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Speaker A: I think that we will look back and see the reason for why we had a bull market in 2024 and 2025.

Speaker B: What's that reason?

Speaker A: Layer twos base coinbase specifically putting all of its marketing and weight behind a base. Layer two because they are, like I said, printing money on it. But they are going to take Ethereum, layer two specifically base, because they now have the incentive they are going to take it mainstream.

Speaker B: Bankless nation. It is the second Friday, Friday of August. David, what time is it?

Speaker A: Ryan? It's the bankless Friday weekly roll up where we cover the entire weekly news in crypto, which is always an ambitious endeavor, yet we persevere nonetheless into the frontier. How are you doing this week, my man?

Speaker B: I'm doing great, man. I've got my coffee, I've got our stable coins going. Some big news this week. PayPal launched a stable coin on Ethereum. I think that's a big freaking deal.

Speaker A: And we got to talk about that.

Speaker B: Yeah, what else are we talking about?

Speaker A: Base gets dropped with already $105 million in total value locked, kicking off on chain summer. Coinbase just putting all of their weight behind the base launch. And so we're going to talk about all those details and more and then something out of arbitrum. Tell us about arbitrum.

Speaker B: Yeah, they got a little bit more decentralized. At least they're preparing to. So we got to cover that with their bold new proposal. David, do you like that one? Bold.

Speaker A: You did it in the show. You can't keep on doing it.

Speaker B: I can keep doing it. This is a different show. I get one per show also. You hit me last time. Whatever. Let's move on. Polygon and Zksync, they are throwing some punches back and forth, at least on Twitter. We got to talk about that. There's been some wallet ux breakthroughs. I feel like recently this is making me pretty bullish. So we'll talk about that. The SEC isn't done yet. They are striking back. And lastly, David, is Joe Biden a bitcoiner?

Speaker A: What words I never thought I'd see written.

Speaker B: We'll talk about that too. Before we get in, we've got a message from our friends and sponsors. What's cracking, my friend? Open up the cracking charts. Yeah, it's become a thing. I'm doing it. Let's see what's cracking with bitcoin USD on the price charts.

Speaker A: Well, nothing is cracking, Ryan, because we're only up half a percent. 929 thousand, 300 ending at 29,400. $100 in bitcoin. It's not much.

Speaker B: Are you bored?

Speaker A: You know, the thing is, like, I would be bored except for how incredibly good the news cycle is. Like the innovations like it is, there is a huge decoupling disconnect between what is going on with announcements and innovation and the foundations, the fundamentals, if you will, and the actual prices. And so people are getting frustrated about, like, PayPal. They just dropped a stable coin on Ethereum, and it didn't even move the price.

Speaker B: Well, let's do that.

Speaker A: Don't be frustrated by that. That is alpha.

Speaker B: Let's look at it. No price movement here. This is the no price on the week. What are we at? Are we flat?

Speaker A: 1840, $3 to 18. $50. We went up $7. What?

Speaker B: It's flatter than a pancake. I used that.

Speaker A: Yeah, a sheet of paper.

Speaker B: That's how flat we are on the. On the week.

Speaker A: Don't even ask me about the ratio. It's flat.

Speaker B: Next you're gonna tell me the global.

Speaker A: Cryptocurrency market was last is $1.2 trillion. You know what's not flat, though? Two things.

Speaker B: Yes.

Speaker A: Layer two TvL and layer two scaling factor is up.

Speaker B: So we get to cover these in our market section every week from now on.

Speaker A: We have added this to the template layer, like total value locked on layer twos coming in at $10.57 billion, working through that 10 billion mount.

Speaker B: So because we are adding something to the template, David, I feel like we have to explain these metrics. First time bankless nation, you only get this one time explanation, and then every.

Speaker A: Single time, you're expected to know it.

Speaker B: You're expected to know it. So what is total value locked in layer two? Why are we looking at this chart on a weekly basis? Forever and more?

Speaker A: Yeah, TVL, kind of the same thing as AUM assets under management. It's just like, what is the total market cap of assets that are deposited onto layer two s? And if you aggregate all of that together on all layer twos on Ethereum, you come up to $10.57 billion. Well, actually, technically, it is flat. It's up half a percent over the last seven days, but it's been incrementally growing for all this entire bear market. The other thing that we're going to look at is scaling factor. So if you hit the activity tab on the right, you see a scaling factor of 4.8 x 4.83 x. That is how many more ethereums all aggregate layer two economic activity is adding. So on layer twos, there are 4.8 ethereums worth of economic activity happening that are settling to the Ethereum layer one, which is one ethereum? Pop quiz, Ryan. How many times larger is the Ethereum layer one in 2023 versus 2015? How many more ethereums is 2023? Ethereum versus 2015? Ethereum?

