ROLLUP: 3AC Further Contagion | dYdX Leaves Ethereum | Huge Uniswap Acquisition

Bankless Station, it is Friday morning. You know what time it is. It's a Friday morning Bankless Weekly roll-up. A little bit different this week because uh Ryan, the AI, powered down for the moment. He and uh his other AI kids and and AI wife are all at the beach. Uh and so we're bringing in the substitute teacher, Anthony Zazzano. Anthony, welcome to the show, man.

Hey man, great to be here. Great to be the substitute teacher. We all know the substitute teacher is always the one that you have the most fun with, right?

That's exactly right. Yeah, we always love the change of pace. So, yeah, we all know what's gonna happen next. It's the end of the week, Friday weekly roll-up. It's the third week of June. So you gotta drink, go grab your morning coffee because we are going to recap the entire week in crypto, uh, which is always an ambitious endeavor, yet we persevere nonetheless. Some big things happened this week in the world. We got further three arrows capital contagion to talk about. Uh the cancer spread a little bit further than what we originally thought last week. So we're gonna cover all of that. Also, DYDX spins up DYDX chain on Cosmos, leaving Ethereum for going for the Cosmos chain. So we're gonna talk about that. And Uniswap acquires an NFT aggregator. Uh, so we're gonna talk about that as well. You know what to do. Gotta like and subscribe. If you're watching this on the YouTube, hit that subscribe button. If you're watching this on the podcast, go give us those five star reviews because the ETH price and the five star review number are highly correlated. So if you want that bull market to come back, we need those five star reviews. Uh, Anthony, ready to get into the markets?

Let's get into it.

Starting with Bitcoin, of course, coming in at $20,500. A little bit flat on the week, I'd say, maybe a slight down. Uh Anthony, how all are you feeling about overall in the market and Bitcoin price?

Uh, I don't know. Like, the markets are are are in a funny place, I think. They've done things over the past, I think, few weeks that uh people never thought they would do, right? Like BTC and ETH both both going under their old all-time highs. ETH did it first, then BTC caught up after it, and we've kind of like bounced back. ETH is still not back above its old all-time high, but Bitcoin is back above that 20k. Uh, and I think it's kind of like no man's land right now, where people are like, oh, did we actually bottom at that eight in the eight hundreds there for ETH, or are we going lower? And I think people are just scared to bid right now because of that, right? They just don't want to get caught buying something that's gonna go down even more. But we don't know, right? It's just very, very hard to tell right now, I think.

Yeah, certainly Ether coming in at $1,100 right now, which is about 24% below its previous all-time high, which is kind of a big oof, I'd say. Uh that I don't really think we've seen that in prior market cycles. Usually the previous all-time high is it the crypto prices stay well above that. Um that that is uncharted territory.

Look, I think we didn't go as high as people thought that we were gonna go on the way up, right? And I think that because of that, we came down percentage-wise, Ether's down what 80%, which is obviously less than last bear market, which is 94%. And last bear market, uh BTC went down 85%. So I think because we went up less, we've just come down like a similar amount, but because of that, uh, it means that we've kind of like gone below that old all-time high, which once that broke, it was kind of like, well, you know, where's the support now? Sort of thing. So yeah, I mean, that's just brutal looking at 2018 right now, like 94%.

Oh my god. So okay, not from 2017. It went down 94%. Oopsies. Uh, but then it went up

In total, from the bottom, oh, a a casual 5,500 to the very, very pico top. And then from that 5,000% up, we are down another 75%. So you know, like three three steps forward, one step backward, 5,000% up, 75% down. These are normal, normal shenanigans, I guess, if you zoom out in the crypto world. Quick comment on the ETH BTC ratio. The new new number is about 0.054. We did get to go to a low number of just below 0.05, but it looks like uh the ETH BTC ratio is defending the 0.5 number, 0.05 number. Anthony, any comments on the ETH BTC ratio?

I think look uh what uh uh the overall market is bearish and I think people are risk off in general and the wider market definitely considers ETH to be at least a little bit riskier than BTC is to hold. So, you know, we did see the ratio kind of lose strength there, but I think it's on kind of like a support level right now. Uh, you know, depending on what the market does, I I'm not sure where the ratio goes from here. Obviously, we have a huge catalyst coming up towards the end of the year for Ethereum with the merge, which is not just a huge catalyst on the technology side, but also on the market side. But I don't have any strong feelings with the ratio right now. I think it's in the same position where it's kind of like, you know, it could go either way at this point.

Yeah, totally. All right. Moving to the total crypto market cap. We're coming in at 0.95 trillion dollars, so still below that $1 trillion mark. Uh a little bit flat on the week. Um, but overall, crypto in the last seven days flat flat ish. Um, there's been some some losses here and there. Any other comments about the total crypto market cap, uh Anthony?

Uh we've come down a lot, right? Three trillion I think was the top and now it's under a trillion. Uh yeah, it kind of like hurts that it's that low, but I think it it's dictated mostly by the top coins, right? Like Bitcoin and ETH and stable coins, things like that. So you know, it could change overnight, right? It can go back up to one point five trillion before we even or something like that before we even know. So I don't know how much stock I put in the total market cap, but it gets a lot of media coverage, that's for sure.

Certainly does. Did you uh slurp any three-digit ETH, my brother? Any

ETH, yeah, yeah.

I I didn't get to catch the the exact bottom because I was sleeping. Um I got it at like 900 because I had I have resting buy orders like down every 50 bucks until like five hundred dollars. So I was able to slurp at around nine hundred. Uh when I woke up, I was like, oh yeah, that buy hit. Well, that's scary and good at the same time.

