# ROLLUP: $300M DeFi Hack Fallout | Arbitrum Freezes Funds | AI Deflation Debate | Productive ETH

*Author: Ryan Sean Adams, David Hoffman*
*Published: Apr 24, 2026*
*Source: https://www.bankless.com/podcast/rollup-300m-defi-hack-fallout-arbitrum-freezes-funds-ai-deflation-debate-productive-eth*

---

## TRANSCRIPT
Ryan Sean Adams:
[0:03] Bankless nation it is the fourth week of april time for the bankless weekly

Ryan Sean Adams:
[0:08] roll-up we got the most consequential defi hack i think in history yeah.

David Hoffman:
[0:13] Big words i think they're true

Ryan Sean Adams:
[0:15] I think they're true because there was so much fallout it uh it it reverberated all around crypto and all around defi including our layer twos a lot of questions were raised this was a 300 million dollar hack We'll talk about who's to blame, was Arbitrum right to freeze some of the funds, and what does this mean for DeFi and for the rest of crypto?

David Hoffman:
[0:36] Zooming out to all the markets, still bullish, still all-time highs in equities just last week. Can that be sustained? We're also going to be learning a little bit more about Fed Chair, incoming Fed Chair, Kevin Warsh, and what he believes about AI and how it is going to be factored into Fed policy. It's interesting to have a Fed Chair. Thinking about how the Fed as an institution will need to adapt to the AI world. And then also, we've got, according to the words of my co-host, and also me, the best ETH thesis since ultrasound money and the triple point asset. We're on to a new one. Yes. Productive money, the best case for ETH. We're going to talk about this whole thesis and why we think it's the best.

Ryan Sean Adams:
[1:18] Oh, yeah. Productive money. There you go. Also, if we get to the end of this and we still have some time, David, I want to get into a rant, okay? Ryan's got a rant. Yeah. It kind of feels like the U.S. government is trying to KYC, let's know your customer, all of our devices. There's some bills I want to talk about. I feel like the surveillance state is the final boss here.

David Hoffman:
[1:39] What does that mean? I need to link my driver's license to my iPhone? Yes. And have that registered with the state?

Ryan Sean Adams:
[1:45] Not just your iPhone, your MacBook, any device.

David Hoffman:
[1:50] Anything connected to the internet?

Ryan Sean Adams:
[1:50] Anything connected to the internet. I think we've got to talk about this and what's at stake if we lose this battle because it's not great. But let's get bullish for a minute and let's look at the market. So David, I know you love sharing your screen. You love showing me some charts.

David Hoffman:
[2:03] I've taken over the charting section of the weekly roll-up. Six years into the Bankless podcast and it's finally figured out that David should do the charts. We are looking at the S&P, which is at all-time highs again for the second week in a row. Last week, we were right above 7,000 at like 720 points. We're at now 7,100 in the S&P, and so the equities continue to look good. We can take a peek at NVIDIA, not at all-time highs, but pretty close, pretty close. And if you kind of go down the list, Amazon, basically at all-time highs, Apple is at near highs. And so if you're a tech equity investor, you're probably doing okay in recent times. The markets are kind of just resuming their normal thing, which is just going up and to the right. Not universally true, and it's not universal good news. We have oil going up, which we don't want. We want oil to go down. Yeah, it's up on the week. Last week, I think I called it wartime lows, wartime being high because we're in war and a war around oil. But lows in the sense that it's a lower end of the prices that oil has seen during the war. We are at now war middle, war warm prices. And so we're up on the week. We're about up 10% on the week on the oil prices for both Brent and WTI. And so...

Ryan Sean Adams:
[3:23] That's about what, upper 90s price per barrel?

David Hoffman:
[3:26] Yeah, so $100 for a barrel of Brent and then $95 for Wexcessus Intermediate Crude. And so what does that tell us? It just means oil coming out of the Strait of Hormuz is increasingly constrained. That is not resolved. And then also importantly, inputs into inflation. Inflation numbers are going to be downstream of oil prices. oil prices are I was hoping they were going to go down this week again seeing as like the conflict of war in Iran has like somewhat found some sort of like equilibrium, I guess. We'll talk about that in a second. We'll get there. And then 10-year yields also going back up. So again, they were going down. Now they have kind of trended back towards like the middle highs of wartime 10-year yield prices.

Ryan Sean Adams:
[4:13] Yeah, 4.3%, I believe on that. How about our crypto assets, David? I think you said Bitcoin was up.

David Hoffman:
[4:19] Bitcoin up 5% on the week. So we're almost at $78,000. We almost touched $80,000 this week. We're a little bit down from that, but up 5% on the week, so a healthy week for Bitcoin. Flat on the week for Ethereum. And that dichotomy is going to be because of the hack that we're going to talk about here in a second.

Ryan Sean Adams:
[4:39] Oh, you think that's fallout from the DeFi hack?

David Hoffman:
[4:41] Almost certainly. Because of how significant this was in the Edger's word, like the idea of trust in DeFi, I think that is showing up in the ETH BTC price. We talked, Ryan, about the ETH BTC ratio last week.

Ryan Sean Adams:
[4:54] Yeah, you were bullish.

David Hoffman:
[4:55] It was trending upwards and we were like, we're not going to talk about this because we don't want to jinx it. We jinxed it.

Ryan Sean Adams:
[5:02] We jinxed it. You take credit for that, not me. I said never look at the ETH Bitcoin ratio again on this show.

David Hoffman:
[5:07] We won't look at it anymore. But the thing that I'll know, just zooming out and talking about like what does all this mean? A, the war markets are painting a not short continuation of the war. Like there's more of that. But the equities markets, and even with the crypto markets, it seems to be when they are left to their own devices, they inch upwards.

Ryan Sean Adams:
[5:28] They like to go up.

David Hoffman:
[5:29] They want to go up. And then we do a war thing, and they go down. And there's a DeFi hack, and they go down. But when you leave them alone... They go up. And so that is my, like last week I came out as bullish. Yes, you did. I will, I'm maintaining that position just because I assume at some point the bad news will stop or the bad events will stop probably as my default case. Like they can always, there can always be more than you expect. But it is nice to know that when they are left alone, things still go as planned, which is going up. That's my take.

Ryan Sean Adams:
[6:08] It does seem like there's still upward momentum here, right? It's hard to keep the balloon underwater a little bit. Let me show you some more upward momentum here in the Bitcoin ETFs. This is Eric Belchunas on Bitcoin ETF flows. He's showing a Bloomberg terminal here and he's looking at IBIT. That's a BlackRock ETF. You see this on the one day flow, on the one week flow, on the one month, on the three month, on the year to date. It's all green. We got green, green, green, green, green across the board. This is what he said. The Bitcoin ETF flows are back in the high life. Every single rolling period for what we track is now positive. Haven't seen that in months. So Bitcoin ETF buyers, they're hanging in there, David. They are proving themselves to be diamond hands.

David Hoffman:
[6:54] Eric Daltrudis' Gen X is being shown there in his deep end quote.

Ryan Sean Adams:
[6:58] Yeah. The only more diamond hands, though, than the Bitcoin BlackRock ETF holders is actually, Mr. Michael Saylor, or Michael Strategy, as you call him.

David Hoffman:
[7:08] Michael Strategy. You should just name his name to that. He just flippened.

Ryan Sean Adams:
[7:12] So he just flippened IBIT. That's wild. Yeah. So MSTR, that's Strategy, Michael Strategy, owns more Bitcoin than the IBIT ETF. So more Bitcoin than BlackRock, which is pretty impressive. I guess they've been kind of neck and neck, but you can see this red line. And Michael's strategy just passed.

David Hoffman:
[7:33] I got you saying it.

Ryan Sean Adams:
[7:36] So impressive, fun fact. They're competing to own a little bit more. Of course, you know, IBIT is the aggregate demand of many thousands, tens of thousands of investors, whereas... Well, I guess so is strategy. But anyway, two big holders here.

David Hoffman:
[7:53] The conversation of is strategy a big Ponzi kind of continued this week.

Ryan Sean Adams:
[7:58] Oh, did it?

David Hoffman:
[7:59] We talked about CoffeeZilla last week. There was a debate from some, maybe some guy at strategy or just a big Michael Saylor bull, like went and like tried to like challenge CoffeeZilla to a debate. Peter Schiff got into some Twitter spaces and was taking the side that he wished that CoffeeZilla said the Ponzi word more strongly than he actually did.

Ryan Sean Adams:
[8:23] It's all so silly to me. It's all so silly to me. Of course, Bitcoin is a faith and flows asset. That's the thing. Just like gold.

David Hoffman:
[8:31] No, no, no. Stretch. Stretch and strategy is the Ponzi.

Ryan Sean Adams:
[8:34] That's just a little sauce on top of the faith and flow asset.

David Hoffman:
[8:37] Right? A big Ponzi on top of a Ponzi.

Ryan Sean Adams:
[8:38] Yeah. I mean, it's not that much more, right? Again, if Bitcoin keeps going up at the rate that it's been going up, Michael's going to be just fine and it's all going to work out. If not, then we got bigger problems. Well, speaking of bigger problems, what is the update on the war this week? Why is oil, I guess, ticking up? Do some of the headlines have anything to do with that?

David Hoffman:
[9:03] Yeah, relative to previous weeks, I'll call it kind of a quieter week. And that's not just happened since. That's because I think the United States has found itself in a position that it's kind of content with for the short term. So like the ceasefire, first off, was set to expire Tuesday of this week on April 21st. Trump then, as a deadline got, as a deadline approached, Trump moved the deadline just one day later to kind of like allow Iran to collect itself and coordinate. But then ultimately Trump extended this ceasefire indefinitely until Tehran submits a proposal and then talks actually like move forward. And so that's kind of where the kinetic war is. Kinetic war is seemingly just indefinitely paused, allowing room for actual talks and negotiations to happen.

David Hoffman:
[9:52] Why are we okay with the kinetic war pausing? Like, why is that the status quo? Definitely downstream of the strait, of course. Everything's downstream of the strait. The U.S. naval blockade of Iranian ports has continued throughout the ceasefire. There's been just significant tension in the strait. The United States struck and seized an Iranian vessel trying to make it through the blockade. It does appear that the U.S. blockade is leaky, so some ships are getting through, but the closure is nonetheless doing the job that it intends to, which is, like, constraining the flows by 95% plus. So the economic pressure on Iran is happening, and that is, importantly, threatening the longevity of their oil facilities. Secretary Scott Besant, who is like, so the kinetic war, Operation Epic Fury, is now basically, I think, in the rearview mirror. And now we have moved on to Operation Economic Fury, which is being led by Secretary Scott Besant, the Treasury Secretary. And that's blockades. And that's the blockade. And then specifically the acute pain, this is reading from the tweet from Scott Besant. In a matter of days, Karg Island, which is where all of the Iranian oil flows out of, it's in the strait, Karg Island storage will be full and the fragile Iranian oil wells will be shut in.

David Hoffman:
[11:06] Something I learned, Ryan, when you pump oil and then you stop pumping oil because you're forced to because you have nowhere to put the oil, then you stop pumping and then water floods back in and it causes irreparable damage to the pumping. And so they need to get oil out of Karg Island so that they can continue to pump. Otherwise, their actual oil production capabilities will be deleted. And it's costly and time consuming to get those things up and running. And you can imagine that Iran just doesn't have the capability of fixing those things if it gets to that point. And so this is why the United States is like, oh, we're cool with where things are right now. Iran is just getting choked out. And we don't need to resume the kinetic war because they are going to just lose economically Under the current conditions. And so that's kind of where things are. Kinetic War is seemingly over because we have the chokehold around Iran and they are just slowly getting suffocated.

Ryan Sean Adams:
[12:06] And so the US-Iran permanent peace deal, that really hasn't moved too much, I suppose, on the prediction markets. We have Polymarket pulled up here, and there is a 54% chance, I guess up a little bit, that we will have a permanent peace deal by the end of June.

David Hoffman:
[12:25] Yeah yeah 50 50 chance not like it's interesting that it's not being priced in that much um we're just in this kind of like wait and see position like if if the if the story that is correct which is the story being told out of like united states government and a lot of the analysts is like it's up to iran to kind of like tap out and say like we can't take this pain anymore and that's going to become downstream of the fact that their oil wells are going to be just damaged. And then also, they're not going to be able to fund the paychecks of people in the regime causing dissent and fracturing.

Ryan Sean Adams:
[13:02] I mean, they have shown some resistance to economic pain in the past, and particularly in the form of sanctions. I guess this is more blockade, oil-based pain, which is perhaps more painful.

David Hoffman:
[13:12] It's more severe.

Ryan Sean Adams:
[13:14] More acute. Yeah, this could last for a while, though. That's what the markets are telling us. Let's talk about Fed Chair Kevin Warsh. We talked about him last week. Now he is testifying in front of Congress as part of his nomination as the incoming Fed chair. By the way, the poly market around this is an 82% chance by the end of June. So it looks very probable that Kevin Warsh is going to be our next Fed chair. But he had some interesting takes that I think separate him from his predecessors, particularly on AI. Let's play the clip. What we call AI in a couple of years, we'll just call business. And AI is going to make almost everything cost less. And the U.S. can be a big winner. And it's a hugely exciting moment. If I were to step back for a minute, if I were the president, what I'd be worried about is a central bank that doesn't see any of that. A central bank that is stuck with models from 1978, governance from a prior period, and don't recognize we could be at the front end of a productivity boom. And if I were the president, I'd be worried that they might not see it. And they might think economic growth is somehow going to be inflationary. I think we were probably in the early innings of a structural decline in prices. Ken sees it on the front lines of real businesses. And I think if you look over the period of the next year or two, it's a pretty special moment. Wow. So this is Kevin Warsh saying that he actually forecasts, because of AI productivity, he actually forecasts deflation rather than inflation.

David Hoffman:
[14:43] I kind of think these are huge statements. because we did a podcast it'll come out next week and one of the big themes of of the the podcast was like is ai doing the things that everyone thinks that it's doing or is there just a bunch of hype and we don't know shit yeah and i'm kind of in the latter camp by default just like until there's data proven to prove that ai is doing anything to the economy to actual like revenues to anything, then like I'm in the camp of just like it's business as usual until we can get something to prove otherwise when a Fed chair is saying that there is going to be an AI-led productivity boom. It's hard to, it's hard to, like, I would like to see why he thinks that reasoning, but, like, he's the guy with the job that's supposed to take those things into account. So it's hard to argue with.

Ryan Sean Adams:
[15:38] Do you think he genuinely believes it? Let's take the case that he genuinely believes it. So he thinks AI productivity is going to lead to deflation. Well, that would cause him to want to, I guess, lower rates, right?

David Hoffman:
[15:50] Which is what Trump wants him to do.

Ryan Sean Adams:
[15:51] Which is conveniently what Trump wants him to do.

David Hoffman:
[15:54] Conveniently what Trump wants him to do.

Ryan Sean Adams:
[15:55] So, there's that aspect, although it is the thing you probably should be doing if we are going to get once-in-a-lifetime productivity gains and deflation accompanying that. Now, we might see – this is what Jordy Visir, he came on the Bankless Podcast. That was the guest that you were talking about. That episode comes out on Monday. His take was like we'll see a lot of deflation as a result of AI, but we'll see inflation in some commodity-type goods, energy-type goods. Kind of the hard physical items that are getting more expensive, as their scarcity becomes greater because we need these kind of hard physical products in order to feed the AI machine. There are some economists that disagree with Kevin Warsh's take. This is Ed Yarden. He disagrees. He's bullish on productivity, but he says that stronger growth will likely push the neutral rate. They call this our star in Fed circles higher, not lower. So he said this productivity, you should actually be raising rates in that productivity because if you don't do that, he warned, you could fuel speculation, financial instability, bubbles that you actually don't want. So people are divided even if you get this productivity gain on what the outcome of the Fed should actually be, which is interesting. You brought this chart into the agenda, which is a productivity boom graph. What are we looking at here?

David Hoffman:
[17:22] Yeah, this is a report out of Morgan Stanley. It goes all the way back. It's a graph that goes all the way back to the 1960s. And it has the era of productivity boom because of the personal computer adoption from 1985 to 1995. And then again with the internet adoption from 1995 to 2010. And then we had like a kind of a bottoming in productivity right at COVID. Huge slump.

Ryan Sean Adams:
[17:44] Yeah, and a huge slump from the 2010s where just basically productivity decreased growth.

David Hoffman:
[17:49] Yeah, but it's been up since then and it's labeled AI adoption. We are likely in the early stages of another productivity boom due to AI. Again, a report from Morgan Stanley. So like big names with a lot at stake, a lot on the line to be putting their weight behind like AI adoption. And then we can go and just talk about unemployment, because unemployment and AI is also a big conversation. There's another report, this is out of UK, that says that after all this new data, three years of data after the release of ChatGPT, there is no evidence for significant impact of AI on overall employment in the UK. Surprisingly, occupations with AI exposure have actually grown faster than lesser exposed ones. And there's a bunch of just data to correlate all of this. Now, I think it's early, Ryan, because chat GBT 3.5, the thing that kind of started off all this AI revolution, was not replacing anyone's job. And I will kind of say that like competent AI is a late 2025, early 2026 thing. And so this data might be preliminary. And so saying the last the last three years of data, I think could it could be argued that it's just too soon. But nonetheless, like it is data. People are making these statements, you know, big people, big institutions are making these statements that AI is leading to productivity gains. AI is actually leading to employment, not unemployment.

David Hoffman:
[19:15] And, again, I think it's very early, but it's trending in the positive direction, which is good.

Ryan Sean Adams:
[19:20] Yeah, I think, but this is very counter to what some of the AI CEOs are saying. So Dario, the CEO of Anthropic, keeps going on the media circuit saying like this. This was just this week too. Dario Amodi, 50% of all tech jobs, entry-level lawyers, consultants, and finance professionals will be completely wiped out within one to five years.

David Hoffman:
[19:39] He needs to stop saying that.

Ryan Sean Adams:
[19:42] But you get the sense that he thinks it's true. I genuinely think he's true.

David Hoffman:
[19:46] I agree that I think that he thinks that what he's saying is true it doesn't really seem to have any nuance to it

Ryan Sean Adams:
[19:54] I just think he's just connecting some dots and saying AI agents are becoming much more capable. They're able to do these things that entry-level consultants, professional services workers are able to do. Therefore, those jobs will go away. Jan LeCun says, who's another AI leader, Dario is wrong. He knows absolutely nothing about the effects of tech revolutions on the labor market. Don't listen to him. Listen to these economists, and he lists a whole bunch of economists. I think the UK study in the point that he said that occupations with higher exposure to AI have actually grown faster than the least exposed one. That's the biggest data point in favor of AI not causing unemployment issues, but actually creating more opportunity. And this doesn't mean that, I mean, the case of the radiologist, Jensen went on to work as she talked about the radiologist, how everyone expected radiology jobs to kind of drop and go away. What's in fact happened is there are more radiologists being hired than ever, and they're becoming much more productive through the use of AI tools. We're also seeing this happen with software developers, where software developer employment's actually only gone up.

Ryan Sean Adams:
[21:03] I come down on the side that AI is actually going to not reduce jobs, but it's going to make some jobs obsolete, of course. It's going to shift job demand. It's going to make some super users of AI more valuable. And overall, I think it means that people can't keep doing their job in the same way they've always been doing it. So they're going to have to shift. But once they do shift, I don't necessarily think it's going to cause massive unemployment issues in the way that Dario says. I mean, this is not how previous tech revolutions have worked. The creative destruction powers have always produced more jobs. They've just been in areas that we can't imagine before we started the revolutions.

David Hoffman:
[21:44] Yeah, I think people like Dario and Sam Altman, they kind of think in these big grandiose terms where, no, a human will be replaced by an AI agent. And man, that is just not how things work. Our entire society is built on humans talking to other humans. And AI is not a human replacement. It is a tool like every other tool that we've ever had. And so maybe one radiologist can actually be 10 times more productive. And maybe that's why people think that like, oh, there's going to be job displacement because, you know, one radiologist, one good radiologist is actually going to equal 10 other radiologists. And so that's the way the wipeout comes. But then also at the same time, it's like how many people have cancer that can't afford treatment and who would otherwise would have demanded those services had those things been better priced because of a supply of them?

Ryan Sean Adams:
[22:36] So much more radiology demanded, right? That's kind of the Jevons paradox aspect of it, where you just keep demanding these things. There is one thing that I think they should actually be talking more about, which I do think will start to fray our social fabric in the social contract, and that is the increasing wealth inequality that...

Ryan Sean Adams:
[22:55] Probably just continue to be exacerbated by AI, in particular, like wealth gains to those with assets. This is a report from the Kobayashi letter. Wealth inequality in the US has never been wider. The real wealth gap of the top 0.0001% of US households has grown 3,500% since 1976. So here's a chart showing the wealth gap in the various tiers. And you could see, I mean, these top percentiles are just getting super gains as a result of this. This is all like digital network effects at work. And I think this will be exacerbated by AI productivity as well, where a lot of the gains will go to the 1% who are leveraging AI to continue to be hyperproductive. And of course, these gains are going into asset holders and capital holders rather than labor. This is another chart. U.S. Wage growth turns more K-shaped. The gap is widest since 2015. You can see higher income individuals are receiving higher wage growth than the lower and middle. Lower and middle are barely keeping up with inflation. So this is a continuing fraying, I would say, of our social fabric, like wealth inequality, inflation. It has a way of biting back in society and causing political problems, as we're seeing now, the rise of populism, etc.

David Hoffman:
[24:22] Yeah, I definitely think the gap in wealth inequality has got to be an input into consumer sentiment that we know has been just very, very low. Yeah. And it's kind of like the tail that wags the dog. Like, you're going to see that show up in 2028 politics. Absolutely.

Ryan Sean Adams:
[24:39] Well, do you see, but like the White House is tweeting stuff like this out, you know, So this is a picture of Trump. S&P 500 and NASDAQ close at record highs. Big picture of Trump smiling.

David Hoffman:
[24:50] That is an Iran war victory lap that he's doing.

Ryan Sean Adams:
[24:54] But that's his scoreboard, right? It's S&P, it's market prices, it's equities, it's stocks, right? What Americans care about, the average American cares about is their cost of living.

David Hoffman:
[25:04] Which is higher because gas is higher.

Ryan Sean Adams:
[25:07] Yeah, exactly. So that's going to play into our midterms, I'm sure, into our politics into the future. David, we got to talk about the DeFi hack, KelpDAO, the bank run on Aave, $300 million hacked, $200 million in bad debt from Aave, all of this. But before we do, we want to thank the sponsors that made this episode possible.

David Hoffman:
[25:28] The $280 million exploit that is rewriting the fabric of DeFi, probably, as we said in the intro, the most significant consequential DeFi hack, not even breaking the top 10 in terms of dollar value lost. I think it's something like 13, 14 or 15. So like not small, like 280, 290 million dollars.

Ryan Sean Adams:
[25:49] That's crazy that a $300 million hack doesn't break the top 10. Yeah.

David Hoffman:
[25:53] Yeah. Yeah. You definitely include a lot of the centralized exchanges. That's right. Those are some million dollars. $1.5 billion Bybit hack. And so centralized exchanges here is definitely, it's probably a top 10 DeFi on chain hack.

Ryan Sean Adams:
[26:04] Definitely.

David Hoffman:
[26:04] But nonetheless, like the reason why this is so consequential is because it touches everything. And so it was pretty sure the first ever large exploit of Aave. I'll get into the details. So this happened on April 18th. It's assumed that this is North Korea. This is assumed that it's Lazarus Group. Exploited the Kelp Dow's implementation of the Layer Zero Bridge.

Ryan Sean Adams:
[26:28] And just to be clear, you said this is an exploit of Aave. It wasn't actually an exploit of Aave itself, actually. The bad debt rolled over and is causing some pain for Aave depositors, of course. But Aave itself was not exploited. I just want to make that clear.

David Hoffman:
[26:42] The code of Aave was not broken. Right. An economic exploit of Aave, I still will call an exploit.

Ryan Sean Adams:
[26:50] A failure of some of its collateral, that's for sure.

David Hoffman:
[26:52] Yes, it's a risk management failure, and it's not like a marginal one. It's like a big one, but we'll get into this. So, like, Layer 0, it's a bridge. KelpDAO has this token called RSETH. It's a restaked ETH from KelpDAO. They use Layer 0 to have it exist across many, many Layer 2s, And so you can take your RSEth and have it be collateral in the Arbitrum version of Aave or on base or just like spread it around all the chains. When you do that, you give Layer 0 the ability to lock up tokens on one chain and then mint IOUs on another chain. That's the part that got exploited. There is a validator network. Layer 0 has a DVN, a decentralized validator network that KelpDow uses, that everyone around Layer 0 uses. And that is just like an auditor, a verifier of the validity of messages being passed around.

David Hoffman:
[27:42] KelpDow only used a one-of-one DVN, and so it only took that one-of-one verifier to be exploited for this attack to occur. About 40% of LayerZero's customers, clients' implementations use a one-of-one. So, you know, there's a big blame game going on here. Some people will blame LayerZero and say, your guys' software got exploited. This is on you. That is a true statement. The other people will say, well, KelpDAO should have been using something more robust than a one-of-one because they had $300 million at risk because being secured by only one validator node, which is also true, also a true statement. When the North Korea was able to mint all of this RSE that it should not have been able to. It was able to deposit these tokens into Aave as collateral, and then they were able to withdraw Ether as a result. And so basically gave Aave fake vapid tokens, and then withdrew real Ether as a result.

Ryan Sean Adams:
[28:49] And they did that because this is the fastest way to get liquidity, to actually get Ether as cash back rather than just, you know, market selling all the RSE, if they would have received far less cash, better to deposit it into Aave and get the cash that way.

David Hoffman:
[29:03] Overall, incredibly sophisticated attack. A lot of moving parts that on-chain data shows that Lazarus Group was prepping for months ahead of to exploit this attack. So they knew that they had this exploit available to them. They patiently waited until they just decided it was the right time to take the $300 million of opportunity, and then they got out, not with actually all of the money. And so there is another event that is part of why this is such a big deal. About $70 million of this exploited funds was on the Arbitrum implementation of Aave, And Lazarus Group, North Korea, left some of that exploited funds on Arbitrum for a couple days. And the Arbitrum Security Council, which is a 9 of 12 multi-sig, got nine people to agree to freeze and recover $70 million of the stolen ETH. And so unprecedented. I don't think this has ever happened in a layer two, an asset seizure. What happened was they just basically changed the state.

David Hoffman:
[30:05] No transactions were rolled back. No blocks were rolled back. But they just moved the Ether from one wallet to another. I think that's how that worked. And recovered the funds, which you can presume will go back to people who lost the funds who deposited into Aave.

Ryan Sean Adams:
[30:21] There's so much to discuss here. I mean, just to underscore, this was a very sophisticated nation state level attack. I mean, some of the ways they infiltrated where they like replaced RPC nodes with malicious versions. Anyways, incredibly sophisticated on the layer zero side of things. I mean, there is a question as to who's to blame for this. And you indicated, hey, layer zero has some blame. KelpDAO has some blame. There's another party we didn't discuss as much, which is Aave. I mean, their risk parameters let a significant amount of RSE into the global system. That is part of the reason. Now, some of the Aave loans, the Aave system is under collateralized by about $200 million.

Ryan Sean Adams:
[31:03] So Aave has a role in this. You could also say, and this was an argument made by, I saw Doug Colkitt and others, that really the roll-up centric roadmap is to blame. He says this, can't help but reflect on how much of this mess is downstream consequences of the roll-up-centric roadmap. For years, we were told L2s are just Ethereum, roll-ups share a security zone, every app needs its own chain. He's basically saying the roll-up-centric roadmap is the reason we have all of these bridges that are multi-sigs, you know, the UX of moving from Ethereum. Ethereum mainnet to a rollup wasn't fantastic, so we had to put in these security holes, these bridge-based multisigs, and that's how a lot of these hacks are actually happening, including this one. It was a bridge hack. And so it was because Ethereum had a bad architecture in place and a bad plan for the rollup-centric roadmap that this hack happened. And of course, you could use the roll-up native bridges, optimistic fraud-proof roll-ups on something like Arbitrum, but that's, you know, seven-day withdrawal period. So no one practically uses that. They all use solutions similar to Layer 0. Of the different pieces of blame, David, how would you allot the blame that goes around here?

David Hoffman:
[32:18] Layer 0 got hacked. So I think it's fair to start with them. Yeah. Maybe I want to zoom out. DeFi as a whole, collectively, is not built to withstand these attacks because there is trust going around. And so Aave trusted Layer 0 to not get hacked. Kelp also trusted Layer 0 to not get hacked. Layer 0 trusted Kelp to use an appropriately sophisticated level of safety when using their own protocol. Everyone was kind of trusting each other to operate as they intended. And that is not the correct disposition to build in DeFi. If you are going to build in a public permissionless protocol, you actually need to assume that every component of your stack is malicious, not in alignment with you. And that was the universal failure.

David Hoffman:
[33:19] And so, but I'm happy to play the blame game. I like drama. Know like layer zero got infiltrated and exploited so like they take some of the blame kelp dow had the reason why i i said earlier uh layer zero had like 47 percent of its implementations using its one-of-one setup rather than a two of uh what uh a two of two or three or three or whatever well why did they choose kelp dow if you know kelp dow is just one of many one of ones well it's because kelp dow had the most economic bandwidth at at risk and so kelp dow shouldn't have been the tallest poppy They should have had a 2 of 2 or a 3 of 3 or a 4 of 4. Just something better than a 1 of 1. And so Kelp Dow also takes some risks. And then Aave needs to fundamentally reconstruct its risk parameters. It needs circuit breakers. It needs rate limiters so that somebody can't deposit $300 million in one block and withdraw $300 million in the next block. We need to be a little bit more pragmatic here. Like these are like nuclear weapons of mass destruction in terms of like financial tools. And we need to just like, if you want to withdraw $300 million, I'm sorry, you can wait two days, like you can wait a couple days to make sure that you are not North Korea and our DeFi apps need to be built around that assumption.

Ryan Sean Adams:
[34:38] So the whole system has failed at various levels.

David Hoffman:
[34:41] The whole system needs to be rebuilt. Which is why this is such a consequential exploit.

Ryan Sean Adams:
[34:47] Right. The other philosophical debate here or consequence is the arbitrum recovery, which you talked about. And so the Security Council, this 9 of 12, some people weren't aware that this could actually be done, including, it seems, like North Korea.

David Hoffman:
[35:02] Question. Did you know or think that this could be done or were you surprised?

Ryan Sean Adams:
[35:07] I think hypothetically, I knew it could be done because it all comes down to this L2B, right? So look at all the, remember the pie slices on L2B? Well, there's this one pie slice that's called exit window that's still yellow. This is why Arbitrum is a stage one rather than a stage two, which says this, the security council can upgrade with no delay. So there is this nine of 12 group that can upgrade anything. They basically have root access to anything on Arbitrum, any state on Arbitrum. And they could do whatever they want if they get 9 out of 12 to agree. I knew that hypothetically that was a possibility, but I was still surprised that it happened. And I didn't actually know that North Korea had the 70 million on Arbitrum at the time. Obviously, North Korea didn't think that this was a possibility because as you said, it was unprecedented. They wouldn't have kept it there. So there's a debate though. It's kind of a code is law type of debate, right? Which is, should Arbitrum have done this? What about immutability? What about, you know, code is law? And some people are saying, here's a critique here from a poster. This is a perfect example of how when left to their own devices, people will overwhelmingly cheer on the loss of freedoms for the sake of security. Obviously, in this case, North Korea is indefensible, but that's just how it starts.

Ryan Sean Adams:
[36:26] I'm personally only really in favor of things like this. This is the intervention when it's survival of the chain itself that's at stake. So there was some division, right? Some people were saying, oh, yeah, like, well done. You stole from the thieves. You got the funds back. You did right by your users. Well done, Arbitrum.

David Hoffman:
[36:44] It was the right thing.

Ryan Sean Adams:
[36:45] This is the right thing to do.

David Hoffman:
[36:47] It was the right thing to do.

Ryan Sean Adams:
[36:47] Others said, no, this is a breach of decentralization and immutability and code is law. What's your take on this debate? Thank you.

David Hoffman:
[36:57] I, yeah, I understand this slippery slope argument of like now, now this has set a precedent. This is almost like a court case of sorts. Like this is a legal precedent of sorts that if you have assets on a layer two and the layer two has the means to protect your, your exploited assets, if they ever get exploited, then that layer two kind of needs to do that because Arbitrum did it this one time. So we know that it's possible. And so now not doing that is much more of a conscious, explicit choice than it was in the past. And so it kind of puts pressure on layer twos to like, you either need to actually get to stage layer two so you cannot do that. Or you need to remain at stage one and then make codified rules about when you do and when you do not do that. And that was not, and so now that impacts the whole entire industry. And honestly, not even layer twos, like Solana validators might need to like make a decision around what this looks like for them or any other like layer one. This isn't even a layer two versus layer one conversation.

Ryan Sean Adams:
[38:04] That's great. I mean, I think ethically, I think morally, if you have the ability to do this, you should do it. You kind of have to. Now it's a question for Arbitrum in all layer twos, whether they want to keep this responsibility or not, because what this responsibility implies is taking intervention in maybe far less severe cases. Maybe they have not only moral and ethical obligations around that, but maybe they also will have legal obligations in the future. Exactly. And so I was thinking of this as like- Well.

David Hoffman:
[38:32] Did you see the statement out of the Arbitrum DAO was like, we seized the $80 million downstream of communications with law enforcement oh like law enforcement was a part of the influence to make this choice

Ryan Sean Adams:
[38:45] Right and so this is i think this is going to be a hollowing out of the middle i think layer twos and maybe all crypto protocols will really have to make a choice do they go full decentralization like full stage two in this case where they don't have the ability to intervene even if they want to or do they intervene in many cases do they automate the intervention do they become a bit more like fintech, have the ability to block fraud, to reverse hack transactions and all of this. And it's unclear what users would prefer. In the case of RSE, of course, the RSE holders on Arbitrum, I'm sure they were overjoyed that Arbitrum had the ability to freeze and redeem some of their stolen RSE, right? But I mean, I guess what's good about this is we have the experiment playing out on Ethereum, which is like never going to do this.

David Hoffman:
[39:38] This would not have happened on the Ethereum. If this was on the layer one, Lazarus Group would get away with it. That's right. And they did.

Ryan Sean Adams:
[39:44] That's right. So the bar would be so much higher for something like this to actually take place. And so we have that experiment. I just wonder what happens with the layer twos, right? The base put out a release this week saying they were getting closer to stage two. They have the tech in place to actually go to stage two with their Azul upgrade that's happening on May 13th. They have multi-proofs. This is TEE and ZK multi-proofs. So the ability to kind of get to stage two, they just have to disband with the Security Council, not have the ability to upgrade or to do these state changes in the future. And I'm not sure what direction they're going to go in.

David Hoffman:
[40:20] Wait, so is it planned that they will go to stage two on May 13th?

Ryan Sean Adams:
[40:26] No, that's not a stage two on May 13th. They just have the...

David Hoffman:
[40:30] They have the technology. They need to make the moral choice or the strategy choice about, like, do we want this for us and our users?

Ryan Sean Adams:
[40:38] Yeah, and I mean, we did an episode earlier this week. We had two, I guess, guests who had different views. They said, oh, base will move towards stage two because they don't want the responsibility. They don't want the liability.

David Hoffman:
[40:49] Yeah, and so it's an interesting predicament because I think that is worse off for their users and it's better for Coinbase to not have the liability. Coinbase gets to do more this way. They get to kind of probably get to put more things like securities on chain because they aren't doing the transaction ordering responsibility and other things like this. And so it just benefits Coinbase by removing liability, not necessarily to the benefit of their users.

Ryan Sean Adams:
[41:17] Yeah, maybe you could argue that. It depends. They might go in that direction. The other guest was making the opposite case, basically, that this will push Coinbase to be a bit more like fintech and automate some of the freezing discovery here. I mean, that seems to be the direction that Circle is going with USDC, for instance.

David Hoffman:
[41:34] The worry that I have if Layer 2s and companies like Coinbase choose to go in the more fintech-y direction is that they're probably going to want to have more like custodianship and control over user assets yes this is like well north korea is not going to hack you guys if you stop being so dumb with your bare assets and keep getting phished all the time and putting them into stupid protocols so we're going to build you a fintech app and you can put your money in our custodial wallets and we're going to protect you guys that way and then all of a sudden this whole like bankless thing that we're doing is like uh not not it's not really the vision that we kind of thought but

Ryan Sean Adams:
[42:12] Maybe that's an okay fit for layer twos so long as that doesn't happen on Ethereum. Maybe, yeah. Remains to be seen. There's still some issues to deal with, which is like DeFi is still in limbo. So there's a bank run on Aave. You know, a bunch of assets could no longer be withdrawn. And so there's, at the end of the day, still $200 million in bad debt wrapped up in Aave. So what are we going to do with that? This all comes down to, I think, KelpDAO and what they decide to do next. And at a high level, there's probably two different options for kelp dow they have to decide um how they split the loss to rse holders so they could do option one which is spread the loss to everyone to all the rse holders both on ethereum mainnet and to all the layer twos and of course the the the effect happened on the bridge layer two assets not mainnet assets so that would be.

David Hoffman:
[43:05] A 15 haircut cut across the board for everyone

Ryan Sean Adams:
[43:08] Equally. That's right. And that would bring Aave's bad debt to like $120 million or so. Aave has an insurance fund for $55 million. What do they do with, you know, the $70, $75 million remaining? Well, who knows? Aave governance would have to decide that. Or... Kelpdow could decide to hit only the l2 users so technically the rs eth on ethereum l1 was just like not affected as always uh remained fully fully backed and fully collateralized but.

David Hoffman:
[43:35] That would mean the argument there is that rs eth holders on the ethereum level layer one never chose to have themselves exposed to the bridge so therefore why do they deserve the haircut because they chose safety so why expose them to the thing that they never expose themselves to It was a fair argument.

Ryan Sean Adams:
[43:52] Yeah, I guess so. But if they did that, if they pushed it all to the L2 RSE holders, they could lose 70% to 75% of all their values. They'd get pretty much wiped out. So that's the main point of decision-making next, and then everything will fall downstream of that. So there's got to be a tremendous amount of pressure on KelpDAO right now.

David Hoffman:
[44:14] Yeah, yeah. Overall, I'll kind of just zoom out and say that this is just a very real-world event happening to DeFi that I think kind of just informs us of like a lot of the things that happen in TradFi. We are in our TradFi era, Ryan. I don't know if you've noticed everything about cryptos like TradFi these days. Except bare assets. Except bare assets.

David Hoffman:
[44:35] But like the lessons that we learned here is like we need circuit breakers and like rate limiters. And maybe this doesn't really look like traditional finance because they don't really have this bare asset problem. But one of the guests on our podcast, which I recommend everyone just go listen to that podcast with Odysseus and Dan. It came out yesterday.

David Hoffman:
[44:54] Odysseus wrote this article that was like, we need DeFi to start looking like our aeronautics industry, which is building a piece of a system that every part of that system is designed to fail and the system remains intact. And that was not the way that our DeFi ecosystem is built. Our DeFi the reason why this hack happened and this exploit happened was because only one thing failed and it caused the whole cascading set of interdependencies to also fail with it and we just cannot in inside of an adversarial environment we just can't build that way and so all of the fabric of DeFi needs to get rewritten under this assumption of like all components will fail and you need to mitigate harm for the day that they do and so like you know the silver lining here is like we actually have an opportunity to build DeFi in a way that onboards and is more secure to more TVL. And so it hurts. It sucks. Like the morale in the industry wasn't even high to begin with. And now we have this.

David Hoffman:
[45:54] But like our work's cut out for us. And at least the path is clear. And like we're going to do it. We're going to get there. And at least we know the destination. And that's exciting for some reason.

Ryan Sean Adams:
[46:05] What doesn't kill DeFi makes it stronger. This has not killed DeFi. And I think we're going to come out of this stronger. More to talk about coming up next. We're going to talk about the productive money thesis for Ether and the case for why Ether could be some point in the future. Not now, David. $250,000 per ETH. Let's go. I kind of like that thesis, that number. We'll do some updates on the Clarity Act and other things. Before we get there, let's get to the sponsors that made this episode possible. The Etherealize team and Mike McGinnis put out this paper this week that you and I thought was fantastic. We did an episode on it. It was called The Productive Money Thesis, and this is a thesis for Ether, the asset. David, I thought this was the best thing I've read on Ether since you wrote

Ryan Sean Adams:
[46:47] the triple point asset thesis, since the meme of ultrasound money. That was a long time ago. Since the meme of ultrasound money came into existence, it felt like a cousin of those two ideas.

David Hoffman:
[46:58] The modern reincarnation of the thesis around ETH.

Ryan Sean Adams:
[47:02] That's right. And part of the reason it was powerful is because it was a synthesis between Menger, Carl Menger, notable economist. He laid out the attributes of what makes a good money, and Ether has many of those attributes. That's what the thesis is arguing. And also Warren Buffett, who quite famously just like only invests in and buys productive assets, assets that generate capital, generate yield over time.

David Hoffman:
[47:25] Compound, compound, compound.

