--:-- David: Bankless Nation, we're in the second week of November and we are once again testing whether or not this bull market is intact or not. Bitcoin lost the 50-week moving average. It's now right in between the 50-week and the 200-week moving average.
--:-- Were the cycle investors predicting the early bull market wrong? Where are we headed next? And also, Ryan, I've got questions about Jensen Huang. Jensen Huang has resigned from NVIDIA. A trillion dollars of NVIDIA value just gone in a month. We've got the NVIDIA earnings coming down in five days. And I've got questions.
--:-- I know that you know that my conspiracy cap can fit really nicely on my head when the time calls, when the moment calls for it. It's on. The cap is on this week. I've got conspiracies.
--:-- Ryan: Guys, David absolutely had to start the agenda with Jensen Huang. So we're doing that for David, okay? What the heck is going on? I know it's big news, but he's got a lot of questions. So I want to hear him out on these conspiracy theories.
--:-- Also, I have some great news for you, David. ETH is finally money because Vitalik said it this week. Because Vitalik said so. For the first time, very concretely. I'll play the clip and we'll talk a little bit about that.
--:-- Also, I want to talk about Phylax. This is an Ethereum app layer security startup, and they've launched something really innovative that might be able to stop Kim Jong-un from stealing all of our crypto on Ethereum. At least that's the hope. It's a pretty innovative solution. The question, though, is how does it impact Ethereum's immutability? Do we lose the censorship resistance? It's kind of a nuanced answer, and I can't wait to discuss that with you.
--:-- But let's first start with your stuff. Okay, Jensen, my stuff.
--:-- David: Yeah, this is an AI podcast now. Okay, so after two extramarital affairs, is it expected that the CEO of a company, of like the world's most important company in this moment, resigns? I say no. So regardless that one of these affairs was potentially with a Chinese intelligence asset, like very important, very important notes.
--:-- Ryan: But do you hear yourself talking there? Okay, Chinese intelligence asset, it feels like that could be grounds—
--:-- David: According to whom?
--:-- Ryan: Yeah. Who is saying that she is a Chinese intelligence asset? Because I would like further evidence that that is also exactly what's going on. And the market was absorbing that news. Like, that was bearish, but we were getting over it. And then the second extramarital affair with one of his employees, a VP of healthcare, who, like, as far as, like, no one was, this was an of-age consensual relationship between two consenting adults, no one.
--:-- David: Are you justifying affairs now, David? Is that whose side you're on? You're on the side of the cheating spouse?
--:-- Ryan: Whether or not an affair is justified is between him and his wife and not the market or the government.
--:-- David: Yeah, but if he's having an affair with a Chinese spy, that's kind of a government issue, right?
--:-- Ryan: Yes, that is, but it's not like he was like, let me go court this Chinese spy. It's like, there's this babe who's into me. And like, all men are fallible on that front. We don't know all the details, but I want to hear you out.
--:-- So, what happened was Jensen Huang resigned as NVIDIA CEO. He was pushed out by the board as a result of these two extramarital affairs. And that was news as of this morning. NVIDIA is down 17% on the week. Is that real? And 27% in November? Are we lost?
--:-- David: Yeah, we've lost, NVIDIA has lost about a trillion dollars of market cap from peak to trough. And just like how much is riding on NVIDIA, both in just A, how much percentage of it represents of the S&P, but then also all of the downstream implications of the entire AI industry. It's like if you want to go for the Achilles heel of the growth of the United States, it's NVIDIA.
--:-- Ryan: Yeah, it's been called AI Central Bank, right, for a reason. It's fueling all the capex. It's all of the supply. It's like so important. And Jensen has been probably the most important person in AI over the past couple of years, probably bar none. It's not even close. It also always struck me as sort of a steady hand, right? He was never hyperbolic. Well, I guess he was, you know, very optimistic on things, but he was just a steady hand in operating NVIDIA. He's been there for, what, like 30 years, like longstanding engineer, good leader, it seemed like.
--:-- So what is your conspiracy theory here? If you don't think he was fired for reasons that the board explained, that these two extramarital affairs, what's the alternative explanation here?
--:-- David: The collection of things is really what I'm concerned about. There's a potential bunch of conspiracies, and I'm sure all of them are mostly false, and all of them also equally have at least some kernels of truth to them. We're going to have to wait for all of the information to really come out.
--:-- But my main conspiracy is that we do not know the actual real reason, because I'm throwing a flag at the idea that sex between consenting adults therefore concludes at the removal of the most important CEO of the most important company in the S&P 500. So that's my first flag.
--:-- The second flag that I don't like is why The Economist, which broke the news that Jensen Huang also had an extramarital affair with an internal VP and therefore should be removed from his CEO position, The Economist broke this news with an article that said "Jensen Huang must go" with the subtitle, "His should not be the only head to roll." So why are we already at the conclusion of heads rolling? Like, why is The Economist publishing a guilty verdict at all as they break the news of the second marital affair?
--:-- And then I go and I listen to all these podcasts, one from The Atlantic, one from The New York Times, The Daily, one from the BBC, all very left-leaning media organizations. And not a single one of those podcasts ever asks the question about why extramarital affairs concludes at a resignation. Like, there was a big leap in logic, I felt like, where it was like, okay, so, like, he had two of these affairs, and now we have to remove him. Like, I'm not ready to make that conclusion. There seems to be a big gaping hole in the logical process of this whole thing.
--:-- Ryan: But isn't it just an explanation for this, that all of these entities, the Economist, the Atlantic, New York Times, the BBC, they're in media, and they've been sort of anti-tech oligarchs, anti-AI from the very beginning. And so this is some rising star that is falling and they're celebrating that and they're, you know, they're wanting that to happen. They just kind of hate Jensen, NVIDIA, AI, and all of these things. So it's no surprise to me that they'd be rooting for the downfall and not questioning these things in the way you'd expect them to question it.
--:-- David: The fact that the whole is the same size in the same place across these three organizations is like not we didn't we didn't ask like is this does the punishment fit the crime like not we didn't ask that question like one time across all three of these things. And so this is why I would like to go down the conspiracy theory. I want to hear the conspiracies. What do you think the real reason is here?