It's always when uh you feel fear and you press buy, anyways, is when the opportunity arises. Uh there's a a fun perspective for the for the newbies out there. This is a frequent format for Bitcoin tweets. In 2011, the tweet reads in 2011, Bitcoin fell below $20. In 2015, Bitcoin fell below $200. In 2017, Bitcoin but fell below $2,000. And in 2022, Bitcoin fell below $20,000. I actually don't know if it fell below $2,000 in 2017. I don't remember getting it getting that low.

It would have been like

it would have been like the volatility from like the start of the run, right? It's kind of like cherry picked, but I guess that's what that they were just trying to make like a pattern, right?

Right, right. Well, I mean when you make the pattern and you ultimately get a four thousand fourteen thousand like tweet. Uh what would the e pr uh price for ether be if we did this? It would be like eighty dollars in twenty seventeen. Uh almost eight hundred dollars so far. Um maybe maybe next time it's eight thousand dollars.

Mm-hmm. Mm-hmm. Mm-hmm. Maybe. Hopefully that would be volatile.

Uh and then one last comment on the on the markets. It's a different market than what we usually talk about, but the GPU markets are starting to get flooded. Here is a tweet that I thought was pretty interesting. Uh that reads Chinese miners and South Asian, uh I don't know what the next word is, uh now dismantling their mining rigs and putting up cards for auction on live streams. Uh 360 TIs, which is a NVIDIA graphics card, going for 300 to 500 or 300 to 350 dollars uh US dollars, which if anyone has been paying attention to the GPU mining market or no, the GPU market for like gaming and also mining, GPUs have been super highly priced for I don't know, two years now. Uh and it looks like a lot of people are st are starting to actually the GPU miners are quote unquote pricing in the merge by selling their GPUs on the open market. Uh and so GPU price is gonna finally come down. If you guys, if anyone has been on the hunt for a GPU to build out their gaming computer, uh it has turned into a buyer's market. Uh Anthony, any comments on this?

I've had a thesis for a while that this was gonna happen. Uh, you know, you mentioned the merge, but also obviously as the prices come down, miners have to sell because it's just not profitable for them to mine anymore. So I think especially, you know, obviously once the merge happens, like all these miners have basically nothing as profitable to mine. Like some of them will go to other chains that are that are compatible with GPUs, but most of them will flood the market. And I actually remember posting to some friends a few months ago that I I thought shorting NVIDIA would have been a good trade. Uh, and that has so far been a good trade, and I didn't take it, of course, because I don't really short things, but yeah, it's just obvious to me that there's just gonna be an absolute flood of GPUs. And I think NVIDIA themselves should be scared of this because they're trying to launch a new kind of like line of GPUs by the end of the year. Well, why would anyone buy their new line when they can get like a severely discounted uh mining GPUs? Which, um, for those who don't know, uh miners, when they use these GPUs, it doesn't actually materially reduce the GPUs' effectiveness and doesn't really harm them. So it's not like you're buying a card that's gonna die on you within a few months. Uh, the card is is fine to buy. It's just that it's severely discounted because there's gonna be so many of them flooding the market at once. And it's gonna be a pretty good time for gamers, I think, that wanna that wanna pick up a card here.

Yeah, I actually came into the world of crypto via mining. And so I remember like uh taking the profit maximumist approach to mining was not to actually run these units at super hot high speeds. You would run it at like 80 to 85% capacity because you need that thing to live a long time and not break down on you. Uh and and I do think there's gonna be like this stigma discount on these things where like, oh, a mining like gamers are kind of like uh what's the word? Uh kind of like

privil what's the what's the word I'm going for? I don't know.

I know where you look.

Yeah, they're they're really really picky, right? And so, like, no, I don't want like a uh a mining GPU in my computer. Like, that's I don't want the miners to have touched my GPU. I want my GPU to be flawless. But the the GPUs themselves, the cards are gonna be like not bad. So uh different different corner of the market, the the uh GPU market, but uh you can start to see the effects of the merge getting priced in here. Alright, fam, coming up next, we're gonna talk about the three arrows capital contagion, the continued fallout from that, and of course DYDX change and well as well as the Uniswap acquisition of Genie, the NFT aggregator, right after we get to some of these fantastic sponsors that make the show possible. And we're back. Alright, we're gonna have to talk about the further reach of the three arrows capital cancer, the spread of the virus, the spread of the contagion. Uh Voyager is an exchange, apparently. Anthony and I were just talking about like what the hell Voyager is right before we uh we got here. Uh, not an exchange I'm familiar with, but somehow they ended up having uh exposure to three arrows capital. Uh and Voyager tweeted out to better serve and protect our customers in current market conditions, today we announced that we signed a term sheet for $200 million and 15,000 Bitcoin revolving line of credit with industry leader Alameda Research. We'll get into the Alameda side of the story here. The reason, the details behind this, why this is happening, is because apparently uh Voyager had $663 million of money that they just lent out to three arrows capital, which then like went full leverage, full tilt leverage, and then lost it all. Uh and so uh apparently Voyager and exchange lent through Euros Capital $660 million. Uh and now that three arrows capital is completely insolvent, uh they lost all that money, which is weird that it's coming from an exchange. Anthony, what what are your thoughts on here?

