SotN#27: Is ETH Money? w/ Ryan Selkis (2020 Recap & 2021 Horizon)

Transcript

some some basic yearly rap questions such as like you know on january 1st 2020 how how do you think the crypto thought that 2020 was going to go and then what are the big changes that it actually went and then things like um who or what were the rising stars that captured the moment of 2020 uh and then how will 2020 be remembered from the perspective of the crypto industry what's the legacy what's the crypto legacy of 2020 uh and then we want to before we get into the debate to parameterize it like what are we actually debating like what what are we what are the the significant points to to walk away with from this debate so pretty straightforward all right let's see

that tweet should have just gone out so now me and ryan are going to do some tweeting nice ryan the youtube link i'm going to throw to you in discord yeah you want a discord i can okay oh i shut the score down okay so we have a five five minute countdown uh window i'm going to put

that up which means we are committing and then we're going to have um a round of sponsors so like two minutes and sponsors we already have it recorded so that means that we are seven minutes out from going live is that is that one three is one hour from now perfect that's right that's great yeah i don't i don't envision us pushing up into that really nineteen eight oh we touched not we

well bitcoin touched 1900 like a couple weeks ago yeah i was about to say what was the real purpose of this comment if you are looking for the front page of

defy look no further than xerion.io xerion is your home base for managing your d5 portfolios xerion offers a central place for you to engage with all of the d5 protocols and assets that you engage with on a daily basis but all in one central spot here you can see i've loaded up a wallet and xerion is giving me the portfolio performance of all the assets in this wallet over time as well as a breakdown of all the assets that i own as well as all of my transaction history that i've ever done in an easy to view fashion xerion also lets you invest right into d5's best yielding financial opportunities right from their home page xerion also makes it super easy to access interest in defy

using applications like compound and ave in the background and you can also exchange your assets using the xerion app using an exchange aggregator in the background to make sure that you always get the best rates you can even use the xerion mobile wallet to add your metamask or arjun or another ethereum address right into your mobile wallet so you can see your portfolio and engage in defy on the go here i just loaded up my argent wallet and now i'm going to load up my meta mask as well and xeron will do the same thing it will add all of my assets and wallets together all in one space and give me a portfolio summary of what's going on adding wallets is trivially easy if you already have a meta mask you can get it right into the xerion app and it can sync with your desktop app as well and

the best part is you can also buy ether right into the app itself use the invest tab to look at all the things that you have invested in as well as other opportunities and coming soon to the xerion app is the ability to buy and sell your assets straight from your mobile device as well so download the app it works on ios and android go to xerion.io plug in your wallets and get a historical report of your portfolio over time as well as a comprehensive breakdown of all the assets that you own and how much yield they're generating for you we're also brought to you by monolith monolith is your cool new defy account your d5 savings account your d5 checking account except the cool thing about the monolith defy account is that it gets

software updates right you actually get to increase the usefulness of this over time so here are some of the features monolith is a smart contract wallet with a lot of the features that you would expect if you've come to know defy and what it is you can you can add money to it you can put that money to work uh in compound and accessing yield uh but you can all and you can also swap through uniswap what was cool with monolith is that they will send you a very sexy monolith visa card that connects to your smart monolith smart contract wallet on ethereum so it's a really awesome tool to live a bankless life with a a savings account that gets software updates so this is something that you're never going to find out in the real world but

you can still do real world things with you know real money and like buy your groceries so that's just fantastic coming soon to monolith actually already here to monolith is now you can buy die and get it sent to your wallet directly right so it's also being an on-ramp so you don't have to go through your centralized exchange like coinbase or gemini or wherever you can just go straight from your bank account right into your monolith checking account smart contract wallet so check them out at monolith.xyz hello bankless nation welcome to another episode of state of the nation this is episode number 27 i've got david hoffman here as usual we have a very special guest we brought in ryan selkis who we

will introduce in a little bit to talk a little bit about his eth uh report and thesis and his thoughts on whether eath is money or not might turn into a little bit of a debate but before we do that david how are you doing today man doing really good december is uh my favorite month of the year for a whole bunch of reasons and particularly because crypto prices seem to do interesting things in december which is what we are seeing and you know the holidays are right around the corner you know feeling good good time to be in crypto absolutely we will see if bitcoin hits all-time high this month it's it's been edging for the last few weeks we'll see what happens there but if this is your first state of the nation what we do here is talk about what's happening relate that to the big

picture stuff we talk about on the newsletter and in the podcast we hope to drop some insights and action items for you this comes out on youtube every tuesday 2 p.m eastern we try to start it around that time and also on the podcast if you want to consume an audio form as well speaking of the podcast david we dropped a killer episode with dimitri kofinas who has one of my favorite podcasts out there hidden forces and he took kind of a a crypto outsider crypto skeptical type view at least he's not fully convinced of crypto we had a conversation about that what were some of your takeaways why should folks tune in to that yeah it was one of the few podcasts that i i edited and then when

