ROLLUP: $19B Flash Crash | Binance Fee Leak | China L2 on ETH | $14B BTC Reserve

TRANSCRIPT

Ryan Sean Adams:
[0:03] Bankless Nation it is the third week of october david i'm just gonna come out and say i'm not saying uptober anymore that word is now banned it is not uptober yeah it's not uptober that word is down

David Hoffman:
[0:16] Timber was more up than uptober.

Ryan Sean Adams:
[0:18] Was i feel like we should apologize to everyone for invoking that i feel somewhat responsible for all the

David Hoffman:
[0:24] People that smashed the buy button because As David and Ryan said,

David Hoffman:
[0:27] October on the first of the month, I'm sorry.

Ryan Sean Adams:
[0:31] Is there a refund coming? But you shouldn't have done that. Anyway, it is time for the Bankless Weekly roll up. And we've got to talk about what the heck happened on Friday. You know, some people are calling this Black Friday. I feel like it's more like Flash Crash Friday.

David Hoffman:
[0:45] Yeah, Flash Crash Friday. That's annoying to say, but yes.

Ryan Sean Adams:
[0:48] Yeah, Flash Crash. But the question is, what caused it? Where's this going? Was this Trump? Or is this the end of the cycle? What else we got?

David Hoffman:
[0:57] What else we got a bunch of drama on the timeline from binance listing fees there was an individual who sent a uh a document from binance uh about what it would take to have their token listed on binance and so we finally have the numbers because usually they're supposed to sign an nta that was not the nda part was skipped so now we know the numbers we're going to talk about that also a major chinese tech company building on ethereum which one, Which one's doing it?

Ryan Sean Adams:
[1:21] I don't know, but we'll tell people later. Also, is the U.S. about to add $14 billion worth of Bitcoin to its strategic Bitcoin reserve? I mean, kind of, but maybe not in the way we hoped. Also, the Democrats in the Senate, they're going all anti-crypto army on us now and trying to take down the market structure bill.

David Hoffman:
[1:37] God damn it, dude.

Ryan Sean Adams:
[1:38] But yeah, I got good news for you, David. None of this is stopping Mr. Larry Fink, who is determined to keep tokenizing all the things. BlackRock seems like they're up to some new things in crypto, maybe on Ethereum. We'll talk about all that and more. But before we do, we got some sponsors to shout out. And these are special sponsors because they help with. All right. Well, speaking of multiple percentage points.

David Hoffman:
[2:00] No.

Ryan Sean Adams:
[2:01] Do we have to look at the Bitcoin chart? Do we have to?

David Hoffman:
[2:04] We do. We do. It's seed and dumping at the time of recording. Bitcoin is down 10.5% on the week. We are at. Oh, my God. It's down even further. I have to update the numbers. I'll estimate down 11 or 12% on the week.

Ryan Sean Adams:
[2:16] It's just free fall right now. It's free fall right now.

David Hoffman:
[2:19] $108,000 Bitcoin. Wow. Wow. ETH price doing something similar. You're going to have to refresh the ETH price page so I can get the accurate price at the moment of recording. $3,875. That is down 9.5% on the week.

Ryan Sean Adams:
[2:32] This is not worse than the lows, though. Yeah. Worse than the lows in September.

David Hoffman:
[2:39] ETH flashed down to like $3,500 and then bounced back up. Right. But it sounds like we are still licking some wounds when people get liquidated. They go risk off. That's what happens. Since like $19 billion got liquidated, we haven't found any dead bodies yet, but they're probably out there. People are probably just at the very least going to be cautious. Hopefully the whole market doesn't roll over because of some stupid flash crash because of a tweet. That would be so dumb.

Ryan Sean Adams:
[3:08] I would be pissed. I would be so angry at this bull cycle.

David Hoffman:
[3:11] We had momentum.

Ryan Sean Adams:
[3:13] It was going up. We had everything. Well, but there's no, look, there's no Doquan. There's no Sam Bankman freed There's no massive Celsius scam There's no three hours. Well, maybe there is.

David Hoffman:
[3:25] You knock on wood right now, sir. You don't know.

Ryan Sean Adams:
[3:29] I don't know. You look. I mean, it seems bad on the week, right? But maybe we'll talk about this later, whether this is actually the end of the cycle or whether it's just a Friday flash crash. Those things happen.

David Hoffman:
[3:40] I know you do these weekly or monthly market reports with Michael Nudeau from the DeFi Report. I know he's. He's bearish. You've told me he's bearish. And it's different when it's Michael.

Ryan Sean Adams:
[3:50] Yeah, I know. So I'm actually going to talk to him on Monday about his bear case because we got to hear it. I mean, you just got to hear the contrarian case, but he has swung bearish. So I'll hear that. But I'm going to bring the bullish cheer because I don't believe it's over. He's not yet. Anyway, let's talk about...

David Hoffman:
[4:06] Gold's at an all-time high, at least.

Ryan Sean Adams:
[4:08] Okay, well, you want to talk about that? Actually, one thing before gold. You know, total crypto market cap, $3.8 trillion. That doesn't sound that bad when I put it like that. 3.8 trillion?

David Hoffman:
[4:20] No, 4 is the happy number. Below 4 is unhappy.

Ryan Sean Adams:
[4:23] It's a happy number, but this is not pitiful. 3.8 trillion is not too bad. Sure, sure, sure. Actually, if you want to see the sufferers over the last seven days, you know how we do movers? This is losers of the week, okay?

David Hoffman:
[4:36] Movers of the week. Movers implies either direction.

Ryan Sean Adams:
[4:39] Yeah, that's good.

David Hoffman:
[4:40] This week it is all down.

Ryan Sean Adams:
[4:43] Pump, 34% down on the week. Aptos, 31% down. Mantle, which had a great run up until recently, 30% down. What else should I? Pangu, 25% down.

David Hoffman:
[4:54] Pangu, Pangu, Pudgies, Athena down 35%. 35% down on the week seems to be the number to be down on the week.

Ryan Sean Adams:
[4:59] It's basically some of the alts that we're running are just coughing up blood right now. Yeah, yeah. That's what's happening. But you're right. It's not affecting gold. Gold remains unbothered and is hitting all-time highs. So at the time of recording,

Ryan Sean Adams:
[5:15] right about $4,300 per ounce in gold.

David Hoffman:
[5:19] It was at like $4,000 last week.

Ryan Sean Adams:
[5:22] These are Gantuan moves. Yeah, okay. So it added an entire Bitcoin market cap this week. That's like $2 trillion on the week. That's scary, dude. One week, $2 trillion.

David Hoffman:
[5:34] That's a lot of capital.

Ryan Sean Adams:
[5:36] It's a whole lot of capital. And I'm just worried that gold is going to hit $5,000

David Hoffman:
[5:40] Before ETH does. Yeah, I saw somebody tweet that out like two weeks ago, and I'm like, that could never happen. Yeah, I was laughing.

Ryan Sean Adams:
[5:47] I was like, no, it's impossible. But look at this. Gold is historical highs, of course. When you do adjusted for inflation, it's looking pretty good, too. It's like back in the 1970s. This is the debasement trade everybody's talking about. And are you seeing stuff like this all over your timeline, David? Actually, let's play this clip, because you brought this into the agenda. And tell us what we're looking at.

David Hoffman:
[6:09] This is a clip of people outside of a, A bullion store. A bullion store. Is that how you pronounce it? I don't even know that word.

Ryan Sean Adams:
[6:19] Yeah, the bullion. Yeah, yeah. It's like they're trying to get their gold.

David Hoffman:
[6:21] It's a bullion store. Yeah, people are lining up to buy gold.

Ryan Sean Adams:
[6:26] It's wild, man.

David Hoffman:
[6:27] It just looks like a new iPhone got released or something. Yeah, yeah, actually.

Ryan Sean Adams:
[6:32] Yeah, doesn't it? It looks kind of like, you ever see that Christmas movie, It's a Wonderful Life, where there's a run on the bank?