Speaker B: Are you just talking about kind of like ignore the LGBTQ, ignoring the layer.

Speaker A: Twos, ignore that, just the scalability of the layer one. Because the reason why I'm asking this is I don't actually think people appreciate that the Ethereum layer one also scales. And so that is a shifting number. So when we say there's a scaling factor of 4.8 x layer twos to the layer one, well, the layer one is also growing as well.

Speaker B: I bet the layer one on its own. And these are through primarily client optimization. So the team over at Geth, for example, doing a lot of work to kind of optimize how fast geth can run. And, you know, there's some juice to squeeze there. Versus 2015.

Speaker A: That's great.

Speaker B: I'm going to say three to four x from 2015.

Speaker A: Pretty good. The answer is six x. So Ethereum is better than I thought. Ethereum throughput from 2015 to 2023 is six times larger than it once was. And like you said, this is layer one. Client improvements, networking improvements, just bandwidth, just hardware. As hardware gets better, the Ethereum layer one is actually allowed to increase in scale, conservatively, because that's our philosophy. But over time, the block size, the data throughput of Ethereum has gone about six x from 2015 to 2023. And layer twos are 4.5 x times on top of that. And they are not even at max capacity now.

Speaker B: So we are at like between 24 and 30 x if you multiply that all together.

Speaker A: Yeah, if you compare to 2015. But like 2015 was like primitive, primitive era, stone age, stone ageing crypto.

Speaker B: Yeah, we didn't have much to do on chain, just like so remember PP. I do remember PBIT. All right, but those are the stats we're going to go over on a weekly basis. So scaling factor 4.83 x, remember that number. And assets in locked inside of layer two is $10.5 billion. Well, let's peep it outside of the crypto markets here, David, and go into the traditional markets. Inflation rose 3.2% in July. That's the year over year. And of course, I'm talking about inflation of the dollar. I'm not talking about inflation of ETH because that's deflationary. Of course, this is a small uptick from 3% in June. So it's 3% in June, 3.2%. This commentator is saying this is good news, that inflation rose a modest 0.2% for the month of July alone. That's an encouraging sign that inflation is moderating. So inflation moderating is one of the takes here. This is the stat kind of over time. And this is annualized. So you can kind of see this. Let me look at a different view. See this? This is all the way back from five years ago where we used to be under 2%, around 2%. That's where the Fed likes it. And then of course, Covid cranked us all the way up over to 9% or so, and now we are back down. But there's a little, look at this little bump. Looks like we're going up.

Speaker A: Hey, things go up, things go down. If you teleported me back to the peak of that inflation back when we were at 9% and then you showed me what the future curve would look like, I'd be like, wow, this is good. That's best case scenario, soft landing.

Speaker B: Is that what you see here?

Speaker A: That sounds like successful manipulation of our economy.

Speaker B: Manipulation of our economy, yeah, it's going to be interesting to see. Of course, this is not exactly what the Fed wants, but it's pretty close. We'll see what the August numbers look like. I also think, David, this number is going to get increasingly political. Why? Because the US gets increasingly political during election season, right. Every four years. So we're creeping up to 2024 in a presidential election. So some people are going to say this number is too high. Others are going to say it's too low. What the Fed says is a good question. I think there's also this debate of does money printing actually cause I. Inflation? Because what we're seeing right now is, I don't know if you saw the headlines this week. You know, the US is at a $1.8 trillion budget deficit as fiscal government spending this year, right? So that's a lot of spend going into the economy. All the while the Fed is tightening and some of that spend goes to like interest payments, that kind of thing. So, you know, to be, to be determined on what inflation, where that goes next. One thing I will say is it does seem like asset inflation is continuing to rise, as always. So there you go. Another thing I wanted to mention, this part of the market, David, this is your quarterly reminder that Home Depot, the stock price of Home Depot is actually higher than the total market cap of Ethereum right now. I saw this, apparently I said this back in May because it blew my mind when I was looking at the largest assets by market cap and a theory was trailing Home Depot. I think Home Depot is really good.

Speaker A: Number 29.

Speaker B: I hate Home Depot. Nestle as well. It's below Nestle. It's Merc.

Speaker A: They have a monopoly, so that's. That's adobe.

Speaker B: Yeah.

Speaker A: Bank of America.

Speaker B: All of these things are worth more than ether. Platinum, than ethereum.

Speaker A: Platinum is higher than ethereum. Palladium is higher than ether. Home Depot. At least you need to, like, you know, build houses. People need houses. People don't need palladium. Maybe they do.

Speaker B: Palladium. Palladium, I'm sure has tons of use cases, David. But there's Ethereum, number 50 in terms of the world's largest asset. So we got our ways to go, you know. How are you feeling, though, in this market? You were talking about it a little bit when we were getting into sort of the market section in the intro, and I think for me, I'll answer for me before I ask you, maybe, yeah.

Speaker A: If you hand it off to me, it's gonna be dangerous.

Speaker B: I think for me, we might be entering my favorite part of the market cycle.

Speaker A: Say more?

Speaker B: Yeah, yeah. So things aren't annoying yet, and a lot of the stupidity has been burnt off. Kind of the fraudters and the scammers were sort of found outdevelop. And the market isn't completely irrational. It's still kind of a builder's market, and it's quiet, so we're not getting all the hype and kind of the shilliness. This is sort of the quiet moment where you look at everything that's going on, and you were talking about it earlier in terms of the fundamentals and the news and the building that's going on, and you realize that doesn't match with the price because the price is still under 2000. And you're just like, oh, this is a very obvious trade. This is a very obvious purchase. I feel very comfortable right now. The last time I felt this way was 2020. Before COVID by the way.

Speaker A: I'll say before COVID and after Covid.

Speaker B: Then after Covid, when we realized the world wasn't ending, kind of toward the end of 2020. And that has been consistently my favorite part of the market cycle. Just before things get stupid and you're in this kind of like, oh, we're building. We're doing the right thing. We got hit by us regulators. That's not going to get any worse. At this point, we bottomed on fading. The US regulation coming out of the hole. We're coming out of the hole on all kind of the scams and the frauds and the centralized exchanges and all that crap from 2022. And now it feels like this recovery phase, but it hasn't been a quick recovery, so it's not yet stupid. And I love that part of the market. So I think we'll get some months here, and I'm actually excited about that.

Speaker A: I think what you're saying is we're in this, like, Goldilocks zone in the crypto era where, like, if you were a tourist, if you weren't going to make it through the bear market, you're gone. You're gone by now, anyone who's still left is here for the right reasons and here for the long haul. And we get to see all, like, all the announcements and progression and like I said, fundamental growth of this industry that the rest of the world is not accounting for. And so all of a sudden, like, in the bull market, alpha is hard because everyone is chomping at it. But in the bear market, alpha is easy because there's just not that many people left. This reminds me of a take that I had this week that I tweeted out. So we'll pull it up here. I tweeted out, once upon a time, there was this six month period between the 2018 to 2020 bear market and then the 2021 bull market, where ETH broke $300 and hit 450 for the first time in three years. And multiple times a week, you would see people on crypto Twitter tweet out something like personal news, I'm leaving my job and I'm starting a thing. The entire set of crypto Twitter, we just all knew that it was on, it being the bull market, and that we had made it. And it was just the best time. It was great because you would see all of your friends who were like, you know, had to commit to their nine to five job in order to make it through the bear market. Then all of a sudden have the foundation to go out and build their own venture. I tweeted out one of these tweets right before going for my last job to bankless. And it was this great Goldilocks moment where, like, ether price was appreciating. But there were. It was all us. Everyone was just. It was all us buying rather than, like, necessarily, like, new money because everyone was positioned for it, and so all of the gains were us. And then. And then you realize, because, like, oh, yes, that's because people are about to come in. And then I follow this tweet with like, little did I know the incoming bull market was.

Speaker B: Yeah, totally. I mean. So are you ready for another round of this?

Speaker A: Like, I could use a few more months, but that's what we get. We're at the beginning of that phase.

Speaker B: Yeah, we're going to get some time in the Goldilocks period. Yeah, that's cool. I'm glad that resonates with you too. It just sort of hit me this week. This is how MErP puts it though. If you aren't happy single, you won't be happy in a relationship. True happiness comes from ethereum breaking two k, not from anyone else.

Speaker A: Hey, two k is pretty achievable. We have happiness on the menu.

Speaker B: Yeah, I'm okay under two k though, to be honest. Just keeping the Goldilocks period of time. You know what else is going up though? Dai savings rate is now live, paying out 8% at no additional risk. Hey, that's above t bills. What's the dai savings rate?

Speaker A: David, the dai savings rate is the yield that dai out of makerdao naturally produces. It's one of the core primitives that is part of the Makerdao building blocks we kind of call ether staking the stake. The risk free rate of ethereum. The dai savings rate is just the risk free rate of holding dai. So if you're holding Dai, you can get 8% at no additional risk compared to actually holding Dai. You're not lending it out. It's just part of the protocol. Kind of like in the same way that holding a United States treasury is not really any different from holding dollars. And if you're holding dollars, you might as well turn it into a treasury.

