ROLLUP: Markets Turn Bearish | Trillion Dollar Bank Launches L2 | Massive Pudgy Airdrop | DeFi Drama

Bankless Nation, it is the third week of December. It's time for the Bankless Weekly Roll Up. I've got Anthony Sesano here. David Hoffman is off uh not climbing mountains this time, Anthony, but he's like apparently circling around them somewhere in Argentina right now. So this is like a hike expedition, not a mountain climb expedition. How you doing, man? Actually, it's super late where you are. So I want to thank you for doing this uh recording. You're all the way in Australia. It's like, I don't know, it's like 12 a.m. or something like that. And I know you always wake up bullish, Anthony, but my question to you is do you also go to bed bullish?

Yes, well, thank you for having me on again. And yes, I wake up bullish, I go to bed bullish, and I I send to you in a message before I said, it's okay if we have to record this late, because I'm always bullish on ETH, so it doesn't matter.

Thanks, fan. Uh well, we appreciate that. I I'm amazed actually that you go to bed bullish because like I tend to wake up bullish and then just the day, you know, if you spend enough time on crypto Twitter, it like beats you down until you're like not as bullish as when you woke up and you have to like go sleep and dream about like you know high crypto prices in order to refresh yourself for the next day. But I'm impressed that you stay optimistic and you're able to go to bed bullish too.

Yeah, yeah. I mean, I think it it can wear everyone down over time, depending on how much time you spend. You know, people get burnt out, things like that. But uh, I don't know, like it's it's it's for me, I I spend the whole day talking to a bunch of different people within the ecosystem, just uh researching a lot about Ethereum, checking out all the new updates, and it just keeps me going, keeps me bullish. Yeah, it's just very hard to be bearish. Like even if the prices are going down, just so much stuff happening in Ethereum, which obviously we're gonna talk about a bit today. But yeah, it's just very uh very easy to be bullish, I think.

Well, um, speaking of prices going down, that is uh pretty relevant to the topic today. So prices are down, Anthony Sasano. We're gonna talk about that. Also, want to get some takes from you and uh others on where we are in the cycle. So there was the Fed chair, Jerome Powell. There was a meeting this week. They did something with interest rates. We'll talk about that. Also, some big layer two news on Ethereum. So Kraken's Inc., this is their layer two. It hit mainnet. This was unexpected. This was ahead of schedule. We'll talk about that. Also, there's a $1.5 trillion bank launching a layer two. What does that mean? And ENS, you know, the.eth domain names, they picked their layer two. So we'll discuss that too. Pudgy Penguins also did an airdrop. We'll talk about that. There's some DeFi drama. I'm gonna get your takes on this. We've got crypto developer numbers, a whole report. And uh guys, stay tuned to the end because what we're gonna do is I'm gonna get Anthony's dot ETH address. I'm gonna plug it into the bankless on-chain version of Spotify Wrapped, and we're gonna actually see his score to see how bankless he is, what he's been up to on-chain this year. So, all of that and more, thank you guys so much for tuning into the bankless weekly roll-up. All right, Anthony, let's get to prices. And um, you know, not as good as they have been previously, but actually, at least at the time of recording, we're still up on the week. The last time we recorded, we're up on Bitcoin about 1.5%. So Bitcoin is hanging out at 101,000. So we're still above 100K. We've got an ETH price down more significantly, down about five to six percent at the time of recording, uh, from 3,900 last week to 3,682. And the big question is, are we down because the Fed cut interest rates? Uh, I thought cutting interest rates was a good thing, but apparently, some of the news, the the the Fed had their meeting this week bringing the target interest rate from 4.25%, uh, for sorry, from 4.5% to 4.25%, but they indicated that there would only be two reductions in 2025. And the market was hoping for four reductions, not two. What's your take on the the prices this week? And like in general, like why are we down? I thought this was a bull market. I thought we were just like infinity up only.

Yeah, I mean it it can feel like that. I think once you get towards the ends of a bull market, you will start to get like that up only every day or every week for a for kind of a few weeks or a couple months or something like that. But I I I think people obviously always need to zoom out and kind of contextualize things. One week worth of price action is not really going to tell you much. And people always look for different reasons as to why movements happen. Obviously, today people will be pointing to the Fed stuff. Uh tomorrow they'll be pointing to something else. So for me personally, I don't tend to pay too much attention to the short-term kind of movements. I tend to zoom out. And I think on both ETH and BTC, they they look really amazing when you when you zoom out there. I think ETH honestly, obviously it has lagged uh for a little while now, lagged BTC. It usually does do that um until later on in the bull market. But I think if you actually look at what ETH is doing, it's consolidating between around 3,600 and 4,000. And I feel like 4,000 just seems to be this very strong resistance for some reason on ETH. Um I I say for some reason, but I think it's quite obvious why, because if you actually zoom out over multiple years, you can see that 4,000 has always been a tough area for ETH. But I feel like in in the new year, things are going to pick back up and

Heath will definitely get through that and go on to all-time highs. So yeah, I'm more of a zoom out guy than anything. Um, I mean, anyone who knows me knows that for sure that I take a very long-term view on these things. So these uh week to week or day-to-day movements definitely don't affect me too much. And I think when it comes to the macro environment with stuff like the Fed, no one's an expert on this. Like even the macro people who follow this aren't experts. It's it's very hard to kind of be across all of this stuff. So I I I honestly don't spend too much time on it myself because you can you can make yourself go crazy trying to find a reason, right?

100%. You can make yourself go crazy. And who knows what the Fed is going to do and how that'll affect uh markets. It did it did seem though in the charts that you know the Fed announcement uh you know correlated very closely with this uh this crypto sell-off. So here's the Fed press conference right here, and we were this is the Bitcoin price charts, about 105K. And then after that conference, you know, Powell, and we're we're dipping below 100K on Bitcoin. There was um Matt Matt Hogan, I always appreciate his takes. They're always like pretty, pretty seasoned, pretty rational. He he uh wrote a brief thread on today's move in crypto, the down move, and uh why he said, I don't think it alters the bullish trend. I want to hear if you agree with some of this. He said, obviously the big catalyst today was the Fed announcement. We just talked about this. Um, but that being said, he says the initial pullback wasn't the end of the story. Leverage is a fact in crypto. He points out that some of these sharp uh pullbacks get amplified in crypto because there's all of these leverage positions. So this was like a $600 million of leverage position that just like gets blown out in crypto. And I'm not saying that like leverage is uh, you know, crypto is the only market to have leverage, but it does have a lot of leverage. The big question though, is this a hiccup or a reversal? And Matt says it's a hiccup. The reason is because the Fed is not even like relevant to crypto, it's less relevant at least than it has been in the past. And he points to these four things that we still have as as tailwinds going into 2025: the pro-crypto reversal in DC, uh, rising institutional adoption of ETF flows, which you're gonna talk about, Bitcoin purchases by government and corporations, and major breakthroughs in smart contract blockchains, primarily scaling them, right? And this you this is coming through uh Ethereum layer two. So, what do you think about that? He says it's just a hiccup. It sounds like you tend to agree.

Yeah, I I definitely think so. Um, I, you know, as I said, like you can make yourself go crazy looking for different reasons when it comes to the macro stuff. But I agree with Matt here that the Fed macro stuff isn't very relevant to crypto overall. Maybe over the longer term when you're talking about different kinds of assets and their price movements and stuff like that and how that reacts there. But in terms of where crypto is going in 2025 and in terms of what's on the horizon, I completely agree with Matt. There are these massive tailwinds. Like the pro-crypto policy uh in in Washington and DC and on the on the political kind of side here is, I think, still way underpriced. I don't think people realize no, I don't think so. I don't think people realize just how bad it was, especially the last two years and how different it's going to be. There is obviously those kind of doubts from people that say, well, they say it's going to be different, but what if it's the same? And I understand that it's not like a guaranteed thing, but everything that I've seen so far points to it being very different and points to it being a very, very favorable environment for crypto to thrive in. And that will actually lead into the rising institutional adoption because they'll be able to get involved. They'll have those regulatory regulatory frameworks in place to get involved, which will then translate to more ETF flows. So it does tend to feed on itself, just having this, I guess, clearer guidance and clearer regulation and a much, I guess, uh not maybe not uh safer is not maybe the right word, but like clearer picture for these institutions to get involved because they're very risk averse, especially the bigger ones that are managing lots of people's money. They don't want to get involved with something that could bite them in the ass, so to speak, later on. And I I think that's this is what they've been waiting for just clearer regulations.

Yeah, there's some structural differences this time, particularly in the regulations. I uh I totally agree with that. And also there's some similarities. I mean, crypto goes in cycles. And I wanted to get your take on this because another question during weeks like this, people ask themselves, and again, at the end of 2024, starting a new year, 2025, is like, where are we in the cycle? You know, these four-year cycles, Grayscale put together a report here where here's kind of Bitcoin price over log scale, and they and they they show kind of the cycles. And you can see sort of when the price goes above the line, right? That's like bull cycle. And when it's below the trend line, then you're kind of in the the bear cycle, but it it tends to follow this long, uh, this log trend line. Of course, this is also the you know, the log line is is fitting the data, so it's a self-fulfilling prophecy, all of these things. I I get that. Here's another chart that's showing Bitcoin price by cycle with um the number of days. And so we are how many days in? We are uh over about 800 days in, something close to that, into the uh the bull cycle. And this dotted line, you can see where we are in the cycle. Basically, their conclusion is we're in kind of the intermediate stage of the cycle. So we're not early in the cycle, we're not late in the bull mania part of the cycle. It's not over. We're in the intermediate phase of the cycle. What's your take on this kind of an analysis and these cycle types of uh metrics?

Yeah, I mean this is the classic four year cycle that crypto has become known for, especially obviously led by Bitcoin, because that's the asset that tends to get us out of the bear markets, tends to run first. You know, Bitcoin dominance goes up, and then that liquidity gets pushed into other assets as time goes on, people can become more risk-on, and then we have a full-blown bull market. So I do agree with this analysis that we're pretty much like not at the end yet, but not at the start. We're kind of in the middle, maybe, maybe I guess like you could say three quarters of the of the way through, so to speak, getting to that really crazy phase that I suspect we're going to see in 2025. Um, but again, I think I've mentioned this on the roll-up before and also a lot of times on my own show. This cycle's been a bit weirder than other cycles, I think. You know, we've had weirder price action and different kinds of price actions. I mean, BTC went to all-time high before it's harvening, and that has never happened before in the four-year cycle. And obviously, this was a driven by the ETFs and driven by Sailor as well, doing his big buys and things like that. So there has been differences, but a lot of similarities. So, as they say, you know, the history doesn't repeat, but it does often rhyme. And I think that's what we're seeing here. But I think going forward as the asset class matures, these kind of cycle analysis that people do is going to become less and less reliable because it'll just become uh, I guess, more well known and it won't be as self fulfilling as it probably has been in the past. And there'll be different uh, I guess, um, ways to access these assets. Like right now, BTC and ETH have an ETF, but nothing else does. And that tends to distort things because there's this whole pool of capital that other assets don't have access to that BTC and ETH do. So there are differences but similarities for sure.

Well, speaking of ETFs, let's look at some Ethereum ETF numbers on the week. And uh I w I want you to go full bull mode, Anthony Sesano here, because look at all of these. These are the totals from all of December. Basically, we're looking at I'm looking at the Ethereum ETF flows and uh this totals column net inflows, positive, positive, positive. All of the days in December have been positive. Even yesterday, which was like uh you know Wednesday, December 18th, uh, at the time of recording, was even a positive day on a sell-off. And uh this, you know, like in in previous months, it looked like the flows weren't actually ETF flows weren't actually coming into ETH. And now suddenly they are like it's it's happening. But later, what do you see when you look at these numbers? And I'll I'll just uh say for the audience who who doesn't have this open total net inflows right now on the week into the Ethereum ETF. This is a net new institutional buyer of ETH that we haven't had in previous cycles 2.4 billion. I think that's like between two and three percent of all ETH supply here. Anyway, what do you see when you look at these uh Ethereum ETF numbers?

