Episode #23: The Re-staking Revolution with Mike Silagadze, CEO & Founder of EtherFi

Speaker A: Hi, guys. Welcome to the Social Block, the podcast that explores the intersection between blockchain technology and society. Our topic today is all about staking, restaking, liquid staking, solo staking. You name it, we'll talk about it. Our guest is Mike Silagatse, CEO and founder of EtherFi. I know that's a name a lot of you know, so that makes it extra exciting for me today. One last thing before we get right into the episode with Mike. The Social Block is taking a little bit of a summer vacation this year, so look out for the next episode around September. And with that, let's get right into the episode. Hi, Mike. How are you doing?

Speaker B: Yeah, doing great. Yeah, Great. Great to be here.

Speaker A: Yeah. Whereabouts are you?

Speaker B: Uh, so normally I'm based in the. In, uh, the Cayman Islands. Right now. I happen to be in the. In the US but normally I'm, uh, based in Cayman.

Speaker A: Right N. Is it warm where you are? It's really warm where I am, like, so hot.

Speaker B: Uh, yeah, it's pretty hot. Especially Cayman. I mean, Cayman is about the same year round. Uh, uh, it's usually about like 30

Speaker A: degrees and sunny every day, so proper summer vibes. Nice.

Speaker B: Yeah, yeah, exactly.

Speaker A: I always ask my guests, the first thing I ask them is to kind of introduce themselves and give our listeners just a little bit of background on who they are, how they got where they are, and, uh, then we can get into the nitty gritty of etherfi.

Speaker B: Sure. Yeah. So my name is Mike Silagadze. I'm the founder and CEO of Etherfry. Um, you know, my. I guess we're talking specifically about probably crypto, and I got to, uh, into, uh, working on Etherfry. So, um, yeah, I mean, I've been doing. Working in startups, uh, for years and years now. My first company, I started out of undergrad in university, um, which was an education technology company that I ran for a while and. And then exited in 2021. And then I switched gears and focused on. On, uh, Ether five. But in parallel to my first company, I had been sort of dabbling and kind of playing around with crypto on the side, uh, for many years. Since 2020. Uh, 11, I think was when I first bought.

Speaker A: Oh, that's a while ago. Uh, wait, did you keep the bitcoin you bought? Yeah, just like, did you not sell it back in? Everybody does. It's this thing of like.

Speaker B: I mean, I bought into ETH pretty early. Um, uh, and I've kept that. That I've, uh, been holding on to.

Speaker A: Nice. Yeah. The only thing I was fairly early on was Solana. Everything else, I'm just so late.

Speaker B: Nice.

Speaker A: Oh, nice. Um, so, yeah, where were we? You said that you were, um, kind of doing things with Crypto back in 2011.

Speaker B: Yeah, that's right. I mean, I read the Bitcoin white paper, got very excited about, uh.

Speaker A: What made you excited?

Speaker B: Uh, well, just the idea of a stateless monetary, uh, system, I think was uh, something that I, uh, felt was um, really appealing. Especially, I mean this was right around the time of the great financial crisis, uh, the first one. Um, and um, so even prior to that, things like inflation and government, uh, kind of manipulation of the money supply was something that I, I'd been thinking a lot about and uh, I thought was a major problem kind of in general. So, um, uh, I felt like Bitcoin, you know, pretty obviously represented a potential solution to that. Right. It was a, you know, it was a potential monetary system that couldn't be manipulated, that couldn't be inflated away, that couldn't be seized and controlled. Um, and uh, you know, as a, as a good libertarian, I felt that that was uh, uh, that was something I was very passionate about.

Speaker A: So relatable. I feel the same way. I have a problem with this unchecked centralization and the road it's leading us down, um, because Etherfi is so deeply embedded into the staking, restaking ecosystem and we were going to get into all of that. I wanted to, if you could start off by um, giving me and our listeners just a little um, summary of Ethereum and proof of stake as it is now, like what that means so that like, people who don't have context will be able to follow the discussion later.

