MakerDAO's End Game, Michael Saylor Tax Evasion & Arbitrum Nitro | Roundup

Transcript

my like big bet in crypto right now is D5 like I just I'm so convicted that if nothing else like get take everything out of crypto I just think that D5 is a better product than tradify I just think it's a better product and products will always good products will always win out [Music] this episode is brought to you by core the brand new non-custodial wallet that offers a seamless and secure experience on Avalanche you'll hear more about core later in the show all right what's going on everyone we are back with another Roundup we got Santi joining us uh Santi looking looking sharp today my friend looking sharp thank you just trying to be more like you sir gotta rise to the occasion I think it's really that the YouTube comments were

piling up on you these last couple weeks and uh I think you're trying to put on a face for the YouTube folks shout out to everyone that's commenting on YouTube I do read them and they're always appreciated and uh so yeah keep keep them coming yeah nice you see my new background I changed my desk around yeah that's pretty cool I like the color and this yeah it's pretty awesome painted the walls we got it all set up now is it is this you like transitioning now into married life oh guess did I disclose that or uh you know I mean it's fine we can talk about it yeah I mean I've got I've been married in three weeks so who cares about the merge like that's the real murder yeah I was getting married I am merging one week after the merch yeah exactly I really

hope no one's talking about it's a it's a good thing my fiance would never listen to this podcast or uh she would just be wildly embarrassed that I said that so yeah no I mean this is this background though is uh actually you know what's cool is digital asset Summit our conference uh shout out Das if you want to come you can get a plug a discount Yano 250 I'm competing with Mike on uh on that discount code right now but uh the merge is happening the day of Das so that'll be interesting which our our events actually coincide nicely like we had a permission list was right after doe and Tara stuff unfolded so high drama around blockworks events yeah seriously I think most conferences are in and around most conferences is when crazy funky stuff goes down and happens not all negative not all

positive assist it's usually when uh a lot of news comes out yeah it's true it's true all right you tweeted out I am recording the Roundup in 30 minutes what should we cover and there's a lot of good stuff so where do you want to start um let's see I mean there's um yeah I don't know I don't know if you have an opinion I'm of the mind that I'm going to let you do a more of talking and B guide more at the discussion so I mean let's get the let's get the fun one out of the way which I just think is the most absurd one uh Michael Saylor was accused of tax fraud on Wednesday um yeah it was announced that the district attorney general uh that DC's AG claimed that sailor had basically been personally illegally avoided uh more than 25 million dollars of DC taxes

by prev he was pretending to be a resident of other jurisdictions that had lower personal income taxes so basically he had said that he was in um foreign track like exactly like like private plane logs of where he had actually been and I mean I think a lot of this you posted a great video of him you know really just saying like Bitcoin is vehicle to do tax evasion and then just like a big Fu to tax man it's like you know like uh I don't know you poke a bear and they're gonna come after you like it was just uh his comments kind of like if you compare

his rhetoric at the very beginning when he came out saying look I believe in Bitcoin to now it's just like he's sort of become a Madman of just being very I don't know I feel like uh like increasingly becoming very aggressive and I think this type of tone never kind of bodes well because it's very polarizing whereas I don't know I think we try to be pretty objective here and yeah everyone should go see the tweet and we can link it of what he was saying publicly on air and it the the if you read the report the feds like the IRS and I think it was the the DC General prosecutor

um or attorney general like they quoted like that X or from the video that you posted uh which was that he sort of said that Bitcoin could be a vehicle for tax evasion you're like well not really that's just a [ __ ] idiot I'm like you what are you doing you're a CEO of a public company and you're saying you if you push me too far then I'll tell you that I've lost my Bitcoin in a boating accident I'm like buddy you are the CE you're the one of the most prominent faces of Bitcoin right now and oh man you're just such an idiot also good luck babe good luck paying those taxes like the the when the Market's down it gets tough to pay those taxes a tune of 25 million or something yeah um here's the thing like there's sort of

this idea that like crypto is like headless marketing it doesn't have a head of marketing it doesn't have like a one Figure Head like some protocols like have like you know vitalik you could see as you know a very prominent figure within the eth community ethereum community but you know everyone has different narratives and memes and like you know things about ether's money ultrasound money and then there's other components and so Bitcoins as well and so most almost makes you wonder like what is better like in many ways like having like some mad mans just like LARPing about like I don't know like what they think like you know what I mean if if sailor perhaps was like recognizes the figurehead the champion of Bitcoin