Yeah, I see a trend shift, to be honest. Like obviously, I think anyone who's been following along with this stuff since the ETH ETF went live in July knows that it didn't have the start like Bitcoin did because it launched in a different market condition. July was still very bearish, uh, whereas the Bitcoin ETF launched right in the middle of a huge uptrend in January of this year. So the ETH ETFs have had a slow start, as we're all pretty much aware of by now. But over the last few weeks, there's been a major trend shift with the ETH ETFs getting, I think, 40 to 50% on average of BTC's flows, which is higher than its market cap percentage, right? In terms of comparing it to BTC. And uh I think it hasn't had a negative outflow day since November 21st. So almost a month now of positive inflow days. And as you said, even on the sell-off, we had a positive flow here. So people need to be paying attention to the trend shift that's happening here and how this tends to accelerate as time goes on, especially as price keeps going up. Obviously, these institutions will also get FOMO. It's not just us uh kind of D gen crypto natives that get FOMO. They get FOMO as well. Um, but I think as long as the price is above uh 3600, I think all ETF buyers are in profit because that's when the ETH ETFs launched. People don't remember this, but ETH went from 3600 to like 2000 after the ETH ETFs launched. So there was no appetite to buy an asset that's going down, of course. But now that it's going up, there is an appetite, but there is also a lot more education happening too. I've I've been hearing um that uh there's a lot more uh education happening on the institutional side, and that's ramping up as time goes on. So that's being reflected in the flows. But as I said, the the main thing here is to notice the trend shift happening and notice that it is a shift that's happened over months now, not just days. And to, I guess, pay attention to this as we head into 2025 because I feel like ETH is gonna have a really good year in 2025, and the ETFs are gonna be a very big uh part of that.

Yeah, I I think that that that piece is understated. The amount of education that these issuers, like the Black Rocks of the world, the fidelities of the world, are like prepping to do and have planned in 2025. That's going to be like and that's something that Ether the Asset has uh I think uh struggled with in mainstream is kind of education, getting institutions to understand it. And they're basically all incented now to help investors understand Ether.

Yes, exactly. And I think uh a a bigger deal is that these institutions traditionally have been selling ether as or Ethereum as like a technology platform, right? Not as a store of value because they don't want to cannibalize the BTC ETFs. And I think that obviously within crypto, we know that ether is the money as a store of value. People treat it like this. And I I think that's gonna slowly bleed into the sales pitch that's it that these institutions use, but they're gonna start with the tech pitch first because that's what resonates most, I think, with these investors after they've just heard about the money and store of value pitch for BTC. But I do think that it's inevitable that the ether's money store of value story gets woven into the tech story as well. And that's definitely gonna help flows.

Do you know uh what I think is gonna be a narrative that's like the institutions aren't ready for, but I think it's gonna be pretty exciting for uh the those of us who think Ether is a phenomenal store of value. I um I just did a AI roll-up with uh eJazz, where we just kind of recapped the AI type agent type news on the week. And uh we talked about an AI agent called Zero Bro, earned a whole bunch of fees through like, you know, trading, earned you know, money through trading, through Spotify streams, all of these things. And you know what it did with with those funds, Anthony, is it it took that that fiat and all those token fees and it actually purchased Ether, the asset, and it spun up a validator, okay, in a so it could have passive income. Okay. So the big question is what's the store of value for these new economic players, AI agents? Is it going to be fiat? Is it going to be stocks? Is it going to be real estate? Or is it going to be a programmable non sovereign money like Ether that generates passive income? It's kind of like the internet bond type story here. And that's how Zero Bro is uh is treating it. Anyway, you know.

Emerging story, that kind of thing, but like they're they're a new economic actor, and what they determine as money and how they store their value is actually going to factor in here and matter. Um, one topic I have for you in the realm of non-institutional assets, though, and but also uh links with uh AI agents is uh fart coin. Like, what the hell, man? I have not like okay, this is there's an actual token called Fort Fartcoin. It's been moving a crazy amount, it's up 27% on the week. Uh started in November, it was like 18 million, and now it's uh wait, fully diluted, over a billion dollars. And its Genesis was really another AI agent, like a token terminal type thing. And you know, token terminal, if people are following that story, um, you'll created a uh not created but popularized a coin called uh GOAT. Token Terminal is an LLM. Anyway, it's sort of token terminal has adopted fart coin as like its mimetic uh you know token of value. And uh the you know, like look at the look at the price ascent here. What what do you think of these types of uh shenanigans that are going on? What's your what's your take here?

Yeah, I mean, I think when it comes to these sorts of things, it's always hard to pick winners. Like you look at this right now and you think to yourself, okay, well, this has done really well price action-wise. Uh it obviously right now it's at all-time high and everyone's made money that has bought it and everything. But then there is usually a graveyard of other assets, like millions of these things that go absolutely nowhere. So, really, what the meme coin and AI coin game becomes is a game of attention. Like, where can you direct people's attention to? And that's what coins usually tend to particularly do well and get outsized attention. I sorry, outsized our price movement. And usually how that attention was given was via humans. Like there'll be some influencer on Twitter that says, I bought this meme coin, I think it's gonna go up for such and such reason. Go buy this. But now we're entering the realm where these AI agents are doing that themselves. It's not just the humans, it's the AI saying, Well, I like this meme coin for such and such reason, and this is the one I've chosen. So people are now following that. So it really is, it's the same kind of concept, but with an autonomous agent instead of a human doing it. And it starts to get weird when you consider the, I guess, incentive here where you can say, well, uh, there is an identity attached to this AI agent, but at the same time, I know it's not a real person and know it's not a human. So I can trust it potentially more than a human because I can actually see what it's doing on chain. Whereas a lot of these humans that promote these things, they got backroom deals going on, they got insider stuff going on, they're part of a cabal. AI agents can do this too, but if they're doing everything on chain from a public address, then it becomes a bit more transparent, I think. But at the same time, it's still fundamentally the same concept of attention economy, I think.

Yeah, I totally agree. Attention economy. What we're looking at here is to your point, is you can see inside of the AI's brain. So this is infinite back rooms. If you do a like search for fart, right, this is where a token terminal is literally dreaming up the idea of, hey, I should we we should do a fart coin and uh airdrop it and instantiating it. So you can literally read the transaction logs of what it's thinking. Anyway, bizarre stuff. In contrast to the institutions where we're like, hey, Bitcoin and Ether, they're serious asset classes, and then we have trifart coin trading over a billion dollars. Uh one last thing on the week that I noticed on the from the Fed FOMC meeting, somebody asked Jerome Powell about uh a strategic, a federal strategic Bitcoin reserve. Of course, that's been a Trump talking point lately. And uh he said this from the Fed's perspective, Jerome Powell, we're not allowed to own Bitcoin, he said. Uh and he was asked a follow-up question in terms of like legal issues like, is it legal even for the Fed to own Bitcoin? And he said, that's the kind of thing for Congress to consider, but we are not looking for a law change at the Fed. I don't think Powell or the Fed actually wants to own Bitcoin. And there's a question uh as to whether you know Trump or Congress kind of like forced them into it or forced the the rest of the US uh government into uh owning some Bitcoin. What's your take on the strategic reserve? Are you like in 2025 over or under on the probability that uh you know Trump does something or the US government does something here? Do you think it'll happen?

I think they'll they'll try to do something and they'll talk about it a lot and try to get things kind of passed or or pushed through. I don't think it'll happen in 2025, uh, to be honest. I think that people underestimate how difficult it is to actually make this happen. It's not like Trump can just like wave a wand and make it happen. He has to go through all the bureaucratic stuff to do this, and he's not like some god king who can just make anything happen, especially when it comes to the money. Like it's a very different game when you're playing that game. So I I think maybe potentially it can happen eventually. Um, but I I mean, I've been following it, and all I'm seeing is a lot of talk with not much action yet, obviously, because there can't be action until the at least the inauguration happens and Trump's actually got in power and everything kind of changes over. But I I feel like

It should happen because I do agree that it is a strategic of strategic importance for nation states to own these assets. I believe that they're better off owning ETH than BTC. I believe ETH isn't is a more strategically important asset, of course. But I think both of them hold their own importance for different reasons. And I think that you've already seen smaller nation states around the world buy BTC. I think some of them even bought ETH or are going to or have plans to. So eventually I can see the US doing it. But yeah, I don't know if it'll happen in 2025. There'll be a lot of talk about it, though, that's for sure.

Yeah, the one thing that Trump might be able to do, it's unclear to me, is just keep the the Bitcoin and other crypto assets that they have already, that they've already seized. Whether you consider that a strategic Bitcoin reserve or not, I guess is semantics. I think buying more might be a little bit of a higher bar. I I did point out, by the way, that um, you know, China has like something like 10x the amount of ether uh versus the US government. So uh, you know, I I don't know if Trump wants to play for second place or if he wants to play for first place, but you better boost those ether bags. And you can see him doing that in World Liberty Financial, his little DeFi outlet. We'll talk about that later. A lot more to talk about, too, including, Anthony, I want to get your take on the developer report. So we got some big insights from a 2024 developer report. Also, Kraken's ink chain. We'll get into that. It's a new layer two, of course. And uh an update on a vote in Congress for the very last remaining anti-crypto SEC commissioner. There's still one of them. Is she gonna be there come January or not? We'll talk about all of that and more. But before we do, I want to thank the sponsors that made this episode possible. All right, Anthony, it's all about the developers. You know, Steve Ballmer, developers, developers, developers, developers. So every year, Electric Capital puts together their uh annual developer report. And my my take on developers is they're sort of like entrepreneurs. You know how regular nation state economies they'll they'll do reports on how many small businesses started in a given year, or like, you know, what's the what's the kind of the company activity of of all of the startups? Well, this is a similar type of thing. I think it's a leading indicator for the crypto economy. So like developer number go up, that's a good thing. That means more entrepreneurs, that means more businesses on chain. So Electric Capital analyzes like a whole bunch of GitHub repositories, 1.7 million repositories, uh, apparently, and it produces this report at the end of the year. So a few things to look into. The number one is uh this chart. You see in this? So this is crypto developers grew 39% per year since 2015, and you can see kind of this chart up. It's not a vertical lineup of interest, right? It's kind of like it's kind of bumpy. Uh, when you see something like this and 39% per year since uh 2015, we we are at the end destination right now as of November 2024. We have 23,000. So there's part of me where I'm like, I'm impressed at the you know, 40% annual growth rate, but also look, there's only like 23,000. I mean, that's a small town. There's not a lot of developers yet in crypto. Well, what's your take on these numbers?

Yeah, yeah, I I mean I agree with you. It's not that many yet. I mean, obviously the growth is great to see and it's up and up, but in compared to the rest of the software development world and and all the other developers out there, there are hundreds of millions of developers in the world, I believe. So this is a drop in the bucket. And we have a lot more people left to onboard. And I think we're going to keep doing that as time goes on. Uh, I don't think this is gonna slow down. Obviously, there's bumps along the way. A lot of these bumps tend to be correlated with price action. Obviously, as prices go up, you know, things tend to get hot up. People, uh, developers, just like everyday regular people, follow the money as well. If you're getting, you know, a higher salary working in crypto and you've got the skills to do it, you're gonna go work in crypto. And then if there's a downturn and you get laid off because the company you're working for doesn't have much money anymore and you go work somewhere else. So it's the same kind of story here, and you follow that boom and bust, but the trend is up. That's what we care about. That's what we care about in all, I guess, aspects of crypto. As long as the trend is up, we're we're doing something right.

The trend is up, but not in all places. Actually, the trend is down in North America. So maybe this was the hostile regulatory environment. But look at North America, it used to be the leader in terms of uh crypto developer share, uh, market share, that is, and it's dipped below two uh other continents, both Asia and Europe. So now North America is number three and has been bypassed by Asia and Europe. I think that's the whole like Gensler anti crypto army effect. Yeah, you agree.

Yeah, I mean a hundred percent. Like as as I I think I said earlier, the last two years specifically have been really, really bad. A lot of different crypto entrepreneurs, developers have either moved their business offshore if they were based in North America or just not started anything in North America at all because they're like, well, it's a hostile environment. I'm not gonna go there. You know, if you're a sheep, you don't go into the lion's den expecting to be treated.

Like

Exactly. So, uh, or the wolves then I should say. But uh yeah, so I I I feel like if we get the positive regulatory change in 2025, North America should go back up uh for uh in the next report that we see from electric capital at in at the end of next year.

From an ecosystem perspective, uh Ethereum was leading on every continent. Uh Solana was like number two, and then there was some of the other ones, uh Bitcoin, et cetera. A couple of my takeaways is it's sort of interesting to see the differences between these chains. So this is um a chart of uh total value locked where Ethereum is like absolutely dominant, like nothing else is closed, not even kind of the layer twos. So a lot of the kind of total capital locked up is on Ethereum. Whereas uh, you know, Solana has uh had uh an increase in terms of transactions, like number of transactions and like exchange volume and that kind of thing. Uh they're they're actually quite impressive on that dimension. So there's some differences between the markets. A lot of people pointed out though, um, this, Anthony. I wanted to get your take. So this is a chart of the number of new developers in the ecosystem in 2024. And Solana for the first time, this was the headline chart. Solana for the first time was ahead of uh Ethereum in terms of attracting new developers. Now, there's a few footnotes to this. If you include Ethereum plus like you add, you know, base and plus you add arbitrary optimus and other layer twos, Ethereum is still ahead on net new developers. Um, it's also the fact that like uh net new developers don't tend to stay. So, you know, there's kind of the tourists and the settlers, right? And anytime you get net new developers, 80% like 80% of them are likely to leave, uh, according to some of the stats, and only a few sort of stay. So they're less valuable uh than the veterans in when it comes to staying powers, but still pretty impressive in terms of attracting new developers. What's your take there as a ETH bull?

Yeah, I mean, there's no denying that obviously Solana had a big year in 2024, right? It grew a lot. Uh, the price of the token went up a lot, which created a wealth effect around the ecosystem, which tends to draw people in, both users and users and developers alike. As I said earlier, users, people, regular people, developers, they're all attracted to the same thing, which is money. You go where the money is, you explore new frontiers, you explore new kind of places to generate wealth. And I think that's exactly what happened here. As I said, Solana had a wealth effect, developers came in, they're like, what's this Solana thing? I haven't tried it before because it says new developers, right? So it's like, okay, well, I haven't tried Solana before. Maybe they've tried the EVM before. You've been able to build on the EVM for a very long time now, which includes Ethereum, its L2s, and also other L1s, right? There are many other L1s out there that are also EVM, but Solana is different. Solana is SVM, they have their own virtual machine that they use, so it's a different environment altogether. So if you had been on the fence about it until this year,

And you saw this activity happening there, you're naturally going to be like, well, let's see what I can build on there. What's the developer experience like? I want to check this out. I want to see what's going on over here. So I think that it's natural for this to happen. Um, and I think that it's obviously impressive as well. Like uh kudos to Solana for this. But as you pointed out as well, Ethereum is still uh is still huge, right? Ethereum still has plenty of developers on there, both at layer one and layer twos. And that shows no signs of slowing down either. There was actually a good thread from Josh Stark that pointed out from this report all the Ethereum-related stuff. And Ethereum still dominates across pretty much everything else. Like, not the new developer's chart as you just showed, um, but for the reasons I explained, but across everything else, Ethereum still dominates. And it dominates, I think, where it matters as well. You mentioned TVL. That is a huge thing. People tend to underrate it, but I think that it is something that uh is not rated highly enough because it really does show where like the big capital likes to be and likes to stay. And even though there are other ecosystems, most of the money stays on Ethereum L1 because I mean they're probably fee-insensitive users. Obviously, because fees are higher, there you have to be. But also you trust Ethereum L1 not to go offline. Uh, you know, trust it to be secure and resilient and decentralized. And you trust that there aren't going to be changes made to the network that's going to cause uh things to go wrong for you and your assets. And obviously, a lot of the DeFi protocols on there are extremely battle tested at this point and hardened, like Ave, for example, like Uniswap on there, been around for a long time. So I think that's what what you're seeing there. But uh yeah, I feel like um as the lay as the Ethereum community or Ethereum ecosystem continues to modulize, you're going to see more of a split here as well because Ethereum also has layer twos that are not EVM going forward as well. They're that are going to be launching. I mean, Eclipse is already live, that's using the SVM. There's Fluent coming along that's going to uh be doing a bunch of blended execution stuff with WASM, things like that. Fuel just launched one with um uh similar architecture to what Bitcoin uses, UTXR architecture with their fuel VM. So there's just a kind of moduliz pattern happening too. So I do hope that the electric capital report can highlight that and and kind of dig into the intricacies of that in their next report because that's what it's going to be like going forward for the Ethereum ecosystem.

Well, speaking of uh all the Ethereum modules there, um, there's there's certainly a lot of layer twos that have launched, and one of which just launched this week. This was kind of a a little bit of a surprise, I think, for a lot of people in crypto because um, you know, this is the the Kraken Inc. launch. Okay, so Inc. is a layer two, it's built on the Optimism stack, so similar in some respects to uh what we've seen from base, which has chosen a similar framework. And it seemed like Kraken just like launched this ahead of schedule. I mean, they had announced that they were going to launch it, I think about six weeks ago or something like this. And now here it is. It's live on mainnet this week, and people who are listening to this can go check out the ink chain. I've got here a dashboard, a list of kind of all of the apps, and it's everything you'd come to expect. You know, you've got like things like curve down here, you've got like fracks on there, you of course have the Kraken wallet support and everything that is you'd see in another uh optimistic roll up EVM type chain. What's uh what's the significance of of Kraken, another major exchange, probably the you know, the one of the top exchanges in the world right now, launching its layer two and uh doing this on the back of a very successful base program from from Coinbase. What do you think this means?

It just continues the trend of everyone wanting to be on chain, right? And they want to be on chain in their own way. They want to kind of create something that reflects their brand identity. And that's exactly what Kraken has done with Inc., that's what Coinbase has done with Base. There's others out there as well. You can go down the list on L2B and check out each of them for yourself. But they all have their own ecosystem, brand, community identity that they try to build. Inc seems to be trying to build its uh kind of branding and ecosystem around, I guess, DGen first, right? Like very DGen kind of uh stuff first, like getting into the meme coin stuff. I I know they had like one of the Giga Chad kind of uh faces on their website, like stuff like that, right? Whereas um when Base initially started, they were going hard on things like SocialFi, for example, and they had Farcaster on board there and things like that. And they've kind of shifted over time. But yeah, it's all about creating that new kind of, I guess, uh on-chain identity for these organizations here. So overall, I think it's really bullish that these organizations get to do this because you can imagine a world where there wasn't L2s, it was just one layer, like Ethereum was just one layer, there wasn't L2s out there. These brands wouldn't have wouldn't have built an L L2, obviously. And then they really to come on chain would probably have a harder time doing that because they'd maybe just create some kind of, I guess, like app on Ethereum instead of a whole L2 ecosystem and try to build an ecosystem around that. So it does become more, more kind of difficult there. Uh so I'm excited to see this go live ahead of schedule. I know that the Kraken guys have been working on this for quite a while now. Uh, and I really do like this dashboard that you have up on your screen because it shows you exactly what you can do straight away. You know, there's no need to ask, oh, what do I do on Inc. It's like here's what you do on Inc., here's all the apps, here's how you bridge in, here's the infrastructure support we have right now, here's how you on ramp. Because that's what we need to see going forward. Because there's no use putting something out there and being like, okay, well, we're live. Oh, and people come along and go, Oh, okay, you're live. What do I do on your chain? So I'm glad that they've done this. This is actually uh a really cool thing to see. Uh but I think that going forward,

You're gonna see these chains uh launch faster and faster as the infrastructure matures as well and it becomes easier to launch these things. And you're gonna see other companies around the world doing this. And I I'm sure we're gonna talk about one of them, as you mentioned, a big, big bank that's doing this as well.

Oh, let's talk about that next because what we've seen, of course, is all of the what we call on bankless sometimes crypto banks, but what we mean is exchanges that are custodying crypto. They all have layer two strategies right now, almost all of them, except for like Binance, which has its own like, you know, uh layer one strategy with the BNB chain. The question is, what's the next uh kind of like group to start launching chains? And the answer to that question might be like TradFi banks, actual traditional banks. So Deutsche Bank is a $1.5 trillion bank, it's Germany's largest bank. And just this week they announced that they were launching an Ethereum L2, not just any Ethereum L2, a ZK Sync L2. So it's a ZK EVM on top of Ethereum. Uh here's the the headline here. Deutsche Bank valued at 1.5 trillion, Germany's largest, is developing a layer two blockchain on Ethereum. Are we just gonna get all of the banks to launch L2s as well? Is that is that how this works? They're just like port all of their ledgers and their assets over.

I mean, uh, if they want to, they can. That's the beauty of it, right? No one's stopping them from building these things on Ethereum because Ethereum is uh credibly neutral and decentralized. It will not stop you from doing this. And I think that you can see on the headline here it says it's gonna have regulatory oversight, and people will maybe bulk at that and say, oh, you know, this is just like another centralized thing from a bank. It's like, yeah, but the the point is that they're using crypto rails. They're coming on-chain, they're gonna interoperate with the wider on-chain economy. And if you don't want to use this, you don't have to. You have the entire decentralized on-chain economy to access. But they're saying, well, I want access, I want to access that too. I want to be involved with this too. And that's why I think they're they're doing this. And one of my um one of my dream things to see in crypto, and one thing that I've been speculating about for a little while now, is an entity like BlackRock coming along and launching their new stock exchange that they want to launch as a layer two on Ethereum, using real world assets that they've tokenized, like stocks and bonds and all that, and doing that there. That to me would be the holy grail because all of a sudden, if BlackRock was to do that, you would see an absolute flood of all of these banks and companies coming in and building their own L2s here, uh, which I obviously strengthens Ethereum beyond words. I think, even though these are centralized entities, it basically says to the world, Ethereum is the place that we're building. Just like when I guess like a nation state comes up, like America, for example, all the businesses went there and said, I'm building in America because of such and such a reason. People are coming to Ethereum and saying, I'm building in Ethereum, I'm building my ecosystem on Ethereum because that is the obvious place uh to build.

Oh my God, do you know something about Blackrock, Anthony?

No

inside it in inside of it. No

Oh no.

It's it's something that myself and others have speculated. But I that's that that's the thing. I think that's the point. You can see it, right? There is a path to that actually becoming a reality.

Yeah, my like my my my my take was when uh BlackRock launched the Biddle fund, which has been a massive success on Ethereum. This is their their tokenized treasury assets. And now by the way, there's some news later in the episode where they're integrating into all of these other DeFi protocols. My my take was that, okay, that's the first BlackRock bank branch on Ethereum. They just like opened up shop on Ethereum. And it totally makes sense that they would expand and eventually become a layer two. So let's see what they they have in mind. Anthony, I don't know if you've been following this, but we have one remaining SEC commissioner that's part of the Gary Gensler uh anti-crypto army. Her name is Caroline Crenshaw. And we uh just an update on this because she was supposed to go up for vote in Congress this week to be reconfirmed, renewed another tenure. And uh, of course, the crypto community pushed back against this. We don't want more Gensler style commissioners that are like super anti crypto. An update on this she was up for vote this week, and what happened? The vote was canceled.