I I just can't believe like this stuff that's come out over the last few weeks. Like people the funny thing about people in the crypto space, I mean probably people just generally, is that they think that because someone has a lot of money or like a company has a lot of money or a fund has a lot of money that they ha that they somehow have like uh the the intelligence to back that up. And as we've seen from the Three Arrows Capital Fallout, that definitely wasn't true. They were literally pretty much the same as the DG's you see on crypto Twitter, just with a bigger kind of balance sheet. And it also kind of seems to be that they didn't actually have much of their own money, they didn't take outside capital's investment, but they borrowed money from pretty much everyone and then were putting that into their trades and then paying back the loans, right, that they took out, using the profits from those trades and not telling anyone that they were borrowing from everyone else. And obviously, once they blew themselves up, they had all this exposure to various parties out there. And I don't know why Voyager gave them so much money because you just saw in the tweet they don't they have like 150 million dollars left themselves, which basically makes them insolvent if 3AC doesn't pay them back, right? Um and I'm just so confused. Like, why did they do this? Like, did they really get FOMO and think that 3AC was gonna trade this money up to be worth billions of dollars or something for them? And the fact that they're kind of like I think a customer-facing exchange as well, uh, that kind of like has retail investors, it's really sad because retail investors have gotten absolutely slaughtered over the last few months, right? They had the terror stuff, then you had Celsius, you had Block BlockFi recently. BlockFi, there hasn't been any fallout there yet because they got bailed out too. But you know, you have uh kind of like Voyager now. It's just like how how how much damage have we done in such a short period of time to these people? Like it's actually just insane to me.

Alright, here's a tweet from Tom Lombardi showing one of the like terms and conditions of Voyager where there is a consent to rehypothecate, which I best I guess means that if you put your money in Voyager, you are consenting to let it let them go and do whatever that they want with your money, kind of like a bank. And Tom, the the take here from Tom is that when you don't know where the yield comes from, you are the yield. So you go and deposit your money into Voyager. Voyager on the back end gives all of their money to 300 capital, who probably like promised Voyager some yield, right? Like give us your money and then we'll go and give you this percentage of yield. And to some degree, and this also happened, we talked about this last week, where a lot of startups gave 30s capital their treasury uh to go do that same thing, right? Like here's here's our treasury for our new project that from what we just raised. Uh 3 Euros Capital, please go give us like 6% yield, and then like 3 Euros Capital like probably just takes it and puts it into like anchor on Terra Luna, and then that that goes down bad. Uh and then they leverage themselves up, probably trying to make it back, uh, and that which just never ends up working out. Anthony, you brought up uh BlockFi, so uh this is also part of that story. Zach Prince, the CEO of uh BlockFi, goes uh today, BlockFi timed a uh signed a deal sheet, just kind of like Voyager did, uh, with FTX official, also kind of like how Voyager did, to secure a $250 million revolving revolving credit facility, providing us uh with access to capital that further bolsters our balance sheet and platform strength. Uh the proceeds of that credit facility are intended to be contractually subordinate to all client balances across all account types and will be used as needed. Basically, to ensure that BlockFi is solvent enough to allow for users to withdraw their assets, and they're actually being assets there to withdraw, and they're getting this money by uh a loan from FTX because BlockFi, like many other lenders in the space, basically every crypto lender that w that three arrows capital could borrow money from, three arrows capital borrowed money from, uh, BlockFi included. Uh and so uh Zach and Block and BlockFi

Like definitely like I would call it more regulated, more above the board type of lender out there. But even, you know, even BlockFi is not immune to this. Anthony, any thoughts on the on the BlockFi side of things?

Yeah, I mean I think we're just very quickly seeing why C Fi is not sustainable, why C Fi is what we're trying to replace with DeFi, right? While we're actually trying to build better systems, is because once you throw your funds into these C Fi C Fi platforms, it's opaque as hell, and you have absolutely no idea what they're doing with your funds. As opposed to DeFi, even if these DeFi protocols aren't actually decentralized, you can still track whatever what's happening on chain, right? You can see where all the funds are going, like it's all open and transparent, uh, and there's no need to kind of like uh uh uh just kind of be in the dark about it. And even with the terror collapse, people were screaming about it for a long time because you could see exactly how it all worked. I mean, even the white paper told you how it worked. Whereas with these C Fire platforms, you're just throwing money into the void and hoping you can withdraw it one day. And you mentioned they were regulated. They are, but they're not regulated like banks are, right? And they don't suffer the same consequences as banks. And that's what they need to get to if they want to be, you know, uh better platforms. But I I think that's gonna come now. I think regulators are really going to screw these guys now because they've just played with fire and got burnt.

Yeah. Like we say frequently on bankles, if you can be regulated, you should be regulated. And if you can't be regulated, it's because you're decentralized and you're transparent and therefore you're regulated by code.

The last part of this story comes from BlockFi, which is apparently allegedly uh struggling to raise. Uh so they are going through another raise round. I believe BlockFi raised something uh the raise at a valuation of like five billion dollars. At least that's what this tweet says from Frank Shaparo at the block. Definitely a reputable news source. So when when Frank tweets something, it's not it's not like vapor. Uh and so previously BlockFi raised at a five billion dollar valuation, and then they are now raising, again, raising more money, uh, but at a valuation of just about $1 billion. Uh so going from a $5 billion valuation to a $1 billion valuation in about six months' time. Uh so a significant loss of valuation by BlockFi. I mean, probably related to crypto market prices going down, yields going down, but then also like losing a bunch of money to three euros capital too. Uh and so uh overall, just like not a it's a bad week to be a centralized money lender. Let me tell you that, Anthony.

Yeah, yeah, exactly. And I mean I I think this is just following on with the trend as well of like uh the private markets coming down. They t they typically lag the public markets by about three to six months, but some of the private valuations are getting way ahead of themselves. And when I saw BlockFi raise at that valuation, that five billion dollar one, I even thought at the time that that was insane. Like I didn't think that they were worth that much at all, based on kind of like uh I guess what they were at the time. And definitely today they're not. And I think the market is kind of repricing that there and also repricing the risk now of these kind of like uh these services.