--:-- Jensen Huang is uniquely a big fan of open source AI models. These are the models that democratize power of AI to the rest of the world, to everyone else. So all of these closed source models from OpenAI and Anthropic and all the AI labs that are hidden behind the walls that are only available to the government elite or the inner elite tech circles. Jensen Huang was like, no, no, no, no. Like open source models is actually like the way to go. And that's the way that power gets pushed to the margins. You know, that's good for the people of the world. And it shifts power and spreads it out more democratically, in my opinion. And so that's offensive to the powers that be, you know, the CIA, the deep state, all the elite circles. They don't like that. They want to concentrate all the power and open source models don't let them do that.
--:-- There's also like the timing of this thing, like right after the midterms is kind of sus. And so there's some conspiracy theory. I don't really quite believe all of this, but that there is like an alignment between the Democrats and Anthropic. And Anthropic right before their IPO is trying to do the whole regulatory capture thing. And Dario, a known lib, is in cahoots with the Democrats to wrangle power for regulatory capture. And Jensen Huang is outside of that trying to pull in the opposite direction. So there's some evidence there.
--:-- This is very similar to Sam Altman's ousting, where, like, there were people that were controllable by the powers that be versus Sam Altman, who's more in favor of commercial interests. Larry Summers' appointment to OpenAI is, like, putting a powerful Washington insider inside of OpenAI's board, suggesting that there's, like, relationships between AI and political power. Overall, there's totally relationships between AI and political power. And I think Jensen Huang is like on the outside of that circle. So like there's stuff like this that is a lot of smoke.
--:-- Ryan: He's not on the outside. He's like BFFs with Trump. Trump calls him like on a regular basis.
--:-- David: Yeah, but Trump's outside of those circles.
--:-- Ryan: What? I don't know, man. I'm not saying I believe in all of this. I'm just saying there's a bunch of different things. Here's something suspicious here. I'll give you the Occam's razor explanation, which I think is probably the most likely to be true, even though I still want to keep my finger on the pulse of these other more conspiratorial ones.
--:-- But the most simple answer is that Jensen was just selling more chips to China than had been commonly known. Right. And like routing them through intermediaries in Singapore and Malaysia, like NVIDIA's overperformance in 2026 quarterly reportings, just like, wow, they're over earning. They're earning more than they ought to. And the market has perhaps sensed that a little bit. And maybe that's why a trillion dollars of market cap has gotten shaved from NVIDIA in the last like two months or so.
--:-- There was reporting from or like people connecting the dots. You watched the Ross Douthat interview on 60 Minutes with.
--:-- David: Yeah. Yeah, Douthat, yeah. And there was that whole section where Trump was like, I was on the phone with a very prominent AI tech leader, and I told him, kiss your wife and kids, you're going to jail. I hope you like the color orange for your clothes. And now this Jensen news is out, people are connecting those dots together. And so maybe Jensen was just selling too many chips to China.
--:-- But then why can't we just say that? Why can't we sell? Yeah, Jensen Huang was violating the CHIPS Act, which is a law that we have. It's not in the extramarital affairs because two consenting adults are allowed to have sex with each other. It's the fact that he was breaking the law by selling chips to China. Why can't we just say that?
--:-- Ryan: I don't know, David. I mean, like, look, it could be a national security issue. There's just like so many things we don't know. You're probably right that we're not getting the full truth of the story here. It's just really hard to jump to any conclusions at this point, I think. I get why your spidey sense is tingling here. It doesn't quite line up. It just really, really matters. Jensen Huang has no obvious line of succession for the leadership of what can be fairly argued as the most circumstantial company for the AI industry and the economy of the United States. He has 60 direct reports.
--:-- David: Okay, but the affairs were real, right? I mean, he admitted to them. Who cares about the affairs? I don't care about the affairs. With a Chinese spy? Unproven Chinese spy. And also, he can just stop. It doesn't matter about the future. He's just like, hey, Jensen, stop banging Chinese spies. Just don't do that anymore. And it's fine.
--:-- Ryan: All right. Well, I don't know what to say, David. I just feel like we don't have enough information.
--:-- David: You are exactly right. We do not have enough information. That's exactly my point. Can we get to crypto?
--:-- Ryan: Do you want to get to the markets?
--:-- David: I will conclude the Jensen Huang section of this. Unfortunately, in markets in crypto, this week delivered a pretty large second test of the early bull thesis. I'm not sure we are passing the test here. So last week, we had, or two weeks ago, we had the biggest hack in crypto history, Binance. We still kept above Bitcoin's 50-week moving average. Last week, we had midterms, huge sell-off. You know, I think... the NASDAQ almost down almost 15%. It's like 13% or something. Still above the 50-week moving average. This week dropped below it. Okay, we have lost the 50-week moving average, which many of the cycle investors, many of the quants said that was unlikely to happen. And now it's happened.
--:-- So let's look at Bitcoin at the time of recording. We are down, I guess, on the seven day, looks like we are down 5.4%, down to 72K. And the 50-week moving average, I believe, is something like 75.5, something like that, $1,000. So we're significantly down from the 50-week moving average. We're also, from a fear and greed perspective, at extreme fear levels. In fact, Michael Nadeau pointed this out on his report this week. It's actually worse from a fear and greed perspective than any time during the early bull of 2023. Okay. Extreme fear right now. That's what sentiment is reading as well.
--:-- You put these charts together. Is this Bitcoin and the 50 week, is that the top blue line, the 50 week and the...
--:-- Ryan: Yeah, that's exactly right. And this chart goes all the way back to like 2023. So this is a pretty zoomed out chart. I also gave you one that's a little bit more zoomed in. The 200 week and the 50 week are just collapsing in on themselves. So the 200 week moving average, which is just the grand bull market support. The only time we've meaningfully broke down before that was just the massive contagion of 2023. And that is currently coming in at $67,000, whereas the 50 weeks at $75,000. And so pretty narrow band.
