Gary And The SEC Will Not Defeat Crypto

I mean i it kind of feels like that because it's it's so bad that I mean maybe the only way up is up from here. So yeah, maybe it it really it's like eighty dollar ETH, right?

It literally cannot be worse.

Bankless Nation, it is Friday, which means it is time for the Bankless Friday weekly roll up. So grab your coffee because we're gonna cover all of the weekly news in crypto with a little extra help today coming in from Australia. We got Anthony Susano, substitute teaching for Ryan Sean Adams today. Anthony, thank you for tapping in once again. I appreciate you. How are you doing, sir?

I'm doing well and always happy to tap in when Ryan's getting a re a well needed service and recharge.

Yeah, so some uh some software updates, some some tinkering, you know, you know the deal. All right, it was a very big week in crypto this week, Anthony, as I'm sure you know. Gary Gensler declares war on crypto, uh, a promising draft of a crypto bill. Um optimism bedrock comes in. Uh Arbitrum rans that runs out of gas, uh, and a f uh cohort of interesting Ethereum proposals. So I think we're gonna get into all of the news and more. Uh, and let's go and get started right into the prices this week. So, Anthony, in the week that Gary Gensler declares war on crypto, we dumped a little bit, but then we recovered. Uh Bitcoin down 1.8% on the week, Ether down just 1% on the week. What would you make of the price action this week? Because look at this big dip where everything like dumps, but then like the Coinbase suit comes out and everything just recovers. What's your take on the markets this week?

Yeah, so it's actually quite interesting to see this because this confirms a lot of kind of uh, I guess, talking points that I've been uh bringing up on my own show lately, and that's this concept of a time-based capitulation in the market, where essentially we already had the price-based capitulation last year, where things kind of bottomed out, everything blew up, you know, everyone's leverage blew up, we had the mass deleveraging event, all the tourists kind of went away and haven't come back. And what we see now is literally just these opportunistic short-term moves where day traders take advantage of any volatility that they can have because they they're starved for it right now. And obviously, big news events like the SEC suing two of the biggest crypto exchanges is is going to cause some volatility, but it really didn't cause much. Uh, it it really kind of, as you said, it went down a bit and then it went straight back up, really, because I think the market is definitely um exhausted right now. It does and the the long no long-term investors are are going to be selling for this. And anyone who sold was just a trader. And the traders are obviously selling, shorting, then they're gonna close their positions, and and it comes back up. So I I I really think this is just the clearest signal that I've seen yet that we're in firmly in that time-based capitulation where essentially the things just go sideways for a while uh until interest just slowly, slowly comes back and and we start going up again eventually and start a new bull market. So yeah, it's actually quite quite interesting the signal that this sends that I think may have escaped a lot of people, especially people who maybe this is their first crypto cycle. But these are the best signals to be paying attention to because this is the market literally telling you hey, like I I don't want to go down because I've already priced all of this in, and like literally it's just traders trying to to to mess with the chart, basically.

Yeah, usually when events like this happen, people ascribe price movements retroactively. But I think uh what you're saying, and what I totally agree with is that the headline SEC sues Coinbase and SEC sues Binance is such a big, scary, high signal to the market's headline. And so we can actually look at the price movements and say, like, this happened because of that. And we can look at the price movements and see, like, well, it didn't go anywhere. It didn't it went down a little bit, but what you're saying is it was just the traders. Like everyone who's buying and taking exposure to crypto is unfazed by this. And since the market didn't really go down, you you're saying that, man, we are in a place where anyone who's was going to sell has already sold. And anyone who's left is just in it for the long haul. So we're in that phase between like we're not we don't have a built bull market, we have nothing to be excited about, but we have no further reasons to be bearish. And so we're just crabbing, we're just neutral.

Yeah, yeah, I and I would wager most, if not pretty much all the people that are in this still right now and are long-term investors, they're probably not going to change their mind here. They're not probably not going to stop buying crypto, they're probably not going to sell what they have. Uh, you know, there are certain people I would assume that would be maybe selling some if they needed to take some risk off the table or maybe kind of uh changing their thesis because of this. But at the same time, we've known for a very long time now that the regulators don't like crypto at the moment. Uh, the SAC especially and Gary Gensler don't like crypto. So I think the fact that they actually made a move is a relief because markets generally hate uncertainty, and Gary Gensler making his move and basically putting it all out in the open and airing it out basically removes that uncertainty from the market. And I and I actually think that people believe that this is going to either be settled uh and and there won't be any kind of, I guess, material impact in the long run, or we'll actually get a positive impact from this where we actually get re uh legislation uh written and passed and we actually get proper regulations put in place because I don't know how Gary Genslow is going to go to a court of law and and argue that he has actually done what he's supposed to do to quote unquote protect investors, while there's all this evidence to the contrary, uh, especially going up against, as I said, like two of the biggest exchanges who have a lot of money and a lot of will to fight this. Uh, I think Coinbase, especially Brian Armstrong and and and definitely his uh Chief Chief Legal Officer Paul Greble, who you interviewed yesterday or the day before, uh I I think they're very ideologically involved in this. Um and it and it's really it for them about uh making sure that they can uh uh in ensure that the SEC can't just get away with doing whatever they want, uh, which I think is is just based, I guess, at the end of the day.

