Joseph Lubin on SBET and Ethereum as a treasury asset

Transcript

GM, good morning. Welcome to the Milk Road Show, the daily crypto show where Ethereum's comeback is so strong, Netflix just called about the rights. I'm your host, Jay Hamilton. It's Monday, July 21st. Today, we're joined by Joe Luben, co-founder of Ethereum, CEO of Consensus, who built MetaMask, and most recently the chairman of a publicly traded company called Sharplink Gaming with the ticker SBET. Now, this company is designed to purchase ETH, the asset, for strategic treasury purposes. Today, we're going to talk about ESBET and the ETH treasury strategy, how to value ETH and Ethereum, and how Joe sees the world in the future, how AI and Ethereum fit into that. Before we jump

in, as you know, we have a team of researchers who live and breathe crypto every day. And each week they drop a nofluff report about what they are watching within the crypto space. And we recently dropped a pro report all about where we think ETH is headed by 2030. The first part is free. Hit the link in the show notes to give it a read. And you might just want to go pro to read the whole thing. Today's episode is brought to you by Definitive, the leading multi-ra trading terminal trusted by funds, Dows, and Pro Traders. It's also brought to you by Letin. Get cash without selling your Bitcoin.

Without further ado, Joe, welcome to the Milk Road Show. >> Hey guys, Jay, how did you get the rights to the Ethereum story? >> Not my rights. Netflix is already They're They're asking though. They're asking. I've heard. >> Kyle's also here today, folks. Kai, I sorry I should have thrown you in the intro. Kai, great to have you here today. >> That's okay. The intro. It's all It's all about Joe today. We're We're pumped to have you on. And And Joe, there's a >> Yeah, there's a bunch we want to talk about today. And um I'd love to to get started first just talking about Espet. Obviously that's kind of making a lot of noise. It was you know on the NASDAQ tower a couple weeks ago and uh and is you know just been making a lot of noise in the crypto space and specifically the

Ethereum uh ecosystem. And so I just kind of want to understand why ESP and why now? Uh and I would love for you to kind of take us back to the early days of ESBAT. You know when did this idea first start? Who was it that you were talking to? It's interesting because there was a few of the other ETH treasury companies that have basically said, you know, we've had ETH on our balance sheet for a while. We just never did this. And then all of a sudden Joe came in with ESB and we were like, oh yeah, of course we should do this, too. And so just curious like what what got you started on this? Like how did this happen? >> Yeah. So there are two questions there. Why why would we consensus? Why would anyone do an Ether Treasury company strategy? And two, why would we choose

ESBet or or that particular configuration? So the big picture is that uh uh Ethereum has been anticipating that it would be the next generation internet, the natural evolution of the internet and web protocols, web 3, the the red decentralized worldwide web. And that meant that we were building for a pretty big future because uh the internet and the web are very large. Um and we anticipated that uh decentralization uh decentralized trust uh changes the nature of everything potentially on the planet. And uh and so we had an opportunity to move the entire world systems um all the uh the web systems

onto uh decentralized protocol rails and enable the world to to benefit from a much more powerful form of trust uh decentralized trust. Uh and so unlike Bitcoin uh whose value proposition was pretty immediate uh with the uh debasement of currencies uh um there's there's real understanding and interest in uh just holding Bitcoin uh for uh protection of your assets uh stable money effectively more stable money or at least uh money that isn't being debased but Ethereum for quite a while uh has been building for the future building layers of enabling infrastructure And we got a bunch of important things done. Uh we got horizontal and vertical

scalability done. We got affordability, lots and lots of cheap block space. Usability is pretty good. Usability will be great very soon as we uh build AI interfaces into applications and wallets. And there were two pieces uh effectively that uh that we needed to shore up. uh one is that uh largely because the United States was trying to kill Ethereum uh for the last few years under the the Gary Gensler regime at the SEC, we didn't have a lot of companies uh wanting to use um Ethereum and tokens and issue tokens and uh make use of DeFi. we didn't have lots of builders coming into the space um to build the really cool stuff and uh and as a result

uh you know few few exciting applications lots of DeFi stuff but uh no no really exciting um social graphs social network platforms uh games not great stuff there just applications for enterprises and opportunities for enterprises to use DeFi were unattractive to the enterprises because their GC's couldn't uh recommend uh that they touch tokens or issue tokens. And also the applications to make that easy and compelling uh weren't there because people weren't building them because um you'd get a a invitation um to provide all sorts of documentation uh for the SEC to scrutinize if you started

building stuff that that cut their radar. Uh so few applications, few users and effectively too much ether out in the world to support the fact that there isn't a ton of activity on all this new block space that we created. Uh so the recent election has brought in a much friendlier regime. uh Paul Atkins and uh David Saxs and Bo Hines and and many senators uh are really putting wind in our sales uh gale force wind in our sales with uh legislation that that has landed and uh and legislation that is incoming. Uh so we're really excited about that. institutions are on fire uh

with respect to our ecosystem. And uh uh so it seemed like a a really good time to get serious about sapping up um what could be considered excess ether out there. And uh and so we uh we started contemplating the strategy about 6 months ago and we had a few different approaches to it and landed on uh something that would get us to market as soon as possible. We found a great team with a perfect configuration situated on NASDAQ and uh from them passing our screen uh to being actually in market uh was around four weeks and we had to do it

