Podcast Summary
Independent Thinker Eric Wall Discusses Importance of Individual Thought and Evolution of Crypto Networks: Eric Wall, a contrarian figure in crypto, emphasizes the importance of individual thought and the evolution of crypto networks from a biological perspective. He discusses his views on DeFi and Balancer, a powerful automated market maker, on the Bankless podcast.
Eric Wall, a prominent figure in the crypto space known for his independent thinking and contrarian views, shares some of the same conclusions as the Bankless platform, but arrives at them independently and outside of any specific ecosystem's influence. Wall, who has gone against the grain of various crypto communities throughout his career, is a strong believer in the importance of individual thought and the evolution of crypto networks from a biological perspective. This episode of the Bankless podcast saw Wall and host Ryan Sean Adams delve into these topics, with Wall even calling out Adams about previous beef between them. The conversation also touched on Balancer, a powerful automated market maker in DeFi that allows users to access the full power of multiple tokens within one liquidity pool, unlocking new possibilities for asset management and token launches.
Exploring New Ways to Engage with DeFi and Crypto: Balancer v2 offers yield generation and gas fee reimbursement, while Gemini provides interest-bearing accounts and crypto credit cards. The hosts debated the meaning of 'trustless' in crypto systems.
Both Balancer and Gemini are offering innovative ways for users to engage with DeFi and crypto beyond just trading. Balancer's v2 allows for idle tokens to generate yield without sacrificing liquidity and even reimburses gas fees. Gemini, on the other hand, enables users to earn passive income through interest-bearing accounts and soon-to-be-released crypto credit cards. However, a disagreement between the podcast hosts emerged regarding the term "trustless" and its application to different types of cryptocurrency systems. While one host believes that trustlessness is a spectrum, the other argues that not all things should be included in the trustless spectrum as some are inherently trusted. Despite this disagreement, both hosts emphasized the importance of open dialogue and learning from different perspectives. Overall, this discussion highlights the exciting developments in the crypto space, from DeFi to earning opportunities, and the importance of continued exploration and debate.
The debate over trusted vs trustless assets in crypto: Understanding trust levels in crypto assets requires nuance, as some have more trusted settlement processes than others. No asset is completely trustless.
The distinction between trusted and trustless assets in the cryptocurrency space can be a matter of semantics and perspective. While some assets, like Bitcoin and Ether, are often considered trustless due to their decentralized nature, other assets, like USDC or DAI, have varying degrees of trust involved in their settlement processes. The debate between trusted and trustless labels in a diagram can lead to misunderstandings and disagreements. A more nuanced approach could be to recognize that some assets are more or less trusted based on where the settlement process occurs, with completely trusted assets having final settlement off-chain, and trustless assets having final settlement on-chain. Ultimately, the goal is to better understand the mental model of different assets' trust levels on Ethereum and acknowledge that no asset can be completely trustless. This disagreement between two individuals in the cryptocurrency space was a result of semantics and diagram design, but they ultimately found common ground and agreed to continue discussing important topics in the industry.
A political and cultural revolution through crypto and decentralized finance: The speaker's work in crypto goes beyond financial gains, aiming for societal change through decentralizing economic systems
The speaker, who is deeply involved in the crypto and decentralized finance space, views his work as part of a larger political and cultural revolution. He's not just interested in making money, but in decentralizing economic and financial systems to bring about a significant societal change. He and the hosts of the Bankless Podcast share this perspective. However, they may have disagreements due to different perspectives shaped by their entry points into the space and varying levels of adherence to early terminology and taxonomy. The speaker's fascination with the industry stems from his belief that digital currencies represent a new form of life, as they become more complex, self-sufficient, and organic. He sees the evolution of digital life forms as a fascinating aspect of the crypto space.
Crypto as an Evolutionary System: Investors can benefit from viewing the crypto world as an evolutionary system where projects compete and survive based on effective resource management, and DeFi apps function as life forms creating value.
The world of cryptocurrencies can be viewed through an evolutionary lens, with each project competing and evolving in its own way. Strong projects survive and thrive by effectively managing economic resources, much like life forms do in the physical world. This perspective can be particularly valuable for investors seeking to identify promising projects. Additionally, decentralized finance (DeFi) apps can be understood as life forms that consume and output value, creating more value than they consume and contributing to the overall sustainability and growth of the crypto ecosystem. Eric Wall, a well-known figure in the crypto industry, has long embraced this perspective, viewing himself as a "crypto Darwinist" or digital biologist, studying the evolution of cryptocurrencies and DeFi apps.
Digital life forms in crypto ecosystem: Bitcoin's self-sustaining nature and Ethereum's collective movement: Bitcoin's symbiotic relationship with users and self-sustaining nature contribute to its longevity. Ethereum's collective movement and community support help it evolve and survive through forks.
