📺 SotN #33: Joseph Lubin on CME ETH Futures

now all right bankless nation welcome to another episode of state of the nation we've got a special guest here joe lubin before we get to joe state of the nations what do we do during state of the nations david we talk about a headline article a headline news piece something in the news cycle that that is uh one moment i got the audio going into my ears we talk about something that's going through the new cycle which for this week it was the cme futures launch something cool that happens every single week we get a guest

on to talk about what's going on in the news cycle and of course this week it's it's joseph lubin who has watched the growth of ethereum since day one and now that eth futures our launch we want to get joe on to talk about really what does this mean for the story of ether the asset and ethereum the economy it has been quite the journey so getting joe's thoughts here are going to be cool um state of the nation comes out every tuesday we stream this live over youtube so catch it there that's the best way to catch it you can also get it directly

into your ears via the podcast so catch it that way too we released the podca cast episodes on wednesday david before we get to cme futures before we talk to joe a few things going on in the nation that we should talk about we just had vitalik on the podcast where we got his reflections on the year that was 2020. we talked about rollups we also talked about smart contract wallets in particular the ux around social recovery that was an awesome episode what were your takeaways there yeah i often say that the crypto

industry has one of the best vantage points to see the rest of the world because there's so many different things that happen that are happening in the world that are very new in 2020 and now 2021 money printer go burr the president getting d platformed uh you know social unrest and crypto offers like a lens to see all of it and that's kind of what vitalik put into his 2020 reflections uh blog post which i thought found absolutely fascinating vitalik does a good job kind of putting into perspective how he sees the world and how crypto is going to impact the world

uh when we when just the uh collision course of crypto impacts the rest of the world which we all think is coming especially this year um and so that was a pretty uh interesting piece and then of course we get into more ethereum-centric conversations such as roll-ups and how roll-ups work and why roll-ups are so cool and also the intersection of social recovery and uh smart contract wallets specifically on l2's like roll-ups vitalik is long-term bullish on smart contract wallets on l2 platforms and so that was just a

fantastic pieces of blog post vitalik's blog post that we went through so really informative episode absolutely anytime vitalik is on a podcast i make a point to listen because there's always something insightful there so do that that came out on monday we also have brett johnson who is coming out next week our podcast recording with him this is the guy behind the dollar milkshake theory and we asked brett about the crypto milkshake theory but we also talk about the dollar's reserve currency status so if you are tracking this from a monetary theory perspective

make sure you tune into that episode coming next monday and then david this thursday we have a live ama with tasha from the alpha finance protocol this protocol has been like exploding in growth just a massive amount of lock the last time i looked it was like three and a half perce uh no it was it was half a percent of beef lock 350 million or something eth locked inside of the alpha finance protocol so this is going to be a community ama with tasha where we figure out uh where they're

going next yeah this is the amas are fantastic for me personally because i ask my own questions that i'm interested in i i get a ton of learning done during these things and then of course we always turn to the youtube chat box to get listener questions as well the last ama we did the chat box was a pretty fun place to be and so if you have questions about what alpha is how it works or what's going on with alpha in the future definitely tune in to that ama coming this thursday guys this is the secret david and i do this bankless thing for ourselves so

that we can level up and so that we can learn and we're just open sourcing it that's actually that's actually the entire platform open source learning yeah all right david before we get to joe uh i'm gonna ask you the question i always ask you at the beginning of state of the nations what is the state of the nation this week my friend the state of the nation is astounded we are astounded elon musk the world's richest man the the ceo of like the most beloved uh company at least from a younger person's perspective just bought 1.5 billion

dollars worth of bitcoin like we've never seen a that large of a single purchase of bitcoin ever and it's been done by like elon musk who has a just a massive platform and a massive following on twitter so like just adding a core core fundamental character right into the heart of like the bitcoin world and like bitcoin paints its largest candle ever a one day candle eight thousand dollars in a single day absolutely insane uh i'm astounded i'm pretty sure the rest of the banquets nation is astounded as well

yeah it's it's it's a pretty big week and i i kind of woke up to the fact that oh uh crypto's mainstream now like that's what's happening uh you're still maybe early on eat you're still maybe early on d5 you are no longer early on bitcoin right like elon musk is buying it and it's going mainstream this is also going to get some of the i think the wall street bets crowd involved of course tesla is one of their beloved stocks and i think given the events of gamestop we've talked about that a lot here this is going to draw some of their attention too so dude

overall bullish it's it's astounding good word choice my friend i'm wondering when you're going to run out of adjectives though we're going through them quick that's awesome especially the bullish ones all right guys last thing um consensus the conference is coming up this is a really exciting conference to attend especially in a crypto bull market i remember my first uh bull market consensus conference it was absolutely off the wall insane they're doing it virtual this year it's happening may 24th ray dalio is coming

like we couldn't get ray dalio you know five years ago so this is consensus the conference of course you can reserve your place now you could save 20 with bankless we've got a link in the show notes for you so do that in just a moment we will be back to talk to joe lubin co-founder of ethereum about eth futures but before we do uh we want to tell you about our fantastic sponsors who made this episode possible ave is a borrowing and lending protocol on ethereum and just recently released

ave version 2 which has a ton of cool new features that makes using ave even more powerful with ave you can leverage the full power of d5 money legos yield and composability all in one application on ave there are a ton of assets that you can deposit in order to gain yield and all of those same assets can also be borrowed from the protocol if you have deposited collateral here you can see me getting a 200 usdc loan against my portfolio of a number of different defy tokens and eth i'll choose a variable

interest rate because it's a lower rate than the stable interest rate option but i could choose the stable interest rate option if i wanted to lock that interest rate in permanently one of ave's v2 features is the ability to swap collateral without having to withdraw your assets trade them on unit swap and then deposit them back into ave ave does all of this for you all in one seamless transaction so you don't have to repay loans in order to change the collateral you have backing them check out the power of ave at ave.com that's aave.com

gemini is the world's most trusted cryptocurrency exchange i've been a customer of gemini since i first got back into crypto back in 2017 and it has been my main exchange of choice to make my crypto buys and sells gemini is available in all 50 states in over 50 countries worldwide and on gemini there are markets for over 30 various crypto assets including many of the hot d5 tokens like wi-fi ave uni and also they are one of the few exchanges that has liquid dye markets having both the

option of logging into thegemini.com website or instead opening the gemini mobile app has allowed me to be able to access any and all exchange and on or off-ramp services that i've needed to on a moment's notice with instant deposits and fast withdrawals i'm able to make my money do the things i want it to when i wanted to you can buy crypto safely and securely on gemiini with the peace of mind of knowing that your investments are insured and protected with industry leading cyber security you can open up a free account in under three minutes at

gemini.com go bank list and if you trade more than a hundred dollars within the first 30 days after sign up you'll be gifted a free 15 bonus check them out gemiini.com go bankless guys we are back with a state of the nation we've got joe lubin here who is the co-founder of ethereum he needs no introduction to the ethereum community he's also the founder of consensus which has built some of the most important pieces of ethereum infrastructure over

the years including metamask which if you're going bank list you probably use just about every day also get coin if you're a truffle many other pieces of infrastructure joe how are you doing today sir welcome to bankless um great thank you i've been sitting back here in the weight room i've got a an appointment scheduled with my bank list managers what about treasury management for the people who like ether you know there's a live shot of david somewhere on twitter and he he was caught in a inside of wells fargo today i'm not sure how that

happened david but like you're supposed to be bankless man you're inside of wells fargo what's going on yeah somebody caught me making a deposit [Laughter] well very good uh well joe this is a really exciting week i think for all of crypto david just talked about elon musk and his purchase bitcoin earlier but also um the launch of ether futures on the cme maybe we could kind of rewind the clock a little bit and talk about because you've seen this project uh through from inception basically

um like two weeks ago okay well yeah two weeks weeks not months right so but uh joe you you when you were starting the project early on with the other kind of co-founders um how did you think about ethiosa did you ever think that there would be a day where it would be traded on the chicago cme um so i um locked in pretty early on this stuff

i thought that when i read pretty much right when i read the bitcoin white paper i thought it would be uh massively transformational uh i thought it would take quite a long time um i have been called uh an optimist or a true believer and so i i um i did um think that uh um that there would be profound transformation accelerated by vitalik's vision um over how fast it would have happened if we were uh sort of moving

bits around with a scanning tunneling microscope and trying to build software that way on on the bitcoin protocol um and i did i've i've spoken over the years about the fact that we were building uh infrastructure and that that infrastructure was what a commodity like or would take on similar architectures as that of grains and precious metals and other kinds of commodities and so

would need um financial instruments and deep financial infrastructure to get more efficient we've seen so we started out with super inefficient mining and and wallets that would just set prices for you and nobody would even know what they were or or adjust them ever and uh and recently uh our infira team um is launching something uh really really cool called the infura transactions manager and they've

demonstrated that uh people are overpaying pretty massively um just because there's so much fear about getting your transaction handled uh that we can actually um using various techniques and intelligence we can actually just assure people that the the pitfalls uh um that are inherent in sometimes in in trying to get transactions processed uh are managed by a service that uh can save

you money and um and uh guarantee nearly uh that uh what you want to happen does happen uh so uh i would say that uh yes uh i did and and several people did anticipate that things would go mainstream it is astonishing to see how fast it's happened um and i kind of want to call out my friends at paris so we've been involved uh as investors and and really actively with that project early on uh airsects

uh um so so the cme news is incredible um super excited about it um it is much more institutional focused um retail trader would um have to jump through some hoops to take advantage of that uh airsecs actually paved the way uh for um for the cme futures so they launched may of last year i think um so they've got bitcoin futures ether futures and spot and um

and they're certainly more friendly uh to retail and they're um they have a physically delivered product which i think is important it's something that i've been talking about for a long time if you're a speculator or need to hedge in other ways on making sure the difference from basis is not because these are really two different markets two different liquidity pools and they can get skewed pretty badly uh and so

making sure that they're locking in at uh uh at delivery yeah yeah uh you know physical delivery is is is key i'm i'm wondering your your thoughts on this is this the kind of the the cme the listing on the cme and airs x as as you were mentioning earlier kind of paved the way for this but is this basically u.s regulators signaling that yes we agree eth is a commodity asset eth is a commodity money

yes absolutely so he harvard made that statement explicitly the secs basically said that we said that um in the first few months of the ethereum project that we saw it as as a fuel as one of the first uh crypto commodities um there are others and will be other crypto commodities um and he said money in there uh i don't know if you think about whether he does money

or not but uh i thought about that dave and i have given that some thought and we've come to the conclusion that indeed it is money indeed is money do you concur david it is known so so the question is what is money or what is money going forward um we know the three definitions of money um so numerous um means of exchange uh store of value um and we've positioned ether as a crypto fuel

um we also positioned it as a better money than money and a better money than bitcoin even because it's programmable and cheaper to fire around sometimes usually we'll see that that will uh change in both directions over time um and money is kind of contextual and social and symbolic so cigarettes are money in some cases um notches on sticks are money in some cases i would argue in the future that we're

not going to need abstract money so much except as a numerator i would argue that maybe that gets taken care of by evolving baskets of tokens um but uh their money is really a convenience right now and in a world in which we're tokenizing everything and in which we have um intelligent agents um determining which tokens you want to get rid of when you're paying for something first and which tokens you want to receive when you're receiving um

in a certain order um and exchange services that can help you make that trade if you're not able to accomplish that directly and just listings of tokens um where you've got these open markets uh that are valuing the tokens whether they're automated market makers or order books inside of the spread of automated market makers i i would argue that um the role of money the abstract rule of money is going to go away and everything's going to be money

joe i want to get your perspective on how this story of eath has evolved so far because you know we talk about ethan's money we talk about like ethan as like a triple point asset as as gas or you know store value for defy but i want to get your opinion as to what what was the consensus around ether the asset back in 2015 and how knowing how what we know now the the six year old history of ether and ethereum how to how has the path followed suit or

not followed suit from the the mental models that you had back in the early days of ethereum like what what is surprising to you and what what is something that you just expected um so there were things that we were thinking that we weren't saying um and we were initially not very disciplined in the first two or three months and then we got very disciplined about what we would say publicly after discussions with lawyers and so we crafted legal arguments

to the effect that we would be selling a token that would not be considered by the sec a sale of uh an unregistered security uh to any americans uh and so um the characterization of ether as a crypto fuel was genuine is still genuine uh it pays for storage and execution of computational steps on ethereum and we also really wanted to focus on

the developer ethos where it was all about building and then biddling um and not so much about um early speculation uh so the speculation came in a few years later mostly in 2017 and that's great i mean we need speculators in our ecosystem we need um people actors with all sorts of interests in our ecosystem um but the fact that we established um the developer ethos early uh was really

important um and as i said earlier we uh we did anticipate uh many of the things that were happening we anticipated sharding in the first three days um i remember having a discussion about that we had a burn model that we were working on with respect to ether very early which presages 1559 so you know the execution has been remarkable um

and it's incredibly difficult to stand up a technology top-down uh it has evolved beautifully um by the agency of so many different actors with different expertise so seems to be going pretty well we've got a long way to go so joe for those not familiar with you know what futures listing regulator approved futures listing means in in the us we have a lot of retail listeners out

there and they're probably not as familiar with kind of the traditional financial banking landscape but what does this mean for the financialization of ether as an asset or even the in in two institutions uh in their outlook on ether as an asset yeah so um there has been astonishing movement in the bitcoin ecosystem um driven early on by people like my friend mike novogratz

uh more recently by um paul tudor jones stanley dr miller and a handful of others who've jumped in um and recently michael saylor who i think wins mvp already for for 21 maybe for 20 as well late late 20 um so microstrategy uh has taken a very uh structured organized approach to pivoting almost their business model to uh uh to turn their balance sheet into a

bitcoin museum uh where their assets for bitcoin and borrowing money and buying bitcoin and uh so far i think that's gone very well for them um bitcoins volatile assets so uh um and i know they're very smart so that i expect they won't get into trouble but uh they're packaging up um the tremendous diligence that they did and the structured strategic um steps that they've followed and i think