--:-- I think the obvious, simple, uninformed thing is like, okay, we broke through the 50 week. We're going to go tag the 200 week moving average again. This is actually something like Ben Cowan was saying back in the day. It's like after the midterms or around the midterms, it's we're going to have a really weak Q4. We're going to tag the 200-week moving average. Then we are heading towards him being right. It's just the interesting thing is how small of a window there is between the 50-week and the 200-week. Just a very short, small band between 72K and 68K, or excuse me, 75K and 68K. So... Do we just tag the 200 week and move on? Maybe. Kind of?
--:-- David: What did Ben Cowan say? Because he is, I know he called for a Q4 dump of some type.
--:-- Ryan: He said this, Bitcoin is allergic to Q4 of midterm years. He said this on today, actually November 12th. But he said this before. He also said, I guess a couple of months ago, that he was wrong about the May high. He was wrong about breaking into like a new highs. And so he was pretty moderate in all of his statements. He's not really making these big sweeping claims, but he was wrong about, I had him on the podcast to talk about this. He was wrong about breaking into the new highs that brought Bitcoin above the previous May highs. So we set new highs for the year. He didn't say that, like, I am wrong and I no longer think that we are going to be in the clear post midterms. We could still break down and hit the 200 week moving average. But I was wrong about the May highs.
--:-- His base case was always in Q4 after or around midterms that we would go back to the 200 week moving average, which right now is 67K Bitcoin price. Not his base. It was before we broke through the May highs. And then once we broke through the May highs, he's like, that's no longer my base case. It could totally still happen. And it looks like it totally still happened.
--:-- David: Okay. I mean, we haven't touched it yet. But I'm actually kind of in the camp that we're going to touch the 200-week moving average. This is, you put in another chart in here, and you said it looks like Bitcoin is getting its first ever two red yearly candles in a row. This is yearly candles all the way from 2014? Bitcoin has never done that ever before, where it has gone red two years in a row. I mean, we still have seven weeks left in the year, but it would have to get above like $87,000 by the end of December, which doesn't feel great.
--:-- Ethereum even worse shape down 10% on the week around 2000 so getting close to the 1900 area this is the 200 week and the 50 week moving average I just I wanted some pain more pain in my life David so I asked if you could produce this chart we are below both. The 200-week moving average. By like 15%, I believe. And this is just an ugly chart. This is the last five years of ETH, according to those moving averages as well. We're below both.
--:-- Ryan: I mean... How crazy is it that we started about, we started five years ago. We were about at this price, $2,000-inch dollars, you know, five years ago, coming down into 2022, into 2023. And then we tagged all-time highs. And now we're back at $2,000. We tagged all-time highs in that time.
--:-- David: Well, I'm starting to see some victory laps. It's not just, I mean, ETH is in worse shape, of course, but even Bitcoin. I don't know if you've seen these tweets in your timeline. Interesting chart. Bitcoin has only returned 3% annually over the past five years. Just holding T-bills would have outperformed this. Bitcoin flat. Of course, that captures a moment in time, of course, if you bought Bitcoin, you're kind of a top five years ago. But flat? On a five-year time period, I mean, Bitcoin's whole thing has been hold, right? HODL. And over any, you know, medium to long-term time range, it's always overperformed. In this case, it's not overperformed T-bills, which almost calls into question if the cycles are like no longer apply? And it's always a question we get when technical prices tend to break down below what people would expect. But that's the question that's ringing. Like maybe now it's different. Maybe there's something about you know, AI slurping in all the world's capital, maybe Bitcoin's big growth years are a little bit behind it. Maybe it'll trade a bit more like gold, which is it could be flat for years and years and years and then suddenly get repriced. So this all remains to be seen.
--:-- The bearish take, which unfortunately I somewhat resonate with, is that Bitcoin is becoming fairly priced in dollar terms, kind of in the same way that I kind of think that at, you know, ETH relation to Bitcoin, whereas like it's found some sort of equilibrium and is becoming fairly priced. And the way that that breaks the four-year cycles, the four-year cycles is like, you know, every four years we go up and to the right. And we're just flattening out way sooner than the optimists had in mind. And you can apply that same like pessimism towards ETH BTC towards BTC USD. Whereas we're just hitting some fair value that like this Metcalfe's law growth curve just doesn't really express. And we're falling off the Metcalfe law network effect growth curve for something that like no Bitcoin bull really ever imagined for themselves. And that's what breaks the four-year cycle And to your point, yeah, maybe there's like a 10, 12 year period where Bitcoin is flat and then it jumps up. But that's not really what anyone listening to this podcast or me had in mind for the value of Bitcoin.
--:-- Ryan: Can I remind you of something, though?
--:-- Ryan: The number one rule of crypto, right? Every time you want to fade the cycle. The number one rule is don't fade the cycle. All right? Yeah. How many times do we have to hear that before we actually, before it actually sinks in, we stop fading the cycle? It's times like this when we want to fade the cycle, but it is always historically held. And I think it could hold today. Maybe sometime in the 400 week moving average, maybe 200 week moving average, maybe we go below that for some period of time. But like. I don't know if you should fade the cycle, David. I think that's a mistake.
--:-- David: Yeah, I take that point. The four-year cycle, the nature of it is squishy. Like, it hasn't held perfectly, but it hasn't not held to the point where it has been invalidated. And so I still remain that we are in this kind of, like, gray area middle ground where... The four-year cycle hasn't perfectly played out in the way that it would have been predicted. It's been way softer. The four-year cycle is showing like at first it goes up and then it goes down. It's softened up for Bitcoin, but it's largely held up. It has not held up for ETH, to your point.
--:-- And like here's another chart that is completely different than any four-year cycle. It's the Zcash chart.
--:-- Ryan: Yeah, that's a different chart. And it's just like... Flat, flat, flat, flat, flat, nothing. And then sometime in late 2025, 2026, we get a massive repricing. And Zcash shoots back up. And above both, it's 50-week and it's 200-week moving average by quite a healthy amount. The 50-week and the 200-week moving average just are coming into relevancy for the first time in Zcash's history in a long time.
--:-- David: Yeah, really. What is the 50-week moving average?
--:-- Ryan: Right now it's at $600. And so if you are viewing TA as you look at Zcash, you're kind of thinking, let me buy Zcash at $750, which hurts my soul to say. But if Bitcoin's going to tag its 200-week, I think Zcash can fairly tag its 50-week moving average.
--:-- David: Well, we talked about Ben Cowan, who has always foreseen this, and he thinks maybe somewhere in the 200-week moving average is where we end up this quarter. Michael Nadeau, he was a bit of a mea culpa on the week. He thought the 50-week moving average, 76, would hold. It didn't. Now he thinks we could see a dip below, but a bounce back up, particularly if AI recovers. But he does think we'll stay likely above the 200-week moving average. Though, if we dip below that, that's a fat pitch opportunity. He does not think we will break to new lows, which would be 58K Bitcoin again. June 30th is when we hit that. If we go below 58K, in his words, that's like it breaks the model. It breaks his kind of like four-year cycle. The four-year cycle is actually in a binary way.
--:-- David: Yeah, then he's, I don't know if he's panicking, but it would be uncharted territory. So that's his prediction.
--:-- I will say, if you look back in history, 2019 and 2020, we were in the early bull period, but we broke the 50-week moving average twice during that time. So one in 2019, barely, like a week or two, and then we reclaimed it. And the other was March 2020 with COVID, which was just a, you know, something, a black swan event in the entire crypto market.
--:-- Ryan: Yeah, well, so was Liberation Day. Liberation Day was black swan. So was Jensen Huang getting fired.
--:-- David: There you go. So it's, you know, unprecedented. It does have some precedent. And we didn't at those times break the 200-week moving average in this early bull period.
--:-- Alex, can I tell you who's been the real winners of this last like phase of the market, the 2026 phase of the market where you and I have talked about, A, is the cycle broken or not? Are we going to go down to the 200 week or not? What are we? Winners. Who are the real winners? The people who have weekly Bitcoin buys set up and haven't listened to us talk about where Bitcoin is in the market, those people are just absolutely winning right now. Because their average buy price is pretty low, is pretty good. And timing where Bitcoin is in relation to the 4C-recycle has not been helpful. And so if you are just a silent DCA or listening to this podcast, congratulations. You're the big winner here. Nice job.
--:-- Ryan: I think so. I mean, I think that's true. So long as, you know, crypto does have a period of overperformance in 2027, 2028. Only in the case that Bitcoin actually does outperform.
--:-- David: Alex Thorne, his take, and this is sort of the galaxy take, is that it's okay to break below the 50 week, but we're on a shot clock. So as long as we're not below the 50 week for like a month or more, if we're below that for a month or more, that sort of breaks down his thesis on, you know, the early bull cycle. So, Those are all the takes. I do think the vibes are definitely broken. You know, at this point in time, the sentiment is broken, even if we do recover. So it remains to be seen how far we'll be hanging here.
--:-- We are increasingly correlated. If we hang around below the 50-week moving average for about one month, the 200-week moving average moves above $70,000. And Bitcoin right now is at $71,500. So you can see kind of this inflection point coming at the end of this year, that something's got to give. So Bitcoin's going somewhere.
--:-- We got more to discuss. Not the best week for Vitalik to come out and say ETH is money, but he did. He said ETH is money. It only took 11 years. Is that bullish? We'll talk about that. Also, talk about Phylax. Maybe they just launched the Cloudflare of Ethereum. It's a really interesting solution. So we'll get to all that and more. But before we do, let's thank the sponsors that made this possible.
--:-- [Sponsor break for Zcash]
--:-- Ryan: Your checking account isn't public, so why should your crypto be? As AI gets more powerful, your privacy gets weaker. Connecting your identity to your financial history on chain or off is the easiest it's ever been and will only get easier from here. Every data breach adds another piece to the puzzle And every public transaction leaves a trail back to you. And when your wealth is visible, you become a target. Money that can be seen can be stolen. Being in control of your money should include controlling who sees what you do with it.
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--:-- [Sponsor break for Near]
--:-- David: I've been trading crypto for almost a decade, and I've used so many different wallets, exchanges, aggregators, or front ends, and I'm basically always looking for the same thing, just one interface with a deep liquidity across a bunch of chains and assets where I can access markets like perps, earn yield, trade confidentially, and still control all of my funds. And I've never really found it. And I'm just always switching wallets, juggling gas fees, or getting eaten by slippage.
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--:-- [Discussion resumes]
--:-- David: Vitalik Buterin posted a thread on Twitter, expanding on why I believe ETH as a store of value makes much more sense to focus on than ETH as a fee-burning token. He goes on, he states, three primary reasons. Actually, I think his talk here at DevCon sums it up even better than this tweet. So let's hear him now.
--:-- Vitalik Buterin: Oh, is that Vitalik? I couldn't tell. It's like people ask, you know, like, what is the point of ETH, right? And for a long time, there have been these arguments about, like, is ETH like a token that collects fees or is ETH a store of value? And I mean, I've kind of been open-minded to both for a long time, but I think I've been drifting more and more. And I think, like, this week I'm basically decided, like, ETH is a store of value, and sort of, you know, ETH is money, TM, like, basically is it, right?
--:-- And the reason why is basically because, like, the thing that you optimize for in both worlds is really different, right? Like, if you optimize for having a market cap based on collecting fees, then essentially you're being a corporation. And if you look at what winning real corporations do, like, they... have very, very activist forms of governance. They definitely do not try to figure out big, detailed sets of norms that constrain them for long periods of time. I mean, if they did originally, they often try to wriggle their way out of them. They spend single-digit percentage points of their market cap trying to grow themselves every year. They do a lot of things that are just not compatible with being the type of project that Ethereum is.
--:-- Interviewer: Isn't that an extreme example in the sense that I feel like the answer is more of a gray zone, right? So I used to think this. Maybe one quick kind of question. So is the message here... or rather is the thing that you're trying to say that you don't know which camp you're on, or do you think there's a third other way that has slightly different trade-offs and you're trying to figure out what that will be?