Yeah, and we're definitely we obviously have more to talk about with the SEC and Coinbase and Binance, but um the to me the fact that Coinbase has a date with Gary Gensler and the SEC in court is bullish. That is a good thing. That is something to be excited about. Just one last thing on this whole like time-based capitulation thing. Because I remember when when we went through this, Anthony, back in the the last uh that's bear market, right, between 2017 and or 2018 and 2020. We were in that 2019, I'm not sure if Kraken Charts. Oh, that's oh, there they do. Lovely. Uh so like right now it kind of feels like we're right here, and I'm pointing to the era where Ether went up to like almost $400 in the middle of 2019 before it went back down to 120 before the COVID dump, then back down to 80. And so, like to me, this was like here is the what we just went through from 2018 to 2019, and then 2019 to 2020 was the time-based capitulation part of the market. And I'm kind of worried if we like play this forward, we're like we're we're at this like local high in the over the last year or so. And it kind of feels like 2019, where like, yeah, we bottomed and then we doubled, and then we went back down to the bottom again before we had a bull market. And I'm so I'm kind of worried about yeah, we are in a one year era long high that's going to find like go back down just out of boredom, not for any particular reason, but out of boredom, it'll go back down. How do you feel about that?

So there are definitely a lot of similarities between, I guess, the last maybe six to twelve months and 2019. I think on the non-price side of things, so like the social sentiment and stuff like that, definitely feels very similar. But I would cover the the price action of 2019, um, especially on on uh ETH with uh the fact that during 2019, especially during the time when ETH and BTC went up a lot and was a few months, mid about mid 2019, well I guess like early mid-2019, there was a massive Ponzi being run out of, I believe, China called Plus Token. And this Ponzi took in a lot of ETH and BTC, like many billions worth. And it was a huge source of buy pressure. Now, uh, I believe that is the main reason why the price retreated so much. And I struggle to see how ETH is going to do the same kind of price reduction because I believe it went to 360 and then down to like 100. So whatever percentage decrease that is, I think it's like 60% down or something. Uh, I I struggle to see ETH going down 60% from where did it go to like 2100 or something, 2200, the last local top we had. So it could go down from here. I'm I'm I'm not sure. But at the same time, we don't have that that same kind of artificial kind of buy pressure that brought us back up here. And also, ETH is much bigger as an asset than it was in 2019, so the volatility is definitely going to be less. So, yeah, as I said, I uh we could definitely go back down. We could go back down to like 1400, which seems to be a place where people like to to test levels because it's the old all time high, right? It's the 2017 18 all time high. But at the same time, uh yeah, the market's been extremely resilient in the face of everything over the last, I guess, six months, especially.

Yeah, man, it has been a while since I have heard the words plus token. Uh so yeah, maybe the claim is that the high of twenty nineteen was artificially pumped and perhaps even the low of twenty twenty-three-2022 was artificially low because of uh the uh FTX and all of the uh the the leverage of three hours capital, etc. Okay, cool. All right, moving on to uh something I know that excites both you and me. Uh this validator queue is up only. If we want to look at charts that are up and to the right, you the validator queue is the one to look at. Um there are now 700,000 validators coming, uh uh 600,000 active and 100,000 waiting to come into the network. Uh that is a wait time of 44 days, 20 hours, which is I mean, it was at all time highs last week, it was at all time highs the week before, it's all time highs this week. Uh, and of course, the execute is just zero. So you are free to leave ETH staking, but to get in forty four hours, twenty days. What do you get? What do you make of this, Anthony?

Yeah, I mean I honestly, as bullish as I am on ETH staking, I didn't expect there to be this big of a queue so so quickly. I mean, we are not that far from Chappella or uh staking withdrawals being live. It's it's almost been two months now since they went live, and wow, those two months have gone by very quickly. Uh, but uh the fact that we're already at um like 95,000 pending validators with you know 44 days uh uh waiting around here for to clear that queue, and it's just been up only with with basically besides Kraken withdrawing and a few other withdrawals here and there after Chappella went live, we haven't really seen any withdrawals. And uh it it has definitely surprised me in a in a very good way, obviously. And I think that it's kind of a bit frustrating for me because I want to spin up some more validators and I'm like I I still do it, but then I'm like, ugh. I I remember the days of not having to wait even like a day to spin it up like uh um in in the history of the.

45 days. Yeah, yeah. So so basically, um, but but there are other ways to obviously get into staking as well. Um, I I believe some of the LSDs like front the yield for you anyway when before they kind of activate the validator. But the you know, i i there are different ways to do this. But I think that

seeing it being up only like this just really validates a lot of people's thesis around withdrawals being a mass de risking event and being incredibly bullish instead of bearish. And it's just funny to see how wrong the bears were about that that kind of uh withdrawal uh upgrade

God Ethereum Ethereum bear is always wrong. Always wrong. It is a

trend.

It it reminds me, I was saying this last week with Ryan. Like we were all bullish on the burn uh pre-EIP 1559, and then EIP 1559 came in and it was burning way more than we all thought that it would. And now the same thing is happening with staking. It's like we knew that we thought the Ethereum bulls thought that it would be a de risking event. We didn't realize to what degree it would just open up the floodgates for so much ether to come in. And started it, I think like once it once it became slightly bigger than expected, that started to become a medic. It's like, oh, everyone's staking. Look at look how many people are staking. Maybe, maybe I should stake. And it w it was big enough to the point where it turned into a meme, and now everyone's like, oh, everyone else is taking. I guess I'll just follow the herd, and now everyone is staking, which I think is like of all memes to get behind, that's a great one.