David Hoffman:
[6:38] Uh-huh.

Ryan Sean Adams:
[6:39] A little bit like that, except people have smartphones, and they're off recording what's going on. So what are people doing? They're actually just like waiting in line to

David Hoffman:
[6:48] Go get some gold? I guess people are just really into buying gold right now. Yeah. So much that they're willing to stand out in line. What do they bring? Cash? I guess you bring.

Ryan Sean Adams:
[6:58] Or you transfer cash or whatever. But are you walking out with like, I don't know, chunks of gold? Little nuggets? Or like gold bars?

David Hoffman:
[7:05] I don't know, man. I don't know.

Ryan Sean Adams:
[7:05] You get a backpack full of gold? At least you get your private keys that way. It's a true bearer instrument that way.

David Hoffman:
[7:10] Yeah. I hope they get right into a car. That looks like they're in New York. Some of those people probably took the subway home.

Ryan Sean Adams:
[7:16] I don't think this is New York. I thought a lot of these were from Australia. But I don't know, man. You're in New York. You tell me.

David Hoffman:
[7:22] I'm in Amsterdam at the moment.

Ryan Sean Adams:
[7:24] You ever see a Boolean store in Brooklyn?

David Hoffman:
[7:27] I've never seen a Boolean store.

Ryan Sean Adams:
[7:29] Well, maybe we're about to. There is some good news here, okay, for crypto, which is Larry Fink feels like he's getting loud again about crypto and about tokenization. And whenever he gets loud, it means BlackRock is about to like launch a product or do something more. Should we play the clip?

David Hoffman:
[7:47] Do something crazy. Let's hear it.

Ryan Sean Adams:
[7:48] I do believe we're just at the beginning of the tokenization of all assets from real estate to equity

David Hoffman:
[7:56] To bond across the board. It's very loud here. It is very loud. But it's good. Capital's at work. You like that.

Ryan Sean Adams:
[8:06] I love capital at work. But there's $4.1 trillion of money in sitting globally in digital wallets. A lot of that money is outside the United States. If we could tokenize an ETF, you know, digitize that ETF, we could have investors who are just beginning to, you know, invest in markets through, let's say, crypto.

Ryan Sean Adams:
[8:29] They're investing in it, but now we can get them into the more traditional long-term retirement products. So we look at that as the next wave of opportunity for BlackRock over the next tens of years as we start focusing on moving away from traditional financial assets by repotting them in a digital manner and then having people stay in that digital ecosystem. They can have their cash. And we have the largest cash money market fund that's tokenized called Biddle. You know, our Bitcoin, iBid, is now over $100 billion.

David Hoffman:
[9:05] $100 billion, I know, from nothing not that long ago. And two years ago.

Ryan Sean Adams:
[9:09] Zero. Yeah, I know.

David Hoffman:
[9:10] Well, you weren't always a huge proponent of crypto, as we know.

Ryan Sean Adams:
[9:14] You'll love it now. But I grow and learn.

David Hoffman:
[9:17] I heard you say that on 60 Minutes.

Ryan Sean Adams:
[9:19] I did say that.

David Hoffman:
[9:21] You'll love it now.

Ryan Sean Adams:
[9:22] You hear that? I grow and learn.

David Hoffman:
[9:25] You know what I hear when I hear this? I hear two things. American exceptionalism because of the strength of our Wall Street.

Ryan Sean Adams:
[9:34] U.S. capital markets.

David Hoffman:
[9:35] U.S. capital markets. Sure. And how U.S. capital markets are moving onto blockchains. Exactly. And we're going to take the value of Wall Street, and now we're going to provide that to the world, and everyone's going to be able to buy it, and it's going to be on chain. That's right. That's what I hear.

Ryan Sean Adams:
[9:50] Yes. what Larry Fink sees is more capital out there that is untapped, right? We tapped all the capital. Where's the next leg? Well, it's all of these international buyers that don't have easy access to a brokerage account, right? And he's coming off of the success of IBIT, which is just printing money for BlackRock. Okay? And also their ETH ETF and the Biddle Fund. And now he's like,

Ryan Sean Adams:
[10:16] what else can we tokenize? Can we tokenize all of our ETF products? Yes, we can. And we're going to. In fact, there's some rumors about this. So there was a rumor. Actually, Larry, thank me. Maybe he said as much that they are developing technology for the tokenization process. assets. Some people are calling, like, there's maybe a platform called Synoptic, I believe. I'm not sure what this thing is going to be.

Ryan Sean Adams:
[10:44] There is today, it's supposed to launch today, so sometime at the time we're recording, we don't know yet, BlackRock is going to unveil a Genius Act aligned money market fund designed for stablecoin issuers. So I guess not just their biddle fund, but a broader money market fund of some sort, I suppose. So they're just taking these things, they're tokenizing them. They're clearly going to create some sort of BlackRock operating system for tokenization. What does this mean? I don't exactly know. Will they tokenize everything on Ethereum and public chains? I got to imagine so. Will they do a layer two? Will they launch their own chain? I have no idea. We are actually going to have Robbie Michnick from BlackRock on the podcast sometime in the next few weeks.

Ryan Sean Adams:
[11:31] So these are questions that we'll be asking them. But it's very clear that they see massive opportunity here in tokenizing all of the things that U.S. capital markets have to offer.

David Hoffman:
[11:42] Yeah, I think that they are just pushing forward on the tokenization of everything movement. And when Larry Fink, who like owns all the assets, hears people say, we're going to tokenize everything. He's going to be like, I'm going to tokenize everything because I own everything.

Ryan Sean Adams:
[11:59] Do you know how many smile on his face at the end of that interview?

David Hoffman:
[12:03] Totally. Totally. Do you know how many employees BlackRock has?

Ryan Sean Adams:
[12:06] Oh, do you want me to take just a wild-ass guess?

David Hoffman:
[12:09] Totally. Go for it.

Ryan Sean Adams:
[12:10] All right. So, like, Wells Fargo has,

David Hoffman:
[12:12] What, like 130,000, something like that?

Ryan Sean Adams:
[12:14] Oh, God.

David Hoffman:
[12:16] That's so high.

Ryan Sean Adams:
[12:17] So, I'm betting BlackRock is much more lean. So, I'm going to say 8,000.

David Hoffman:
[12:23] 21,000. Oh, okay.

Ryan Sean Adams:
[12:25] Okay. So, big enough.

David Hoffman:
[12:26] How many employees do you think are on the digital asset team of BlackRock?

Ryan Sean Adams:
[12:30] 150.

David Hoffman:
[12:33] No, I don't know the answer, but it's somewhere, like, between... Between like 6 and 12, dude. What? It's a very low number of people. It's like a SEAL Team 6 of people. And that's the story of crypto is very low number of employees. Use Ethereum as your back end. Use Team Ethereum as your best employee ever. Do the smart contract as your compliance. Hire no one.

Ryan Sean Adams:
[12:59] Highly profitable.

David Hoffman:
[13:00] And make it highly profitable. And I think that's part of the story here too.

Ryan Sean Adams:
[13:03] And pass some of those gains back to retail? So your take rate is lower? And so you're not rent-seeking? Right, David? Sure. Right, David? Sure.

David Hoffman:
[13:12] I'm sure that's what Larry Fink thinks.

Ryan Sean Adams:
[13:15] You know what was crazy here is in terms of real-world assets on change, I actually saw a Treasury estimate. This is the U.S. Department of Treasury, and they were contemplating the question of how much in stablecoins could we actually see as a result of the Genius Bill? You know how people like Secretary Scott Bessent have quoted things like, by 2030, we'll have $3 trillion or so?

David Hoffman:
[13:38] Which, for context, is 70% growth year over year until we get there.

Ryan Sean Adams:
[13:43] Huge. Okay. U.S. Treasury says in final form, look at this number, $6.6 trillion in M1 will leak out of demand deposits in banks, checking deposits, and going to stable coins. Because stable coins are in the process basically unbundling the banks. So banks are depository institutions right now. They collect rent on all of the interest from all of their deposits. They love that business. This is Treasury saying they're no longer going to be able to do that business. It's all going to leak into stable coins. So you can kind of see why the banks are up in arms about this. And they're freaking out now about the Genius Bill and what they already signed on to. And the fact that crypto exchanges and DeFi are able to give customers back their interest because they see $6.6 trillion in potential depository leakage from their systems.

David Hoffman:
[14:38] So the reason, Ryan, why I'm in Amsterdam right now is because of Theta Capital, which is one of the bigger fund of funds in crypto, the European capital in Amsterdam, birthplace of modern capitalism. They have their like annual blockchain crypto day. And it's like a day of talks, not unlike the Bankless Summit. So like a whole day of talks and they bring their LPs and then they bring some of the GPs that they've invested in. Big money guys. Yeah. Well, big money guys coming from old money and also crypto GPs. So Hasib is here. Matt Walsh is here Robert Leshner is here and everyone's kind of giving their take about like here's the current state of crypto and obviously as you would expect stablecoins huge subject Hasib brought up that whole like, 16% of M2 is going to turn into like stablecoins so I'm like crazy downstream of like Scott Besson so he's talking about this and everyone is like all kind of putting these pieces together of it's not like we've always gone after the banks this. The time is now. The time is right now. We are watching the banks get unbundled in the next three years. Things are going to have tectonic shifts. We are watching it unfold in real time. It's the first inning of the game actually being played. And the event in question is European capital. But the whole world is watching this happen right now. Watching the banks just sink like the Titanic. Took a while. How long did it take the Titanic to sink?

Ryan Sean Adams:
[16:05] Like 12 hours or something? I mean, they're not going to sink, sink. They're just going to be unbundled. So there's parts of banks that are useful and they're providing credit, community banks, credit for communities. But the depository and payment side, they don't need to be in that business. Why are they in that business when we have stable coins? We can do it for far cheaper. You know, though, David, it seemed like we were going to get a shortcut. We have about 300 billion in stable coins right now, 350 billion. And then suddenly we got 300 trillion minted on Ethereum. Did you see this?

David Hoffman:
[16:37] Yeah, I did see this. Okay, so this is a P-Y-U-S-D from PayPal. Yes. minted 300 trillion PYUSD. So we just got an injection of $300 trillion into, and then it went away. They deleted it. They burned the tokens like 25 minutes later because somebody put in three too many zeros, which like is kind of funny, but then like, okay, now everyone, now in PayPal has to like go through their checks. Why did this happen? Why is this process broken?

Ryan Sean Adams:
[17:10] You know, PayUSD uses Paxos. So Paxos actually came clean with it. They were like, okay.

David Hoffman:
[17:16] This is our bad.

Ryan Sean Adams:
[17:17] Yeah, at 3.12 p.m. Eastern, Paxos mistakenly minted excess PYUSD. They don't say how much. $300 trillion worth of PYUSD.

David Hoffman:
[17:25] 99% excess PYUSD.

Ryan Sean Adams:
[17:28] The reason it doesn't really matter is because those are all kind of IOUs, right? So they didn't really have $300 trillion worth of treasuries that are real.

David Hoffman:
[17:37] In theory, it could matter. if this was a malicious attack, right? If somebody was maliciously minting PYUSD, they could go and they could liquidate people's positions. And they could disrupt all PYUSD collateralized positions inside of DeFi. And so that could matter.

Ryan Sean Adams:
[17:54] People were worried a hacker got, you know, so they said, no, it was an internal technical. Blame it on the intern, man. Some intern fat fingered some number.

David Hoffman:
[18:02] They didn't blame it on the intern. They said it was an internal error.

Ryan Sean Adams:
[18:06] I'm blaming it on the intern. I know there's an intern somewhere. Maybe listening to this.

David Hoffman:
[18:11] It is worth noting that this is how the Fed prints money, though. Like, they could do this.

Ryan Sean Adams:
[18:17] So easy. You just fat finger a few digits into a ledger somewhere. Anyway, okay. It's a funny story. So one thing that has been a continuing trend this cycle has, of course, been Tom Lee purchasing Ether, the asset. And I can tell you, he was not phased by the flash crash.

David Hoffman:
[18:36] No, he bought a bunch more.

Ryan Sean Adams:
[18:38] On Sunday, he bought a billion more ETH.

David Hoffman:
[18:41] A billion dollars. A billion dollars of ETH.

Ryan Sean Adams:
[18:45] Of course. There's not a... Bankless listers know there's not a billion ETH in supply in existence. We all know our supply numbers.

David Hoffman:
[18:51] Bitcoiners will be like, you could just mint ETH out of thin air.

Ryan Sean Adams:
[18:54] But okay, but here's the thing. He's got a lot of people who are betting against them. I read an entire, we're shorting. Short report. BNMR, Bitmine Immersion Technologies, is Tom Lee's company, from a company called Carousel Capital. And their case was basically like, there's no way that Tom Lee's Bitmine should have an MNAV premium. They're not betting directly against ETH, but they're shorting Tom's stock, and they're trying to essentially bet against his MNF premium, being any surplus. In particular, they don't like how he's making these buys, which are basically like issuing more equity and diluting shareholders in order to make these at-the-market purchases, as we know the mechanics behind these things are. I mean, the level at which Tom Lee is able to do this is astounding. Anyway, Carrizale is calling their bluff. And I got to think there's a lot of organizations, entities, hedge funds out there that are shorting some of the dad stocks right now. I'm sure MicroStrategy has a lot of shorts going on. Certainly Bitmine does. Certainly some others. And that could be contributing to these suppressed MNAF prices.

David Hoffman:
[20:04] Isn't the whole thesis of BMNR is a long-eath short BMNR position anyways? so like take out they're shorting it with a dollar but the whole idea is if the MNAV goes above one you print, BitMine shares to buy more ETH, which pumps up the ETH price and suppresses the price of BMNR. So the premise is already long ETH short BMNR in the first place. The whole that is short BMNR as it relates to ETH.

Ryan Sean Adams:
[20:34] Depends how much at the market purchasing you're doing versus other types of funding. And, you know, one of the metrics for these treasuries is obviously increasing ETH per share. That's something that- Yes,

David Hoffman:
[20:45] That is true.

Ryan Sean Adams:
[20:45] And that kind of goes against the metric that you just said. So yes, investors want growth and they want volume, but they also want to maximize ETH per share in these entities. Anyway, the long-term thesis for positive MNAV is basically liquidity premium and yield that ETH as a productive asset offers. So long-term, some of these stats have to be trading at some positive MNAV premium, but the market is doubting some of this. Did you see this clip though? So this is Michael Saylor commenting on Tom Lee.

David Hoffman:
[21:17] Tom Lee's impact on Ethereum, yeah.

Ryan Sean Adams:
[21:19] Yeah, yeah. So let's just play the clip. And I want to get your take on how you read his comments here. So this is Michael Saylor.

David Hoffman:
[21:25] Tom Lee has emerged as probably the most visible influential spokesperson in the entire Ethereum ecosystem in a matter of months, maybe a matter of weeks. What does that represent? Well, first of all, they have $10 billion of capital. Second of all, Tom Lee is part of the Wall Street establishment. He was never part of the crypto establishment. You saw Wall Street merges with the crypto economy. Capital flows because it trusts Tom Lee. And then the next thing you know, you have Tom Lee having conversations with the early Ethereum entrepreneurs, with the Vitaliks of the world, you know, and the like. And what's interesting there is that entire movement becomes commercialized, institutionalized, legitimized, rationalized, becomes a bit older, a bit more credible.

Ryan Sean Adams:
[22:18] Okay, so I took that as bullish. I took that as Michael Saylor giving props to Tom Lee and saying that he's helping to make Ethereum more credible, more legitimate, particularly to TradFi. But we were talking before this episode, and you took this in a totally different way. How did you take this?

David Hoffman:
[22:37] Dude, no, he is firing shots, dude. He is like Tom Lee is a part of Wall Street. He's a part of the system. Ethereum and Wall Street, these are the system. These are the man. And he's like out grouping for the Bitcoiners. He's talking to Bitcoiners. And he's like, yeah, like they are not the revolution. They are the same old guard, same like new guard, same as the old guard. And like Wall Street comes in and they commercialize it. They neuter the revolution.

Ryan Sean Adams:
[23:05] That's what he's doing with Bitcoin. That's exactly his play with Bitcoin. I don't see how he could be criticizing that.

David Hoffman:
[23:12] Well, I mean, how large is Bitmine as it relates to microstrategy? Like, not insignificant. So Tom Lee is soaking up some of his oxygen, and Michael Saylor is feeling threatened, and so now he's throwing shots about how Ethereum is bending the knee to Wall Street. I don't agree. And Wall Street is like, that's totally what he's doing.

Ryan Sean Adams:
[23:32] Dude. No way, no way.

David Hoffman:
[23:33] This is a negative stance towards Ethereum and Tom Lee. This was negative towards him.

Ryan Sean Adams:
[23:40] Really? maybe we need to see like the full clip okay so I don't think that's how Tom Lee took it so I think Tom Lee is like clapping or something maybe clap tweet did I imagine this

David Hoffman:
[23:54] I mean, he clap tweets everything, though.

Ryan Sean Adams:
[23:57] Oh, love, love, love. Love emojis.

David Hoffman:
[23:59] It's one of those things where you're like, yeah, that's what I'm doing, and that's why it's working for me. But then Michael Saylor would be like, yes, you guys. And then he goes like, and he points at Vitalik and says, yeah, the Vitalik types are now in association with Tom Lee, who's in association with Wall Street. This revolution is not found here, and it is not found in Ethereum.

Ryan Sean Adams:
[24:22] Well, Bankless Lister, you make the judges of whether this was like a, I guess it may be a backhanded compliment is what you're saying, David.

David Hoffman:
[24:29] No, it's not even backhanded. It's a jab.

Ryan Sean Adams:
[24:32] No way. I actually think this is Michael Saylor, you know, not completely saying ETH is now a legitimate asset class because he's in front of Bitcoiners, but kind of saying that and giving some credit to Tom Lee. Anyway, Bankless Lister's can decide how they interpret. Maybe it's the tone for you. I know Michael Saylor has a very like kind of like a way he speaks that is kind of sharp, I suppose. Maybe that's what you were reading. Anyway, Bankless listeners can decide on whether Michael Saylor is.

David Hoffman:
[25:01] I'm pretty sure I'm right here.

Ryan Sean Adams:
[25:02] All right. All right. We'll see. David, what do we have coming up?

David Hoffman:
[25:05] Coming up next, we're going to talk about the flash crash on Friday. The biggest liquidation event in crypto, $19 billion got liquidated in about three to four hours. What the hell happened? Why did it happen? And why are we still taking this long to recover as we approach seven days later? We're going to talk all about that and more, but first I'm going to talk about some of these fantastic sponsors that make this show possible. Flash crash Friday, $19 billion, wiped out in just three, four hours. The second largest liquidation event happened just six months ago, and it was something like $16 billion. So we're having these stress tests pretty damn soon here. So what happened? Obviously this got started off from Donald Trump's, black swan tweet. I'll call it a black swan tweet because no one was prepared for this tweet where he just ramped up the tariff wars one more time saying, hey, on particular goods being shipped in from China, we are adding in 100% tariffs. And when you add 100% tariff on something, you're almost effectively banning it unless the margins by the producer are so incredibly high they can somehow pay that. It's an effective ban. And so this got sent out Friday after hours. stock market was closed, you know, people packing up for the weekends, market makers shutting down their operations for the weekends. I don't know if they do that, but like liquidity is low. But stock futures were down too.

Ryan Sean Adams:
[26:19] Right? Like this was a little similar to what he did in April, which was like, now there's tariffs. Was that, did that happen in April?

David Hoffman:
[26:26] Yeah, he always does it during the weekend, which sucks because no one can buy or sell equities. So they go to crypto and they sell their crypto. They sell our bags because they do it during the off hours.

Ryan Sean Adams:
[26:37] God.

David Hoffman:
[26:38] Yeah. Yeah. Yeah. United States will impose a 100% tariff on China over and above any tariff they are currently playing, blah, blah, blah. When the stock market opened, NASDAQ fell 3.5%. S&P 500s fell 2.7%. Recorded worst day since April. But Bitcoin went down 14%. And ETH went down 21%. ETH went all the way down to $3,500.

Ryan Sean Adams:
[27:02] Okay.

David Hoffman:
[27:03] What? Which is bad. I can see that. Which is bad. Dude, altcoins? Have you ever, you've heard of, sometimes you're not in the trenches. Actually, most of the time you're not in the trenches, Ryan. Have you ever heard of the term 9-11 for the trenches?

Ryan Sean Adams:
[27:17] No, it's so disrespectful.

David Hoffman:
[27:19] Oh, it's actually on the cover photo of the article you have. This is truly 9-11 for the trenches in the sense that some altcoins actually went to zero, dude. The order books broke. So I'm like, Adam, Adam actually went to zero.

Ryan Sean Adams:
[27:35] That's the Cosmos coin. It's so funny. It's like, you know, people talk about, you know, yeah, you know, we're going to send whatever token is zero. It's all going to go zero. And it literally went to zero on some of the workbooks.

David Hoffman:
[27:47] Zero.

Ryan Sean Adams:
[27:48] Now, this was very brief, though, right? We should say even the 21% ETH fall to $3,500. Was a wick. That was a wick down. This did not last long. I mean, still traded down. But what we're looking at here in all of these alt trades are quick wicks down. But we are looking at, in some cases, 100% down.

David Hoffman:
[28:10] You didn't think it was possible.

Ryan Sean Adams:
[28:12] Seoul dropped 40%, dude.

David Hoffman:
[28:14] Yeah, that's a lot. Athena dropped 80%. And so it's like, okay, so here's what happens when some shenanigans like this happens, especially when it happens on the weekends, is, well, there was a cascade of failure, starting with Binance. So Binance APIs started to not respond, started to just break down. And so liquidity stopped happening on Binance. Trades stopped happening on Binance. Binance is an oracle for many other DEXs, especially some of the perp DEXs. They use, like Binance is used as an oracle almost everywhere, systemically so. And Binance stopped happening. Market makers get scared, so they yoink their books. Market makers have agreements with all of the tokens that they do, that they have agreements with, right? But their agreement is something along the lines of like, 99% of the time, we will be market making for you. One percent, when you are market making 24-7, 365, you get to just yoink the liquidity for an hour and you are within your agreement of being a market maker. And so that one percent of time, we found the one percent when market makers decided to yoink their liquidity, stop market making, and then tokens were just in a free fall. And there was no bids. And also the exchanges were broken. And so you couldn't get an order.

Ryan Sean Adams:
[29:33] Not all the exchanges, right? It was like some APIs on Binance, but it did seem like something was going on with Binance specifically. That was where a lot of the chaos kind of started. But I liked Doug Collett's take here, which is basically, yeah, Colkitt. Sorry, yeah, Colkitt. Sorry, Doug. He said, why was this, and why are we even calling this a flash crash? It's because it's one of those things where it was so amplified because of all of the leverage buildup we had. So we have, you know.

David Hoffman:
[30:03] Specifically on Perp Dexes. because we do not have that much leverage in the system right now other than.

Ryan Sean Adams:
[30:09] Perp dexes not just perp dexes we can see that leverage but even just general perps exchange like binance perps exchange as well so all perps a lot of leverage on perps so on perps dexes specifically we had open interest near all-time high 26 billion before the crash global crypto open interest so sex included almost $100 billion. This is 10x or higher leverage on these things. So a lot of the run-up has been, or a portion of the run-up has been not due to new buyers. We've definitely had new buyers as a company, like institutions. But it's also been a lot of existing buyers in crypto It's levering up.

David Hoffman:
[30:50] You mean the market everywhere? Across the market?