--:-- Vitalik Buterin: I think on specifically the question of ETH the asset, I actually feel like I do know what camp I'm on. I'm on the camp that the pragmatic personal reason, so kind of the financial reason to hold ETH is that ETH is money, right?
--:-- David: There you go, David. The pragmatic reason to hold ETH is that ETH is money. He said for a long time, there've been arguments about ETH. Is it a store of value? Is it something to collect fees?
--:-- David: He said this week he decided ETH is a store of value. ETH is money. 11 years since Ethereum went to mainnet. Now Vitalik is on the "ETH is money" camp side of things.
--:-- I think the big elephant in the room was that it would have been better to have had this sort of leadership back when the market was listening and more people cared about it. But to me, this has been mostly a settled conversation for a long time now. And... it's just too little, too late.
--:-- Ryan: Well, you were the guy in 2019. This is the first time actually that I saw Vitalik directly asked whether to eat this money. And this is you in 2019, David, at a conference in Israel, I think, asking Vitalik if he eats this money.
--:-- David: Yeah, this is the Ethereal Conference in Tel Aviv. This is actually the same conference that I made the triple point asset presentation. This was the same conference, debuted triple point asset. And earlier, the context here is Vitalik is doing a Q&A with Joseph Lubin. And earlier in this conversation, Vitalik mentioned something to the effect of, "Oh, and Bitcoin kind of fills the role of money in this ecosystem," and blah, blah, blah, blah, blah. And then me listening in the audience perked up. And I was like, "Whoa, whoa, whoa, whoa, whoa. ETH can also do that." And so when they open up the Q&A session, I get in line to grab the microphone to ask this question to Vitalik.
--:-- [Audio clip of David Hoffman from 2019 plays]
--:-- David Hoffman (2019): Here he is, early Ethereum bull, David Hoffman. This subject was briefly touched on in your guys' talk a second ago, the concept of Ethereum as a platform for non-money applications. And Vitalik, you seemed ready to hand off the role of money to Bitcoin. I believe there's a growing population inside the Ethereum ecosystem, one I identify in as the camp of ETH as money. And I would contend that a proof-of-stake smart contracting platform can actually emulate money far better than a proof of work hard cap money. And I was wondering if you actually do think that Ether could be a global permissionless store of value asset that would be most functional.
--:-- Vitalik Buterin (2019): Ether absolutely can be money if the community wants it to be.
--:-- [End of audio clip]
--:-- David: There you go. That was the most Vitalik said about Ether being money. "It can be money if the community wants it to be." He's been largely silent on ETH the asset. I think there have been other times I've seen him post or comment on Twitter about this. DC investor at one point asked him about this and Vitalik replied, "If I did not believe ETH as a store of value, I would not hold 90% of my net worth in it." That was 2024. There was a reply to a tweet I said where I was like, "Things I'd love to hear, quiet part out loud, is for Vitalik to say ETH is a store of value." Vitalik replied to this tweet, "ETH is a store of value in one of the most important apps on Ethereum."
--:-- Every time he said this, though, it's been almost tongue in cheek, right? It seems like he said it after being dragged kicking and screaming by the ETH community to say the obvious good thing.
--:-- Ryan: Yeah, and it's almost like we're like, "Say the thing." And so he's like, "The thing." You know, that was his answer. It wasn't like his heart wasn't behind it. It didn't seem like he actually believed it. And indeed, in this conversation we just listened to, the video, he said this week was the first time he actually decided. And that's pretty consistent with what I've seen from Vitalik. It seemed like he was always very lukewarm on it, very undecided. Well, now he's decided, David. ETH is a store of value in his mind.
--:-- David: One of the broad complaints I have about Vitalik's leadership is that he doesn't really want to do the hard thing. And I totally understand that. The hard thing of making Ethereum market-relevant, market-dominant, having growth to it. One of his arguments is that optimizing for fee burn makes Ethereum act like a corporation. Active governance, revenue chasing, higher gas, value capture and therefore value extraction. Right. And in my opinion, we should be doing those things. Like Ethereum, the Ethereum economy should be growing. The point of a smart contract system is to have an economy built on top of it. And so if he doesn't want to take on that responsibility, somebody should for the good of Ethereum. But Ether as an asset, he's saying is like, okay, let's just do the store of value thing. Great. Okay. We can agree with that.
--:-- The way that Vitalik has been a leader, if he's not going to do the being a leader for the growth of the Ethereum economy, the way he has been a leader is writing all of these thought piece blog posts about the possible futures of Ethereum, like legitimacy and how that relates to blockchains. And the way that we're getting this ETH as an asset topic out of him finally is A, regurgitating things that people have already said. So other people have already been doing the thought leadership. And B, he's doing it as a Twitter thread or in a Q&A at DevCon, whereas all of his previous leadership for Ethereum has been as the chief blog post officer. Why couldn't he have been a little bit more on the ball and doing what he likes to do, which is write blogs about Ether, the asset, back in a time in which other people weren't already having this conversation first?
--:-- Yeah. Is this fair or is once again my frustration towards Vitalik and Ethereum and all of the years I spent dedicated to it coming out?
--:-- Ryan: I think you've got a little bit of frustration of all the years you spent. So there's definitely something that's a little personal there. But I don't disagree with much of what you said. The one point I probably disagree a little bit about is I don't actually think, I think his point that ETH shouldn't be valued based on fee burn or fees and it shouldn't optimize for that is totally valid. I think ETH should have always optimized for the asset to be a store of value. And the fee burn thing is just not really relevant to that in the same way it's not relevant to Bitcoin. But that aside, I do agree. The question is, he could have always said this. Why did it take so long? I mean, it's been 11 years, seven. Seven years since that was the first documented time.
--:-- David: Right. And I think we made the point that the crOss roadmap, everything that Ethereum has been pointing to has just only made sense. Even Dankrad made this point when he left the Ethereum Foundation. The strategy, the whole roadmap, the technical, everything only makes sense if Ether is a store value asset. That's the reason you actually want crOss for the rest of the Ethereum chain. So we've always pointed this direction. Why not just say it? Because that would be fantastic leadership to have the community and the ecosystem and the investors all rally around that. Now the problem is, I don't know if it's too little, too late, but it does feel like it's late. You've lost a lot of folks in the process of this.