>> super quietly um extreme secrecy very very tight group of people uh because if you find an opportunity like that there there are people uh who are now just scouring uh markets for I think Robert Lesner maybe um just bought some company um cuz he's going to try to try to take it into a similar situation. I think he brought controlling stake or something like that. And so we raced to market even in the last couple days. The price of of the the stock went from about two bucks to six bucks. Uh so it's clear that something was up and it could have been innocent. It could have been somebody just screening and saying, "Hey, somebody's going to put this into

play." uh or or could have leaked on on one side or the other. But we got it done. We got uh an initial pop uh which we expected, but it it grew really large cuz uh the liquidity conditions were so small in in the first couple of days. And so we we knew that wasn't going to last. But uh we had the uh the ATM facility already in place and uh and we were off to the races virtually right away. We have another ATM coming uh and uh the goal is obviously to increase the ether concentration uh per unit fully diluted share. We'll do it by selling equity. We'll do it uh by offering different kinds of financial

instruments. Usually running Michael Sailor's playbook. Uh but there's a lot more that uh that we can do with Ether. First, it's a productive yielding asset. So, we're already generating uh quite a lot of Ether uh via staking. We're going to add restaking and uh and more sophisticated prudent risk level uh DeFi and uh we we definitely won't uh get into a position where we're forced to do anything that that we want don't want to do but we should be able to ramp up yield quite significantly and uh that'll enable us to to maintain a premium to net asset value and uh and keep this thing running for I think a very long time.

>> Interesting. And and just to give a bit of context, so when you guys first launched, you raised I think it was 425 million. You basically bought all that with ETH. You've staked 100% of it. You've raised a bunch week over week. >> Buying and staking right away pretty much. >> Yeah. Yeah. And you guys have now raised I don't know, it's getting close to a billion dollars. You guys have raised at least the value of what you guys hold. 280,000 at your last um release. Uh 280,000 ETH worth a little over a billion dollars. Uh so congrats. That's uh wild in such a short period of time. >> Congrats.

>> Exactly. >> Yeah, absolutely. Congrats to Ethereum. Congrats to everyone involved. Um so a question for you here. So obviously I mean the stock has done well. There's been a lot of um noise around ESP and what you guys are doing. And I'm just curious on the the appetite for ESP on the more like institutional side. So those that when you do the ATMs um who is it that's buying this stuff, are they interested? Are they because everyone's super excited? Why are they super excited? Like tell me a little bit about the kind of behind the scenes discussions that you guys are having. Is this like crypto specific people, people that already have ETH or is this a whole new world of people that like otherwise maybe couldn't be buying or weren't buying for whatever reason? Um, walk me through that uh behind the scenes a

little bit. >> Might be easier to answer who isn't buying this stuff. Um because it's pretty compelling. So it's obviously retail, it's obviously institutional on on the open market. in terms of the investors that uh that we spoke directly with their financial crypto financial sovereign so so we as I said we had to race to market uh so we talked to some groups that uh it just no matter what can't make decisions um by tomorrow and so uh there were uh some major major investors that said yeah we really like this but uh there's just no way that our organization can move that quickly and So we continue to speak to lots of

different call it major investors uh and uh that will go well that's already going well. Stepping way back the big picture is that this is all based on a a structural shift in the shape of society in the shape of the global economy. it. You know, as you may have heard me say somewhere in the past, um I believe we're at the end of a super cycle, a debt and generational super cycle that lasted about 80 years from the end of World War II. Um you can read about it in Strauss and how or Ray Dalio or lots of other uh people who describe it in in different terms. I think Peter Turin does the same. And the next super cycle

will be based on our technology decentralized protocols plus AI at least for the first couple of decades. And if you think about what happened at the end of World War II, uh America effectively won that war in the sense that it had uh a much stronger industrial base than any others. And so it was able to set the uh the monetary system for the world. That happened in the form of Breton Woods. And that created a a structural structural way that the world worked um which ended up leading to structural imbalances. effectively the US was able to trade goods and services to countries around the world uh in exchange for paper uh dollars and treasuries and that created

um for decades um including uh very clearly in the last three decades it created a trade or a trend of US treasuries uh going higher in price and lower in yield. Um and so structural structural trade uh based on the way the world works. Uh something similar happened based on the boom and bust in Japan. Uh extreme deflation uh enabled uh lots of traders around the world to to borrow and yen the the yen carry trade and and buy uh different assets that were higher yielding. That has lasted for about 30 years. So the new structural trade I believe is based on the idea that the world is

decentralizing. Uh that decentralized protocols are going to get more and more important um in the global economy. Uh and for the next years and probably decades uh the major assets undergirling uh these decentralized protocols in particular uh for now Ether and Bitcoin are going to continually grow in value. Uh and so if you believe that uh and if you believe that uh ESBET and Michael Sailor and 21 Capital and and our our friends uh Tom Lee and Sam Tabar and Charles Charles Allen and others, we are all in this structural trade um that will probably last for a long time and we should all work as hard as we can to