it was released i actually tuned into it turned into my own podcast because it was so good yeah dimitri koffinis really salient really sober really secular thinker about things he he understands our industry he understands what crypto is yet he doesn't uh fall into like the religious thinking that a lot of us do which i would totally say that i i and you as as well ryan kind of we definitely have that religious story uh sort of thinking it's really important to get out of that bubble sometimes and that's what we did with dimitri uh he's one of those people that believes that you know at the end of the day like these these internet-based entities like bitcoin and ethereum still have to interact in meat space and therefore things like governments and community

consensus and community and like human management overrides the power of these systems and it's really going to be an interesting um uh way for these uh blockchain crypto economic systems like bitcoin and ethereum to manifest in the world when they are going to be under the subject of the nation state so that's the perspective that dimitri brought and it was a really really valuable conversation for me speaking of the nation state we're actually we're also having rohan on who is maybe quick set crypto twitter abuzz with uh some of his commentary he's one of the primary authors of the recent stable act and we're going to maybe spar a little bit with him but also hear his perspective on why the stable act exists

and the reason it is good for both the united states and the world i bet there'll be some back and forth about that but he was recently on dimitri's podcast too so there's some crossover there and in ongoing conversation i think that's super useful what what are you hoping to get out of that conversation we're doing that thursday right yeah we're recording on thursday we'll probably release it on friday i actually think the crypto space generally misunderstands rohan and i actually have a lot of respect for the guy i do find like a lot of commonalities with what you and i are doing ryan with what rohan is doing like rohan understands money as a public institution that needs to be protected and cultivated and and uh steward and

and have stewards and i think rohan sees himself as a steward of public institutions mainly money he just has a different opinion of where money comes from he thinks the money comes from the state and we on bank list think that monies like this kind of bottom up every money for themselves kind of environment and so you know starting i think we actually have a a way to start with rohan with common ground and attack the the uh conversation from that angle and i and i think that's going to be a very interesting conversation i think it'll super i think it'll be super interesting i may be a bit more pessimistic because i i totally believe that both rohan and the crypto community and us we we start from a set of common

goals but then we we come to diametrically opposed conclusions right and that's that conclusions those conclusions where things get sticky so we'll see if he's open to protocols existing outside of the nation state and humanity's ability to marshal those into a financial system it'll be an interesting conversation we are also doing an eth bull series so if ryan sulcus gets you down a little bit about his eat this not money conversation today don't worry we will have some eath bull conversations in the future on the podcast i think that wraps up what's new so i'm going to start with a question i ask you every state of the nation david hoffman what is the state of the nation today sir the state of the nation is

debating we are debating we're going to bring ryan selkiss on but ultimately to have an east is money or not uh debate we're going to ask about 2021 and and the the crypto industry at large over the last year of course but ultimately we're going to get into a debate then we're debating with rohan on thursday too so there is some debating going on one thing i've noticed lately especially in the latter half of 2020 is that the bitcoin and ethereum like ecosystems have kind of diverged recently like bitcoins kind of doing its own thing ethereum's doing its own thing and all of a sudden we kind of like have stopped to care about each other very much but i still see that conversation um uh coming to a head when it comes to like uh you

know things like microstrategy putting their treasury into bitcoin and then also things like ether capital in three iq putting treasuries into into ether right and so at the end of the day while these uh ecosystems are doing different things they meet in the real world in the same place and so there shall be debates to be had at some level like crypto is um just one long debate all the way from inception all the way from satoshi's white paper up until now both debating with the rest of the world and debating internally as to what the future of money should be all right well let's get to it let's bring on ryan celcus uh ryan is probably he's the original ryan in uh in crypto media so i'm i'm more the newcomer uh

but he's been around for a very long time he is the founder of masari which is like a crypto bloomberg it's absolutely fantastic they just released a a facelift uh and the tools that they're putting out weren't available in 2017. it makes me bullish just seeing what massari has produced and the rigor of analysis that is now present in crypto he always puts out a yearly wrap-up report and he didn't fail to deliver this year he put like i think 134-page report together uh we're going to talk a bit about that report we're also going to talk about a section that begins on page 43 about ethereum specifically and whether eath is money or not ryan fantastic to have you on state of the nation today how are you doing sir

thank you for being so brave to see you guys coming right back at you my friend right back at you i don't know if david is the neutral party or if he's going to lean more uh ethereum here or what what's what's your what's your status david you got to declare before you come in here yeah oh well i mean if you're making me pick sides i'm obviously on the east side but i think one of my big advantages i can all i tend to be able to see where bitcoiners are coming from which is actually why i think i'm so good at debating this subject but that will be up for mr ryan selkis to decide well very good before we begin before we talk about the ethos money conversation that debate let's talk a little bit about the the thesis that you put forward and

just the high levels because ryan this is a 134 page report like it's super meaty uh we will include a link in the show notes guys just download this go look at it it's a fantastic summary of the year and looks at the the next year moving forward but on january 1st like a year ago or so um how do you think the crypto industry saw 2020 play out and how how did it actually play out like what were kind of the differences between what everyone expected and what actually happened well i think the things that didn't change were some of the projects from the 2017-2018 variety finally come to market and introducing their their main