Ryan Sean Adams:
[47:27] Compounding, always compounding. And so the author of this post argues essentially Ethereum is both of those things. It is bringing the money-like properties that Menger values and the productive yielding capital compounding asset that Buffett admires so much and it's pushing them into one single asset, which is ETH, not just a money, but a productive money. You know, we've said often the most bullish thing for Ether is to be understood. I think this is a paper that really helps Ether be understood to investors. There's a whole website about it, ProductiveMoney.org, that shows the productive money thesis, compares Ether, the asset, to gold and to Bitcoin on all of these dimensions that Menger cares about so much, scarcity, fungibility, divisibility, and really makes the case. It was a well-written paper, a fantastic podcast guest in Michael and Vivek who we had on. And I think this is worthy of pushing far and wide. There were some dissenters about this idea. Of course, David.

David Hoffman:
[48:31] Yeah, ETH always has its haters.

Ryan Sean Adams:
[48:32] Yeah, I read one from Scott Melkor, you know, the Wolf of Wall Street guy. So his main take was like, hey, don't get too out of yourselves. Like, ETH has so far to go on this score. Stop focusing on Ether as a money just focus on the network you know Bitcoin already has that covered Bitcoin is special Ether is not you're so far away from gold it's embarrassing to even talk about your prices of 250k like what are you smoking so yeah, Obviously, there's non-believers out there. What was your take on this overall, though?

David Hoffman:
[49:11] The pushback is normal and expected because, again, Ether just rubs people the wrong way for some reason. $250,000 is a very large number. That is how many times larger? A hundred times larger than we are now?

Ryan Sean Adams:
[49:27] Okay, let's just specify. That wasn't a price prediction in the article itself. That was a, if you, if Ether became a civilizational store of value asset of the size that gold is and Bitcoin is, that's what it would be worth.

David Hoffman:
[49:45] Sorry, Ryan, that's a price prediction. You're just saying a price prediction and saying, well, actually, it's not a price prediction. But like, why are you saying the number, though?

Ryan Sean Adams:
[49:54] Let me ask you, do you think this is crazier than Michael Saylor saying that Bitcoin is going to $21 million per Bitcoin?

David Hoffman:
[50:02] I think that is also crazy.

Ryan Sean Adams:
[50:04] It's in the same order of magnitude of craziness, right?

David Hoffman:
[50:07] So just crunch the numbers, Ryan. So if Saylor thinks that Bitcoin is going to go to $21 million, it's currently at $80,000. That is a 262x from its current price. And as we just did the math, $250,000 Ether is a little bit more than a 100x. Yeah. And so that is the sailors 21 million is roughly, scientifically speaking, 2.6x times more crazy to answer your question.

Ryan Sean Adams:
[50:35] Yeah, exactly. And also, I just think this moves the Overton window to talk about Ether the asset more. You know, that's been one of our criticisms of the entire crypto community and just investors in general. Now, this obsession with Ethereum, the network without talking about Ether, the asset, this gives a nice narrative to Ether, the asset as a store of value asset, which I think in the future, increasingly, people will come to view it as such. But I guess we're still early with $2,000 Ether.

David Hoffman:
[51:02] Yeah, yeah. My kind of bullish, I'm as bullish on Ether as the next guy. Maybe that's not totally true these days. But I will say that the bowl case for Ether kind of just depends on Bitcoin rattling apart. and we do kind of see that like fees keep on dropping quantum is an existential threat And so like Ether, I think, will kind of always be a call option to like leapfrog Bitcoin because people realize that actually safety and security and longevity are the properties that you want in your money. And Bitcoin doesn't really have as many of those. But anyways, since we're into the world of making predictions, let's talk about prediction markets. First off, prediction markets are adding perps, perpetuals, perpetual futures. Both Polymarket and Kalshi have announced their perpetual futures platform. Now, this is regular perps as opposed to prediction market perps. To my knowledge there's no such thing as a prediction market perp so this is like like 10x long bitcoin or 10x short like nvidia or something uh regulated inside the united states or at least call sheets is regulated inside the united states i'm assuming polymarket is offshore because that's where polymarket is really based uh and so interesting that the prediction markets are going into like an adjacent strategy at an adjacent vertical that is separate from prediction markets but they're just saying, hey, the window is open for us to build a Perps platform. Let's go ahead and do that.

Ryan Sean Adams:
[52:24] The window is open. They can expand. Perps are a very exciting, interesting product. A lot of growth ahead. They have a common user base, I'm sure. So this would be competing against Coinbase, Robinhood, Hyperliquid, Kraken, all of the other Perps asset investment and trading platforms out there. It's a good move.

David Hoffman:
[52:45] Yeah. Speaking of prediction markets, did you hear this story, Ryan, about this one, actually surprisingly not small market about the temperature in Paris prediction market and it getting exploited? Did you hear this?

Ryan Sean Adams:
[52:57] I saw something about this. Yes.

David Hoffman:
[52:59] Okay. Okay. So there were two odd temperature spikes registered at the Charles Dugall temperature. That's the airport outside of Paris. Temperature sensor on April 6th and April 15th. Each of them just lasting a few minutes. Also, with no corresponding changes in nearby temperature monitors or any sort of like humidity or wind data. So people are like, why did the temperature just jump seven degrees?

David Hoffman:
[53:26] Both anomalies occurred precisely at the threshold needed to resolve this one polymarket contract about the highest temperature in Paris that apparently this event happens every single day. So like we can look at it right now, the highest temperature in Paris on April 23rd. And then you can go and bet on April 24th and April 25th. It's a surprising amount of volume. There's $190,000 volume on today's market. And on yesterday's market, it was another $180,000 of volume. And it was just weird that there was this temperature spike on April 6th and then also on April 15th that paid out $14,000 and $20,000 respectively. And at least one winning account had been created days before the first anomaly, suggesting that there was some premeditation about this lucky speculative bet. There has been a criminal complaint filed by entities in Paris about this. And somebody suspected, this is unconfirmed, but this is why it went viral, that somebody is just taking a heat gun or like a hairdryer or a lighter or something and is pointing it at the thermometer right as they have like a $10,000 bet on the line. And why this is a problem is because the oracle for Polymarket, the Paris temperature of Polymarket, is just this one... Thermometer. And so whatever the thermometer reads is the outcome.

Ryan Sean Adams:
[54:55] It's a meat space oracle attack, I guess.

David Hoffman:
[54:58] Yeah. Funny.

Ryan Sean Adams:
[54:59] What are the chances this is somebody from North Korea? Just making their way over to France and hacking this market too.

David Hoffman:
[55:07] I think it's just some hooligan who's having a good time.

Ryan Sean Adams:
[55:09] You're going to get busted. This is not going to work.

David Hoffman:
[55:12] Speaking of getting busted, Tether has frozen $344 million in Tether on Tron in coordination with OFAC and U.S. law enforcement. Biggest ever. The largest stablecoin freeze ever, $344 million. We do not know why. We do not know whose assets got frozen.

Ryan Sean Adams:
[55:31] You have a guess.

David Hoffman:
[55:32] I have a guess. OFAC. You know who's doing what OFAC is busy with right now, Ryan?

