Is Joe Lubin the Michael Saylor of Ethereum? | The $SBET Opportunity
David:
[0:00] So my question to you, Joe, do you have what it takes? Can you become the Michael Saylor of Ethereum?
Joe Lubin:
[0:07] Well, I don't think I need to answer that question directly.
Ryan:
[0:15] Bankless Nation, we have Joe Lubin. He's the co-founder of Ethereum. He's the CEO of ConsenSys. And most recently, he's now the chairman of a publicly traded company. It's called Sharplink, a company designed to purchase Ether, the asset, for strategic treasury purposes. Joe, welcome back to Bankless.
Joe Lubin:
[0:33] Thanks, guys. Feels like I've been here recently, but the vibe's a little different.
Ryan:
[0:38] Yeah, you know what? Last time we were here, I was just looking at this. It was just over a year ago. It was May. And I think you were in the process of getting sued, getting nasty grams from the SEC, at least consensus was.
Joe Lubin:
[0:48] Also suing, if I remember correctly.
David:
[0:52] I think that part was the part that worked out, actually.
Joe Lubin:
[0:55] I think we were on the offense, actually.
Ryan:
[0:57] Why didn't we actually start there, then?
Joe Lubin:
[0:59] The ecosystem won that one.
Ryan:
[1:00] Okay, so what happened with that? So last time we talked, Gary Gensler was on his rampage. Consensus was kind of the next thing. They were actually talking about, it seemed like they were intent on making Ether the asset a security as well. That was some of the implication in their Wells Notices.
Joe Lubin:
[1:15] Yeah, there was an inquisition underway. Driven by President Elizabeth Warren. She and the progressive wing of the Democratic Party preferred to have large government and granular control over all human activity.
Joe Lubin:
[1:37] Simultaneously, the bank lobby, some big banks that preferred to keep winning a red game, they made strange but happy bedfellows. So Jamie Dimon and Elizabeth Warren in sync on some actions and they all felt that this new technology for decentralized protocols, which would enable disintermediation, lots of systems and empowerment to people in communities was antithetical to their goals. And so Chair Gensler was essentially deputized to stop disintermediation, to maintain control of all the things. And the way they intended to do that was to go back on what Bill Hinman, director of corporation finance at the previous SEC, had said about Ether, that it's a commodity, not a security. And they went back on several things that the CFTC had been saying for a long time. Ether, commodity, not a security. So they secretly seemed to recategorize Ether as a secret security. And then they proceeded to do all sorts of enforcement actions.
Joe Lubin:
[2:53] An inquisition which forced many companies, including our own, to pay tens of millions of dollars, hundreds of millions in sum. The lawyers to produce documents to defend ourselves for things that they were insinuating that we were doing. When it got to the point that they were subpoenaing and inquisitioning just independent researchers to try to figure out who to pin this reclassification on, then we got active. So we thought we might have to sue the SEC at some point based on a few years of that sort of activity and eventually ended up pulling the trigger. So we stood them in the great state of Texas and we pretty much tried to put them on their heels to answer our question, which is, do you consider a heat threat security or a commodity? And they did some fancy work. And so they said, oh, we're bad. We're not actually investigating or we're going to stop investigating your ecosystem. We're going to stop harassing researchers and so by doing and they sent out a letter of.
Joe Lubin:
[4:01] Sort of apology letter because they were forced to make a direct statement. And then the judge in that case felt that that was sufficient and our case wasn't right enough to be seen in that particular court. And so he said, sorry, I can't look at this in Texas anymore. And so immediately Immediately after that, the SEC sued us in Brooklyn, so they got on the E-Train, I think. They went from one jurisdiction to another jurisdiction, the one which they lost to Coinbase in. So they moved to a different jurisdiction. They sued us there for basically the same thing. And November 5th happened, Chair Gensler resigned. And the complexion of government actions towards our industry has profoundly changed. And so that ended up getting settled.
Ryan:
[4:57] Like did the Wells notice all that, did it evaporate in a puff of smoke?
Joe Lubin:
[5:01] So they sued us based on the Wells notice. And ultimately we basically won. We achieved our agenda in the first action. And the ecosystem won. It was liberated to a certain extent. And then they settled. We all settled. So the other action just disappeared.
Ryan:
[5:21] Have you met with the new SEC chair? What's kind of the new SEC administration like?
Joe Lubin:
[5:26] They're outstanding. I haven't met with Paul, but I have interacted with Hester on some occasions. She's a superstar. And I think we love the SEC.
Ryan:
[5:37] Did you just say we love the SEC?
Joe Lubin:
[5:39] We love the SEC. The SEC is doing really healthy things for the United States of America and the world and very reasonable things for our ecosystem. People on our policy and legal team interact with them in a positive, constructive manner quite regularly. So it's a pleasure to work with them.
Ryan:
[6:01] Wow. What a 180 change. I'm just curious if you could maybe project forward. So let's say November had a different outcome and we got a similar administration to the one we had last time. What do you think, how do you think that world would have been different? That kind of reality exists maybe somewhere in the multiverse. Play that reality out.
Joe Lubin:
[6:23] It's really hard to know, but we were very convinced that we would win in court. The judicial arm of government would end up being relatively independent and rational and do the right thing and set our ecosystem on a healthy course. I think it was the goal of Gensler and Warren and others to slow us down, to try to inject some things, to co-opt our industry perhaps, and just try to do ridiculous and egregious things in case they might end up being able to win. So the spacing on the name of that project, Gary's pet project, that was already set up to treat Ether as a security. That was weird. This feels like a different timeline. It feels like we're not living in that world anymore.
Ryan:
[7:18] Yeah, okay.
Joe Lubin:
[7:18] I've reclaimed those brain cells.
Ryan:
[7:20] Yeah, exactly. I just like, let's leave that in 2022 to 2024. And let's talk about the future. And part of the future is this new publicly traded company that we mentioned in the intro.
Ryan:
[7:31] The ticker is SBET. So this is on the NASDAQ.
Joe Lubin:
[7:35] I should probably take this moment as our GC, Matt Corva has suggested. I should probably say something to the effect that nothing I say here with respect to SBET, the strategic bet on Ethereum, should be considered forward-looking statements. And I'm just talking big picture about why ConsenSys was excited to be an investor. I'm certainly not licensed to offer financial advice. If there was a license to offer Ethereum advice, I'd probably be qualified.
Ryan:
[8:08] Okay. Okay. Well, disclaimers out of the way. SBET is the ticker. A strategic bet on ETH. I guess it was Sharplink before. Can you talk
Joe Lubin:
[8:15] About- It is Sharplink Gaming Inc.
Ryan:
[8:19] Right, right.
Joe Lubin:
[8:19] Everything I'm saying is hypothetical.
Ryan:
[8:21] Okay. Tell us about this. So tell us, as we understand it, there's the press releases is basically, it's a gaming company, still is a gaming company.
Joe Lubin:
[8:32] So affiliate marketing for sports betting, things like that.
Ryan:
[8:36] Okay. And the pivot here, the change here, or the new capital raise is all about setting up a strategic treasury around Ether, the asset.
Ryan:
[8:46] I believe $425 million maybe to start. What's the strategy here? What's this vehicle actually doing?
Joe Lubin:
[8:53] So it's two-prong. One, because it has its own mandate. It is very interested in making use of Web3 primitives to enhance what they do. So one could imagine, again, this very hypothetical prediction markets could be relevant to sports betting, maybe more granular kinds of propositions. We like to do peer-to-peer things in our ecosystem. I'll say no more on that front. And the biggie is that they're really excited to bring Ether onto their balance sheet. About 425 million dollars worth of ether initially they are very excited to to stake it to restake it to participate in defy and essentially michael saylor in his strategies strategy is doing some very interesting things with at the market sales of shares with the convertible debt offerings, He's able to create financial instruments that that are attractive to different cohorts of investors, like certain kinds of bond investors, attractive in the sense that he can dial up or dial down the ratio of risk to return in different kinds of investments. So we will look to do, hypothetically, we'll look to do some of those things and we can do so much more.
Joe Lubin:
[10:20] And Saylor has this notion of Bitcoin yield, which is the amount of Bitcoin exposure for every fully diluted share, the shareholders own. We have this notion of yield in the Ethereum ecosystem. It's called just earning Ether based on staking your Ether and stuff like that. So we're going to stick with that definition of yield. And I'm thinking there might be another definition like Ether concentration or something like that, where we keep doing these different activities. And if you own one share, then you would see the amount of effective ownership of Ether continue to grow through the actions of the company.
David:
[11:01] So as I understand these acquisition vehicles, there's two sides of it. There's the pool of capital, which you guys are starting with $425 million. That's going to turn into Ether and it's going to be put on the balance sheet of SBET. And then there's the kind of the financial alchemy, the Michael Saylor-ing of the deal structure to make sure that just more for him, Bitcoin, for you, Ether comes into the balance sheet at, you know, a managed risk. And so there's like two different ways to grow this effort. Growing the balance sheet, so getting more investment, getting more people to getting more ETH on the balance sheet, and then also the financial alchemy.
David:
[11:37] Can you talk about both of those independently? So $425 million to start. What's the strategy for growing that pool of capital?
Joe Lubin:
[11:47] Yeah, so they're not very independent in my mind. One fuels the other. And so we take in investment from different kinds of actors, VCs, et cetera, in our space. Consensus led that investment round. What we're doing next is ATM at the market sales of shares. So through a broker-dealer, you can just sell, I was going to say tokens, but you can just sell these shares to retail, to institutions directly. And it was kind of funny that I was going to say tokens because another thing you can do is you can tokenize equity. So imagine a company that has a strategy like this, tokenizing a portion of their equity, making it available in a popular wallet potentially for end users to purchase.
Joe Lubin:
[12:38] There's this notion of token gated perks or admittance or things like that in the traditional world. The DTCC operates a company that I think is called Seed & Company, and Seed & Company owns all the shares, owns all the publicly traded shares. And there's, I think, an IOU between them and your brokerage and then between your brokerage and you. So you don't really own your shares. And that all happened for good reasons. There was a paper crisis and you had to shut down the stock market a couple days a week because the messengers couldn't get the stock certificates around. But imagine now that we can know exactly who owns a token that has ownership of a share. So there are really exciting things that we think we can do with that. Imagine any of the companies in the orbit of this company could offer perks or privileges in different kinds of contexts.
David:
[13:36] One of the reasons why MicroStrategy, NowStrategy, is what it is, is because there's always been this premium for MicroStrategy stock compared to the NAV, right? It's not a trust, but it holds a bunch of Bitcoin. But MicroStrategy stock, the value of MicroStrategy has always been higher than the Bitcoin that MicroStrategy owns. And this is what gives Michael Taylor the room to issue more shares and then turn those issued shares into revenue and then buy more Bitcoin with it. Now, I think we could spend hours, hours debating and unpacking why that there is exactly a premium. I'm not sure anyone truly knows why there's a premium. One of my answers is that because Michael Saylor is kind of this larger than
David:
[14:17] life figure who has done a fantastic job promoting Bitcoin to the world in this very big way. And that's kind of what I think it takes to really allow SBET to work its way up to become sitting shoulder to shoulder with MicroStrategy, with Strategy and Michael Saylor. So my question to you, Joe, do you have what it takes? Can you become the Michael Saylor of Ethereum?
Joe Lubin:
[14:43] Well, I don't think I need to answer that question directly. I think what Michael Saylor's done is truly remarkable. I've had the privilege of being able to talk to him three times. He's been very generous with his time. He congratulated us on SBET. And he's just, he's a superstar in what he does. He's been incredible for the Bitcoin brand. And I think it's actually much more that's going on than just his cheerleading. I think it is, there are structural things that are in place in economies based on geopolitics and things like that. And I think we're in a paradigm shift. You may have heard me say that once or twice before. And the paradigm shift is enabling structural magic potentially to happen. And so if you go way back, World War II, the U.S. Emerges from that. with the dominant military and industrial complex compared to the rest of the world. Bretton Woods, U.S. becomes a reserve currency of the world.
Joe Lubin:
[15:53] And these structural advantages turn into unfair advantages for the U.S. Where it trades a lot of kinds of paper for goods and services from companies around the world, papers, dollars, and treasuries. It sets up this feedback loop where countries like Japan, China, et cetera, have to do something with that paper and they don't have the deep capital industries, financial industries to, to make good use of that. So they end up feeding it back to the United States. And so you get a lot of cheap money for the U.S. to keep building itself. And so one structural trade that happened there was, was interest rates on treasuries just dropped for 30 years. Treasuries go up for 30 years, the prices.
Joe Lubin:
[16:39] Another structural thing in the U.S. was the weakness of the Japanese yen, driving 30 years of different kinds of carry trades, borrow, GPN, invest in something higher yielding. And so I believe that as we come to the end of one super cycle, we're smashing against the rocks right now, and the start of the next super cycle, which I think will be dominated by decentralized protocols and AI,
Joe Lubin:
[17:06] at least in the first couple decades. It's you have this migration of the economy because it has to to decentralize rails. So the United States politicians just demonstrated that austerity is just not a thing in the U.S. We don't do austerity. Scott Besson takes that. He pivots. He says, OK, we're going to grow our way out of this debt and deficit mess. What that means is the old economy is going to fall apart in pieces. We're seeing jitters in the treasury markets, and we're going to rebuild on the new economy, the decentralized protocol economy. And so we are seeing the U.S. government get behind our technology. We'll see them paving the way for hopefully stable coins and market structure will happen sooner rather than later. And they're going to use the technology because that's how they grow. So we are now seeing, with SBET and other projects, we're seeing TradFi being onboarded to DeFi.
Joe Lubin:
[18:08] Because these things are, so let's think of them, to use a silly phrase, as perpetual motion machines for a little while. Where because there is more demand for Ether and Bitcoin, because we've got more applications, almost this new kind of decentralized World Wide Web. So more usage, price appreciation is likely to be significant. Tom Lee a couple of days ago said Bitcoin $3 million. It's an interesting number.
Ryan:
[18:39] A lot of people that believe price is going to go up,
Joe Lubin:
[18:42] You're sitting with your shares and you're seeing the Ether concentration go up when more and more people invest in this company that you're invested in. And what do Wall Streeters care about? All they care about is making money. And so if they see this thing working for a while, if they hear people in earnings calls talk about the details of Ethereum and the details of DeFi and this particular strategy, what are they going to do? They're going to become experts in our technology, just like we did for different reasons.
Ryan:
[19:13] That's why I feel very much is the story of MicroStrategy and Michael Saylor is that it was kind of a megaphone. I mean, I remember when he started this, the price of Bitcoin from a market cap perspective is something like 200 million. So similar to the market cap of Ethereum today. And he started this in 2020. I think Wall Street kind of thought he was crazy.
Joe Lubin:
[19:30] I think it sounds like magic and opium.
Ryan:
[19:35] It does. It does.
Joe Lubin:
[19:36] And a Ponzi scheme.
Ryan:
[19:37] Right. And what he continued to do with the strategy is just like, I mean, every couple weeks, every month, we'd put like dollar cost average and dollar cost average. And now I'm looking at this, at the time of recording, he has almost 600,000 Bitcoin. There's almost 600,000 Bitcoin on the microstrategy balance sheet in the treasury. It's worth about $61 billion.
Ryan:
[19:56] If you talk about Bitcoin going to the millions, I mean, we're talking about a very large company. I guess my question for something like SBET is, do you think that SBET, that kind of a vehicle for Ether, the asset, can grow as large as MicroStrategy has in a five-year time range? So we're at about the same market cap now. Do you think that SBET can do basically what a MicroStrategy did?
Joe Lubin:
[20:21] Sure. First, more props to Michael. Two things that he's been focusing on is focus, like be narrowly focused on Bitcoin and ensure that that focus brings volatility to the asset, to the share, because he's trading volatility in different forms. Also, to answer your question, which I kind of avoided, yes, I'm going to be very loud and consistently out there. For a couple of years, we were in a blackout period because the SEC was trying to pin this scheme to sell unregistered securities to Americans on consensus. So we had to be quiet. We used to obviously champion that they're in the lot in our marketing and everything we did.
Joe Lubin:
[21:11] So one thing you're asking there is, is Ether going to flip it? Another thing you're asking is SBET going to flip in strategy? Let's think about it this way. I was inspired last night to retweet something that Robert Drozd of Eigenlare put out. And I was thinking, we're trying to frame what the valuation model for Ethereum and Ether is. Discounted cash flow. We can discount that for a bunch of years, hopefully. That's not a healthy way to look at things. People think of Ethereum as an operating system, the next operating system of the world. But I'm really loving the idea of framing Ether as framing trust as a commodity. We frame information as a commodity. So lots of virtual commodities are out there. If we think about how much value sprinkling some ether dust or chunks of ether or a.
Joe Lubin:
[22:17] A an ether diamond an ether trust diamond onto a transaction onto a relationship onto an agreement on the ethereum blockchain the kind of facilitation that that brings the kind of guaranteed execution that that brings what does that do to the value of each one of these transactions or processes i think it's more than 10 increase in value i think it's kind of hard to how to imagine is Is it 100%? Is it 1,000%? And so if you do that to the world GDP, and if you recognize that you're packing more of these transactions into each unit time, more of these agreements are easy to make, packing them into each unit of time, if you bring the power of compounding into that, then you're just creating compounding more and more value. So gold 2.0, really valuable. I think Tom Lee said $23 trillion. Above ground gold right now. What's the size? What's 100 times, 1,000 times the size of global GDP running on Ethereum rails? I think SBET's going to drive a lot of that.
Ryan:
[23:31] Okay. So let's pull those two pieces apart and go into more detail. I mean, the first is kind of evaluation and how you think about valuing Ether the asset. There's been a lot of conversation about this recently in kind of the crypto circles. And I think some people are advocating discounted cash flow because of the way you're staking, you're looking at it. Okay. And others are saying, no, look, this is a monetary phenomenon. This is like a commodity. It's commodity money. It's a store of value. It's just like Bitcoin. Don't have different rules apply.
Ryan:
[24:01] What's your answer to this? How should Ether the asset be valued?
Joe Lubin:
[24:03] I think the money premium comes from the nature of trust. So if Ether is seen as the gold standard in trust, the highest octane grade of trust, then it should have a very high monetary premium and I think that's gonna dominate the valuation model how there's there's just memory like yeah there's a ton of mean power in ether Bitcoin is still the biggest meme coin on the planet biggest most valuable meme coin on the planet it has a store of value utility but you know just like the US dollar there's a lot of mean power in.
Ryan:
[24:40] How do you communicate this narrative to Wall Street? So right now, it seems like Wall Street has this idea of Bitcoin as kind of gold, doesn't need cash flows, just the number just goes up, right? Whereas with Ethereum and Ether, the asset, different rules apply, at least right now. It's some kind of a tech platform. Maybe it's like a high performance growth equity. They are looking at DCF models and cash flows. Not all of them, but at least some of them. How do you kind of changed that narrative or that model for ether the asset in wall street to them
Joe Lubin:
[25:14] So it is difficult bitcoin has a an easy to understand power proposition solana ran up impressively on the back of the mean coin phenomenon for for better or worse and ethereum has always been the good middle child building a scalable infrastructure for the decentralized future and you know we can and say things like it's a civilizational technology, but it's, it's a big thing to express, which is why we at ConsenSys have been doing a lot of work too, writing out thought pieces, we're going to put out this idea of trust as commodity, quite measurable.
Joe Lubin:
[25:55] But bottom line, I don't think we need to work too hard anymore to educate Wall Street because we're going to demonstrate that there's this sort of magical, perpetual motion flywheel thing going on. You do have to believe in order to appreciate this, what SBET can do, you do have to believe that there is a paradigm shift on. That we are moving from an old system, a dying super cycle to a new system of the world. You have to believe that Ethereum will be the dominant foundational digital asset settlement layer. And also Web3 primitives on Ethereum will be a big part of Web3,
Joe Lubin:
[26:39] the really centralized World Wide Web. But I think it's going to be the simple things that it gets Wall Street there. Watch number go up for two or three quarters.
Ryan:
[26:49] This is funny. This is very similar to what my brilliant podcast co-host says. Basically, number go up is Bitcoin's marketing, right? The number, the price point, the ticker, that's what gives all of that flywheel effect and that faith to Wall Street investors everywhere. Can we talk about the last two years of ETH price performance? And I know David and I have given our perspectives on why ETH performance has been lackluster, maybe not compared to the dollar, but compared to Bitcoin, certainly on the ratio. And also you mentioned Little Brother Networks, like the Solanas of the world and other smaller market cap alternative layer ones.
Ryan:
[27:26] Why do you think ETH has been in a malaise? And is that about to change?
Joe Lubin:
[27:32] Well, it's already changed quite significantly. There's a lot of organic optimism in the ecosystem right now. So it's been a long slog. A lot of people put heart and soul into it and.
Joe Lubin:
[27:44] It's hard building civilizational infrastructure. You need to build layer and after layer of functionality and scalability. And we've always been building for the future. And I think the future is pretty much here. I think we've hit our broadband moment in the sense that we're horizontally and vertically scalable. Black space is affordable. Black space is very affordable. The user interfaces are good. They're going to get great as we infuse AI into our wallets and into our user interfaces. It hasn't been safe or smart for companies to use tokens, to issue tokens, to participate in DeFi in the United States. It hasn't been smart at all for the best and the brightest builders, entrepreneurs to build applications for end users, for consumers and enterprises. But now it is, and it's just so much better, so much less toxic to build of, by, and for the community rather than building an adversarial relationship to your user, which is the traditional economy and web too. So the best and the brightest will come, are coming to build in our ecosystem.
Joe Lubin:
[28:56] Ethereum has been additionally in what I have been calling an awkward adolescent period. Where it built great technology, knew it wasn't scalable, tried to figure out ways to shard itself to bring scalability. We couldn't get that done, so we threw it open to the world in a divergent phase. We had some optimistic people. I know you guys are very optimistic people, build roll-ups.
Joe Lubin:
[29:23] And then we had some ZK people do some research. We did a lot of research in consensus. We thought it was five, maybe eight years away before it would get practical to build a ZK roll-up.
Joe Lubin:
[29:36] But things moved incredibly fast, astonishingly fast. And so our R&D team turned into our Linea team, our Linea ZK EVM Layer 2 roll-up solution.
Joe Lubin:
[29:47] And essentially, we built all these Layer 2s. They built. Have not been accretive to the ether token so that they there has been some extraction of value into the layer two roll up ecosystem but that's fine i think it was perfectly reasonable for ethereum layer one to step back and and enable them to have pricing power and and build out their domains they did they did all come up with exciting technology we're now in a convergence period where where projects like across and other kinds of technologies are going to enable layer twos to talk to each other better twos to talk to layer one better sdks programming through ai interfaces are all gonna make building on ethereum pretty seamless it's gonna be less about fragmentation going forward this is especially true when glamsterdam comes around probably sometime let's hope it's mid 2026 it's a hard fork right after the next one the Fusaka hard fork in Glamsterdam we're going to see an enshrined native roll-up technology we believe that our own technology Linea is the only standing viable ZK EVM technology that can be donated to the Ethereum protocol.
Joe Lubin:
[31:11] Every execution client syncs to it right away. It is as its equivalent to Ethereum. You can take your Ethereum code at layer one and run it unchanged at layer two. So we believe we're going to be able to beef up mainnet very significantly. And we believe that through various mechanisms, we're going to see layer two's support layer one much better. We in particular are going to be doing a TGE in the not too distant future. We're going to be rewarding our LXP, our very patient LXP token holders.
Ryan:
[31:45] Points holders. Is that breaking, by the way? Do people know this?
Joe Lubin:
[31:48] Well, I'm not going to put a date to it. I think we've hinted at it on Twitter. Fair enough, fair enough. And we're going to A, reward those people because they put a lot of work into helping us build out and burn in our network. And we're going to do something in the tokenomics that is very directly supportive of Ether. and layer one. We're hoping that that is a mechanic that other layer twos will follow. And other applications too.
Ryan:
[32:17] A lot of
David:
[32:18] This is about Ethereum, the technology, Ethereum, the platform, which has been just one of the more interesting stories, I think, from the tech side of things in the crypto space to follow how Ethereum scalability challenges have been faced and then solved. But I want to turn the conversation back to kind of the main character here, which is Ether the asset. Both Ryan and I here had the same aha moment independently, I think, about Ethereum and Ether the asset when we both deposited Ether into MakerDAO and we were able to mint DAI, mint a stable coin programmatically with smart contracts. And that was just this big breakthrough moment for me as an end user of Ethereum and its smart contracts and some of his applications that I could deposit ETH, deposit this asset that was native to the blockchain, deposit it into one of its smart contracts on the blockchain that we just call MakerDAO. And there was a button that I could press that I could mint DAI and I could mint half of the value that I deposited. So I deposited about $1,000, minted 500 DAI stable coins. And that was like a power that no one had ever given me before. No app, Robinhood never gave me that. No financial institution ever gave me that. I never had the ability to mint my own asset. And it all came from the value of my collateral, the value of my deposit, because kind of like how you said with your trust diamonds analogy, diamond being the logo of Ethereum,
David:
[33:39] MakerDAO could trust me because I had deposited some Ether into the account and I was able to mint DAI. And so that's the thing I think that really pilled me and Ryan about DeFi and the idea that Ether is this like collateral asset and Ethereum is able to create
David:
[33:56] its own DeFi depository economy. And actually what I see you doing with SBET, with your strategic bet on Ethereum, is you're doing the whole collateral reserve thing in the trad way with trad contracts, trad legal contracts, but it's still nonetheless a treasury asset for SBET. Maybe you could talk about like why Ether the asset is a good treasury asset for companies like SBET or people who are just interested in Ether as a collateral on their balance sheet.
Joe Lubin:
[34:27] Yeah. So Bitcoin is a good treasury asset. Ether is a much better treasury asset because it's so productive and yielding. Another analogy, it's the fuel, the oil, the gas, the electricity that powers applications and storage on the emerging decentralized world computer. So people are going to need it just like they need a reserve currency in the current world to buy oil and wheat things. And there are so many ways to earn yield on this productive asset that I think
Joe Lubin:
[35:00] will be the token that just keeps giving.
Ryan:
[35:02] What's nice is with, I guess, with SBET, if you guys are able to stake it, that this is not available in Ether ETFs right now, right? Staking features are not available. I don't know. Currently, no. Yeah, currently, no.
Joe Lubin:
[35:13] We think it's a few months away.
Ryan:
[35:15] Okay, okay. Yeah, so do you think that there's room for other...
Joe Lubin:
[35:18] But also, we'll be much more aggressive than they can be, while still maintaining proven risk levels.
Ryan:
[35:24] One of the things that was also beneficial about MicroStrategy's strategy and Michael Saylor's play is not only did they engage in the strategy, but they pilled others to do it too, right? And so GameStop, I think, recently just bought 4,000 Bitcoin, put it on the balance sheet. And there's others with this strategy. How many SBETs do you think can exist? And what is the path to get others to adopt Ether on their treasury? Is this kind of like a business development effort? Do you lead by example? Do you have to evangelize, be very loud on Twitter? You have to put AI memes together with, you know, Ethereum blue logo the way Michael Saylor does. What's the plan here?
Joe Lubin:
[36:04] Yeah, so in the 90s and in the aughts, there were web studio companies, also called interactive companies, companies like Razorfish, March 1st, and they built websites for traditional companies and they put information on those websites and then they brought them into e-commerce. So... We believe that there will be at least one of these in in any nation state that has a stock market of any significance and probably more than one because it's going to be really exciting to implement different versions of how to accomplish this kind of onboarding of Ether to Treasuries. What ConsenSys is going to be able to do is we're going to take our wallet, our different components. We will have a stack for developers, Web2 developers, Web3 developers, a stack for enterprise, a stack for financial institutions.
Joe Lubin:
[36:59] We will help enterprises onboard tokens to their treasury. We'll help them issue tokens. We'll help them set up in Ethereum, layer one DeFi and Linnea DeFi. We're actually going to put a pretty giant amount of Ether onto Ethereum and onto Linnea. We will have a very vibrant Dex set up there very soon. And we can help them set up homesteads, save spaces where they can operate on Web3, where they can make use of different kinds of web primitives, like decentralized identities and badges to identify who their employees are, who are members of different teams. We have a debit card that is a very exciting product, essentially you can put some, instead of the normal dynamic where you send your whole paycheck to your bank.
Joe Lubin:
[37:56] In order to use your debit card and they immediately start earning yield on your back and you don't earn any yield for a little month. But instead of that, you you put your salary on into your Linea account and you're earning yield up to the minute that it is debited. So any sort of transaction across the global MasterCard network can just take some stable coin or some ether. Don't use either. Just use stablecoins out of your Linea account. We're working on a payroll system, so we can close the loop on that. So we can help companies issue payroll through Linea or through blockchain networks. So this is a playbook that we can help lots of projects do. And like Saylor, who's handholding a bunch of other companies, we'll want to do a lot of that.
Ryan:
[38:49] You brought up ConsenSys, of course, and ConsenSys is a company that you founded that's basically building tools up the stack on top of Ethereum and other crypto
Ryan:
[38:58] networks, but particular focus and attention on Ethereum. I know there's been a lot of speculation and talk and rumors about consensus actually IPO-ing at some point in time. And I'm sure you have regulation against what you can say about this. But I'm curious. We were talking earlier about the regulatory tailwinds that we now have. You said the SEC was fantastic to work with. We have the circle IPO that's happening in a matter of days at the time of recording. said will have already happened by the time folks get this. We've had Galaxy IPO recently. Is now a good time for crypto companies to IPO? And can you say anything specific about consensus on that?
Joe Lubin:
[39:42] Well, yes, now is a very good time for blockchain companies to IPO. And no, I can't say anything specific about consensus.
Ryan:
[39:50] Perfect. I maybe want to talk about a discussion that Dave and I have been having and was even a debate earlier on this podcast. So much of kind of the treasury strategy, I feel like for MicroStrategy or for SBET or for any treasury organization that intends to stack cryptocurrency and collect it, it's really about the store of value use case of the underlying asset. And it's been said to us, David and I have been Ethereum bulls for a very long time. It's been said to us, hey, ETH bulls, you got to give up on this whole store of value thing. And the reason is because Bitcoin has already reached escape velocity as a store of value asset. It is a special snowflake. and then everything else is in a different category. Everything else is maybe a DCF type model, has to earn fees. It's kind of a high-tech equity. It's not a special snowflake. So there's Bitcoin as a special snowflake, Snow White and the Seven Dwarfs. Everything else is the Seven Dwarfs. It's not Bitcoin. And so it doesn't get monetary premium, is not a good store of value.
Ryan:
[40:58] Obviously, you seem to be rejecting that with your strategic bet on Ethereum with SBET. But can you tell us why is is either the asset also a special snowflake and like, if you think so, why do you think that
Joe Lubin:
[41:11] Anyone who tells you that there can be only one store of value has an agenda and there's gold, there's diamonds, there's real estate, the US dollars for however many decades and all these things. Aren't guaranteed stores of value. So I don't know if I would want to be a special snowflake. Snowflakes are brittle. Along along can come something that has a lot of productive utility and yielding power. And if you squint has been going up for about a decade and is likely to keep going up. And so while it may be very volatile in both Bitcoin and Ether's case, both are outstanding stores of value on a sort of civilizational scale. So again, we're back to the flipping discussion in my mind. Ether is likely to be a more powerful store of value, in my opinion, than any other digital asset.
Ryan:
[42:10] And before we get to a flipping of Ether of Bitcoin, we have to get to multi-trillion dollar status and cross that trillion dollar line with Ether the asset. What do you think that's going to take? What does Ethereum need to do to become a multi-trillion dollar asset?
Joe Lubin:
[42:24] We need end-user applications. Really, our best set of end-user applications
Joe Lubin:
[42:30] are in DeFi right now, and we'll work to bring more to consumers and to enterprises. But I think SBET is going to drive a trend where it is going to be seen as safe and acceptable for people and organizations to dip their toe in. And you mentioned being blown away by the power that Maker gave you.
Ryan:
[42:57] Just doing a simple transaction,
Joe Lubin:
[42:59] Sending $1,000 to somebody in another country and watch it take a few seconds and cost you nothing. That's mind-blowing for a lot of people. So we need to get a lot more people to do that and then enable a lot more people to, and especially organizations, to participate in DeFi. Once that gets rolling further, because we really don't have a lot of users in our ecosystem that aren't crypto nerds, finance nerds, or art nerds. Once we get real companies starting to benefit from the technology, I think it'll pick up steam.
David:
[43:36] Joe, SBED is not the only acquisition vehicle going after Ether. There are at least a handful of others, some that haven't been announced yet. But there's a growing number of these acquisition vehicles. Now, anytime that there's multiple acquisition vehicles going after the same asset, it's splitting the efficiency of the lending market. So at least with the way that MicroStrategy works is there are people who are willing to lend money to MicroStrategy and Michael Saylor. And that sucks up some of the amount of available capital MicroStrategy does versus any other Bitcoin acquisition company like MicroStrategy. So it's a little bit more efficient if multiple acquisition facilities like SBET or any other facility looking to acquire Ether would join forces and merge together. Is that a future that you see? I don't know if you're in discussions with any of these that you might be aware of or are unannounced, but where do you think this future goes? Because I don't think you're going to be the only one entering the game. There's going to be two, three, four more. What do you think about this?
Joe Lubin:
[44:41] I think there'll be a bunch trying it out. So I think we will all be mutually supportive as well as competitive. And I do think that there are different ways to bring Ether on Treasury.
Ryan:
[44:53] And so may appeal to different audiences,
Joe Lubin:
[44:55] Different use cases. In our particular case, we believe that we're a thought leader. We're we've been the Ethereum company. We will be the Ethereum company for a long time or their first pan ecosystem company will drive thought leadership. So we will enable retail and institutional investors to to have the top professionals at ConsenSys, at Galaxy, at Perify, at SBET. But we'll bring in the professional investor approach to this. And so we, from a competitive perspective, we think we're in pretty good shape. But we will also, I think, want to collaborate and support a bunch of these companies. I do think you're probably right. I think there'll probably be some consolidation after a while.
