [Music] this episode is brought to you by core the brand new non-custodial wallet that offers a seamless and secure experience on avalanche you'll hear more about core later in the show what's going on everyone uh welcome back to another episode of empire we got the roundup we got santi hope you guys all had a really good week we are one week out from the merge so we're going to spend a lot of time talking about the merge talking about how santi and i have positioned ourselves but before we do that santi how are we feeling my friend tune great uh good to be here how are you good good

what what's uh i feel like you're in like a chipper mood today i feel like you're in a really good mood no you know just uh there's a lot of i mean it's kind of surreal that the merge is gonna happen next week and uh there's some good stuff happening today on the crypto side of things and so yeah it's always yeah no it's not a good mood what's not to be you know like yeah it's a good way to end the week you know recording this thing i like recording the days that we record we always typically record on thursday thursdays are one of the best days of the week because you're closer to friday it just feels it's a nice day what is like your ideal week or ideal day like are you in meetings are you investing are you like how much time are you spending working do you like work out what what's

like a day in the life asante oh boy well is this a going to be an episode about that well i don't want to make an episode about that but i typically like to reserve and carve out the morning is just alone time me time i love to read uh multiple newspapers and then also what's going on in crypto and check you know across a variety of sources crypto twitter and telegram and yeah i keep the morning to just exercise and and just reading and try not to have any meetings and then i stack meetings most of the time just talking to existing teams and new teams um and i've had a really good set of for the last three weeks i've been telling it you know a number of times but i've had really interesting discussions of teams building things that i've like haven't thought about or just new use cases and i'm like oh this is pretty

interesting like pretty crazy pretty out there but like uh i'm always getting really excited uh about teams that are uh i think crypto founders or people coming into the space are not shy in their ambitions uh and it's always really exciting to kind of see that even yeah everything that's going on so yeah by the way so talk speaking of teams that we're excited about i remember like three episodes ago or two episodes ago we talked about a web 3 crm you remember that yeah i'm going to put out this like call to action i was like that this should exist so i got like probably 10 11 12 dms wow i looked at a bunch of of 12 teams building this uh end up getting on calls with five different teams i'm gonna write one check there's there's one

there's one team that was just amazing i'll have to introduce you to them but like what you can do with is kind of like a combination of if you know like looker or tableau um like these these business intelligence tools it's kind of like a looker meets like a zoom info like con for like contact uh discovery so it's like zoom info meets looker meets a crm like salesforce hubspot it's really interesting they're already working with a couple protocols um yeah it's really really interesting so that's fascinating yeah when you think about it like uh if you're a marketer if you're someone that's not really deep in crypto just think about it this way like blockchains are super data rich and the amount of information that you can extract from that and then take it and and glean a lot of insights

is going to be super explosive like i think that a lot of people are kind of not realizing that and from from a marketing standpoint of your consumer brand then you can mint nfts to your user base and then see everything else that they're doing is and we talk about privacy here too which is important but as things stand you know it's pretty crazy what you could do uh just by mining or just by looking and gathering insights from like ether scan or some of the block explorers it's awesome yeah yeah exactly there's um there i'll we'll put a link in the show notes there's this guy tomas tungas i don't actually know really what he does um he's a vc at red point i think got it okay um [Music] he laid out he had his good blog post on

um the web3 marketing stack the next big wave in crypto and he kind of uh diagrams it all out from like the advertiser flows into the analytics flows into segmentations crm flows into the segmentation you've got the blockchain data infrastructure so i i don't think that these like uh building the a crypto native web three i don't think they're going to be directly analogous to like i don't think the next crm for crypto is going to look like a sales force or hubspot um but but i'm starting to get really excited about it so yeah yeah all right so we got the merge coming up we got the merges predicted to occur between the 13th and the 15th are you taking any bets are you like how are you positioning yourself are you just holding eath and and riding it yeah business as usual i think i'm going to

leave the arbitrage and acrobatics and to more sophisticated players which i'm not one of and this reminds me a lot of there have been prior instances and look robert from compound has a great um tweet thread that says like guys beware like don't try to get cute or creative there's going to be probably a lot of volatility um a lot of maybe actors out there that are gonna try to scam you just just my best advice and i don't like giving advice but in this case i will because i feel like the right thing to do for like 99.9 of everyone out there is just like sit tight don't act on impulse when things get out of control and look things might can be

i don't think they'll be like super orderly even though certain protocols like abby have taken i think the right measures and steps and we'll talk about what those are but if you're just a normal user just kind of like sit tight because i feel like and you've done some things jason that you should talk about just for the normal user that you can do today but in and around that event i wouldn't try to get cute or creative around like trying to maximize and squeeze profit and try to like get the most amount of like eath pow and then swap them for like ether usdc it's just yeah yeah all right i know you're not getting cute with it but if you were to get cute with it here here here are a couple things no no here are a couple things that i'm that i'm doing and that i think folks should probably be thinking about

with their eth and spend some time this weekend like kind of setting themselves up well i actually don't think uh you really necessarily i'm like i'm not trading around the merge or anything like that but i i am kind of setting myself up to maximize profit around that's your distinction that's yeah and and here's kind of what i'm doing so like the first thing is like figure out where you hold your crypto um so if you hold if you hold your crypto on an exchange if you hold your eth on an exchange the first thing to do would probably be to check to figure out whether or not the exchange supports the fork so again as a reminder eath is going through this upgrade it transitions from proof of work to proof of stake after the transition eth miners can no longer mine so what the miners are doing is

