Bankless

ROLLUP: Ripple (XRP) Wins Big in the SEC Lawsuit | Google Play NFTs | Layer 3 Summer

Fri Jul 14 2023

Ripple's XRPCrypto MarketBond MarketStaked ETHPrivacy ConcernsTokenized AssetsLayer 2 SolutionsCBDCsOracle-less ProtocolsImproved Account AbstractionCrypto PerceptionClosing Remarks

Description

A comprehensive summary of the episode covering topics such as the ruling on Ripple's XRP, the crypto market overview, bond market and staked ETH, storing wealth and privacy, tokenized assets and privacy concerns, layer 2 solutions and privacy, CBDCs and Ethereum's role, oracle-less protocols and P2P payments, improved account abstraction and mainstream adoption, crypto perception and news, and closing remarks.

Insights

Ripple's XRP ruling challenges SEC's classification of cryptocurrencies as securities

The court ruled that XRP is not a security but determined that Ripple's original selling of XRP directly pursuant to contracts was an investment contract and therefore a security.

Staked ETH offers higher yield compared to sovereign bonds

Staked ETH provides a more attractive real rate of return compared to holding sovereign bonds.

Privacy concerns in non-private blockchains

The lack of privacy in non-private blockchains has allowed businesses like Arkham to thrive, but there is a need for privacy by default to protect everyone.

Ethereum's role in CBDCs

Ethereum could serve as an interoperability layer for CBDCs if central banks create private forks of Ethereum.

Improved account abstraction for seamless user experience

Improved account abstraction in smart contracts will make the experience of using cryptocurrency more seamless, similar to fintech applications.

Integration of crypto into fintech platforms

Progress has been made in integrating crypto into fintech platforms, such as the ability to send ETH through Venmo.

Changing perception of crypto

Building products that provide value may change the perception of crypto as a scam over time.

Closing remarks on crypto industry

Crypto is a risky industry, but the Bankless journey is appreciated and the community looks forward to future episodes.

Chapters

Ripple's XRP Ruling
Crypto Market Overview
Bond Market and Staked ETH
Storing Wealth and Privacy
Privacy and Tokenized Assets
Tokenized Assets and Privacy Concerns
Positive Outlook for Crypto and Privacy Concerns
Privacy Concerns and Solutions
Layer 2 Solutions and Privacy
Scalability Solutions and New Developments
Governance and Layer 2 Solutions
The Future of Stablecoins and ETH as a Stable Coin
Bitcoin's Future and Legal Developments
CBDCs and Ethereum's Role
Oracle-less Protocols and P2P Payments
Improved Account Abstraction and Mainstream Adoption
Crypto Perception and News
Closing Remarks

Summary

Transcript

Ripple's XRP Ruling

00:00 - 06:51

A U.S. court has ruled that XRP is not a security.
This ruling challenges the SEC's classification of cryptocurrencies as securities.
Ripple's sales of XRP do not constitute an offer of investment contracts.
XRP is not considered an investment contract when traded on exchanges, used for payments, or offered through securities transactions.
However, the court did determine that Ripple's original selling of XRP directly pursuant to contracts was an investment contract and therefore a security.
Politicians have weighed in on the case, with Representative Tom Emmer stating that this ruling establishes tokens as separate from investment contracts and calling for it to become law.
Representative Richie Torres criticized the SEC for its enforcement-based approach to regulating digital assets and called for an investigation into the agency.
Major exchanges like Coinbase have re-enabled trading for XRP following the court ruling.
The outcome of this case has implications for future security regulations in the U.S.

Crypto Market Overview

06:35 - 13:34

Controversy surrounding a new bounty program that rewards people for doxing crypto addresses
Google Play Store has unbanned NFTs
Aave is launching a new stablecoin called Go
Discussion on whether Go is the stablecoin we've been waiting for or if there is another option
Bitcoin's price remains flat around $30k with no significant changes expected due to lack of new money entering the market
Ethereum's price is also flat at $1880, resulting in a flat ETH to Bitcoin ratio
Crypto market cap surpasses $1 trillion, although some tokens may be overvalued
Zooming out to discuss bonds, staking in ultrasound money, and real-world assets in the market section
Comparison between fiat bond market and crypto bond market (Ethereum bond)
$60-70 trillion global sovereign bond market vs. $70 billion network-state bond market (Ether being the majority)
Pantera's perspective on US bond market being turned into a Ponzi scheme
Negative real Fed funds rate causing negative returns on US bonds

Bond Market and Staked ETH

13:04 - 20:28

The real return on bonds is at its lowest point in the last 50 years, with a negative 6.3%.
The COVID pandemic and response have distorted the bond market.
Buying sovereign bonds is considered low-risk due to the backing of the US government.
Central banks are buying their own bonds, leading to a distorting effect.
Staked ETH offers a higher yield and can be seen as the risk-free rate of Ether.
The real rate of return on staked ETH has been between four and six percent since the merge.
Compared to sovereign bonds, staked ETH offers a more attractive real rate of return.
Holding sovereign instruments may result in a decreasing real rate of return over time.
ETH's stability should be considered relative to itself rather than comparing it to other assets or currencies.

Storing Wealth and Privacy

19:58 - 26:28

Comparing assets for storing wealth in a risk-free way
USD and gold traditionally considered stores of value
BTC and ETH also seen as stores of value in the past 5-10 years
Staking ETH provides real returns through new issuance, fees, and MEV payments
Burning more ETH than issuing, resulting in negative inflation rate since the merge
Difficulty in printing new ETH compared to burning it
Recent increase in burning ETH
Staked ETH offers attractive real yield as a store of value
Different options for staking ETH including centralized exchanges, staking protocols, or solo staking
Considerations when choosing a protocol include security, liquidity, and decentralization

Privacy and Tokenized Assets

26:04 - 32:26

Consider the decentralization and security aspects when staking with a centralized service or dominant player.
Different models of LSTs can have tax implications, so it's important to understand how they operate.
Solar staking requires running software and managing hardware, but maintenance can be low if everything runs smoothly.
Losing private keys is a concern in solo staking, but the risk of getting slashed is not significant for everyday users.
Tokenized Treasuries and real-world assets on chain are seen as a bridge between DeFi and TradFi.

Tokenized Assets and Privacy Concerns

32:05 - 38:50

Real-world assets have been successful on Ethereum through stablecoins like USDT and USDC.
Young people still love stocks, and bringing stocks onto crypto rails would be more convenient.
Tokenized treasuries and money markets could offer better returns than holding stablecoins.
Bank of America is bullish on tokenized assets, predicting a $16 trillion market by 2030.
Crypto correlations with stocks have dropped, indicating crypto's independent cycles.
The stock market may serve as a leading indicator for crypto movements.
The four-year cycle in crypto suggests next year could be positive due to the Bitcoin halving.

Positive Outlook for Crypto and Privacy Concerns

38:31 - 45:33

Next year is expected to be a positive year for crypto due to the four-year cycle and the upcoming Harvard Nings.
Crypto as an asset class has not been correlated to the SMP or macro events, so it may be worth ignoring macro factors when investing.
Arkham has released the world's first on-chain intelligence exchange, allowing users to buy and sell information about blockchain wallet addresses anonymously.
Ethereum and Bitcoin are pseudonymous, not anonymous, and Arkham is monetizing the fact that this information is already public on the ledger.
Chain analysis companies like Arkham likely have de-anonymized a significant portion of Ethereum and Bitcoin addresses.
The lack of privacy in non-private blockchains has allowed businesses like Arkham to thrive.
Privacy by default would protect everyone and eliminate the need for services like Arkham.