--:-- Ryan: Could you have imagined this thread from Vitalik going live? Imagine if you wrote this in 2021.
--:-- David: Yeah. It would have been global news. The mainstream media would say, "Vitalik Buterin, founder of Ethereum, thinks that ETH is the new money for the internet." And we would have been able to lock in a lot of progress that has ultimately been traded for just a lot of gnashing of teeth and pain from the Ethereum community about trying to get both Ethereum as a whole and Vitalik to this point.
--:-- Ryan: I mean, on the plus side, now Vitalik's on board, which is nice.
--:-- David: This has always been the plan, always been the inevitability. Tom Lee thinks that's bullish. "ETH is a store of value. Vitalik said it. Breaking Tom Lee thinks it's bullish. ETH is playing the biggest game, which is the store of value game. That's ETH's copywriter." Now it's kind of out there. Gabe Shapiro says, "This is a nature is healing moment." So Dan Held, a notorious Bitcoin maximalist, said, "ETH trying to pivot to Bitcoin's store of value narrative yet again. As predicted, narrative collapses." That's not a productive take. He's very bearish on this. Tulip King says, "This is an admission of how bad the prospects for ETH the asset are. Vitalik is right to want Ethereum to be a store of value because it doesn't make sense as a fee generating asset." So saying that this is an act of desperation are all of these various takes.
--:-- My take is that this is just Vitalik finally saying the quiet part out loud. It would have been great if this happened about five years earlier, but better late than never. And it does align with crOss and the roadmap and quantum resistant money and all of these other things. So I guess it's locally bullish from that perspective.
--:-- Ryan: Does it feel like it's coming from a place of strength or a place of weakness?
--:-- David: Yeah, it's not great timing. I will acknowledge that. I will definitely acknowledge that.
--:-- That's not the only news out of Ethereum land. We also have the seppuku clause to talk about. So the TLDR of the news here is that an ex-EF employee, there was a bunch of layoffs and downsizing a while ago. One of the employees that was let go during this downsizing is suing the Ethereum Foundation for firing her a single digit number of days after she informed them that she had been diagnosed with cancer. One of the reasons for why she is suing the EF was this seppuku clause in the EF mandate, which the EF required everyone to sign or else they would be requested to leave. And so the claim is that she was coerced to sign this clause and then they fired her along with a bunch of other people anyways.
--:-- Ryan: Seppuku, of course, stabbing herself in the stomach with a Japanese tradition of committing suicide because you have done something dishonorable.
--:-- David: Yes, and so there was this whole seppuku clause in the mandate, which again, the EF employees were required to sign, the suicide pledge, if you will. It's tongue-in-cheek, let's just say. No one was actually serious about this. It was in bad taste, but the Ethereum Foundation was not asking employees to literally commit suicide if they didn't honor this.
--:-- Can we put the seppuku clause on the screen? Okay. Is this it? Yeah, that one. Yeah. So there were two versions of the mandate. The picture that we are seeing is in the second version. The first version of the mandate had all of the text that you see here actually written into the document. And then after an immense amount of feedback where a number of EF employees all kind of agreed that they don't want to sign a document that has a seppuku clause in it, the mandate was edited to have, instead of the actual text in there, a graphic that contained all the same text. And so the text remains, but now it's a graphic. And so, again, tongue in cheek is this weird anime style that was persistent all across the mandate. I'll just say that. This is my own take, but I don't think this is good taste at all.
--:-- Ryan: It's not good taste, and especially when all of the EF employees were like, "Hey, 70 of us all signed this thing saying, hey, we don't really want this in the document. Please remove it." And then they didn't remove it, and they just put it back in a different way.
--:-- David: Ultimately, what happened was that the unaligned people who didn't really agree with the mandate were asked to leave the Ethereum Foundation. So there was a downsizing of the Ethereum Foundation more or less along the political lines of, "Do you agree with the mandate or do you not?" One of the employees was this individual who's now suing the EF because she informed them that she had just been diagnosed with cancer. But now a lot of the drama around the details of how this whole thing shook out has opened it up again.
--:-- Ryan: Yeah, it's opened it up again. I do feel like there's an element of, this is some old news here. It's just been kind of reopened, right? So EF restructuring and management issues have already been known. And I guess on the face of it, I think having employees at an institution sign something which is just like, "Hey, this is what we believe and you kind of have to believe this in order to work here," is fine. But again, the suicide pact kind of clause is just bad taste. Rolling it out in the way that they did, forcing everyone to sign it in this way, probably not a great implementation of it.
--:-- But Hasu made the point that the end result was actually not too bad. He said this: "In the absence of other information, always judge a plan by its outcomes. Say what you want about the mandate. It was successful in three ways. One, executing a badly necessary downsizing at the EF. EF needed to be downsized. Two, purging unwanted political elements. So people who didn't believe that this whole project is about crOss. And three, increasing ecosystem diversity at the time." What he means is we got things like ETH Labs, which spawned and is doing a fantastic job of guiding and shepherding Ethereum outside of the Ethereum Foundation. So the end result was actually somewhat bullish, even if the implementation of this was ham-fisted and avoidable and a bit of an own goal from the Ethereum Foundation.
--:-- David: Yeah, I agree with the idea of, okay, judge a plan by the outcome here. One of the outcomes that I think needs to be included is everyone I talk to, which is absolutely not everyone at the EF, but the people that I talk to at the EF, is like, "Yeah, morale is just really bad." And that's an outcome of a lack of faith and trust in leadership being who they wanted them to be.
--:-- Ryan: Sure, sure. But how's morale at ETH Labs?
--:-- David: Yeah. I bet they feel more free to do things for Ethereum than they ever have.
--:-- Ryan: I think morale at ETH Labs is better than morale at the Ethereum Foundation.
--:-- David: I take that point. I take that point.