And what I think this might mean is it's likely that she's going to be out because we are running out of time for her to get the votes in the Democratic uh controlled uh Congress to actually vote her in. And in January, this all flips to Republican, of course. So that's kind of crazy. And it's also crazy because it's another extension of the story of crypto advocacy in DC. This is stand with crypto, you know, also part of kind of like uh, you know, the pack. Uh they sent, they had crypto advocates send over a hundred thousand emails to US senators about a regulator, about Caroline Crenshaw saying, like, don't reconfirm her. Like, crypto is watching your votes, members of Congress. And if you vote yes, that is an anti-crypto vote. I think the the a big story coming out of 2024 is just like the political willpower of the pro-crypto army, which it seems like is composed by a lot of single issue voters, crypto zealots, a lot of capital, of course, industry support, all of these things, but it's like a force in Congress. We may be down to like zero anti crypto like commissioners uh going into 2025. And that's absolutely crazy.

Yes. Yeah. And I think that if you look at all of the stuff that's happened over the last couple of years as well on this front, the SEC is at the forefront of being the worst actor in the crypto ecosystem on the on the regular regular uh regulator side of things, for sure. So having a positive SEC going forward, like once the inauguration happens and everything changes over.

That's going to be a huge boon to crypto, I think. So we're definitely going to have a pro-crypto SEC finally, like after so long. It feels like we've been waiting forever for this, but we're finally going to have that. And you know, I I think it's funny because I think most people would settle for just an SEC that actually plays by the rules. People don't realize it. You know what I mean? It's not about being pro anti-crypto. It's just that we want a regulator that follows the rules that they're supposed to follow.

I mean that was basically Hester Purst. I mean she was just like open to it. She wasn't just like, oh, I support everything. G you know, God bless. All of your tokens are none of them are security. She wasn't like that. She was just like

Why don't we create a sandbox? Why don't we just not stop this innovation in the US? It was totally reasonable. You're right. It's not even pro-crypto. It's just like neutral. We just don't want anti crypto. Actually, last thing on politics before we leave this section a uh Congressman French Hill, which has been on the Bankless podcast. He's uh a congressman. He has been nominated to chair the House Financial Services Committee. It's a very big rule in Congress. He is definitely pro crypto, and he got that nod this week, too. So big news on that.

Anthony, we got a lot more to talk about, including uh Athena. They introduced a stable coin backed by what were we just talking about? BlackRock, the BlackRock Biddle Fund. What does that mean? Also, there's some uh Ave versus Polygon drama, DeFi drama that I want to get your take on, all this and more. But before we do that, we want to thank the sponsors that made this episode possible. All right, Anthony, have you been following the uh Ave versus Polygon drama? I'm not sure what the lessons are from this, if this is a lesson in risk, a lesson in governance. Like, how would you summarize this?

Yeah, I mean it's been a while since we've had some serious DeFi drama, I think, within Ethereum. So it's it was quite entertaining to follow along with this, if I if I if I say so myself. Um, but I think if we we zoom out a little bit and focus on what was actually being debated here. So essentially there was a proposal put forward by a bunch of projects within the Polygon ecosystem that wanted to use the bridged funds, so the funds that were bridged into Polygon uh and put them to work, essentially. Because right now they're just sitting in the bridge. These projects were like, hey, we can use these stable coins to earn a yield, and we're leaving like $70 million a year on the table by not doing this. And then, of course, there was a whole debate kicked up about this uh once people started paying attention to it, saying, well, that's really risky. What if something happens to those assets? Then the assets that were uh uh bridged over aren't backed by anything anymore and essentially can become worthless. And we've seen all these bridge hacks over the years, and it it's really ugly, they're huge honey pots, so on and so forth. It also breaks a kind of social contract you have with users that you won't use their bridge assets to do other things, and so on and so forth. So ultimately the proposal was shot down and it's not going to be going ahead right now. Um, but the drama I think stemmed from a bunch of community members or a bunch of people within the Avare and Polygon ecosystems having a bit of, I guess, like.

I I don't know if I'd call it personal attacks, but more of like personal drama where they said, oh, yeah, he said see sh she said kind of thing. Um so it that's what blew out the drama, I think. But the actual proposal itself, yeah, there was debate around that, but then there was also debate around the interpersonal drama that stemmed from that.

Yeah, okay. So I I wanna so I haven't been watching this up close, but I've sort of seen some of it. And I I guess my take is um so there's this proposal, as you said, to take bridge assets and do something else with it with it, like put it in morpho and yield or something like that, or morpho and urine, get some additional yield on that. Like my take on that is like, oh, that sounds like a really bad idea because you know, none of the the the users who bridge their assets, you haven't consented with any of them. And what we're doing is like it's almost like re-hypothecation, right? We're stacking risk on top of risk. So, like at the outset, I don't like proposals like this. Doesn't sound like a great idea. However, it's just a proposal, like it's not, it hasn't happened yet. Open governance forms, proposals are messy. And then what I saw is um the Ave, some members of the Aave community submitted their own proposal, which is basically like, uh, if you do this, uh, we're gonna deactivate Ave on Polygon. Basically set risk like set parameters to zero in in their risk model so that nothing on Poly. And so, and then uh Polygon reacted to that, and some of the you know the founders, uh Sandeep, etc., and and said, wait, okay, hold on. This is just a proposal. Uh, you're like, why are you exiting? Maybe you're doing this for your your your own reasons, Ave, and you secretly wanted to use like the the bridged assets for something.

Yeah, I mean that's the that's the point, right? The one of the the projects that proposed this was Morpho, which is a direct competitor to Avair. So that's where a lot of the the drama stemmed from as well. It's like this conflict of interests, I guess, and competitive stuff.

Yeah, and then the there's so there was some uh like uh Sandeep from Polygon and Stani from Ave like back and forth, like back and forth. And you know, uh I think Stani was saying like, well, what are you get what are you guys getting from the Morpho community? Are you getting token incentives? Anyway, some messiness, some mud slinging. What did what did we learn from this other than like some of this uh happen all of this happens in the open, such is the nature of DeFi. So we're this is probably not the last time that we'll see like a blow up uh from this. Uh you're like, what else did we learn?