Alright, moving on to the second big news item of the week. DYDX chain. The whole entire blockchain. DYDX, the uh has it used to have its own layer two on Ethereum using Starkware technology, and it still does. I don't think they've migrated yet, but they are planning DYDX version 4, which includes DYDX chain, which is a Cosmos chain. So going from Ethereum layer two to a Cosmos zone, I think. And so they they tweet out DYDX V4 will be developed as a standalone blockchain based on the Cosmos SDK Intenderment Proof of Stake Consensus Protocol. At DYDX, we embrace radical changes in technology that have the potential to dramatically improve the protocol. After exploring the landscape of current and upcoming blockchain technologies, we've decided that Cosmos will allow us to build the best and fully decentralized protocol. Anthony, what are your thoughts on this move?

So there's there's a lot of thoughts here. Like a lot of thoughts. Um, I do want to say that I think DYDX isn't being that forthcoming with their reasoning here. I think that like uh from people I've spoken to and just thinking about this a lot uh since it was announced, I think that the main reason they're doing this is regulatory. I don't actually think this has much to do with the technical uh aspects of it. And I'll explain my reasoning there. In this announcement, in this blog post, they talk a lot about decentralization, right? Decentralization this, decentralization that, blah, blah, blah, right? Right now, with their Starquare implementation of DYDX, they cannot decentralize it because Starkware does not have the ability to have decentralized sequences yet. Uh Starquare hasn't hasn't put in those features uh or anything like that. And the order book specifically is centralized and DYDX does all the matching and things like that. Whereas with a Cosmos chain, for example, they can spin up their own validators, they can say, well, there's DYDX, people can can stake their val uh token holders can stake their val um their tokens and validate the chain, and then they can kind of say to regulators or anyone that comes knocking, hey, we're actually decentralized. We don't centrally control any part of the protocol. It's part of the uh the um DYDX protocol, and there's the there's uh nodes that validate it and they're spreader all around the world. When in reality, it's not really going to be that decentralized because the D 50% of the token supply belongs to insiders anyway. But I guess that's orthogonal to the to the point of that. I think this has just much more to got to do with regulatory than it does with technical, because I actually think this is the third time that DYDX has now pivoted on their product stack. First they were on layer one Ethereum, then they went to Starkware, layer two, now they're doing DYDX chain. And honestly, like, yes, they they kind of like got a lot of traction as their layer two, and their layer two is actually really cool. I love using it, but uh from what I've seen, they're nowhere near the capacity that Starkware can give them, right? I think they do like 10 TPS or something like that. And I'm sure Starkware has plans to decentralize the sequencer and and kind of like uh improve their technology and bring more scale and all that sort of stuff. So I think it's less technical and much more regulatory for those reasons I outlined. And I just don't think that this is a good move from that perspective because I get the regulatory side of things, but you're sacrificing your product and your technology for that. And maybe they believe that they can build a better product, maybe they truly believe it, but I don't know. Like from everything I know, layer twos is still strictly better than Cosmos chains, and it's not even a technically a Cosmos zone because they're not going to connect to the Cosmos hub from what I've seen. There's gonna be their own standalone chain that uses Cosmos technology, and the DYDX token will be used to validate the network. And so by doing that, they're actually giving up heaps of security too, right? Like they're literally live leaving, say you're in like a massive fortress and you have an army protecting you. That this is what they're doing. They're leaving that fortress and they're going to their own camp out in the wilderness, have a few guards posted, and that's how they're going to protect their chain now. So I think the trade offs that they're taking here are really, really kind of like bad, and I actually don't think this is a positive for them. Um, but as I said, if it's if you take the regulatory view, I think it makes a lot more sense than the technical view.

Yeah, I I I definitely agree with that take. And that's uh an interesting take that I haven't heard yet. About the the security comment, uh, this is also where the changes in the DYDX token come into play. Uh and so the uh the DYDX token, which uh you know is is a token on Ethereum, but is now going to be part of its own layer one blockchain. This is a brand new layer one blockchain that's coming to play here. Uh the in the in this blog post they go the DYDX token uh is the protocol token of the of the DYDX protocol, of course, governed by its holders. The V4 protocol is designed with a need for a layer one protocol token. The protocol token would be used for staking to validators as well as ongoing governance of the chain. The DYDX token would seem to be a natural fit to be used as the layer one token uh of the V4 network, but we look forward to understanding the perspectives of the DYDX community. Uh I'm trying to find where this is on screen, but I'll find that in a sec. But basically, now in order to have a D a layer one blockchain, uh you need to have a token. And so like DYDX is becoming the ether of uh, you know, ether is to Ethereum, DYDX token is to DYDX. Uh and now you stake DYDX and run a validating node and you like process the blockchain as one does. Uh but this uh like previously DYDX didn't have to pay for security, which is what you were saying. They would just they would just receive the security from Ethereum. Now that they're going to their own layer one blockchain, there needs to be DYDX emissions to pay for security, changing the nature of the token. Uh and the and so you can now, if you're bullish on DYDX, you can now stake it, run a node, process the blockchain, and receive those emissions. But this is now an expenditure that the system didn't previously have, and now it does have, because like you said, they have to pay for their own security.

Yeah.

Any thoughts on that?

Yeah, yeah, I mean you're you're you're totally right. And I think like you know some people have kind of brought up uh brought up points around oh they are they're doing this because they want to drive more value to the DYDX token. And I'm like, yeah, okay, I could see that, right? There is a there is typically a layer one premium, some of these things get, but at the same time, uh they're by by doing this, as you said, they have to inflate their token to secure their chain here. Um, and actually, one thing I forgot to mention about the regulatory stuff before and gives further kind of like proof to this is that the airdrop that DYDX did, they barred US investors from getting that airdrop. So they have been very, very careful when it comes to regulatory stuff, right? So I think that um that game gives is kind of like further proof that this is a lot to do with regulatory stuff rather than technical, technical stuff.