Ryan Sean Adams:
[30:55] In crypto. I mean, a good portion of this.

David Hoffman:
[30:58] Because I thought a lot of that leverage, that open interest leverage, is people farming lighter points, people farming the next hyperliquid airdrop, people farming Axiom. Well, how do they farm though?

Ryan Sean Adams:
[31:07] They have to take on leverage in order to farm.

David Hoffman:
[31:09] But you can go delta neutral. You can go delta neutral.

Ryan Sean Adams:
[31:11] Crypto is levered up at this point in time. Always. Always. Always. Always. seen this like uh other flash crashes in the past it's kind of expected you you mentioned one earlier this year it wasn't as severe we had something like this in the summer of 2021 is the end of this i was like september 2021 yeah dude

David Hoffman:
[31:28] Dude eth price went from like four thousand dollars down to like eighteen hundred dollars.

Ryan Sean Adams:
[31:32] I don't even remember what eth price did i remember bitcoin did like a almost 14 to 20 percent kind of went down in september 2021 which seemed crazy that

David Hoffman:
[31:42] One scared That one scared me. That one scared me. I mean, my, like, Zerion at the time went down 70%. I'm like, what?

Ryan Sean Adams:
[31:50] Stop. Can you talk about what happened specifically on Perp's Dex? Because it felt like crypto learned about a new term called ADL, which is auto-deleveraging. So if you had a Perp open at the time, you may have gotten liquidated on ADL. Liquidated when you sort of shouldn't have. or the price didn't dictate that your margin

David Hoffman:
[32:12] Would be called? You got your position closed. Yeah. Yeah.

Ryan Sean Adams:
[32:15] What is this? And how did this affect traders?

David Hoffman:
[32:19] Sure. Yeah. So inherently in any perp platform, what does a perp platform do? It gives you leverage. It gives you potentially massive amounts of leverage, 50x. So your $1 can turn into $50, either long or short, depending on which way you choose. In the happy case, 99.9% of the time on a perpdex, longs and shorts balance out. And when they don't balance out, shorts just have to pay the longs or longs have to pay the shorts. And so the perpdex by construction equilibrates between a dislocation between too many longs and not enough shorts by making the longs pay the shorts. And that's totally fine. Sometimes when there is a dislocation between longs and shorts, which there always is, and that's fine. And again, the platform just balances out by making one side pay the other. But also, if price moves significantly in one direction, while there is also a significant dislocation between longs and shorts or shorts and longs, all of a sudden... There is effectively a bankruptcy in the sense that there's not enough money on the platform to pay the winners from the losers. The losers don't have enough money to pay the winners. And so in order to equitably transfer all the wealth, we need to do an automatic deleveraging of the winners because they won too much. And so usually and so each you say automatic.

Ryan Sean Adams:
[33:40] Maybe another term for that is like forced, basically forced.

David Hoffman:
[33:42] Yeah, forced deleveraging of your position. And so if you say you had a 50x short and then crypto prices went down by 30%, I mean, congratulations, but the platform doesn't have enough money to pay you because the losers didn't lose enough money to pay you how big your winnings were. And so they need to automatically deleverage you and everyone else. And there is a each perfect change has a way to do this, an opinionated way to do this. And so it's a style of deleveraging who there's a cue of like, OK, first, we're going to deleverage this person and then that person and then that person. And hopefully that clears the books and I'll go down the line. Many people, especially as we got down into the long tail of altcoins with very low liquidity, many people just had their positions just stops, just deleverage because there just wasn't enough capital in the market, which just effed up a lot of people's positions. Because like I said, they were farming Aster points, they were farming lighter points, they were farming hyperliquid. They thought they were delta neutral, but when the platform deleverages them, they're no longer delta neutral. And all of a sudden they're taking a directional stance on the market that they didn't intend to.

David Hoffman:
[34:46] In addition to that, Leiter had an outage for like a number of hours. Binance had an outage for a number of hours. So both of those platforms are working on compensation plans. Overall, just very messy and chaotic. Usually when we have cascading liquidations, we don't really have to talk about it other than just like, hey, don't take too much leverage. Now we're talking about it because the markets failed. Truly the platforms and the infrastructure broke down in a way that is now requiring us to do like manual work. compensation of people who are harmed.

Ryan Sean Adams:
[35:15] Not everywhere, though. Primarily on purpose exchanges. Primarily on Binance. If you're doing stuff with Spot, you don't have to worry about this. Yeah.

David Hoffman:
[35:24] I was up in the mountains, dude. I was like, shit, like ETH is down $400. Oh, well.

Ryan Sean Adams:
[35:30] Oh, well. Yeah, well, I mean, if you're not on margin, you can kind of do that. So even Binance hit this ADL. So a lot of liquidations there. Binance ultimately paid $280 million in compensation to some of the affected users who were liquidated and lost a certain amount of money. So they're trying to make good. As you mentioned, some of the other purpose exchanges, Lighter had its own problems. It didn't actually hit too much in the way of ADL, but it did have an outage. Hyperliquid stayed up the entire time, but a lot of traders have some dissatisfaction because they weren't aware of the ADL mechanism and they got liquidated in a way that they didn't feel that they should have. So A whole bunch of platforms had problems. I guess one bright spot is DeFi did fairly well. Always does. First I'll talk about some of the wallets. So unfortunately, Rabi and D-Bank stopped working. They must have had some sort of DDoS kind of damage.

David Hoffman:
[36:24] Accidental DDoS from people trying to save themselves.

Ryan Sean Adams:
[36:27] Yeah, something like that. So that wasn't great. But other crypto wallets stayed up. But DeFi was pretty much fine. In particular, Aave. So big stress test of Aave, right? It's one of the largest liquidations on record. Actually, the largest in record in an hour, I believe. $180 million. Handled it flawlessly.

David Hoffman:
[36:46] Love it.

Ryan Sean Adams:
[36:48] $75 billion capital and just ate that $180 million liquidation.

David Hoffman:
[36:54] Fair and orderly markets.

Ryan Sean Adams:
[36:56] Yeah, it was very good. The other DeFi protocols fared similarly. Actually, Athena had a deep hegging event on Binance. One of the reasons this did not affect DeFi was because most of the DeFi oracles peg the Athena stablecoin, USTE, I believe, with USCT. So they're not using the Binance order book data so much. And so if they had have been, they had kind of their Oracle risk management configured in a different way, could have caused some problems in DeFi. Fortunately, they avoided that. Athena also has some interesting ADL deals that are custom that I didn't know about, right? you know something about this

David Hoffman:
[37:36] Yeah with the centralized exchanges because you can't really make a deal with a decentralized exchange uh so athena again which is a delta neutral platform they just make their stable coins by longing spot and then shorting the derivative uh and so because they are not like inherently leveraged they have gone out to binance by bit okx and just made deals, take out, like, preserve us from ADLs. Like, don't ADL us ever. Give us a privileged position when it comes to ADL. Because ADL is for people who are winning on the platform versus losing. And Athena is delta neutral.

Ryan Sean Adams:
[38:13] Delta neutral, so.

David Hoffman:
[38:14] So it doesn't matter. So it kind of doesn't apply to them. So that deal makes sense for Athena. It's like, well, they're not winning or losing. They're not profiting.

Ryan Sean Adams:
[38:22] From the fact that they. It's a good thing they put it in place, though.

David Hoffman:
[38:23] Yeah, very good thing. Very smart of them. The day finally came where that deal actually played out in their favor. Other people are like, eh, this is kind of unfair. Like, I'd like to go negotiate my ADL position.

Ryan Sean Adams:
[38:35] Ah, then be Athena done. You have to have that kind of size. Yeah, right.