amongst many in like traditional markets and like they look at that and you as you said you know you're really scared them like not ER the problem is not everyone in the Bitcoin Camp is like sailor right not everyone in the in the ethereum camp is like you know X or Y P pick your influencer of choice and so yeah it's pretty difficult to um you know to navigate like that because this is why I think most people on the outside are kind of afraid I'm like wow this this space is I mean it's a good reminder that like the most ridiculous people on social media usually rise to the top and become almost like the heroes of the industry so let's like let's look at the past Heroes who have fallen this year three arrowsy three arrows right Kyle and Sue those are

heroes of the industry uh doe was a hero of the industry Michael Saylor hero of the industry it reminds me of that of that saying right never meet your Heroes it's like I don't know I'm kind of waiting for like well who's the next hero to fall who who do you think is the next hero to fall who's the next one now I never want to make a prediction about someone falling but I will say like as a general matter anytime you've glorified someone it's usually like a bad sign right like we tend to like Success is Not driven by one person then we can glorify them we should always kind of correct but uh but yeah you know what I mean like I think we tend to attribute

success and failure to one specific person especially success and it's really the case it's sort of a combination of factors and so I think it's always important to understand why people were successful but like never glorify them because there's always a component of like like what about the team behind Facebook for instance it was not all suckerberg like there's so many things that went into the success of Facebook as an example and so I think just to glorify or vilify one particular individual I think it's just a sort of missing the point so anyway I think it's a good reminder that uh I mean here I'll redo this headline New York Times microstrategy chairman Michael Saylor accused of fraud by the SEC the date on that is December 2000 so 20 years later I mean here's the story of Michael Saylor settled the Civil charges that

were filed in federal court uh SEC contended that sailor and two other microstrategy execs um had committed fraud in reporting profits when the company was actually losing money so I don't know it's like if you are going to choose a hero just make sure your hero hasn't been uh publicly committing it is the last thing I'll say is it is crazy like how like short-term it's like Goldfish Memory that investors have not just encrypted but in general like you know very short term and people Overlook and don't do diligence on like you know you know unfortunately like yeah yeah um let's talk maker you wanna talk maker yeah let's definitely talk about that first of all I know you've been digging

this is where I get to ask you most of the questions because you become very deep in the maker ecosystem to the point that you become a uh uh voted in delegate right I just became a recognized delegate recognized yeah yeah so maybe tell us what that means and what you've been looking at that excites you about all the different D5 protocols you could be spending time on yeah I mean I so here's what happened over the last like several months I've just gotten very I've gone very deep into maker I've done read everything I can possibly read talk to everyone I can talk to learned a lot we had that episode with um Monet Supply um and hexanot uh who's an engineer over maker I've just like tried to go really really deep reason being I have like you're you're very deep into gaming my

like big bet in crypto right now is D5 like I just I'm so convicted that if nothing else like get take everything out of crypto I just think that D5 is a better product than tradfi I just think it's a better product and products will always good products will always win out out I have a very strong conviction that D5 will grow exponentially in the coming decades right by orders of magnitude and I think that if maker plays their cards right they have the opportunity to become the backbone of defy and if that happens right two two big things two big ifs right if D Phi gets grows exponentially eventually gets bigger than C5 and then gets bigger than Trad Phi I think that will happen I also think maker will become the most uh will become the backbone of defy and if if

those two things happen I think maker will go down in history like could become one of the most impactful initiatives in the history of global finance and that's just an insane opportunity um I think that to achieve that though maker needs to evolve right it needs like a better growth strategy it needs improved governance it needs more scalable operations and I think I can take what I've learned at block works over the last like four and a half years building it and launching it and scaling it uh and apply some of those things to maker so like yeah I don't know I was encouraged to do this by a lot of folks like big shout out to hasu and uh Mark over maker Monet Supply like they yeah they're very helpful in encouraging me to do this and yeah I just went for it

and got voted in uh there's a big thing happening at maker today which is please tell us yeah there's a big thing happening at maker today which is just um a big conversation around what is the end like the end state of maker and what should happen so someone like hasu um uh is looking to basically create like almost what looks more like a board of directors I would say of there's there's a lot more in it and and actually hustu is going to come on the podcast and talk about this but um so I won't get too into it and then there's um roon wants to basically uh create what he calls the end game plan and it's uh I would say and I would say a very

comprehensive plan to try to eventually um the new update is potentially free float die um and that and that would be the big like end goal uh and with the with the like North Star of saying we are a uh self-supporting uh self-sustaining censorship-resistant protocol big really really really tough goal right and so he just came out with this week um like more details on what that looks like and I I actually so I've been kind of skeptical of rune's end game plan to be honest um but I thought his strategy makes a lot of sense and so what it is is like for the next three years um he's basically saying for the next three years have unlimited real world asset exposure and the pushback on real world assets has been uh okay well since