nets we saw that with pokedot with filecoin uh a number of other high-profile projects we saw some maturity in the stable coin sector we saw some maturity obviously the d5 sector i'd argue um that's the innovation you could argue uh that was initiated by synthetics in in mid 2019 but but really kind of came into vogue with compounds liquidity mining uh in mid this year was maybe the most important um development of the year outside of what was going on in the macro picture now you can't talk about 2020 without talking about the the coronavirus and and just the incredible impact that covid and subsequent lockdowns and

and monetary and fiscal responses had on bitcoin and then by extension and all other assets and crypto and um and and the fact that a lot of this happened right around the having uh when bitcoin's inflation rate finally dipped below two percent the target inflation rate fed um i i think it was uh incredibly um fortuitous from a narrative perspective and um and of course you know the trillions upon trillions printed and the the record-setting you know negative uh yielding debts um has certainly played a large role in that narrative taking off um with ethereum it's really all been

about wednesday 2.0 going to come online and you know are are we actually going to see this anytime soon is uh have the developers actually got a credible path to bringing um this upgrade to fruition and how smoothly is that transition going to go because we are talking about essentially a brand new blockchain um in any 2.0 so uh in some respects i'd say the year is ending about where most optimists would have have uh put us at the start of the year in terms of development in terms of bitcoin kind of leading the charge from a macro narrative standpoint and then ethereum actually getting his first milestone with the beacon chain launch how about d5 ryan was was there a surprise there

you kind of alluded to it a little bit when you were talking about synthetics i i don't i don't know that there was a surprise um the surprise was the velocity at which it took off and um unlike icos which were really kind of manufactured bubbles to a certain extent uh there are some similarities but i'd say unlike icos liquidity mining has a credible argument for pulling forward demand versus just creating a bunch of speculative fervor right uh the problem with compound the problem with some of the other default applications that were early uh to embrace liquidity mining is that participating in those protocols as a user

uh was kind of like picking up pennies in front of a steamroller because you're taking all sorts of videos from credit risk you're taking principal risk with the underlying assets and for what to turn a couple of points of marginal return you're better off just waiting for the market to play itself out and and and for these speculative assets to to hit their next cycle of growth um and it's kind of this chicken and the egg problem defy i think exploded because you were able to give people a credible path towards these protocols and their native tokens actually capturing value in the form of fee markets and so you you kind of had your cake in in data two when you're actually

participating in these protocols both from a yield standpoint and then from a stock option standpoint almost if you were to kind of make the make the analog to the public companies um and i think uh that sweetener that that returns juicer was the difference between slow and steady growth and what we saw over the summer which was a tremendous pop ryan i'm curious because i know you pay attention to the coronavirus more than the average individual and and you already said that like you know that one of the big legacies of 2020 is the coronavirus and specifically the relationship between the money printer and bitcoin and just the cascading effects of the value of bitcoin increasing as a result of the money printer and the net positive effects for

the rest of the ecosystem taking that variable out of the equation do you have any opinions as to how the coronavirus impacted the ethereum ecosystem uh honestly i i don't think it had much impact at all um you know there was there was three primary narratives of the year there was coronavirus and bitcoin's entrance in the macro scene um and it is almost 100 bitcoin at this point we'll talk about um why the limited institutional interest in ethereum is kind of manufactured it's it's not organic um the um the second was just would ethereum uh get to phase zero which they did uh so i think that's the biggest

milestone for ethereum and then um alongside that which other uh blockchains came online that had credible pitches for siphoning off some demand some applications uh from the ethereum blockchain and then and then the third was was defy um i i would put everything else into like the the very distant fourth fifth sixth place like also ran category so there's interesting things going on in non-fungible tokens um and um and you know some of the early web 3 applications and the like but um far far behind those three mega trends for the year who or what would you say captured the moment of 2020 in our industry either in the greater industry or maybe

specifically inside of ethereum well i think if we're um if we're going to go off of those two uh or three mega trends i'd say um we put out a list of ten people to watch um on the ethereum side it's it's danny ryan uh as much as it is vitalik him for for being the central coordinator and and really kind of the figurehead that's that's led this massive upgrade so far and and and helped to uh shepherd the the right resources and and actually hit the milestone before your end um i'd say uh on the defy side it's uh it's got to be hayden uh and rob leshner hayden uh from from uniswap and rob from compounds

um and then andre uh uh from from wi-fi i'd say those are probably the big three in terms of um entrepreneurs that really hit the accelerator and and got defy where it is now and and where it's spiked over the summer i think maybe the craziest thing is um that the pace hasn't really let up i think um when we saw the dip in september and october kind of felt like this was the beginning of a bear market um that would be protracted and the the vicious kind of rebound in terms of volume and in terms of um how uh how quickly things turn back around was was was pretty impressive and certainly uh took me off carter

and then i think um on the on the bitcoin front you know there's there's a hodgepodge uh of of people that i think helped you risk it you know uh things like the wyoming uh blockchain initiatives that the caitlyn long and spearhead uh spearheaded started to pay dividends this year in the form of not only clear state regulations but a path to building a special purpose depository institution it's kind of like a bitcoin bank um banking was was you know probably the biggest risk for a while to the industry certainly was last year we wrote about brian brooks uh former chief legal officer at coinbase not the occ opening the door for

uh banks to not only bank stable coin issuers but open the door for actual crypto custody probably through m a uh was big and and then uh i think what um what michael saylor did and maybe more importantly what uh what what square did with their uh corporate treasury purchases of bitcoin will will resonate for quite a long time then there's you know probably a dozen or so macro money managers that that had a pretty pretty big impact on the bitcoin side but um it was really just about the digital gold narrative on bitcoin herding cats on ethereum and um getting this defy ecosystem really bootstrapped for uh for

the rest you know what's kind of interesting i think about the the list that you guys put out ryan um is a lot of folks on the bitcoin side are all kind of wearing suits right these are almost like bitcoin bankers essentially right even um yeah you mentioned uh sbf who like came out of nowhere with uh an entire new custody exchange of derivatives on these things on the ethereum side it's these d5 protocol developers who if they are successful essentially remove themselves from the protocol entirely like hayden adams whom you mentioned right like the goal for unit swap is that uniswap turns into a protocol and we don't need

hayden anymore it becomes completely decentralized what are your thoughts on this kind of dichotomy it seems like bitcoin these these days is kind of wearing suit and ethereum is taking the flag of no let's build a intermediary-less financial system without banks in the middle i'm sure we'll get to more of that when we talk about the the the ethan's money debate but are you seeing that as well even with the choices of you know the standouts of the year that you named well who's the most important developer in bitcoin i mean i i it's probably some member of bitcoin core i would say but like at some level the project is already finished right and you know it's it's at a different stage of

completion exactly so i'd say that the fact that it's it's ossified means that uh being very difficult change allows people to create their own image of bitcoin right for some people it's going to be a swiss bank account in your pocket for others it's going to be an uncorrelated asset that fits in a portfolio um for others is going to be a hedge against inflationary pressures coming out of this next uh recep out of the most recent recession um and you know that's that's a positive because i think bitcoin is at a different phase of the game than ethereum or any other protocol or ecosystem right now right

bitcoin is on to the final boss and with the final boss you don't want a ton of attack vectors available to crack down upon you know different developers or development teams or mandate certain types of activity or or or non-activity um in the bitcoin blockchain once we see the the taproot um activation that uh adds another layer of pseudonym a to the uh bitcoin uh ecosystem i think that's probably about as private as it gets and it's probably the last major upgrade for a while that we'll see um but ethereum's just getting started right you know there's there's no one date in mind for when

the beacon chain uh becomes accessible you're basically just relying on the availability of this synthetic beacon eath um on an ongoing basis is the new kind of reserve of record that people can unlock and defy um the major players are very well known right uh if you asked anyone in the world uh who they think of when they think of ethereum it's our philosopher king vitalik i'm not saying that's a bad thing but again it opens up uh some pressures in terms of you know his influence and ability to dictate how this ecosystem matures and what the roadmap looks like going forward um because his opinion carries so much clout um

i uh you know i i don't think um i think it's like uh it's apples and oranges comparing bitcoin and ethereum at this point and that's fine but this is why i wrote in the thesis that you know it's it's plenty good to be powering the financial internet infrastructure that ethereum is that doesn't mean that it's at the same phase as as bitcoin um they're almost you know two entirely different markets at this point so what about ryan brought up the fact that the bitcoin cohort seemed to be represented by suits would you say that that's a a symptom of that of bitcoin's maturity and and extended lifespan is that's kind of just where bitcoin is in its life cycle

and maybe if you're yeah i mean i don't know the future too yeah i mean you're uh i think the fact that bitcoin has been successful means that it's available and it's liquid enough for larger investors to actually access it but every single retail investor every single minnow has had 12 years to front run jp morgan they've had 12 years to front run paul tudor jones and stanley druckenmiller so it's like that to me is such a non-issue because obviously as something moves from uh a billion-dollar a million dollar asset billion dollar asset 100 billion dollar asset trillion dollar asset there's going to be larger institutions that are interested in it so you know um the flip side of that is you know the bankers are buying our bags

right now um but so so you know of of course they're going to but uh that that doesn't mean that bitcoin is now beholden to the banks it just it just means that this is a phase where um that's a new audience of users and and a new ecosystem of buyers that have materialized okay i feel like we're bleeding into the the next section where we we want to talk about whether ethan's money or not or even the the definition of of money but let's kind of parameter parameterize the the discussion um ryan so we kind of led this with we're going to have a debate on whether eath is money or not and you put on page 43 of your uh report