Privacy Concerns and Solutions

45:04 - 51:18

Non-private blockchains have proliferated, raising concerns about privacy.
Arkham is monetizing non-private blockchains by adding tokens and bounties.
Building open permissionless systems means morals don't factor in.
Improving privacy requires better tools that protect people.
Tornado Cash was a better tool, but it got sanctioned by the US government.
Privacy should be the default for the entire chain, not just an app.
Ethereum L2 may achieve better privacy before Ethereum L1 does.
Everything done on-chain is visible to everyone in the world.
Arkham's actions are seen as evil and a dark future for humanity by some.
The community needs to solve the privacy problem instead of relying on Arkham or others like them.
Knowing that on-chain activity is transparent may discourage people from using on-chain systems.
However, this could create market value in solving the privacy problem.
Privacy by default would provide more protection from everyday people and traditional finance systems.
Aztec Network is already building a promising layer two solution with encrypted and private transactions.

Layer 2 Solutions and Privacy

51:05 - 57:36

Ethereum mainnet is unlikely to add privacy by default on the layer one, but layer two solutions may offer privacy features
Developer activity and contribution in the crypto space has decreased by 22% compared to a year ago, but this could be due to developers leaving ecosystems that have stunted in growth
Google Play has changed its policy to allow NFTs in apps and games, putting pressure on Apple to do the same
Creating a new mobile ecosystem outside of Apple and Google is difficult, so it's better to encourage these app stores to allow crypto-related apps
Solana's initiative for a Solana phone is unlikely to gain traction as most people don't care about accessing niche crypto apps
Aave is launching a new stablecoin, ZK EVM is hitting the market as part of Layer 2 Summer, Brazil is exploring a central bank digital currency on Ethereum, and the UK is becoming more crypto-friendly

Scalability Solutions and New Developments

57:09 - 1:03:50

Arbitrum 1 and Nova are secure Ethereum scalability solutions that offer faster transaction speeds and lower gas fees.
Uniswap Labs has released the Uniswap mobile wallet for iOS, allowing users to easily trade tokens on the go.
Consensus is launching a layer two solution called Linea, which is a ZK EVM.
Mantle Network has developed a layer two solution using Eigenlayer as the data availability layer, offering low fees and fast smart contract wallets.
Gitcoin is releasing a public goods layer two that specializes in supporting public goods applications and aims to create a close-knit network of protocols.

Governance and Layer 2 Solutions

1:03:22 - 1:09:17

Governors of different protocols reside in the Public Goods Network
Fragmentation is a concern, especially on the social side
Interoperability and economic aspects are relatively solved with bridges
Socially, there may be L1s that exist as zombies due to social capital and financial incentives
Over time, people tend to migrate to more successful L2s
Tokens in crypto rarely fully collapse to zero and can have occasional breakouts
Avi has launched a new stablecoin called go, similar to DAI
Decentralized stablecoins pegged to fiat are not truly decentralized
Collateral limits scalability of decentralized stablecoins
Scaling up would require a market cap of over $100 trillion

The Future of Stablecoins and ETH as a Stable Coin

1:08:58 - 1:15:25

The end state of a decentralized stablecoin is ETH becoming the stable coin if it succeeds and reaches a large enough market cap.
ETH would be used as money when it becomes more stable than people's local currency.
ETH may become a niche stablecoin for crypto enthusiasts, but not as scalable as USDC or Tether.
There are doubts about the overall ability to create a true decentralized stablecoin pegged to fiat currencies.
Eigenlayer has increased its restaking cap from 9,600 to 30,000 staked ETH.
Anthony doesn't hold any LSTs because he is a solo staker and rocker pool note operator.
Native re-staking will be available in Eigenlayer in the future.
Vitalik Buterin praised Ordinals and the BRC-20 token standard for reviving Bitcoin builder culture.
There is a cultural divide between Bitcoin builders and laser-eyed maximalists who oppose NFTs and tokens on Bitcoin.
Bitcoin's special qualities should not be compromised by trying to replicate Ethereum's functionality on the Bitcoin network.

Bitcoin's Future and Legal Developments

1:15:04 - 1:21:51

Bitcoin's functionality was introduced accidentally with the Taproot upgrade, adding uncertainty to its future.
Building on Bitcoin may turn it into a dollar store version of Ethereum.
There is concern among Bitcoiners that the changes in Bitcoin may lead to another split or civil war.
The Winklevoss twins have sued Barry Silbert and DCG over owed money.
Former SEC chair Jake Clayton believes there should be a spot Bitcoin ETF, similar to futures-based ETFs.
A verdict on the grayscale court case could be delivered by September, potentially changing the game for crypto ETFs.
London and the UK are becoming more favorable towards crypto, attracting potential crypto projects and refugees from the US.

CBDCs and Ethereum's Role

1:21:23 - 1:28:27

Brazil's central bank digital currency (CBDC) pilot project was deployed on Ethereum.
Ethereum could serve as an interoperability layer for CBDCs if central banks create private forks of Ethereum.
CBDCs may not be widely adopted due to concerns about centralized control.
Ethereum is the standard technology for CBDCs because it is open source and free to use.
Ethereum could become the sediment layer for all types of value, including CBDCs.
Anthony Sassano is looking at Oracle-less protocols in DeFi.

Oracle-less Protocols and P2P Payments

1:28:01 - 1:34:30

Oracle-less protocols are a trending topic in the DeFi space, with Uniswap being an example of a protocol that operates without oracles.
Ajna Finance is a new company launching an Oracle-less lending protocol.
New AMM designs are being developed to give liquidity providers more control over their liquidity, with Uniswap V3 and V4 being notable examples.
Stakefly protocols like Eigen Layer and newer LST protocols are also of interest in the DeFi sphere.
Account abstraction refers to the ability to create Ethereum wallets with additional features and controls built-in, such as spending limits and multiple transaction capabilities.
Development on account abstraction is happening behind the scenes, but it's not widely discussed due to its infrastructure nature and lack of speculative attention.
Wallets integrating account abstraction need to be cautious about making changes that may confuse or scare users, resulting in slow and gradual rollouts of new features.
The goal is for account abstraction to provide a seamless user experience similar to fintech applications, reducing gas fees and simplifying transactions.

Improved Account Abstraction and Mainstream Adoption

1:34:01 - 1:40:23

Improved account abstraction in smart contracts will make the experience of using cryptocurrency more seamless, similar to fintech.
Larry Fink from BlackRock expressing support for crypto has led to a shift in the mainstream media's narrative towards being more pro-crypto.
Media organizations often align themselves with trends that generate more clicks and profit.
P2P payments may not be a primary use case for public blockchains, but they could become more prevalent as crypto becomes integrated with real-world applications.
Building infrastructure and integrating crypto with everyday expenses is necessary for widespread adoption of P2P payments.
While P2P payments are not currently well-suited for Bitcoin or Ethereum layer one, Ethereum layer two and stablecoins show promise for future development.
A PayPal product manager demonstrated the ability to send ETH through Venmo, indicating potential progress in integrating crypto into fintech platforms.

Crypto Perception and News

1:39:56 - 1:46:22

Received point zero zero five ETH in Venmo from someone at PayPal and Venmo building out crypto
Venmo now enables the ability to withdraw to a bankless non-customer address
Progress made in being able to buy and send crypto assets through fintech tools, even if custodian
Discussion on the perception of crypto as a scam and how it can be changed
Perception is influenced by marketing and different sectors within the decentralized ecosystem
No centralized marketing for crypto, leading to diverse perspectives on scams
Building products that provide value may change perception over time

Closing Remarks

1:46:03 - 1:48:33

Crypto company announcement translation guide in one column
Quitting due to fraud and looming legal actions
Expansion to the UK means under investigation by the SEC
Decentralization means founders and investors dumping tokens
Shout out to The Daily Gway YouTube channel
The Daily Gway provides daily technical episodes focused on Ethereum
David will be back next week after climbing mountains
Appreciation for Anthony's help in managing vacation and keeping rollups going
Crypto is risky, but we're glad you're with us on the Bankless journey