ROLLUP: What BlackRock's Bitcoin ETF Means For Crypto

I really do think that we could get a repeat of DeFi Summer.

Yeah. It just maybe just a little bit more commentary on alpha here. I do know of at least two startups um that definitely was planning on releasing a token last bull market and then the bear market hit and they were like, we're gonna sit on our hands and release our token later. So there is pent up airdrops that people are just waiting for bullish sentiment to re-emerge so that they can release their airdrop.

Bankless Nation, happy Friday. It is the Bankless Friday weekly roll-up time where we cover the entire weekly news in crypto, which is always an ambitious endeavor. And yet again we have Anthony Zano tapping in to substitute Teach for Ryan Chat RSA. Anthony, welcome back to the weekly roll-up.

Thank you, sir. Always a pleasure to be here.

Anthony, it was um a bullish week this week, which is like the first bullish week that we've had in a long time. We're gonna talk about why. Uh perhaps it's because TradFi decides to enter crypto all at once. BlackRock, Charles Schwab, uh the NASDAQ. We're gonna talk about all of the things that just came out in the last one one week, ten days, uh, that has changed the sentiment around crypto Twitter and crypto in general. Uh, then we're gonna get into Polygon Proof of Stake and how it has just submitted a proposal to turn it into a ZK roll-up, a Validium specifically. We're gonna talk about, I'm gonna ask you, Anthony, the nuances between that, and hopefully you can reteach me something I learned forever ago and then lost. Uh, and then finally, Zach XBT is sued, and the crypto community is gathering to support him. And all that is coming up as soon as I plug the Daily Gway. Anthony, this is your YouTube channel, The Daily Gwe. This is where I get my news. And just as a big thank you, we gave you this plug at the end of last week's uh weekly roll up last week that we had you on. But we're gonna do it at the start this time. Anthony, who are you and what is the Daily Gway?

Yeah, I I guess just generally I'm an Ethereum educator, Ethereum community member, been around for quite a while. Uh, and the Daily Gay is an education ecosystem for Ethereum. So I do a 30 minutes or or so uh video every weekday um on the YouTube channel when it's uh it's available in podcast format as well, just recapping everything that's happened in the Ethereum ecosystem for that day and just giving my takes on things. And I'm actually uh going to be doing a regular uh podcast with Eric Connor again. Uh we did one the other week, as you can see there. It's called the Deadly Gray Drive Thru. So we're going to be doing that regularly. And anyone who may have listened to a podcast called Into the Ether back in the day, that was Eric and myself as well. So yeah, it's it's gonna be exciting for Eric to come back there. But yeah, mostly it's just like me talking on the daily videos. But uh, but yeah, from time to time there's other people as well. But hopefully going forward, um, Eric and I will be doing a regular thing as well.

Well it's a great service that you do for the Ethereum and broader crypto ecosystem. I I often say if uh you, listener, can get to the point of understanding what Anthony Susano is saying on the Daily Gway, then you are in maintenance mode and you can just chillax and then just listen to the Daily Gway and and you'll be fine. Uh is where I get quite a quite a lot of my news in the in the crypto world. Uh and

Let's see, how do I want to segue that?

And it's

And it's uh where we get a lot of just news for the Bankless Weekly Roll Up. So though a lot of this Anthony is probably already gonna have uh covered once before, at least in the last week or so, uh, because like like he said, he does this every single day. Uh moving forward, Anthony, I know I've been pestering you about this. Uh, I'm trying to get you to come to Permissionless. Uh this is a call to action for the bankless listeners out there. We are less than three months away from Permissionless in Austin, Texas, 11th through 13th. Uh, I've tried to get Anthony to come. I haven't convinced him yet. Uh, we didn't get him last year. Uh, getting him all the way out from Australia is going to be a little bit difficult. But Anthony, we're working on some extremely exciting topics that I think I can get you for, but uh I will I will reserve in judgment until those topics come out.

Uh-huh. Yeah, I mean I I can't rem what what are the ex exact dates for permissionless?

September 11th through 13th in Austin, Texas.

Yeah, I I would have come if I can, but I I don't think I can make it work. Um not just the travel time, which is brutal, of course, um, but also I have prior engagements around that time uh already. So unfortunately won't be able to make it. But the lineup looks killer. I mean, I saw this earlier today. The lineup looks great, guys. Uh really, really great work you guys have done with that.

Yeah, and there's that's uh without a bunch of uh EF members and some other topics as well coming onto the lineup. There is a link in the show notes if you want to get a ticket. If you are a bankless citizen, you get 30% off of the permissionless ticket, which basically pays for bankless citizenship. Uh and so stay tuned. You can uh follow the permissionless Twitter account as more talks and things are scheduled. Uh all right, let's get into the markets, Anthony. Uh like I said, it was a bullish week this week. Uh so Bitcoin going up 15%. Look at that. We are at $30,05. Bitcoin started the week at $26,000, ending the week just above $30,000. 15%? It is not often that you get a 15% move in Bitcoin this week. Ether, of course, also up, not as up as much, starting the week at $17.50. Went down to um but almost below $16.20. Um, but ended the week up 8.5%, currently at $1,900, $18.93. Uh, and then of course, that what does that mean for the ratio? The ratio is down about 4%, down to 0.063, so kind of a big move downwards on the ratio. Anthony, what's your read on the markets this week? It's an exciting week for the markets.