Mm-hmm. Definitely. Yeah, and it's it's just great marketing because everyone's talking about ETH staking now, and people are understanding that you can get that really nice real yield uh on eat staking because obviously there is the issuance part of it of the rewards, but there's also the execution layer rewards, which are fees and mev. That's actual real money that's being spent by network participants that go to validators. So yeah, I think people finally woke up to to eat staking.

Moving on to some stats here. I thought this was pretty interesting. Since we are in June, halfway through the year, I wanted to pull out some uh centralized exchange volume stats. So starting the week, uh Coinbase was at 47% of United States trading volume, 47.5%. Now it's actually down to 38%. Uh so Coinbase has actually lost 20% of United States market share. Uh Kraken uh is at 14.8% to start the year, and it's actually up to 22%. So it's up 50% on the year. And Anthony, question to you but number three United States volume crypto exchange, LMAX Digital. What the hell is LMAX Digital? I have never

The only time I ever hear about them is on the block because they're they're they're their headline sponsor. You can actually see on the left hand side of your screen there, it's got LMAX as their logo. They're all over the block as a sponsor. I've never used the exchange. I don't really know anyone that uses it, but yeah, I mean it seems that their volumes are pretty big. Um yeah. Yeah.

Okay. Alright, I've never never heard of it. Uh you can see uh here's just FTX is going to zero.

FTX Gs just goes to zero.

Obviously, of course, yeah. Um pop quiz. Uh what percentage do you think Gemini is at?

Uh

Uh it can't be that much. I know you can see it on screen, but it's pretty small. It's way smaller than I thought it would be. It is at one percent of United States trading volume. I did not realize it was going to be that little.

Yeah, I mean I feel like Gemini has always been the just the very small kind of not really talked about that much exchange uh or US-based exchange. They they do make a lot of waves, I think, because of the fact that um the Winkelvoss twins are the you know the founders of it and they're pretty famous and they had their GUSD stablecoin, but that didn't really go anywhere. So I I'm not n I'm not surprised by the the lack of volumes there. Uh especially given that they I believe were affected a lot by the stuff that happened with uh Barry Silbert and his different companies like DCG and stuff like that. So yeah, I I do feel like the that's not surprising, but it might be surprising to to people generally though.

Yeah. Binance US volume started the year at uh just about nine percent United States market share, currently coming in at just seven percent, and I expect that to approach zero next month because of the uh SEC's uh approved request to freeze all of Binance assets, which is actually where we are going to get to next. We're gonna talk about SEC suingance and Coinbase. We're gonna talk about the uh promising new crypto bill inside of the United States, and also this cool uh proposal that put uh was put out on the ETH research forum to increase the maximum balance of ETH per validator, allowing us to go above 32. I know Anthony's probably got his finger on the pulse of that, so we're gonna talk about all of that and more. But first, I want to talk about these fantastic sponsors that make this show possible. Bankless Nation, we are back with our favorite person ever, Gary Gensler. Uh Anthony, you ready to hear from Gary Gensler? Here we go.

We don't need more uh digital currency. We already have digital currency. It's called the US dollar, it's called the euro, it's called the yen. They're all digital right now. We already have digital investments. And you you have digital, you have entrepreneurs representing digital investments on this program all day long. And it's it's whether it's the big tech companies, the automobile companies, uh, you name it. It's all digital right now, the investing world.

What do you think about that, Anthony?

Oh man, he just really revealed his true intentions, huh? It seems like his true intentions for crypto is to basically effectively ban it in the US because he seems to personally not like crypto, which oh man, which is just ridiculous because uh a bureaucrat like this shouldn't have the power to do that, let alone be able to just openly say that and basically try to impart his own views on an entire industry. Uh it's ridiculous. And honestly, I believe at this point he should resign, uh, given uh not only what he said here, but a lot of the stuff that he's been doing. Uh, but unfortunately, uh, due to politics, I don't think that's that's going to happen because uh the Democrats don't want to have their um chair, the SEC chair that they appointed, resign because it would look really bad on them. But generally, yeah, him saying this is literally just him being like, oh well, I'm gonna drop the facade now and I'm basically gonna tell the world what I really think.

Yeah, that's that's exactly what uh Jake Shravinsky's take was is like uh it he has been operating on by like a veil of obfuscation and uncertainty and unclarity and now with suing Coinbase and Binance after doing the whole thing like Coinbase, you're totally allowed to go public, you're totally fine, and then suing them later after the fact. That's exactly what Jake said too is like he's just now revealing his true intention, his true colors. Even though like we all we all kind of knew it, it was still just like a gut gut feeling that we knew it. And now we I feel like everyone has like the strong assurances like no, this this is Gary and he's being a uh a rogue tyrant. So just to recap the news, Bankless has done four shows on this this last week. So uh we'll just recap this really quickly. SEC has sued Binance and CZ on allegations of violating federal securities law, failure to register as a clearing agency, failure to register as a broker, and failure to register as an exchange. Staking securities and staking as a service were also implicated. So the the um uh uh the the staking service provided by Binance US was deemed a security. Tokens, including Solana, Cardano, Matic, COT, Algo, Filecoin, Atom, Sand, Axie Infinity, and Mana were deemed as securities. Um, interestingly, and unique to the Binance case was that uh CZ and Binance uh were uh uh charged with commingling funds. Uh so a customer's assets were put through uh an legal entity that CZ owned and controlled called Sigma Chain. And so that is unique to the Binance case. That is just not something that is in the Coinbase case that we're gonna get to specifically. Interestingly, also BUSD was named as a security, BUSD the stable coin. Uh and using the customer funds that was funneled uh without customers' permission, apparently over twenty billion dollars went through this uh organized this entity that CZ owned, Merit Peak, uh, that was associated. I don't know if all $20 billion was was buying BUSD, but

