57 - Ultra Sound Money | Justin Drake

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Mar 22, 2021

Justin Drake, a researcher at the Ethereum Foundation, returns to explore Ethereum's economic evolution. He discusses the concept of 'ultrasound money' and how innovations like EIP-1559 and Proof of Stake enhance Ether's value. The conversation highlights Ethereum's shift as a sound money asset, its transformative upgrades, and the contrasting economic efficiencies compared to Bitcoin. Drake emphasizes the importance of community consensus and the implications of new financial products like Visa cards that integrate seamlessly with crypto, showcasing Ethereum's future potential.

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INSIGHT

Monetary Premium and Shelling Points

Monetary premium stems from an asset becoming a shelling point for value storage.
Programmability, security, and efficiency contribute to an asset's shelling point status.

INSIGHT

The Magic of Monetary Premium

Monetary premium is a social construct driven by consensus on an asset's value.
Gold's inherent security stems from physics, while Bitcoin requires continuous upkeep.

ANECDOTE

Hypothetical Attack on Bitcoin

A hypothetical attack on Bitcoin by a nation-state actor could involve collaboration with a tech giant like Apple.
This highlights the vulnerability of Proof-of-Work systems to large-scale attacks.

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Justin Drake is a researcher at the Ethereum Foundation and is leading the charge of applied cryptography to the Ethereum network. Last time he was on the podcast, we discussed cryptography as the foundation for what we called ‘Moon Math.’

This week, Justin returns to the show to discuss Ethereum’s economic engine and how its design decisions (EIP-1559, Proof-Of-Stake, Issuance, etc.) emerges as an incredibly bullish evolution of sound money: Ultra Sound Money. ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ GO BANKLESS WITH THESE SPONSOR TOOLS:

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🎙️ 57 - Ultra Sound Money | Justin Drake

Last time Justin was on the Bankless podcast, we went in-depth about cryptocurrency's primitive tools: cryptographic hashes and signatures. He described these as the fire and wheel of cryptography technology. This time, we dive into the specific economic design of the Ethereum network and how it is positioned to expand upon the 'stone-age' cryptography of Proof of Work.

Given Ethereum's expressive capabilities, its future has infinite possibilities in terms of both innovation and development. To explore Ethereum's value proposition as Ultra Sound Money, we use the model of the Ethereum Economic Engine. In this metaphor, the basic energy harnessed is monetary value, stored in the 'engine' battery via tokens. The engine itself is structured by the network's consensus mechanism, Proof of Stake. The engine's efficiency is maximized through the issuance structures proposed in EIP-1559.

All of these components (explored in great detail throughout the conversation) contribute to the concept of ETH as 'Ultra Sound Money.' Soundness describes the degree of efficiency and security in the storage and exchange of monetary value. Economic security, anti-fragility, optimized issuance, efficiency, and scarcity combine to create a robust, maximally effective network. This could be the best episode we've ever recorded. ETH is Ultra Sound Money. Pass it on.

------ 🧑‍🎓 Want access to this episode's exclusive Debrief? Join the Bankless Nation: https://shows.banklesshq.com/p/exclusive-debrief-ultra-sound-money ------

Topics Covered:

0:00 Intro 5:08 The Economic Side of ETH 11:40 Ethereum's Economic Engine 24:00 Integration, The Meme, and Monetary Premiums 35:23 Sound Money & Economic Security 42:58 Cryptoeconomic Horsepower 47:57 Load-to-Power (Towing Capability) 55:59 Competing at the Base Layer 1:02:17 Repairing the Engine (Defense) 1:20:18 POS Plutocracy? Trust? 1:24:43 Engine Fuel 1:33:13 Engine Resilience 1:38:33 Redundance & Security 1:49:10 Stealth & Insurance 1:59:01 Economic Efficiency 2:09:11 Ultra Sound Money 2:18:00 ETH is Money 2:24:12 Hard Money 2:33:13 Closing & Disclaimers

------ RESOURCES

The Bull Case for Cryptography https://shows.banklesshq.com/p/-moon-math-the-bull-case-for-cryptography

ETH is Ultra Sound Money https://newsletter.banklesshq.com/p/eth-is-ultra-sound-money-market-monday

Justin’s Research https://ethresear.ch/u/justindrake/summary

Justin on Twitter https://twitter.com/drakefjustin?s=20

------ THIS WEEK ON BANKLESS:

🗞️ Weekly Rollup (3/19): https://shows.banklesshq.com/p/-rollup-elon-musk-nft-song-stimulus 🧢 Weekly Action Recap (3/20): https://newsletter.banklesshq.com/p/another-1400-weekly-recap ⚫ Token Thursday - Ren (3/18): https://newsletter.banklesshq.com/p/rens-trillion-dollar-opportunity ✏️ Ultra Sound Money (3/15): https://newsletter.banklesshq.com/p/eth-is-ultra-sound-money-market-monday 🐦 Follow Bankless on Twitter: https://twitter.com/BanklessHQ

----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.

Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures