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    Bankless

    ROLLUP: Celsius CEO Arrested & ETH CC Conference Recap

    Fri Jul 21 2023
    Legal TroublesCrypto EcosystemMarket AnalysisProtocol UpdatesRipple Case RulingToken SalesLayer Two SolutionsEthereum Layer Two SolutionsMarket SpeculationIndustry FiguresCrypto RegulationLayer Two ScalingToken StandardizationTokenizationPsychology of Bull and Bear MarketsCrypto Market and Social Media Influencers

    Description

    This episode covers a range of topics including legal troubles and fall from grace of industry figures, updates on the crypto ecosystem, market analysis and bullish outlook, protocol updates and legal rulings, token sales and layer two solutions, Ethereum layer two solutions and token upgrades, market speculation and industry figures, crypto regulation and layer two solutions, layer two solutions and network transitions, layer two solutions and token upgrades, market speculation and industry figures, crypto regulation and layer two solutions, layer two scaling and token standardization, tokenization and regulatory challenges, psychology of bull and bear markets, and the crypto market and social media influencers.

    Insights

    Legal Troubles Signal Turning Point

    The arrest and legal troubles of industry figures like Kwan, Sam Bankman Frieda, Moshinsky, and Alex Wichinski may mark a turning point for the industry, exposing fraudulent actors and allowing for a more bullish outlook.

    Ripple Case Ruling Challenges SEC's Theory of Law

    The recent ruling in the Ripple case challenges the SEC's theory of law by clarifying that investment contract analysis should focus on transactions rather than assets. This has implications for ongoing cases against exchanges like Coinbase and may lead to an explosion of token sales.

    Layer Two Solutions Driving Innovation

    Layer two solutions like Uniswap X and Ethereum layer two transitions are driving innovation in the crypto ecosystem, enabling faster transaction speeds, lower gas fees, and off-chain order routing. However, there are concerns about centralization introduced by pushing certain functions off-chain.

    Tokenization Creates New Asset Class

    Tokens represent various things such as money, memes, loyalty points, NFTs, shares, coupons, IOUs, commodities, etc. Categorizing tokens as securities or not is missing the point; they are a new asset class that doesn't fit into traditional categories.

    Psychology of Bull and Bear Markets

    Human psychology plays out in the same way during bull and bear markets. Staking ETH can provide financial independence and freedom. The episode on how much ETH it takes to retire was a fun exercise before the Beacon Chain launched.

    Crypto Market and Social Media Influencers

    The pinky doll, a TikToker known for animations, is making significant money by reacting to specific emojis. Crypto is risky, but the bankless journey is appreciated. Pinky Doll thanks Solana, Cardano, Avax, Udi, and mentions Polygon and Ripple.

    Chapters

    1. Legal Troubles and Fall from Grace
    2. Crypto Ecosystem Updates
    3. Market Analysis and Bullish Outlook
    4. Protocol Updates and Legal Rulings
    5. Legal Troubles Continue and Ripple Ruling
    6. Ripple Case Ruling and Market Speculation
    7. Token Sales and Layer Two Solutions
    8. Ethereum Layer Two Solutions and Token Upgrades
    9. Layer Two Solutions and Network Transitions
    10. Layer Two Solutions and Token Upgrades
    11. Market Speculation and Industry Figures
    12. Crypto Regulation and Layer Two Solutions
    13. Layer Two Scaling and Token Standardization
    14. Tokenization and Regulatory Challenges
    15. Psychology of Bull and Bear Markets
    16. Crypto Market and Social Media Influencers
    Summary
    Transcript

    Legal Troubles and Fall from Grace

    00:00 - 06:12

    • Kwan is in jail in Montenegro waiting to be extradited to the United States.
    • Sam Bankman Frieda is under house arrest and likely going to jail.
    • Moshinsky's going to jail.
    • Suzu and Kyle Davies are on the run and ostracized from the West.
    • The complete fall from grace of three-year capital.
    • Efforts going on behind the scenes to capture those individuals.

    Crypto Ecosystem Updates

    05:46 - 11:55

    • Builders at ECC are still actively building despite being in a bear market.
    • Layer twos are shipping, solving hard problems, and transitioning ecosystems.
    • Bankless citizens attended a party event and had a great time.
    • Bankless citizens are described as the Athenians of crypto, diverse and humble.
    • The venue for the party had free drinks sponsored by Sega.
    • Exotic options were discussed at the event.
    • Permissionless conference in Austin, Texas is recommended for those new to conferences.
    • Uniswap X is a new protocol paired with Uniswap AMMs.
    • An L1 wants to become an L2 in the Ethereum ecosystem.

    Market Analysis and Bullish Outlook

    11:31 - 17:23

    • Stater Protocol is a new decentralized ETH staking protocol with low capital requirements.
    • There is a 1.5X staking boost and LP rewards available from Stater this month.
    • Bitcoin is down 4% on the week, while Ether is down 3%.
    • The crypto market is currently in a crab market phase, similar to stocks.
    • Stocks like NASDAQ and SPY are almost at all-time highs.
    • The decoupling of crypto from stocks in the wrong direction is causing frustration for some investors.
    • Despite this, there are reasons to be bullish about crypto now.
    • Crypto has solved many hard problems and is well-positioned for future growth.

    Protocol Updates and Legal Rulings

    16:58 - 23:52

    • Crypto is well set up and the hard problems are being solved
    • Aave's stablecoin Go has hit $4 million in market cap in two days
    • Ave is a hybrid compound maker protocol
    • MakerDAO is developing its Spark protocol, similar to Aave for MakerDAO
    • There is a lot of convergence happening in the crypto space
    • $116 million worth of Ether was moved after eight years of dormancy
    • Ripple put the SEC on its heels but ultimately lost

    Legal Troubles Continue and Ripple Ruling

    23:23 - 29:52

    • Alex Wichinski, a prominent figure in the crypto industry, has been arrested on fraud and other charges.
    • The Department of Justice, SEC, CFTC, and FTC have all filed lawsuits against Wichinski and his company Celsius.
    • Wichinski is accused of orchestrating a scheme to mislead customers about the market value of Celsius and the sell token.
    • The SEC has charged him with securities fraud and misleading investors.
    • The CFTC has accused him of defrauding customers by misrepresenting the safety and profitability of the platform.
    • The FTC has accused him of violating the Federal Trade Commission Act in connection with cryptocurrency lending and custody services.
    • Celsius has agreed to a judgment of $1.7 billion, which will be suspended to allow for asset return to consumers and bankruptcy proceedings.
    • Nick Carter's previous tweet about purging certain individuals from the industry seems to be coming true as Wichinski joins others like Do-Kwan in jail or under house arrest.
    • The fall from grace of these figures may signal a turning point for the industry and permission to be bullish on its future.
    • Bear markets serve a purpose by exposing fraudulent actors within the industry.
    • The recent ruling in the Ripple case affirmed that XRP is not considered a security according to the court.

    Ripple Case Ruling and Market Speculation

    29:30 - 36:16

    • Ripple is being charged by the SEC for selling an investment contract to large institutions.
    • The XRP sold to retail is not a security, but the institutional sales were considered an investment contract.
    • This outcome is a win for crypto because it establishes that XRP is not a security when bought by retail investors.
    • Ripple has to pay fines for their legal securities offerings.
    • Gary Gensler and the SEC's claim that all crypto assets are securities was refuted in this case.
    • There are differing opinions on whether Ripple's actions were good or bad, but the refutation of all tokens being securities is significant.
    • Gary Gensler expressed disappointment over the treatment of retail investors, but many retail investors are actually celebrating this ruling.
    • While protection for retail investors is important, the SEC's posture of considering all tokens as securities stifles innovation in the space.
    • The ripple decision clarifies that investment contract analysis should focus on transactions rather than assets, which challenges the SEC's theory of law.
    • This decision has implications for ongoing cases against exchanges like Coinbase and has led to XRP trading being re-enabled on Coinbase.
    • Two reasons to be bullish after this ruling: FUD and negativity around asset securities are gone, and there may be an explosion of token sales similar to DeFi summer in 2019.

    Token Sales and Layer Two Solutions

    35:54 - 42:24

    • Colin predicts an explosion of token sales and distributions similar to what happened in 2019, after the fear of the 2018 ICO crackdown subsided.
    • There are concerns about whether the industry is ready for this level of responsibility and if it will lead to another FOMO season.
    • Crypto-cycles are moving faster due to faster information flow and better understanding of cycles.
    • Uniswap Labs launched Uniswap X, an aggregator for DEX liquidity that pairs with Uniswap AMM.
    • Uniswap X uses a Dutch auction mechanism with off-chain order routing, allowing users to swap tokens without paying for gas.
    • In the long term, Uniswap X aims to enable trading on different layer-two solutions through off-chain order routing and bridge proofs.
    • There is some pushback regarding the centralization introduced by pushing certain functions off-chain in Uniswap X.

    Ethereum Layer Two Solutions and Token Upgrades

    42:00 - 48:27

    • Charges of pushing things off chain are a centralization vector and a departure from a permissionless protocol.
    • The idea behind Uniswap X is that anyone can be a third-party service provider in the free market, which promotes decentralization.
    • There may be an analog to builders and searchers in Ethereum, and understanding the points of centralization in new functions is important.
    • Validators still have control over the network in Ethereum, which helps maintain some level of decentralization.
    • Polygon is upgrading the Matic token and discussing token economic upgrades for the Polygon network.
    • The bankless layer two thesis is playing out with ZK Singh's groundbreaking prover.
    • MetaMask Portfolio allows users to view their crypto portfolio across all chains and perform DeFi actions.
    • Arbitrum offers secure Ethereum scaling solutions with faster transaction speeds and lower gas fees.
    • Sello, a non-Ethereum layer one blockchain, has proposed transitioning to become an Ethereum layer two.

    Layer Two Solutions and Network Transitions

    47:59 - 54:35

    • Celo has submitted a proposal to transition into an Ethereum layer two.
    • The transition would allow Celo developers to utilize Ethereum tools and libraries.
    • End users of Celo would experience a seamless upgrade with no impact on their usage.
    • Other layer one networks like Avalanche and Solana may also become layer twos for similar reasons of tribe, network, and economics.
    • Becoming an Ethereum layer two provides tribal affiliation, network effects, and cost savings for security.
    • Celo apps may participate in optimism for retroactive public goods funding.
    • Coinbase's base Mainnet is open for builders as part of the layer two summer trend.

    Layer Two Solutions and Token Upgrades

    54:06 - 1:00:35

    • Coinbase is leading the charge in onboarding users onto layer two solutions.
    • ZK Sync announced its new high-performance proof system called Bojum.
    • Bojum requires 8 gigabytes of hardware to produce a proof, making it more accessible than other ZK rollups.
    • Polygon is upgrading its Matic token to a new token called Paul, which will power all of the chains in the ecosystem.
    • Paul holders can become validators and earn transaction fees from the many networks within Polygon.
    • The upgrade from Matic to Paul is a one-to-one swap, ensuring existing holders are not negatively impacted.
    • There will be a yearly emission of poll tokens with 1% going to validator rewards and 1% to the community treasury.

    Market Speculation and Industry Figures

    1:00:13 - 1:06:35

    • Matic holders are excited about the move to Polygon.
    • Polygon can be used for staking and other roles in roll-ups.
    • Ben McKinsey, former star of the OC, published a book claiming all crypto is a scam.
    • McKinsey invested $250K in crypto and lost most or all of it.
    • He spoke to representatives from the crypto industry like Moshinsky, SBF, and Justin Sun.
    • McKinsey believes crypto is not backed by anything real and calls it a Ponzi scheme.
    • The podcast hosts see McKinsey's book as a bottom signal for crypto.
    • Robert Kennedy Jr. supports backing the dollar with Bitcoin and removing capital gains from smaller Bitcoin transactions.
    • Ron DeSantis opposes central bank digital currencies (CBDCs) due to concerns about government control.

    Crypto Regulation and Layer Two Solutions

    1:06:07 - 1:12:30

    • CBDCs are seen as a threat to American liberty as they could be used to impose a social credit system.
    • Crypto has become a mainstream topic in politics, with politicians weighing in on it during the presidential race.
    • Binance cut employee benefits and laid off workers, but the reported numbers were exaggerated according to CZ.
    • GnosisPay Visa card uses a private key transaction when scanned, running on top of Gnosis Chain.
    • ECC Espresso announced an ecosystem partnership with Eigenlayer for restaking on the Espresso Sequencer Network.
    • The problem of parallelization between layer two networks and chains is being addressed by sequencing systems like Espresso and eigenlayer.

    Layer Two Scaling and Token Standardization

    1:12:17 - 1:18:53

    • Kyle Kaplan asks if switching from optimistic fraud proofs to ZK proofs in optimism will reduce the need to bridge between networks and create a hyper super chain
    • ZK stack is a new concept that includes ZK sync circuit, but it's not yet EVM compatible
    • O1 Labs is also building a ZK circuit for the OP stack, creating competition for standardization
    • Standardization and competition are important for creating a hyper super chain
    • Ethereum needs to figure out layer two scaling with good UX and standardization or risk losing to monolithic chains like Solana
    • Antonio from dydx believes in Cosmos Appchains over layer twos, but there are concerns about security and economic arguments
    • Tokens can be various things like money, memes, loyalty points, NFTs, shares, coupons, IOUs, commodities because they represent ownership

    Tokenization and Regulatory Challenges

    1:18:28 - 1:25:05

    • Tokens can represent various things such as money, memes, loyalty points, NFTs, shares, coupons, IOUs, commodities, etc.
    • The SEC and regulators should focus on disclosures to help the public understand what they are buying in the crypto industry.
    • Regulators can create dune boards and collaborate with the crypto industry to organize information and solve coordination problems.
    • Categorizing tokens as securities or not is missing the point; they are a new asset class that doesn't fit into traditional categories.
    • The speaker is bullish on the current market based on a chart analysis comparing previous bull and bear markets.

    Psychology of Bull and Bear Markets

    1:24:38 - 1:30:56

    • Human psychology plays out in the same way during a bull market, just the inverse in a bear market.
    • Bullish on staking and staking ETH as a productive asset with a risk-free rate of return.
    • Staking ETH can provide financial independence and freedom.
    • The unit of account is still ether for Bankless.
    • The episode on how much ETH it takes to retire was a fun exercise before the Beacon Chain launched.
    • Staking ETH allows for acquiring passive income and semi-retirement.
    • Considering redoing the episode on how much ETH it takes to retire now that staking is available.
    • Bullish on the bankless nation and appreciative of people's support at conferences.
    • Meme of the week featuring Vitalik walking with an entourage of suits.
    • 'Pinky doll' is a TikToker known for animations that people can pay for.

    Crypto Market and Social Media Influencers

    1:30:31 - 1:32:40

    • The pinky doll is a Tiktoker who reacts to specific emojis that people pay money for.
    • She can make hundreds of thousands of dollars by reacting in a particular way for five hours straight.
    • In this moment of Zen, Gary Gensler is superimposed upon her.
    • Crypto is risky and you could lose what you put in, but we're glad you're with us on the bankless journey.
    • Pinky Doll thanks Solana, Cardano, Avax, Udi, and mentions Polygon and Ripple.
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