accumulate as much ether as possible as as quickly as we can. you know it trades just don't go in straight lines for very long. Um unless there's a paradigm shift underway uh in which case uh uh you got to move so fast um or so far uh sorry that uh uh certainly there'll be pullbacks but uh I think this thing will last for a long time. >> How much are um so obviously the big picture makes sense and I'm curious like I don't know if all institutions they see it the same or the sovereigns are seeing it the same. Do they understand that there's this kind of like new super cycle, this new paradigm? I I don't know. I'd be interested to know. I I know you guys are talking to them all,

but stable coin seems something that's extremely relevant. It's grown like crazy over the last little bit here, and it seems to be catching the eye of of of Wall Street, let's call it. Um, and at least what Tom Leah said as well is like stable coins is the thing that's gaining a lot of interest here and why people want exposure to to ETH the asset. Um because obviously Ethereum uh has I forget what the percentage is, but a large the largest market share of of of stable coins. So curious is um when you're having these conversations and you're pitching to Wall Street, maybe it's not you, it's it's probably your team doing this. Is stable coins a big part of that and a big reason why there's been this kind of like rejuvenated energy back into into ETH?

>> Yeah, stable coins are a big part of it, but just one part. Uh I think there is uh recognition amongst uh nation states in major institutions that uh something is changing. It's changing quite dramatically. There are skirmishes all around the world. Uh there are nation states that are trying to reformat their trade relationships and their military relationships and uh uh etc. Uh so the US is uh is driving that pretty hard and one of the ways the US is driving that is reformat those two things. There was interest in uh in reducing budget deficits in the US, but um the legislators uh just stated the obvious that uh um austerity is unamerican. Uh

and uh we're not going to do that. Uh so uh Scott Bessant uh essentially took that and pivoted and said, "Okay, that's fine. We're going to grow our way out of this mess, this debt mess, and uh uh we will deregulate in many different ways and and grow the economy that way." And uh one of the ways is to regulate or deregulate by regulation. And if you enable the US economy, the US uh monetary systems uh to move on to decentralized rails, um it will accelerate things quite dramatically. So stable coins enable the whole world uh to help fund the US government if uh

other nation states pull back. uh so more decentralized funding and it enables the US dollar uh to effectively dollarize the world which is incredibly valuable for a lot of people around the world uh that don't have good access to stable stores of value. It's not good for the tyrants in in the countries that they live in uh who prefer to financially repress and exploit uh their citizenry. Uh so I think there's a decent chance that uh uh there will be better human rights or even access to American law if you're transacting in American dollars potentially. Maybe a bit of a stretch and uh for the US dollar the world is moving onchain as much as it is online and u stables are

going to be uh the way that uh people conduct commerce uh on chain. Uh so the US dollar needs to weaken in terms of exchange rates uh to reformat trade relationships but uh stable you know dollarization of the world is going to enable the US dollar to be politically very strong uh even as it gets cheaper. >> You brought up uh regulation and obviously there's been a massive shift in the US. The Genius Act has recently passed and the Clarity Act looks like it will pass shortly as well. How how does this change in legislation and even the change that we've seen at the administrative level in the US impact

Ethereum and consensus and the things that you're building? >> So in the near term it's going to be spectacular. It's a massive shot in the arm. Um the majority of stables I think the all stables are um mostly on Ethereum. Certainly Tron has a lot of activity, but Ethereum's, I think, going to run away with that most likely. We'll see. It's definitely way in pole position on real world assets in general and DeFi in general. Uh so it as uh serious financial actors and nation states kick the tires on on different ecosystems, it's going to it it's already clear because we talked to all of them or lots of them and they

appreciate a platform that's been up non-stop for 10 years. You can't really beat that sort of thing. It's looking good for Ethereum. And it's uh it's also something that we need to be careful about uh because um stable coins in the dominant variety are centralized structures, centralized constructs and uh uh we need to be careful uh that uh that we are insulated against a potentially very progressive democratic government in place in some number of years. Uh hopefully it's not very soon, if ever. Um because no, I you know I'm I'm socially pretty liberal and uh uh

financially pretty conservative, fiscally conservative, but uh what we saw under the the Biden administration or the Warren administration or the Gensler administration was pretty toxic and dangerous, I think. So, we we need to think about how to build stable coins that are properly decentralized. Uh we'll we'll take this win. It's a giant win and we'll run with it. Um but we also um should do what we can and ESB is is playing its part to put a lot of wind in the sales of of overcolateralized decentralized stable coins. Um so, make or die or sky. Um and uh the reason I

say ESB is playing its part is because what we need is much greater decentralized economic bandwidth. And by that I mean uh the price of ether has to go up very very high so that we can use ether in decentralized infrastructure like like stable coins. Same thing for Bitcoin. Um, I'm so rooting for Bitcoin to to get uh absolutely giant in price uh because then we can use it in in Ethereum, DeFi, and and stables. In traditional finance, whales use the Bloomberg terminal. In crypto, they use Definitive, the trading terminal built by Coinbase alumni, which lets you trade across every major chain out there.