Some amount of money going through this legal entity that CZ controlled called Merit Peak purchased BUSD the stablecoin and some of that money was users' funds. So not great. Not great. Interestingly, uh the day after the SEC has seeked emergency relief to ensure Binance US customers are protected. Uh in that is just uh implementing a restraining order, a freeze on all Binance US assets. Uh and so if there is any concern that Binance uh US at least is insolvent, we're about we're about to find out. I don't think there's any indication that there is, but either way, we will we will learn. Uh Anthony, what's your take?

Yeah, I mean the Binance case, uh, I guess like outside of the securities uh kind of or unregistered securities that the SEC claims that both them and Coinbase have been trading in is generally I guess pretty strong, to be honest, because I mean it's been an open secret for a while that Binance has been pretty shady, right? Especially in the early days of Binance. It's not like it really has been an open secret. It's it's not something that I think that most people would disagree with, given that uh they've been operating basically on this notion of regulatory arbitrage where they move around different jurisdictions, they don't really have a permanent office, and they do a lot of things that are quite quite dodgy. And there is a lot of evidence that the SEC has and has has put out there that that I mean it doesn't prove anything yet. Obviously, they have to prove it, but it makes Binance look pretty bad. And the Coinbase case really doesn't have any of that because I don't think any of that went on, and they're really just going after Coinbase for trading things that they uh allege are uh unregistered securities. So I I think Binance, look, I want Binance to win just based on the fact that the SEC doesn't deserve to win any of these cases, given just how fragrant the flagrant they have been and and how they're trying to stuff things into them, like the unregistered security stuff. But at the same time, I'm not gonna def sit here and defend Binance and say that they're totally innocent in this and they haven't done anything wrong, given that the evidence that I've seen so far, but also given what I know about Binance since I've known about them since they basically became a company and all their practices over the years. Uh, but but yeah, I mean it's gonna be interesting to see what comes out of this because we've already seen a bunch of dirty laundry aired uh by Binance lawyers themselves. I don't know if you're gonna if we're gonna talk about this, about how Gensler tried to become an advisor to Binance in 2019. So yeah, there you've got it up there. So if we're getting that this early, what else are we gonna be getting from from uh Binance's lawyers? Are they just gonna take the gloves off and start airing all this stuff? Uh I don't know. It's gonna be an interesting uh time to see what happens here.

Yeah, the the Binance case is is interesting due to its miss mixed bag nature. There are things that are not not about Binance that Binance is charged with. Like staking as a service platforms are deemed to be a security. BUSC a stablecoin as security, Binance is caught up in that. Like Solana, Matic, all these tokens trading on Binance Exchange are securities, Binance is caught up in that. And then there's the commingling of user funds from offshore entities that you that CZ controls. And uh to Gary Gensler's benefit, he's able to wrap all of these things up together and say, look at what these crypto exchanges are doing. They are operating an unregulated Wild West fashion with no rules outside of the rule of law. And he gets to wrap everything together and put the bad things next to what the crypto industry thinks are just like the normal and good things. Uh so that is it's I mean, it's a pretty smart strategy from Gary Gensler, but like still illegitimate nonetheless. Yeah. So the headline, of course, Binance lawyers allege that SEC chair Gensler offered to serve as advisor to the crypto company in 2019. Uh

Yeah.

It's just it's been amazing. You could not write a better script.

Uh really, I mean, it's amazing to see how Gensler has changed his tunes over the year, because over the years, because he used to teach courses on Bitcoin and blockchain at MIT. He used to promote uh other kind of blockchains like Algorand, right? Of all blockchains, he was promoting Algorand. Um then, you know, two yeah, exactly. Two, three years later, he's just completely changed his tune to effectively wanting to ban crypto in in the US. So I I don't know exactly what has changed. I don't really have evidence to what has changed. I have my own speculations, one of them being that it seems like he cares more about his own personal power and political power, and he wants to advance his own career uh other than anything else, and he sees crypto as like a joke, it doesn't deserve to live, and it's just his way to, I guess, get more power by going after crypto because right now it's very popular to go after crypto, but also I feel like he's trying to get a lot of the egg off his face from basically cozying up to SPF and not going after FTX, but now going after Binance for pretty much similar things that he should have gone after FTX for. There's a lot of things, a lot of moving parts here, but yeah, it doesn't seem like Gary Gensley is acting in the best interest of the American people at all. It seems like he's acting in the best interest of himself and himself only.