Speaker B: Sure, yeah. Maybe I'll start with um, actually, uh, you know, Bitcoin and how that, you know, uh, how proof of stake sort of builds, builds on that. Um, you know, because most people are familiar with Bitcoin, the way the Bitcoin network works is you've got, you know, thousands, tens of thousands of computers all over the world, uh, that are, you know, very rapidly guessing random numbers. And every 10 minutes or so a computer on the Bitcoin network guesses correctly and gets rewarded with, I think it's five Bitcoin these days. Um, um. And so that mechanism allows the sort of random reward, uh, mechanism allows the um, uh, first of all a way to distribute Bitcoin, uh, to the ecosystem over a period of time. And it creates kind of an economic, uh, security mechanism because you have to pay for uh, all of these Computers to aggressively guess random numbers. So that's a very crude description of uh, the proof of work system of Bitcoin. Um uh Ethereum started off as proof of work but then migrated uh, I guess it's been about a year or two now migrated into a proof of stake system. Proof of stake systems work differently than the Bitcoin mechanism. Um the way uh, proof of stake works is you have to take a certain number of eth tokens um and lock them up, basically lock them in a smart contract on Ethereum in order to get the right to run a uh, node to run one of these computers that processes transactions on the Ethereum uh network. Um uh, and you're putting those uh, tokens that the native token of the ecosystem at stake. You're kind of, you're putting it at risk uh, in exchange for getting uh, getting uh to run one of these uh, one of these nodes. Um and then the reward for putting it at stake is that you get a uh share of the fees on the uh, uh on the network. So um, it you know it's sort of a skin in the game type of uh, type of mechanism. Um so that's proof of stake. Now there's a new kind of layer on top of that that's been introduced. Uh, you know it's been around for a little while but it's been now labeled uh, as restaking. And that's the idea that you take that same eth that you have put at stake in order to run a node on the Ethereum network to provide economic security for Ethereum, um, you're now able to enroll that same eth to provide economic security to other crypto economic networks in exchange for rewards from those networks. So you can basically take your staked eth and restake it across other uh, uh services.

Speaker A: So quick question, how does that work mechanically? Because supposedly when you've staked the Ethereum it's supposed to be like you can't use it for other things. How is it liquid when it's staked so that it can be restaked?

Speaker B: Yeah, sorry. So liquid staking is um, I mean it's abstractions on abstractions but normally when you take your eth and you lock it in the smart contract in order to get the right to run a node on this network, um uh, you're locking that eth and it's not available to you. So there are projects that have uh, developed um Lido and rocketpool were the first that give you a receipt token that is then tradable so basically they. The protocol kind of, you know, it serves as an intermediary to stake the eth and then provides everybody with a receipt token that accrues those, uh, those network, uh, rewards.

Speaker A: So that's another layer.

Speaker B: Um, yeah. And liquid restaking is the same thing. It's a receipt token. It's uh, uh, and there's duration risk on that receipt, uh, token in that you can redeem it for the underlying eth. But it may, most of the time you can do that pretty much immediately. But, uh, it may be subject to some duration risk if there's lots of redemption demands, uh, uh, that are coming in, uh, and restaking. And liquid restaking works, um, more or less, uh, the same way in that it is a receipt token that's subject to some duration risk that becomes tradable, uh, within the Ethereum ecosystem.

Speaker A: Right. I have a question. But before that I just want to say, uh, my mind was just kind of circling. Going back to what you said about, um, Bitcoin block rewards. I think you said it was like 5 BTC, isn't it 3.12 something. Right. Now after the halving. We need to check this back. I think it's about.

Speaker B: I thought it was 10.

Speaker A: Um, no, no, I think it was.

Speaker B: I thought it was 10 and then it got cut down. So I don't know.

Speaker A: I think it's 3.1. Uh, yeah, sorry, that was just kind of in the back of my brain. Uh, anyway, so from what we were saying about liquid staking and restaking, are they technically the same, like just two different ways of saying the same thing, or is there actually a fundamental difference?

Speaker B: You mean restaking specifically?

Speaker A: Yeah, like liquid staking and restaking, like what you just explained. Because I got one concept out of that.

Speaker B: The liquid aspect of it is the same in the sense that they're both receipt tokens. It's like imagine, um, you know, to take a trad. By analogy, imagine you buy a bond, whether it's a government bond or whatever, corporate bond. You get some sort of receipt that says, yeah, you own this, you know, this bond, and then you can basically sell that receipt to somebody else. So the money that you loan the government is still, you know, with the government, but you have this receipt that is tradable, that has its own, like, value. So it's the exact same thing. Uh, yeah, even if there's duration risk on that bond, you know, it can go up and down. Um, is, uh, it's, you know, it's a liquid asset that is, uh, that is Tradable.