David Hoffman:
[38:39] Yeah, if you have size, you can make negotiations, yeah. Guy here, guy from Athena, he's here at the Athena one day event. And he actually talked about this because he was on a fireside chat. I thought he said something pretty interesting. So again, Athena, delta neutral. But when they are, short. So they are short on derivatives, long spot short derivatives. And in theory, the price goes down and their spot value goes down and their short value goes up and those things equilibrate. But when markets dislocate and are disorderly, and when prices go down in this disorderly way, shorts actually make money because it dislocates further away from what it ought to compare to spot. And so apparently Athena was actually pocketing millions of dollars because their short positions actually profited them more than their spot positions lost. So I thought that was a little fun fact that like Athena actually walked away.

Ryan Sean Adams:
[39:31] Maybe they'll show up in their token price at some point. It hasn't yet. Some people are thinking this is a coordinated attack, okay? So there's some suspicious timing. Part of the issue was on Binance and Binance had an Oracle price update that they had scheduled for October 14th. And during the interim, before October 14th, there was some vulnerability. There was also on different perps exchanges, we saw whales open up billion-dollar short positions, like 30 minutes before the Trump tweet. And they were doing this in Bitcoin and ETH. So, I mean, somebody knew what was happening. Now, what's interesting here is because these markets are transparent, you actually see it. How often does this go on in traditional markets? We just don't see it. I mean, somebody knows something and is trading something for sure. Now, I don't know. the question is like will this continue um you know is this the end uh kobe said he compared this he said this was the most severe flush he's ever seen on alts he said it did remind him a little bit of summer 2021 it's a good reminder to myself to own to own things that i'm actually bullish on and not try to shift the momentum um ralph paul had a take which is

Ryan Sean Adams:
[40:46] This is all noise. The lesson here is don't use leverage, right? Okay. So if you weren't using leverage, this is just kind of a pretty bad whip down, but it's not existential. It doesn't affect you. You're still in the game. He said, there's only two questions you need to ask as a long-term holder. Will tomorrow be more digital than today? And has the liquidity cycle and business cycle topped, or is it still rising to finance the 10 trillion that needs to roll in the next 12 months? Raul Paul is betting it's not over because of the liquidity cycle. That's basically it. Now, there are some who are saying, I don't know, that felt like some weakness. That felt like maybe we've seen kind of the top. One of them is Mike Nadeau, who I'm going to talk to on Monday. Do you have a take on this, David? Do you think it's over or do you think we're still good?

David Hoffman:
[41:35] I know who I am, Ryan, and I'm not going to be the one to call the top. I don't have that skill set. I don't have that disposition.

Ryan Sean Adams:
[41:43] And so but good to your head is it the top yeah

David Hoffman:
[41:47] No it's not the top.

Ryan Sean Adams:
[41:48] That's the way I feel We got some stuff coming up next. You got to fill me on the Binance listing fee drama. Also, hopefully it's not the top for the Monad token and the MegaGeek token, which are coming out. And we got to talk about the US adding billions to its strategic Bitcoin reserve, but like maybe not in the purchasing Bitcoin type way. Talk about all that and more. But before we do, we want to thank the sponsors that made this episode possible.

David Hoffman:
[42:15] So there's a tweet that was heard around crypto Twitter. This comes from CJ, who is a founder of a up-and-coming prediction market, price prediction market on base. And Limitless has definitely gained some attention and some momentum lately because they had a Kaido sale. So they were selling a million dollars of their future token, and it was super oversubscribed. So they were gaining some momentum. Apparently, he gets an offer from Binance about what it would take to get their future token listed on Binance. And apparently, the intern, we're blaming interns this week. That's the theme of the week. Blame the interns. Yep. Is the intern forgot to send CJ the NDA of what the deal would look like. So CJ was free to just post the deal on Twitter. And so here's what it would take for CJ to list his Limitless token. Limitless is the name of his prediction market on Binance. 1% of the token supply for an airdrop on day one. 3% further of the token supply for further airdrops over six months.

Ryan Sean Adams:
[43:13] 4%?

David Hoffman:
[43:13] One more percent for marketing at Binance's full discretion. He also has to provide 100% of the TVL for a token pool on PancakeSwap. That's a million dollars. A $250,000 security deposit. Three more percent of the token reserved for the BNB holder program. And $200,000 worth of tokens for Binance affiliate marketers. And then a $2 million BNB security deposit for spot listing. That was the fee. Now, I think these numbers are negotiable. That's what CJ said when I interviewed him. that podcast came out on your podcast feed. So in theory, those numbers could be lower, but they can also be higher too. And so we've always known as an industry, that there are egregious exchange listing fees because liquidity is so incredibly valuable. Simon, founder of Moonrock Capital, he put out a tweet that said, I spoke with a tier one project that raised close to nine figures. After wasting a year of due diligence with Binance, they finally received a listing offer.

David Hoffman:
[44:07] Binance asked for 15% of their token supply. Imagine paying 50 to 100 million just for a sex listing, centralized exchange listing. We as an industry know that these fees have existed. We've never actually seen an offer before because they get NDA'd. And then also when I was talking to CJ, he talked about like, well, who is really incentivized to actually disclose what these deals are? Well, Binance definitely is not. The market maker deals who also are like kind of privy to this information, the market makers aren't incented to like disclose what the deal is. if the founder signs this deal, they're not interested in disclosing what the deal is either because it's kind of embarrassing to sign such an egregious deal. So no one really is incented to release the details of the deal. So it remains like a not so well-kept secret that founders pay for liquidity. Now we actually have one and it just caused a bunch of rambling on Twitter. It's like, no, now we actually have the details of a real offer and it's as bad as we ever thought.

Ryan Sean Adams:
[45:08] And I guess we're throwing Binance under the bus. Other exchanges have charged these fees in the past, still do, to my knowledge, charge these fees. We don't know what Coinbase's listing process is, for example, or what fees that they charge. I do think, though, that the whole thing feels very TradFi and not in the spirit of DeFi and not in the spirit of crypto, which is... You get your asset on a decentralized exchange. There's no listing fee. There's no permission. It's just there. And so this kind of fee charge of 5% feels anachronistic. It doesn't feel like real crypto. So I get the sentiment there. The other thing I'll say is 5% of token supply, you know, Binance is really juicing the BNB token because that 5% goes primarily to BNB token incentives. So one thing you can say is like-

David Hoffman:
[45:57] Who owns BNB? Who dominantly owns BNB?

Ryan Sean Adams:
[46:01] We talked about last week, potentially 67% CZ, right?

David Hoffman:
[46:05] Yeah, wow.

Ryan Sean Adams:
[46:06] But they are doing a good job for BNB token holders. Let's say that. The other thing I guess I would say is just like, it's unclear how long that this type of rent seeking can actually last. And I think the power of centralized exchanges starts to diminish as decentralized exchanges gain market share.

David Hoffman:
[46:26] Which they haven't. 20%, 30% market share. Something like that, right? Which is low, but it's been up only since forever.

Ryan Sean Adams:
[46:33] Yeah, that's great. I do think also this was an opportunity to do a little bit of Coinbase versus Binance type like back and forth. Because I saw back and forth, you know, and one of them from CZ.

David Hoffman:
[46:44] Jesse was definitely in the replies, yeah.

Ryan Sean Adams:
[46:45] Yeah, and CZ responded. He was like, okay, like you don't like listing fees. Like don't pay them. It's a free market. Do whatever you want, blah, blah, blah. And by the way, he said, Coinbase doesn't even list the third largest crypto asset, which is BNB. Why don't you ask them why they don't list BNB? And then a day later, Coinbase listed BNB.

David Hoffman:
[47:03] Listed BNB, yeah. Which I thought was pretty funny.

Ryan Sean Adams:
[47:07] Larry's drama.

David Hoffman:
[47:08] Yeah. There's another conversation of kind of like the PR failure of Binance as it relates to CJ, the founder of Limitless, because there was definitely some, Maybe I'll call it bullying.

Ryan Sean Adams:
[47:19] Back and forth between.

David Hoffman:
[47:21] They like explicitly, the Binance, the at Binance Twitter account explicitly tagged CJ. And it was like false and defamatory statements from this one individual. Oh, wow. And then one of those, one of those, they made like three arguments and they bulleted one. And like the first one was something like making false claims. And then the third was defamation. And like, whoa, and releasing private info. And like, wait a second. Either the info is false and it's defamation or he was released in private info.