we saw tornado cash like doesn't it mean if real world assets become the collateral of dye doesn't that mean that we're like more uh open to kind of authoritarian threats and like they could basically seize some of the collateral of dye uh which makes us like more at the whim of The Regulators um so basically runes thing is for the next three years just go all in on real world assets unlimited real world exposure with the goal of like accumulating Max eth and then after three years you would cap the real world assets at 25 uh the next is like you would keep the peg for three years so the USD to die Peg you keep that for three years and you can even go longer if there's no authoritarian authoritarian threat uh and then the next is you would delay the free float

if collateral becomes 75 decentralized so 75 of the collateral is crypto native like Bitcoin and eth um you would delay the free float and the the reason you don't go all crypto collateral right now is because there's just not enough crypto basically to uh to increase the total addressable Market of uh and to scale die uh you you kind of need to be able to scale die proportionally with the with the demand and for that you probably need real world assets and that's for folks listening because the reason why that's true is because dies collateralized and so you think about the upper bound of die Supply is tied directly to its only crypto collateral well the size of

the crypto Market whereas if you're on board non-crypto assets as collateral types then it really increases the the upper bound what um what is the kind of why is this relevant now in terms of this free float and maybe for context like it's not free-flowing today free floating today and so maybe explain a little bit of those mechanics and why is it kind of being discussed uh now I think that so in in maybe what roon would say and and honestly we should just invite roon on but I think he believes that Maker only has two options which I would agree with him on actually

I think there's probably only two options client um completely compliant path and you end up operating uh almost like a Neo bank right like a monzo or n26 or one like a fintech platform and you're completely regulated and you're a good product right to be a really good product it'd be hyper efficient but like you do have to fit into the regulatory boundaries um the other path that you can go down is like complete decentralization and the way that you do that is um you really minimize the degrees that regulatory crackdowns can damage a protocol and one of those things would be uh free-floating die essentially so and when you see the price of dye gra like fluctuate it's never fixed it's it

does fluctuate today right I mean you've seen the the peg if you will gravitate and uh they can oscillate around the range of a dollar but at times it has lost you're deep in it right March 12th noticeably like March what as someone who is very Hands-On with maker a couple years ago um like what do you what are your your thoughts on maker right now I I've continually believed the maker is sort of the backbone of defy it is perhaps the most important protocol and for context historically maker really opened up the possibility of having decentralized Finance on ethereum because in the absence of maker

you know the smart contract that like allows anyone to Mint this stable unit called die with some collateral in this initially and for a long time it was only ethereum eth is collateral which is sort of pristine and you could say censorship resistant um so so when you think about like in the prior cycle you had the value of that collateral drop kind of what you're seeing now is 70 80 percent and dye really maintained its Peg and so I think that really opened up people's imaginations and certainly did mine to say wow okay you have won this like this like

very well-functioning system that you know while you have a very volatile collateral type it has maintained its Peg and if it can survive in this very adversarial Market condition which was 2018 and post-crash like you you saw a password saying okay well okay there's something here and a lot of people historically use maker to not have to sell eth and borrow against their stack to pay for you know other stuff you know pay for Real World stuff you know die would be converted to and sold in an exchange for and to go buy a house or whatever pay for food or what have you and so that was like that to me feels and has

been a killer use case like money markets and the ability to have a stable unit of account across defy was it's a prerequisite for having decentralized finance and so to me that I and I still think that maker is a leader in the space it has a very robust it's a very it's not a very intuitive straightforward protocol to understand but it has done a lot of things over the years it's been resilient and um I think it now would characterize it as moving slower than other protocols rightfully so because like the central it's almost like when you hear Jay Powell and central banks never are never very explicit are never very

rash and they're you would think in their decision making they're very like measured and guarded and I think in many ways that's the role the maker plays in this ecosystem um well if that and that's why in my mind like if I I have some friends who have recently come into crypto in the last in the last cycle and they're like well why is everyone talking about maker now I didn't hear anyone talking about maker in a bowl and maker is one of those uniquely like almost inversely correlated with uh with the market type of projects where like in Bear markets I think maker thrives because they don't get ahead of their skis in the bowl they build slowly they have real checks and balances on governance um and so that causes maybe them to build a little slower than other folks uh but what happens is like they're

