ROLLUP: Under Attack - Crypto, Freedom, & Privacy

Where where does this stop, David? Are they gonna arrest Tim Berners-Lee, you know, the creator of the internet protocols? How about Netscape 1994, who designed uh HTTPS? Remember Mark Andreessen talked about kind of Crypto Wars 1.0 when he came on the podcast and talking about the battle there. I mean, are the developers of internet protocols responsible for how North Korea uses the internet in order to do nefarious things that Treasury doesn't want? It's absolutely ludicrous. And I think that if if Treasury or ever any government uh regulator in the US took this type of stance towards communication, we would have no Silicon Valley, we would have no free and open internet based largely in the US today, we would have none of this innovation and economic GDP growth. It would have been completely squelched.

Bankless Nation, it is the last Friday of August. David, what time is it?

It's the Bankless Friday weekly roll-up where we cover the entire weekly news in crypto, which is always an ambitious endeavor. Yet we persevere nonetheless into the frontier. How you doing, Ryan?

Doing okay. Just okay though. You know, this this week felt like a gut punch, and we're gonna talk about some uh the bad thing that happened this week and uh in the show. Uh there's also some good stuff, but um I mean getting the bad thing out of the way. Number one, the Department of Justice has arrested Roman Seminov. This is a U.S. developer of Tornado Cash, an open source privacy developer. Uh this one hurt, David. It feels like crypto continues to be under attack. Privacy and freedom are under attack. It's a big freaking deal. And we're gonna spend some time talking about it in the episode. That's the bad stuff, but we got some good stuff too.

Plenty of good stuff. Plenty of good stuff. The arrival of EIP 4844 draws closer. This is, of course, the one that scales up layer twos further than they already have. The friend dot tech debate continues. Is it good or bad? Ryan and I did an entire show on that. We will recap it very quickly, but really talk about the big takeaways, which are that it's proof that we are ready to go mainstream. We got a mainnet debut as well. We got an airdrop to talk about and an exploit as well. Just a normal week in crypto. So make sure to like, subscribe, rate, and review wherever you get your podcast. Ryan, I don't know if you've uh checked recently, but on Apple Podcasts, we are about to hit 1,000 five star reviews. So this is a call to action for anyone listening to Bankless on Apple. Give us those five star reviews so we can legitimize the bankless podcast and get that top of the iTunes uh investing and business categories.

You know what? We gotta start here though. Uh this is pretty cool from our friends and sponsors over at uh speaking of cool events, this one's not in Germany, David, but we're throwing a little party, a little shindig over at Permissionless. This is gonna happen Monday, September 11th, from 7 p.m. to 10 p.m. in Austin, Texas. David, what are we doing here?

Uh so every once a year, bankless manifests in real life. Could you imagine? That is the permissionless conference, of course. We've been talking about it endlessly on the weekly roll-up. Uh, for bankless citizens who did not catch it last week or for whatever reason missive roll-up, how dare you. We are throwing a party for you, the citizens. And that is Monday, the 11th at Permissionless. So the one time of the year that Banklist shows up in real life. Ryan will be there, I will be there, the entire bankless team will be there, so you guys can meet all the magicians that make this show possible behind the scenes. Big shout out to the team. We're all gonna hang out, gonna get some drinks. 500 people is our limit. Uh, we are not there yet. So if you are a citizen, make sure you show up in the Discord to click the link that is only for citizens, as well as all the other podcast guests that you guys have listened to, all the people, panelists that we've invited to Permissionless, anyone that's ever been on Bankless that's also a permissionless, will be there. Uh, I think I think Eric Voorhees signed up today. Uh so he'll be there at the party along with everyone else, you know, all the fam.

I'm gonna I'm gonna buy that man a drink for what

Thank you for that debate with SP. I will also buy well you can get Eric For He's. I'll get Dankrat's drink. I'll get Dankrad.

Yeah.

Yeah.

Do you know what? Actually, I I got a surprise for you, David, because all the drinks are free.

We already are doing that. Every all the drinks are free. Kraken is actually buying Eric Forhees a drink. Thanks. Thank you, Kraken, for sending it.

Yeah.

Uh well, speaking of kraken, let's pull up the Kraken price charts. Uh Bitcoin price this week, start of the week. I think we're down from last week, but uh tell us the carnage here.

Uh down seven percent. Oof. Bitcoin has lost two thousand dollars off of its market cap, starting the week at twenty eight thousand dollars, ending the week at twenty six thousand dollars. You know, last week uh we were covering the prices d during the dump and I was like, Oh, we n almost never get to do this because it always usually dumps right afterwards.