We've had Antonio on the show before, and one of the takes that I've really enjoyed from Antonio is that he is not uh he is not a maximalist in anything other than DYDX himself. He's going to build the best uh derivatives exchange possible. And we enjoy we I like that tape because he was building it as a layer two on Ethereum, and he says that he's going to be able to beat out competition by by optimizing for decentralization and using decentralization as a tool. Uh but the take here is Antonio's a DYDX maximalist. He's gonna do whatever possible to make DYDX the best exchange possible. And so the the the writing on the wall actually started, I think, forever ago when Suzu had that abandoning Ethereum uh tweet, uh, which you can which Antonio retweeted and said, here's a risky tweet of the day. This is uh said much harsher than I would put it, but I somewhat directionally agree. Ethereum has not executed over the past years. I can't think of a single 10x useful improvement Ethereum has made in the last four years. Uh, and this was back in like November of 2021 when uh we had this like drama with Suzu and the Ethereum community. Uh and Antonio kind of tapped on and agreed with Sue, saying, like, well, you know, Ethereum as a protocol hasn't really upgraded. And so uh the writing on the wall here uh was was was definitely present. Uh and then later Antonio tweets I don't I 100% don't care what chain DYDX is built on. All I care are the technical trade-offs, decentralization, security, scalability, UX, et cetera. D apps will move to other chains if or when they offer better trade-offs. Anyone who doesn't like it will be outcompeted. Uh so you could you could kind of see the the tone that Anthony was taking forever ago. Antonio, excuse me, uh was taking forever ago in November 2021. Uh, and now it has come to fruition of DYDX going on its own blockchain. We are actually having uh Antonio for uh the state of the nation this coming Tuesday. So we're gonna talk to him about this this uh decision uh and like what made him uh make this decision for moving DYDX over to Cosmos. Uh there's some takes from some ecosystem participants. Uh Paulinaya had this take where he said uh they said, very interesting. Technically, everything here can be done with roll-ups, and better so for many reasons. There are two advantages of going with their own layer one blockchain I can think of, sovereignty and timing. Probably a combination of both. Concerned about the plummeting security though. One observation and potential red flag. They have some deep answers about uh they have some deep answers about decentralization, but there's not a peep about security. They say they they will use the DYDX token with fifty percent of tokens allocated to insiders. How will this thing be economically secure and sustainable? What do you think of uh Paulinaya's take here, Anthony?

Yeah, I think he has it on the money. I think it like when you kind of look at this sorts of stuff and the arguments from the pro, I guess, Cosmos people, I should say. Their arguments usually revolve around them thinking that sovereignty is critical. They think that every chain should be an app chain, should be sovereign, should be able to do what it wants, and have full control over its uh kind of like destiny. And you know what? I actually get that. I get that view. I don't agree with it, but I get it. And I think this is where the divide comes as well from Ethereum and Cosmos. Like Ethereum ecosystem believes that sovereignty of a chain is just really not that important. You don't get many benefits from it. The trade-off includes, you know, you're plummeting security, as Polynia said here. Um and then timing, I would also agree with because I don't think Starquay is ready right now for what DYDX wants to do. So if they're trying to get ahead of regulators, then they're there, you know, it's it's probably existential enough for them to kind of like go to a new chain as as well there. So yeah, I agree with those points. But I also just wanted to quickly touch on what you were saying with Antonio before. I actually don't really believe what Antonio was saying a lot of the time. Like a lot of the comments I've seen from him over the years, and this might be controversial, I don't know Antonio personally or anything like that, but the comments that he's made, especially that tweet that you highlighted from November 2021, showed that he just doesn't really have a deep understanding of Ethereum or its scaling roadmap or how it's going to kind of like get to where he I you know he would want it to be for DYDX. So I do believe it when he says he's a DYDX maxi because it's his company, right? He's trying to grow it as big as possible. But I think that he's making strategic mistakes here personally. And and and you know what, that's just my own opinion. I could be wrong. I'm not gonna say I'm right here, but I do think that he he makes some comments like, oh, you know, ETH2 is three, you know, habitually three to five years away. And it's like, well, no, even back then we knew proto-dank sharding was going to be that thing that gave a lot of benefit to um layer twos, and that should come like relatively soon. He also had made a comment about EIP 1559 and he thought it lowered gas fees when you know anyone who was paying attention knew it didn't do that. So I think that there's just a divide here that um, you know, I don't know if it's other app developers or just Antonio where they don't seem to understand how Ethereum is going to actually scale, even though he built on a layer two and everything. I I feel like because he's so focused on DYDX itself as a product, he seems to miss the forest for the tree, so to speak, right? He seems to be focusing a lot on DYDX, but losing sight of maybe the bigger picture uh of kind of like the the scaling stuff. And, you know, I guess it's his kind of like thing to prove everyone wrong, you know, with Cosmo with uh not Cosmosh, with DYDX chain. Uh we'll see how that how that goes there. But this isn't the first time we've seen this either. There was comp chain from compound back in December of 2020, that went nowhere. They didn't build it on Cosmos, they built it using Polkadot Substrate, or at least they attempted to, that went nowhere, and now Cosmos wants to deploy to other EVM chains and and things like that, like layer twos and things like um some other apps have done. So, you know, we're still early, remains to be seen. But again, going back to what Polino Polinar said, uh, I just don't think the trade offs are worth it. Like trading off massive security for some sovereignty for what, right? Like, what do you need that sovereignty for that is worth all that security loss? Is is my question to people. And I haven't really come up with a good answer yet.