going to be around longer than 99.9 of projects um and that's why in the bear market like I think maker ends up doing really really well there's a lot of focus on them and the bowl like well their price of their token go up more than the hottest projects like probably not but I think that's totally fine you mentioned it's a complicated protocol to understand I my God it is I think it's a barrier to entry to folks to come in to Makers governance I've I've spent so much time uh trying to understand maker you've got the PSM you've got how dye Works you've got real world assets you've got the d3m uh providing liquidity to other protocols you've got like the DSR the die savings rate you've got now meta dies you've got

protocol owned vaults you've got uh how liquidations work you've got like the Surplus Reserve it is very complicated I must say no it definitely is um I will say it's uh although I said earlier that it is a protocol that has moved slower than others it's also charting new territory and onboarding real world assets as collateral and I remember talking to the team you know almost two years ago about this particularly like accounts receivable and like working with a project called centrifuge and now you know obviously they've come a long way in that which is a controversial move honestly it is hard and it does pose the question of well

what happens if that collateral is frozen and it's really like where atoms meet bits and I think that look if they're successful I think it will be an interesting precedent on a number of fronts one what happens in a situation of bankruptcy and like if part of that collateral like is not honored and where do you settle at and you know that one in and of itself and the other one is you know this whole again given the tornado situation of censorship resistance or lack thereof and what that really means for a quote-unquote decentralized protocol but that is you know perhaps moving a direction where some feel that you know in a in a version where I think governance will will vote in and and

monitor what percentage and introduce a cap of what percentage of the total kind of collateral base uh backing die is kind of these all real world assets which it would never get to a point where it's like 100 or you know even close to that but nonetheless I mean that is uh it is pretty interesting um a lot of things going on in maker recently are are pretty groundbreaking I would say all right folks this episode is brought to you by our friends at Avalanche and Ava labs they have just dropped a new crypto wallet called core you're going to be hearing a lot about it over the coming months you can now be one of the first to try it out here's the reason I'm excited to partner with them on Empire right now crypto wallets and browser extensions they feel clunky

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ecosystem last but not least core makes unwramping super easy you can convert dollars to crypto right now using the moonpay integration just takes a few clicks download Core today using the link in the show notes it's really really nice if you are interested in the Avalanche ecosystem at all you have to be using core download Core using the link below now let's get back to the show that the real world asset conversation is one of the most I think important conversations and like biggest decisions that any protocol has ever had to make in my mind yeah it's sort of I think there's just like two camps in crypto one which is it goes back to like the purists of maker which have always said and were very

critical of onboarding uscc as collateral because you know obviously usdc is is can be Frozen as it has been recently and over time and so it's like wait a minute the purists have always said well let's just keep it that collateral that is you know censorship resistant like ethereum um and you know there's another camp that is perhaps more practical that says how can we actually make die really this kind of the de facto the more popular kind of stable coin out there and and which is what you're saying which is you're not necessarily as focused on censorship resistance but more so the practicality of the protocol and I think

it that type of Camp is always and I sort of fall more in that camp actually more strictly in that camp it says I think D5 needs to be and will be compliant and it will be permissioned in some capacity like not to say that like if you want to play in this really fun really transparent really frictionless decentralized system you're gonna have to you know kyc AML and do certain things that are important for law enforcement and Regulators but that doesn't mean like but in order but doing that first of all you're already doing that when you go through an exchange so nothing's really different um of course the criticism to all that and my last Point here is you know

open question time and time again there are some I would say politicians not necessarily policy makers that have been more critical of D5 and crypto generally and there's always that like question mark of you know if crypto becomes really big well people want to squash it all together and it while it remains a possibility I continue to think that the more the longer that this system exists and crypto as a whole exists the more that I think it's going to survive and exist and be and kind of coexist in a world where yeah you could argue that Bitcoin and some crypto assets like are undermining kind of like the the power of nation states as an alternative non-sovereign kind of store

of value if you will but I sort of think that the longer this exists like governments would just sort of assume that it's like just have no choice but to like understand it adopt it and work with it and it can coexist I think that maybe thought for listeners to think about this weekend and just to explore is like is that question right which I because I do think they're mutually exclusive I do think they're at odds with each other those two camps and I think it's important to know almost really just think about like what camp do you fall in right like should you and maybe using maker as an example like do you basically just try to get maker to be as big as humanly possible and become