Cited?

Yeah, because we actually covered them. We actually were able to cover the market action. Okay. And so like I said, like, oh yeah, so the it's we're botting them out right now. It's at 1740 or maybe 160. It was 1640. I was like, okay, sweet, we're actually getting the market action. And then afterwards, there was a huge wick all the way down to like below 1600. Uh that's the ether price I'm talking about. Um so no, we actually did not get uh the capture the market actions. But moving on to ETH price, 1740 is where it started last week, down five and a half percent to sixteen forty. Uh Wicks down to fifteen hundred and twenty five dollars. Whoa! That got real low. That got real.

We're gonna talk about that. We're gonna talk about that in a bit, why that wick may have been. But before we do, let's talk about a few of the other metrics here. Uh ETH Bitcoin ratio is that flat up

Up 1.5%. Yeah. So this was a Bitcoin sell-off that dragged the rest of the market down?

all right. Um and global crypto market cap, total market value of crypto. What's that sitting at, David?

Yeah, almost 1.1 trillion. We did drop below a trillion dollars during the buying work. Yeah, but we're back up. We're 10% above a trillion. Yeah.

I don't like Bitcoin below 30k, ETH below 2k, and uh definitely market cap below a trillion.

Enough buyers kept us above, you know, above one trillion dollars. So thank you to the

buyers out there. I I was a buyer last week. You're a buyer last week?

Yeah.

I was a buyer, I think. Via proxy. Um, you know, one of the things that I do is buying. Um total crypto market cap above a trillion, though. Still, I I think this is gonna be one of those uh bad news, good news episodes. All right, so that was the bad news. Prices are down a little bit. Let's get into some good news here. It's all on layer two beat. Look at the activity, David. What are we looking at here?

Uh we're looking at a growing area under the curve of the scaling factor, hitting new highs for the week at 5.2x Ethereums. So the aggregate scaling of all layer twos on Ethereum are 5.2x1 the uh the base Ethereum. Um mainly thanks to ZK Sync Era, actually, interestingly enough, clocking in at 12.2 transactions per second, coming in at number one. Uh followed up by uh, so this is earlier in the week, followed by base coming in at 8.6 transactions per second, Arbitrum 7 transactions per second, and OP mainnet 5 transactions per second. So really honestly, like shout out to ZK Sync Era. The transaction volume has been absolutely insane. There is a decent supply of that that is bots, but also there's a decent supply that's not in the

Bot.

Uh airdrop farms. Oh,

Bots. Okay.

actual bots.

Yeah, passing money around. And so, like, yeah, like maybe many many people think like, oh, well, it's bots. It's kinda it's like illegitimate, uh, illegitimate transaction volume. It's not it's not real humans. It's real money. Like, that's there's a half a billion dollars being pushed around in ZK Sync era. So that's real, actual like stress testing of the protocol bots or not. There are actual like new novel apps being built on ZK Sync that real humans are actually using. So it's a mix between bots and humans. Kind of a taste for the future.

Well, that's what you're gonna get when the transactions are so cheap then the then the robots can start affording it, right? Yeah. So all the cheap cheap transactions are robot transactions. Um Base flipping Arbitrum and Optimism by daily transaction count. Wow.

Yep. Coming in and number one at the o the optimistic roll ups. Yep. Mm-hmm.

It's a big freaking deal. Look at this chart, just straight up. Have you been surprised by BASE's adoption, David?

Uh I mean as someone who's been playing on Friends all week. Uh no.

I mean, from a month ago to now, would you have predicted this chart?

Base in like a period of weeks outstripping Ethereum and then also the two largest uh optimistic roll up chains that have been live for like two years.

And BASE beats it in two weeks.

I have the benefit of hindsight right now, but I don't know, feels pretty obvious. That's why people have been excited about base all along. Like a lot of the uh L2 base contrarians have been like, why is everyone excited? It's just another like optimism fork. Like it's nothing new. And then everyone the the base, you know, bulls are like, what do you mean it's nothing new? It is the largest exchange, the uh largest US public company exchange with their own layer two, of course they're gonna pump the hell out of it. And they have the marketing reach. Uh and so we're seeing I think the base bulls uh take a victory lap here.

Well, I would say it uh, you know, a lot of things in crypto do not live up to the hype. I would say even among the people who are hyping it, BASE has kind of lived up to the hype, at least uh to this point in time. Um, this is a post from Will Sheehan. One million trades on friend.tech in the last uh

Two weeks.

in less than two weeks. That's uh that's incredible. So would this be sort of BACE's first breakout app? It's all friend.tech.