Yeah, I mean, I think from some of the discussions that I saw that fell out of this, just regardless of the projects involved, it was discussions around using bridged assets in other ways. Like that's been a big discussion for a while. I know there are some, like layer twos, for example, like Blast and Mantle, that will tell you we're gonna use your bridged assets to do things. Like they just put the ETH into Lido and stake their ETH and only yield on that. But they tell the users up front that they're going to do that. There is no kind of like after-the-fact bridging, or sorry, after the fact usage of assets once they're bridged in. So I fall more in that camp. As long as you let the people know that, hey, your assets are actually going to get used if you bridge into our L2 or use our protocol, whatever it is, then that to me is fine. It's when, yeah, you do it after the fact where you've bridged in all these money, like billions of dollars of capital, and then you say, well, it's just sitting there right now. Why don't we use it for something? That's where things get very murky. So I think that we're gonna be having more and more debates over the coming months over about this, because there is a lot of money in these bridges that is doing nothing right now. And as that grows, it's gonna become more and more tempting to put that to work to earn yield and to kick that back to users as well in order to get more users on your platform, especially when it comes to the L2s competing for users. This could be something that they use to essentially even offer free fees. Even though the fees are low, they could offer free fees because they could earn that yield and then kick that back to users as subsidization for fees. So there is gonna be a lot of more discussion around that. But in terms of the other major lesson as well, is the fact that these protocols compete with each other. People tend to forget this, but they compete with each other and it's cutthroat competition too, because it's all out in the open, as you said. So we're gonna see more of this drama unfold as protocols start juicing uh uh incentives for these things. That's hey, why don't you use your bridged assets in our protocol and we'll put some nice token incentives on top as well? And then you're gonna get the users saying, Well, I want those token incentives, so I want you guys to use the bridged assets, and then you're gonna see capital flow around like that, and projects fight with each other over users and so on and so forth. So I think this is really only the beginning of what we're gonna see around using bridged assets for different things, but there's gonna be lots of drama as well.

Okay, so I totally agree with you about informed uh consent. And for anyone who's looking at this and and like being like, oh, this is terrible. Like, I don't like it. You you're you're watching how the sausage is made. And what I would uh remind everyone listening to is banks do this all of the time, except it's completely closed. They don't talk about it, they don't ask anyone's permission, they don't like they just re-hypothecate, okay? And there's no accountability because none of it's on chain. So you have no idea what's actually going on. So these types of conversations actually, and kind of the the um the back and forth of it, and even the competing for for users here and the competitive pressures, it's good for us. It's good for DeFi users, okay? Because it's open, it's transparent. You could right-click view source and the code to see where the assets are, you know, you know, what the risk profile is and all of that, and that you can't get in traditional finance. So I think it's like in that way, it's like bullish, even though it just look looks a little bit uh, you know, mudslingy. Um Pudgy Penguins launched their Pengu token. 7 million addresses were eligible, whole bunch of ETH addresses, whole bunch of Solana addresses as well. This is what the token is doing, Anthony. So almost a 2 billion uh market cap. Does what does this remind you of? Okay, so like it feels like I'm getting flashbacks to uh Bored Apes and

They launched a coin. Am I right about that? I I I'm pretty certain they did at some point in the cycle. And it did something like this multi-billion dollar valuation. Um are you getting flashbacks to that?

I mean, they launched a different timing in the market. I believe they launched in 2022, which was obviously the bear market. Like crypto had already topped in 2021. Whereas Pudgy Penguin seems to be launching at least halfway through the bull market. But the price action is interesting to see because uh there was another airdrop a few weeks ago, or maybe a month or two ago, called Hyperliquid that happened. And then it went up only after the airdrop, right? But with Pudgy Penguins, it has gone, I believe, like mostly down only since it launched, basically, uh a few days ago. Um, and and obviously the Pudgy NFTs, for anyone who saw, they also dumped, I think, 50 to 60, 60% because people were buying those NFTs in order to farm the token. And then as soon as you got the token, that was baked into the price of the NFT, the ARB was done, everyone sold the NFTs. So what kind of happened is that there was a ton of hype, the broader market sold off, you know, the NFTs sold off because that ARB closed, and then the token just is already worth, you know, a fair bit right now. So it's kind of plateaued of where it is. So I don't have any opinions of where it's going to go from here. I don't know much about the pudgy ecosystem. I'm not a bull or bear on it, I'm relatively neutral on it, but I don't think it is that comparable to what happened with Apes because it was a different timing in the market and also.

I think from what I've seen, the Pudgy Penguin ecosystem is doing a lot more than the Bored Ape ecosystem is doing right now. And they've branched out and doing a bunch of different things. They've got their own layer two coming out with abstract, you know. I I don't think it's like the Pudgy L2, but it they've working very closely with it to launch that. So they're doing a lot of a lot of different things. So I I I I I um respect the the building that's going on there, but yeah, the the token, I mean, who knows? I think they even called it a meme coin themselves. So we'll we'll see.

Yeah, fair enough. Fair enough. It's just it's just another meme coin. I I do uh really respect uh Luca and his ability to execute. He basically brought Pudgies back from the dead. And you're you're right around this ARB opportunity. So Pudgy Pudgy's has been up from the NFT perspective, and now it's like it was down on the week because everyone sort of got the uh proceeds from this. You know, one other dimension that's different than board apes or anything that we've seen before is actually there's actual Pudgy Penguin toys in stores. And so uh what's happening is Pudgy Penguins uh toys were sold with a QR code that entitled you to Pengu airdrop. So what's been happening, Anthony, in stores like all around uh like I guess the world is um people are like you know ripping open the package and and yoinking the QR code in order to be eligible for that airdrop. So they're just like, here's a package of Pudgy Penguins, you know, they they they left the stuffed animal, but they ripped off the QR code in order to be uh eligible for that airdrop. So some weird incentives when it goes into like when it comes to airdropping you know physical products.

Yeah, yeah. And this this is funny because we like uh I I pay uh attention to like the trading card game kind of arena and uh I collect Pokemon cards and stuff like that. Um and this was happening with with Pokemon cards where people would go in, open packs, collect the rare cards, and then resell them on eBay or whatever, and then they had to end up locking up all the cards behind glass. Imagine seeing these Pudgy penguins locked up behind glass, and you have to go to the tower and ask, hey, can I get one of the Puggy plushies, please?

Yeah.