uh like in the game with like in in the C5 game right on the same level like on board uh create vaults for like these big real world asset vaults like work if uh you know a big fund a billion dollar fund wants to create a uh rwa Vault like do you do it and do you knowing that that maybe ends up making you more like a compliant eventually potentially kyc AML like platform uh do you want to go in that route or do you want to go in the complete decentralization uh completely decentralized governance at the trade-off of decreasing your total addressable Market yeah it is a very philosophical question and some

maybe Old-Timers would say like then what does this all matter like what are we working towards like what's the end goal for crypto and I mean I I would be happy with a compromise where like you be make Finance more efficient and you remove friction and there's always trade-offs you're never at a perfect decentralization you're never at a perfect like are we going to be in a world where like you disintegrate nation states and you create network States well you know biology I think makes a good point around that like fine but I also think that my version of the world is where one where you continue to have like certain governments to provide in funds from public goods and enforce certain things

and look you know credit has always been enforced with the perceived you know threat of violence and law enforcement and you know but I think that my version of this is like kind of like Montesquieu which is you know there are three currently three like legs of the stool that create checks and balances within a political organization which is a legislative executive and judicial and I think crypto in many ways is that third one which is I think we'll describe to what Balaji is saying and others are which is ultimately it is this idea that people can exit a system more easily and have an alternative which is called Bitcoin or ethereum or something else that creates more accountability because

it's transparent it creates more I think pressure on politicians and the political system to kind of honor and serve their constituents in the best manner possible because governments end up becoming more like corporations it becomes a more competitive geopolitical sphere where people can migrate more easily because it can move money faster they can move money across border they don't have to have and hold a local [ __ ] coin like the Turkish lira they can actually hold something called ethereum or Bitcoin which prompts and purposes might be more stable than 90 of all other currencies and I think that's the uh like I'm I would be happy with that and like that scenario where governments kind of feel a little bit more pressure

to honor their constituents and and serve them to the best possible way as opposed to trying to like you know be very rigid and like exert violence and threats to control the population and I think ultimately that would be a better world not perfect nothing ever is but I think it would be a better world in that scenario and I think crypto enables that moving on let's talk about another London tomorrow platform in defy uh compound um yes I don't know if you followed this but uh so compound this past week executed a governance proposal that updated its chain link price feeds that contained a code error the code error has frozen the CE so the compound eth borrowing and lending markets this is

how I haven't dug it into a 2d but this is how I understand it um because so the code error froze the CE bar and land markets users can still repay debt and add collateral to avoid liquidation no funds are at risk I'm pretty sure so there's a new governance proposal that's been put forward to revert to the formally uh used price feeds right obviously this is the this is the obvious thing to do you you introduce a bug and then you kind of to revert the bug but compound has what's what they refer to as a seven day time lock meaning it takes seven days for a new update to be implemented um this is kind of the second time that uh that the time lock is that compound has been hurt because their governance has a seven day time

lock I'm just I'm curious I don't really care about The Compound thing as much I'm just curious to get your take on time locks and I don't know if you have any thoughts there on like if they're preferable or there's too high of a downside what do you think there yeah yeah I think the the interesting thing here is uh when compound makes upgrades anyone can submit a proposal and the code to upgrade a particular component mechanism of the protocol in this case the Oracle um price feed and you know while you know it's pretty interesting anyone anyone can submit that proposal and it could be passed through governance like um there can be mistakes and bugs found and so it is a little bit more I think rigid in that sense where like

once a proposal passes like the code goes into effect and so um you know yeah it sure has a time lock so you have seven days but still like to revert that is not as easy as perhaps like other protocols where the team can like pause stuff and like quickly patch it and so like for context like in October of last year compound had a you know another bug that made like over 100 million dollars of comp claim claimable by protocol users and it was sort of like a big like once that happened like of course some a lot of people claimed and some sold and the team was like trying to like at some point even threaten like certain users was like Hey give back comp

and you know it's like who's right and wrong in that situation like uh so anyways um I think this goes back to I think one discussion that we're having on the regulatory side which is you know the immutability of the code and who can actually upgrade a particular contract um and I think where I settle with all this is I think it in this stage where there's still a lot of issue like there's still a lot of bugs in D5 I think you can still assume that over the next five years where this is chaotic Innovation there's still going to be a lot of bugs as people try to push boundaries of innovation but so I think it's really important one yes code should be immutable and like touching user funds like a team should never have

the ability to upgrade a contract like all of a sudden be able to like migrate and drain a particular like in touch user funds but I think on the periphery I think you could argue that the team should have like at least like certain like you know big red big red eject buttons if things go wrong like you can pause it and I think this is what happened here so yeah this is just a reminder that um you know this was to be fair this particular governance proposal and code that was implemented was audited I think three times by three different providers and somehow like it's still malfunction it still had a bug and so