When considering the survival of different digital life forms in the crypto world, it's essential to consider their place in the ecosystem and their ability to sustain themselves. Bitcoin, as an example, is seen as a strong life form due to its symbiotic relationship with its users and its self-sustaining nature. However, the degree of centralization may also impact a crypto project's longevity, as more centralized platforms may face regulatory risks that could lead to their demise. Yet, even in such cases, the community and developer support can help the platform evolve and survive through forks or other means. The metaphor of ant colonies or beehives can be applied to Bitcoin and Ethereum, where the organism isn't an individual but the collective movement or ecosystem itself. The desire to replicate and contribute to these digital life forms keeps them alive, making it a collective effort rather than the work of a single individual.
Centralized vs Decentralized Systems: Ant Colonies and Cryptocurrencies: Centralized systems offer more planning and progress but are vulnerable to regulatory risk and have shorter lifespans. Decentralized systems are more resilient and have a greater chance to survive but may be slower to adapt and progress. Understanding the dynamics and interplay between different systems is crucial for success in cryptocurrencies.
Both centralized and decentralized systems have their strengths and weaknesses, just like ant colonies and individual ants. Centralized systems may offer more planning and progress, but they may also be more vulnerable to regulatory risk and have shorter lifespans. Decentralized systems, on the other hand, may be more resilient and have a greater chance to survive, but they may also be slower to adapt and progress. In the context of cryptocurrencies, the level of decentralization necessary for long-term success is still a topic of debate. Eric, a digital biologist and early Bitcoin adopter, believes in keeping things as decentralized as possible to ensure there is always something to analyze. However, he is open to new decentralized systems that can "flaunt their wings" in interesting ways. Ultimately, the key is to understand the dynamics and interplay between different systems and the benefits they offer.
Exploring Ethereum's potential despite Bitcoin loyalty: Stay open-minded to new developments in the blockchain industry and evaluate them objectively, even if they challenge your current beliefs or loyalties.
The evolution of the blockchain industry requires an open-minded approach and a focus on producing the best technological solutions, rather than being locked into a single frame of thinking or supporting a specific coin. The speaker, who gained popularity in the Bitcoin industry for his critiques of other cryptocurrencies, noticed the potential of Ethereum's layer 2 solutions, such as zk-rollups and optimistic rollups, which offer decentralization and user experience benefits that Bitcoin currently lacks. Despite his deep understanding and commitment to Bitcoin, his advocacy for Ethereum's technological innovations was met with skepticism and criticism from some in the Bitcoin community. This highlights the importance of evaluating new developments objectively and being open to the potential of other projects, even within the same industry.
Rejection from Bitcoin community over Ethereum: Ignorance and tribalism in Bitcoin community hindered exploration of potential benefits from Ethereum and other cryptocurrency projects.
The speaker experienced a sense of rejection and exclusion from the Bitcoin community when they began to explore and advocate for innovation in other cryptocurrency projects, specifically Ethereum. They felt this rejection was rooted in ignorance and tribalism, as some members of the Bitcoin community were unwilling to consider the potential benefits of innovation outside their own project. The speaker found that Bitcoin's core developers had actually been exploring similar technologies, but the community's loudest voices, who were not always the most educated or knowledgeable, created a divide. This experience led the speaker to pay more attention to the innovations happening in Ethereum and to question the motivations and understanding of some members of the Bitcoin community.
Bridging the gap between Ethereum and Bitcoin communities leads to labels: Staying informed, open-minded, and having a long-term perspective are essential for navigating the crypto industry through multiple cycles.
Being vocal about cryptocurrencies, particularly Ethereum and Bitcoin, can lead to being labeled and even becoming a controversial figure. Eric Wall shares his experience of trying to bridge the gap between the two communities but instead, he was labeled as a Bitcoin maximalist by Ethereum community and a shit coiner by Bitcoiners. Despite the labels, Wall continues to stay true to his beliefs in technological innovation and progress. He acknowledges that he's not always right and that he's still learning. He also shares his perspective that Bitcoin, as a system, has its challenges and needs upgrades to become a user-friendly payment mechanism. Wall still holds Bitcoin as his favorite project but acknowledges the need for improvements. He also holds Ethereum and has publicly shared this. Wall's experience of negative encounters with Bitcoiners led him to reconsider his stance on Ethereum and ultimately become more optimistic about its future. Wall, as a contrarian investor, has been through multiple crypto cycles and shares that staying informed, being open-minded, and having a long-term perspective are essential to making it through the industry in a multi-cycle time frame.
Decentralized Finance on Ethereum: Uniswap and Aave: Uniswap and Aave are transforming finance through decentralized, autonomous systems, offering features like token swaps and yield farming without intermediaries or order books, and demonstrating vast opportunities for innovation and labor within Ethereum's decentralized ecosystems.
Ethereum and decentralized finance (DeFi) projects like Uniswap and Aave are revolutionizing the financial industry with their decentralized, autonomous systems. Uniswap, a decentralized exchange, allows users to swap tokens without the need for intermediaries or order books, while Aave, a borrowing and lending protocol, offers yield farming and seamless collateral swaps. Ryan, a well-known figure in the crypto community, has had a journey of being skeptical about Ethereum but eventually becoming bullish due to its potential for decentralization and scalability through roll-ups. The Uniswap grants program and Aave's powerful features demonstrate the vast opportunities for innovation and labor within these decentralized ecosystems.
From Skepticism to Belief in Ethereum: The Enterprise Ethereum Alliance brought validation to Ethereum, but the traditional financial sector's need for innovation underscores the potential for a complete overhaul using Ethereum's technology.
The speaker's initial skepticism towards Ethereum turned into belief after witnessing the Enterprise Ethereum Alliance in 2017, which brought validation to the project. However, the speaker's experience working in the traditional financial sector made him realize the need for a complete overhaul of the system using innovation similar to what happened on the internet. The speaker's personal experience of driving in the Nevada desert and encountering misleading GPS directions illustrates the complex and outdated nature of the financial system and the need for a fresh start. The speaker's journey from skepticism to believer highlights the potential of Ethereum and the importance of embracing innovation in the financial sector.
Decentralized Finance on Ethereum: More Open and Innovative: Traditional finance is transitioning to decentralized systems, offering greater flexibility and innovation through Ethereum's permissionless environment.
Just as a smartphone with multiple map apps offers greater flexibility and innovation compared to a traditional car's GPS system, the decentralized finance (DeFi) ecosystem on Ethereum provides a more open and innovative financial platform compared to traditional financial institutions. The speaker's experience with a faulty GPS system in the desert highlighted the limitations of relying on a single company for technological advancements. In contrast, Ethereum's permissionless innovation environment allows for the creation and adoption of the best financial apps, leading to rapid progress. The speaker believes that traditional finance is experiencing an "Uber moment" as it transitions to decentralized systems, despite initial challenges and criticisms. The speaker also drew parallels between the early use of cars by criminals and the current use of cryptocurrencies for illicit activities, emphasizing that the fundamental properties of the technology determine its future potential. The speaker's groundbreaking article on proof of stake highlighted its efficiency and sustainability, contributing to the ultrasound money thesis.
Proof of Stake rewards long-term bullishness in Ethereum: Proof of Stake systems like Ethereum incentivize long-term bullishness and provide security through staking, minimizing costs when many people are committed to holding ether for the long term.
Proof of stake systems like Ethereum naturally reward bullishness and provide security through the incentives of staking ether. This is similar to a DeFi yield farm, but the costs are minimized when there are many people who are highly bullish on Ethereum. Eric's perspective on proof of stake has evolved since his 2019 article, where he believed that proof of work was inherently more cost-effective due to the security budget and the resources spent to earn rewards. However, he now recognizes that locking up liquidity in Ethereum, such as staking ether, does not necessarily have negative consequences if the person staking is just holding ether for the long term. The cheapest source of liquidity in Ethereum is those committed to holding ether for a long time, and they take on the risk of staking with no alternative cost.
Proof of Stake vs Proof of Work: The Energy Efficiency Debate: Proof of Stake is considered more energy-efficient than Proof of Work in cryptocurrency mining, and its value increases with societal growth, making it a potential hard money for the future. Bitcoin's immutable monetary policy and abstract brand as digital gold contribute to its dominance as a store of value and medium of exchange.
Proof of stake is considered less wasteful than proof of work in cryptocurrency mining due to the production costs of mining equipment and energy sources. Proof of stake also increases in value as society grows, making it a potential hard money for the future. The collective thought of a society determines what money is, and the network with a monetary premium in its base asset gets economic security at a discount. Bitcoin, as a digital gold, has an immutable and predictable monetary policy that aligns well with its abstract brand, making it a dominant store of value and medium of exchange. Ethereum, on the other hand, prioritizes securing its network and changing emission rates to accommodate the system's needs. The meme of Bitcoin's immutable monetary policy, despite potential inconsistencies in practice, has significant influence on its perception as sound money.
Bitcoin's focus on stock to flow ratio overshadowing Ethereum's potential deflationary supply: Ethereum's adaptability and potential deflationary supply through gas fees make it a compelling alternative to Bitcoin, even if it doesn't perfectly fit the 'sound money' definition
The obsession with the stock to flow ratio in Bitcoin has opened the door for Ethereum to compete in the "memetic game" of being sound money. The speaker believes that Bitcoiners' focus on this metric has overshadowed other important factors, such as Ethereum's potential deflationary supply due to gas fees being burned. Ethereum's ability to adapt and change its monetary policy may make it a compelling alternative to Bitcoin, even if it cannot match Bitcoin's fixed supply. The speaker personally has increased his Ethereum exposure based on these beliefs and has seen positive results. Ultimately, while Ethereum may not be able to become "sound money" in the exact same way as Bitcoin, it can still become a widely used and valuable form of digital currency. The speaker also suggests that a potential flippening in the cryptocurrency market may not require Ethereum to be considered "sound money" in the same way as Bitcoin, but rather simply offer more appealing features or benefits.
Ethereum vs Bitcoin: Different Roles in Crypto Ecosystem: Ethereum's focus on decentralization and ongoing development sets it apart from Bitcoin as 'sound money', but criticisms of governance and DeFi risks are valid concerns. Both have unique strengths and roles in crypto ecosystem.
Ethereum and Bitcoin serve different roles in the crypto ecosystem. Ethereum, with its potential for more flexible monetary policy and ongoing development, may not be able to match Bitcoin's brand and predictability as a "sound money." However, Ethereum's focus on decentralization and its ongoing commitment to the philosophy, despite scaling challenges, sets it apart from other projects. Criticisms of Ethereum's governance and the potential risks in decentralized finance (DeFi) applications are valid concerns, but Ethereum's dedication to decentralization is a strength compared to other projects. Ultimately, both Bitcoin and Ethereum have unique strengths and weaknesses, and their roles in the crypto ecosystem may complement each other rather than compete directly.
Ethereum's Shift Towards Faster Syncing and Validation: Ethereum's move towards faster syncing and validation methods like SnapSync could lead to confusion and risks if terminology and defaults continue to change, especially for decentralized applications.
Ethereum's approach to syncing and validation is evolving towards faster, less resource-intensive methods like SnapSync, which validates less of the Ethereum protocol. This shift, while aimed at making clients faster, could potentially lead to confusion and systemic risks if the terminology and defaults continue to change, especially for applications that rely on centralized sources. The Bitcoin community, known for its emphasis on decentralization, expresses concerns about this erosion of values. Another axis of decentralization worth considering is the banking layer on top of Ethereum, as using custodial solutions instead of decentralized alternatives can centralize control. Despite these concerns, Ethereum's potential to decentralize more parts of finance makes it an exciting space, and Bitcoiners may underappreciate this aspect of the conversation.
Focus on learning fundamentals, not technical analysis: Novices should prioritize understanding blockchain tech and joining decentralized communities over relying on ineffective technical indicators. Stay skeptical, think long-term, and add value to the crypto ecosystem.
Eric, a long-time crypto enthusiast and unbiased truth-seeker, advises novices to avoid relying on technical analysis and instead focus on learning the fundamentals of blockchain technology and getting involved in decentralized communities. Eric, who came into the crypto space with a goal to become a financial trader, shares his experience of spending years using ineffective technical indicators before realizing their futility. He emphasizes the importance of staying skeptical, thinking long-term, and producing value in the crypto ecosystem through involvement in DAOs and Ethereum projects. Eric's unique approach to staying unbiased and focusing on the truth sets him apart in the industry, and his advice encourages newcomers to approach crypto with a long-term perspective and a commitment to learning. Remember, this advice is not financial advice, but a reflection of Eric's experiences and insights in the crypto space.
Investing in Cryptocurrencies: Risks and Rewards: Investing in cryptocurrencies and DeFi projects involves risks, including potential loss of money, but also offers potential rewards in the form of high returns. Only invest what you can afford to lose and do thorough research before participating.
Investing in cryptocurrencies like Bitcoin, Ethereum, and decentralized finance (DeFi) projects involves significant risk. You could potentially lose the money you put in. However, despite the risks, many people are drawn to this new frontier in finance. It's not for everyone, but for those who are willing to take the risk and join the "bankless" journey, it's an exciting time to be a part of the rapidly evolving world of decentralized finance. The potential rewards, in the form of high returns on investment, are what attract many people to this space. But it's important to remember that past performance is not indicative of future results, and there are inherent risks associated with these types of investments. It's crucial to do your own research, understand the risks, and only invest what you can afford to lose. The cryptocurrency market is volatile and can be unpredictable, but for those who are willing to take the risk, the potential rewards could be significant. So, while the risks are real, the potential rewards are what make this an exciting time to be a part of the decentralized finance revolution.
