FTX blows up, OFAC updates and more - The Daily Gwei Refuel #484 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Daily way refuel where he kept the latest news in ethereum ecosystem I'm your host and this Asana enters the 9th of November 2022. all right everyone let's get into it and getting into it is going to take a while today I think obviously I missed yesterday's episode apologies for that I kind of lost my voice uh so I didn't want to do a refuel and then just sound croaky the whole time but I mean the reason why this episode is going to be longer is not just because I missed yesterday well it's because it's been one of the craziest days in crypto ever I thought that these crazy days were behind us for this part of the I guess crypto cycle but it seems not now obviously I'm talking about all the drama that happened with FTX I did touch

on this on the last refill I did a couple of days ago but obviously the situation has changed substantially since then and there is a lot to get through there's also other things I'm going to get through but I'm probably going to spend quite a while on this because I think it's very very important and there's a bunch of things that I want to talk about so let's start at the top what what happened here what what's going on with FTX now why is everything you know it's selling off why is everything dumping why are we all losing money again okay well what seems to have happened is that the same thing that happened with three hours capital and uh dokwon with Terra and Celsius and blockfi and you know I guess like a bunch of other things there was someone that had a massive ego they got really

rich during the bull market made a lot of money during the bull market we're not positioned to not manage their risk correctly during the bear Market decided to leverage up right do a bunch of shady things let their ego get the better of them and then blow themselves up that is really the tldr I guess of the FTX situation as well as all the other situations out there so uh that's that one there now let's go into some more details well the big announcement today was that CZ our CEO and founder of binance and uh uh announced that FTS FTX asked binance for their help there is a significant liquidity crunch to protect users we sign the non-binding LOI intending to fully acquireftx.com and help cover the liquidity crunch we will

be conducting a full due diligence in the coming days now that was a tweet from from CZ and he goes on within a little bit of a mini thread here and SPF has his own thread which I can't show you because he has me blocked but I'm sure you've all seen it by now but I want to comment on this for a second so this whole bit of drama or it started a little while ago but it really accelerated when CZ started spreading I wouldn't say there were rumors but started spreading the this kind of information that uh FTX was in you know for all intents and purposes in solvent that they had this massive uh debt that was owed on um and they were using their ftt token as collateral and CZ said that he was going to sell over many months a couple billion dollars worth of ftt I I

believe and this obviously led to a sell-off in ftt and that just accelerated over time and it basically really accelerated today I mean when I went to bed ftt was 20 and now it's like four dollars so yeah it really did accelerate overnight that's another note I woke up and it was just absolutely insane this morning uh I you know I there's very few times where I've woken up to such you know craziness and such insanity and today is one of those times um but I think this play from CZ as much as I don't think CZ is a hero at all I think CZ is just a better player than a lot of these other players he plays the same game but he's just a better player um this is masterful here from him he Not only was able to wreck a competitor but then he swooped in and basically

says that uh he's entered in an agreement to acquireftx.com now this is a non-binding uh kind of agreement here which means he could back out at any point in time and I'm actually not seeing what CZ would actually get out of this to be honest because if he was to acquire ftx.com he would uh he would acquire with that all their liabilities and it's come to light through a bunch of different threads one of them here from Lucas nuzzy at coinmetrics that FTX was actually using customer deposit as collateral I believe to take loans against uh through that through the Alameda arm which they said was a separate uh company to FTX but we all knew they always co-mingled and SPF had uh you know saying everything that was happening so for all intents and

purposes it wasn't a separate thing maybe legally speaking it was but practically speaking it wasn't so basically uh that's what happened there and uh I don't really see a reason why CeCe would want to fill that hole because my estimates put it at if all the customer deposits need to be covered which I don't think everything would need to be covered but probably the majority of it would I would say maybe five to ten billion dollars around about in terms of customer assets that need to be covered that were sitting on FTX and how I arrive at that estimate is it's very rough because we don't know uh who ftx's cold wallets I still I I think we still don't know them um and I was just doing a naive calculation based on how much binance has in custody and then taking a

percentage of that based on trading volumes of FTX versus binance uh and and seeing what's going on there and this is just FTX not FTX us which seems to be unaffected by this since FTX us is based in the US heavily regulated there so I don't think uh SPF was wanting to do any funny business because he knows what can happen if he does that in the US uh but but yeah so I don't really see a reason for CZ to go ahead with this uh so he may back out of it still we don't know and at the same time it's not as I said it's a non-binding agreement so he can back out of it with no consequences for himself he can just let let them blow up either way he's probably going to get uh ftx's customers because ftx's customers uh uh when uh even if they're sorry

we're not based in the US so they probably already got binance accounts anyway uh because binance has a US arm as well so they're all just going to flock there regardless of if CZ makes them whole or not right so I think I think that that that might be the more likely outcome and on top of that uh FTX if they don't get acquired we just have to I guess file for bankruptcy and it'll be an empty Gog situation where customers will not see their funds for a very long time and I remember I warned about this a few weeks ago on the refuel to get your assets off centralized exchanges and centralized Services uh it doesn't matter who it is like I know I've gone on record saying that I trust maybe something like coinbase more than I trust these other entities but it's

more about like who I trust who I trust least right it doesn't mean that I like just because I say I trust coinbase more than FTX and binance doesn't mean that I trust them a lot right it means that I would trust my assets there more than on FTX or binance but generally I just don't keep my assets on exchanges I use exchanges sorry centralized exchanges I use them to on and off ramp with Fiat and and and sometimes I will I will trade on them very rarely I do most of my trading through defy uh and by trading I mean kind of like investing not actual day trading or anything like that uh but this is why I keep warning about this stuff guys like you cannot trust any of these centralized services and I've gone through why before obviously because you can't trust their

word or anything and even if they were to do a proof of reserves like you can't trust that that's you know if they do approval reserves you can trust that it's accurate maybe to that point when they've signed for what addresses they have and everything but they can do Creative Accounting in the background and then say oh we're just moving stuff around because we're switching cold while it's blah blah and you have to trust them on that the secret system is all about removing trust so if you have to trust someone on on their word it already is a red flag to me but anyway absolutely masterful play from CZ yeah I have to give him big kudos for this because he was able to take out one of his main competitors and then come in and say that he'd acquire them and I don't know I mean it's a coin toss but I