Speaker A: Sweet. So I was reading a little bit about Etherfi online before we like went on and uh, one thing that kind of popped was that I think it's probably either the only or one of the only protocols that supposedly allows people to retain ownership of their private keys when restaking. How does that work and why is that important?

Speaker B: Yeah, so when we started the protocol, one of the things that was very important to us was uh, self custody, um, which meant that stakers, because we built this protocol really for ourselves and we asked ourselves what are the features that we're important to us as, you know, as eth holders and stakers. And uh, I have a problem.

Speaker A: I have a solution.

Speaker B: Yeah, exactly. Um, so, so the way the protocol is designed is that the stakers are the ones that generate the uh, the, the keys and then um, that allows the staker to uh, you know, get, get their ease back if they uh, if they, if they want to. Um, so uh, whereas other protocols are designed in such a way that the node operators, the people that are running the server, hold um, the keys and uh, for now, that would actually allow them to uh, hold the eth hostage. Um, uh, that thankfully is actually no longer going to be a problem as of the next Ethereum upgrade because um, uh, they're introducing a feature that allows you to force exit validators.

Speaker A: What's it called?

Speaker B: So without getting too far into the.

Speaker A: Just to know what's the upgrade and what's the feature so that we know what to look out for.

Speaker B: Um, I forget what the latest upgrade is called.

Speaker A: Wait, we can check it.

Speaker B: Last one. Now, uh, I forgot what this one's called, but uh, it's called Execution layer Exits. That's the feature. Um, so it allows you to exit validators from the execution layer from a smart contract action.

Speaker A: Okay, I'll look this up and I'll put it in the description for our listeners because I feel like this is important. Um, but yeah, cool. Um, essentially when people retain ownership of their private keys, I uh, understand it that in the other situation they're sending their eth somewhere, whereas in this situation they actually keep it. But then how do they actually stake it? What's the mechanism?

Speaker B: Uh, it's not that they keep it in a different way, it's that they, they're able to force. So uh, and so we're getting into a bunch like all these technical details. Hopefully I'm doing an okay job.

Speaker A: I mean, I'm asking about them.

Speaker B: Um, yeah. So, um, normally the way staking works right now is you generate uh, your private key. It's called the BLS key. You generate your private key, then you uh, derive from that private key, uh, uh, another key that you actually use to run the server that processes transactions on the Ethereum network. And this is called the validator key. And then you stake your eth, you deposit 32 ETH into the beacon chain deposit contract. Uh, and that eventually will register that validator and allow you to run uh, that computer, that server. Um, so uh, in order to get the eth back, let's say at some point you say, all right, I'm done running, um, uh, the server, I want to get my eth back. In order to get it back you have to generate what's called an exit transaction. And the only way that you can generate that exit transaction is if you have that validator key. It's like you need that key to get your eth back. That's, you know, that's the short sort of summary. Um, uh, with other staking protocols the only party that has that key are the node operators. So the people that are running the servers on your behalf. Um, and the challenge with that is that there are certain ways that, that could end up basically resulting uh, in your eth being stranded or held hostage. Um, you wouldn't have the ability to force them to give you back your eth. Um, and whereas with Etherfried, the way we design the system is you would, you are the only one that has that key. And so the node operator can't hold the eth hostage. But with this latest um, upgrade that's coming, um, that will no longer be a problem. Um, and uh, so uh, I think that's a really positive development for uh, Ethereum.

Speaker A: Yeah, definitely. You know what makes me really curious about this is why this wasn't done initially because I think Ethereum, the Merge was on the 15th of September 2022 if I remember correctly. Uh, so that's when it transitioned to proof of stake. Right. And I was wondering, with all of the staking that's been going on, people were talking about it even before that date. Why are we only now getting to a point where we have um, staking clears? Okay, so it just takes time to get there.

Speaker B: I think it, uh, yeah, it was just complexity, you know, they chose for a simpler implementation. Um, and now, you know, now it's this uh, is uh, this feature is going to become available to everybody.