Yeah, and the other the other conversation is do you have the same on ramps when you're on your independent blockchain versus a layer two to Ethereum? Because if you're on a layer two to Ethereum, like I can send my assets on Ethereum straight over to DYDX instantly. But I if in order to get to a Cosmos chain, I'd have to take a bridge or go through a centralized exchange. So like there's a conversation about like where the money flows in.

But let's go ahead and move on to the next big item, the last big uh news week uh news news item of the week. Uniswap acquiring Genie. Uniswap Labs tweets out the Uniswap universe is expanding in pursuit to unlock universal ownership and exchange. We're excited to share that we've acquired Genie XYZ, the first NFT marketplace aggregator, expanding our products to include both EERC20s and NFTs. Anthony, first impressions on this news.

My first impressions was that it was only a little bit surprising to me. Like I think that Uniswap uh as a kind of like a vibe and a culture has always been about just swapping things in general. Doesn't matter if it's tokens or NFTs. I mean, obviously they had Unisocks, which technically isn't an NFT, but I mean uh it kind of it like it it practically is. Uh so yeah, I wasn't really surprised by this, but I also had some thought thoughts about like just aggregators in general and how I think that so far decentralized exchange aggregators themselves have actually not fared well against the single exchanges. So, like for example, One Inch has not really fared well against Uniswap, and neither has the other aggregators. But I actually think when it comes to NFT aggregators, it's gonna be a different story because you know you can have the same fungible liquidity pool across many different uh DEXs, but a lot of the time you won't have the same kind of like thing between different NFT marketplaces. So, for example, there might be an NFT that's listed on OpenSea, but it's not listed on LuxRare, and then you're only on Lux Rare, well, then you haven't found it there and you won't you won't be able to buy it. Whereas an NFT aggregator will actually tell you where the NFT is, like what marketplace it's on. Uh so I I think that because of that, the NFT aggregator probably has much a much more of a chance of being a thing than the decentralized exchange aggregators have been to date. Uh, and Uniswap obviously has that brand power to make it happen too. Like just insane brand power and and and awareness around Uniswap, that's for sure.

And in case you missed it, we talked to Hayden on the on the YouTube uh to that show. If you guys want more details on that show, Hayden and I talked, uh, this is him in the Uniswap offices down in Soho in New York. Uh pretty cool offices. I've been there. Uh I was uh over there about a week ago where he actually like gave me the alpha a little bit ahead time, so I kind of kind of knew it was coming. Uh if you guys have used uh Genie, uh you got a USDC airdrop. If you used Genie more than once, you got airdrops USDC, uh, which is an interesting airdrop. I don't think I've ever seen a dollar stable coin airdrop before. Uh but either way, that's what that's what happened. So uh airdrop season still on, still on, but USD airdrops that uh this time. All right, uh that is the big news items, but there's so much more news left. We got the Arbitrum Odyssey to talk about, which is extremely exciting. We got some DeFi down bad stories as well as some Ether staking stories. Uh, and of course, we got some Elon Musk and Dogecoin things to talk about as well. So all that is coming up next next, right after we get to some of these fantastic sponsors that make the show possible. And we're back, Bankless Nation, onto the rest of the news. Starting with the Arbitrum Odyssey. Arbitrum tweets out the Arbitrum Odyssey will officially start on Tuesday, June 21st. That was this last Tuesday, so this has already started happening. We know all you Arbonauts have been very excited to venture into the unknown with us, and we're very eager to have you on board. Uh, and so starting on June 21st at 1 p.m., by using any of the bridges or centralized exchange listed below, here's the here's the tweet, uh that you can to move ETH into Arbitrum, you'll be able to claim the first NFT after the weekends. Users who end up using the bridge that have the most wallets bridging into Arbitrum are in store for a bonus NFT. And so here is a bunch of available bridges, hot protocol, across, transact, uh, li-fi, lefi, dgate, seller network cash flow. Uh, there's so many of these. And so I guess if you get your ether onto Arbitrum, you get an NFT. Uh, and then that is the first part of the Arbitrum RTC, that's the bridge week. And then weeks two through eight is like DAP week, is kind of how I've separated this in my head. First, there's bridge week to get all the ether onto Arbitrum, and then there's DAP week, which are weeks two through eight. So there's so many applications on Arbitrum that you're gonna use, and then they're gonna give you NFTs if you use them. Uh so it's basically just a big treasure hunt for NFTs over the Arbitrum Odyssey. Anthony, any comments on this?

I think it's an interesting way to grow their ecosystem without using a token. That's what I really like about this. Is obviously Arbitrum does not have a token yet, uh, may or may not in the future, but uh because they don't have a token yet, they're using this as a way to bootstrap uh the growth. And I think also they are aware of the fact that people are going to be using this as a way to potentially farm a future airdrop, right? Which obviously has factored into this, but I mean I don't think that's that's kind of like uh a big deal there. Uh, I've already seen some really nice metrics that people are kind of like bridging in and they're kind of using um kind of arbitrum there, and they're kind of like obviously using I think hop protocol, I think. Yeah, though that was that's the tweet that I saw. So most people seem to be using hop protocol there, and there's actually a lot of bridges now. Like that graphic that you just showed, there's so many bridges. There's too many at this point, I think. But uh like I just I just don't I don't I don't think most of them are gonna like survive long term. Just just it's there's too many, right? But uh, but it's cool to see that they're all being supported, at least by Arbitrum. People can use them, they can kind of like get value out of them. Uh but yeah, I just as I said, I think it's is it's cool that Arbitrum is bootstrapping uh kind of growth, new users without using a token. Because I've always for like a long time now said that I want to see more kind of like incentive programs that don't involve a token because we all know how liquidity mining programs end, they don't end very well.

For the podcast listeners, this tweet that we're looking at here says over 4,000 users have bridged to Arbitrum on the first day of the Odyssey campaign. Over 2,800 alone used hot protocol. Amazing to see. And then the chart here is just like a big candle, which is illustrating daily new users bridging into Arbitrum. It looks like it's hovering around like, you know, 50 to 200 on like an average day. And then like this big red candle is at over 4,000 people in one day and about 2,000 people the next day. And so people like the tokens. People like the NFTs. And so William Pister in the Bankless newsletter put an article out called The Arbitrum Odyssey Begins Breaking Down the Arbitrum Odyssey and getting you all the information you need. So if you're trying to do a deeper dive into what you should be doing if you want to embark upon the Arbitrum Odyssey, you can check out that newsletter for all the details down there. Alright, moving into the DeFi Down Bad section. This is a governance proposal on this thing called Soul Lend. And this is this is some spicy drama. The title of this governance proposal is Mitigate Risk from Whale. And basically the TLDR of this proposal is that there is somebody using Soul Lend on Solana. And Soul Lend is basically like the Ave or the compound version, but on Solana, Soul Lend, like lend your money. And there's somebody, there's a big whale that put all of his soul tokens into Soul Lend and borrowed a bunch of stables from it, and is very, very close to getting liquidated. I think the liquidation price is something like $22. The soul price is back up to like something like $35, but it did get down to like $28. And the problem here was that there were so many Solana tokens in this position, and there was not enough sufficient liquidity in the Solana decentralized exchanges to liquidate this for what it was worth. So like the sole token in Solana's DeFi ecosystem was literally going to go to zero because there wasn't enough liquidity there. And so there was a governance proposal to uh take the money, take the position from this whale, and like uh take it over, liquidate a part of it, and then just uh in order to prevent this cascading liquidation. Uh Anthony, what are your takes here?

Yeah, I mean this is like the cardinal sin, right? Of uh of kind of like DeFi. If you do this, you just are not DeFi like at all. Like, I mean, there are obviously admin keys for a lot of DeFi protocols and multi-sigs and things like that, but I'm not aware of any in the Ethereum ecosystem that have done something like this, even proposed something like this, of taking over an account because uh they want to kind of like do it for the good of the protocol or something like that, right? So I I I think that it was insane, and then they had another vote. I don't know if we're gonna talk about that, but like they had another vote to like invalidate this first vote, which was, I mean, in very much in favor of yes. You can see a 97.5% yes. Um, and like, which was I think a lot of the a lot of the voting was the team, like in investors, because of course they're just gonna vote with with with them. But uh, yeah, it was not it was not good, that's for sure.

Okay, so the this initial vote to take over the um the position of this whale passed, but then there was another vote that said like, wait, wait, no, just kidding, we don't want that.

Well, yeah, because the sole price went back up, right? And they're like, well, the sole price is up, but it's no longer a risk anymore, so let's do another vote to cancel the first vote. And I was like, this is just clown world now. Like, this isn't even funny anymore. Like, it's just stupid. Um, but yeah, I don't know if it's gonna load for you there. But yeah, there was another vote. Um, I think like uh this was then but mind you, this was the first gov uh vote on the governance forum. Like they had no other ones, they just had this one. Oh man, it's just it's funny, it really is.

Yeah. Well I I think there there's a I'm gonna imagine that the Solend token doesn't have a lot of distribution because of how uh how young the pr the application is. Uh and so there's the critique going around that this is basically just like the operators of the protocol voting to take over the margin position of this of this large whale who just didn't do anything. Um so I hope this I both the Soul Lend community, the Soul Lend operators, and this whale is definitely hoping that we don't go down to like another twenty, thirty percent because then we will start to be liquidating all the the Solana tokens.

Yeah, I mean there is that, but there's the thing with the whale is that like I don't think the whale even cares to pay this back because how are they gonna liquidate that much soul? They've already got over a hundred million dollars of stable coins that they can just keep, right? Like who cares about the soul? Like they th there is obviously a sixty million dollar difference here, but if they can't sell the soul anyway because there's too much of it, like it they're just gonna take that money and and run, right?

Right, right. Yeah, there's a lot more liquidity for US dollars than there is Solana tokens. That is for sure. Um the here's a tweet from Fat Man Terra. This is pretty wild. The Solon the Sol En team wants to take over the whales accounts and execute the liquidation themselves. The whale's position is so degenerate that if Sol drops too low, it will cause cascading liquidations, basically recapping what we just said. Uh and then at the end of this tweet thread, he said the Solend team just confirmed to me that when this change is implemented, the whale will instantly be partially liquidated down to a safer ratio. Sol price is 32, but his current liquidation price is only 22 on the fence about the main proposal, but I do not agree with that part. So some interesting decisions going around when communities get stressed. And speaking of communities get that getting stressed, Bancor has released a market conditions update in June 19th, 2022, which is when this was posted. And they said due to hostile market conditions, Bancor's impermanent loss protection is temporarily paused. IL protection will be reactivated on the protocol as the market stabilizes. This is a temporary measure to protect the protocol and its users. And so what this really means is Bancor has this interesting mechanism to mitigate from IL impermanent loss protection.