I don't really see a reason why CZ would need to require FTX at this point I don't see what he gets out of them their exchange infrastructure is worse than binance so he doesn't need that um why would he doesn't need their employees right he doesn't need any of their staff and even if he did he'll just hire them himself he doesn't need to acquire FTX to get these people because these people probably want to work in crypto anyway and they'll probably go and apply to something like binance right because the customers are going to go to binance or probably already have an account with binance there's probably a lot of overlap between FTX and binance customers to be honest so yeah I'm not seeing what the uh the play is here unless unless there is one angle that I can see unless CZ believes that by not bailing out FTX

it's much worse for the ecosystem uh long term than than it would be for him just taking a hit because even if if he was to plug that hole say he he spent 10 billion dollars to acquire FTX to plug that hole that's Trump changed to him I mean he has a [ __ ] ton of money uh and we don't even know how much money he has because like he's made so much he's he's got it in a bunch of different assets uh but it's safe to say that he's probably still got uh you know I mean it's it's hard to estimate because obviously price is moving a lot of his net worth is tied up in crypto but he probably has a you know 50 to 100 billion dollars worth of um of personal wealth and not to not not including binance and obviously there's

BNB as well which which has a rather large market cap which he owns a substantial part of so yeah I I say chump change it's obviously not chump change but you know when you're talking about someone who has that much money it has an extremely successful business who is extremely dominant and just killed one of its competitors I mean yeah you can see that that that play but other than that there's not many angles that I can see where this ends up being a net positive for CZ to do and I think that's why he entered this non-binding thing because he's probably going to look at FTX do like extreme due diligence on them and then I don't know I I I think you might come might come to the conclusion that it's better to just let it blow up right it's just too toxic

because Brian Armstrong was actually on a bankless live stream today and said that he looked at them did a quick due diligence on them I don't think like under the hood but his team did a quick due diligence on them and figured it wasn't worth uh the hassle to to acquire them now that may be because coinbase doesn't have the capital to do that or they have the capital to do that and it just doesn't make any Financial sense at all and cz's in the same position I would believe like if he has if he has to Pony up 10 billion dollars obviously it's not a huge amount for him but it's still a hit for what benefit that's that's where that's the angle I'm coming at it from so so there's that there's the CZ kind of I guess arm of of what's happened here and as I mentioned there

is a thread from Lucas Nazi here of coinmetrics that and he starts off the thread by saying I found evidence that FTX might have provided a massive bailout for Alameda in Q2 which now came to haunt them 40 days ago 173 million f TT tokens worth over four billion dollars uh became active on chain a rabbit hole appeared this is the thread that I referenced before where he basically found evidence of uh well he's what he he says here here's what I think happened he goes Alameda blew up in Q2 alongs with three hours capital and others just a quick note here Alameda is the kind of market-making side of sbf's Ventures uh I believe it was one of his first companies that he founded and as I said they are legally separated FTX and

Alameda but practically not and they've been co-mingling assets well that's what Lucas found evidence of here said it it only survived the blob in Q2 because it was able to secure funding from FTX use using as collateral or the 172 million ftt that was guaranteed to vest four months later once vested all tokens were sent back as repayments uh and then I think there was a note about uh them using customer deposits as well uh but yeah I highly recommend giving this photo read if you haven't seen it yet for a more detailed breakdown here but guys like I'm gonna give my very very honest opinion on on this uh just generally in terms of using customer deposits for things it's [ __ ] ridiculous like I mean I get their Banks through this as a fractional Reserve

banking thing right but these banks are so heavily regulated they have so many Watchdogs they have so many people making sure that uh there's all these Protections in place and you can argue about whether these protections help or the regulations help or not um you know that's not the point I'm trying to make here but the point I'm trying to make is that there is a substantial difference between an offshore centralized crypto exchange which is completely opaque and a bank where uh it's extremely heavily regulated right uh and and and I mean they they do engage in Shady Behavior don't get me wrong but there is a difference between those two things there so it's a disgrace it's embarrassing it really does set this ecosystem back and I know even on the

refill I said the other day that I thought the chances of FTX blowing up are relatively low uh and honestly like I don't know why I said that because I've been calling at SPF as a cowboy for so long actually you know what I do know why I said that now that I think about it I said that because I honestly didn't think that SPF I I knew he was Grady I knew he was a cowboy I knew he was basically a sociopath but I didn't believe he was stupid enough or greedy enough to blow himself up like I just didn't see that and that's on me uh not much surprises me in this ecosystem anymore but that did right um but and in such a spectacular way as well like it's just a [ __ ] disgrace I I know like I'm sorry for swearing but

like I I'm actually like really upset about this like after everything calmed down and I caught up with it I'm like this is ridiculous like the amount of people that have blown up this year by not managing their risk at all what the [ __ ] were they doing what what did they think was gonna happen like did they think that prices were just going to go up forever right I I don't understand the frame of thinking here like I am like as I said the other day I took profits right I've said this many times I took profits in the bull market I did at times uh get a little bit uh bought into it and drink the Kool-Aid a little bit around me maybe are some of the memes that were were being portrayed and thinking wow we're actually like in a proper mainstream adoption cycle now I