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during the chaos of 2022. If you're a long-term hodler, this is the move. Get liquidity without selling at milkroad.com/letin, spelled ln. interesting. Um, so speaking of acquiring a lot of ETH or driving the the demand for ETH, you came up with a term called the League of Extraordinary ETH accumulator gentlemen. Uh, which I absolutely loved one night. >> Yeah. Was that you were just late night posting posting on Twitter and that's what came up. I got the uh we we made a nice little tweet with this here at Milk Road when we I saw it when you were doing it and uh so this is this is you guys right here. Um anyway, I

absolutely I absolutely love this and it was >> I love this honor. Thanks for choosing that. >> That's great. >> Absolutely. So we um yeah, we were watching when you did this and we thought it was was quite funny, but I I I just want to ask on that for a second. Um to this league of extraordinary ETH accumulator, gentlemen, it's a tough one to say to be honest, but basically what you're saying is Espa's not the only public company in town that's buying ETH and running this ETH treasury. There is about maybe six or seven currently uh in the US and I'm sure there's about to be uh a bunch more. Um I guess a couple questions here and you sort of just answered the first one which is what's the impact of these companies on Ethereum? Like is this a good thing to

have a bunch of these companies doing this and do you think there'll be many more? I mean Bitcoin has like over a hundred at this point globally. Um so but they've had five years of doing this now. Uh Ethereum it's been I don't know a month and a half, two months, I forget when it was the date that you guys actually started this. So curious your kind of vision for this moving forward and if you think this is a good thing, a bad thing or like what's your thoughts overall? >> Yeah, so I I think we should all be rooting for each other and collaborating with one another uh at least for a while. We're certainly competing in a sense uh for some of the same investors. Uh but uh uh we are all very Ethereum aligned and uh we're all helping each other. Um I guess uh every time the

price goes up uh because Tom Lee um announced something big we we we are not harmed by that. >> Um so so there are two two structural things going on uh that are quite different. One is that uh we're trying to accumulate giant piles of ether for as long as we can for as long as it makes sense. Um and at some point uh we'll either have to pivot uh because um the company's too big and buying more ether uh it gets really hard at that price um or it just doesn't have impact on the price of the equity. Um, so at

that point we might have to pivot to something that's very Ethereum aligned uh and purchase that um or just become a a value company and use the the giant pile of highest powered money um to create a lot of revenue on in different kinds of businesses. So there'll be a phase shift in what we do as a company um might be years away. Uh I'm not really sure. And so there will be a small number of call it winners um so big big projects that uh accumulate a ton of ether maybe a few in in a big market like the US um probably one in in different national markets um just because they'll be able to advertise to

uh to the local population and get people excited about doing something local. I think there'll be you know there'll be ups and downs in in the ecosystem. there'll be consolidation opportunities. Uh so I imagine a bunch of us end up working really closely together at some point uh in the same company. Another very different thing that's going on is similar to what happened in the '9s and the as uh when web studio companies or interactive companies um got excited about this new web thing uh and they um started to reach out to tra traditional companies to build websites for them informational websites which uh uh ended up being e-commerce websites and then they added

mobile social etc. And so that's how the economy uh got onboarded to the web. And the way um the economy will get onboarded to web 3 or the decentralized protocol ecosystem is by getting comfortable having tokens on their balance sheet. Uh and so uh we are building tools uh to have been building tools have been having thousands of tokens on our balance sheet for uh quite a few years. So, uh, consensus has gotten pretty good at it and it's really complicated actually. Um, it's it's not very mature infrastructure in our ecosystem. It's, uh, it's not easy pricing the long tail of tokens, uh, when when people transact in MetaMask, uh, with them. You got to, uh, figure

out exactly where the token was at different periods of time. If you're um, helping people understand their portfolios over over an extended period. So, we're pretty good at that. We're building tools uh for enterprise treasury management and uh and essentially every uh web company in the world, every company that's on the web, every traditional company is uh eventually going to have they'll take um tokens in exchange for goods and services and they will buy tokens, use them for different things in DeFi and and other protocols. They'll issue their own tokens. uh they'll use DeFi and and so it's incumbent on us and people in our ecosystem to uh to provide those

tools so that uh we're all ether treasury companies um >> at some point. Love that. Okay, I got to give you a a chance to um to speak to some of the naysayers because when you launched this um I think I I've been pretty loud about I was super excited, especially because it was, you know, Ethereum co-founder Joe Luben who did this, not some random job that that launched this E strategy company to start things off. And there's been, you know, as I've been quite loud about it on Twitter and on other podcasts, I've had a few, I wouldn't say a few, a lot of naysayers and people that are kind of spreading FUD. Um, and I just want to get your opinion and hear what you say about this. The things that I've heard people say is these companies, they go against the Ethereum ethos of

decentralization. They're against the main point of crypto, which is self-custody. And then the ones that like have no idea what's going on, they just kind of say these are ponzies or a new version of a spack. Now, of course, I don't think any of that and I think there's many reasons why, you know, there's a lot of good things coming out of these, but I want to hear your opinion uh and your sort of like remarks to to those for for those who are saying those kind of things. >> Yeah. Um so, uh we like the idea that the Ethereum technology is open, permissionless, um very decentralized. We I guess believe in the right uh of people to do what they want to do uh on the platform. Uh whether it's uh putting their tokens in a a centralized custodian service um or taking care of

things themselves. Uh we like to do both when uh when each is warranted. SBED is a decentralized company. It's getting more and more decentralized in the sense that the ownership is getting pretty large. uh it's decentralized in certain ways. The shareholders could potentially start running the show if uh uh if they voted in different ways. So, uh it's not like it's it's uh governed day-to-day in a decentralized and and well- constructed fashion, but uh you know, public companies are are significantly decentralized. And is it against any of the ethos of the Ethereum ecosystem? I