Speaker A: Right. A little bit of a tangent, but I was reading about solo staking as well and I know that like if you're doing that just on the actual Ethereum network. That's quite taxing. Like that's kind of hard to do because you would have to be an incredibly big holder to I guess, you know, have some kind of chance I think. I'm not sure if I'm right there, but I was reading that Etherfi also provides opportunities for solo staking. Can you break solo staking down and tell us what's up there and what people can do with solo staking?

Speaker B: Yeah, so solo staking is very important. Solo staking basically means instead of delegating your eth, uh, uh, operations, your eth server operations to somebody else, you uh, actually run the node yourself. So it's basically individuals in theory. This is what it's meant to be solace taking as individuals running computers either in their homes or businesses distributed all over the world. Um, rather than them, you know, delegating that uh, that task to a third party. So that uh, I mean the reason that's important is it does add a layer of robustness to the network. It makes it far more decentralized and democratized rather than it being concentrated in a few large data centers which is kind of unfortunately where Ethereum to some extent is now. Um, last I checked, um, something like half, over half the network was really was based on just two data centers.

Speaker A: Oh that's not good.

Speaker B: One in the US one and one in Germany. Yeah, it's quite, I mean it's really bad if one of those data goes

Speaker A: like the opposite of what we want in blockchain. The exact opposite.

Speaker B: Yeah, exactly. I mean Bitcoin has similar problems where just a couple of the large mining pools control most of the hash rate. So this is a real problem. I mean I think having more solo stakers is super important. Um, uh, and so we started this program called Operation Solo Staker which helped uh, more people come online and get computers and tech support to be able to run Ethereum nodes. Um, we uh, were planning to invest a lot more into that program and in particular to make it so that uh, restaking uh, is accessible to solo stakers. Because right now Restaking is basically not accessible to solo stakers at this point because it's just um, uh, I mean there's a lot of complexity and overhead associated with restaking. Um, so that's something that we're planning to invest uh, a lot more into. Um, yeah, I'll leave it at that for now.

Speaker A: Okay. Are you planning uh, this more of like I guess humanitarian comms question, but uh, do you have like Any idea of like what strategy you want to use to I guess put out some educational material, some outreach Because I feel like there's actually a lot of people with the potential to be a solo staker who just either haven't thought about it or just don't know how.

Speaker B: Well there's a bunch of technical engineering work that has to happen in order to facilitate this. Um because normally um restaking requires you. If you're running an Ethereum node uh there's a lot of overhead associated with restaking because it requires you to run not just the Ethereum client but the clients. Um uh like the way restaking works right is you're providing economic security to a bunch of other crypto economic networks. Right. Um, so providing security to Ethereum means running the Ethereum client. Providing security to restaking services requires running their clients. And so you can imagine a scenario where someone like an individual with a computer under their desk would um, be you know that's running just one Ethereum node would be required to run I don't know like 10 or 15 different clients which is just an administrative uh, nightmare for a person. I mean it's like almost a full time job to keep these things active. But even more so it's um, it's not really practical because like these various networks wouldn't waste there wouldn't be able to like apply the resources to provide tech support to like one random guy somewhere in a random country uh uh, that's running uh this node restaking right now is really just not accessible to solo stakers. It's just not practical for them to do that. The work required to make it practical is first of all making it um, possible for them to uh, building software that makes it more easy for them to run these clients or allow them to easily delegate the non Ethereum client portion to, to others to other operators and to, for them to register themselves as a, under sort of an umbrella organization of solo stakers to sort of to plug themselves into these other uh, you know, restaking services. Uh again I mean there's, that's a lot of like uh, in the weeds detail but uh, hopefully that that makes sense. The basic idea is we want to make restaking accessible to solo stakers. That's what we want to do and uh, there's a bunch of technical work required uh uh before that becomes possible.

Speaker A: Yeah, I just feel like, I guess my question was more focused not even on the technical work but on the actual outreach because you can have an amazing opportunity and if people don't know about it or understand it, they'll completely block.