don't think the bear Market's going to be as bad I did kind of get stuck in that a little bit but I kept myself grounded I took profits uh and I've protected my Capital all throughout this year even buying you know uh as time has gone on through this year uh and I've done that just as myself I have no financial advisors nothing like I I've done it all on my own I have some friends that have been in crypto uh in ethereum with me for for a while we talked to each other right uh we keep each other relatively grounded but at the end of the day the decision is always up to you so so how the [ __ ] have I managed my risk like like this and these people haven't like I don't understand like I have nowhere near the amount of money these people have as

well let me be straight here like they have so much more money than me and their risk management is worse than mine it's worse than probably yours is right like I I just do not understand how someone can be this greedy like I just it doesn't compute for me right and I can understand from there are these people that exists and greed is is very poisonous and especially if you make all your money in a bull market your it just goes to your head and you think you're literally a God especially you have if you have all these people around you simping for you but I just do not understand how you can manage your risk so badly that you end up billions tens of billions of dollars in the hole and on top of that you wreck all your customers and you wreck your business

that you spent years building up like what the [ __ ] okay I'm gonna stop swearing I don't want to spare too much but seriously guys like I I just I I can't fathom this right and this is why I say it's a disgrace and it's embarrassing I've seen some of the ogs on on Twitter today say that this is uh the most embarrassed I've been about this ecosystem ever and it's the first time that they've thought about leaving and honestly guys like if it wasn't for ethereum I would have left ages ago like this like look at this objectively look at what's happened this year objectively it's an Atta embarrassment it's utter Insanity it is it should not be happening this is not what we're building towards but the one thing that keeps me in this ecosystem is literally ethereum and some people can call me an

eth maxi for that I don't give a [ __ ] right I've called out so many things in this ecosystem and it's all played out like I remember calling out all these alt l1s as just complete garbage look at them today right like they're all pretty much dead like no one cares about them they were only popular during a bull market I've called out all these centralized actors as being bad actors and being as people who are just cowboys and are ruining this ecosystem and I'm not trying to toot my own horn here or I'll inflate my own ego I don't care about any of that the reason why I say that I've spoken about it in the past is because maybe when I myself and other smart people in this ecosystem are saying something listen I know the refueled listeners and watches you guys

uh you guys do listen I talk to a lot of you and you you do I take what I say on board but you know maybe tell your friends and and show them evidence of this and say hey like you know anytime someone says this like maybe think about this maybe maybe think critically about it maybe not get caught up in all this [ __ ] and get caught up in the Mania and listen to this like like it actually makes me really angry and sad that more people didn't listen because you've probably seen on Twitter today on FTX there are a lot of people who left their funds on there thinking and trusting that Sam wasn't gonna blow himself up and I was like this is an utter Insanity like how can you trust someone like this like I I don't understand it I I don't understand how

someone how people can trust someone not only trust them uh generally but trust them with their money like this isn't just a normal level of trust guys this is like literally giving your money to some some person that says hey bro like trust me I'll keep it for you you didn't keep it on here it's all it's all well and good like like I mean SPF yeah okay he's a big player he had a reputation he ran a a relatively successful exchange right but that to me doesn't mean anything we've seen exchanges blah before we've seen these people blow up plenty of times before so why would you trust them like stop trusting people like we invented this absolutely amazing technology where it allows you to uh Financial technology that allows you to self-custody and you keep funds on a centralized exchange with ego Maniacs at

the helm like come on guys I know I sound like a broken record and I've gone on this rant before but every time this happens it's the first place my mind goes to is holy [ __ ] people just got wrecked again imagine trying to invest in this ecosystem and being like Oh I'll put my money in here I imagine investing in in Terror I'm gonna put my money in here you know I'm safe in the UST stable coin I'll get 20 yield through anchor it's all well and good bam you're dead you're blown up right you're absolutely wrecked oh I'm just gonna leave my funds on FTX is there a reputable exchange SPF seems that seems okay bam you're [ __ ] wrecked right like oh I'm just gonna put my money into into this sort of stuff the super Cycle's happening it's all

going to be good I'm Gonna Be Rich bam wrecked oh Sailors buying BTC at 60k at the all-time high you know he's got my back wrecked oh the El Salvador's gonna use BTC for payments this is a new paradigm Rex like for [ __ ] sake like imagine you're that person imagine you're new to this ecosystem and you've been trying to invest in it uh I just ah yeah yeah I don't I don't know what else to say like I'm just I'm just saying it as it comes to to my mind here but I think I'm gonna pause there on on the ranting because I don't want to go too much about it uh but you can read this thread from from Lucas um there was also a tweet here from DB who said that SBF uh was canvassing uh Deep Pockets in Silicon Valley and Wall

Street uh I think billionaires not institutions seeking more than one billion dollars uh to plug the hole before uh but by midday Tuesday the hole looked to be significantly deeper and that's when CZ kind of swooped in here there's also a great tweet here from wazir lawyer about this whole situation I recommend reading this as well which I'll link in the YouTube description uh and this tweet is one one that I wanted to focus on as well so this is a list of some of the most high profile investors in FTX to just show you how shitty this situation is right so I'm going to read out some of them BlackRock largest uh I guess like um manager of capital in the world the Ontario pension fund a pension fund right Sequoia one of the biggest