Yeah, that was uh Jake Shravinsky and Amanda's take when uh we did the show yesterday is is he uh uh Gary Gensler is using crypto as a means to an end to elevate his political status for some sort of political aspiration. So he's just one of those figures, uh one of those people that plays a political game that would like a bigger and bigger chair. Uh and so he's using crypto as a way to do this. Okay, turning into the the Coinbase side of news, SEC charges Coinbase for operating an unregistered securities exchange brokerage and clearing agency, more or less the same exact suit that uh they took to Binance. Uh the the big things here, the the unique thing that is unique to the Coinbase suit is that um they emphasize the Coinbase wallet. And say they said that Coinbase is offering brokerage brokerage's services via Coinbase wallet. Uh and so they and this is what was actually said in the Squawkbox that um interview that Gary Gensler was on is like Coinbase lets you trade 16,000 tokens using their their software. Uh he was basically just saying, yeah, with Coinbase wallet, you can trade on Uniswap and you can access all the tokens there, is basically what he's saying. Um but uh they the in this suit, the wallet is being um mentioned as part of Coinbase's exchange infrastructure, which is kind of positioning the SEC to go after generalized DeFi, non-custodial wallets, non-custodial apps, anything that allows a token to be traded. Uh so that is a foot in the door that sets a precedent that is that is unique to this case. Um, of course, the the big components about this thing is is unlike the Binance case, the only thing about the SEC v Coinbase is that Coinbase is being charged with eliciting securities and doing security things, like the staking as a service with CB ETH, Solana, Matic, um uh like the many of the other tokens were deemed securities. Uh, and so there's nothing that Coinbase did like co-mingling funds or sending users money offshore or et cetera, anything like that. It's just about, hey, Coinbase is doing things with securities. Uh, and so that's really all they are claiming about Coinbase. And of course, interestingly, uh, the SEC used Coinbase's risk disclosures from their own S1, which an S1 is what you file before you go public as a company. They used the SEC used Coinbase's S1 as evidence against Coinbase because Coinbase said, hey, some of the the SEC might deem some of the assets that we have on our exchanges to be securities. And the SEC goes, ha ha, so you knew, which is insane because it's actually self reference, it's a self referential argument. Um, anyways, uh about about uh Coinbase specifically, Anthony, what's your take here?

Mm-hmm. Yeah, I mean, I feel like there's a lot of uh shotgun approach here from the SEC basically trying to go after everything at at once and maybe try and overload Coinbase's resources because they know that Coinbase will will fight this and fight this basically till its end. They're not going to give up, it seems like. So maybe they're just trying to go after them with everything they've got and and water them down or kind of make it harder for them. But at the same time, yeah, there is all this evidence of of the SEC doing things that don't make any sense, right? They basically let Coinbase go public and and they they're now uh alleging that they're trading securities or trading unregistered securities that they were trading at the time that they went public. So when you kind of look at that from that lens, it looks looks very weird. Um, and it seems like the SEC has a bone to pick with Coinbase specifically as well. I think because Coinbase is fighting so hard, they're like, well, if you're gonna fight us on this, then we're literally going to come after you with everything we've we've got, which which is what what I feel is happening, because this is isn't the first time the SEC has gone after Coinbase and given them grief. Obviously, with Kraken, you know, they went after Kraken for their staking product, and then Kraken closed their staking product down, and the SEC hasn't gone after them for anything else. Like, why isn't the SEC going after Kraken for trading the same assets that Coinbase is is trading? Maybe they will, like, maybe this is gonna age poorly and they're actually going to sue them as well. But if they don't, then it clearly seems like they are only going to go after the people that say they're gonna fight because they want to make sure that no one else gets the idea of fighting them. Because if you try to fight us, we're gonna come after you with everything we've got. Now that's just pure speculation on my part. Maybe I'm wrong, maybe they will sue Kraken, but yeah, it seems like they're definitely trying to go after Coinbase uh as hard as they can. And with Binance, it's limited in scope, just as a related point here, because it's only Binance US. Uh they can maybe have some jurisdiction over Binance globally if they can prove that CZ was commingling funds and all that sorts of stuff, but it's probably going to be limited to Binance US. And I think that what's going to happen is Binance US will probably just shut down. Uh, I don't think Binance cares enough about Binance US to keep it alive in the midst of this. And then, yeah, once it shuts down, uh, I don't think they're gonna cry over it. But the SEC pretty much gets what it wants as well.

In a uh extremely Chad move, uh Brian Armstrong says that he will not be shutting down the staking service. So Coinbase will continue to run the CBE staking as a service program. Uh they were ready to prove this in court that what they are doing is not a security, and so they uh appear to be so confident that it's not a security that they're not even going to bother to shut it down. Um Senator Bill Haggerty uh says the SEC is weaponizing their role to kill an industry, allowing a company to list publicly and then stonewalling their attempts to register is indefensible. Gary Gensler expect to hear from Congress. So like it's stuff like this that is like, man, Gary, what you doing, bro? Because it's you're going up as Icarus right and flying right into the sun. At least that's what it appears, uh, appears to me. Uh and he's getting pushback from not just you know all of the crypto industry, but many, many um uh regulators and legislators uh in in government. Uh for some reason, Gary thinks that he can just do this uh and get away with it. Anthony, do you have a take here?