this is just a state um over in I mean I'm happy that they were able to pause it and and it sounds like no user funds were like lost but still it's uh it's unfortunate just a reminder that even for a big protocol that's been around for a long time like compound yeah I mean I think so these things are good when things are going well right like a time lock is inherently useful except in uh except in emergencies right in which it's a bug not a feature so maybe it'd be interesting to the question is how do you define like a time lock if it's good or bad right me like you can have a time lock for like new proposals but that you'd be deemed good upgrades and then no time block for like when you need to like pause and make sure that like you know people are not

hurt it's weird because code doesn't make that distinct like you don't mean like it's I mean let's play this out right it's like uh so if you have a token if your voting power can be bought in the open market um upgrading like security functions using voting power with that token is inherently an attack Vector if you can use that token to if you can buy that token in the open market so maybe the takeaway is that you design emergency actions that can react to things but can't proactively rug but that still feels like you're reacting um yeah maybe it's maybe the solution's like multi-cigs with trusted signers with like limited pause and emergency

action I I really don't know actually I really don't know um [Music] I would love to we should we should have some Security Experts on here uh to talk about like maybe folks from open Zeppelin yeah I mean I think uh the governance attack vectors are going to continue to be a thing especially as the value in these protocols continues to go up and say like yeah of course like maybe you can't upgrade the ability to touch user funds but maybe you introduce code that has like a malicious kind of price feed that is able to manipulate it and then you're able to drain and get away with like you know a lot of a lot of the hacks and deep a lot of the a lot of the bugs in D5 have been and like hacks or user funds have been lost like cream for instance like this

happened multiple times is when there's a faulty Oracle price feed and all of a sudden like you're able to manipulate that through flash loans and you know get away with like you know um getting more of the collateral versus what you you know so anyways what I'm trying to say is it is uh it is defense always been a very adversaling environment and so you just gotta assume that like and build multiple sale safe uh mechanisms in place to be able to react very quickly if there's an attack that's going on let's uh this is a maybe call to the audience if you know any good security firms I mean the ones I would probably invite on are like trail of bits I think does a good job chain security open Zeppelin uh

but if there are other folks who think that they're building like The Cutting Edge of even independent guys like Sam son and a few others out there that are really good yeah cool um what's next what are we talking about arbitrum um sure actually don't even know too much about so uh here's uh Arboretum is launching Nitro I think they launched it today or yesterday yesterday today today basically Nitro is an upgrade to arbitrum that allows for exponentially higher throughput and efficiency it went live today or yesterday uh you say today uh so I'll Trust you on this um today today yeah yeah I mean my understanding of I don't know too much about this except that it makes things cheaper and it makes uh increases the

throughput that's like and it seems I I met uh Steven the founder of off chain Labs which runs arbitrum I met him actually at a urinal at permissionless and asked him some questions and he was yeah while in the urinal hey can you talk to me about optimistic Roll-Ups and uh I was like are you Stephen from arbitrum he's like yeah what's up I was like I had like some two questions about arbitrum it's like the smartest sounding answers I've ever heard and uh I was like okay you seem like a big brain I trust you here so I I mean hopefully hopefully you know more about this one than than I do but I do I do know that that's a big upgrade yeah it is I mean arbitrum has been live for like a little under a year and uh I

think uh along with all um optimism is pro you know the two most widely well I guess if you consider um polygon but you know from an or optimistic roll-up l2's arbitrum and optimism are the game like two names in town and yeah this is a pretty big deal for them I think they've I've always really liked how they've kind of methodically rolled out um their the protocol and I think Nitro is a big upgrade um yeah this is a good good chart by a blockworks research Sam Martin um you can this is Arboretum versus optimism daily transactions and you can see optimism has been in dark purple has been slightly higher um what is 531 for optimism this is

probably like the op token launching or something like that um and but now you can see for the first time that arbitrary yeah exactly or maybe for the second or third time but arbitrum daily transactions are now higher um anything else on our on Nitro L2 L2 season's coming I feel like L2 season like came and went in the narrative but I mean if you just look at the data uh l2s are just month over month continuing to grow so I think it's just like slow and steady wins the race long-term value accrue of these tokens is going to be really interesting to watch um yeah some of the more interesting questions are like again time time again people are like well doesn't this attract from the value prop of eth like like a lot of fees going on L2 but it's like you know like there's still