that basically ethan's not money and that's that's fine it doesn't need to be money but you made that claim but i think there there's a question of what people mean when they say eth is money like what is money so if if we're to maybe open up the question uh or open up this conversation right i i guess i would have the question to you do you think bitcoin is money and based on that we can probably define what we mean by each being money or not so is bitcoin money in your mind i don't think either of them are money in the traditional sense right there they're commodity stores of value they're used for two different things right now bitcoin is primarily about the

store value use case secure financial settlement of large uh savings accounts basically right so i think the swiss bank account in your pocket is true uh for for better or for worse for uh ethereum most of the usage is going to come in these experimental protocols and these experimental financial applications and that's fine right uh the the transition to proof of stake when it does happen still not there but you know when when it does fully happen um will also make ethereum a defensive asset you're going to need some minimum price for ethereum to back into a minimum market cap for ethereum that will actually ensure that the network is

secure if it's gonna be processing trillions of dollars of transactions and settlements all that's fine um but uh by and large uh this is not about whether you know every token can be money every stock can be money right if you just loosen the definition enough but ethan's money versus not the question there is let's be clear about what we're talking about we're really talking about which is the ultimate and best form of digital money is it bitcoin is it ethereum is there any chance that ethereum is going to flip in bitcoin for that use case and the answer is definitively no not anytime soon and if it does there's something very systemically wrong i think in the industry so like

that's that's the that's the headline the catchphrase but really what we're talking about with money and a narrative is uh this is a winner take most market with power law type distributions and returns and is it there i'm going to come close to bitcoin in that court i think the answer is no so i think that i agree with that definition going into this conversation so the way you defined money we're really talking about uh monetary premium essentially when we say is eath money and what we're talking about in this in this conversation is whether eth can accrue a monetary premium that exceeds bitcoin's monetary premium but of course both of these

assets are not money in the traditional sense where they are used as a universal you know medium of exchange and unit of account and then also a store of value they're more on the store of value side and they're dipping into the unit of account medium of exchange portions so i think with that as the foundation the context we we could get into uh into the into the conversation in your like 10 points about uh whether eth will actually flip in bitcoin but before we do we should get to some of our sponsors that have made this state of the nation episode possible if you want to live a bankless life you need to get a hardware wallet there is no alternative for storing your crypto in a self-sovereign fashion that's why i

have four ledgers that i use to manage my different crypto assets using the ledger live account as well ledger live is like your home base for managing your ethereum defy and crypto accounts it does a really good job of aggregating all of your different ethereum wallets if you are the type of person that uses more than one but you can also add other cryptocurrencies like bitcoin or cosmos or whatever your preferred blockchain is and then it will display an aggregate portfolio of all your accounts at the main page one thing that ledger is doing a really good job of is enabling all the money verbs that me and ryan talk about with the bankless skill cube enabled in the ledger live app so right now in the ledger live app you can buy sell lend

swap and stake your crypto assets which is doing a really good job of fulfilling all of the money verbs in the bankless skill cube something that's new to ledger live is ledger swap where you can swap assets one for another directly inside the ledger live application ensuring trustlessness in your financial activity on ethereum and on bitcoin if you want to learn more about what you can do with a ledger go to the blog post the power of ledger live on the ledger website where they share some of the more advanced things that you can do with your ledger that you might not have known about there's a link in the show notes that will take you to the ledger shop where you can get your preferred ledger hardware wallets i personally like the ledger nano x but i also have both they're both great options when you

own a ledger you own your own assets in the way that they have been designed to be held by the user and the user alone so go get your ledger today to make sure that you are as self sovereign as possible the bankless state the nations are brought to you by wiring wiring is defy's first self-building community run project which i just get really really excited about iron is a system that seeks out yield in d5 and it does that in a number of different ways a very aggressive way is with the vaults where you can deposit your preferred asset of choice and different defy experts will come in and generate a strategy for what to do with your deposited token right and so it'll go find ways to get yield in that

deposited token in d5 for those who want to just earn yield on their stable coins the earn system is for you where you can deposit your preferred stablecoin and wiring will go and figure out which money market on defy and defy is producing the best interest rate whether it's dydx it's compound or ave it looks around d5 to see where the yield is coming from and it directs stable coins automatically so you don't have to check them out at yearn.finance to get started and also check out the stats page to see what other people are doing as well all right guys we are back with ryan selkiss we are going to get into the 10 points that ryan brought up in his year-ending theses for 2020 and 2021.

