ROLLUP: Elizabeth Warren's Anti-Crypto Army | Arbitrum Controversial Vote | Dogecoin Twitter

Elizabeth Warren tweets out this image. Elizabeth Warren is building an anti-crypto army, uh, triggering the entire actual real army of crypto Twitter.

Bankless Nation, happy Friday morning. It is time for the Bankless Friday weekly rollup where we cover the entire weekly news in crypto, which is always an ambitious endeavor. And here to help us explore that frontier, we are tapping in Anthony Sesano. Anthony, welcome back to the weekly rollup, man. How's it going?

Hey man, I'm going great. Thanks for having me back on.

Lots of news to cover. So I know, Anthony, you are a fellow coffee maxi like me. Uh, but it's a little bit late for you to have coffee. I'm sure you already have it. But I just finished my first cup of coffee. So we're gonna go through all caffeinated and stuff, all the topics of the week. Arbitrum's first governance vote, which was to sell a billion dollars worth of tokens. Turns out it wasn't actually a vote. Much more drama ensues. You're going to cover all of that news and give our takes as well to unpack all the nuances about that. A brand new frontier gets unlocked in the MEV world, potentially a new paradigm now unearthed by a validator who sandwiched attacked a sandwich attacker. Uh, we will discuss that and what that means for the MEV landscape. And Liz Warren is gathering her anti crypto army, and everyone is trembling in fear, right, Anthony?

Yeah. Yeah, yeah, I'm I'm dead literally trembling in fear right now.

Alright, so you guys know the deal. Bankless Nation. Make sure to like and subscribe, rate, and review wherever you get the podcast, because this is how we get all this fantastic information scaled out to as many people as possible. This comes out every Friday morning. And this is, of course, where we cover all this crazy, the crazy, crazy crypto industry. And first, some news out of Bankless that came out on April 1st. You might notice that Anthony Susano is here, not Ryan. That's because Ryan and I have broke up.

What was funny about this is how many people actually fell for it. So

Yeah, emphasis on the April 1st date. To this day, people are still reaching out to me and be like, man, I can't, I can't believe you guys broke up. The reason why Ryan is not here is because he is having some very well-deserved time off with his family and kids, uh, powered down and getting some software updates on some beach somewhere. Hopefully relaxing. Uh Ryan and I did not break up. That was an April Fool's joke. Um, and the seriously, the amount of people that got tricked by this April Fool's joke actually warranted me having to bring this up here on the podcast.

Yeah, yeah. I mean, I I honestly hate April Fool's Day because I have to go through it twice living in Australia. First in Australia on April 1st, and then second on April 2nd for me, but April 1st for like the for like America, and I have to put up with it uh for 48 hours almost, and it just it's it's not great.

Yeah, so uh Ryan and I, Ryan will be back uh next week for all the regularly scheduled programming. Uh and then quickly before we get into the markets, we actually got uh some nice perks out for the Bankless Nation here from Coindesk Consensuses 2023. This is actually not a sponsored message, uh, but they have given the Bankless Nation 15 pro passes to the Consensus Conference. Uh, that is worth $2,200. First come, first serve inside of the Bankless Nation Discord. Uh, and then the next 100 people after that will get 50% off. So I bet you those first 15 tickets are already taken. Uh, but that is one of the benefits of being inside of the Bankless Nation Discord. Uh, so if you want one of those 150% off uh tickets for a consensus 2023, jump into the Bankless Nation to fill out the form. This is happening April 26th to 28th at the end of this month in Austin, Texas. Getting into the market's Bitcoin price, starting the week at $27,300, ending the week up up half a percent. So still green at $27,800. Let me zoom through to the ether price uh starting the week at $1,800, ending the week at $1,870, up four and a half percent on the week, and also the Ether Bitcoin ratio up 4.5% on the week from 0.064 to 0.067. Anthony, give me a read on the markets. How was this last week and last month on the markets from your perspective?

I think it's led to a lot of renewed optimism about the markets just because these are the highest prices we've seen in a little while on both BTC and ETH and people are getting excited again, thinking that, you know, this might be the early innings of a new bull market and things like that. I struggle to kind of say that. I don't think it's the early innings of a new bull market. I think that ETH and BTC, BTC are still in this range that they've been in for quite a while. And it just feels like we're we're doing this, what people call crabbing. We're basically going sideways for for quite a while. I think that's probably going to be the theme for the rest of the year, to be honest. I I don't expect a new bull market this year, maybe maybe next year, right? Um, but generally, yeah, whenever this sort of stuff happens, obviously people are going to get excited, but I think people tend to forget that the we could go back down to you know low 1000s on on ETH, you know, 20k for BTC or something like that with relative ease and uh sentiment can change very quickly. But you know, generally, yeah, I don't really pay attention to day to day, week to week kind of movements. Um, you know, I see people getting excited, and I'm like, you know what, it doesn't really bother me either way. Just obviously.

Looking at the long term and and and and thinking obviously that ETH's going to be higher long term. Like I have I have my conviction on that and my thesis around that. But uh but yeah, it's interesting just to see different people's takes on it because you've always got the traders who always just trying to trade whatever volatility there is because that's their bread and butter, right? If there's no volatility, they don't really they can't really trade uh and and there's not really much opportunity. But as soon as the volatility starts, you see all these kind of narratives form and all this sentiment change because people just trying to trade, trade it. People, you know, people long-term investors are thinking, oh wow, okay, finally the bull market's back, you know. But yeah, as I said, I I don't think that it's the bull market. I just think that we're in that kind of accumulation range that we've seen in previous bear markets where you know the die hard buyers are buying, traders are trading. The retail investors, most of them, are not here right now. But eventually, I think that uh eventually we go back into a bull market and and they and they come back.

Yeah, and at least in the ether price, we haven't seen these prices since August of 2022. And we are about at that high. That August 2022 price is kind of the resurgence after the three Euros capital liquidation. Uh, and so before that, it was May of 2022, and that was just in that perpetual uh down price action that happened for like almost uh 14 or 15 weeks, which was the you know what was 2022 and 2021. Uh and so we're at we are as high as the big bounce back out of that initial uh liquidation uh candle that when Ether went down to just below $900. So went down to below $900, bounced back up to basically $2,000 in August 2022.

Yeah, I think it was based the merge hype kind of got us back. I mean, that was just a narrative people latched onto, I think, as an excuse. But uh it it's it's it's funny just seeing like where the price is now because if you go back to 2019, a similar thing happened where it kind of bounced back up to uh a point, uh it was like $360 or something. And then after that it went, it went back down uh to like ETH particularly went from like

The bottom to 360 back to like 130 during 2019. So it was a very volatile year. Um, but we we didn't set new lows even during the COVID dump, it just went to the previous kind of low. Uh so I think people generally should be prepared for for that uh if it if it repeats itself um and not get and not to get too ahead of themselves just because there's a few weeks of positive price action.

Yeah. Just a quick uh comment on the ratio, the Bitcoin Ether ratio. We had a really good week in the ratio after just getting slammed for the past like two or three weeks. So Ether is up four point five percent on the week when uh it's been like four weeks, four to actually a few months of of just down price action on on the ratio. What's what's your read on the ratio here?

It is by far the noisiest chart, I think, in crypto. Getting signal from like the ratio chart is really, really hard. I don't think anyone really trades it on the shorter time frames. It's more of a longer term narrative thing where you're like, okay, right now feels like Bitcoin season or right now feels like ETH season. And people will trade ETH and BTC and then that'll reflect in the ratio. But generally, yeah, I think that looking at maybe month to month is the best time frame for the ratio rather than day to day, week to week, and even kind of shorter than that. Um, because yeah, as I said, it's a very noisy chart, and uh and you can see that just zooming out on it generally.

How noisy it can be. And it's funny because it's something that a lot of people use to form narratives and to dunk on each other. Like when it's going up, you know, Ethereans are dunking on Bitcoiners. And when it's going down, Bitcoin is dunking on Ethereans. And it's just a perpetual game of that. But I think what it what it generally just does is it just kind of follows a over the shorter time frames, it follows just the that that kind of sentiment, that trader sentiment where they're just playing the volatility between BTC, you know, now it's time to bid BTC, or now it's time to bid ETH and other stuff. And yeah, I I I that's why generally I think it's it's very noisy and it's very hard to get a good read on it uh over the short term. But longer term, I mean, yeah, I everyone should know by now, everyone, anyone who knows me knows longer term. I believe in the flipping, and I think that ETH is is definitely going to outperform Bitcoin. But yeah, it's very hard to get signal over the over the shorter time frames, that's for sure.

All right, moving into general market cat uh talk. Uh Ethereum is now being held in self-custody, the bankless way and away from exchanges at the highest level since the week the token was uh since the week Ether was introduced eight years ago. So the ratio of Ether in self-custody in DeFi and away from exchanges is at all-time highs. And that actually correlates with for the second month in a row, Uniswap has beat Coinbase in trading volumes. Now, I I remember when uh Uniswap came out in 2019, and that would be like unheard of to talk about back in 2019 that Uniswap would be beating Coinbase, the biggest uh highest volume centralized exchange uh that's out there, maybe except for Binance. Uh and for the second month in a row, Uniswap has beat uh Coinbase by by more than a little bit, 45% higher than Coinbase's volume, the best months, uh Uniswap's best month since January 2022. Anthony, give us your read on this.

Yeah, I mean, I'm not surprised by this, to be honest, considering how much liquidity and and capital has moved on-chain, um, not just on Ethereum layer one, but on these layer twos as well. Uh, and Uniswap obviously dominates there for uh uh decentralized exchange trading. Uh and if you include like even the other decentralized exchanges, not just Uniswap, then it's even much higher than that, right? Uh, which is which is pretty cool uh to see to kind of see that all of them put together just blast away um Coinbase, which is the second biggest centralized exchange, still not higher than Binance, but obviously I think Binance is like almost 10 times uh the trading volume of of Coinbase. So it's it's quite a bit bigger, maybe not that much these days. I think that the gap is definitely closing, uh, but there's still there's still a pretty pretty big gap there. But generally, yeah, if you had told me that this was going to happen so quickly as well, like a couple years ago, I would have probably not believed you because uh I uh uh centralized exchanges have such a grip on on

I guess, uh, volumes and and liquidity and trading. But in hindsight, looking looking back, it's kind of well, if liquidity can move as fast as it can move in on crypto rails, then there's no reason why these these things can't happen very quickly. And I think that's what we've seen play out.

Unisoft's not the only decentralized exchange that's uh seeing a lot of volume right now. Trader Joe, which uh recently deployed uh in addition to their Avalanche, their original home base Avalanche deployment, also deployed on Arbitrum a few months ago. The volume on Arbitrum, and I know you saw these numbers, Anthony, is now three times what it is, a little bit over three times what it is on Avalanche. So uh in the the 24-hour uh volume on our Arbitrum, $177 million measured on March 30th, when it was just $58 million on Avalanche. And so this is uh size Chad tweeting out who's uh on the Arbitrum team. Looks like Trader Joe is now primarily an Arbitrum Dex. And then he's got the uh the look at me, I'm the captain now meme. Anthony, give us your take.

Yeah, I mean maybe I'll cop some heat for this, but I had primarily been very bearish on Avalanche because their main thing was the C chain, which was just an EVM chain. And I figured that L2s like Arbitrum and Optimism that were EVM compatible and equivalent would offer a much better experience on the EVM front, uh, and that would lead to a lot more liquidity and trading and activity than we would see on these other the these other kind of um uh L1s that were EVM compatible. So this doesn't surprise me at all. And it's really funny because I used to see Trader Joe fans and even the founder kind of like crapping on Ethereum for the high fees. Well, now you know they're on the L2s and they're doing better than on Avalanche, so everyone comes to Ethereum, right? All roads lead to Ethereum, as we like to say.

Yeah, sadly it really takes a bear market to force a contraction uh to really make this happen. But um that's this is something that that you and I and and many other people in the Ethereum community have been saying that this is this is gonna happen one way or another. Uh and uh the the Ethereum gravitational pull is uh pretty hard to escape from. Here's a a tweet out of Eric Wall, moving on to different subjects, talking about the Nasdaq correlation between Bitcoin is at the lowest point ever since 2021. How do you feel about that? How do you feel about our correlation to Nasdaq being low? What's your sentiment there?

I I don't know if Nasdaq is the best thing to compare with with Bitcoin too, because Bitcoin's primarily trying not to be a tech play, right? It's uh like it all the Bitcoiners will always tell you that the Bitcoin is like tech second, and for at first it's like a trying to be a reserve currency or trying to be like a digital gold or something like that. So I don't know if it's the best comparison. Um, but generally, yeah, I mean, especially in the bear markets, correlations tend to go to like one. Uh everything just correlates with each other because everything's getting sold off with each other and and indiscriminately, especially during the peak fear of bear markets. So to see the correlations come down again usually points to a more favorable market, and you see that play out in the in the prices. Uh, but but yeah, I mean, maybe comparing it to like the S P 500 will be better than the Nasdaq. I know people do that a lot. Um, because yeah, I I generally think

b based on the narratives, people probably trade Bitcoin more like uh

I'm uh I don't know, more in in in sync with that than the Nasdaq. But

yeah, I haven't looked too closely at the at this sorts of stuff and you can find correlations, but they don't equal causation across anything you want to. So it it can kind of become a bit of a self-fulfilling narrative at the end of the day.

Yeah, I I do enjoy having the the disconnect because being a non-correlated asset class, it was kind of one of the original visions between crypto and I think one of the uh where this all of this correlation really came from and why Bitcoin, even though it's uh purported to be this like non-sovereign store of value digital gold, it's still traded like a tech stock, is because it's all about liquidity, right? It's all about Federal Reserve liquidity. And so even though uh the narrative is that that's what Bitcoin is, uh it's still a very volatile risk asset that falls right in line with all with all the tech stocks these days.

A little bit more interesting news in the Bitcoin market. US government now has 49,000 bitcoins that it sees from the Silk Road hacker. This part of the news is old news. We've known that the government has this. But what is new is that uh 10,000 bitcoins and what is assumed to be eventually all 50,000 bitcoins is going to be sold. So they transferred basically 10,000, 9,800 bitcoins to Coinbase, uh, and then also the right remaining 40,000 bitcoins to two new addresses. And uh that 10,000 bitcoins was purportedly sold. Last week we talked about Michael Saylor buying uh new bitcoins uh last week, and uh turns out he might have been buying the US government's bitcoins because they were selling at the same time he was buying. Uh the the bearish news here is that 40,000 bitcoins, uh roughly 867 million dollars of bitcoins uh is going to be sold by the United States government over uh the next few months or perhaps the next few years. And so um not a not an existential amount of cell pressure, but not a definitely non zero amount of cell pressure. Anthony, is this signal or is this noise?

Yeah, I mean it's kind of hard to tell because just the nature of markets, you know, there's gonna be different points where there's more or less liquidity, right? It was probably much easier for them to sell that BTC over the last couple months than it would have been to sell it at the end of maybe last year, or when volumes kind of go down a lot more than uh than what they've been over the last couple of months. And I do believe that they said that they were gonna aim to sell all of it this year. So it doesn't, I don't know what what kind of cadence they're gonna do. Um I don't know how they're gonna sell it. I think they're gonna sell it via OTC. And it's it seems like they also got a really, really bad execution price. Um, I saw some some metrics around this saying that they had sold it at like an almost 10% discount to what the spot price was on the days that they basically said that they sold it. Yeah, so I I don't know what happened there, whether they just really wanted to get rid of it. Um, I don't know how I mean it's the US government, right? They can they can literally print the money to buy the BTC. So I don't know how sensitive they are to that. Uh but generally, yeah, I it was it was a bit of a weird thing that that kind of came out when they were published their report that they said they did. They so I I believe it was a yeah, 10% discount to what the spot volume uh spot price was at the time that they sold.

Yeah, United States really uh really paper handing the the bitcoins here. One funny uh quip I saw about this is that here's a tweet from Joe McCann. Just so we're clear, United States regulators sent Coinbase a wells notice while the US government also sent $200 million of Bitcoin to said sell that said Bitcoin. I mean, there's nothing really real here, but it's just kind of funny to see these uh juxtapositions.

Yeah, I mean the juxtaposition is definitely funny, but I don't think there's any signal in this because there are different departments of the US government, right? And they're not all talking to each other all the time. And at the end of the day, they can st like a regulator can still send a wells notice and then they can still use the service to do whatever they want. And maybe I don't even I don't even know if the timing was was lined up on this either. And I think people are are well aware at this stage that the SEC is a bit of a rogue agency within the US government anyway, and they just seem to be doing their own thing. So yeah, but the US government's absolutely massive. Like you can't just say that they're all kind of like in sync with each other, they all know what they're doing, they all talk to each other. No, I don't I don't think so. I think that they went to Coinbase because they're like Coinbase is a US company, they're gonna be able to process this for us. We can trust them to do it, you know, in a safe and secure manner, and uh and they're regulated too. I I don't think probably there is some rule that the the US can't sell this Bitcoin to any unregulated institution, uh, or they you know, it's not like they're gonna it's not like they're gonna send it to Binance, right? That would be even funnier if they send it to Binance after the CFTC did that massive kind of thing, a lawsuit against Binance, right? So yeah, it I think it was like the the just the the logical spot for them to go to, like Coinbase, right?

Yeah, right. All right. Uh, that is the market section coming up next. We got to talk about this Arbitrum governance drama. Uh, we also we talked uh a lot last week about Elizabeth Warren, and that was before she released her War on Crypto campaign. So we're gonna talk about Elizabeth Warren a little bit more. Also, got to talk about Elon Musk and Doge because that is in the news cycle this week. CZ has an interpol rumor. We're gonna have to unpack that. All of this news and more is coming right after we talk to some of these fantastic sponsors that make this show possible. Bank of the station, we are back with this Arbitrum drama. We're gonna start with talking about Arbitrum. Here's a tweet that really just kind of raised the alarm, if you will, about this. Uh, Arbitrum Foundation made a proposal, AIP1, to allocate 750 million arb tokens for admin and operational costs, but Arbitrum holders voted against it. Now they said that the vote was just a formality, and they have already spent 50 million tokens of the proposed 750 million arbitrum tokens that the foundation was going to receive. And this tweet from Eden Ow concludes your vote is not a vote.

So here is the snapshot. 76.6% of uh voters voted against this Arbitrum improvement proposal framework AIP1, basically the genesis of the Arbitrum DAO. This is a proposal created uh and originally proposed by, I'm guessing, the Arbitrum Foundation, or at least initial core DAO members, that really would just like set in stone what Arbitrum would look like. And in this DAO proposal, 750 million Arbitrum tokens was going to be sent to the Arbitrum Foundation, and that the Arbitrum Foundation would be able to just more or less administer these funds as they see fit. And so this uh caused some concern uh with the Arbitrum DAO and Arbitrum community because these tokens were sent, and then a portion of these tokens were sold, and then other portions of these tokens were sent around uh regardless of the status of this vote. Uh and so people were concerned is like, well, like what why why are you guys selling tokens? We hadn't we didn't even approve this thing. In fact, this proposal ended a few days ago very clearly against. So 76% uh voted against it, 12.5% voted for it, and the remainder voted to abstain. Uh and then as it turns out.

The Arbitrum Foundation and Arbitrum team says, no, this AIP number one wasn't actually a proposal to begin with. It was actually just a ratification process. This is the way that it's going to be, regardless of the DAO vote. And everything after this is up to Arbitrum governance. But this first initial proposal is actually not a proposal. It is a ratification process. It's just a formality, if you will. But the things in this proposal is going to be the way that it is, regardless of the way that the DAO votes. And so sorry about it, is the way that the community is perhaps interpreting the communications from the Arbitrum DAO. Anthony, I know you and I both have our perspectives on this. And maybe to start this conversation off, I think I believe you are an Arbitrum investor. I am not an Arbitrum investor. And so those are our disclosures. Anthony, give us your take as to the events.

Yeah, so I mean it's it's a there's a lot to unpack here, I think, that people didn't realize at first, um, but I'll try and keep it short and sweet just to summarize my thoughts on it. So I think what people got most upset about when it came to this was the poor communication and the lack of transparency. So this stemmed from the fact that as you said, this AIP was only put forward as a formality. All of the decisions in here were made before the token went live and before the DAO went live. So essentially all that was happening was that the decisions that had already been made were being formalized and ratified. It was silly for this to even go to a vote, to be honest, because it set the obviously wrong expectations and it confused people and it was just really poor communication overall from uh the foundation here. And people really also need to understand that the foundation is something that was spun up as a separate entity to off-chain labs, which are the original developers of the Arbitrum network. So our off-chain labs and the Arbitrum Foundation are completely separate, uh, legally, logically, um, and they had to be. And the foundation is uh the entity that launched the DAO and uh and the token, basically. So what they did was they said that we're gonna you know allocate 750 million ARB tokens to the foundation uh at Genesis, basically. And we made and they made that decision before anything was live, before the DAO was live or anything like that. And then we're going to use that for various activities. So 10 million ARB tokens were sold to cover foundation-related expenses, and this is where another thing that people didn't understand. Off-chain labs can't fund the foundation because they have to be separate. So any expenses that the foundation incurred needed to be covered in some other way. And they chose to sell um uh $10 million worth of tokens or more than 10 million ARB tokens to fund that. And these expenses included all the legal expenses to set up the foundation, the DAO, the token, everything around that, and all the administrative expenses, people expenses, everything. It was, I think, three to four million dollars um just just for that, right? And not including all the uh future expenses that are going to be incurred. And then they also sent 40 million ARB tokens to Wintermute, which is a market maker, to do market making things. Now, this was not um a gift, it was a loan, basically. So they didn't send it to them and say, here have 40 million tokens. No, it's loaned to them at some uh uh at some kind of like uh interest rate, maybe this maybe it's 0%. Um and then it's also uh it has a term, so maybe it's a yeah, maybe it's two years, but that is supposed to be used for market making on exchanges, whether they be centralized or decentralized. Now, that stuff wasn't communicated. That's where the lack of transparency and the crappy comms came from. Uh that that kind of stuff wasn't communicated initially. And then the community hit back and they did uh Arbitrum did communicate this. And uh actually yesterday or even today, I I don't know if it was today or yesterday. Um

Uh when we're from when we're recording this, Arbitrum posted a bunch of new uh texts. So they posted a transparency report that covers everything that the foundation did uh before the Down token was launched, and they published AIP 1.1 and 1.2, which are actually going to be proposed real proposals that ARB token holders have a say on, and the results of the vote is going to be binding. It's not just going to be a formality, it's going to be a real proposal. So, as I said, like my general thoughts on this was that I think people overreacted. I think that it was uh it was uh just a communications issue here, uh, and obviously a bit of a lack of transparency as well. And um, I think there was a lot of things that people just didn't have the context around, uh, and that's why they they're an uproar about it. Uh, and I think since then, as I said, there's this new thread from Arbitrum that came out that alleviates a lot of these concerns and also publishes the the much-needed transparency along with these new AIPs. And also going forward, the Arbitrum governance has the ability to change the terms now of what of what the foundation originally decided on. So they can say if if arbitram governance wants to, they can say, well, no, we think 750 million tokens is too much for the foundation. We're gonna take uh a portion of those back and we're gonna put it back into the arbitrum uh treasury and they're gonna stay there. So those sorts of things can happen from from now. But yeah, the drama was really around AIP one, and as I said, it should never have gone to vote to begin with because it wasn't really going to be a vote. It was a it was a formality, and it that was uh I don't know what happened there, I don't know why that was it was the case, but that's uh that that was my overall opinion on it.

Yeah, I I agree with everything. I really think that the cause for frustration is not because of arbitrum or the choices that they made, but because of the legal hurdles and legal gymnastics that they are forced to go through as a result of the legal environment here in the United States. So, like once again, I'm gonna point the finger back at just like the regulatory environment that forces this like foundation structure that also is very what makes it very, very delicate about like how did the tokens come into existence? Who gave the tokens to the foundation? Like all of these things are very careful and very delicate. And that forces that really constrains and constricts uh these organizations to be able to do what's best for the community and the protocol. And as a result of that complexity, they had this miscommunication where they said, like, hey, we're gonna ratify this thing, but also because of the regulatory environment, the no doesn't matter, we're gonna have to do what, we're gonna have to do this anyways because we are constrained in our choices here. So the first, uh, before this, uh there's two parts that we're gonna cover here. You you touched on it a little bit, but there's uh an April 3rd Twitter thread that Arbitrum put out.

And they say, thanks for all the feedback and all the participation on the DAO. It is likely the AIP one is likely not going to pass the ratification. But again, it's already the decisions being made are already made. Before we dive in, we want to clarify why 10 million ARB tokens were sold by the Arbitrum Foundation. Foundation is a separate entity to off-chain labs. It was established with no funds, no money. The 10 million ARB tokens were sold to Fiat to fund pre-existing contracts and pay for the near-term operating costs. For example, the $3.5 million setup costs that's outlined in AIP1, the cost to set up the foundation so it can do its job. The foundation does not uh exist to sell tokens, only sold enough to fund its current operating expenses, and has no near term plans to sell more tokens. And so that's where the $10 million uh came from. Or excuse me, the 10 million tokens came from.

And then also, like you said, uh the remaining 40 million ARB tokens has been allocated, what they say, as a loan to a sophisticated actor in the financial market space. That's Wintermute, that's a market maker. Uh by the way, any ARB token holder uh is highly interested in Wintermute having these 40 million tokens because this means that what they're what a market maker does is increase the liquidity of the spot price of the ARB token. So if there is some big fund out there who's unallocated to ARB, yet they are bullish on ARB, they be as a result of this liquidity that's coming from Wintermute, can buy ARB tokens without moving the price too much. And so it increases the scope of external actors who can purchase and put ARB tokens on their balance sheet because they're bullish ARB, because there's sufficient liquidity for them to do that. Additionally, on the other side of things, for everyone who got the airdrop and wants to sell because they just want to sell and do that, it also increases the liquidity of sellers. So they don't also move the price downwards. And so I think the community.

Who might be frustrated by this should consider like this increasing the liquidity of R by transferring these $40 million tokens to a 40 million tokens to a market maker, it's bullish on both sides because people get to exit who want to exit without disturbing the price. And it opens up the scope of funds to enter, and they otherwise wouldn't if it was if there wasn't sufficient liquidity there. So this is the this first tweet thread. That's my explanation for like why we should be accepting this 40 million transfer to Wintermute. This also happened, by the way, with with OP and Optimism. They also sent tokens to Wintermute. This is a pretty normal practice. Uh, and and then again, that the $10 million that were sold ahead of time, it's unfortunate that it was done in this way and communicated in this way. But like anyone who is, in my opinion, questioning the incentives of the Arbitrum team and Arbitrum org, I think is really kind of missing the point. Um

So here's another tweet thread that came out last night uh uh 9 30 p.m. my time my Montenegrin time. Uh I think that's um 3 30 in the afternoon uh Eastern time. Uh they said the foundation will not move any of the remaining 700 million tokens in the administrative budget wallet until an acceptable budget and smart contract lockup schedule has been approved by the DAO. And so are the arbitrum org is responding to a lot of the feedback, regardless of whether this like like justified or not. They are responding to the feedback and the criticisms from the community. So, like you said, uh Anthony, I'm just repeating what you said. Three new documents have been posted: a transparency report about the foundation's initial setup, AIP 1.1 lockup budget and transparency, and AIP 1.2 amendments to the current founding documents. Uh, and so this is just them reacting to the wants and desires of the community. So just some more details on these reports. The transparency report describes actions taken to get the DAO up and running. As these have already occurred, the DAO will not be asked to vote on them. However, the DAO can change these parameters and futures uh and roles via future AIPs. So that's the first document. AIP 1.1 proposes important restrictions on the foundation spending, including a smart contract enforced lockup schedule that releases linearly over four years, further adjustable by the DAO. And AIP 1.2 uh also proposes uh well defined budgetary budgetary principles and categories and mandated transparency reports. Uh these have been posted on the community forum and will be available for feedback for at 72 hours before a planned week long snapshot vote. So

The culmination of this thing is more transparency and more agency by the DAO. Yet the initial 1.1 or AIP1 is still going to go through because that's just needs to happen for legal purposes and for foundation cost purposes, and also just because it's, in my opinion, the correct thing to do. Any further thoughts on that, Anthony?

Mm-hmm. Yeah, no, I I I think that you covered most of it. And I also think that the Arbitrum or Foundation had already had plans to post these things and the transparency report and everything. Anyway, it's just that they seem to have been following some kind of defined uh standard operating procedure that they came up with pre-DAO, and they just did it and they probably didn't put too much thought into it. They didn't think the community would would go into such of an uproar. And now that they saw that that was uh probably the wrong way of thinking about it, they've uh they've come back strong, I think. And I'm someone who likes to judge people on what they do after they make a mistake, right? So uh they made the mistake and now they seem to be really killing it in in making up for it, in my opinion. I I really do like the transparency report. I read through it, it covered all of the I think questions people had and these new AIPs, which are, as I said, actually going to be binding as per the way token holders vote. I think will go a lot to restoring confidence in the Arbitrum Dow.

Yeah, I I 100% agree. And and also like sometimes just Tao culture

The the foundation is set up with capital so that they can the purpose of the foundation, so like I actually want to go in into this a little bit. The purpose of the foundation, as they've stated, is that for the sake of operational and administrative efficiency, a separate account controlled by the Arbitrum Foundation will be created. 750 million ARB tokens will be transferred to the administrative budget for the purpose of purposes of making special grants, reimbursing applicable service providers for the total setup costs, and further funding uh out of the administrative budget wallet shall require approval of an AIP uh from the Arbitrum Dow pursuant to the AIP process. The idea we want, I at least me speaking on behalf of the Arbitrum community, we want the Arbitrum Foundation to be able to fund projects, fund people, put money in people's hands without having to be burdened by an encumbering like DAO governance process. I think it shouldn't be a shock, but like we have not figured out DAO governance. We have not figured out streamlined and efficient capital allocation and functioning by DAOs. Sadly, centralization still works in this industry. And the people who make up the Arbitrum Foundation, and the point of the Arbitrum Foundation, is to be able to move faster than what is would be a dysfunctional DAO. Because I mean, I'm just assuming that this DAO would be at dysfunctional from the beginning because they kind of all are. So, in my opinion, it would behoove the Arbitrum community.

to put power and control in the hands of a select few people, controlled by governance if they ever do something wrong, so that they can move faster and make better decisions than the DAO can as a whole ver versus mere snapshot vote. That's my like hot take on the matter.

Mm-hmm. Yeah, yeah. I mean, DAOs when they first start out need a lot of stewarding by, you know, maybe the original team and a foundation that's been spun up. It can't just be here, everyone, we've got a DAO, now go to your own devices. There've been projects that have done that before, and I don't think they've been very successful. So I think the projects that will succeed the most when trying to become a DAO is uh they they stick to it, right? They they steward it along. But I think for legal reasons, uh the foundation gets spun up in order for them to enable them to do that, right? And this means that like off-chain labs is just one actor in the DAO. The foundation is another actor of the DAO. And then you have the community delegates that are other actors. So you can have those separations there. But people will criticize that and say that it's a lot of decentralization theater where they're just doing it because of the regulatory environment. And it's like, okay, well, that's that can be true, but at the same time, it can also lead to better outcomes later on where it actually does become truly decentralized, and you have a really vibrant community of stakeholders that uh that operate the Down that and that kind of submit proposals and people vote on it and and they care about doing what's best for the arbitrum protocol and the arbitrum ecosystem. So yeah, I think both things can be true uh at the same time.

Just one last uh rabbit hole during this whole thing. Since we're talking about the Arbitrum Foundation, I just want to put a little bit more color on it. Um, so here is the AIP one, the initial proposal, the ratification thing that kind of um triggered the ire of the DAO community members, some some DAO community members, the very loud ones. Uh and here's a here's a part of it that I want to just focus on is like the structure of the foundation and how it works. So, as a Cayman Islands Foundation, the Arbitrum Foundation is required to have at least one director responsible for the management and operation of the Arbitrum Foundation, in particular approving and entering into contractual arrangements on behalf of the Arbitrum Foundation. Once again, a thing that a DAO cannot do is enter contractual relationships. That's why we need a foundation. Um, so the directors, the three directors who I'm about to list, are responsible for ensuring that AIP's Arbitrum Improvement Proposals do not, one, compromise their fiduciary duties owed to the Arbitrum Foundation, two, violate the Arbitrum Foundation's amended and restated memorandum of association or bylaws, the Arbitrum DAO original constitution or the AIP process or any other laws or regulations of applicable jurisdictions, making sure the Arbitrum Dow doesn't violate laws. And then three, cause the Arbitrum Foundation to be in breach of or in violation of any contracts, agreements, or other arrangements. So the foundation is saying, hey Dow, uh if we sign a contract, no proposal will can go through the ratification process that makes us break the law or violate a contract. Uh so like kind of just like regular legal stuff. So

The initial directors of the Arbitrum Foundation are Campbell Law, Edward Noyans, who I believe is this individual, Web3 Directorship and DAO services. I believe this is just like a TRAD DAO delegate, like a foundation delegate, if you will, somebody who's like disconnected and independent and like provides these services. I'm assuming this he's based in the Caymans. And so I'm assuming this is just a service that this man provides and is uh well trusted in this space. Uh and then uh lastly, uh Ani Banner G, who I also don't know, but I think oh, I I couldn't find out who this person was. Anyways, three initial directors of the Arbitrum Foundation who are like custodians, if you will, of the org. Um, the Arbitrum DAO may remove or elect the Arbitrum Foundation's directors or expand or reduce the number of directors at any time pursuant to the non constitutional AIP. So that is the foundation, and then there's also a security council.

A committee of 12 members of a multi-sig wallet, which has the ability to perform both emergency and non-emergency uh actions, further detailed in section three of the Arbitrum DAO. And here these people are Mo Dong, co-founder of the Seller Network, Harry Kalodner, uh Arbitrum, off-chain labs member, uh, Diane Dye, co-founder of Dodo, Adex, uh, Caleb Lau, software engineer at Etherscan, Ed Felton, one of the co-founders of our Off-Chain Labs, Brian Pellegrino, uh co-founder, CEO of Layer Zero Labs, uh, and then uh Patrick McNabb, co-founder of Mycelium slash TracerDAO, uh, Justin Drake, we all know who Justin Drake is, uh Bartek from Layer 2 Beat, Rachel Bowsfield, software engineer at Offchain Labs, Patricio Wartho Wartower, uh the Mr. Poap himself, uh, and then also Joav Weiss, security researcher at the Ethereum Foundation. All of these security members, uh, security council members are paid $5,000 a month in ARP tokens to like secure the foundation and do their roles. Uh, and so that is a foundation, that's how it works, that's how it's structured. And so here is uh my rationale for why people got so upset by this. And it's because crypto people love drama. Uh, and so this was a thing to be upset about, and so people decided, elected to get upset about it. And so here is a meme of uh it's a Simpsons meme. It's just like a cop, it doesn't actually make sense if I try and explain this out loud. But the idea is just like crypto Twitter is addicted to drama. Uh, and this is Lisa Simpson drinking coffee, and she's just like addicted to coffee. It was like crypto people love drama, and so this is one billion tokens or one billion dollars worth of tokens getting sold by Arbitrum, like very hot thing to tweet and like very easy to like pile on to. Uh, and so my explanation for why this turned into such a big deal is like one part, the communications could have been a little bit better. And second part, it was really easy to turn this into a very viral, like dramatic event. So that's my explanation as to why this turned into what it was. Moving on. Elizabeth Warren tweets out this image. Elizabeth Warren is building an anti crypto army, uh, triggering the entire actual real army of crypto Twitter. Anthony, uh, what was your reaction when you saw this this tweet from Elizabeth Warren?

So I the funny thing about this is I come for at this from like a totally non-US political view because I don't live in America. I don't follow US politics very closely at all, to be honest. And I know or only know who Elizabeth Warren is because of her crypto takes and because everyone on crypto Twitter is always complaining about her. But I I know what her kind of like stances are and her policies are after looking into it a bit. And I saw this and I'm like, you know what? This is actually going to be popular with her base, and this is probably going to win her some votes, given that right now a lot of people outside of crypto don't have a positive view of crypto because one, they probably lost money in the bull market, right? A lot of people were came in at the tail end of the bull market and then lost money in the bear once the the bull market just kind of collapsed. Uh, and two, they saw a lot of other stuff like Terra collapsing last year and FTX, the biggest fraud since.

Basically, uh what um uh Bernie Madoff, right? So I I think this resonates with a lot of people, but as you said, like it this triggered like everyone in crypto and the actual crypto army kind of responded to it. If you actually look at all the replies to this tweet, she just gets ratioed a million different times as you keep scrolling down, and it's it's kind of it's kind of hilarious to see all the replies. But um, yeah, that that was my first kind of reaction where I was like, look, she isn't trying to appeal to anyone in crypto at all. Obviously, she knows that this isn't going to resonate with them, her bat her team knows it's not gonna resonate with them, but she's trying to appeal to her existing base and any potential new voters. And as far as I can tell, she's in a relatively safe seat as well, and she she doesn't actually have to work that hard to retain it, from what I've seen. So, yeah, again, this could resonate with those people uh pretty strongly.

Yeah, how many tweets did this? This got fifteen hundred likes, and then this one response, uh Coin B Coin Bureau, the other uh very big YouTube channel uh about crypto says Imagine thinking that building an anti crypto army is going to win you votes. 4,300 likes.

What what I find funny about that is that it actually is going to win her votes with certain people and and and it's

But

going

but what you said is like it's going to be very popular with her base. Her base was already gonna vote for her.

Yes, yes, but the people that weren't gonna vote for her in crypto, doesn't matter what she does, they're not gonna vote for her, right? So for her, it's like the people she doesn't have to be friendly to crypto people because they're never voting for her. Even if she is friendly to them, they disagree with her about a lot of other things too. Because she has a lot of very uh, I guess like you'll call them progressive policies or very, very like I don't want to say far left policies, but like they're pretty on that side of the spectrum. And I feel like in crypto, you get a lot of centrists generally, from what I've I've noticed. Um, and and depending on where you go, there are uh a a uh a lot of people, a lot of crypto people um define themselves as libertarians, they're not voting for Elizabeth Warren, right? So to her, it's like I'm pissing off people that are already pissed off at me and hate me, so who cares, right?