Speaker B: Lots of people want to do it. I don't think that's even. I don't even know what the numbers are now. But I mean, we've had like tens of thousands of people apply to be solo stakers. So there's, there's an unlimited demand. There's only, like, there's less than 10,000 Ethereum nodes out there, I think. Um, so, you know, there's basically unlimited demand of people wanting to run Ethereum nodes, uh, and being willing to do the work, to do it. The issue is like, you know, again, like, the software has to be written, the business models need to be developed. Like, there's just, there's a million things to actually. And honestly, nobody's working on this right now. Like, this is. No, nobody that I know of is working on allowing restakers to participate, allowing solo stakers to participate in restaking. It's actually kind of crazy like, that. It's, you know, uh, there's over like about $20 billion worth of ETH. Um, you know, it's a significant percentage of ETH that is now enrolled in restaking of Stake Deep. That's enrolled in restaking, I think, uh, like 10%, 20%, something like that. Of all.

Speaker A: That's a lot. That's a lot. Especially if it's 20%. But it makes sense because, like, if you're, if you're, like, you hold an asset on a proof of stake blockchain, you should be staking it because otherwise it's. You're just not doing yourself a favor.

Speaker B: Yeah, sorry. So the specific metric is 20% of stake deep is now enrolled in restaking, uh, which is a lot. Like, that's, that's a very mature number. And it's going up. It's still growing up pretty fast. And again, that 20% is completely inaccessible to solo stakers. Uh, and that's, that's really bad. That's, that's, you know, imagine that 20% turns into 50% now you've got like 50% of the network that is inaccessible to receive stickers. Um, and that, like, that is, you

Speaker A: know, that's the opposite of the point.

Speaker B: The opposite of the vision. Yeah, exactly. I mean, Vitalik and obviously the folks of the Ethereum foundation, the early. This is the exact opposite of what they intended.

Speaker A: Well, the good news is Vitalik's a smart guy. He'll figure it out. If you guys, like, with you guys, there'll be a solution. I'm sure he'll just Be like, oh no, this can't keep going.

Speaker B: No, yeah, this is. I mean the solution is very, um, doable. And I don't want to say it's simple but like, you know, I know exactly what needs to be done. So it's really just a matter of like putting the engineering resources to, uh, uh, doing it. And uh, really within the next probably month or two we're going to start, um, we're going to call out, actually a call for proposals, uh, for people to build this, uh, implementation, uh, to facilitate SOL staking participation in restaking. So it is coming, um, uh, so probably by the end of the year we'll have uh, uh, some sort of democratization of this thing.

Speaker A: Good. So we're practically there. I'm glad that somebody sat down and is like, oh no, we're going to build this. If you don't, we will. It's really smart.

Speaker B: Everyone is so focused on the, you know, the, I guess the economics, uh, of uh, you know, the hype around restaking that, um. Yeah, I think there hasn't been enough interest in the solo m. Staking part of it.

Speaker A: I mean, I guess so. Because also I think if you're a solo staker, it can also feel like you don't have a voice. Like you can go and like post on Twitter and stuff, but like you're one person after all. Whereas, like all these other organizations and like, they're just bigger and they're louder. So I do understand where like there's this big problem with the democratization of restaking, but like, we just don't hear people's voices loud enough. So it's good to have like a, a company or like an organization that's loud enough to be like, let's talk about this now and then let's build it. I love the, I love the do the work mentality there. Um, but you said, um. God, you mentioned something that completely slipped my mind. Um. Oh, well, I'll probably remember later. Um, so I wanted to ask like a little bit of a spicier question if that's okay. Uh, I know that the SEC declared everything besides Bitcoin a security, and that includes Ethereum, obviously. So, um, like, how did that affect your business in any way? Is there any specific way you would approach things if Ethereum, um, is starting to be treated very strictly as a security?

Speaker B: Uh, I think they, uh, recently dropped the suit against the Ethereum foundation. And so, I mean, did they. The SEC is such a shit show. Yeah, I mean, like, I don't.

Speaker A: I'm not like little pancakes, like flipping

Speaker B: the opposite of an expert in this thing. I think the risk of Ethereum, the fact that they approved the ETFs, the uh, fact that they dropped the suit against the Ethereum foundation, it would be very surprising to me and to uh, others probably if Ethereum suddenly, if ETH suddenly got declared a security. I think that's extremely unlikely.

Speaker A: Does it confuse you with the approval of the ETFs? I feel like that kind of snuck up on me. Um, were you expecting it and what

Speaker B: were the signs to lots of people.

Speaker A: I feel like it happened overnight.

Speaker B: I think everybody was surprised.

Speaker A: Yeah. So it wasn't just us.