--:-- All right, we're going to talk about a bullish development inside of the Ethereum world. This is the Phylax and Titan Builder collaboration that got announced last week. But first, before we talk about why I'm excited for that and what Ryan's takes are, first, we're going to talk to these sponsors that make this show possible.
--:-- [Sponsor break for Ripio]
--:-- [Sponsor break for The DeFi Report podcast]
--:-- David: So as the recent Binance hack has shown, the uncensorable, immutable, irreversible transactions on crypto are as much of a problem as they are one of the reasons why we are here in the first place. It's a bug and a feature. Ethereum is a bug and a feature. The uncensorability and immutability of Ethereum is awesome. These are the properties that also have allowed North Korea to steal five, tens of billions of dollars from smart contract exploits.
--:-- So the big question is, how does DeFi prevent malicious transactions inside of a context of instant immutable settlement where we can't reverse transactions that are approved by code, but those same transactions were not really intended by the DeFi developers that wrote that code in the first place? So how do we do this? How do we have our immutable code while not giving North Korea its money?
--:-- And the answer is coming out of Phylax Systems, which is an Ethereum security solution. It's a startup that has been working on Linea and a few other Layer 2s through a partnership with Titan Builder. And Titan Builder is the largest block builder on Ethereum. Like 50% of all Ethereum blocks are produced by Titan Builder. And Phylax's what they do, how it works is they build circuit breakers, app-defined circuit breakers so that all transactions have to follow these rules of these circuit breakers. And those rules are written outside of the actual smart contract that's on the Ethereum layer one, but is nonetheless implemented by Titan Builder. And so it is an integration of the block building side of Ethereum and also the app level rules of transactions.
--:-- So for example, one transaction could be a vault can't pay out more than 50% of its AUM inside of one transaction. And that is actually enforced at the block building level with Titan. So if it breaks that rule, then what happens? The block just doesn't get executed or the contract reverts on the application layer?
--:-- Ryan: The contract reverts. So the transaction happens and it is reverted. And so it's a failed transaction that is executed. Does that make sense?
--:-- David: It does. And because this is at the builder level, this is Ethereum-wide, right? It's Ethereum-wide rule set that apps can opt into and set their own rules. So this would stop an event. Let's say Aave implemented something like this, right? But you said vault not paying 50% of its AUM in one transaction or something to this effect, and they had that rule, then if North Korea found a hack, a smart contract bug in Aave, tried to execute that, the contract would revert. The transaction wouldn't go through and that would be enforced at the block builder level because it breached this rule. Is that correct?
--:-- Ryan: Yes. And the way it's an opt-in platform. So Aave, as just an example, Aave hasn't opted into this, but I would be interested in seeing them think about it, is that they work with Phylax, who's working with Titan Builder, and Aave would then give Titan Builder, the Ethereum block builder, this privileged position of reverting transactions that are not approved in this extra transaction rule set. And so what that does is that if an Ethereum block is produced outside of Titan Builder, these extra rules still apply. And I think maybe this works. I'm going to get Odysseus on the podcast to talk about this. I think maybe this works is that if a block is produced not by Titan Builder, then Aave actually has downtime in that example because they only can land transactions if the integrated block builder or anyone who integrates with Phylax is part of this whole system.
--:-- David: Yeah, I see. What's cool about it, and this is the reason I was kind of comparing it to Cloudflare, is it's very much opt-in, but it also sort of operates as a security shield, or like the wall in Game of Thrones. I don't like the wall against the White Walkers, all of the attackers, right? It's a way to protect all of the apps inside of this enclosure.
--:-- But the big question I had is, this gets implemented through a centralization vector, which is block builders, right? Titan builder. There's a small group of builders that maybe have the ability to start censoring things. And there was an Ethereum improvement that is scheduled for a future hard fork. It was originally scheduled for next year called Fossil. Do you remember this? This is an upcoming Ethereum block upgrade that forces block builders to include transactions. So they don't have the ability to opt out. They actually have to. Block builders can't censor anyone. This is a forced inclusion type of rule.
--:-- So what I was trying to understand is how Fossil interacts with this Phylax solution, right? Because Fossil is saying, block builders like Titan can't keep your transaction out of a block, whereas Phylax is saying apps can create rules that have some of these transactions fail inside. How do these two things get straddled? Because it seems like a conflict, right? Ethereum wants to be, at the protocol level, censorship resistant and fully immutable, but the apps don't want North Korea to be able to hack them and steal the funds. So how are these two things reconciled?
--:-- Ryan: So Fossil has the power to force a transaction into the block. But nonetheless, the block builder and the app have the power to make that transaction fail. So the transaction is included and it fails.
--:-- David: Huh. And so it's kind of a thumb war between Fossil and app layer. This is application-specific sequencing. This is something very similar to that, which had its own discussion on Twitter a couple years ago. So this just gives the app a thumb war over what gets included versus the Ethereum protocol. So the transaction does land. Fossil will do the job it promises to do, which is make sure that your transaction does not get ignored by the block builders. And the block builder, Titan builder, will be like, "Hi, I see your transaction. And according to the rules of Fossil, I'm including it. And also, by the way, it fails."
--:-- Ryan: This is kind of why I like it and kind of why I think it's interesting. It's a very good kind of balance of powers and separation of powers, right? So because it is true that apps could always block lists, like block certain transactions. You can put a whitelist on a smart contract and say only this address can interact with this contract. And that's censorship. And that's part of the rules. And so Ethereum still at the protocol layer can't censor you, but an app still could. And I guess they could. If they choose to opt into the system. But this just makes it more scalable, I suppose. And so you could imagine a world where the only apps on Ethereum are just apps that have some sort of censorship.
--:-- David: The worry you could have is that the CIA owns Odysseus' company, and also they go knocking on the door of Titan Builder, and they force everyone to opt into these things, and now the CIA controls. But still, what they're opting into right now is just rules, right? I guess in your scenario, they'd have to opt into some CIA rulebook, which says no, unless you're validated from the CIA database. This is a centralization vector.