Ryan Sean Adams:
[47:49] You got to pick one, guys.

David Hoffman:
[47:50] You have to pick one of those two things.

Ryan Sean Adams:
[47:52] Yeah, that's fair for sure. I mean, kind of a rough week for Binance, let's say.

David Hoffman:
[47:56] Yeah, not great.

Ryan Sean Adams:
[47:58] Let's talk about MegaEth and Monad. So last week we talked a little bit about the Monad airdrop, which is coming up. Now it's open, so you can go check if you're eligible. In fact, I think you sort of have to check whether you're eligible for Monad and go claim right now or else, I don't know, You lose your tokens? That's right.

David Hoffman:
[48:16] So we are claiming our Monad tokens, but you don't get your tokens. You just get them in the future when the Monad blockchain is up and running. Monad is an EVM. Soon. Yeah, well, end of this year. We don't really know. So like November, December is my guess.

Ryan Sean Adams:
[48:29] Really? I heard October, but no.

David Hoffman:
[48:32] October's almost. Could be, could be, could be, could be. The Monad is an EVM equivalent chain. So you're going to use your Ethereum address and your like Rabi wallet or your MetaMask wallet or whatever. And you're going to go sign and authenticate your ownership of the wallet. And I would presume that would be the address that would then have the tokens on the Monad blockchain. I presume that's how that would work. And so go do that. You have until November 3rd to go claim your future tokens. So go do all the things, connect your Farcaster, connect your Twitter, connect your Discord, and yeah, make sure you don't miss out on your tokens. You might have them. And so also... Since it's happening in the same week, MegaEth has their sale. They are doing a sale on Kobe's platform, Sonar. And so you can sign up KYC. It takes a bit, so you have to go do some TradFi legal document bureaucracy bullshit because of rules. But then once you get through over those hurdles, then you can potentially participate in the MegaEth ICO if you so choose. Do you know the valuation of what this is going to be? No, details are going to be, details soon on that. but I'm guessing, understanding MegaEath, it's going to be kind of favorable. But people aren't going to be able to have large allocations, though.

Ryan Sean Adams:
[49:45] From the very beginning, Monad and MegaEath have been kind of set against each other as competitors. It's interesting that they're going main at kind of a similar time. Also tokens at a similar time. So the design is different, right? This is almost a little bit of a battle of alt layer 1s and layer 2s as well. So Monad...

David Hoffman:
[50:04] They're both EVM. They're both extremely fast.

Ryan Sean Adams:
[50:07] Right and monad took four years to redesign the evm to do a parallel execution and really juice it right whereas mega eth is super juicing their sequencer they're not even they're not decentralized sequencer at all but juicing that to the nth degree so they can have max dps and they'll have more transactions per second than than monad and so it's kind of a race and i'm very interested in seeing what the FDVs of these tokens will end up being. Like right now, pre-market, Monad is about $6 billion, which indicates like a pretty nice L1 premium, let's say.

David Hoffman:
[50:45] I thought it was higher than that. I saw 13 to like 16 billion.

Ryan Sean Adams:
[50:49] You saw that last week. Not this week, my friend.

David Hoffman:
[50:51] Oh, yeah, that's a good point.

Ryan Sean Adams:
[50:52] This week we're at 6 billion.

David Hoffman:
[50:54] Okay. Ruh-roh.

Ryan Sean Adams:
[50:55] Now, I'm not sure. I mean, I guess we could look at like top layer twos. What are those right now? I mean, something like Arbitrum. It's probably floating at 4 billion, something like that. FTV.

David Hoffman:
[51:09] Yeah, do you think MegaEath comes in above or below that?

Ryan Sean Adams:
[51:11] I don't know. That's what's going to be really interesting comparing MegaEath to Monad because they feel similar. They're both highly juiced EVMs where you get a ton of throughput.

David Hoffman:
[51:24] Yeah. My take on this is both of those chains are fast enough where being faster doesn't really matter. They're both over the hurdle of they're so fast that users don't care. And so it's really about the app ecosystem that is the game changer between Monad and MegaEath when they go head to head. And MegaEath on Twitter is like, we're not competing with Monad, we're different. I'm like, yeah, okay, sure. It's going to be their app layer that is going to be how these ecosystems compete. Not about the speed. They're both so fast it doesn't matter.

Ryan Sean Adams:
[51:55] I totally agree. So we mentioned a Chinese company that's building on Ethereum. That company is, and financial, is the parent company of Alipay. It's a big Chinese, I mean, I would say Alipay and Alibaba is sort of the Amazon of China, but it's also a kind of a super app as well. So 1.4 billion monthly active users on Alipay. So the parent company is launching an Ethereum L1, looks to be a ZK roll-up of some type.

David Hoffman:
[52:26] Ethereum layer two, please. Layer two, did I say?

Ryan Sean Adams:
[52:29] Layer two, I meant. It's called Jovay. Now, there was some talk, like there's some hype tweets like Alipay and it's 1.4 billion monthly active users. They just chose the Ethereum layer two. It's not like Alipay is actually going to be involved in this. and they're not going to port their 1.4 million monthly active users for payments, not out of the gate. It looks like what Joy of A is, is kind of like a real world assets blockchain initiative by Ant Digital, which is a financial company, but using some pretty cool tech. So this is going to be ZK Proof Engine. It just goes to show these projects seem like they come out of nowhere, but here is like a mega tech company out of China, no radar like under the radar no hype and i said i didn't even know like i don't even know if they talked to anyone at the the ef before launching it and major companies just build on ethereum and we find out about it later actually turned out not to be true apparently the ef was talking to them yeah

David Hoffman:
[53:28] I think things happen in asia that we just don't know about because we don't speak any of those languages.

Ryan Sean Adams:
[53:33] Exactly so it's it's like you know the west kind of ignores mandarin at some level anyway seems like it could be a big deal uh but we'll have to see and it's all based on traction what they said i had to do with it um david did you see the ethereum phone the dgen one this was a uh unboxing from jesse pollack from base do you see this i

David Hoffman:
[53:52] Have not seen this no.

Ryan Sean Adams:
[53:54] It's actually kind of cool. So, you know, the D-Gen one was like this phone. It doesn't look like a traditional smartphone, right? It's kind of like, you know, it looks like something out of, I don't know, it looks like a Game Boy or something. Yeah, that's what I was thinking. But like, look at this. So this is Jesse unboxing it. It's kind of cool. Crypto native. It's got a laser.

David Hoffman:
[54:20] What do you do with the laser?

Ryan Sean Adams:
[54:22] It's got an entire app store. It's completely, it's got Uniswap all integrated.

David Hoffman:
[54:26] Do you play Pokemon on it?

Ryan Sean Adams:
[54:27] Look at some of these screens. XMTP Messenger. It's got Zora on it. It's actually cooler than I thought. I'm looking at this and I'm like, at $500, this might be something to go test out and try, at least for the Ethereum enthusiast and hobbyist.

David Hoffman:
[54:43] Deep enthusiast, yeah. I want to play Pokemon. Excuse me. That's what I want.

Ryan Sean Adams:
[54:47] It's not going to replace your phone though, right? That's the thing. It's got to be some sort of side companion type of thing for the Ethereum enthusiast. Cool thing is, the entire operating system is open source completely. It's built, hardware, everything, by a three-person team. Obviously, they outsource the manufacturing, but pretty impressive.

David Hoffman:
[55:05] Dude, those are going to be a huge hit at DevConnect. I bet you I see a handful of those at DevConnect.

Ryan Sean Adams:
[55:10] I bet you will.

David Hoffman:
[55:11] Ryan, so you know the Bitcoin strategic reserve that we now have that has hundreds of thousands of Bitcoin in it? Yes, we have, the United States has 127,000 more Bitcoin this week than it had last week. How did it acquire that much Bitcoin? Where did that Bitcoin come from?