Tech VCS Paradigm the biggest crypto VC I think besides a16z crypto tiger Global uh they're a meme SoftBank again a meme uh Circle the issue is of usdc right uh Ribbit uh a pretty big uh fund I believe Alan Howard uh pretty I believe big investor multi-coin uh I mean they're multi-clown capital for a reason van Eck absolutely huge issue out of um ETFs uh and temasek as well I believe is a big fun here out but so looking at this list my main point is that even the quote-unquote smart money fell for this and trusted in SPF so maybe you don't feel too bad if you I guess lost money on FTX or I mean like it's easy for me

to say that but don't feel like you are a dumbass that didn't listen to anyone didn't see it coming uh and that you're all to blame I think that when investors like this get involved it lends a lot of credibility to these platforms into these exchanges which means that people end up trusting them much more than they should for example right if you see Paradigm investing in something which is and I really respect Paradigm as a fund as a VC but if you see them investing in something multiple rounds mind you you think to yourself well you know the the Paradigm is really legit uh if they're investing in FTX they must have done their due diligence they must have uh uh you know seen the seen everything happening uh behind the scenes they must

think that SPF is a good operator you know what I'm going to trust FTX with my with my money I'm going to trust them to trade on them I'm going to leave my assets on there okay I get that fair enough right but then it's not just Paradigm right it's all these investors and you start going down the list and you look oh black Rock's in there oh the Ontario pension fund surely a pension fund wouldn't invest their money in something that would go to zero right and go down the list and you just see all these big names you're like oh okay well I can trust this no no you can't that if there's one lesson that you should take away from this year is that doesn't matter who else is involved with something doesn't matter how reputable they are they're not infallible they

make mistakes just like you and I do they've just got more money than us that's it like people look at these institutions and think uh they must have some special Insight or they must have um uh so special some special special way of doing things at the end of the day they're just a company or institution with more money than you you and me they're making the same kind of decisions they're looking at the risk factors they're doing due diligence they're doing research and they're making a bet or a guess on on something right on uh an investment bet I guess so to speak right so from that point of view you shouldn't really trust things just because other people trust them I know that there are certain things that lend legitimacy to others that maybe you can right if there's a lot of smart

people looking into something then you can uh but I don't think that you should just on face value trust in something just because there's a bunch of well-known big name investors behind it like I've never personally I never looked at something with big name investors behind them and being like I'm going to trust this with all my money like that's just not the way I go about things so that's that there just absolutely insane that they were able to get so many big-name investors which obviously added a lot of credibility and legitimacy to FTX but that's that one there uh other tweet was from uh this Twitter account called Bearer News Network who said still can't fathom how Alameda can own the house FTX employ a bunch of employ a bunch of smart people scam retail left and right for years and still get wrecked every unfair Advantage

anyone could ever have still wrecked you can't make it up LOL yeah so when I think about it like this and this was what I was explaining before the endless greed that SBF had was his downfall in the end right like how can you start basically with such a massive head start on this ecosystem make so much money have everyone uh you know uh simping for you have politicians in your pocket and then blow it all because you got too greedy like that just to me is absolutely insane that someone could do that I just I I can't compute it right I just kind of the more I think about it the more I try to rationalize it the more I try to come try to come to terms with it just insane like I feel very similar to how I felt when Terror

exploded I I you know I didn't think it would explode that quickly and it just caught me off guard and the fact that they just let it explode and everything got wiped out and it went to zero in like less than three days yeah the insanity never stops in crypto right guys um but there's that I think there's a couple of things left before I move on from the FTX stuff but basically the block posted an article today saying spf's priority crypto bill is effectively dead after FTX as I was to finance so that's a bit of good news that has come out of this is that that bill that I've been talking about uh that SPF was backing uh to I guess regulate D5 is dead and it's just hilarious how he was backing that bill while doing all these Shady stuff with

his own centralized Empire but anyway that's another discussion there uh and Victor Boone actually put out a great little tweet here on the back of this news uh the back of the um FTX news saying I literally can't believe people use any exchange that he's not coinbase because coinbase is a public company with audited financials doesn't djm with user funds Best in Class custody and security fights crypto and decentralization and sits at zero zero on the [ __ ] around and find out chart as I said before guys like it's not that I trust coinbase it's that I trust them more than every other exchange out there right um and I I still wouldn't leave my funds on there or anything like that uh personally I mean it's up to you what kind of risk you want to take but as I said they've been around since 2012

right they've survived many blow-ups within crypto before uh over the over the years um and they're fully regulated in the US extremely heavily regulated in the US uh and Brian Armstrong really cares about the decentralized mission and values and you know what as I as I said before I've given SPF a lot of flack in the past but you know he survived a lot since 2017 uh since binance was founded uh I still wouldn't put my funds on binance but if you're looking for exchanges to use and on and off ramps I mean there's only a handful that I would actively use uh I can't really I mean I traditionally haven't been able to use coinbase because I haven't been able to sell so I've used a local Australian exchange called coin job I've been using them since 2013 and they've been excellent but you know in terms of the other

exchanges that I would personally put my my weight behind but do remember as I said before just because someone that you trust puts their weight behind something doesn't mean that it's foolproof and perfect right this is just my own personal opinion but it would be uh from from my experience uh coinbase and Kraken in the US I've used Kraken pretty extensively uh coin jar as I mentioned in Australia I've never had any issues with them uh they've been really great for for a long time uh and even binance I mean like if I mean binance has a lot of coins that maybe other exchangers don't they have a lot of liquidity they are the biggest exchange but above all of them I would just use D5 but obviously I can't often on ramp uh through Fiat with defy so I still have to use centralized exchanges

uh which is what I do and you know depending on the size that you're trading D5 might be complicated for you but you'd have to be trading some insane size for D5 to start being complicated for you depending on the asset uh for each you would have to be trading probably in the hundreds of Millions for you to care about uh uh liquidity concern turns within D5 for eighth um but yeah those are still concerns as well so that that's where I would put them but if you're in the US coinbase and Kraken should be the the first two stops for you uh in the centralized exchange space um moving on all right that's enough on the FTX stuff actually before I move on from the FTX stuff I just wanted to say one final thing about the whole ordeal people have lost money yet again right I