Yeah, I would say so. Yeah.

These are the Dune boards, David. What are we looking at here? Um this is fascinating. Root uh roll-up economics. What uh what do you see in these charts?

Yeah, this is just some great bankless candy right here. This is why we've been bullish on uh layer twos fundamentally, is because their economics just check out. Uh and so this is an economic dashboard from Nifty Table. Shout out to Nifty Table. Thank you for putting this uh dashboard together. Uh they've got a newsletter at zeroxtrends.com if you want to sign up. Um so okay, so on the top left, on-chain profit. This is how profitable these roll-ups are. Uh, and you can see like kind of like why I was pointing like here, yeah, sure, there's a bunch of bots on ZK Sync Era, but they're paying ZK Sync Era a ton of money. That's real revenue into the org, bot bought or not. Followed by base, this is uh for the month of August of 2022, followed by base profitability and then OP, mainnet, and arbitrum. And so this is the transaction fees that the roll-ups are charging minus the cost of publishing transaction data to the Ethereum layer one is the profit. And that is what you are seeing on the left in ether terms and on the right in dollar terms. And then if you go scroll down, it'll kind of just walk you through the costs and also the revenue, just all the economics that make a make a roll-up a roll-up. Uh, and so um I just this is the Dune dashboard that basically articulates the economic case for layer twos. Uh, and as you can tell, they are extremely profitable. So, in aggregate between Arbitrum, Optimism, Base, and ZK Sync era, all of them combined together, profited 3,000 ether so far in August, in the first three weeks of August.

Thousand ether in August. What would that translate to? Three thousand times.

Uh almost eight million dollars. Almost eight million dollars. Thank you to the uh US dollar uh chart on the right here.

What I what I love about this, David, is um, you know, in in so many, I guess, crypto economic models that are obfuscated or or hand waved away, this is like real tangible on-chain revenue. And the business model for roll ups for layer twos could not be more simple. What do they do? Ethereum is a wholesaler of Ether block space, Ethereum block space. Rollups purchase that and they resell it for more. They are a value-added reseller, and then they make a profit on that resale. And that's how they generate 3,000 uh ETH worth of value in one month. It's a really freaking simple business model. I mean, like a lot of technology here, a lot of work to get the kind of the network effect. But what what do roll ups do? They take layer one block space, Ethereum block space, and they resell it for a profit. That's what they do.

Mm-hmm. So Ethereum layer one is Costco and all of the op the roll ups are your local grocery store that goes to Costco, buys the goods, restaurants, unpackages it. Yeah, restaurants. Yeah, your your local distribution center, wherever that is. Uh yeah. Ethereum is a

Costco of blockchains. Wow.

The new narrative watch. It's it's coming from Bankless. No longer ultrasound money.

Uh this is a graphic that I saw going through uh Crypto Twitter last week that I thought was pretty cool. Uh the current layer two landscape. I think this already needs updating because there's definitely some extra OP tech OP stack chains that aren't in here. But these are all the layer twos that are uh deployed to Ethereum, and then also the ones that are scheduled to be deployed, things like Scroll, Tyco, some other ones I'm not familiar with. Uh so you can see it's just like the Stark X ecosystem, the ZK stack ecosystem, the OP stack ecosystem, and then like the ones that don't have shared codes, like Arbitrum, Starknet, Aztec, Connect, etc. Linea.

Where's Polygon? Oh, I see it. No shared code base up here, huh?

Yeah, that should be changing soon. So the scheduled not live immutable ZK EVM, I'm pretty sure that is a Polygon ZK EVM. So the Polygon will have its own ecosystem. I don't know about the no shared code base between Arbitrum Nova and Arbitrum 1. I thought that that was a shared code base. Um PBD on the accuracy of this whole thing, but this is like the spread of the layer twos. And there's a lot of them, is the point.

There's a lot of them and each of these. Uh this is kind of a a new thing to to take a look at the taking shape. Each of these, I think, will become super chains in and of themselves. Networks of chains, uh, I believe. So uh we'll talk about that a little bit more maybe at the end of the show. Uh David, some market news here. Let's get back to why there was this massive down uh candle right after we recorded the roll-up last week. Um did we say something wrong? Uh

Uh Bitcoin is at twenty-six thousand at the time of recording and it dumped down to twenty-five thousand two hundred. Ether dumped below fifteen hundred fifty. That happened last year. We call this a wick or a flash crash.

yeah. So it happened last Thursday, the 17th, I believe.

Yeah.