ryan brought up 10 unique points and we're going to go through them one by one starting with history uh and uh ryan i i've summarized your point in this section as bitcoin has killed all of its competitors yet ethereum has not and there are still plenty of eth competitors around meanwhile ether ethereum is kind of going through this like transitionary period from eth1 to eth2 and if we're using like a uh a a metaphor to to talk about you know apex predators of money then like ether is like in this this vulnerable weakened state while it's doing this transition while its competitors uh uh exist without having to worry about that transition would you say that's a fair analogy of what's going on here

i'd say that's true i wouldn't go so far as to say that it's in a weakened state um but it is certainly not in as strong a state as bitcoin particularly with with polka dots and dfinity and some of these other new protocols coming online that really have massive balance sheets in the ability to centrally coordinate uh different attacks if you will or just you know marketing uh schemes to uh to siphon off demand and and develop ecosystems from ethereum all right ryan my co-host ryan what do you have to say about that yeah so i i think it's an interesting point right so uh you'll find this in a lot of maybe the counterpoint so what ryan's saying that i do definitely

believe that ether the asset let's separate either the asset versus the theory in the network because they're different things ether the asset is probably a full market cycle behind bitcoin right it is bitcoin 2016 okay so like with that as a backdrop i do think the the the point that ryan's raising that uh bitcoin has no uh like predators no competition but ether has many is is much overstated so there aren't actually competitors to ether there are a lot of eve killers who say they're competitors to either their marketing says that they're competitors to ether but ryan ryan even raised the point of of marketing and centralized

war chest it's that centralization that makes them weak competitors to ethereum because the thing that ether has just like bitcoin is credible neutrality it was not vc funded it was not pushed out to only accredited investors it's already crossed the gauntlet to become a decentralized network even the cftc said the two crypto assets that are commodities are bitcoin and ether and they haven't weighed in on any of the other flock of eth killers so what's actually happening are these killers these smart contract platforms are competing with each other and they're competing with ethereum's layer two and they're not competing with

ether as an asset for money that's what i see is actually going on though from like it could look if you're looking at it from a high level it it could look like there's all of these competitors and bitcoin has slayed its foes but ethereum has to slay itself i'm just like looking a couple years in the future where ethereum has already won this contest it is the only credibly neutral monetary system apart from bitcoin uh and really it's just kind of the only smart contract platform standing that's my take well no proof of stake network has been proven at scale yet no protocol of this size has migrated to an entire new architecture

at this time no one has gone through a multi-year transition like ethereum is proposing to do and no one has tried to do that at the same time as billions of dollars worth of competitive spend is heading their way at the same time most of d5's killer apps are getting very expensive to run on ethereum and if you're going to need to set up infrastructure to support ethereum roll-ups or layer 2 applications there's going to be a lot of teams that spend the same amount of time and energy on interoperable solutions to other base layer chains so the infrastructure is going to be built you know you said ethereum's a market cycle behind bitcoin the truth is all of these other ethereum like

platforms are not a full market cycle behind ethereum because ethereum is in some cases running in parallel as the established lead horse and as a brand new blockchain that's unproven i think uh well maybe we'll get into the second point in a minute but um i just want to draw the attention of the distinction between ether the asset and ethereum the the network because those are two different things right and so ether the asset as a money system right as a sovereign non-sovereign store of value is different than ethereum the the network right and so these other alternate blockchains don't just have to compete with ethereum the

network in terms of trustless transactions per second they actually have to compete with the monetary properties of ether as an asset but maybe we can address that in kind of the next point right where you talk about um either the asset being sort of this this reserve currency and maybe david you can kind of articulate the the point here so famously uh icos largely in 2017 required uh ether to participate in right making ether like as it is ether the native currency of ethereum ether was really heavily used during icos to make investments right and that was kind of the big thing about why ethereum was so cool in 2017. the the claim here is that you know the

reservation demand in 2017 for ether was really really strong and that's why ether was able to pump up to 14 1400 dollars in in december of 2017. uh and and ryan i believe what you're claiming here in number two reservation demand is that you know the eth leveraged in d5 doesn't have that same sort of like reservation demand coefficient where icos really needed ether to participate modern defy applications don't necessarily need ether to participate therefore the reservation demand is less was that a fair analysis of your take well let me let's be clear bitcoin was the reserve for crypto exchanges as well in 2017. both

lost their reserve status for uh applications that would be better suited with stable coins and in fact stable going through five times this year to i think close to 27 billion now in total supply so whether you're talking about d5 whether you're talking about exchange settlements or any payment application stable coins have really eaten into that uh reserve demand for both assets to be fair what's different is that bitcoin has basically entered the the institutional conversation as an uncorrelated asset and a speculative sort of value that should outperform gold in um a gold investor's portfolio so um there's a new reserve demand for

bitcoin it's from a new market you might not like that it's bankers and institutional investors but there is no such demand for ethereum uh that replaces its its previous reservation demand for icos yeah i think that's yeah i think that's a it's an interesting point and i i totally agree with your characterization of um both of these assets competing at some level against stable coins but i think that ether as an asset on ethereum is still irreplaceable uh even if you had um you know stable coins and you know stable coins really took off and went mainstream the reason is because ether the asset is the only

trust list trust minimized form of collateral on ethereum so coinbase circle they can do a timeout they could do a pause they can stop uh usdc they can't do that with a ethereum native crypto asset like ether so if you want to build something that is trustless a protocol that is maximally credibly neutral if you're trying to build a uniswap you can't have the reserve currency of uniswap be something like usdc you could maybe have it be a an uh a stablecoin that is um ether backed right and and have a pure kind of you know stable