Yeah, I mean you can see that this is a Republican, right? So I don't think Gensler actually cares about what they say. I think Gensler cares about what high-ranking Democrats think and what they say. And unfortunately, they're on his side, right? You have Elizabeth Warren that's on his side. Uh, you have uh by proxy really Biden that's on his side because he listens to Elizabeth Warren on a lot of this stuff. You have um uh Maxine Waters, I think as well, Brad Sherman. They there's just these names that you you see pop up time and time again that take the side of the SEC and say that the SEC is doing a great job, blah, blah, blah. And, you know, the Democrats, uh, at least in the Senate in the presidential level, are in power right now. So I think Gensler doesn't necessarily care what these people think, he only cares what those people think. And I've been thinking about this recently. This might be a bit of a crude analogy, but I'm thinking of as like the human centipede of the high-ranking Democrats, where you basically have these three high-ranking, I think it's like, you know, Biden, Elizabeth Warren, and Gary Gensler, and they all seem to be working on the same wavelength of, you know, screw crypto, the SEC needs to be able to regulate this industry, it's bad for everything. Warren's trying to go out um and say that crypto is responsible for the fentanyl fentanyl crisis in the US. And I'm like, this is just insane. They're literally making shit up now because I think that they're getting so much pushback from the crypto industry and they're getting so much pushback from from other angles, they're just like, you know what, we're just gonna make stuff up now, we're just gonna say whatever to get what we want. Because then that maybe they're even getting frustrated at this point because they're because crypto's putting up such a fight as well. Um, but yeah, it it's very, it's very weird um when you when you look at it and very weird what they're doing. But then when you kind of come to the uh, I guess conclusion that a lot of them are just in it for power and they want as much power as they can assume for themselves, maybe at the end of the day, they don't actually care how this all resolves. They just want to make headlines, they just want to market themselves, and and that's really it. Because uh Gensler might may not be the SEC chair when the Coinbase and Binance cases are resolved, because it could take two, three years for it to resolve, and Gensler may have moved on already to Treasury or something like that. So I think really it's all just a power play for them at the end of the day. Um, and I haven't seen anything really to suggest otherwise.

Moving on to a different part of this conversation. Um, I know this one uh triggered you, Anthony. This is uh Jack, Jack Dorsey. Jack on Twitter retweeting a question saying, Is ETH a security? And Jack, Jack Dorsey, former CEO of crypto or of Twitter, just says yes. And I'm gonna also bring up this tweet from uh Udi Wertheimer, uh, who goes Coinbase onboarded millions to Bitcoin, many minted many multimillionaires by giving them trusted access to Bitcoin early on, helped onboard institutions such as MicroStrategy, and he says, seeing laser eyed maxis cheering as the SEC tries to take down Coinbase makes me sick to my stomach. Uh, Anthony, I I know you've got some hot takes about this.

Yeah, I I mean like look there's no secret that Jack is a Bitcoin maximalist, right? And it's just very sad that these people fall into this camp of oh we're cypherpunks, oh we're anti-nation state, we're anti-government, oh wait, no, SEC, please call uh label ether security, please police all the other crypto assets out there, and please just bless Bitcoin and make sure that Bitcoin is the one holy asset in crypto. And it's just really embarrassing and disgusting. And then Jack says this, and then he's challenged on this, and he doesn't reply to any of the challenges because people actually explain to him hey, you know, ether is not a security because of this, this, and this, and this reason. And yeah, it there's no logic here, there's no reasoning behind it. All it is is tribalism and fanaticism, and these people just wanting the competition to be killed by the state, which is just the grand irony of it all coming from Bitcoiners.

Uh but uh don't forget that uh today, this week, the SEC is officially eighty-nine years old, so Gary Gensler saying happy birthday to the SEC. Thank you to the Securities Act, Securities Exchange Act of nineteen thirty-four. And then he breaks it down with a threat.

Unreal

It's so bad, man. If you if you scroll down a bit, you might see rema my reply to this. Um I don't know, it maybe show more replies. I don't know if that's gonna Yeah, there you go. I s I I said like eighty-nine years ago.

on him.

It yeah, explains why there doesn't seem to be any signs of cognitive function left. I thought that I thought that was pretty funny.

Oh my god, it's what world does this live in? And then to tie finally uh tie off this uh this conversation, uh we just have Gary Gensler kind of doing like the aliens pose and goes, Earth is a security, uh, because everything is a security, according to Gary Gensler. Okay, that was all of that conversation. Coming up next, we got a bunch of Ethereum news. We got both Optimism and Arbitrum experienced downtime this week. One was planned ahead of time, one was not. Uh, an ETH research proposal to change the 32 ETH stake number, along with a bunch of other pretty cool, exciting things. Nick Johnson's got an ENS update, Pool Together's got an update, Rocket Pool and ZK Syncera has an update. We're gonna get to all these conversations and more, but first a moment to talk about these fantastic sponsors that make the show possible. And we are back with Bedrock. Bedrock is now installed, installed, is that the right word? Into the OP mainnet. So uh the OP mainnet went down for a few hours while they upgraded the the network into its bedrock update. Uh, and so that is now concluded, and the bedrock sequencer is now up and running. Uh Bedrock, what does bedrock do? It reduces transaction fees, it sets up uh the OP mainnet to have this coherent super chain ecosystem. It does a bunch of other things, uh, everything to be excited about. Um, it just lays the foundation for a bunch of future steps. Uh, and it also improved the security by implementing a two-step withdrawal process for bridged access assets, which helps the security of the chain itself. Uh loading up a layer two fees info, you can now see the optimism, a swap on optimism is coming in at nine cents, which I believe makes it the cheapest optimistic roll up that there is. Of course, there's a ton of variables that goes into this thing, so that is not just a a simple, um, a simple way to view these things, but still coming in at at uh nine cents on a uniswap swap, that's pretty good. Anthony, uh, what's your take about optimism uh bedrock?