Speaker B: I mean I'm sure people on the inside. Yeah, I had some idea, but yeah, that really surprised everybody. Um, so anyway, I think ETH is like, you know, however much value we put into the, you know, the opinions of the sec, they have anointed and said that ETH is almost certainly not a security.

Speaker A: Um, almost certainly not. I love it.

Speaker B: Yeah. I think though, ah, staked eth. I don't know if um, uh, that especially liquid stake deep. I don't know that it's as clear, you know, it should be because if you just think about mechanically what's happening, uh, like if ETH isn't security, then stake deep is certainly not a security. I mean it wouldn't make any sense in my opinion.

Speaker A: Supposedly it's the same thing. So. Supposedly, uh, like the underlying asset. It's not logical.

Speaker B: Yeah.

Speaker A: Ah.

Speaker B: And then liquid staked ETH is just a receipt token for staked eth. So that's be weird. And then, then there's another whole other layer on top of it around restake deed. So, so there's lots of like components that are still, I would say in the gray area. The way we deal with that, uh, the different companies, you know, do different things. The way we deal with it is we aggressively try, uh, to block, uh, we first of all, in our terms of service, we, we say that our um, uh, uh, protocol is not accessible to U.S. persons. Um, and we aggressively try to prevent U.S. persons from uh, you know, participating in our, in our protocol. And based on our data, I think we actually do a pretty good job of that. Um, so, um, that those are the things that we're doing. You know, we basically just try to um. Like we want to be compliant, we want to be a good actor in this space. Um, if someone tells us that in their jurisdiction, they don't like what we're doing, uh, or even just doesn't give us clarity that what we're doing is fine, that we're not gonna, you know, play games. We're not gonna operate in that jurisdiction.

Speaker A: So in all fairness, the same for us. It's the same. Like, you know, if you have uncertainty, sorry, clients, but, you know, we can't do this if it's not legal. Yeah, I just.

Speaker B: That's right. You know, some people are more fast and loose with the, uh, you know, their willingness to take those types of risks. But we try to be, as I said, we're trying to be compliant and a good sort of citizen, do things the right way. We, you know, we have our foundation and Dow and labs company and, like, separation between those. So there's just. There's certain ways that you're kind of supposed to set this up on the, you know, the advice of lots and lots of expensive lawyers. Um, and we try to do that. You know, whatever the rules are, we. We're following the rules to the extent possible.

Speaker A: It's so incredibly reassuring to hear that, knowing what it's like for us at Nexo as well. We have a huge legal team, and they are just working their asses off, and we have lawyers and consultants from all over the world for every jurisdiction. And it's such a heavy process, and I can see how these people have to think about everything and how complicated it is, and they're trying to set it up in the way it's supposed to be set up, but sometimes it's literally instructions unclear, you know, um, and, you know, they're just kind of like, we'll do our best with, like, the instructions we're getting and the regulations we've got. But, you know, there's only so much certainty we can give, given the fact that the regulators haven't, you know, put their cards on the table yet. So it's frustrating. And I feel like, especially coming back to the U.S. it's, um. I don't think they're doing themselves a favor in being so unsure. And so, you know, they kind of go, um, three steps forward, one step back with regulation. Um, and I think that's confusing companies, and it's. It's like chasing companies away. Like, sometimes they're actively trying to shuttle us out, but then other times, I feel like companies are just leaving. Like, that's what we did. We were just like, we can't. You know, we, um, won't actually take this risk. So, uh, we're going to measuredly, uh, you know, scale out, depending what happens,

Speaker B: I guess, with the presidential election. I think that might change. I mean it does seem like Trump is a lot more friendly to he. Yeah, I mean this is uh, a point that's been made lots and lots of times is that crypto can be a, uh, mechanism for the US to dollarize the world, which is to uh, a large extent a major advantage, uh, for the US because it effectively allows them to print, to print dollars globally, essentially send them to the world and then people send them good to keep

Speaker A: the dominance that they have right now and they're completely missing it.

Speaker B: Yeah, yeah, exactly. Uh, it's a point that's been made lots of times by crypto folks that the US has this golden goose and an opportunity and they're just stupidly squandering it. Uh, but it does seem like if Trump is in fact elected, it does seem like there's going to be a bit of, ah, a change.