they're forking keeping this proof of work version so they can continue mining there are a couple things you can do to get the eth proof of work token so the first thing is you have to hold eth on a wallet that supports the fork so the easiest thing would probably be to have full custody of your eath on like a hardware wallet like a ledger um if you're holding eth on an exchange you may or may not get the fork token so the first thing is if you are holding your ethernet exchange uh i think some exchanges are either already putting out policies or will put out policies on whether or not you'll get the fork tokens for anyone who remembers the bitcoin forks of like 2017 2018 uh you usually do like some exchanges like i remember coinbase supported a lot of those forks in that they would give you

the they would airdrop you the tokens but it would usually take like three or four or five or sometimes six months so keep that in mind is even if an exchange sort of was lost out on pretty the time value money there was high in that current very high there are some exchanges already have ious and like the implied market cap of ethpow is like one to two percent of the ethereum market cap so that and if you back into that it's kind of like 13 to 15 bucks yeah um but yeah yeah so okay so that's the first thing to do is like figure out where you're holding your eth uh hopefully you know that already and then figure out what the policy is if you're holding it on an exchange like are they going to give you that uh the the proof of work tokens the second thing is uh bridge all your

tokens back to the eth main net so this is this is important you are not going to get any eth proof of work for your eat that's held on like optimism arbitrarum polygon any other layer two scaling solutions it's probably a good idea to move back to the main net before the merge to get those eth proof of work tokens so that's that's the second thing uh the third thing is probably uh is probably unwrap all your wealth or wreath or i don't i still don't know how to pronounce it wrapped eth w eth to eth um there's i'd probably like there's probably going to be a dex on the new eth proof of work chain that will help you unwrap your wrapped e proof work token but like it's going to be probably a pretty unstable ecosystem i would just unwrap it before

the merge um i would unwrap it before the merge that's the third thing the fourth thing is remove liquidity from protocols you are not going to get any proof of work tokens for eth that's being used to provide liquidity so probably a good idea to withdr unless you're getting crazy rates somewhere you should probably withdraw now and provide liquidity again after the merge um and i you you have to assume there's going to be a big liquidity crunch on protocols uh in in like the coming week as more folks do this so that that again that might have some tax implications folks if you're using ave is different if you're using maker and some other protocols so anytime you're yanking liquidity out of a protocol you know this is not tax advice but just bear in mind that sometimes it has tax implications uh

depending on your jurisdiction so um yeah it's important to it's onto the tax man coming through for you but i feel like a lot of times like if you're if you're converting i just finished i finished my crypto taxes and it was not pretty not a pretty sight it's it's it's important you know if you're my understanding is and we'll have to have like the token tax guys here to sag from who does great work there um and i've used them and this is not in paid endorsement or anything they've just helped me a lot is when you deposit your ethan ave it gets converted into a eth right and that is a token conversion event that is taxable which is different than wrapping um your token which is not so uh just bear that in mind is that what you use santi for taxes

well i mean i've used like the three different providers at once but one of them was token text because again like you want to compare and make sure that like uh it's very comprehensive um but yeah token text is pretty good okay so those are the steps that i would do to set yourself up for success it's pretty easy things if you want to get cute with it as santo was saying you could borrow eth from aven compound so you're going to get any there's going to be basically like a snapshot i think so you're going to get eth proof of work for any eat that's held during the snapshot this what some what actually a lot of folks are doing is they're saying okay there's going to be this snapshot that looks at how much ethic i have held at the merge this means it probably makes sense to borrow as much eath as

humanly possible uh which is now starting to happen uh you're seeing rates on ave and compound go up to like 30 35 40 um you can get cuter you can like monitor the steeth to eat market you could buy or sell steath as we get closer to the merge um depending on what the kind of so-called peg is doing um but that now that's getting cute with it yeah well that's the neat thing that uh is worth noting i mean we'll just jump to it the what's been happening the st lending market is pretty interesting um this week there was a big sell-off and spike in the ave eth borrow rates and that puts pressure on the sde east peg because there's been i guess a number of market participants have been playing kind of this recursive leverage trade

which um you deposit us to ethan ave you borrow more eth and you buy sd eat and you kind of rinse repeat but as as rates go up you know that puts pressure right and so yeah um it's i would just it's just an interesting tidbit like uh the the peg went uh down to or the rate i shouldn't call it it just went down because it shouldn't be pegged ever yeah it's not it's not it's not a big but the rate the sd fell all the way to 0.95 and that's been its lowest level since uh kind of the um the fallout of three arrows kind of uh was happening put was putting and after tara was putting pressure um on sde and it fell all the way down to 0.93 uh so that was this is the second lowest level since then and it's hovering currently around 0.96 which i

actually think is pretty decent right if you think about kind of the uh the uh duration and kind of the liquidity discount that these things should have uh but yeah i mean so you got to expect folks are selling steath to get back into eth right now right so that means the so that will drive it lower that'll drive steep lower which means there's probably a nice arbitrage play there yeah there's there's some there's some selling pressure yeah on st um and uh yeah i mean i think it's just interesting to monitor each borrower rates around this time i mean they went all the way as you said up to 35 percent yeah so you know monitor during this time we should link to robert uh thread on twitter which is you probably should be really cautious