Yeah, it definitely is. I think it's it's pretty obvious why the market's moved over the past week for anyone who's been paying attention. But just to recap, uh a lot of noise is being made around uh Bitcoin ETFs again, uh, because BlackRock uh basically put in an application for a Bitcoin ETF. And for those of you who don't know, BlackRock is the largest asset manager in the world. They are not a small player. For them to do something like this is actually a big signal. And then a lot of other companies and money managers and stuff like that, they followed as well and have reapplied or applied for a Bitcoin ETF. So, and I mean on top of that as well, there has new been a string of news coming out about different TradFi institutions getting more involved with crypto. We recently had Powell, uh actually just yesterday, I believe, uh give um um this kind of uh speech uh or answer a few questions as part of some committee, uh basically saying that they need to kind of uh to pay attention to stable coins, you know, stable coins should be regulated as money, uh, and that crypto is kind of here to stay as well. So just a lot of positive news um from, I guess, like outside of crypto. But in saying all of that, I think that while it's been a bullish week, I think that tempering expectations is also something that people should be doing as well. Because I think right now, at least over the last week, what people are doing is they're speculating on future inflows of money, right? Like the existing money that's in crypto, the traders and everyone like that. They're basically saying, okay, well, this is a new narrative, this is something to latch on to, and there's potentially a lot of money coming in because maybe the ETF gets approved. Like for the for those who who don't know, there is no Bitcoin ETF, and every other application that has ever been put in has been declined. There is a pseudo-ETF known as GBTC, which is not an ETF, it is actually a pretty crappy product, it trades at discounts uh quite regularly, so it's not not something that that um that people really want to buy. But uh, but yeah, people are speculating on this one actually getting approved, so that's what you've seen so far. That's what you've seen this week. Now, whether this kind of continues, this price positive price action continues, I think is going to definitely rely on new money coming in. And if in absent that, I think it would re it would just retrace because speculating that new money is going to come in can only get you so far. Because if it doesn't actually materialize in you know what you're speculating on, then it's just gonna go back down. That that that's my kind of read. So I'm I'm not bull like bullish or bearish, I guess. Uh it's more of like a neutral stance and just the wait and see.

Yeah, I think that's I think that's a smart take to have. I I'll add on additionally that yes, there are traders that have rotated into Bitcoin. It's why the ratio is down, it's why Bitcoin dominance is up. On the news of BlackRock, the largest asset manager with over $10 billion of assets under management, has proposed a Bitcoin ETF. That is traders that have like, that is not there's no new money there. They have just proposed an ETF, along with everyone else that's also proposed and also gotten denied a big Bitcoin ETF. And so I totally agree that this is traders making the Bitcoin price go up. Yet at this also at the same time, I think what is real is that it is different when BlackRock does it. Uh, and also they are doing it in spite of the worst regulatory environment that crypto has ever had. And so, yes, you could say that like there is speculation of future cash flows going into Bitcoin, so people are buying it now. But also, there's just like the crypto has gotten absolutely fudded in the last three weeks, a month or so with regulatory concerns. And so I think there is a take that the BlackRock ETF is a signal that, hey, those regulatory concerns were the bottom. Uh the but the bottom of regulatory FUD. And so now that BlackRock is here and Charles Schwab and Fidelity are here entering the crypto space, people are perhaps thinking that this will be the end of regulatory FUD because now we have the Trad players involved.

Mm-hmm. Yeah, I think it's definitely a win change for sure. And I guess my comments were more maybe the short-term uh kind of stuff, not definitely not long term. But it also means that the foundations are being laid for the next crypto bull market. Um, and I believe strongly that there are foundations being laid everywhere right now, not just in with TradFi coming in, but also in crypto foundations, start uh such as all the development in the Ethereum ecosystem. Obviously, we had um staking withdrawals go live, which opened or de-risked staking for a lot of people, and we've seen a lot of inflows there, layer two, stuff like that. So all of this is just part of those foundations being laid. Um so long term, yes, it's incredibly bullish that that this is happening. It's a win change. I I did actually tweet uh the other day that I thought that the regulatory bottom was in, and I think that was before all this news came out because it really did feel like the regulators overstepped, uh, specifically the SEC just overstepped um their their bounds here. And it doesn't matter, you know, uh how much support you think you have, if certain, I guess, players don't support you, then you are going to uh you know lose this uh lose the support of the people that matter very, very quickly. So I think there's definitely a win change. And I'm and I'm actually trying to kind of figure out or speculating on, you know, who's the SEC going to go after next? Are they actually going to do any more high profile lawsuits or are they gonna pause now that these big players have basically shot this, you know, shot and basically put this signal out there saying, hey, you know, we actually think crypto is legit. We we don't think this stuff should be uh, you know, killed in the US and you know, basically you guys should stop. That's that's that's kind of my rate on it.

Yeah, certainly, certainly. Really quickly, we have a $1.2 trillion market cap, which is up bigly. We almost fell below uh a trillion dollars last week, but this just shows what happens when Bitcoin puts a 15% weak uh in the green there. And then also, like you said, Anthony, stake and withdrawals went live, and so we've seen the post uh post withdrawals meta emerge on Ethereum. 23 million Ether staked, seemingly up only. And interestingly, also uh Ethereum staked, the supply of ETH staked is ready to flip ETH on crypto exchanges, which is just something you gotta love to see. Uh crypto exchanges losing in their ETH supply ownership percentage versus the beacon chain. Uh so staking just really seems to be up only. Yeah, 23 million ETH are staked. Any comments on this, Anthony?

Yeah, I mean I it's definitely not something that surprised me, but what did surprise me was the speed of which it happened. I I knew that that staking withdrawals was going to be bullish. I just didn't think that we would see this much ETH FOMO in. Because it's just, I mean, the validator queue's been over 90,000 for a while now. It's like, okay, why didn't these people enter before? Well, the obvious reason was is because they felt it was risky, right? Uh they felt it was risky to get in before withdrawals went live. And now that withdrawals are live, uh they're they're fine doing it now, right? Obviously, um, you know, the proof is in the numbers, and uh and it's just been really amazing to see that. So yeah, just generally great to see that the thesis played out that withdrawals was was gonna be bullish, and I believe that ETH staking is gonna be up only for a while. It will obviously slow down and taper off. Um there's I think there there definitely is like a finite amount of of ETH that can be staked outside of the total supply of ETH. And I think that I don't think ETH's gonna get to like 70 or 80% staked unless there's like an outside incentive, such as Eigenlayer, for example, or restaking generally. Um, if it's just vanilla ETH staking, yeah, I I don't see it going like too high because it's just the incentives aren't there for that. Um, but yeah, generally it's it's pretty bullish.

Yeah, we're looking at a a chart here with two lines that are converging. One is the ether on exchange and one is the ether staked and we are basically at that flipping point. I love the caption here. It's not the actual flipping, but we'll do which is

One kind of nuance to this chart that I know this isn't probably something people want to hear, but uh s a lot of the ETH staked goes through exchanges. So if they're staking it, it it it means it's not being counted as their it as their exchange balance, but it's still theirs technically, right? Because they're staking it on behalf of their users. So I would like to see a more detailed chart breaking that out, basically identifying which ETH was staked via a centralized exchange, you know, versus but generally I think it's still fine because uh you have, I guess, like ETH being productive rather than just sitting um, you know, and securing the network. So obviously there's there's benefits. Uh but yeah, I just that's a that's a caveat and a nuance I thought I would I would bring up.

Yes, yes, they're very, very important. Yeah, there should be a third line, which is ETH staked on exchanges. Uh and if we could get that line to also trend downwards, that would be great. You brought up uh Eigenlayer, which I think this is uh uh important to bring up. Here is a uh graphic of just all of the different uh ETH stake derivatives, the staked ETH from Lido, RETH from Rocket Pool, and CB ETH from Coinbase being deposited into eigenlayer after mainnet launch. Uh and this happened in this is an hourly time frame, so this is a very short period of time while the uh the until the caps were reached, the caps of 32,000 ETH, uh 3,200 ETH, excuse me. Uh and so like not only do we have Ether staked on the beacon chain to watch, but now we have Ether staked on Eigenlayer to also watch. All three of these things are capped. I think we covered this uh last um uh last week or last week we had you on, Anthony. But uh it's just fun to uh to watch these uh ether being staked across all of the different staking utility ecosystems. Any last comments on Eigenlayer before we move on?

Uh no, I mean I didn't uh I wasn't surprised by this. I I actually kind of woke up to both the announcement and the pools being filled. That's how that's how fast they it got filled up here. Uh but yeah, it's gonna be interesting to see which ones kind of fill up uh and and succeed like in terms of market share. Obviously, it's gonna probably reflect the market share of each of these LSTs themselves, but will it actually change the dynamics? Like, will there be more R ETH minted um because the R ETH cap you know won't be reached uh as fast as the ST ETH cap is because it's just more ST ETH out there? So I'm I'm that's what I'm watching the dynamics there between the different LSTs and how that drives the I guess dynamics of LST market share on the beacon chain itself.

Mm-hmm. Alright, Bankless Nation. Coming up next, TradFi enters crypto all at once. We're going to talk about each of the individual entrances into this crypto world, followed by the Polygon proof of stake chain set up to upgrade to a ZK Validium. And then, of course, the Zach XBT drama. The beloved crypto sleuth gets sued by a victim, and Crypto Twitter arises to his defense. And then we have Goose season from 3R's Capital. We're going to have to talk about the Goose and a few other NFT things on Ethereum as well. But first, a moment to talk about these fantastic sponsors that make the show possible. Alright, here's a tweet from Delphi Digital that I think sums this up pretty nicely. Over the past two weeks, BlackRock files a Bitcoin ETF, Nasdaq launches a crypto custody service, Deutsche Bank seeks a crypto custody service, Soros' fund management says crypto's here to say, and then Citadel Fidelity and Charles Schwab launch a crypto exchange, finishing up with the institutions are here. And so this has been the theme of the last two weeks, I'd say, starting with, of course, the BlackRock uh submission of the iShares uh paperwork for a spot Bitcoin ETF. This was a rumor, it's like, oh, BlackRock is rumored to be close to be submitting for a Bitcoin ETF. And then about, I don't know, four to five hours later, it was confirmed that they did indeed submit a proposal to the SEC for an iShares Bitcoin trust. iShares is just their uh branding for BlackRock. Uh and so BlackRock, the world's uh world's largest, it's either first or second after Vanguard, over 10 uh trillion dollars. I might have said billion, trillion dollars in AUM. Uh and interestingly enough, there's some some stats I want to pull out. Uh after the $10 trillion in AUM, BlackRock has received approval of $575 out of $176 ETF applications. They have only ever been denied their ETF applications once. Uh so they've done they've A, done this a few times before, uh, in fact, 575 times, uh, and they have gotten approval quite frequently, except all except for once. Uh and so uh this is using some crypto service providers. The custodian is going to be Coinbase. There is a Kraken subsidiary company that is providing the uh exchange data, uh, and just everyone knows BlackRock plus Larry Fink, the CEO, has a lot of political power. Uh and so, in combination with like finally, we're getting a spot Bitcoin ETF, not the futures ETF that no one really liked earlier. We also have the weight of BlackRock. And to uh, if you aren't familiar with BlackRock, if in addition to all the context I just gave, BlackRock is the closest thing to the government while also not being the government. Like they own half of the equities in the United States of America. Like that it is part of the it's an extension of the government itself. This kind of a cynical, nihilistic take about the relationship between governments and public and private markets. Uh, but but that's my take. Anthony, anything you want to add to this?

Mm-hmm. Yeah, I think just on that note about the ETFs that they've approved, um, or have had to approved, and which ones have been denied. I actually looked up the one that got denied. So it was one in 2014, so quite a while ago now, and it was denied because apparently it was just a blind trust. So you'd buy it, but you wouldn't actually know what was in it. So you would be buying something you didn't know. So obviously that's not something that that uh that people that you want to offer to to retail customers, especially. Um, so that was denied there. And again, that goes to that kind of stuff we were saying before about the wind change. I I don't think we brought it up before, but yeah, that point around that BlackRock seems to only file for ETFs when they know with like 99.9% certainty that it's going to get approved. It it has people speculating, okay, well, there's a higher chance of this one getting approved, this Bitcoin ETF getting approved, than not this time, right? It's not like a it's a you know 1% chance, it's maybe over 50%. So that's what people are speculating on, I think.

I think that's right. Yeah, and there's a just a lot of speculation going on. So Frank Schaparo says BlackRock Fidelity Citadel, they're all making big moves into crypto despite the Gensler crackdown. Uh Tree of Alpha responds to this and says, you wrote despite instead of thanks to. And so the uh people with the conspiracy hat on, which I always love to put on, are saying like Gary Gensler and the SEC and the powers that be were just hammering the crypto native companies, right? The Winkelvoss ETF, denied, right? Like all of the other crypto-native ETF proposals denied. And they're just the the claim, the conspiracy, is that they were just biding their time for some of the bigger players to come in. And it's just interesting that Fidelity, Citadel, BlackRock, all of these Trad institutions with trillions of dollars of AUM and strong political connections all seem to come into crypto at once, right after the SEC and other regulators start hammering crypto native orgs. And so just the timing on this is curious. I don't if I I think if I talk to somebody like uh Jake Czervinsky or somebody a little bit more measured, they would just say, yes, it's curious, but there's not really a there there. But I think everyone in crypto is like, yo, what the F is up with this timing? Do you have any thoughts on that, Anthony?

Yeah, I mean the the timing is what I think a lot of people are latching on to when it comes to putting their conspiracy hat on, right? But there is another uh lens you can view this from. You can basically view this as uh these TradFi institutions had their hands forced by the SEC. Because the SEC went after you know Coinbase, the biggest crypto company in the US, they went after a bunch of different tokens or had used those tokens as evidence against Coinbase. Obviously, they went went after Binance, which isn't US, I mean Binance US, but obviously they're trying to extend that to Binance Global as well. Um, so I think that maybe these trad file institutions were already interested in getting into crypto. They just hadn't announced their plans yet. And then because the SEC went after the, you know, Coinbase, especially, they're like, okay, well, we need to send the signal back now that we're actually wanting to play in this arena and the SEC needs to calm down with whatever they're trying to do.

Interesting. Okay, so that's actually just like the pro-crypto. It's like they were they were always ready to pull this trigger, but then they they decided to like, hey, let's publicly stand in support of crypto before Gary Gensler destroys the industry that we want to generate fees from.

Mm-hmm. Yeah, pretty much. And like, I think not just Gensler, but all the high ranking Democrats that have been anti crypto, these companies probably like, well, it's time to put a stop to that, right? It's time to if we want to be involved here and make money from it, we can't have all these uh regulators and these politicians trying to kill crypto in the US. And that's why I said it's a win change where it was like blowing in one direction, now it seems to be blowing in the complete opposite direction.

Yeah, speaking of uh a wind change, here's a meme that I thought kind of sums this up. Uh Larry Fink, the CEO of BlackRock, first initially said Bitcoin is an index of money laundering. And then the meme is you know, first they ignore you, then they laugh at you, then they fight you, and then they create a spot Bitcoin ETF.

Yeah, all these comments from like uh yeah, Larry Fink and like Jamie Diamond and and their change of tune over time, I think you like a lot of times you can just chalk that up to they've been around a long time. Uh they've been around markets a long time, they're very experienced there, they've you know, they've probably seen it all, and a lot of these things that are these new things that come along end up failing, right? A lot of these new things people get excited about end up failing. So I think for them, crypto needed to you know exist for a long time and needed to become a much bigger asset class than it traditionally had been. I needed to affect uh maybe the political sphere as well and and be conversate uh be conversational there for these trad fi people, these CEOs, to actually be like, okay, well, this thing's here to stay, let's focus on it, right? Because CEOs have a million things to think about. And I doubt Jamie Diamond's sitting there every day being like, oh, crypto, I'm gonna go look into what what's happening with Bitcoin mining, we're gonna go look into what's happening with Ethereum L2s. No, they're not doing that, right? Uh, they've got their own things they need to focus on, they need to run the business, the existing business, and their innovation arms or whatever will look into it. That's why Jamie Diamond was saying these comments while uh JP Morgan was making uh I believe they were making an Ethereum client or working on an Ethereum client or something got to do with the EVM. Um, so that's why I think these things happen. So yeah, I I I don't think that uh these CEOs really um, you know, when they make those comments, they're not making it from a position of being super involved with crypto or being like a believer, they're more from the sidelines.

Sure. So yeah, certainly, certainly. And of course, this was not the only thing in the Trad world about the crypto world. Fidelity, Charles Schwab, and Citadel have launched a centralized exchange, a non-custodial centralized exchange titled EDX. I don't know what EDX stands for. What is with these acronym Base Exchange? I don't know. Okay, so EDX is launching. It's a non-custodial exchange. Non-custodial centralized exchange, which I think is interesting to the crypto world, but it actually is normal in the Trad world. And so the EDX, the quote from the CEO, Jamil Nazarali, says EDX's official launch allows our outstanding team to bring the crypto the same values and standards of competition, transparency, fairness, and safety that investors in traditional assets expect and enjoy. And so, okay, so what why what's the big deal here? Ram Allawalia, who we've had on the podcast before, uh the non-custodial aspect of EDX refers to its settlement process. Unlike traditional crypto exchanges like Coinbase or Kraken that require customers to deposit assets into wallets controlled by the exchange, EDX just plans to use a third-party bank or custodians to hold customer assets. So you use a custodian, a custodian service, and this is how like the NASDAQ works. This is how TradFi works. There is a custodian or a bank, and then there's just like API access. And so the trading happens on paper by this brokerage, by this trading service, and then there's settlement after the fact. Whereas crypto exchanges, Coinbase, Kraken, uh, Gemini, anywhere, anyone where you submit your crypto assets and they are the custodian, and then they also let you trade. Those things are commingled. And the trad world likes these things separated. Uh, and so this is just following the old model of separation of exchange duties and custodian duties. And so this is being a hyper compliant new form factor for an exchange. Uh, and so.

The website is edxmarkets.com. You can check it out. But you actually can't trade on there. It's not for you. It's not for retail investors. It's not like your Coinbase or your Kraken. It is meant to be like a software service for trad custodians. And then Trad custodians will allow you to trade. So I would imagine if you uh are a customer of Fidelity, which you have Bitcoin or Ether there, that trading of if you press the buy button or the sell button or the I don't know the options button for Ether or Bitcoin, that information as an API gets routed to ETE EDX, and then EDX does the the trading, and then there's final settlement between the custodians later. And so this specifically is intended to avoid set uh serving retail investors. Interestingly, Paradigm is an ETX, EDX investor. Uh and and also interestingly, they only offer four tokens Bitcoin Ether, fine, Litecoin and Bitcoin Cash. Interesting. Um the Nazarari N Nazarari, the CEO, says we have a limited set of tokens because until there's more regulatory clarity, we don't want to trade something that is potentially a security. So hyper compliance, uh fitting the old form factors of TradFi, meant to serve TradFi uh institutions, backed by uh Fidelity, Charles Schwab, Citadel. Interestingly, Nazarali, the CEO, was a former Citadel employee. Uh Anthony, that's the summation of the details. What's your take here?

Yeah, no, I think that's a great uh great summary of everything. Um before I dive into my take, I just want to point out that the E uh on the logo there is the currency symbol for ether uh on EDX. Uh I don't know if that's intentional or not, but that's pretty cool. Pretty true. Not intentional. No, probably not. Uh

So the assets that you that you rolled off there, the ones that they're trading, right? Uh, you know, as you said, Bitcoin Ether, no brainer, that's fine. But Litecoin and Bitcoin Cash, I mean, yeah, yeah. This so this is what's frustrating about the SEC not giving clarity to anything, because it means that these platforms are very limited into what they can trade, and they literally will trade things that just are dead, right? That that that no one really cares about, right? That are that are kind of old coins, dinosaur coins or dyno coins as we call them in crypto. Um, and they could trade all these other stuff if there was clarity, because what they could do is that they could literally register with the SEC to trade securities. So even if these crypto outsets were securities, they would still be able to trade them. But they can't do that because the SEC does not offer any way to actually do that. And no, and and and contrary to what they've said around the Prometheum thing, which in my eyes, the Promethean thing is like uh

An SEC plant, to be honest. I I think that whole thing is just absolutely wild. Um, but like, yeah, the the EX it not even EDX can probably register with the SEC to trade crypto asset securities because there's just no guidance there. So it really does speak to the fact that the SEC, as I said, has overstepped completely and has just provided absolutely no guidance to anyone. Um, and I I think that's super frustrating because it means that instead of actual crypto assets that people want to trade being on this platform, you have Litecoin and Bitcoin Cash, which like no one cares about. I mean, maybe some people do, but I think the majority don't, right?

Yeah, it also just sends a a bad signal to investors. It puts Bitcoin Cash and Litecoin shoulder to shoulder with Bitcoin and Ethers. Like, mmm, that it's just the wrong signal. Like, let's not legitimize Bitcoin Cash when like it's more of a nuanced discussion, but really there's just ever only going to be one Bitcoin, and very clearly BTC has won that fight, and Bitcoin Cash has very clearly lost. And so I don't think there's the investors who are clients of Charles Schwab are sufficiently informed about the dynamics of what a hard fork is and what like block space competition is. Uh and and so like they're like, oh, Bitcoin Cash, it it's cheaper. I'll buy it. Like they're gonna fall for that. And so it's just like a it's a poor service, at least in in my opinion. Uh and I will say like

Yeah.

It's the cheaper Ethereum, right?

Right. Yeah. And it's so like I I know like neither you nor I are necessarily bullish on like Solana, at least in comparison to Ether. You and I are lean towards the Ether camp, but I will be way more bullish on Solana than Litecoin or Bitcoin Cash. And I'm sure that's a sentiment that's shared by almost anyone that's gonna have an account with some of these uh Charles Schwab uh fidelity types. Um one more comment from uh uh Nazarar Nazarek, the CEO of this new exchange, uh made left a comment for Coindesk. Regulators like the different approach. This is talking about the separation of exchange function uh and the burlo dealer function. Investors want to trade through trusted intermediaries, and that is especially true post-FTX. Uh and so this is also just naturally a it's going to service a demand for the more conservative, cautious Trad investor who doesn't like any of these crypto native companies, even the great ones like Kraken and Coinbase, that we in the crypto world completely trust because they've been around. Uh, but still, like to the trad investor, you put up Coinbase and you put up FTX, and people are like, I can't tell the difference, uh, just because they just aren't informed. Uh any last comments before we move on?

No, I I mean I think that's right. And then these other financial institutions have been around for a very long time, but a as well, they're also like registered and com and regulated uh within the proper frameworks, and that's what crypto exchanges are trying to do in the US, but they just have no path towards that. But I would I will say that that Coinbase and Kraken, uh particularly Coinbase, is viewed very, very favorably by um US TradFi uh kind of people. I mean, as as you say, EDX is using Coinbase as a as a uh a custodian. No, sorry, not EDX. Um the b the the the ETF, uh the black they're using Coinbase as a custodian, and to use someone as a custodian is a is obviously a huge deal because they have all the assets, right? So you only want to be using companies that are completely legitimate, that you trust, uh, and that and that have good practices around this. And I would say that Coinbase's custody practices are the best in the industry. Um I don't think they've ever actually had a hack um at all uh or an exploit. Not to say they obviously won't. You can't ever say they won't, but that that test of time that they've been around for a very long time and through, you know, from the youngest days of crypto to to today is a huge uh kind of deal for these these more trad fi kind of uh institutions.

Yeah, yeah, that's a funny point where if like Trad investors are like, Mm, I'm not really sure about these crypto exchanges. I don't really know about Coinbase. I'm gonna use BlackRock and BlackRock's like, Well, we're gonna use Coinbase

Yeah, exactly.

Alright, okay, moving on to Polygon News, the big other big news of the week. There is a proposal submitted by Polygon Labs to Polygon Governance titled Polygon 2.0, Polygon Proof of Stake to ZK Layer 2. Okay, so a proposal was published to move the Polygon Proof of Stake chain, the big one with all of the egg trading activity, the economic activity, to a ZK EVM Volidium. So Polygon already has their ZK EVM. So this is a new chain. Well, say it's the same chain, the Polygon Proof of Stake chain. They want to turn that into a ZK EVM Validium, which is a specific kind of ZK rollup. So this is a core part of their whole Polygon 2.0 vision, where they everything ultimately just becomes a ZK layer 2. So the goal here is to upgrade the Polygon proof of stake chain, which is actually not not people will throw a flag at the calling it a roll up because it's technically a s a proof of stake side chain. So this turns it closer to being an actual roll up. And this proposal itself actually re triggered the what is a true roll up conversation on Crypto Twitter because a Validium.

Is a roll-up and there's but there's an asterisk asterisk there. So like we're gonna get into some of that nuances, but first uh just like what is the big difference? Uh higher security for users compared to the proof of stake chain. Again, the proof of stake polygon chain is a side chain, turning it into a ZK validium actually does produce more final settlement on the Ethereum layer one itself. Uh there's better interoperability because of the ZK uh part of this component to the rest of the Polygon 2.0 ecosystem. All the applications on Polygon should continue, and fees should actually get much, much, much lower.

And so, okay, what is a Validium? I'm gonna briefly answer this, and Anthony, you're gonna help me help me define this. Validium is a lower cost, high throughpoints throughput sibling of a ZK rollup. Uh so the pros are that it fully inherits security of Ethereum, except for transaction data, which is kind of actually an important part. Uh so publishing transaction data to Ethereum is expensive and it limits throughput. So a validium has similar security guarantees to a rollup, but the transaction data is made available off-chain. So that'll be made uh available by a proprietary uh Polygon solution. Uh and so much, much lower Vs fees than a true ZK rollup, a ZK EVM like Scroll or ZK Sync era. Uh it doesn't this doesn't consume Ethereum gas to store transaction data, so there's higher scalability. But the cons are there is an external dependency. Uh the transaction data, uh the data availability for transactions is secured outside of Ethereum, so there is an extra dependency there. Anthony, what would you add to my limited definition of a ZK Validium?

Uh no, I think you covered it quite quite well there. There is obviously a lot to unpack here. Um, so I will offer a bit of just extra kind of context around this. So uh validium was a term that was, I think, coined by Starkware back a while ago, and it basically just describes a construction where the, as you mentioned, the transaction data is not stored on the same uh, I guess, like layer that the ZK proof is. Uh, so the ZK proof is in this case for the Z uh Polygon, ZKV, and Validium will be stored on Ethereum L1, and that's the cheap component. That is very cheap to store on Ethereum L1, uh, whereas the transaction data, which is the expensive component, will be stored on the existing Polygon Validators nodes. So their Polygon validator set consists of around 100 validators, um, and there is obviously staking with the MADIC token. Um, there they've got a depos system or a uh delegated proof of stake system. So those validators will be the where the data is stored. Now, what this does is that it enables uh cheaper fees because uh storing the data on the with polygon validators is cheaper than storing it with the Ethereum validators, uh just by the virtue of how each of these um networks work here. But in saying that, there is no uh in a in a typical validium construction, um, there is no kind of limit to where you can store your data. So you can store your data on anywhere, basically. You could store it locally if it allows you to do that, right? You could store it on another net another L1 altogether, or you could store it on a data availability network itself, something like Celestia or a Veil, which actually spun out of Polygon, um, or potentially eigenlayer uh data availability layers if those get things get spun up. But it's all about the security guarantee, right? Because what is the actual practical implication here of not storing your data on Ethereum L1, but storing it elsewhere, is what happens is that there could be a withholding of data. So let's just say, for example, that the Polygon validators all go offline, right? And and the data is gone. Like not gone, but inaccessible, right? You can't actually so if you want to withdraw your funds from the ZKVM Validium, you wouldn't be able to do that because you don't have the data to uh allow for the cryptographic proof to basically say, or you've got the proof, right? But you don't have the other part of it, which is the data, to say, hey, these are you know, this is my funds, this is the state of my account. Please give me my funds on wherever Ethereum L1.

Whoever else. Now that's the worst case scenario. They can't steal your funds. They can freeze your funds, but they cannot steal your funds because they do not have the proof that is tied to your address. Um, at least that's that's my understanding of it. So that's the trade-off basically, where you do get more security than the Polygon POS chain, but uh because the data is stored off-chain, you still rely on those validators uh in order to access your funds. So your funds would be frozen in in that world. Now, obviously that's not ideal, but that's the trade-off for the cheaper fees. In saying all of that, post EIP4844, which is proto-dank sharding, which uh it basically creates a new transaction type for uh for roll-ups. If the costs are low enough for Polygon uh for what they want to achieve for their ZK VM, what they could do is they could essentially just store the data on Ethereum and still get the same fees that they would by storing it uh elsewhere. And that would make it a full roll up. So a full roll up needs its data and its uh its transaction uh and its proof uh stored on the same kind of uh, I guess, like settlement layer, such as Ethereum L1 here.

And another thing that they could do as well is that with the Validium construction, they can, as I mentioned before, allow users to store their data wherever they want. So if you store your data yourself, you you pay for it yourself, obviously. If you want to store your data on Ethereum L1, cool, do that, but you have to pay for it, right? And by doing that, you actually now have the same guarantees. You have the guarantees of a roll-up on Ethereum. And if the their Polygon validators go offline, it doesn't matter for you because your data is actually on Ethereum. So you would still be able to get your funds out. But you can store your data anywhere, actually, as well, which is which is actually, I think, a really cool uh kind of um construction type here is where you could have it default stored on the polygon validators, then give the users the choice to store it wherever they want. Uh, but we'll have to see. I I I think that uh if um 4844 offers enough scalability for Polygon, I think that they could end up uh defaulting to Ethereum L1, and then maybe in times of like high congestion, they change over to the Polygon Validators. So there are literally various different ways that this can be done, which is actually what's really cool about this. Uh, but but yeah, that hopefully gives people extra context around this itself. But um just the last thing I'll say, uh, I know I'm I'm I'm going on a little bit here, but the last thing I'll say is that the reason why this is really bullish for Polygon is because the POS chain has uh a huge network effect, right? Yes, it's a side chain. Yes, it's uh obviously less secure than than Ethereum and everything. Uh it's not a roll up or an L2, but it has a lot of activity, has a lot of apps, has a lot of users, has a lot of network effect. So converting this over to a ZK VM for Lydium inherits all of that and keeps all of that.

And just gives it more security. And if it's a full ZK roll-up, then you've literally just converted what is essentially a separate L1 into an L2 on Ethereum. And that right there, I think, is a playbook for other L1s to potentially follow. Not to say the other L1s have as much activity as the POS chain, you know, but at the same time, it shows that it can be done. It shows that it is possible and it shows that it works. Because from my reading, this is actually easy to do. In in the proposal, the uh Polygon said this is actually not difficult, a difficult thing to do. We can actually do this with relative ease. Um, and then uh everyone, and there's no need for users to do anything. It's like the merge on Ethereum. The merge was obviously not an easy feat, but um, it's like the merge where essentially it happens and the users don't feel anything, they just get the same experience. So, yeah, overall, I think very bullish, uh, even though obviously there's a lot of nuance to the construction itself. But I think that once you understand the nuances there, um, you know, you you you have a better understanding of of of of all of it.

God, I'm so glad I have you this week to explain this one. That was so helpful. Uh you talked about the size of the polygon roll-up, over two billion dollars of assets, tens of thousands of DAPs, and an average of 2.5 million transactions per day. That is in the current proof-of-stake polygon chain. And so just to really drive this point home about like this ZK Validium, the ZK part of a ZK Validium, the ZK part is the cryptographic proof that prevents the operators of this rollout from stealing your assets. The trade-off is that you do not have the same assurances of having your data, but at least they can't steal your assets. They can only prevent you from retrieving your assets. And so it's basically like what's left is a griefing attack, as they can only prevent you from withdrawing. So there's no incentive for them to do anything else because they can't steal it from you. They can only prevent you from withdrawing. And so there's a much significantly reduced attack surface area down to the circumstances of just like when a griefing attack by a layer two operator or set of operators would be would be viable, uh, which is just like that's much less incentive to be malicious than if they were actually able to steal your funds. So the ZK part of the ZK Validium prevents them from actually being able to steal your funds. So what's left is just like they can withhold it from you for and be mean for some particular reason, but the reasons for doing that are much, much more reduced. And then on top of that, you also have the Matic staking as well, which I'm assuming if they do this, uh if anyone uh griefs or you know censors your withdrawals, then they have Matic at stake, which can get slashed, which is an additional um protection against this. All of this is correct, right, Anthony?

I I'm not sure. I don't actually know if MADIC has uh or the Polygon POS chain validators have uh slashing mechanism, um, and I'm not sure if that will be implemented as part of this move. Um, I haven't I don't actually uh know the details of of what they have there. Um but generally what you're talking about is is uh the data availability kind of problem, right? Where the the the the thing is, this is a this is a huge problem in in crypto generally, and the way Ethereum aims to solve it is by using um some some really fancy cryptography that is beyond my understanding, uh, that is part of the dank sharding roadmap. But so with with the with where the data is stored, if it's stored with the the POS chain validators, it I don't know if all of them are going to store all of the data or how long they're going to store it for, because they could say, okay, I'm gonna keep it for 30 days and then discard it because it's too expensive for me to you know to keep it, right? Or a portion of them will only keep the data. So maybe only like 30% of them will keep the data and the other 70% won't. So if 30% of if they withhold the data, it doesn't matter that the other 70% don't. They don't have the data to withhold in the first place. So there's been all this research and development over data availability guarantees and how to actually do it in a scalable way because storing data is expensive and serving it is expensive.

Because you it's it's it's all hardware at the end of the day, right? You're storing the data, it's it's literally gigabytes or megabytes, whatever storage you store on a computer, it's the same concept, but then you also have to serve that, and that costs money to do, right? You need to serve it off of uh a good connection, you need to be online so the data is available. It's like running any kind of a node or validator or anything like that. Um, so from that lens, uh, when you're talking about the cost of this, the cost is always borne by the people storing the data. And if it becomes economically inefficient for them to do that, they're either going to discard the data or they're just going to shut down their validators. So that's where the problem of data availability comes from. And how do you ensure that the data is always available, even if only a subset of validators have it? And that's where all the research that's going into dang sharding has come from, uh, which uses all the very fancy cryptography, uh, which obviously I is way beyond my my knowledge there. I'm not a cryptographer. Um, but yeah, I I don't know exactly how Polygon is going to construct this and which validators are going to keep it for how long. Um, but that's why I think that they should uh make it so that the Validium has that option to fall back to Ethereum L1, for example, if you want to pay there. Because, for example, big players who don't care about fees, they could use this chain and just post their data to L1 Ethereum, so they'll have no risk of their assets being frozen, right? Whereas smaller players, maybe uh it's not worth it to them to for to do that, so they can just have it stored somewhere else. So again, giving the the users choice, I think, is very important. Uh but yeah, this is a this is a huge design space when it comes to to research around this.

Yeah, the the last thing I want to pull out is that uh interestingly, in this blog post, uh they talked about like Polygon talked about why this is a good thing. Uh and so they say upgrading the Polygon proof of sake chain to a ZK Validium would offer very high scalability and very low fees. Yes, we know this. It would be a great fit for applications that have high transaction volume and require low transaction fees. For example, Web3 Gaming, Social, and Micro DeFi. Interestingly, that they added the word micro because you wouldn't want to do a million dollar transaction with constrained settlement assurances. So even they are admitting that, like, hey, this is great for micro micro transactions, micro DeFi, uh, but for a for large-scale DeFi services, you would want the full ZKEVM, which Polygon also happens to have supplied to the market. Okay, wrapping up the Polygon conversation, thank you for helping me navigate through that one, Anthony. Uh Zach XPT writes a Twitter thread, says, It's unfortunate that I have to write this thread, but I'm being sued by Maki Big Brother for an article I published in June 2022. Today, Maki filed the defamation lawsuit. The lawsuit is baseless and an attempt to chill free speech. I intend to fight back and defend free speech. Uh for bankless listeners who are not on crypto Twitter or not tapped into who Zach XBT is, he's a I would call him a famous crypto sleuth. He has done a massive job, just like thankless job, uh just crawling through Etherscan, tracing transactions, uh watching crypto influencers talk a big game about crypto assets while secretly selling them on the other side and then exposing them on crypto Twitter and generating like massive threads of research. Uh and so I definitely call him a beloved member of the crypto Twitter community, the broader crypto community. Uh Zach Zach XBT was actually the one that exposed who was the the uh who was the Quadringa X uh founder that uh was also

Remember the name. I don't remember the name, but yeah, that was the Canadian Exchange.