Speaker A: I don't know. I had this conversation with my dad yesterday and he is of the same opinion as you that Trump might actually be good for crypto. But as, as a woman, I don't feel very, um, okay with Trump and not just as a woman. As a person, uh, I'm uncomfortable with a lot of his opinions and the kind of policies he um, stands for.

Speaker B: Sure, yeah.

Speaker A: Um, but anyway, um, digressing from that, I just want to say I did find the article about the SEC dropping the suit against the Ethereum, um, foundation. So I stand corrected. You are right. It was from um, six days ago, this one. So I must have just been sleeping under a rock six days ago. It just happens to me all the time.

Speaker B: Anyway, it's um, not precisely the same as saying ETH is not a security.

Speaker A: Yeah.

Speaker B: But the combination of dropping the suit and ETFs. Yeah. It would be really weird for them to say ETH is a security now after those.

Speaker A: It's definitely, it's movement in a different direction from like where they were going. So. Yeah, I stand corrected and I'm sorry. Um, all right, so wait, we talked about the etf and um, I read some news that uh, Etherfi's, um, like you guys saw so much interest when that was released. Can you talk about that for a bit and what happened after? Because this was a while ago. Um, how's it been since the ETH ETFs?

Speaker B: Yeah, yeah, I don't think they're trading yet. At least.

Speaker A: I'm like when the news hit, I feel like you guys.

Speaker B: Yeah, we've had, I mean actually a pretty consistent, uh, run up over the Last, uh, uh, how long has it been? Since November, So almost a year now. Um, and yeah, no, it's been completely wild. Like we're the fifth largest protocol in crypto. Uh, we're about six and a half billion in tvl.

Speaker A: Are you a little frazzled?

Speaker B: It's just been insane. Yeah, for sure. Um, I don't know that there's any other instance where something is ramped up to $6.5 billion that quickly, uh, like from launch to less than a year. Well, Eigen Layer, I guess is an example of that. We're obviously like riding their coattails a little bit. Uh, so that's just been completely insane. And I think we first of all executed well and built a good product that people really like. Um, but we were obviously also the beneficiaries of the crypto market kind of resurgence and uh, and the narrative around restaking, uh, becoming, you know, the narrative that kind of dominated the space. So, um, so we're just very fortunate that that uh, you know, that's happened. Um, yeah, yeah.

Speaker A: It was just a response to the article which I actually had it from previously pulled up. It says, Ether ETF listing approval sees billions poured into restaking protocol EtherFi. So I was wondering whether that gave you a big boost. But from what I'm hearing, you've just had a lot of consistent growth. And I guess like the media was just kind of like, you know, they were just like, oh, let's put A and B together into this article. Yeah, interesting, interesting.

Speaker B: But like you look at our growth graph, it's just like still been going up straight line for like a year.

Speaker A: Yeah, that's good to hear.

Speaker B: Actually, deposits are still pretty. Yeah, pretty.

Speaker A: Well, it's nice to hear that people weren't purely just like etherfi is great and then news and then just back to Ether is great. I'm glad that like you've had.

Speaker B: I mean there's always something. Um.

Speaker A: Yeah, but I feel like, um, it's good to not have over exuberance. There's always something. And yes, you can definitely sell news. It's even a good thing, I guess. But, um, it's good to know that it wasn't just the news selling, it was just a consistent growth overall. So that's pretty cool.

Speaker B: Um, I mean what we're proud of or what we're excited about building is not just like a staking, restaking protocol. Because I think, you know, for myself, I consider myself very much a product person. Uh, I want to build products that people can actually use. Um, Day to day rather than just this sort of very specific kind of technical service around restaking. Uh, and so our vision, our longer term goal is to provide a suite of uh, integrated services that make crypto, uh and defi specifically accessible to normal people. Um, and this is where I actually think we're very well aligned with uh, uh, with Nestle in terms of our goals and uh, objectives. And hopefully that mean we'll work closely together. Um, um. But yes, we actually have three products now that are integrated with each other that allow users to uh, stake to invest and then to spend uh, uh, their money. And we call these products EtherFi Stake, EtherFry Liquid and Etherfi Cash. Uh, and so I think that's another reason why we've continued to see growth. Um, whereas maybe some other folks in the category have uh, in some cases have started to plateau because our vision is broader than just hey, stake your eth and uh, collect your rewards. Um, we're actually trying to create something that ultimately becomes a utility uh, for users and that allows people who are um, uh, less technical, less hyper financialized to participate uh, uh, in this economy