asset uh you know bearer instrument on ethereum this trustless collateral of ether this like on ethereum is the part that i think a lot of folks miss and it's why ether is irreplaceable on ethereum and i do i think we'll get back to that point about um outside banker demand right where right now institutions are clearly demanding bitcoin uh again i think ether is just a cycle behind right this this idea of ether as an internet bond is going to take off i think the same companies that are putting bitcoin on their balance sheet will put ether on their balance sheet eventually and in the meanwhile i do think uh ether's reserve status as eight percent locked in d5 right now you

know five to ten percent in the future going to be locked in and staking it has a lot of sinks native to its own economy that will propel scarcity and price forward thoughts on that well i mean it seems that the market is speaking that the the best collateral asset for d5 is actually bitcoin if you look at the wrapped bitcoin chart i don't think that ethereum is got the special position that you think it does as a reserve asset for for these ecosystems um and you know the market is more or less spoken in the beginning of the year there was less than 10 million in rap bitcoin on ethereum now there's two and a quarter billion and since yield farming started earlier this year i was about 35 million again two and a quarter billion

today so that's uh about 100x um depending on what your starting point is uh ethereum's price certainly hasn't appreciated that quickly and and the ethereum collateral locked david wants to jump in here yeah the btc on ethereum and the btc and d5 are different metrics and i don't know uh the details or the nuances behind the metric that defy pulse puts onto their front page but according to d5 pulse bitcoin in ethereum in d5 specifically capped out at 173 000 which is a very low number so btc tokenized on ethereum as maybe uh using ethereum as a ledger of sorts is not the same thing as btc

pushing out ether as collateral and defy and those are telling those numbers are telling very different stories yeah i mean well we can put two two together right if if that's where all the values coming in that that value is coming from the bitcoin blockchain in search of yields and where's that yield going to come from it's going to come from either making markets on decentralized exchanges or in providing liquidity for lending and derivatives protocols so look you know we're talking about months here where this is going to come to fruition but you know the fact that there is that much of a collateral asset coming on to ethereum it's no different from the erc uh 20 stable coins so if you're going to say that you know ethereum is the only uh you know permission credibly neutral

permissionless assets uh that is available for collateral that's simply not true or at least it's not going to be true in a matter of months um going into the new year of course like um you know bitco can press the stop pause button on anything that's wbtc right but but that aside i actually think that what you just said ryan is uber bullish for ether the asset because uh if ethereum is maximally successful if it becomes the gravity well for all assets all over the world they all end up on ethereum that is uber bullish for ether the asset when we start talking about uh like ethereum scarcity engine eip1559 where every single bitcoin trend like

wbtc rap bitcoin transaction on ethereum actually makes ether the asset more and more scarce the the i guess the concern for bitcoin is essentially what if it ends up with um a chain that is kind of empty of its assets right like low transaction fees what's that going to do for for uh securities so some of these like i guess uh weaknesses that you're seeing i actually think are our strengths on the ethereum side but i'd love to get to your your your third point because this is really interesting i will not uh dismiss the fact that now bitcoin has had massive amounts of institutional demand this year it absolutely has with

microstrategy paul twitter jones all of these things it's being stacked on on the balance sheet but you called ether demand uh in institutions a mirage at this point what makes you say that well almost all demand from institutions right now for ethereum is specifically related to the ethereum investment trusts at grayscale and the reason there is staggering demand for that product right now is because there is a mismatch between where institutional investors can purchase shares of the trust at the net asset value on a given day according to 4 pm timestamp and where they can resell it in six months due to the illiquidity of

the rest of that supply so where the real demand is it's in retail investors wanting to put their 401ks and and iras into a publicly traded security that maps to either the assets maybe because they're too lazy or too scared to to set up a coinbase account um but uh but the institutional interests there like there's there's no uh there's no missionary or or real longevity um status to uh to those investors because i haven't seen anything to suggest that they'll still be around once that premium declines that's interesting because so um

i think there is more institutional demand than meets the eyes so dave and i just did a podcast with the publicly traded company in uh canada called ether capital they have thirty thousand ether on their balance statement um they have since 2017 called ether capital well and they're buying 125 million more right and that demand has got to they're called easter capitals exactly the only ones they're they're a publicly traded company also i3q is another canadian the grey scale of of canada i think that what what is happening here is again back to that idea that um ether is just one cycle behind we didn't see any of this institutional demand back in