sediment happening on the L1 so you're still using the L1 so I think I've always been of the opinion that like l2s are net positive and win-win for the L1 as well in this case ethereum is a base settlement layer because everything that happens in the L2 at some point needs to be reconciled and settled in the L1 and so you're just freeing up a lot of capacity at the L1 um which is in this case ethereum and so while today like you people may not see it but l2s really are going to enable you know kind of mainstream use cases um that if you think about all the different kind of verticals that are seem to be emerging in in crypto today

and it's like nfts are big gaming will be big it's starting to see early indications for that and you know d5s continue to be a thing and a lot of D5 Protocols are deployed in these l2s and so you know not to mention a lot of the different use cases that weren't kind of practically feasible in an L1 and become much more economical and and their value properly shines in an L2 particularly like very intensive both at the Smart contract but also in terms of frequency like these are options and like you know perps um you know stuff like that hasn't really been feasible in an L1 like ethereum but there will be if you look at what synthetics and the efficiency gains that they've had in an L2 like

optimism it's it's pretty cool um what's happening and I think people may or may not be paying too much attention to that but uh yeah yeah here's the magic number in my mind is 2.9 right that's the that's the fee that credit cards usually take is 2.9 so if we can get gas fees plus borrow fees Plus app fees or uh L1 settlement fees plus L1 data fees plus L2 fees lower than that those com those three numbers combined lower than L than uh than 2.9 which is credit card fees I mean that becomes really interesting right that goes back to this the the payment Narrative of 2016 and 2015 that just kind of was probably five years too early seven years too early so and I

think and then we have EIP 4844 coming which will further improve this right which will take you know the merge does not lower transaction fees l2s and eip4844 take care of that so it's really exciting exactly by the way if folks haven't used arbitrum I would I would recommend uh uh bridging some assets over to arbitrum and actually playing around with arbitrone because it's real it's once you play around with D5 with these really really low fees it's you can see you can see how it almost becomes addicting actually it's like wow you can just Cruise money it's like you can just Cruise money around in a way that you've never been able to do it before it's really really cool so um all right another borrow and land protocol in D5 we've got Ave talking

about Ave for the second week in a row um Ave has a new proposal to pause eth borrowing for the period leading up to the youth merge it just went live on ave's governance uh portal um the upcoming uh merge creates new risks for the protocol uh is is what the proposal says and the proposal aims to ensure that Ave remains solvent by temporarily pausing youth borrowing um yeah I don't I don't know if you have thoughts on this one if you're I know you're close to the Ave team I don't know if you've uh thoughts on on this proposal here but curious to get your take yeah it's interesting I think it raises attention to a particular Vector here where like if you if two versions of eth exist like if eat like ethereum

and ethereum classic for instance and you hook crab both and like there is a possibility where like you know some tokens excluding each like whatever the other token is called like the proof of work chain eth if that's used as collateral then that probably loses value relative to the you know ether we know like the proof of stake ease um and so some of those loans maybe underwater and have to be liquidated and so it's more of like even if that happens like there should be orderly liquidations but given the magnitude of Ethan potentially you know it could place some stress in the system and I think uh the proposal is trying to address that

um to some extent um and so you never want the situation where you can't like liquidate these loans if uh and and Ave solvency could could be put into question or like they're in the hole for that it's like bad debt so I think the I don't it's hard to make these simulations like I don't have a perfect answer to that I haven't really thought much about it other than it's going to be pretty interesting um you know blocks leading up to the merge and after the merge of what happens across D5 especially these money markets and um you know uh you know I think it'll be a lot of frenzied activity happening and people trying to ARB this out and um so yeah I think uh it's pretty this is gonna pass by the way it's 90s

it's got one day left we've got 96 saying yes so yeah I think it's the right thing to just be cautious and try to head ahead of potential I think it's a good reminder that like the the mer even if the merge goes well there's so much dependent on there's basically all these second order implications for things that are impacted by the merge that if protocols don't handle this right there could there could be some messiness around the merge what else my friend um I don't know if you want to talk about macro or what's happened on that front it's always macro's always been kind of a thing that I wanna it's like end of summer I want to break from the macro I'm like I don't don't we get one week off from macro you know I feel like this is the week when everyone yeah uh

although all the Wall Street folks we're all supposed to go out to the Hamptons you know everyone becomes like a shipping shipping container expert given what's happening in the Swiss can have it's like great it's funny to see crypto Twitter just how I mean how dependent can we get a bowl run in this market in this macro Market or do you still think we're entirely influenced by macro right now I still think macro is at the helm here uh again near term medium term I do too I mean I sent this tweet out and I really strongly believe it but like I'm seeing more innovation in D5 right now than I've seen in over two years it like you know the feeling in like late 2019 where you're seeing everything in D5 but you you're like man like why doesn't the market see what I'm seeing like I just