Ryan:
[45:41] We mentioned maybe the Bitcoin-Eth ratio has seen a bottom, at least a local bottom. It's shown some momentum recently, here recently. hard to know how long that will persist or whether we're due for another dip or what's going to happen. But there does seem to be a momentum shift with respect to sentiment around Ethereum. And particularly, I'm noticing that in the Ethereum community, there's been some big changes. SBET was very cool, very well received. But even before that, there's been changes at the Ethereum Foundation. We've got new executive directors, new leadership, a clearer, more focused roadmap, It seems like at least it's been communicated as such. We've got other third party groups like Etherealize, which Vivek, I believe is in front of Congress as we're recording this and he's talking about Ethereum. He's talking about decentralization. These are things that it's felt like Ethereum has not had in place before and has lacked. And I'm wondering your reaction to this, so changes at the EF, you know, institutions that are still early, but like Etherealize. Are you feeling that momentum change? And how do you view all of this?
Joe Lubin:
[46:47] Yeah, the change has been organic over the last little while. It's actually been going on inside the Ethereum Foundation for perhaps a year, where they've been thinking about how to reorganize and interviewing people, etc. Been in discussions with leadership, a whole bunch of them. And I'm so excited with how they have reformatted themselves and how they're approaching their major goals and how they will interact more actively with the world, whether it's developers or potentially policy people in governments.
Joe Lubin:
[47:25] I think the Ethereum ecosystem is back in a pretty big way. If you think about the long trajectory of this adventure, I have likened it to how Google had done years and years of leading edge research in AI.
Joe Lubin:
[47:47] Amassed all the best talent, built some truly brilliant things, domains like chess, etc. But they had a lot to protect, first of all. They had a lot to lose. They had no clear indication that if they exposed the world mainstream to this profound new technology, that it would go well. And so they needed a young upstart like OpenAI, who didn't have that much to lose, to sort of create a sense of urgency for Google. And Google's just crushing it right now with Gemini, Notebook, LM, etc. And they're just going to keep crushing it because they've done so much good work. And I really feel like that sounds like the Ethereum ecosystem. We have the best and brightest, the best technology we've been building for a, what felt like a distant, decentralized future. And it took young upstart or some loud Bitcoin maxis to wake us, not really from a slumber, But from this idea that the future is distant, I think it's really now. And I'm very confident that SBET is going to make that very clear to Wall Street and then soon Main Street.
Ryan:
[49:06] Speaking of now, we're also on the cusp of some stablecoin legislation maybe going through under the Genius Act. Of course, Ethereum is home to a lot of the stablecoins, the majority of stablecoins
Ryan:
[49:18] in terms of value, and I believe also volume. Is this going to be a near-term catalyst for Ethereum at all, or do you think this is kind of a sideshow?
Joe Lubin:
[49:28] Oh yeah i think uh i think once we get stablecoin legislation it's going to be a real shot in the arm for a theorem and for the ecosystem i think stables backed by assets in centralized institutions, is a great vector for growth and adoption i'm also a little concerned about it i think what we really need to see is ether to go up in price very significantly and bitcoin to go up in price very significantly because they both represent decentralized bandwidth, economic bandwidth. It's possible that one of you even invented that phrase. I didn't invent it. No, that's Ryan. Is that you, David? No, that's Ryan. Oh, that's Ryan? Oh, sweet. I'm MoneyLangos.
David:
[50:10] He's economic bandwidth.
Joe Lubin:
[50:12] Got it. So in terms of Maker, we can have pure natively decentralized stablecoins, And we need that because we can't rely on, you know, centralized institutions potentially pulling the rug out from under us. So fingers crossed, Bitcoin 3 million, Ether follows it.
David:
[50:36] Quarter million.
Joe Lubin:
[50:38] Quarter million, all right. And there will be ways to keep Bitcoin where it is, where the maxis like it, and still make deploy it in DeFi on Ethereum.
Ryan:
[50:49] I, for one, am very much looking forward to that future of an Ethereum resurgence because I think it's a very boring, unfulfilled world if what we have, the focus of crypto is just Bitcoin on one side without the kind of the defined centralized stable coins on the other. It's kind of not why we're doing this whole bankless thing. So hopefully Ethereum gets some more wind under its sails. And maybe your bullposts will be part of this, Joe. I look forward to seeing those on Twitter because what I heard in this episode is a renewed commitment to get loud about Ether, the asset.
Joe Lubin:
[51:21] I got a new job.
Ryan:
[51:25] Well, we will see you on Twitter then. Joe Lubin, thank you so much for joining us today on Bankless.
Joe Lubin:
[51:29] Awesome. Thank you, guys. It was fun.
Ryan:
[51:31] Guys, got to let you know, of course, none of this has been financial advice. Crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.
Music:
[51:43] Music