2015 2016. it was kind of where ether is today and bitcoin is being a like a great big brother and introducing digital scarcity to the masses into the institutions once they get their mind wrapped around ins like digital scarcity in this concept they're going to come back for more and they're going to come back for ether as a monetary asset particularly when they they start to grasp this idea of an internet bond a productive yield bearing instrument that is also digitally scarce so i think what we're seeing is just a a um i guess a snapshot in time and that this will play out that you know bitcoin has already done all the hard work and

now ether by the way the only other asset that the cftc has ruled as a commodity uh we'll just ride those rails into institutional adoption and that'll start this cycle by the end of this cycle there'll be a lot of institutions with if they're on their balance sheets right yeah the thesis the idea is that ether is one cycle behind bitcoin but it's it's actually at an accelerated place in comparison to where bitcoin was the last cycle because it's already having the balance sheet conversation although it's being forced by bitcoin it's we're still having it you know ethereum is a capital asset getting bonded to the the you know proof of stake chain it's not actually that interesting to investors that like bonds nor is it that

interesting to investors that like cryptocurrency exposure because they can get the uncorrelated asset in bitcoin and if they're going to look for yield they're not going to want to take principal risk in an asset that's as volatile as either so you know really yes is it important that this proof-of-stake transition is happening that there's some rewards and some senior age for the investors that are going to take that financial risk and do the work to actually process these transactions of course but it's otherwise inferior on both other you know axes uh when it comes to institutional money managers and their interest in accumulating the asset said another way once the premium comes down for the ethereum trust i'll believe it when i see it when it comes to institutional demand and maybe there will be some but it's not going to be

anywhere in the same ball park as bitcoin anytime soon fair enough ryan let's move on to probably the last point that we'll be able to get into i know you have a hard stop in at the top of the hour which is in three minutes but this way this one's important in my mind narrative complexity which i summarize as the bitcoin uh thesis the bitcoin narrative is really easy to grunt out doesn't take too many words but the ethereum thesis that your narrative takes some explaining maybe you can elaborate on that uh well bitcoin is digital gold that is secured in a global censorship resistant ledger and it's much much easier to self-custody than physical gold one sentence if you're talking to a macro money manager you can say this is

an uncorrelated asset that has outperformed every single other assets and it belongs in every portfolio at least a one to two percent allocation fine with ethereum uh you're really talking about technical innovation you're talking about all the experimentation that's happening on ethereum we're talking about all of the financial applications that can drive value and you know long-term growth in in you know these money protocols but um it you know it's it's much more abstract because you're talking about replacing banking and lending and um and then you know all of the legacy markets infrastructure and then you throw on things like new asset creation and digital assets and and ownership over data and um

all the other kind of emerging web three applications that are are part of the same pitch and yes a settlement layer for value uh sounds interesting but again you can do that with the protocol it's not asset specific the asset is used to secure this protocol that's going to displace a bunch of traditional applications whereas bitcoin is is really all about the asset and just the tech and the game theory behind it that makes the asset work do you guess my response go ahead oh go ahead david do it oh yeah go for it uh my my response to that is like to ask the question what can you do with bitcoin right what can you do with it you can hold bitcoin that's what you can

do on the bitcoin blockchain and maybe you can transact it right but when all of the whales and the bitcoin banks start using bitcoin you're not even going to be able to transact it for a fee that that makes sense right those are the two verbs that you can do on bitcoin on ethereum it has like so much more surface area so you can hold you can transact of course you also have an economy of stable coins an entire trading economy built up over the last year on uniswap you have nfts there are all of these different i guess vectors for people to enter ethereum that bitcoin simply doesn't have bitcoin does have a better meme

like i'll grant you that right digital gold okay like i buy bitcoin to hold i get that right but you've got an entire digitally scarce economy that that's built building up over uh on ethereum right now and all of these various ways to enter we're just talking to the gods unchained uh ceo and founder and like people are buying god's unchained cards that have no interest in crypto but they're gaining exposure to these gods and change cards and then ether so once once once society and once mainstream starts to understand the idea of uh digital scarcity thank you bitcoin for that and once this decentralized economy gets unleashed right it's going to feed into demand for ether as an asset so the

surface area that you're talking about is i think a strength of ethereum because it allows all of these various places to enter sorry david i just jumped in before you could i don't know if yeah no go for it i know ryan ryan has to to run to a meeting here so i'll let him get the right last one well most of the applications that you just mentioned actually aren't really that compelling to do on ethereum right now because of the state of the fee market and most of the scalability is going to come on our two chains same as bitcoin so you're it's it's really no different i would say the diversity of applications that are tied to bitcoin anytime soon uh any time period that you're talking about i think it's going

to be much lower than ethereum but in terms of scale applications money is the biggest market that you could disrupt in the world bitcoin's got the lead there ethereum plenty of other opportunities it's just never going to be money well ryan thank you for coming on the show and sharing your thesis with us if you guys are looking for a way to understand all of 2020 in in just a short 70 or 130 plus page report check that out at missouri we'll get that linked in the show notes ryan thank you coming for coming on and uh giving us some of your time thanks ryan thanks guys it was fun cheers take care all right bankless nation that is the end of our episode as always risks and disclaimers eat this risky so is crypto

so is defy you could lose what you put in but we are headed west this is the frontier it's not for everyone ethmoni see you later guys are we adding that to our sign off in the future [Laughter] all right goodbye