know I've been shipped posting a lot on Twitter today but underneath all of the [ __ ] posting is genuine sorrow and sadness for all the people that have lost money if you have been affected by this like I've just I genuinely do feel sad for you uh let it be a lesson for you if you want to still stick around in crypto still want to be around let it be a lesson of the importance of um self-custody the importance of just not you know trusting any of these centralized institutions at all really I mean you shouldn't be trusting them at all you should be as I said trusting uh having like a ranking of them and just trusting some others less than than others right um and on top of all of that the number one rule of crypto is as it's always been don't blow yourself up and just

survive like that's how you win at this game and I think that's how you win at investing in general it's probably going to be a pretty shitty time for a while guys if I'm being honest we've already you know how long into this bear Market I mean if you count like the whole year is the bear Market or when it's almost at the end of the year so it's almost been a year worth of of a bear market and we just had one of the biggest exchanges completely blow up basically uh in another Hole uh with some possible contagion going to be spreading around the ecosystem so yeah I don't know how long we're going to be in this hole for obviously the macro backdrop is still not very favorable it could take a while for us to to recover from this but at the end of the day I will say what I

always say I've never been more bullish on ethereum the ecosystem the technology everything that we're building it's still being built right still tracking along uh fine doesn't matter that the price is very volatile uh and honestly if it wasn't for ethereum I would have left this ecosystem a long time ago the rest of the ecosystem just frankly discussed me like pretty much every single part of it discusses to me except ethereum and as I said before you can call me an eighth Maxi for saying that but like just look at the evidence I mean how many things have just gone the way of blowing up and hurting so many users yes ethereum obviously the eighth price has gone down yes tokens in the ethereum ecosystem has gone down yes there's been ponzis and scams on ethereum but if you're talking I'm talking about the core ethereum Network

protocol work our people building actual things on ethereum like actual D5 like all that stuff's still there and working and improving all the time so as I said if it wasn't for ethereum I'd be out guys uh and so so I guess I'm very glad that ethereum is is where it is and ethereum is thriving and going to continue to thrive into the future all right shifting gears here to a bit of news that came out today that got completely overshadowed by the uh FTX news but it's just as important I believe so Peter van volkenberg from Queen Center put out a tweet saying oh fact today repealed the tornado cash designation that Queen Center is challenging in court and then replaced it with a new one nothing they've announced nothing they've announced changes our strategy in this lawsuit you

remember that coin Center is suing ofak with uh David Hoffman and a couple other people I believe um over these um these sanctions uh and uh where's the Tweet here Gabrielle Shapiro I had a tweet about this as well where he said ofak reverse tornado cash designation and redesignates with Clarity on what person quote tornado cash is I.E the unincorporated association of tornado cash Founders and developers plus the tornado cash Dao a tacit surrender to coin Center's lawsuit but also a more legally credible pivot to be clear this raises leaves various questions how can we determine what Prosper a property this alleged um this alleged entity owns has interest in when it's some kind of Novel joint

venture with no contracts who exactly is included in the tornado cash deal at any given moment and more and then Collins Belton another lawyer here uh replied saying this would be more credible to me if the Dow actually had any say on the developers activities here governance structure Financial incentives Etc aren't really things that the tornado cash Dow had a material say on other than relayers on the home page so yeah I mean it's just a lot of uh legal stuff going on here a lot of legal maneuvering going on here from ofac it doesn't change anything about the sanctions and I think it actually like they actually added an address to the sanctions there was a tweet here from Michael uh from open Zeppelin who said new addresses added to the tornado cache oh fact list some of them include test net contracts so who does the US

Treasury think it is laundering uh dprk or the the People's Republic of North Korea money and using a test ether did they just copy paste the tornado cash docs list and not check any of them so yeah more stuff from ofac that doesn't really make sense from a technology point of view um but Michael calls that North Korea here so I think uh the I think ofac actually came out on top of this and said that the money that was being funneled to North Korea via tornado cash was being used to fund their nuclear weapons program I've said in the past that I believe that if you read between the lines that the main reason and tornado cash was targeted or they are only raising pretty much was because of

that link to North Korea and them using it to funnel funds that they hacked via the Lazarus group apt or apt stands for advanced persistent threats basically a sub security term uh but yeah this is just more confirmation on that uh and they're saying directly you know to fund their nuclear weapons program so you can see why ofac is being so strict here because from their point of view the uh North North Korea right a repressive regime has been able to raise a lot of money or I guess like steal a lot of money and then hide their their tracks uh uh to get that money uh sorry to get that money but probably out of crypto into something where they could fund uh into something like Fiat or US dollars for example where they could fund their

nuclear weapons program I guess that speaks for itself right uh so that's the update on the ofax stuff now a bit of positive news around the censorship resistance stuff or censorship stuff on ethereum they said being creeping up the other uh uh over the last few weeks the post-emerge of fat compliant blocks on mevwatch.info I think it went to like 76 enforced offak compliance but it's been trending down over the past couple days it's now at 70 of total blocks obviously still a lot higher than it was just a few weeks ago I might try them then we would want to see it obviously we want to see it at zero percent right uh but if I untick include all blocks we can actually see where this is coming from so flashbots's uh dominance has actually dropped very uh uh dropped by a lot here

that's at only 73 percent whereas blocks route Max profit which is an uncensoring relay is now at 18.5 percent I believe they were at only three or four percent a few weeks ago so they've been able to to gain a lot of market share here and then if we scroll down to this chart from uh this chart on mov watch.info we can see the green uh area here the not of fat compliant blocks is in increasing and this is not including all blocks this is only including relayed blocks which which paints a much better picture because the relay blocks was at 92 percent I think at Peak or something like that um and now over the last day it's only 79 of relay blocks enforcing Eartha compliance so very very awesome to see that uh the trend seems to be shifting here whether that continues or