Ryan Sean Adams:
[55:37] Yeah, I bet they're Economic Fury.

David Hoffman:
[55:40] Operation Economic Fury. $344 million in Tether on Tron. You know who might be doing that? You know who we know works with Tether on Tron? The IRGC. I'm making the claim that this is the IRGC's $344 million.

Ryan Sean Adams:
[55:55] I bet we'll find out pretty soon. I bet we'll find out by the next roll up. Next week we'll report in on this.

David Hoffman:
[56:00] Do we just get that money? Do we just have that?

Ryan Sean Adams:
[56:02] Who gets that?

David Hoffman:
[56:03] Do we? Is it going to the Strategic Reserve?

Ryan Sean Adams:
[56:04] U.S. government?

David Hoffman:
[56:05] Yeah.

Ryan Sean Adams:
[56:06] They probably can do that. It's kind of like the Arbitrum Council there. Just freeze and reroute that. They have firmware level access there.

David Hoffman:
[56:16] And for all the crypto natives out there who are still paying attention to on-chain stuff and new chains, MegaEth. The MegaEth TGE is happening on Thursday the 30th. That is next week. They put their TGE behind a bunch of KPIs. One of those KPIs, they just needed to hit one of the KPIs. One of the KPIs was 10 live apps. They had their 10th live app go live yesterday. Nice. And so now there is a TGE countdown for seven days. So we're going to get the MegaEth token trading on chain on next Thursday, which is pretty exciting. Hyperliquid is currently valuing MegaEth at $1.7 billion. Which is above the pre-sale price. It's hanging in there. Which is the pre-sale was at $999 million. So we are at $1.7 billion. So all pre-sale buyers are up. And just for context, I think we can also check in on Monad, which is for some reason like lumped together with MegaEth. Both are very high throughput, high performance EVM chains that are kind of launched at the same time. The Monad token launched a while ago, currently clocking in at $3.3 billion fully diluted. also above the presale price of 0.025 cents. It is at 0.032 cents. So it's nice, Ryan, to have healthy tokens, healthy new tokens, because... You know, usually in bear markets, when consumer sentiment, if you will, is down bad, prices don't go up. And so the fact that prices are above pre-sale prices, I think, is pretty optimistic.

Ryan Sean Adams:
[57:42] It's hanging in there, hanging in there. There's not much supply, though, I will say, on this Monad, right? So the market cap, you know, supply, 386 million. Yeah, a little bit over.

David Hoffman:
[57:51] Like 11% flow. 11% flow.

Ryan Sean Adams:
[57:53] Yeah, that's not a lot of flow. But they're hanging in there. You are right about that.

Ryan Sean Adams:
[57:58] David, let's end with this. I am becoming increasingly concerned with governments taking action on what you might call device level, know your customer, KYC. So this is an age verification bill coming out of the U.S. Congress. And it's not really an age verification bill because what it is specifying is that every operating system. So Windows, Mac OS, iPhone, Android would need a proof of age requirement in order to just set up the device as part of the install package. And what that means practically in order to prove your age in a verifiable way,

Ryan Sean Adams:
[58:39] that means government ID, that means a photo. It means something we're quite familiar with in crypto, which is KYC. The implementation of this that we've seen in other setups like Discord, for instance, who's implemented age verification, is you have to send your driver's license or your passport and a selfie to a third-party company called Persona, and they verify that you are indeed who you say you are, okay? So imagine if this type of legislation gets passed, and that is the default, it would effectively mean KYC, know your customer for every device that anyone uses in the US, right? And for anything that's connected to the internet. That destroys...

Ryan Sean Adams:
[59:24] You're talking about what are the implications for crypto, basically. We could have private crypto, but if we have firmware level at the device at the operating system level, KYC, none of that matters.

David Hoffman:
[59:36] Wait, this is just for phones, right?

Ryan Sean Adams:
[59:39] No, this is broad enough that it would cover any sort of device. Now, this is a draft bill.

David Hoffman:
[59:45] My computer, anything that talks to the internet. That's right. If it talks to the internet, it has to have a government-issued ID to go along with it.

Ryan Sean Adams:
[59:52] That's right. That's wild. This is a bill in Congress and you'd read the full text. I don't think that this will actually make it through the process, the bill creation process in Congress. But there are about like four or five states that have already passed through the state legislators, something pretty similar. So I'm very concerned about the Overton window shifting on this. And it's terrible from multiple angles. One is the way they're actually implementing it, the defaults, where it's your government passport KYC to Persona. I mean, that creates the biggest honeypot for hackers. That is a bow wrapped gift to North Korea, where they get identification information of every single American who uses a device. And like we have the tech to do this differently zk passports for instance that's a way to do if you're going to do this you could do government mandated uh identification age verification without actually creating a honeypot and giving up your passport and a selfie photo so from that perspective it's offensive the other the other way it's offensive is of course like, This is a government mediation of any device or connectivity.

David Hoffman:
[1:01:05] Right? The amount of surveillance that can come out of this. You know the Marauder's Map from Harry Potter where you have the names running around Hogwarts? Yeah. This is just a Marauder's Map for the United States government of just like names attached to devices running around in real time. Yep. That's scary.

Ryan Sean Adams:
[1:01:21] So it's not great. And they're already rolling this out. I don't know if you've seen this was a couple weeks ago in Claude. For new Cloud users, this is not fully rolled up, but you can look at this in Cloud support. They're already requiring the same KYC, Persona, where you have to submit a government ID and also a selfie, Toad Persona, in order to start using Cloud. And they're doing this for age verification reasons. And this is Cloud and Anthropic just adopting this, not by government regulation. They're trying to be kind of the good boys that are staying ahead of this thing. Anyway, AI, like KYC for AI, right? KYC for devices. We got to keep this stuff on our radar because this could create, you know, like a massively dystopian surveillance state for sure.

David Hoffman:
[1:02:08] Ryan, I know you're a Claude power user. I know you like your Claude. If you had to continue to use Claude to give up your, but you had to show your ID to Anthropic, would you do it?

Ryan Sean Adams:
[1:02:19] What else are you supposed to do, right? I think I would run it in parallel to some sort of self-sovereign system that I have to go figure out how to set up, right? And I would have these two systems in parallel.

David Hoffman:
[1:02:33] So you would... But how do you just not erode yourself to the good UX version? Because your self-sovereign AI is going to be so cumbersome and produce worse results for you.

Ryan Sean Adams:
[1:02:46] I know. That's the whole prisoner's dilemma coordination trap we have right now. That, you know, I hope these don't become system defaults or else we're all in a world of hurt.

David Hoffman:
[1:02:56] Yeah. I think the idea of government logs of humans is always scary.

Ryan Sean Adams:
[1:03:04] Yeah, I agree. Well, let's end it there. Got to let you know, none of this has been financial advice. Crypto is risky. You could lose what you put in, but we are 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.
---

*This article is brought to you by [MetaMask](https://www.bankless.com/sponsor/metamask-1776260643?ref=podcast/rollup-300m-defi-hack-fallout-arbitrum-freezes-funds-ai-deflation-debate-productive-eth)*