--:-- Ryan: Right. Yeah, Gabe Shapiro's take is that this could be bullish if implemented correctly. If it's not implemented correctly, it could be a censorship vector. Martin from Gnosis says he's still undecided how much this makes sense for Ethereum, but it 100% makes sense for rollups. And in fact, Phylax has already been deployed across some rollups, like the Linea rollup. I think it's on, is it Derive? Is Lighter going to use them?
--:-- David: Yes. So with this announcement, they started with, they've been working with Linea for forever. And so that's been their test bed. Now they are on the Ethereum mainnet in 50% of blocks, which is just a huge expansion of Phylax's TAM. And then they are also working with LIDR and also working with Derive as well. So landing some of the biggest projects in Ethereum too.
--:-- Ryan: I'm cautious, but I'm definitely optimistic on this approach. I think it preserves...
--:-- David: I am bullish. I am bullish. Because if you tell me it's like, okay, between the tension between growth and product market fit for DeFi versus making compromises on our cypherpunk values, admittedly, this makes a modicum of a compromise on our cypherpunk values in the way I kind of said. The tradeoff that you get is protection against DeFi exploits, which... I don't think it's the fact that we have compromised too much on our cypherpunk values that is the reason why we have not grown into a larger market share as an industry. The North Korea stealing fives of billions of dollars is actually a much larger reason why crypto has become less relevant in the market. And so I am phenomenally okay with making this compromise, which I consider to be a small, tiny, less relevant compromise on cypherpunk values so that we can stop getting hacked.
--:-- There's some news out of the CFTC this week that's pretty relevant for crypto. What is it, David?
--:-- David: So perpetual futures on individual equity securities can now begin trading. If you are a CFTC registered DCM and DCO, and then you are also notice registered with the SEC as a national securities exchange. You might ask the question, okay, who are these people? It's Coinbase, Kraken, Kalshi, and then one more. One long tail exchange that I don't really know.
--:-- Ryan: You're not like a Hyperliquid or a Lighter?
--:-- David: No, no. Hyperliquid is not a registered DCM. Can they become one? Or is that... They would need an onshore US legal entity.
--:-- Ryan: I see. This is about onshoring equity perps. And then you also need to have a notice filing with the SEC. NADX... which is also zero g.com. I don't think anyone's heard of those, but there's four of these that are registered with the CFTC that are also on notice with the SEC that are now allowed to issue equity perpetual instruments. And so these are onshore U.S.-compliant equity instruments. Kalshi already launched theirs. So a couple of days after, Kalshi announced that they launched their perps with the CFTC approval. I would expect Coinbase to not be far along if they haven't even launched these already. But basically, this is U.S. onshore regulated equity perpetuals, which I think is pretty cool. People love perps and I think they're really interesting products.
--:-- David: But is the commodities exchange, the CME, trying to slow this down as well?
--:-- Ryan: Yeah, the Capital Markets Alliance Association, think of these like the commodities exchanges like the CBOE and the CME and also Citadel Securities, is suing the CFTC in court trying to block stuff like this from happening, specifically this, and also just on-shoring perps.
--:-- David: This feels very reminiscent to the banks freaking out about being behind the ball here, not on the ball. And so they're trying to slow down progress.
--:-- Ryan: Yeah. Coinbase, Kalshi, Kraken, DRW and Jump Trading, which are, it's the same thing. It's the trad commodities markets with the trad market makers, Citadel Securities, going against the new exchanges and the new market makers who are in support of this whole thing. So it feels like a very microcosm of the same fight that we had with the banks, although much smaller. I don't think this is going to escalate that much. But nonetheless, we're going to court. I think perpetuals will prevail though. And it seems like a crypto-friendly CFTC will get this approved. I don't know if the CME and others can stop them.
--:-- Last thing, David, you had to note that the IRS is maybe coming for crypto traders. I saw you retweeted this post. This is from a crypto tax expert. "Six weeks ago, I warned that the IRS was dramatically increasing the number of Letter 6174 notices being sent to crypto traders." So all of these letters are going out. Apparently, these are voluntary compliance letters. So if you get one of these letters, it means the IRS has information about your cryptocurrency activity and wants you to review whether you've met your tax reporting obligations. It's not an audit, but they're sending these letters to crypto traders just saying, "Hey, we have eyes on what you're doing. And you better double check your work."
--:-- David: I do think that AI has got to be a boon to the IRS and their ability to just see what's going on across taxpayers and identify those that are not filing correctly or paying their taxes correctly. So I would anticipate a competent IRS would have an uptick in this type of thing.
--:-- Ryan: Yeah. Another reminder. A competent IRS. There's a big amount of load on that "competent" word.
--:-- David: Yeah, but all you need is kind of Claude to be competent, right?
--:-- David: And then you just— I was talking to Justin Slaughter about the Democrats in the midterms, and he was talking to me about how members of Congress got access to Claude for the first time ever in October. And the AI tooling that they had before that was from Microsoft Teams, which you can imagine does not hold a candle to Claude. The co-pilot sector.
--:-- Ryan: I think we have to remember that the public sector's access to AI tools is significantly behind the timeline in terms of the public sector's access.
--:-- David: That's true. That's true. But they are getting better.
--:-- Ryan: So just a reminder, if you're in crypto, keep on top of your taxes. I'm the guy to remind you of that. Although, David, you've been pretty good on this too lately. I mean, you're...
--:-- David: Yeah, because I pay somebody else to do it for me. But also I want to stress that the point of this PSA is that they do not require a response. And this person, this tax attorney who's tweeting this out, is like, this is kind of a scare tactic. I hope your taxes are in order and it's our advice that your taxes are in order. You getting a letter 6174 does not mean that they are out of order or require you to respond. It can kind of be considered a scare tactic, although your taxes should be in order.
--:-- Ryan: Yeah. I'm always scared of the IRS. I just like in a perpetual state of...
--:-- David: Yeah. Very scary.
--:-- Ryan: All right, Bankless Nation, we will see you in one week. One week from today, hopefully Bitcoin is at a higher price from where it is now. But until then, crypto is risky. You can lose what you put in. This is the frontier. It's not for everyone, and we're glad you're with us on the Bankless journey. Thanks a lot.