Yeah, I mean it's been a long time coming. It's basically their version of uh Arbitrum Nitro. So Nitro went live on Arbitrum a few months ago, and now Optimism has with Bedrock, uh, and it's gone, it's uh basically upgraded the whole OP stack. So anyone that's using the OP stack, such as Base, uh the the Queenbase uh layer two, will be able to take uh a benefit of this as well. And I think one of the major things, and you've got it up here on your screen that Jesse Pollack talks about, is that with uh the bedrock upgrade, uh optimistic roll-ups built using the OP stack will actually be able to use validity proofs and not just fraud proofs. And a validity proof essentially, if you if you use that instead of a fraud proof, you make your chain uh what is as I guess is known as a zero knowledge roll-up instead of an optimistic roll-up. And you can build hybrid constructions and as well and things like that. So, and this is something that I've talked about for a long time, saying uh exactly what Jesse says. Yeah, it's not zero knowledge or optimistic roll-up, it's both. It doesn't have to be uh, you know, either or you don't have to choose. You can literally do both, and the best technology can win in the long run. And optimism and arbitram's networks can be upgraded to be, you know, uh ZK rollups essentially. So they're not stuck being optimistic roll-ups, which I always found bizarre that people thought that they were stuck and they couldn't upgrade when literally it's just technology, it's just software. Of course, you can upgrade it right. And uh, neither of these um chains right now are trying to be like super decentralized or they have to go through a long ass process to get upgrades into the network. They're they're upgrading and moving at a at a pretty rapid pace. So, so yeah, but uh but yeah, Jesse's tweet here I think addresses that nicely as well.

Yeah, and and it's important to note that um a validity prover, a ZK validity prover is um a very important step to uh enable what the optimism ecosystem calls the super chain, right? The cross-chain composability of OP stack chains. Uh ZK ZK Tech um from just a high level just allows for composability and synchronous synchronicity across chains. Uh so this is just a step in that direction. Uh so congrats to the uh optimism team for shipping bedrock. They've been uh having they've been their sites on on that update for a very long time now. Uh also in the layer two world.

Arbitrum ran out of gas. So it stopped see it stopped uh deploying its transactions, its checkpoints to the the layer one because it ran out of gas to do so. Uh that happened for about an hour before someone uh sent 1.4 ETH back to the sequencer so that it could continue to checkpoint to the layer one. Uh so the but the Arbitrum uh actual chain still continued as normal. It still was a blockchain, a layer two, adding Arbitrum blocks onto the Arbitrum blockchain, it would just wasn't checkpointing to the layer one for a little bit over an hour until we filled it up with gas. Uh one of the one of the more ex unexpected reasons as to why a a layer two will stop checkpointing. How would you classify this, Anthony? Because it's this isn't downtime, it's just like non finality of a layer two. How would you would you explain what this meant?

Yeah, it definitely um you know downtime is probably the wrong term for it, but also there's some added nuance here that the reason why the I guess like the the uh the c the um address that's used to batch ran out of uh ETH for gas was because there is an automated process that actually uh refills that address with ETH, but there was a bug. You can actually see it's detailed here. There was a bug that occurred on the sequencer that led to its batches reverting on-chain. So when the batches revert, the sequencer is not refunded the gas cost for sending the batch from the contract that refunds them. So this isn't like a human sitting there having to re-up the ETH that's in the account. This is an automated process, but because there was a very specific bug, it made it so that automated process didn't happen. Because if it did happen, it would have actually drained all of the ETH uh for no reason. It would have it wouldn't have worked properly. So uh this bug happened, they fixed it, and it wasn't just someone forgetting to send ETH to to the contract. And in saying that as well, anyone can send ETH to this contract. So anyone could have started this up again if they if they wanted to, which is I think actually pretty cool.

Hm.

Okay, moving on to this ETH research proposal. Increase the mass max effective balance, a modest proposal. So this is coming from Mike Newter. Basically, this idea is to uh reduce the rigidity around the 32 ETH minimum to become a validator. Now it's not proposing a lower number, but it's proposing that 32 doesn't have to actually be the maximum number. So right now, like validators are in increments of 32. 32 or 64 or oh gosh, uh 96, 96 is how that math works. Um and so he's saying like we don't actually have to have that rigid upper bound. So it could be 32, it could be 33, it could be 32 and a half. Uh and so as a result of this 32 ETH rigidity.

We have a very large set validator set because every increment of 32, instead of 320 ETH becoming one validator, it becomes 10 validators. And so what does this do? This has just a uh uh overhead, it increases the overhead about the whole networking layer. And so this proposal to increase the 32 ETH max effective balance, what this actually does is actually, I in my mind, I think it's really bullish for solo stakers because as they get ether from staking, they have to wait to accumulate 32 ether in order to redeposit it, but with the increase of the max effective balance, they can stake 33 ether, 33.1 ether, 33.2 ether. And so they get to auto compound their stake and have faster compound interest. Uh, there's a bunch of other benefits, uh, but uh Anthony, I'll leave it to you to explain those because those are more technical, and I know you're more technical than I am.