not is Up For Debate right I don't know obviously I can't tell the future but it seems that the relayer market is getting more distributed it's becoming more competitive and flashbot's dominance is going down which is exactly what we want to see here you know and as I've said before even if flashbots wasn't censoring I would still want to see their dominance going down I don't think there should be any dominant relayer uh because of the fact that the whole point of Mev boost is to create a Marketplace in a democratized Marketplace for I guess relays for Mev extraction so in order for that to actually materialize we need uh these relayers to gain market share we don't need them to just be online we need them to gain market share so very cool to see blocks route Max profit gaining market share here as a

percentage of blocks and you know if you look at the last hour they're even higher they're 19 but at last hour is a bit noisy I'm looking at the last day the last seven days as well but yeah there are different time frames here of the block so very very cool to see that things things seem to be looking up here uh and are on a related note uh Barnaby here from the robust incentives group at the ethereum foundation has published a Long blog post on proposal separation a collection of the various topics related to mostly protocol side PBS and how they all tie in together if you want the definitive I guess blog post on PBS this is probably it uh I would probably suggest this over anything else at this point I know there was one that pseudo

theosyn I believe Domo thee co-wrote together which is really good as a probably an introductory piece but this one from Barnaby goes much deeper so if you're interested in learning more about PBS and how it affects Mev boost and how it affects Mev and censorship in general then this blog post is definitely for you highly recommend giving it a read it's going to give you a great overview of everything PBS so definitely go check that one out I'll link it in the YouTube description below all right another big piece of news that came out I believe two days ago now was that the library token so lbr y token has been classified as a security so the SEC had brought a uh lawsuit against the uh creators of the library token uh the library project I guess like whatever

the company is behind them and you can see here Gabrielle had another tweet had a tweet saying uh uh it's dicta but here the library judge reasons that even if the team was completely silent about efforts no promises no contracts but pre-mines tokens that alone creates a sufficient expectation of profits from their efforts in common Enterprise to pass the Howie test now this is a very bad result uh and then Gabrielle goes on to say I think the judge's reasoning in this dictator is challengeable it essentially counts the same facts Library team earning tokens as satisfying two different elements of Howie if that was how the test was meant to be applied well there's even be two elements rather than one so Gabrielle is basically saying that this doesn't really make sense from a legal point of view and the judge got it wrong here and

there was also a a reply uh that was uh that made an analogy here I think yeah uh uh Troy said Beanie Babies are a security because uh Ty held an inventory of Beanie Babies yeah in the transcript of the oral argument the judge literally says he would view beanie babies as an investment contract scheme which is Gabrielle replying here so obviously the judge I mean I think he's get the judges got it wrong here Gabrielle seems to think the Judge has got it wrong here uh I don't know much about the library project I know I know of his existence I've heard of it a bunch of times but yeah this is a bad result it does set a bad precedent hopefully there can be an appeal and and Library gets this overturned but you know the differences between something like this case and the

Ripple case is that I doubt the library team has anywhere near the amount of money that Ripple has to spend on lawyers like that's just a sad reality of it the more money you have to spend on lawyers the better your chances are of fighting these sorts of things so I'm still rooting for ripple to win their case against the the SEC because that would set an even greater precedent than the library thing I think the library thing ends up being a footnote whereas the the Ripple thing if they win uh ends up being kind of like the headline right and ends up being the thing that people reference in future cases uh and then some people ask me you know what does this mean for eth like is Eve going to be labeled or security because everyone always talks about this and Heath was uh

eth had a pre-mind and this and that guys like I mean look you could it's it's hard you know I'm trying to go through my thoughts here I'm trying to to to to give as much clarity as possible here you I think I'll start with you can always argue for any one side of anything like that's the whole point of a court you go to court you have a defense you have a prosecution you argue both points and then uh depending on Whose Arbiter uh uh um doing the arbitration whether it's a jury or a or a judge or both or whatever you come to a conclusion in the end and it really doesn't matter who's right or wrong I mean that's a sad reality it matters who presents the best argument so what do you think is going to happen if I don't know I don't think this is

gonna happen what do you think is going to happen if the SSC goes after the ethereum foundation and says hey we are suing you because you believe eth is a security well the ethereum foundation has a [ __ ] ton of money they're going to be lawyering up instantly they're going to have the best representation probably just as good as Ripple if not better in the courts uh and and that'll be that I don't think that that A8 would be labeled as security and that's just on the legal side of things then you get then you consider oh sorry the service level then you consider all the arguments as well uh the lawyers would simply argue that like if you're considering a premine uh uh to to meet the criteria of the Howie test and to meet that investment scheme uh criteria well then you could literally expand

that out to anything that anyone ever produces like as I said there was that Beanie Baby example but you could say that Apple pre-mines the iPhone because they create it like that's that's the that's the kind of logic you can follow here and that's exactly what the lawyers would do they would say if this doesn't make sense because it would apply to everything here this is the part you know and then they would argue this is what we think makes more sense based on such and such and such law regulations our precedent and different uh cases and all that's a different case law and all that sorts of stuff so it is a very complex machine do I think Edie is going to get labeled a security no right um the SEC probably already would have have gone after ethereum or at least made some noise I haven't seen that yet

maybe I'm jinxing it by saying they won't do it I'm not saying they they won't do it I'm saying that I believe there's a low chance of it things can always happen like they're always black swans as we've seen this year there's plenty of of these things that can happen but I don't think the library case sets a a kind of preset in here because there has been other um things being labeled as a security by the SEC and then uh it you know things just continued on uh and and like for example uh there was another another case with EOS another big profile case where they admitted that it was an SEC at time of issuance they paid a fine and now uh uh sorry they made it it was a security at time of issuance and they paid the fine and now EOS isn't a