think inclusiveness uh is part of the ethos. Um appropriateness is part of the ethos. Uh so I I believe that uh the base protocol uh needs to be uncensorable. permissionless to build on and use, rigorously decentralized. Um, but on top of the base protocol, um, whether it's a layer 2 or applications on a layer 2 or applications on the base protocol, you can build anything you want. You can build a monarchy. Um, you could, uh, say, um, this is Kingdom Kyle and I'm the monarch of Kingdom Kyle and, uh, you know, anybody who wants to join my kingdom, you can bow down to me on on

chain in some form and, uh, and you're in. So, I don't think we're uh, breaking any rules. >> Love it. Okay. Well, one more question on Asbet, then I think we'll move into I want to speak more about ETH and how we're valuing ETH and what we're thinking about Ethereum. Um my question is more on I guess the future of ESPET today. You said you're staking 100% of the ETH. The moment you guys get it, you guys just stake it right away. But you've talked about uh and you've hinted at on Twitter that you would do more uh you would do potentially restaking uh potentially other things in DeFi, which you've kind of discussed a few times uh within this this podcast already. And so I'm just curious like and I know you can't tell us everything, but as you think about it, I would love to hear

like what do you want for ESP or for the future of ESP in terms of what you're going to do with your ETH? Do you want to be in a bunch of different DeFi protocols? How will you guys make those decisions? How will you decide the kind of risk parameters of that? Um how are you guys thinking about that today? >> Yeah, so um we have a bunch of people that we've secounded uh from consensus into the ESB company to manage tokens and manage strategy. Uh we're currently working with Galaxy and Parfy who are the official asset managers. So they're they're the ones that uh uh effectively move the tokens around. we uh will take some things in house and and drive strategy from ESB itself and we're we've been in discussions with with lots of

sophisticated uh TI strategists, traders uh etc. Uh and so we don't have anything concrete to to announce about uh how we're going to enhance uh sort of vanilla yield. It's being structured as uh I guess Donald Trump would say, we have concepts of a strategy. Um and so we'll we'll uh share some of those concepts fairly soon. >> Okay. Interesting. Uh well, we're excited. We're excited to hear that. >> Bottom line is um we're working with the best and the brightest uh in the ecosystem. uh we're not locked in yet on the different elements of the strategy, but uh uh you can buy the token if you believe in decentralization and if you

trust that we're going to keep um adding more ether concentration to every fully diluted share that you own and that we're going to do that with the best professional financial engineers and strategists in the ecosystem, um then ESB should be pretty attractive, Right. And by the way, to the naysayers, I think that is one of the big reasons why I think this is such a great idea is you guys are about to go not just buy ETH, but then use the Ethereum ecosystem, use Ethereum DeFi and educate the world on how to do that and why it's a good thing, right? Uh and and what all can be done with it. And I think that to me is like one of the greatest things that can happen to Ethereum. So, um I don't know, to me, I think it's a it's a fantastic

thing. But, >> you know, Twi Twitter is an incredible resource for the planet. Um yeah, >> it's also it's disappointing uh you know expected uh that people take any sort of platform uh to voice their agenda and when people come out with arguments like that it I I just see it's uh competitors or I see naysayers don't like Ethereum uh for some reason and they'll use any opportunity to craft any sort of shot at it. So, I just don't think of these as as legitimate concerns that >> people are having. I I think it's just noise.

>> Yeah. No, I agree. All right, let's let's take off your your espadet chairman hat. >> Cared about those things. They would be like, "Yes, snarfle up as much ether as you can because as because my self-custodied ether is is getting more and more valuable." Thank you. >> Exactly. Uh, okay. Hey, I want to shift the conversation a little bit and we're going to take off your ESBet hat. We're going to put on your ETH co-founder, your consensus hat, and we'll dive into a little bit of ETH. Um, I want to get into how we value ETH or how you value ETH and how your team thinks about it.

But before I do, ETH has sort of underperformed the industry over the last, I don't know, I guess about three years now, let's say. Um, and I would say it's underperformed if you look at it versus Bitcoin, right? Um, obviously it's gone up in in US dollar terms, but it's it's underperformed versus Bitcoin. and it's gone down I think about 80% since 2022. It's onchain metrics. It used to have 100% market share. There's others that are beginning to to sort of eat some of that. Uh and then you have the tech roadmap for Ethereum that's I guess been criticized a lot. Now I'm curious like what's your take on what's happened over the last few years? Like why did this all happen? Um and where do you feel like Ethereum sits today? Has that is a lot of been fixed? Has that you know was just a short-term thing or

like what do you think about that? >> Yeah. So uh let's talk tech roadmap first. Uh I think the rollup centric roadmap is right and brilliant and and being executed very well. Uh we knew we couldn't scale um with the technologies that we had a few years ago. We opened it up uh to the ecosystem. We entered a divergent phase of exploration of of the problem space and the solution space and uh both optimistic roll-up technology and ZK proof rollup technology ended up happening very fast. Um so that was great uh for scalability. um we knew it would introduce fragmentation. And so

after this divergent phase um we're now in a convergent phase where lots of different techniques are are going to make things composable um either synchronously or uh near real time synchronously or or quickly asynchronously you know within a small number of seconds. So uh we're going to move to uh satisfying sort of homogeneity and uh and composability. We're also going to see applications being built across different blockchains um different layer twos and layer 1 uh that just offer different characteristics. Uh so there may be some that are focused on name spaces like uh Ethereum name service. Uh there may be