Yeah, yeah. Well, so the way this basically would work is that right now, I mean, the way it works today is that you're you're you're right. 32 ETH is the minimum that's required to spin up a validator, but it is also the maximum in that if you add more than 32 ETH to one validator, you are not going to earn more rewards. You are only going to earn rewards on that 32 ETH. Uh, and if you were to spin up a second validator with another 32 ETH, that's when you start earning uh additional rewards because you've now spun up another validator. In and with this proposal, what would happen is that, as you said, you could stake a maximum of, I don't know what the exact number is, I don't know if that's been ironed out yet, but let's say the maximum uh is like 96 ETH, right? So it's a three validators worth. Well, you could stake like 70 ETH or 80 ETH in one validator and you would earn the rewards based on that. So proportional to your ETH stake. Now, why this is really cool is that it look, it doesn't mean that you uh like as a solo staker, as you said, you don't actually have to save up to spin up another 32 ETH validator. So say you have 32 ETH um and you've staked it, and then you have another 10 ETH. Well, to stake that into another validator, you would need to acquire another 22 ETH. But with this proposal, you could just add that to your existing validator. And then also with your rewards that you get, you can also add them to your validator. And

The advantage that uh LSDs have right now over solo staking is that they can actually compound their rewards because they have a huge amount of rewards coming in and they they can compound it for the whole um share share of the LSD network. Whereas solo stakers actually have to wait until they have 32 ETH again to compound their rewards. So this would basically allow them to do this. And now, because of this, what this also does on the technical side of things is it basically allows for a reduction in the amount of, I guess, like actual validators there are, but it's not a reduction in security. There would still be the same amount of ETH staked, there would still be the same amount of of full nodes, but it's just that the validators, like instead of someone running 10 validators because they have 320 ETH, they would run one validator that gives them 320, uh, 320 ETH as well. So uh that has 320 ETH there and the rewards would be the same. So, and then as I said, the compounding rewards would also factor into this, which is which is really exciting. And what this does by reducing the validator um account is it takes the load of the peer-to-peer layer. So it makes it easier to run validators and full nodes. It's already really easy to do this, but it takes the load off, takes the load off the network, makes the network generally more stable, resilient, and secure. Um, and then it also enables other things. So if you scroll up to the top of this post, uh Mike actually says what this uh uh what this does. It actually unblocks something called single slot finality and enshrined PBS and reduces unnecessary strain on the P2P layer. So single slot finality uh and enshrined PBS are two of the biggest upgrades coming, I believe, to the beacon chain over the next few years. And I'll quickly just explain both of those. Single slot finality basically reduces the finality time from the current around 13 minutes, so two epochs, to 12 seconds because a slot is a block on the Ethereum Beacon Chain, or I mean it's not literally a block, but people think of it like that. It's 12 seconds. So you would have finality within 12 seconds, and then enshrined PBS is basically taking what MEV boost does today with the relays and and and the MEV ecosystem there, and basically enshrining it in the Ethereum protocol itself. So it's not a piece of separate software you run, it's actually part of the core protocol, and this would allow for those things to to go live there. And uh, I think just one last thing, I know I'm ranting a little bit here, but one last thing. There is potentially a downside to this that people have brought up in that it would unfairly reward those who uh basically had uh, I guess, like more ETH to compound than those that didn't because of the share of rewards. But I haven't looked too much into that and I haven't done the math on that, so I can't give too much of an opinion on that. But uh I believe that would be something that needs to be researched and and kind of uh ironed out before we could do something like this. But overall, this is a very promising proposal and something that I believe in one way or another, one shape or another, will actually get implemented into the protocol.

Yeah. This was uh just proposed two days ago on the ETH research forum. So it is in its pre-EIP phase. I don't even know if it has an EIP number. Um very, very early in the process, but um I think many, many of us are are very excited about it. Uh moving on if to uh ENS updates. So this is Nick.eth, Nick Johnson from the ENS uh um organization. Excited to show that this is now public, my dot box.box will be the first blockchain native DNS routable TLD, and it's enabled via ENS. All registrations and transfers will be on chain, and the owner of the NNT NFT will own both the DNS and ENS names. Uh I I think what this means, uh check me if I'm wrong, but there's these new domains called dot boxes, and owning which is a DNS domain, and so you can own, you can make like Anthony.box, which is a DNS domain, not just an ENS name. So you would go like www.anthony.box.box, uh, but owning that domain is as an NFT on Ethereum and it routes and it plugs into the ENS ecosystem. Did I explain this right?

Yeah, I mean it's kind of hard to explain this like I'm five because if people aren't familiar with the way DNS works, uh it could be quite hard to explain that. So I'm not gonna get into how how DNS works. I mean, I probably don't remember all the details there either. Um, but yeah, the the cool thing about this is that there is currently like you know Sassel.eth, right? Where I could uh host a website on Sassel.eth. It's not just my Ethereum address, but I could host a website on there um and it resolves. I could host it on on IPFS, but uh it's not part of uh of DNS, it's not DNS routable from what I know, uh, unless you're using um a service that does this, like uh.limo, I believe is one of the services out there. Whereas .box, uh, from from what I can tell here, it would be routable on DNS. So you could just visit it on any browser and it and it would be fine. And it would also obviously be uh enabled as uh integrated with ENS and an A and an NFT on Ethereum too. So there were some concerns around this in the comments. I don't know, uh just just to bring up uh the concerns that it's not as censorship resistant um and it doesn't really it can be like seized by the FBI, like they can seize domains. It's a valid concern, but at the same time, I don't think everything needs to be totally censorship resistant and decentralized. There can be these solutions that uh that kind of uh people can use and they can use other ones if they want as well. So I guess just another solution that plugs into the ENS ecosystem.