Speaker B: Yeah, you just park it in t bills and it can stay in the DSR. Can it be fungible as well?

Speaker A: Yeah. Yeah. So chai. Chai money.

Speaker B: Oh yeah.

Speaker A: I don't know why they call it chai, but chai is. It's like how there's our eth, or staked eth for ethereum. Chai is the Dai savings rate version of Dai. Why and where is that 8% coming from? It's part of the maker doubt protocol. Gosh, back in my maker dao days I would be able to very fluently explain this, but that was like four years ago. There's just a demand for Dai and it's creating yield.

Speaker B: Yeah, and not everyone is in the die savings rate as well. So that's why the yield is higher than normal. That's what rune reminds us. The rate is so high because there are currently not that many people using die savings rate. Only 8% of DAi holders use DSR currently. So the more holders, the more that goes down. Of course. A reminder that you can access this at Spark protocol, but not if you're american or use a VPN because we live in a financial prison.

Speaker A: VPN users, hands off. Yeah, don't touch VPN. The specific mention of not available for VPN users, I'm pretty sure that's a wink. I'm pretty sure that's a wink right there.

Speaker B: I don't know, we can't interpret that right. But of course the smart contract is uncensorable. It's just people have to screen out on the UI side or else the big bad american government gets mad. With all of your financial access, David, another interesting stat I dug up this week. Did you know that Worldcoin is spending money on Ethereum block space? Well, certainly not.

Speaker A: Just how much?

Speaker B: A little bit. A lot. 500k in the last 40 days. So if you were to annualize that, which we can't exactly do, but if you were to annualize that, that would be $4.5 million in gas fees. And so my take on that is this course the bull take comes out. Companies will need to hoard Eth the same way they hoard other essential commodities. Ethereum block space is the new oil what's really cool to me is something that we've predicted for a long time about Ethereum is companies actually purchasing ether as a right, as access for block space in the future, in the same way that maybe an airline might procure barrels of oil or like futures on oil or something to hedge against future gas price costs. It's very cool to see third parties actually spending on block space and that being a driver of demand rather than just users. And if you're curious about what they're actually spending on, DC builder of course, he is a dev over at Worldcoin. He gives some context here. For context, this is the world id identity manager contract. The biggest costs here are insertions and not Zk proof verifications, which are mostly happening on optimism. So this is the part. The insertions part is happening on Ethereum main chain. Most of the other activity for world Coin is happening on optimism. Anyway, it's interesting to start quantifying that. And, you know, companies actually purchasing block space in this way.

Speaker A: Speaking of companies, Coinbase just released its q two earnings. This is from Ram Alawya, former Bankless podcast guest who says this is the first quarter where reoccurring revenue, for example, USDC income staking and subscriptions exceeded transaction revenue, as in like trading revenue 51% to 49%. So Coin has cut its reoccurring expenses by a whopping 50%, as well as all the layoffs and all that stuff. And they also still rolled out new products like Coinbase wallet and also base. And so inside of the product innovation section, they say we are expanding our focus towards crypto use cases beyond trading. Of course they are. That's been their ever since going public, that has been basically their number one focus as a company is to get away from being dominated by trading fee revenue. And so they've opened up new lines of revenue and it's been working. And so, as an example, of course, base is an investment in blockchain infrastructure where we expect to drive down transaction costs and increase transaction speed. Of course, the point of a layer two, but also a way for base to make Coinbase money. Also stated in the regulation section, we're beginning to see a pathway for bipartisan legislation that could enshrine consumer protections and an equitable market structure framework. Aka, soon the regulatory trials will be over. So it's still pretty early. We are 24 hours into base, but base yesterday generated $213,000 in fees.

Speaker B: Wow.

Speaker A: That is $78 million in annual run rate. 15% of that goes to the optimism collective. Coinbase pockets the rest.

Speaker B: Huh?

Speaker A: Yeah. So, like, brand new business model. Poof. Out of nowhere. Like $70 million in annual run rate for Coinbase because of base. And that is again before the layer two bull market kicks in.

Speaker B: I kind of like that Coinbase is a publicly traded company because then they get to explain how layer twos work to Wall street.

Speaker A: All they got to explain is $70 million.

Speaker B: Yeah. And they're like, that's all I have to say. Wall street analysts are like, wait, you could see that on chain. I don't have to wait for the annual report. Like, oh, wow, okay, that's really cool. I think it'll totally educate them on how to start evaluating crypto protocols and crypto networks.