security like as it currently exists so worst case scenario eth would probably be treated the same where the the uh where the ethereum foundation would admit no guilt they just uh they may sign something that says hey like yeah okay it was a security at time of the premium final time of the sale but it's no longer a security so literally nothing would change uh the maybe the information pays a fine which is probably a rounding error for them to considering how much money they have and that's it so I believe that would be the worst case scenario which is still like not a bad scenario in my in my art in my mind but I'll keep tabs on this I'll see what what happens I'll see if I hear anything down the Grapevine but yeah from what I've seen it doesn't seem like this case um with library is going to

set any any kind of big precedent here I believe the Ripple case would set much more pre-set and be much more impactful than than this one but still shitty to see that this judge is just being very unreasonable here and not applying uh the Howie test as it's supposed to be applied uh and hopefully as I said the library team can win on an appeal here all right so some very positive news and I'm sure some of you caught the live stream today of this but eth is now net deflationary since the merge so you can see on ultrasound money that the merch happened 55 days ago and Supply chains supply chain supply chain since then is negative 489 each so I put out this Tweed what is it uh 12 11 hours ago and

we are still net deflationary uh 11 hours later which is very very cool now I think this is because gas is high due to everyone getting wrecked uh because the prices are going down everything but I mean I'll take what I can get at this point but this is just incredible guys and the reason why it's incredible is not so much the deflation uh the deflation since the merge it's more when you when you toggle this button that says simulate proof of work and you see that even with the burn if we were still on proof of work we would have issued 653 000 each over the last 55 days which is almost a billion dollars worth of eth two miners who we know are forced sellers so that would have added more cell pressures to Ethan than currently exists and for sure eth would already be

back in the triple digits now eighth is at 1183 I don't know where it's going to go from here but I don't think you can deny how much cell pressure has been alleviated just from this and as I've always said over the longer term over the year over the years this is going to play out in a really really really big way in in my mind but uh yeah I mean the main Milestone here is the fact that we're net deflationary since the merge which is absolutely awesome I hope it continues obviously you can go back to inflationary since the merge and I've said plenty of times that I don't think uh measuring it over even like a two month three month period is totally accurate I prefer to measure things over over yearly periods but this is still like a very cool Milestone but if we

click like you know since erp1559 was implemented 460 days ago we're still in that deflationary by minus one point two seven percent per year so we're still deflationary right and we've still come down from the peak Easter Supply that happened uh kind of pre-merge here which is just yeah I mean it's just amazing guys like I I honestly I'm very very excited about this stuff happening in Bear markets because of the fact or the matter is that uh we we basically are living up to our deflationary meme uh they are living up to our ultrasound money meme uh I'm just very happy about that in particular so yeah I guess congrats to the ethereum network for and the asset for becoming net deflationary

I think everyone loved seeing that today all right so just a few other updates to get through uh as this refuel is coming up on the hour I think oh it's going to be an hour long by the time I'm finished but ethereum pools.info has a great blog post out today measuring the performance of ethereum staking pool so they titled this performance analysis of ethereum staking pools they also looked at solo staking as well uh I think around the time of of the merge so 12 hours before and 12 hours after it happened this was the analysis done so go read this blog post it's quite a lengthy analysis you can see everything in in the post itself there is a thread that accompanies this as well that you can go check out uh and there's a bunch of nice little pretty charts here showing this uh but

basically uh uh solo stake has performed very very well around time of the merge which is I guess to be expected because solar stakers are definitely more the individual Staker they don't want their um oh they care more about the network on net and they obviously don't want to be losing money either from going offline or from not attesting to blocks and things like that uh or from not so I should say proposing blocks considering the rewards it became juicier because of the execution layer Awards but just great to see a nice little analysis done here from ethereampools.info which as I said you can check out the blog post for and I'll link that in the YouTube description below but I want to see more of this analysis happening especially as time goes on because I think writing the effectiveness of different staking providers will give people a more

informed view of who to go with like if it's not possible for you to solo stake and you want to see the performance of different staking operators uh from I guess like an um well I wouldn't say unbiased third party but at least from a third party well this would be something to watch that's for sure all right so David mihal has launched a new website called cryptoflows dot info which is them his most ambitious website yet so he says yeah crypto flows aims to be the first complete map of the crypto ecosystem charting the relationships between all major chains chains and the bridges that connect them together I think I mentioned on the refill that I would love for someone to build this a little while ago and basically basically shows the relationship between all the chains well here we have it we have uh a

nice little visualization here as you can see on my screen you have ethereum in the center with these purple arrows going everywhere and showing funds bridging from from chain to chain and you've got a list on the right hand side of top exporters and top importers so ethereum has exported 15.7 billion dollars worth of value and imported 4.4 billion dollars worth of value so people definitely uh are on ethereum and then migrate their funds to other other chains such as polygon the POS chain you know optimism arbitrum and and other uh other evm ecosystems like the like BSC and things like that and then you say top importers you know which chain is actually the biggest beneficiary here well BNB chain is actually first with 9.7 billion dollars going uh to BNB

chain here and then ethereum has at 4.4 billion as I mentioned before polygon POS Arbitrage one and optimism coming in in third fourth and fifth place which is awesome to see but it's just crazy how much uh value b b chain was able to import there I mean as I said before like about CZ he's a he's a very ruthless operator but I mean he's a very good businessman like I have to give him credit where it's where it's due there he's done I mean he's done a bunch of shady stuff in the past as well I think uh especially in the earlier days of of binance uh but he operates ruthlessly he hasn't blown himself up yet uh and he's managed to create an on-chain ecosystem with BNB chain that uh I believe a BNB Cham would be the second most active on-chan ecosystem behind only ethereum

so yeah you've got to give credit there but this site is awesome I love it I think it's really great way to visualize what's happening across all of these ecosystems and to actually put numbers to the narratives because there'll be a lot of probably say oh you know all this money's going from ethereum to this chain and ethereum's getting losing users to this chain it's like okay well let's look at the actual facts here for all the talk of some of these chains right they don't even register uh some of them right in in terms of um in terms of liquidity that they've imported so so yeah I think it's always good to get actual data behind the narratives and uh have it visualized like what's uh like what David has done here but uh but yeah you can go check this out I'll link it

in the YouTube description below all right last stop here we have something that launched a couple of days ago which is called Helios so this is a fast portable and secure ethereum like client written in rust from the a16z crypto team so Helios sinks in two seconds uses no storage and provides trustless access to ethereum so this is a True Light client guys which is absolutely awesome I mean there's a blog post here that you can go read but basically what this does is it allows you to connect to a centralized RPC provider uh with your like client sync to them but then have cryptographic guarantees that that centralized RPC provider is telling the truth so to speak so you don't have to sync your own full node to use your own RPC or to I guess like have a trustless way to

access an RPC you can do it with running a like client and then oh and then talking to a centralized RPC provider but having guarantees that they're not doing any funky business you know they're not forging anything forging any transactions or sending wrong uh sending back the wrong data which is very very cool and what's even cooler is this came from a16z right didn't come from ethereum Foundation it didn't come from ethereum Foundation backed teams didn't come from really anyone in that's in the ethereum ecosystem directly it came from a16z which as you guys know is one of the biggest funds in the world uh so just awesome to say this like I I as I said you can read the blog post to get more details here but just a really big announcement and release that you can run starting today that I think got

stripped under the rug a little bit uh because of all the other news that's been happening over the last 48 hours so yeah I'll link this in the YouTube description you can go check it out below uh but just to end this extra long episode for today wanted to give some very uh maybe not very final but like final thoughts for today on the last 48 hours um I think generally when you think things can't get worse than what they've been like I don't think thinking in those absolutes helps you as an investor and helps you as someone in the crypto ecosystem because as we've seen time and time again like things can always get worse than what they seem and that's because a lot of these a lot of these things are opaque so for example pretty

much all the centralized stuff going on is opaque you don't know what's going on under the hood you you have to trust that these operators are telling the truth you can't order anything you can't have really any guarantees over the audits done by Third parties uh and it's just like a whole mess of that right so but then you come into D5 well you can audit everything everything's transparent everything's backed everything works you know everything has worked through multiple crisis multiple massive kind of events massive volatility events and you could contrast the Two Worlds and you can kind of see that while things can get worse there are always Pockets that are getting better and I think every one of these events that happens defy gets stronger

ethereum gets stronger and it emboldens Builders to basically say why am I building centralized things when I can be building decentralized things and the clearest example of this I believe is coinbase they've been contributing a lot to ethereum uh over the last past 12 months especially a lot to D5 a lot to layer twos on ethereum they've been contributing directly to ethereum called protocol work with 4844 and I actually believe the end game for coinbase is to become a decentralized exchange I I really do uh do think that eventually coinbase uh they'll probably keep their Fiat on off-ramp gateways the fully regulated thing but eventually they'll probably pivot to just being a fully

decentralized exchange using a ZK roll-up or something like that maybe something similar to a Dy DX except actually decentralized and scalable and and run by um coinbase but in a way that you can order that that it's transparent that you can kind of see what's happening you don't have to trust anyone I think that really is the end game for coinbase and it seems like they are barreling down towards that and they're actually committed to that so massive kudos to them for that but I don't think that their only example I think the as I said The more of this stuff that happens that the the more time goes on we get more and more Builders coming in that are like screw C5 I'm going to build defy because at the end of the day that's what we're here to do we're not here to

recreate tradfi with crypto like that is just the most boring and dystopian outcome I can even think of like treadfire has all of the same issues that that the centralized uh uh Finance within crypto has opaque is on these select people who actually have access to the data you have to trust people in sit in Trad fire you have to trust governments because the people who are regulating the tradify are governments and if the government isn't actually regulating them properly if the government isn't uh making sure that they're doing what they're saying they're doing we it leads to things like the 2008 blob right for example because if you've only got one entity able to audit things well that's not good within default we have thousands of people tens of thousands of people able to audit

things and we have plenty of people who have called most of the collapses that have happened well in advance just by looking at the chain even the C5 collapses because you can even see things and you can connect dots on chain from these C5 operators um but that's still not good enough because those dots that you connect sometimes don't pan out right and it's very it's very hard to get a full picture so you don't know the extent of it we still have absolutely no idea the extent of the FTX blob we don't know what the contagion London's like we don't know how much they've lost estimates put it at five to ten billion dollars in the whole right we have absolutely no idea where where the what money they've got left whether where where they've stored it what assets they have it in uh you know we have no idea

what uh what SPF is doing behind the scenes like none of that right uh which just again shows the value of D5 shows the value of ethereum shows the value of what we're building so short medium term pain for long-term gain really and that's I think always what happens with these crashes is that we have that I mean it is quite painful to see Eve go down yet again and just Meander around and the whole crypto ecosystem go down again and one of these you know one of the biggest exchanges collapse and users get hurt again but I do truly believe that in the long term it makes ethereum and D5 stronger it makes defy a stronger value proposition for Builders for users for the world and we just need to make defy uh as it just as easy to use as C5 and I do believe that we can onboard the

next 10 million 100 million people into D5 instead of C5 on that note I'm going to end this episode at that thank you everyone for listening thing I'm watching be sure to subscribe to the channel if you haven't yet give that video a thumbs up subscribe to the newsletter join the Discord Channel and I'll catch you all tomorrow thanks everyone