some that are focused on extremely high throughput low latency uh like Mega ETH our own uh ZKVM technology. Uh Lineia is going to be a very fast uh but very general technology. Uh we can talk about uh how big it's going to be in DeFi um a little bit later but uh um let me just answer this question first. So why why did um ether lag even while the Ethereum technology was still doing great things? Um so first uh the way the technology is built uh it's built out in the open with a lot of people bickering about a lot of great ideas um and prioritizing them and so that may look like uh there's discord

in the Ethereum ecosystem um or it just looks like we're we're building and you know scrutinizing lots of different uh potential paths forward. Uh so pretty healthy in general. Um when it gets to feel negative is when price leads sentiment. Uh so if if for some reason uh the price is lagging uh if it's lagging for a couple years or three years against uh big brother Bitcoin or uh little brother Salana for whatever reason then yeah people start to get stressed and they start pointing fingers and um uh so as I said before uh we didn't have as many applications as we

would have liked to have we didn't have as many users as we would have liked to have we had as much block space as we wanted. Um because that was our our goal just to build as much capacity as we could as fast as we could. Um because we want to move the web onto web 3 and we want to move the the entire global economy onto sounder decentralized rails uh so they can take advantage of uh the much greater trust properties um of Ethereum and and decentralized trust in general. So we had a glut of block space uh and and a glut of ether uh and so that leads to

lack of demand uh for ether or lack of tight supply demand dynamics. Uh and again that's why esbet um is doing what it's doing and what our our league of uh gentleman accumulators are doing because we're we're trying to tighten up supply demand dynamics. um while also building companies that uh can help drive the the paradigm shift towards greater decentralization. >> It's pretty funny how fast the the narrative can change too, right? You know, you launch us >> Yeah. price goes up and and everything's changed. Now, Ethereum is the best thing in the world according to crypto Twitter. So, it's uh and that's that's flipped in about two months, not even.

So, it's it's pretty funny to see. >> All that time uh Consensus was talking to major financial institutions and nation states and sovereign wealth funds, etc. They're like, "Yeah, we we know that Ethereum is far and away uh the most mature um >> absolutely >> usable ecosystem >> 100%." Um okay, let's get on to valuing ETH. Um so you and the consensus team have put a lot of work into this. I know uh and I think many are trying to both in the crypto space but also in the Tradfi space trying to figure out how do we value you know layer 1 assets.

There's, you know, store of value which is kind of the the Bitcoin model. there's, you know, is the stuff money? Um, there's been the words around like rev and and kind of revenue models for L1's. So, there's a lot of different ways and I think right now a lot of people just don't know how to value these things. And I'm curious when you hear that question, how do you think about that or how does your team think about that if they're the ones doing more of the work there? >> Yeah. So, there have been a bunch of narratives over the years and I think u they're all accurate. Um, so World Computer, New Trust Foundation, Internet of Value, um, those those all apply uh to Ethereum. And I uh I loved what Tom Lee said um a couple of weeks ago now um where he boiled it down uh in a way that

uh nobody has boiled it down before. Uh which is kind of surprising. Um uh even while Ethereum can do everything and is much larger and more mature ecosystem than than any other smart contract platform is um uh what he said was what really matters is that Ethereum is the next Bitcoin and and what what he meant was people retail consumers businesses etc are going to recognize very very soon that in terms of uh impact, in terms of mind share, um that Ethereum is what people are going to be talking

about the way six months ago uh people were talking about Bitcoin. Uh so love that. Thanks for that, Tom. uh in terms of trying to put numbers to the valuation of the uh uh price of ether or the monetary base, our friends at Etherealize and a bunch of other people put together one narrative around uh it being energy or digital oil. Uh and I like that one. Uh essentially ethers used to pay for for storage and of data and execution of transactions. Um we recently came out with uh with a thought piece uh sort of quasi thoughtpiece academic paper um and and we're thinking

about it as as sort of version one and part one um uh because we think we we can take it uh uh quite a ways we think we can refine the main thesis and and then we can add uh some calculations on on how to value things based on the different kinds of use cases. cases. Uh so if we assume that uh you're using ether uh to pay for a transaction or to pay for a process uh or to pay to maintain relationships on chain and if we um believe that those are enhanced in some way in the sense that they're

guaranteed to execute in the sense that they're verifiable uh as correct then we believe that um that we are adding trust uh to these things that happen in the traditional economy anyway. And so uh we've started seeing trust as a new kind of commodity, a virtual commodity uh and we think we can start to quantify it. And so if we uh add some ether uh to power a transaction or to ensure that some sort of business process executes in a guaranteed fashion, then are are we potentially doubling um the value of that transaction or reducing let's say maybe reducing the expense of that

transaction? And what if uh relationships or or agreements are facilitated by smart contracts on chain? Um so instead of maybe work with some software engineers and some lawyers um to create an agreement construct and you make use of that once and then you can use it over and over and if there's a platform of these agreements then a lot of lawyers u may be making less money um but uh the economy is moving much faster uh and less expensively. Uh so if we can get massive trust infusions into uh all these business systems, uh if we can speed each process up, I if we can reduce the time between each value