yeah I think give it six more months maybe nine more months and the the product momentum in D5 is just gonna be too strong for the market to ignore yeah I did see that tweet of yours which says I I'm really bullish on on D5 and um I'm curious do you think that D5 outperforms eth and does it outperform other categories like nfts and as a category yeah I think it's strongly outperforms nfts um nfts haven't had their big bear Market they're having it right now I think we're going in I think we're going in it but like I think it'll take longer for nfts to emerge from that than than D5 I think D5 will lead the way in the next Bowl um yeah would you say that like nfts are like like certain like things like

Collectibles and Fine Art and Wine which tend to be recession-proof are they recession-proof I don't think they're I know some like well people like make the argument of like investing in like some of these like alternatives no so no it's wrong no nfds are not recession preventive teaser at the par that absolutely not because it's like the like most of the people that are buying these things are like heavily exposed to other like are crypto users and like just recycling a lot of capital and so yeah it's uh they feel pain in their traditional portfolio they're going to chop nfts like you've got the risk Spectrum right you've got like cash then bonds and high yield and hybrid Securities than property then like developed market stocks then emerging market stocks and then like crypto comes in at the end of that probably and then like d5's even past Ethan Bitcoin and

then nfts are like way way way way out like D5 like nfts are like the edge of Montauk and like I think people want to invest in like Long Island right now so not that you're biased or anything but how big is your bag of Long Island like Apartments Long Island City I mean I feel like Long Island City is a good investment I've gone to two weddings then last year it's booming that's all like when we're talking about Long Island uh Long Island real estate on Empire I think that's how you know uh it's the end of the episode I think so I mean we could we could talk about well I guess before we go um any interesting book recommendations or movies or documentaries or something else has caught your eye no no I'm I'm like I'm

playing no it's just too busy on my content consumption is at a minimum right now I would say I haven't watched many movies I mean I'm watching I'm watching The Wire but well I will say one uh I just recently read and also watched the podcast on uh the knowledge podcast I think uh of biology on the network State and I think it's uh you know it's three hour episode podcast um I think it's it's worth listening to uh Andrew reading the book Network State um oh I've got one for you Santi I've got uh how to change your mind by Michael Pollan um it's on it's a it's a book Michael pollan's a great author

um and he writes about like the impact of like caffeine he wrote one book on like the impact of caffeine and like the impact of plants on your body um but he just he wrote one called how to change your mind about psychedelics um and for folks who don't want to read the book they should watch uh it just came out on Netflix as a it's like a four-part series or six part series um I I this is sort of like the idea that like some psychedelics increase neuroplasticity you shouldn't help yeah you should watch it I mean I'm an episode and a half in I also read the book um it's like what psychedelics teach us it's not just about neuroplasticity and health it's like what psychedelics can teach us about like depression and addiction and Consciousness and uh yeah yeah it's crazy to think that like like

psychedelics nuclear energy and crypto what is a common denominator of all three I believe in all three of them I don't know misunderstood stigmatized and probably worn further research at minimum I mean the Tweet of the week by the way too uh was that was the nuclear immune it was a guy you know the there's two buttons meme yeah and there was a guy and it was like you know the guy sweating at the bottom and it's uh it was Europe it was like Europe is sweating and he's like debating Europe is debating which button to press and one button says turn on the nuclear power plants uh and the other button says starve but stay woke and I feel like Europe is like do I think like appeal to the like you know the the

whoa crowd or like do I turn on the nuclear power plants and like save our country uh and you're up sweating right now trying to figure that out everyone go and check out the great episode that we recorded with um Josh Wolf from Lux Capital Josh Wolf we'll throw that in the show notes it's so good yeah fantastic talks about nuclear energy a topic that we feel strongly about in this episode in this In This Crowd and yeah I mean unfortunately crises are moments where hopefully people like unrattle themselves from like old held dogmas and stigmas and realize like there's a way forward that doesn't have to be as dependent I feel like we're fitting into a stereotype right now talking about nuclear psychedelics and

crypto we have to throw in longevity and then we'll just we'll we'll have the we'll be on like past it I don't get me started on that I think this is the cue to end the episode everyone out there uh have fun and enjoy if you're in the northern hemisphere whatever that means all right everyone have a good uh have a good September uh have a good rest of the week good weekend we'll see ya see you next week thanks everyone [Music]