around the new east proof of work chain most market most kind of big players have come out this is like most exchanges from like coinbase to circles like center circle crack and even open c like most folks have come out saying we're not going to support these proof of work chain and so what is important is anytime if you are interacting with say and you can correct me here but for instance a lot of people might see this okay you you have 100 x amount of e you get proof of work you go on to that chain you say oh wow look i have this i want i i want to you know profit and sell these tokens

you're interacting in that chain if you sign a transaction there just be cautious what you're interacting with because a miner there might be able or wanting to replicate that transaction in the like east um proof of stake chain and so i don't know the exact kind of vector here that they could exploit it but it's just important to like be really cautious and probably probably like sit tight and not do much um that's a that's a good flag santee because okay so you remember um you remember the bitcoin fork so you had bitcoin cash obviously then you get like all these other ones you got like bitcoin gold bitcoin diamond bitcoin remember bitcoin hot you had oil bitcoin bitcoin smart united bitcoin bic b2x

segwit uh bitcoin cash plus you had light you had all these you had all these forks right so if you like okay so if you hold eth on a non-custodial wallet you're gonna be eligible for every for every fork token which is good you think that's good uh what it's what is not good and where it gets risky is and this might have been what lester was referring to is uh you shouldn't just go a lot of people will be like ooh new fork things have just fallen into my wallet there's gonna be a lot of scams that people are basically just dropping into wallets so don't ju don't go just like claiming all the airdrops there's probably going to be a lot of scams trying to get at signatures and keys correct um correct and i know that happened in 2017 and 2018 with the bitcoin forks and it's

four years later now so i can only imagine how sophisticated some of these forks some of these scammers are going to be i mean probably the best course of action is hold out a bit see what other people are doing don't be the guinea pig don't don't be in the front line and if you want to if you're holding it in a in your in your own kind of wallet not an exchange then be careful when you're like transferring these tokens um but uh yeah look it's going to be a very interesting time um the more i don't want to lose sight of the big picture here which is look guys finally ethereum is migrating for a mistake there's a big upgrade uh what's the bellatrix update that happened this week

of a lot of the clients it was the last step uh you know before the merge and so all in all really exciting um and and we shouldn't kind of lose the force for the trees right the most important thing is i think this is a really good setup for ethereum price aside speculation aside just fundamentally this has been in the works for years for years and i think it is a very positive transition to ethereum and lends a lot of credibility as we've talked about in prior episodes on the narrative shifting a lot of really institutions kind of taking now perhaps more actionable from the esg standpoint it's just i think really a positive step uh in the ethereum camp which whether it's correlation or causation but it is pretty interesting that we are

like 90 plus upside in ethereum for the full flipping um this the east btc ratio has been on a tear and it has traded to the highest level since 2018. and so yeah it's pretty interesting uh that we are closer to the flipping than ever um and the momentum i think is very much on the ethereum side now a lot of things could be derailed uh you know that there could be a lot of momentum traders out there but nonetheless i mean i think um it's difficult to understand all the factors that go into this kind of rally but i think a big part of it is ethereum is finally migrating and and a lot of people are observing that yeah it's interesting that the uh that the the eth btc ratio i've just got this pulled up on trading view let's see if i can

share right here it's interesting that this ratio is so high here you go uh it's so high in the bear market right so if you look at when this when it got so high the last time so it was up to you know it did fl did it flip no what am i looking at here no no it went well it went on the market cap basis like it should never go like the flipping doesn't occur at one the flipping occurs on market cap basis and so yeah yeah that is yeah so the highest it got was in 2017 in july and then again in like january of 2018 right so like right after the peak of the bowl so it's interesting now that this is happening like nine 10 11 months into the bear market yeah yeah definitely so i mean look i think ethereum's market cap fully

diluted well market cap current market cap right now is like 196 billion and bitcoins is 368 billion so you know the ethereum is like at 53 um and so yeah yeah moving on from the merge yeah i don't think there's anything else to discuss here other than you know obviously we'll be covering a lot next week but uh yeah uh let's talk about i don't want to turn this into the maker show but i do feel like there's a lot of interesting stuff happening on maker right now so i will continue talking about maker and if it gets to be too much too much folks should just uh tweet at us or dm us and let us know but i do think there's really interesting things um uh there is a maker coinbase prime proposal so coinbase basically made a proposal for maker to transfer 33

of maker's psm into coinbase prime's custody uh to earn 1.5 api on usdc rewards that's 33 of the psm would be about 1.6 billion dollars why that's interesting for maker and why that probably makes a lot of sense for maker is because they've got all this usdc that they're not actually earning anything on so if you look at 1.5 of 1.6 billion that's an additional 24 million in revenue that maker could be earning every year um maker's governance would be able to freely mint burn withdraw settle almost instantaneously in usdc it's like five or six minutes which is consistent with coinbase prime standard offering and um [Music] yeah i mean i think so so so like like

this is what we talked about this is what we've been talking about right there's this huge dichotomy i think in crypto right now between uh what i'd call focusing on decentralization maximization to avoid sense to become censorship resistant with the downside of losing out on maybe some total addressable market that you could capture the other side of the argument is just race to acquire users capital um and just try to get as big as possible and maybe sacrifice some of the decentralization and this proposed we've been talking about this and last week we said this is the biggest dichotomy in crypto right now and this is such a good example of it right you've got some folks at maker like of course we should do this this is an extra 24 million a year it basically costs us nothing uh and then other folks like chris black