Right. They're the part of the Wonderland Sifu, Zero X Sifu, yeah, part of the Wonderland exchange with Zero X Sifu, who turned out to be this X scammer, and Zach broke that story. And so he has just done a number of number of just jobs exposing fraud in the crypto space. Uh and so uh he continues and says, My understanding is that Maki is very wealthy. I am not. He is using his money to try and silence me. I'm asking for your help so that this doesn't happen and then and the truth survives. He also created a donation address to assist with legal costs. Uh the basically the story is that Zach accused Maki big brother, whose name is Jeff Hyang, of launching over 10 failed pump and dumps and NFT projects, including treasury management services from Formosa Financial. Uh Formosa Financial co-founder George H withdrew 22,000 Ether from the project's treasury wallet in June of 2018. Uh and then this all of this data based on blockchain data, Zach XBT concluded that these were Maki's addresses. So Zach XBT blames Jeff Wang for draining of the funds as the ETH inflows of private round funds into the multisig before the two 11,000 uh Ether withdrawals were made by both Jeff and George in June 22nd, 2018. Basically, Zach traced a lot of fraud back to Maki Big Brother. Uh and then Maki Big Brother has sued him for defamation. Uh and so I will say

Everyone gets their day in court. Maki Big Brother gets his day in court. He is suing Zach because he would like to clear his name from the record and say that he is this is n none of this has happened. What Zach XBT is not correct. What Zach is claiming is not correct. And so he would like to have his name cleared because Zach is wrong. And Zach, who published this article, is saying, hey, I am right. I also need help defending myself in court. And since Zach is so beloved by the broader crypto world, over a million dollars has been sent to the Zach XBT donation address. The last I checked, it was over a million dollars. And so Crypto Twitter has absolutely risen to the occasion to defend Zach XBT uh from Maki and kind of judged Maki is guilty, uh bef uh at least collectively, uh just because uh Zach's um uh prowess in the crypto Twitter field is just so strong. Uh Anthony, what's your what's your summation of all these events and what's your take?

I mean I think you summarized it all uh very well there. You gave all the the relevant uh relevant background. I will say that I consider Zach, for those who don't know, to be like Crypto's Batman. Um but he's not a billionaire, unfortunately. So he he c he he obviously had to set up this donation address and obvious and obviously uh crypto Twitter came out or crypto people came out and and donated to him and stood behind him. I am not going to, you know, obviously say that Markey Big Brother is guilty or not, because I don't want to get sued. Um but what the the the the thing about this suit is that.

What happens is there's a period of discovery, and what that means is that everything's gonna come out into the open about what uh Maki wants to actually defend against and what Zack has accused Maki of. Now, if Zack is right and and and everything that he's accused Markey of is is correct, then Maki is just opening himself up to lawsuits from other people that will now have all this evidence to go after him with. So I don't know if this lawsuit is actually going to continue for that long. Maybe he thought that Zach wouldn't be able to defend himself and Zach would just uh basically cave and apologize to Maki because Zack has actually issued a public apology before to Ran New. I don't know how to say his last name, right? But he he's pretty big in the crypto ecos. Yeah, yeah. So he has actually issued an apology before because I believe Crypto uh Rand Man or whatever his name is was gonna sue Zach. But this time around, uh Zach either wrongly or rightly feels he has a good enough uh defense and good enough uh kind of evidence here to defend himself against uh against Maki. So maybe Maki miscalculated here, maybe he will withdraw the suit. Um, but yeah, it's great to see Crypto Twitter come out with huge support for Zach. And I think obviously if Zach needs more money, if he exhausts the existing funds, people are gonna come out and help him with it anyway. Uh, because he has done a lot of great uh good um work for crypto unveiling scammers and grifters at great personal risk because he's not really an Anon, right? People know who he is now. He started off Anon, but then he was traced down, and obviously you can't put that um can't put that back in the in the bottle once it's out. So yeah, he does this at great personal risk. Uh and it's a thankless job, as you said, because yeah, okay, he's gotten some donations from people here and there, but the risk that he takes on is is huge. Uh, I can't even uh overstate like how big the risk is because if he goes after the wrong person, um, you know, that is probably a scammer, but is a bit crazy, they could physically harm him, not just sue him, right? There could be physical kind of violence involved here for him or his family. So, so yeah, it's it's great personal risk, but it's it is a duty that needs to be done because there are so many scammers and grifters that just get away with things in crypto that we do need a Batman at the end of the day.

Yeah, uh a hundred percent. And and if you've been following Zach's Twitter account, he has already published the death threats that he has gotten just from around the space. And so this is this is not speculation, this is a reality. And I I I will say that even in the circumstance where Maki is correct and he uh was not doing the things that Zach believes that he was doing, I think the still the public signaling from Crypto Twitter of sending Zach over a million dollars to help pay for the suit is important because even if Zack gets this one wrong in that particular version of the universe, we still want Zach to do the stuff he's doing because his track record is so strong. Uh and so like we still want Zach around. I think we want to support him. Uh Bankless, we sent him $25,000 just to help support him and kind of wrote a thread to uh talk about like why we were doing this. Um and so like yeah, even in the event that like Zach misses one or two every now and then, like on net, oh my gosh, he's such a valuable resource for for the crypto world. Uh so again, all of these links are in the show notes, uh including the donation address for for Zach XBT if you feel compelled uh to donate to Zach's Defense. Uh okay. All right, that was all of the big news of the week. Coming up next, we got the Three Arrows Goose gets sold for how much? I will tell you. And then there's Nike's NFT platform.swish continues to grow even though no one in crypto Twitter seems to care. MetaMask is going cross-chain. Uh, we'll talk about that and more. But first, I'm gonna want to talk about these fantastic sponsors that make the show possible. Is it a bull market? Is it a bear market, or is it a goose market? Because apparently you like that one. Uh apparently you think it is a goose market because the goose, which is a ringer, one of the more famous art block collections that famously Three Euros Capital's Starry Night Fund bought at the absolute top of the NFT market, has been sold for $5.4 million. Sue and and Kyle, Suzu, and Kyle Davies, of course, purchased the goose. This ringer is known as the goose in August 2021 for $1,800 Ether, about $5.8 million. Uh and so I think they the value of the goose in Ether terms has almost tripled. Uh August 2021, Ether was definitely around uh high three to low four thousand dollars. Uh so five point four eight eight million dollars when they bought it, sold just now for five point four million dollars. It was estimated to sell for two point three two three million dollars, so basically double the estimation. Uh and it got uh oh it got sold to Punk six five two nine, previous podcast guest and famous NFT bull. Uh Anthony, what's your take on the story?