creation process or activity, um and therefore compound the value creation um higher and higher uh faster over time. I like what does that do to to GDP? Does it add 50% to GDP? Does it add 10x to GDP? Like it it's pretty mind-blowing when you start to think about all the different use cases about uh how they can be uh made more efficient and uh made more plentiful per unit time. >> Very interesting. Yeah, I' I've gone through and we'll actually link the um the not article but I guess report that consensus uh created on this around Ethereum as trustwear. Uh and um that there was a there's a chart I'll bring

it up on screen here. here. I don't know if you want to comment on it as well, but I'm just trying to find the right here. This was sort of the way that you guys were looking at um at valuing ETH as well, which was like um essentially what you just said um the I guess you can say the the assets that Ethereum is securing, which what you guys have put in this report here was stable coins. Um >> the book value as I think you guys put it in the past. >> Exactly. was stable coin, DeFi, TVL, and I think reststaking assets both on the L1 and the L2, of course, because it's securing both. Um, and there's been about an 80% correlation, I think, between um between that and the market cap of Ethereum. So, so long as more assets go onto Ethereum, uh, whether

that be stable coins or DeFi or other things um, and Ethereum is securing it, then thus the the price of ETH should go up along with it essentially, right? >> And correlation is not causation. So this is a thesis and uh >> it's not not clear which comes first uh the capacity or or the uh the forcing function. Um right >> we we'll see but uh it's a really strong correlation at least um if you're participating um in real world assets, DeFi, etc. um there's just a a really good chance uh that you're holding ETH to use it or because you believe that hey this is a a really useful platform I should probably invest in it um and

ESBet's going to keep buying lots and lots of Ether and etc >> right um okay we're going to soon wrap up but what I want to do here is you've kind of painted this picture of why decentralized protocols are so important right you just talked about how much GDP it could increase how much it can save for institutions or anyone transacting anything globally. Um why so like that world makes sense I think to most people. Uh you've done a great job explaining that in actually a simple way. Why Ethereum, right? There's so many others that have come out. You mentioned the the little brother of Ethereum I think was Salana. And then there's a host of others. Espet decided we're going to buy ETH because it believes in Ethereum. You have decided you're going to build consensus and build a bunch of things on top of

Ethereum. And I just want to know your sort of like um your pitch or your elevator pitch, let's call it, on on why Ethereum versus everything else to to deliver this sort of like decentralized uh world that you speak of. >> It amazes me that people even ask that question because we're we're just so far out in the lead um in terms of size of the ecosystem, number of developers, maturity of the ecosystem, uh connectivity to traditional finance, etc. Um I did mention that we've never been down um in the last 10 years uh even while uh executing mindblowing improvements uh in in real time. Um didn't skip a block. Um and there's

there's no other protocol uh that can really say that. Um maybe Bitcoin can say that, but not really. It was down once uh to fix uh something about two years in. Salana is a a great ecosystem with lots of uh uh dedicated builders. Uh they're not really undergirling, let's call it civilization scale infrastructure. Um they're they're not undergirling uh extremely important use cases in the same way that Ethereum is. Um a lot of the success of of Salana rests on uh the memecoin use case. Uh for better or worse. Some of some of it's really cool.

uh some of it was incredibly toxic. Uh DPIN is really interesting on that project. Um so bottom line uh say Aptos, Polka Dot, Cosmos going on like we could talk about EOS. Uh we they're just so many Ethereum killers uh that have come um and gone. And the reason they're even called Ethereum killers, uh, is because they have marketing teams and bisdev teams, um, Ethereum didn't have a marketing team and didn't didn't do any sort of bisdev. It's all pretty organic, just, uh, um, the best and the brightest building the best technology. Um, but, uh, we were out in the lead and so we're

the ones that you have to take shots at. Um, and journalists need people to take shots at the leader. And so so they're embellishing everything. They're they're constantly doing clickbait stuff and and so it's never been a contest. Um even you know so Salana did do us a favor. Um and Bitcoin led effectively. Salana did us a favor by uh forcing us to look inwardly. um you know think about uh user interface and performance in terms of latency and and throughput um and uh actually start to uh do a little less contemplating of our own enables as we

build the the best technology and um reformat the Ethereum Foundation a bit so that it's a bit more outward facing a bit more uh just ensuring that uh that conversations uh that should be had are being had uh consensus used to do a lot of that work early on. Um and then uh the Gendler Inquisition uh came and cast a entire ecosystem and Ethereum was bore the brunt of that because Ethereum is the most by far the most decentralized technology and it it threatened to disintermediate government and major financial institutions. And so, um, the progressives in, uh, the Democratic