are saying there's no way we should do this this is this is we are getting away from d5 so i'm curious to hear your take on what you think of this well you're deeper in a maker so maybe i'll just ask a few questions and then i'll like you'll see where i'm going with this is like what is so i get at 1.5 of apy fine but what is like a does maker have okay fine it's nice to get 1.5 on this size 24 million it could go to a bunch of things but are there alternatives like what is being done with the psm today um and could you be doing it and depositing in a way that is not using kind of you know not going to coinbase if you

will i mean you could buy you could buy treasuries but and get like higher than 1.5 percent but you're but that's like less crypto native that's more that's more off-chain you know yeah but also keep in mind like usdc usdc is an iou backed by off chain assets that is managed by circle so you're already like i think okay so you look at you look at maker you've got like look at the balance sheet of maker you've got like assets and liabilities the assets of the liabilities of maker are die the assets are the psm and the user faults the user vaults are users own those assets maker can't touch them the psm is maker owns those assets the maker can invest them and they should probably only invest them in like really really really safe

instruments like treasuries and bonds and things like that right and that's what usdc is in is in the psm right now i think the argument for doing this is that this is no riskier than just holding uscc the current structure of the dye that is generated from the usdc psm looks like kind of i mean you're already using uscc which is an iou backed by off-gen assets managed by this management circle right i guess you are saying you're taking on the risk of you're adding one more layer which is coinbase yeah the custodian risk custodials which by the way the keys could still be compromised in the ps like there is risks of being holding your own kind of assets being your own custodian there is a risk of coinbase

um coinbase custody i am curious because this came out in surface a few months back which is and i'm not sure if depositors and the custody accounts are like like subprime like meaning like they are not creditors of coin so if coinbase were to default or like go bankrupt you as a client like a maker could stand to lose that if they're right because they're technically like not a creditor it's just like a client and so i think like armstrong came out saying like yeah our customers like in a scenario where coinbase were to go to bankrupt like you are taking counterparty risk and so well you know you you are adding on that layer but yeah

you're right i mean i think like you have uscc today that could be frozen if you like in an extreme scenario whether it's in your own wallet or in coinbase's custody wallet it doesn't kind of really matter the only risk incremental here is some marginal kind of well some incremental counterparty risk which is you have to trust coinbase and their custody uh now a third of the psm is i mean it's not all of it at least so you're diversifying a bit um and so i do wonder how much you're getting in those short-term t-bills that they bought um not too long ago but it's probably comparable right it's like not too

dissimilar from this rate even the right thing probably higher yeah i think it's probably two and a half or i think it's probably three sub three over two somewhere between two and a half and three percent yeah yeah yeah interest rates are going up my friend noted yeah i totally know that the eu the european kind of central bank just like 75 basis points which is why yeah um but um but yeah i know i i this is going to be interesting i do you think it passes uh i think this passes yes i definitely think this passes yeah yeah do you think they're getting the best

rate here and could they negotiate with coinbase to get a higher apy that's what i said so i post on the forum i said i like all this this is great work from the growth team and from coinbase really liked it um chris black would probably tear me apart here and probably disagree with me on this one but i was like i like it uh it's providing a bunch of revenue uh i think the 1.5 is what i post on the forum is that 1.5 seems low i think what someone might say to me is that maybe two responses um who was it in the discord i said it's low too and luca prospero who's great um really really like the guy um he's like look it's better than zero percent he's like we gotta do something this is a good short term solution until

we figure out a better solution and then some other folks said look where else can you get one point five percent still being crypt kind of like crypto native you know keeping it in the ecosystem so um and my question here is i'm unfamiliar but when you when you invest in t-bells you know they're fairly you know i guess you know fairly safe or the safest in the risk spectrum um in the centralized spectrum i should say but um do we have an insight into what coinbase prime and how what they're going to be doing like are they buying what kind of assets are they going to be buying and is it further out on the risk curve all right folks this episode is brought

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the most important question so i would assume that the coinbase this deal is very close to some sort of like safe like t-bill investment um like maker did but if it's more like unsecured lending to crypto market makers then i would change my entire mindset on this and i would not support it yeah so i think that's the this might have been answered overnight uh because i haven't checked the forum yet today but that is i think that's the most important question really that's what would be interesting though is like uh so okay fine if this goes through and you're really worried about it then you could probably hedge some of this exposure by buying like cds or like shorting coinbase stock or something uh on like synthetics or some other platform or like you know i mean like you could use synthetics i don't know if they support coinbase but like if you're

really worried about counterparty risk then you could probably do some sort of interesting strategy where you hedge out some of the exposure assuming it's not wildly expensive to do so which i haven't run through this exercise but theoretically yeah you minimize kind of counterparty risk but i think we're coming into a if you zoom out i think it's more and more apparent that we are coming to some sort of big i don't want to call it a fork in the road but um just kind of more towards this this kind of like philosophical standpoint meets like practical implementation and regulatory um kind of

policy like regulatory compliance if you will which is um i think you know the like i think a lot of and this goes back to the episode that we recorded with jake and rebecca that there will be a lot of more regulatory clarity um and even today right gunzer just kind of came out saying that the my understanding was that the cfdc would be overseeing kind of bitcoin um in ethereum but he's also hinting or just further emphasizing the point that he's been making all along which is a lot of other tokens look and feel like securities and a lot of like service providers exchanges and all that i need to register with the sec and all this stuff um and

so ultimately um yeah like this is again we asked i asked you this question in prior so like what are the odds of like a regulator freezing usdc not just in maker but like across d5 and what their motivation would be to do so um and i think there's two caps one of them it says look at what happened with tornado they can do that at at their own kind of whim if they wanted to and make you know kind of shut down defy but i think um you know i sort of feel that the tornado situation was pretty unique and specific um and it probably doesn't happen unless there's a very clear kind of bad actor interacting in these