Ryan Sean Adams:
[55:30] Well, they didn't buy it. They did not buy it. They got it the way they got the rest of their Bitcoin, which is asset forfeiture. They seized it. They seized it from criminals. So this is a report coming out of the Justice Department that the U.S. seized 127,000 Bitcoins. That's about $12 to $15 billion worth of Bitcoin from scammers, from pig butchering scammers. You remember the pig butchering thing, which is like the idea that you have to fatten up your victims, you become friends with them, you just like fatten up the pig for slaughter, and then you defraud them, then you take all their money. Because apparently there was a massive operation that's been going on for the past five or more years run by a guy named Chen Zai. He's a Chinese national who leads a group in Cambodia who's doing this. They used forced labor to actually carry out these scams. So people who had extortion over, they're trafficking victims. These were some of the scammers. They were actually forced into this. And they basically stole money from all sorts of crypto investors and crypto users.

Ryan Sean Adams:
[56:34] You know, $127,000 worth of Bitcoin. So they've been charged with fraud. Apparently, the main guy behind this, Chen Zai, he faces up to 40 years in prison. They haven't found him yet. So he's somewhere out there still. but they do have the Bitcoin. And what's interesting about this is people like Taylor Monaghan have been doing some on-chain sleuthing as far as how the US government actually seized the Bitcoin. And this is a tweet from her. She said, it looks like maybe someone in the US government cracked weak entropy wallets three years ahead of anyone else and kept quiet about it. whether that's the U.S. government or private industry partner or something else entirely, they beat open source security researchers. She's got a whole thread on this with all of the receipts and facts that you can go scan.

David Hoffman:
[57:27] Wait, that's a different story and also way bigger. The government hacked wallets, Bitcoin wallets.

Ryan Sean Adams:
[57:33] So the government at the DOJ, like Justice Department, is not going to tell you how they got 127,000 Bitcoin, right? They just say they seized it. But Taylor Monahan is doing some on-chain sleeves. And she's seeing these addresses that she's calling weak entropy addresses. That means when they were set up, there was something like with the way they generated the seed phrases.

David Hoffman:
[57:56] Yeah, it was just with like weak cryptography. Yeah, yeah, yeah.

Ryan Sean Adams:
[57:58] Yeah, they used like, I don't know, something that wasn't some random number generator that kind of could be hacked or was susceptible to brute force. But then somebody in the U.S. government has some advanced like weak entropy address cracking magic that allowed them to go like yoink 127,000 Bitcoin. That's what Taylor is saying could have happened here, which is wild to me.

David Hoffman:
[58:21] I'm sorry. How does that connect to the pig butchering scandal?

Ryan Sean Adams:
[58:25] Oh, that's just how they seized 127,000 Bitcoin.

David Hoffman:
[58:29] I thought they seized it because they cracked the wallets.

Ryan Sean Adams:
[58:32] Yeah, that's how they seized it. Exactly.

David Hoffman:
[58:33] And it just happened, the wallets happened to be owned by this scammer.

Ryan Sean Adams:
[58:37] Yeah, yeah. They're not going around and going and seizing all of the weak entropy.

David Hoffman:
[58:42] So they identified that there's this scammer. They identified that he owned these wallets. And they're like, well, these wallets are weak, so we can steal them. They didn't arrest him?

Ryan Sean Adams:
[58:49] Oh, they're trying to arrest him too. But again, he's somewhere out there.

David Hoffman:
[58:53] No, they're doing both. They just went around and they're just like, okay, this Bitcoin belongs to a scammer. Therefore, we can steal them by hacking the safe.

Ryan Sean Adams:
[59:02] That's what it looks like that's

David Hoffman:
[59:05] Crazy dude that.

Ryan Sean Adams:
[59:07] Is crazy think about it practically how do you seize private keys by arresting

David Hoffman:
[59:12] Him and making him at gunpoint.

Ryan Sean Adams:
[59:15] At gunpoint, okay, I mean, there's like laws against this. I mean, does the government like actually wrench attack people, that kind of thing, right? But anyway, it looks like that's not the case. Taylor is saying non-chain evidence. That's nuts. It looks like they used some brute force magic to go attack the weak entropy wallets and yoink the funds. This is some tech that the U.S. government has that seems pretty advanced, more than what we thought they had, potentially.

David Hoffman:
[59:39] That is extremely ominous.

Ryan Sean Adams:
[59:42] Yeah. Well, don't worry. I'm sure like no one listening has weak entropy wallets.

David Hoffman:
[59:47] But yeah, because they all own ETH.

Ryan Sean Adams:
[59:50] Look, man, governments can do scary stuff. Governments can do scary stuff.

Ryan Sean Adams:
[59:54] Let's just leave it at that. Speaking of scary stuff governments are doing, looks like the Democrats are shooting down the market structure bill right now. Democrats in the Senate. So the Clarity Act went through the House, bipartisan support. We had a good Republican draft in the Senate of market structure bill, which is kind of a derivative of the Clarity Act. And then Democratic senators, they spit back something that basically makes DeFi illegal, David. DeFi protocols, they would all be seen as digital asset intermediaries. DeFi websites, they'd be financial brokers. Do you remember when Sam Begman-Fried was proposing basically this back in like 2022 before he crashed out?

David Hoffman:
[1:00:32] Yeah. Do you see Sam Begman-Fried, he has his appeal, his sentencing appeal this week. Hopefully he's going to appeal his 25-year sentence. And his claim is that it was the hostile Biden administration, the hostile Democrat administration, that is the reason why he got such a terrible sentencing. Never mind that he was the largest donator to Joseph Biden.

Ryan Sean Adams:
[1:00:55] Not only that, I've seen stories where he's basically like there was an interviewer who went to prison, got his side of the story. Sam Bank-Bitfried was saying, I did nothing wrong. If you look at the bankruptcy, there shouldn't even have been a bankruptcy. All the creditors were made whole. There was never any missing funds. I think that's true, actually. No, it's not true. Do not let him rewrite history. He was completely, he was stealing customer funds.

David Hoffman:
[1:01:19] He was stealing customer funds, but then he made some banger investments, dude. He invested into the anthropic seed round.

Ryan Sean Adams:
[1:01:27] Yes, but you can't steal customer funds and invest in risky assets and then hope that pays off. And you know what Sam Bankman, he wouldn't have stopped there had he gotten away with this. the dude would have just done more and more in risk he's trying to rewrite history the money was not there he stole customer deposits and he invested in them just because he invested in anthropic and it was like a hundred and

David Hoffman:
[1:01:52] Robin hood at like nine dollars and now it's at 150 okay like he actually made a ton of money dude.

Ryan Sean Adams:
[1:01:59] So he should have been a freaking vc he shouldn't have been running a custodial crypto exchange you're

David Hoffman:
[1:02:05] Totally right anyway arguing with that He.

Ryan Sean Adams:
[1:02:07] Needs to stay in jail, and Trump needs to not pardon him. I'm going to be super pissed. End of rant.

David Hoffman:
[1:02:15] And anyone who glorifies Sam Bankman-Fried on Twitter, I'm going to bonk them.

Ryan Sean Adams:
[1:02:21] You're going to shun them?

David Hoffman:
[1:02:22] Bonk.

Ryan Sean Adams:
[1:02:23] Bonk them? Just like, okay.

David Hoffman:
[1:02:25] Hit them on the head with a bat. I don't know, from my desktop. You really made that weak, or maybe that was me.

Ryan Sean Adams:
[1:02:33] I don't know. Whatever. We'll bonk people.

David Hoffman:
[1:02:35] We'll bonk people.

Ryan Sean Adams:
[1:02:37] Got to end with this, of course. You know, none of this has been legal advice or crypto advice or financial advice. Certainly not this week. We've been wrong. You could lose what you put in. We're headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless Journey. Thanks a lot.

David Hoffman:
[1:03:16] So I got 14 days to turn downtober into uptober. 14 days.

Ryan Sean Adams:
[1:03:22] You had to say it.

David Hoffman:
[1:03:23] Yeah.