Speaker A: So remember that, that old website, current website, still running. Mario Anacondi put it together, dyestats.com. it's just like a live audit of makerdao. It's like every, every theory block, it gets updated. Somebody should make that for base. Coinbase should make that for base, base economics. And they can just have this in their investment reports, but they can just link out to it like, hey, are you curious about how much money we are printing in this very current moment on base. You should just go to basestats.org to look at that. And one of the themes I think is happening is that like, Fortune 500 companies are being shown the way to mint their own layer two using the op stack. And that website would go very, very far in helping that narrative.

Speaker B: Yeah, I think so. We can pill Wall street if that's what we want to do. I don't know. I'm still comfortable in the Goldilocks zone of just like, waiting.

Speaker A: That website can be under development for a while.

Speaker B: It'll take them a while to catch on.

Speaker A: Bankless station coming up next, PayPal is dropping a stable coin. Coinbase is dropping the base. There's a layer two summer party and you're all invited. And Bankless is also dropping something big to help you navigate all of it. Coming up next is all of those details. But first, a moment to talk about some of these fantastic sponsors that make this show possible.

Speaker B: PayPal is launching a stable coin on Ethereum. Guys, this is a really big deal deal. It's called Py USD. It's a fully backed us dollar stable coin. It's backed by short term us treasuries and similar cash equivalents. For all intents and purposes, David, this looks to me a lot like USDC. Here's the contract address. This is very cool to see this on Ethereum Live. This is pay. This is PayPal us dollars right here. And you can see some of the activity on Etherscan right now. David, do you think this is as big a deal as I think it is?

Speaker A: Yeah, I mean, I can't imagine why it wouldn't be. It's just like, well, it's just another USDC clone, but it just indicates that, hey, perhaps the market doesn't think that the stable coin market is saturated. Like we can enter the game with further stable coins. PayPal USD $27 million market cap at the current time of recording. Twelve holders. Twelve total holders. I don't think it's actually like live in the app yet. But hey, we have a contract address and we're watching 182 transfers going around in this very moment. I mean, PayPal has weight, PayPal has size in terms of users and demand. We don't know the TVL of PayPal, but there is a number of PayPal somewhere.

Speaker B: Well, there is. I mean, when we had Jose on and the public stats are 450 million active user accounts on PayPal. And think about the significance of this too. PayPal really pioneered payments on the Internet in the web 1.0 days before web 2.0. Right. And so now here they are in crypto innovating on this front and doing this first, this is issued by Paxos. It's kind of the, you know, the bank machine behind it.

Speaker A: Paxos. Who are they? Had to give up bus Binance, stablecoin. And I'll pull in a Harry Potter quote for all the Harry Potter fans. Trading a nut for a galleon, giving up binance in all of its regulatory gray areas, and gaining PayPal as a, as a client, as a customer, that's, that's definitely a win. That's what you call a dub.

Speaker B: So just like USDC, you're going to be able to transfer PayPal US dollars between PayPal and external wallets. So that would be bankless wallets. Of course you could send it person to person. So peer to peer. You could fund purchases with PayPal US dollars by, by selecting it at checkout. Right. All right, so like your different checkout using PayPal, you can use this as an option and you can convert any of PayPal supported cryptocurrencies, of which there are, there are many now to and from PayPal US dollars. This definitely feels like a big win to me. There's some comments on it, of course, in the crypto community. This is one from Saigar who says so. The PayPal stablecoin contract, number one is written in an extremely old version of solidity. Number two allows the owner to pause all transfers. Number three allows the owner to freeze addresses to prevent actions. Number four allows admins to increase the total supply at will. Centralized but transparent. At least you could see all of those controls in the code. What do you think here, David? Do you think that these, these centralization vectors are an issue for PayPal US dollars?

Speaker A: All the properties that he just listed allows owners to pause transfers, allow owners to freeze addresses, allow admins to increase total supply at will. These are like table stakes for centralized stablecoin service providers. You have to have all of those functions. You need to increase the supply because if you get more dollars in the bank, you need to issue more stable coins. Of course you have to increase the supply and then in order to be compliant at all, you have to also be able to pause and freeze addresses. Like imagine if somebody starts sending this money to North Korea. Like PayPal's gonna need to do something. So I don't think that there's any pearl clutching about this. This is totally expected. USDC has all of these things.

Speaker B: This is why we call it a centralized stablecoin. It's not a decentralized stablecoin. It's not a crypto native asset in any way. And some people are saying, well, as a result of that, why are you crypto people celebrating David Ryan, why are you so excited about this? Why are you even excited about this? What's your response to that?

Speaker A: How many million accounts did you say was in PayPal?

Speaker B: 450.