protocols which yeah i i don't feel like i mean i feel really con we've i've been we've been close with circle since they've since very early days like we've known jeremy and their team since the very early days i um what what what happened to tornado is not just going to happen to circle like they've got a huge regulatory team a huge policy team they meet with the regulators i would probably i would assume every day someone on their team is talking to some sort of regulator or policymaker it's not just gonna it's it wouldn't what happened to tornado would never happen to circle and that was just like you kind of wake up one day and like boom action's been taken there would be i i mean look i could end up looking like a fool in a couple of years if that ever

happens but like i just really don't see that happening um it's not to mean that we shouldn't try to get more censorship resistant and like you've got this obvious dichotomy between like decentralization and creating censorship-resistant systems verse kyc aml apply like work with regulators and basically try to capture as big of a market as possible but i don't see like them just freezing usdc so yeah i remember meeting jeremy a number of times and every time we met he was like yeah i was just in dc and this is like he spends so much time there and like when the when when there's a hearing and they need someone to come talk about it like he's usually someone they tap they tap um uh chad cascarilla from paxos like there are a couple of these companies that are

just very deeply embedded in uh into the dc scene yeah so yeah i mean i think just around at this topic i i think the in my mind it is look in the extreme scenario where if the regulators want to you know freeze usdc they're going to do it and circle's going to do it no matter if it's held in makers kind of self-custodian wallets multisig or on coinbase it doesn't matter folks the heart of the problem is if you believe it's a problem is why are holding that much usdc yeah which this has been in the works since we first introduced the proposal back in march of 2020 to onboard usccs collateral to bring more stability and scalability to protocol now if you don't

like maker go somewhere else you have options but it is the best but it is as you as you to quote you it is one of if not the primary backbone of d5 so everyone that is indeed should be paying attention to this because sure you can use another protocol but even for access uscc like other protocols have and use uscc it is the most kind of fluid used stablecoin out there yeah and it does pose a systemic risk let me just one more thing on why i think this makes sense there are 5.6 billion dollars in the uh of like stable coin like backing right uh in the psm right now you don't need all 5.6 billion dollars to be fully liquid and i mean i'm sure i'll get some pushback on that

but like a lot of the other stablecoin issuers kind of run this fraction i guess the i uh i guess that was what i was walking into saying is like makers should create a fractional reserve system which is like the one of the biggest points of pushback about the traditional banking system but like i don't know like that's anyways that's yeah no you should at least look there have been some protocols that have been really hurt by doing poor treasury management and others that have been in this case maker and a fairly conservative do something in the middle but i think uh you know earning some yield on your on your idle assets like cash stable coins is probably a good thing to subsidize and finance ongoing i just think that as the like if you look at the balance sheet maker you've got the assets and

liabilities liabilities are die assets are the psm and the user vaults you can open up at least a small chunk of the assets to become to have a third bucket which is like safe investments so and by the way on the custody risk you're really just switching custodians because if you already have you have a bunch of usdc usdc is uh custody like center via usdc is the current custodian of the psm's underlying assets i think so you're really switching to coinbase prime is effectively just i mean yeah but the uscc is actually custodians it's an iou in its center circle that like maintains that ledger and can freeze and update balances so yeah you're right on the coinbase side of things um coinbase i just got a alert coinbase is funding a lawsuit actually um

coinbase is funding a lawsuit brought by six people challenging the u.s treasury department sanctions of the tornado cash smart contracts and asking the court to remove them from the u.s sanctions list this is really interesting this is written by brian armstrong i'm reading this in real time i'll ping it over to you um why i think this is interesting is um [Music] is because coinbase is a public company and it's very rare i would say that you see newly listed public companies that are like already kind of pushing the boundaries of maybe what folks would say they should the company should be doing right there's probably some regulators who say that coinbase lists uh unregistered securities and so they're probably under the watch

the you know the the eye of the regulators already or in fact i know they are so it's it's really interesting that they're coming down and just saying like look this is what we believe in i'm still reading this blog like it touches on a lot of when people should go back to the episode we recorded when the tornado thing happened which is my observation was it felt like they were using like a sledgehammer where they should be using more of like a finer knife and tool and in this case the point they're making is one treasure is using a hammer instead of a scalpel um you know and there are second of all it acted outside of its authority meaning treasury is allowed to sanction people and their property but congress has never given treasury the power to sanction open source software and i think that is the

primary strongest argument here that it is probably unconstitutional to do so it goes back to the first amendment which is if you're a developer in europe like um you know this is open source code um and a more finer argument that they're making is more kind of this is stifling innovation and um you know it's it's uh you know it i think it has made a big impact on a lot of developers in the space and how they could be treated because obviously one of the tornado cast developers was arrested in in the netherlands and is still held to my knowledge by the authorities and so um yeah it you know historically open source developers i don't just developers at large have been you know it's pretty important to to

have the freedom to kind of write code yeah so i love this move a lot of respect good job there's another uh good uh mirror post by katie han who used to be uh the prosecutor yeah do you know katie can we have katie on empire oh katie if you're listening we'd love to have you on i have met her i have interacted with her i think she's very smart on these type of topics um now runs haunventures yeah but yeah she she has a good po i haven't read it she argued more that it was like most people were focusing on the first amendment there's also another argument to be done on the fourth amendment which um i'm not an expert in law but we should link it up in the show notes and then discuss it and if uh perhaps even have her on to talk about it but this is gonna be a really big

precedent i feel like um the more i've thought about like everything that has transpired on tornado cache and talking to a lot of developers out there it it sort of like kind of reminds me of in the 90s where like the department what is it the doj or even the department of defense like was pretty um at some point i think overacted in the sense that it wouldn't even allow like certain people to leave with like computers like if you were traveling outside the united states i think you were not allowed to like at some point like take like pieces of hardware and computer and because they would feel like it would like um yeah they were pretty paranoid about it and

um yeah i think there have been these instances where uh like the regulators or like the different departments um have tried to block this sort of stuff and then it ultimately kind of goes away um but uh but yeah it's not like the first like everything like we try to put it in a historical perspective and this is not the first time or the last candidly where like i feel like regulators might like clamp down temporarily or try to on you know pretty fundamental um like freedoms like freedom of privacy and freedom of speech and whatnot yeah let's move past unless there's anything else i want to talk about binance actually um

another company that's usually in the regulatory uh eyes is binance uh starting september 29th binance will automatically convert all usdc usdp what is that paxos usd paxos and t usd st anyways binance is converting their stable coin balances basically into b usd which is binance to stablecoin which is really just a white labeled paxos coin um at a one-to-one ratio in order to enhance liquidity and capital efficiency for users users will still be able to withdraw their chosen centralized stablecoin the amount will simply be deducted from their busd balance finance added that usdt is not one of the stablecoins involved in the auto conversion initiative but they didn't provide a reason as to why uh yeah i think there's some really good

takes by um the founder of winter mute which is a big market maker and jenny uh yeah f jenny and even jeremy from circle they all seem to suggest it's a positive thing and i tend to agree which is you're leaving essentially the role of arbitraging to a market maker um but improving liquidity of busd if there's a discrepancy between the peg then a market maker is going to step up and capture that r fairly quickly and so there's kind of no reason uh this is the point that evgeny make which is like if when you have too many pairs it fragments liquidity and so it's probably it's a more inefficient kind of market and so you're by removing a lot of these pairs you consolidate liquidity and then it just makes market maker's

job easier um to make to make you know to arb that perhaps discrepancy in the peg and make the markets more liquid um and so yeah i think uh ftx does something similar right when you deposit a stable into fdx you're basically depositing um like if you deposit uscc and ftx um it has like it it is a basket of different stable coins except usdt tether um but for the most part it's just um yeah it's it's like consolidated um and then depending on what you want to redeem like withdraw or trade on like you which pair then i think that's when um you know just consolidates the liquidity

and it's probably not positive or it is not positive is binance taking a swing at tether here no i think this is also consistent with how ftx does it right which is tether has always been in a category of its own yeah but ftx doesn't have their own stable finance has at least but yes yeah i i i'm not reading too much into tether other than tether i think it's just a stable coin that is you know just treated differently certainly like u.s regulators have always had it in it's not the same as uscc let's put it that way um and so yeah this is this is total tether fudd but it's not one no no what i'm going to say what i'm going to say is well you what you could make the argument that binance is like

taking a swing at tether and that they'll try to like hurt tether with this um but because eventually if tether gets hurt enough finance has enough capital to come in and basically bail out tether this is total tetherfud by the way i don't think this is going to happen uh and then and then if binance was behind tether like that is just so powerful um well uh that's terrible fun that's another fun which is you know there's always tetherfud uh i mean jeremy said something similar which i mean not per se but just his opinion which obviously is biased binance is trying to consolidate dollar liquidity with cash equivalent stables that's good for liquidity and market depth usdt is not cash equivalent not even close full stop period so yeah anyways time and time again

tether has uh come out with uh you know reports of uh what is backing tether and what have you so i'm not gonna comment or make an opinion people go read and inform themselves on the matter and if you do want to talk about it or have an opinion just comment on youtube as a lot of people do who's your favorite data provider santi did you guys use everyone or did you use like kaiko amber data coinmetrics like do you have any favorites uh good question uh i like uh in no particular order but coinmetrix is a really good newsletter and just provides really nice charts um you know in network data visualization um i'm a big fan of what they do uh missouri has good charts um i haven't looked closely at yours but i assume you guys have as well

fairly new um don't kill me for saying this but the block has good defy charts um who else nansen you know paid but yeah uh the first ones that i said are with the exception of maybe you guys and others are they have different tiers but a lot of these are free so yeah yeah um how about you you'll see what we roll out in in like a here we go there we go that's my plug yeah we've been building a bunch of data stuff in the background so nice yeah nice there's my plug um all right man i want to bring this guy doug cole kid on doug has he keeps having these i don't know if you read uh garrett's notes that he wrote for us but uh doug keeps showing up in the notes and

we keep not talking about it because but garrett is uh he is right doug keeps making these interesting arguments and the argument this week was that there uh he argues that today's completely free floating gas means that prices keep falling until supplies clear i think he's basically saying that um uh there should be a floor price a fee floor price on l ones i mean the the question just now on this the first jumped at me was well it is possible that at this early stage of a lot of these l ones that some might be even subsidizing block space to attract you know to make it artificially drop fees and then convert users and then over time you know let it be more of a free-floating market um and stop subsidizing um