they mentioned it maybe a thousand or 1400 ceos and cfos were on their live stream and i'm sure um many more will be watching uh the recorded versions and so novogratz has been saying the herd is coming uh for several years uh and by that he meant that uh the ethereum and bitcoin phenomenon uh was largely retail driven um and by the herd he meant that institutionals were getting more and

more interested uh and uh the herd is now taking um university economics courses uh delivered by michael saylor and crew in how to um exist and thrive in the early days of the decentralized protocol system in the early days of d5 so with respect to futures options um regulators in the united states

um these organizations need to be prudent uh as they divest themselves of certain assets and invest in certain assets um there is likely a transformation going on and evolution going on between legacy or state-issued assets and newer decentralized protocol assets in different forms um and they need the as you said financial infrastructure they need instruments

uh so that they can respond in real time if they want to put on a hedge or if they want to take advantage of an opportunity or you know if they want to wire up a a lending driven financial flow in real time uh in d5 on ethereum so that that's coming real soon uh real organizations are getting serious about that um and bottom line uh they're not ready to hedge in defy on ethereum um but absolutely they you know they

already have the accounts open uh they have for years or decades and uh um this moves cryptocurrencies into their wheelhouse and uh they know that uh the world is evolving much more rapidly than we all expected it to for certain reasons and the smart ones the air ones are going to survive and thrive and if your head is buried and you for whatever

reason uh aren't paying attention to or uh refusing to understand and acknowledge what's going on in our ecosystem then uh you're gonna have a wicked game of catch-up or find a another job or a career or something like that speaking of a wicked game of ketchup uh one thing that really interests me about this this futures release is that it took ether only five years to get futures yeah it took bitcoin nine and

like naturally bitcoin came first it has a harder fight to fight but ether ether got futures faster than faster than bitcoin did what what is your take away from that uh so i i would say thank you to bitcoin for being there first and taping the way significantly big bitcoin and and so you know the cme sibo others um air sacs especially have done a tremendous amount of work to to try to get the regulators comfortable with this

it was weeks away a few years away and and regulators uh have put up uh uh hurdles or just slowed processes so um uh built on the shoulders of giants uh and giants in our ecosystem um and i i think what you're saying has merit that uh uh i forget the exact wording of mr tarbert but uh he just said something

like ethereum is awesome period stop something like that um and uh that's just a reflection of the understanding of people financial professionals who when they take the time to understand the technology are just astonished at all the problems that it will solve and all the opportunities that it will create and the frictions that it will eradicate and um the financial flows that will get

immediate and the agency that small organizations and individuals will have over their uh economic freedom their economic activity and their political activity you know joe on on bank list we've called bitcoin kind of the the gateway drug to crypto the gateway drug to d5 and um i wonder if you sort of see that playing out so you capture this moment in time where you've got michael saylor putting bitcoin on the microstrategy balance sheet we've just come off uh news this week where it turns out tesla

stacked 1.5 billion worth of bitcoin in january and i was kind of struck by uh their sec filings where it sort of disclosed that information that they said they would pursue a strategy to continue acquiring digital assets they didn't just say bitcoin they said digital assets so i you know i'm curious do you think that ether is just going to follow in that same path now that we've got regulator approvals like you know cme futures

is either going to be the next thing that a public trade company like a microstrategy buys maybe they start staking it maybe a tesla buys ether as part of its digital strategy portfolio what's your take here yeah so i was a bitcoiner um then i encountered ethereum and was blown away by how much more expressive and capable it would be and we've realized a lot of that vision um

i like to think of both the bitcoin token and the ethereum token as high-powered money you may have called it uh permissionless bandwidth and those tokens are beautiful as they are ethereum adds onto both of those high-powered money foundations uh an astonishing layered complexity um or you know we will build an astonishing

layered complexity of magic internet money protocol legos um and uh that that's where the excitement lies uh so in staking in massively uh decentralizing these networks i expect that we will see many organizations uh contract two um with a cloud or or run their own infrastructure consensus offers a

mining infrastructure sorry uh we do a little bit of mining but uh staking infrastructure which is i think uh what you're interested in uh in discussing uh and these uh foundational protocols um or at least ethereum um serve as a platform for other kinds of platforms these other kinds of platforms are um what i've sometimes called collaboration networks and so

we as individuals and organizations will be participating in a wide variety of collaboration networks that are built on platforms like ethereum and they will involve investing they will involve um holding tokens they will involve uh voting the governance rates on your tokens they will involve active treasury management they will involve setting goals for your collaboration network and raising money for your collaboration network and executing the work uh so

um all of those different functions that uh essentially sit in different companies right now are getting much more tightly integrated i'm not sure how that's going to play out other than by having much more granular groups of people responsible for that and the the boundaries between what we call companies uh sort of dissolving where i and you two will be part of lots of these collaboration networks for