And it basically, if you just want to supply Ether into Bancor's AMM, Bancor is like a very much like Uniswap, it's an AMM, but it's got some extra features involved with his token and some other things. And so you can do single-sided liquidity providing. So you can provide liquidity for the Ether BNT pair. But if you don't want to provide liquidity for both, you can just do it for BNT, and the Bancor protocol will mint the extra BNT to provide that balanced liquidity. And that this is a way for people to not have to deal with impermanent loss because they just inflate BNT in order to mitigate from impermanent loss, which is attractive for LPs, but also it's it's a it's a sacrificing value capture in the BNT token by making it inflationary as a function of impermanent loss. And so Hazu had this really spicy take that says Bancor's shell of impermanent loss hiding is collapsing. They print new BNT to compensate underwater liquidity providers and they call it impermanent loss protection. The cost is transferred to BNT holders via inflation, which causes further impermanent loss to all other BNT pairs and leads to further inflation, a death spiral. You can see it clearly in the performance of these DEX tokens. Uni's down 20%, sushi's down 20%, but BNT is down 61%. And then he continues saying, Now Bancor is pulling the plug to stop the bleeding. Didn't even take three weeks for my prediction to play out. More reading. And he he tags a Kobe tweet, and Kobe says The need to pause impermanent loss protection is a result of how we designed and built impermanent loss protection. Kobe always being a little bit facetious here. Anthony, what are your takes here?

I've been really harsh on Bancor on my own show over like over this, and I've just not been a fan of Bancor since basically day one. I remember their ICO. I participated in their ICO back in 2017. Um, and they're back then they actually in their ICO, for those who maybe who weren't around, they changed the rules of the ICO mid mid-sale, where they were supposed to be capped, and then they changed it to kind of like be uncapped because there was so much demand and they got all this extra money. And ever since then, I've just like not liked them. And then even on the tech even on their technology side, they didn't really seem to do anything innovative, right? They have the obviously their AMM and everything like that, but this impermanent loss protection thing that they were doing, I looked at it and I'm like, what how does this make any sense? It's literally just inflating the token to uh and and the um the cost is borne by token holders. So as far as I'm aware, there's no kind of like solution to impermanent loss, like in terms of like everyone winning, someone's always losing. Like, you know what I mean? Like there's always gonna be someone losing if you're trying to protect against impermanent loss. So I think from that perspective, I uh I the thing what Bancor did here is another cardinal scene where they paused it, they broke their social contract with their community uh to save their their own kind of like token value. But you know, you're you're bringing up bringing up the chart here, it's already down 95% from its all time high, so it's it's not much left to save.

Ooh.

The i the it's actually interesting. You can see this dynamic play out when you compare the price to the market cap of Bancor. Because since the token supply is flexible, the market cap and the price charts look very, very different. So like the market cap chart actually has gone up. Like the system has captured value. It's lost a lot of it in the last like you know week or so. Um but like the the price seems to have you know been down over over the the course of of time since like uh July of 2017 when this token came into existence. But the market cap has actually gone up a decent amount because the system captures value, but the token is just sacrifice in order for the system to capture value. Uh and so uh with the uh removal of the impermanent loss thing, what happens is that if you as an LP would have suffered impermanent loss, but then you withdrew your assets, uh BNT would just be minted and sold into the market so that you could uh be protected from impermanent loss. But since so many bank or liquidity providers would have uh felt impermanent loss because of how down bad the BNT price is, it would cause a hyperinflation event, not unlike the one that we saw with Terra Luna, but just with a different mechanism. Uh and so, like, you know, impermanent loss protection, good in times of market uh when markets don't go uh moving in one significant direction. Like if it stays within a particular band, that's kind of where the mechanism works. But as soon as you find find any long tail risk and like down 90% mechan uh uh to uh market conditions, that's when the whole system breaks. Um so moving moving on from that, DeFi down bad. Here's some some more optimistic side of uh the the crypto world going into Ethereum staking. This is a the nether mine saying with the Cepolia beacon chain set to be launched today, we can current confirm the readiness of our Cepolia nodes. Today will mark another big step towards the merge with the panda emoji. Anthony, I know you pay attention to this side of Ethereum much more than the the average person, much more than me and Ryan. Can you give us the TLDR of what's going on here?

Yeah, so the the Sipolia public test net needed a beacon chain because if it's going to run through the merge transition, it already has a you know execution kind of like layer chain. It needed a consensus layer to merge with. So they launched a new beacon chain for Sipolia, which will be merged into the existing Sipolia network. Uh and that will happen. Look, there's been some dates thrown around. It's either going to be late this month, like really late this month or early next month. Uh and then once that happens, that'll be the second public test net that goes through the merge transition. And then we have one left after that, and that's Gorly. So, but yeah, that the beacon chain needed to be launched for Sopolia because there just wasn't one. So we couldn't merge into anything unless we launched a new beacon chain. But this is testnet. This is not mainnet, nothing to do with mainnet, it's just all testnet still right now.

Yeah, but there's only so many test nets left before the mainnet day eventually comes. Continuing on the theme of e-staking, Lido has announced an expansion of the Lido node operator set. So I previously believed that Lido had about 14 validators, uh independent validators from around the ecosystem, and they are adding in a bunch more. Chainsafe, uh, attestant, uh, a few others, nevermind, Prismatic Labs, all becoming validators in the Lido network. Uh, but also at the same time, while Lido does move forward in adding more and more validators to their network, we have Swell Network, uh, an alternative, newer uh staking as a service uh application protocol, uh launched a test net. Uh so things are moving in the world of staking as a service. Uh the Swell Network DAO says they are pleased to publicly announce the launch of Swell V2 Testnet on the Gorly network, a critical milestone in the development of Swell's next generation ETH liquid staking design. Uh and so if you are interested in that world of uh staking and want to be part of the Swell Network's uh test net, there's a call to action to join that uh that testnet, and there's a link in the show notes to get started. Anthony, any comments on these two bits of news?