block space but yeah that may be a totally inaccurate and incorrect statement but well i think it comes down to the big question of value accrual right like which the one of the bit we were talking about one of the big dichotomies or questions in crypto right now is like decentralization and building censorship resistance and sacrificing maybe addressable market on the other side of it is address like basically racing to acquire users make as much money as possible another big question crypto right now is like basically just what part of the stack is value going to accrue is it going to accrue to the settlement layer if it accrues to the settlement layer does it accrue to l1s or does it occur to l2s or will it accrue to apps or does it accrue to aggregators which i don't think many people think aggregators it's really between apps for settlement layer and if

you i think it's really between like l1s verse apps i would say um but i think that's one of the big questions yeah i definitely will let's add to in future episodes where we bring on doug um and potentially katie and or jeremy would be great to have actually uh santi where do you think value will occur in the next cycle settlement layer or app layer i tweeted about this i put a poll yesterday um and we can link it here which is i asked what part of the stack will accrue the most value in the next crypto cycle and the different options were settlement layer which includes l1 and l2 apps which would be like d5 games etc aggregators mostly i'm thinking like wallets um and or other and

the there are 25 minutes left in the poll for now it's an overwhelming 45 46 say that it will accrue the most on apps whereas historically it's been mostly the sediment layer meaning you know the l1 um now my i i'm sort of split i think apps um more so than an l2 because it's really exciting what's happening in l2 land optimism-wise but to get all the drum i think uh l2s are going to over the next like eight like i was gonna say eight years but for the next cycle l2s are really gonna shine because um i think we're there's it's gonna coincide nicely uh with really good apps that are

coming out and support a lot of users but my overarching thesis is that they're and where what i look to invest the most at this point is investing in one application that is going to capture and probably build out other parts of the stack so look at step in for instance and people that want to learn more about it should go to our episode and full disclosure i'm an investor in steppen and i'm an advisor so so you know take this all this with a grain of salt but nonetheless the point stands they have created a really you know nice application which allows people to earn nfts and um uh this by walking and exercising um and they've onboarded a lot of users and they've first were deployed in solana and then

they migrated to other chains because they were hitting like they were just kind of breaking solana they just had a lot of traction um since then they've become so they captured all this attention and all these users they've now rolled out their own marketplace and they're now the most popular decks in solana and so what's to stop them from continuing to build out other products meaning they already have a wallet like they build their own wallet they already have their wallet they do have their own wallet yeah i mean they have their application so like essentially it's a wallet and the marketplace and what's to stop them from building their own chain [Music] um like dydx ish type also doing this so i'm the way i characterize this these is the wechat of web3 which is like wechat there is going to be someone

that probably um just kind of captures all these users and attention and then can build all these different parts of the stack everything's open source you just fork it yeah so i think so that leads me to invest in an app that captures a lot of users and attention probably a game and then that allows you to do so many other things yeah that's all i got today you what do you think um i could make the i think i think that in in the next cycle it's still going to be the settlement layer i think um you know i need to think about this more last week i told someone who's going to beat the app player and this week i'm saying the settlement layer so there's my uh minimal conviction that but well it's okay to change your mind that's fine yeah yeah i i don't

think i have a conviction yet on it yeah the the fun contrarian bet say uh thing would be to say con uh the wallets because um historically user aggregation theory and look read well they're the only one who owns the they're the only one like no one owns really it's very tough to own the user right in crypto but um they're the only one who really owns the user like once you start using metamask you're gonna you could flip between compound and ave really quickly but like you're still staying in metamask you know they just make no money yeah they make very minimal very minimal money uh metamask makes a good amount of money that's true swap fees yes they they do but those fees will trend towards zero ish yeah i guess what you're seeing in exchanges is like a lot of fees are just gonna go to zero well this was our argument

about unit swap like a month ago i think most fees end up trending towards zero in financial markets yes or no yes or no i know what you're going to say which is there's always a fee but it's either on the front end and the user knows it or it's on the back end of the flow yeah exactly yes yeah fees there's no such thing as a free lunch uh have you looked before rook finance by the way santee right yeah yeah but it's been a while for long for a while right yeah it's been i had no idea that they were even still around they are i talked to their team last week they are um really interesting stuff like i when i think about like uh mev i think flashbots immediately but the work team is doing interesting stuff i've no affiliate i don't i don't even know if they have a token i have no

affiliation yeah okay this is the team that uh was the rent team i think also spun out and then ended up being acquired by someone else pretty interesting what they're doing the reason i bring them up is because it's it's kind of like the payment forward or flow model um yeah before we go there have been some pretty interesting rounds lately which suggests that the market at least on the private side of rounds is pretty healthy and strong and a lot of the private capital is being deployed i'll just point out a few here that uh the first one uh well while you're playing while you're playing absentee did you do the k did you invest in chaos labs yes i did they are on an absolute tear right now i was fascinated look thematically uh either they're like they're like a gauntlet yeah kind of like a gauntlet

super smart ex israeli intelligence unit folks founders and they are building tools like gauntlet to do real-time simulation and stress testing um defy and when you think about it like there should be more sophisticated tools like d5 and blockchains just generally are like really data rich and transparent environments that should allow you to do really interesting data modeling and simulations um and yeah i was an early investor in chaos shout out to omar and the team there and they just put out a proposal to they've done some really interesting work on creating a dashboard for money markets like ave to monitor in real time the different collateral positions and what's at risk and you know allows you to do simulations and i played around