Party, uh, prefer to see giant government control all aspects of of human life in a granular fashion. And, uh, and they were aligned with the big banks in the US that wanted to keep winning a rigged game. And, and so, um, we were the threat. Um, so I don't believe Bitcoin was the threat, just an uncorrelated digital asset, um, that you can stick in centralized custody if you want. Uh, and I don't believe that Salana was much of a threat uh because they knew where all the machines were and yeah, all all the layer twos currently all the um alt layer ones um and I don't class uh Ethereum in in that category. Um they all look more like

companies uh than properly decentralized protocols. And so um why Ethereum? um because it's obvious it's uh um it's pretty much if it isn't already declared uh the winner of the uh the paradigm shift to decentralized protocols by now um then maybe it'll be next week or maybe it'll be next month momentum is uh is pretty unstoppable. >> Well, this year has been a big big year for momentum. I mean Robin Hood and you know the list goes on and on. ETH treasury companies. The list goes on about everyone who's building on top of Ethereum, who's buying ETH, all the things you want. So, I Yeah, it's

definitely 2025 is is >> what um it it costs all those projects lots of tokens uh to incentivize people to build in those ecosystems. Ethereum doesn't do that kind of thing. And if you run out of uh your token treasury um or if you're inflating too much and you have have to keep inflation high um people will eventually notice that and uh >> and the economics are not going to be in your favor long term. >> 100%. All right, let's go with one last question here and this one's more directed just towards you Joe. Um and your big master plan. So you know you co-ounded Ethereum and then you've created consensus which essentially

builds things to help people use Ethereum now people AI institutions whatever it is you're helping people use Ethereum interact on on the chain >> Ethereum first but we have to be pan ecosystem um right >> we need to uh give people access to all the reasonable tokens and all the reasonable protocols out there >> we'll say build onchain then or or use things that are on chain >> yeah we're all coming together um a lot of those things will be layered Anyway, um there will be lots of bridging. So, it's all all going to be uh it's all going to be just web three at some point, >> right? Definitely. So, you've got consensus over here that's helping people kind of build things and move on chain interact chain. Then, you have aspet over here which is essentially a vehicle to help people access ETH the

asset, right? And if they don't want to do things with ETH or they don't want to get ETH themselves, they can just go use ESP instead, right? And you're educating and teaching the world about why ETH is so powerful and what can be done with ETH to generate yield, etc. So you've kind of got this like flywheel of like let's help make Ethereum and its wider broader web 3 ecosystem more usable and get more things built on top of it through consensus and then you've got the let's take the digital asset let's get more people buying it uh and using it etc through esp it's a great flywheel you've created with your two companies here and I'm just curious like as you think about your master plan what's next for you is there something else on the horizon you need to sort of complete this flywheel or is this the two you

just got to keep kind of pushing with those or like as you think about the future for Joe Luben and for all your companies. What do you see in the future and what is your big master plan here? If you can share that with us in any detail or not detail you want. >> Yeah. Um I like that you use the term flywheel. Um I I like to think that we're setting up these positive feedback loops between um different kinds of processes and then we attach a flywheel to it so it just keeps going efficiently. Um uh the next element um and so we're going to do this over and over uh with lots of different protocols and lots of positive feedback loops. Uh the next major shoot to drop uh will be uh around the linear um TGE. Uh so uh we're going to change the game uh at

layer 2. Um we're going going to uh announce very soon that uh uh Lineia is 100% compatible with Ethereum in terms of uh the programs that run on layer 1 and layer 2. I can use the exact same tools and the exact same code uh to deploy all of the execution clients in the uh Ethereum ecosystem uh sync with Lineia. Um it's not true of any of the other layer 2. So we're we're really the only one. Um, and we're going to pledge to be perfectly aligned with the Ethereum technology and Ethereum layer 1. Uh, we are going to be very good for the economics. I don't want to say anything explicit right now, but uh, uh,

we're going to contribute positively to the economics of layer 1. Uh, and so I'm hoping that uh, that other layer 2 follow suit and they start supporting uh, layer 1 economically. We are going to have some exciting interactions between ESBET and Lineia and MetaMask and that's going to end up establishing DeFi on Lineia um as very large um with very deep liquid stores of Ether. >> Very interesting. Jay, I don't know if you have any additional questions or you want to wrap up from here.

>> Yeah, let's wrap it up. Joe, really appreciate your time today and uh a deep bow of gratitude to you. consensus, especi of of the crypto world. >> Not even close. He He's amazing. Cool. Thanks so much for all the work you guys do. Hugely appreciate. >> Thanks so much for for listening, y'all. I have to remind you as always that none of today's episode was financial advice. I am not your investment adviser. Joe is not your investment adviser. Kyle's not your investment adviser. You should always do your own research. And if you need help with your investments, you should speak to a professional. If you would like to dive into our view on where Ethereum is going by 2030, you

should check out our recent report just came out a few weeks ago. Click the link in the show notes to read that report today. Have yourselves wonderful, wonderful day. We'll see you back again tomorrow. Thanks so much for listening, everybody. And finally, I've got to give a shout out to our partners over at Nexo have just partnered with the DP World Tour, one of the leading golf tournaments in the world, 45 tournaments across four continents, and they're going to have the Nexo Championship debuting this August in Scotland. So keep an eye out for that because this is one of those things that feels very marketing talk, but I get super excited because when you think about sports and the crossover with the attention that it

has and how many leading global brands are sponsoring massive sports tournaments, it's pretty exciting to see crypto brands sponsoring large sports tournaments as well. So hat tip to Nexo, way to go, guys. Thanks as always for doing what you guys do in the space. Thanks for tuning in y'all. Have a wicked awesome day. We'll see you back again tomorrow. As always, if you liked today's episode, please hit subscribe and make sure you follow us so you don't miss out on the next one. There's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you while making you laugh. And if you're willing to step up your crypto investing game, we're going to also leave a link for Milk Road Pro.

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