the tool um you know if what happens if the price of sd drops below 0.96 like what does that do the like cascading and do simulations of like cascading liquidations and whatnot and yeah it's pretty it's pretty cool uh tooling uh that they've developed and these are the type of projects that i think are going to push us towards more mainstream adoption because if you're a more sophisticated financial player as the market matures becomes more competitive and these protocols are transacting more value at risk then it's pretty awesome to be able to like in real time do these simulations and it's the type of tools that a i think teams defy teams want b investors and users want and also regulators you know like regulators track like um capital

efficiency ratios and like solvency ratios like basel rules one two three or whatever uh to basically like if you're if you're like a depositor in some of these banks you want to understand like water that the bank is like not doing crazy stuff as they were doing like in the financial before the financial crisis so again i think these are the type of tools that make d5 a better safer or work towards making it a better safer environment yeah tell me about the rounds then we can wrap with that yeah well the biggest one is this uh mistin labs so the creator of the sweet sui blockchain um they closed a 300 million dollar raise led by ftx ventures that value i missed that oh that was today two

billion that was today yeah so these are like again competing l ones so it's aptos and sui i think are the ones that are mostly kind of talked about now um but yeah valuing the company two billion so they're the they're the they're out of uh facebook right this is the former meta executives yeah facebook executives um so aptos is probably the most kind of direct competitor here if you will uh also x meta employees um um like novi financial what was called so uh yeah pretty pretty interesting and i think the valuations are fairly comparable if i'm not mistaken because aptos raised forever another 150 million dollar round

bringing it to total of 350 million raised this year so again you know people might these are not small numbers um yeah and for anyone listening it's like it was pretty the dilution's not much and the the question is why would you raise that amount of money and i think if you could do it you know you probably need a big watches to compete against existing l1s and it's from a bd standpoint attracting developers that's not cheap right and so i think um yeah we'll see but it's fairly interesting um there have been other rounds not at this scale but uh i feel like the private markets have held up nicely in our you know back uh there's been a number of you know funds i think the amount of dry powder i don't forget the figure exactly

but there's a decent amount of dry powder um of funds in crypto that have raised recently uh they're deploying and backing the next kind of startups um yeah so what about uh i've a couple others 21 co uh uh hani's great known him since the early days they just raised uh now a unicorn credits which is bringing real world assets those are mine i think yeah focus on latin america they just raised 11 fuel labs raised like 80. um yeah a lot of raises yeah absolutely what is this hubble protocol like censorship resistance stable coin that multi-coin invested in financing yeah just multiplying multiplying a few other folks yeah interesting yeah oh

animoka raised another actually today animoka raised another 100 million or so well uh and it was like ggv yeah i don't get animoka i feel like every three months they just raised another 100 million and then they use that money to go invest in in all these early 110 yeah they've invested in 150 companies they're a whole they're a holding company now they're holding code yeah they they've so it's around 110 million dollar round led by temasek um and another another a few other investors which i like like uh vc from ggv capital these are pretty smart guys i think in the consumer land uh but yeah i think it's sort of like to give them more capital to invest um

and and continue to i mean they they're i think their sub is uh like sandbox and like they've invested in early and a few kind of notable projects like axi and a few others so they're everywhere really anything else you want to rap sir no any before we go any book or uh movie recommendations i have a podcast recommendation actually which is fire it's not empire it's a non well i have two actually two podcast recommendations i have to plug bell curve which mike and van the guys at framework just launched vance and michael framework really good show the other one is a non-crypto show which i've been trying to read some non-crypto stuff um which is uh

uh tape notes really interesting so this guy in the uk he basically sits down with a bunch of artists who i like like you know flume and imagine dragons and uh fred again and like all and chain smokers like he'll basically sit down with all these like djs and musicians and bands and basically just like dig deep into their uh recording process and like how they came built albums and how they came up with the album like where their inspiration came from like gets really nitty-gritty and you'll he'll like play songs on the podcast and then you dig into the songs it's really good so i would recommend tape notes that's my content of the week interesting uh i will plug a guest for the sake of diversity a book i think i mentioned the network state by biology it's really good uh if you don't want to read the book just go listen to his

podcast um the other one that i'm reading and almost finishing now is matthew's ball the metaverse matthew ball's book a recent book called the metaverse uh it's pretty good it says the metaverse how um the metaverse and how it will revolutionize everything oh yeah we had we had uh oh no you weren't on that matthew came on the show actually but you weren't you weren't on that episode yeah um but it's it's it's fairly good uh it also reminds me one of my favorite books which is how the internet happened um now which lends a lot of really good perspective on the evolution of the internet and so yeah go check that out the metaverse is is pretty cool cool i'm enjoying it nice did you watch the psychedelics thing how to change your mind on netflix

uh partially i haven't i haven't had much time for tv because i'm starting something new i think oh oh there's the alpha i've been waiting for you to release that i gotta sprinkle this on but yeah well tbd but uh in the works i'm excited it works this has been me for us you want to say more you want to say more or next time i it is related to one of the things that i think we can do better as a industry which is better security and until we have more hardened security to protect consumers i think is is the most critical piece a lot of people talk about more regulation in the space and it concerns them and worries them and i'm channeling that energy to building something that i think will be net positive

to push the space forward and it is around bringing more risk management solutions uh for crypto well i've actually been tired of like telling this idea to so many people that at some point i'm like all right you know what time for me to just maybe just do it we'll uh we'll do an app on it someday once you're ready to talk about it so hopefully we've got a year all right i'll enjoy the weekend hope everyone has a great weekend we'll see you next week for another episode [Music] you