Speaker A: also like me, I'm that person. I'm less technical, less hyper financialized. Just curious. And trying to participate in the blockchain economy and struggling or failing sometimes as well. Never um, be afraid to fail. Done it so many times at this point it's just so hard to learn. Um, okay, well uh, one thing I wanted to ask specifically because you guys are really riding the edge of that um, restaking wave. Uh, what do you think is going to be the next big trend in Ethereum or in Defi or in the space right now? What would you like put your finger on? What do you bet on?

Speaker B: Um, well there's a lot of things I'm excited about and um, uh well I'll just say what I'm excited about because I don't know, it's so hard to predict what the next big narrative is going to be. I mean I wouldn't have. I honestly think we just got super lucky that restaking became the narrative and we, we got, you know, got a lot of growth out of it. But I uh, wouldn't have predicted that honestly. Like it felt like this very like niche like technical thing. Anyway, um, so the things I'm excited about, uh, I, I'm very excited about the RWA category. So real world assets being tokenized. The reason I'm excited about that is because it brings productive assets on chain. It's not just people speculating on you know token prices, uh, where it's essentially just driven by new uh, money coming into the ecosystem. Um, whereas rwas actually bring in uh, income streams, cash flows from productive activity on chain. And I think that's critical if uh, the defi ecosystem is to grow beyond just being this sort of global decentralized uh, casino. So that's something that I'm very excited about. And then consumer apps, like actual consumer applications of, of crypto. And I think there's a few areas that um, we're seeing some really interesting work being done. So everything from you know, art to gaming, I mean that's. Those are things that have been around now for years, uh, on the blockchain. I think it's interesting. Um, but even you know, some of the stuff that we're doing around giving people an ability to deploy capital to spend crypto in uh, real life and uh, giving them some utility for these uh, assets that go outside of just the uh, as I said, sort of the speculative casino, uh, world.

Speaker A: Yeah, I feel like RWA is just like it's been big for years but it's just not been I guess built yet. It's exactly like the thing with like the solo staking. I feel like everybody knows it's really necessary. Everybody knows it's going to be huge. It's just not been like built out and fleshed out properly. And I think it's a matter of time.

Speaker B: I mean it's growing.

Speaker A: It is, yeah.

Speaker B: I mean uh, it's probably grown like 10x in the last year. You know, uh, with projects like Ondo, I guess to some extent Athena could kind of be viewed as that. Um. But ah, yeah, it's grown a lot. Like there's now obviously like a lot of different mechanisms for getting treasuries like bonds, government bonds on chain, um, to where that's like um, billions and billions of dollars uh, have been tokenized. Um, uh, and then other asset classes like real estate, like commodities, uh, are now starting to get plugged in. And I think that's um, you know, uh, uh, that is both exciting and I think it'll lead to a world where um, crypto eventually becomes the default kind of launch point for new asset classes and new uh, uh, financial instruments and um, it becomes like the default capital market of the global economy.

Speaker A: Yeah. Yeah. You know, I'm really excited about something that I know is never going to be trendy. Um, and I'm really bummed about that because it's never going to be the next big thing in crypto. But I really want us to see, um, to use blockchain technology for like tokenization of basically more like digitalization of um, documentation. Because I feel like my adult life is just a bunch of uh, people giving me pieces of paper and I need to choose which ones to hold on to and I keep choosing wrong. And I really need like an identity wallet or somewhere where I can put everything and never lose it. I desperately need this in my life. But I know that that's so not. That's like a very not so sexy application of blockchain. But I need this so much. I wish, I wish it was like something that.

Speaker B: I think it's going to happen.

Speaker A: I do too. I just think it's never going to be hot.

Speaker B: Makes a ton of sense. Yeah.

Speaker A: You know, if, I mean it'll be,

Speaker B: it'll be I think, a category that grows, uh, as crypto becomes more widely accepted and actually used. Uh, I think identity and um, there's even ways, I think for um, coordination around like um, sensitive documents like medical records or other kinds of data that can be encrypted on chain. I mean not to like nerd out too much, but there's lots of really interesting things you can do where information can be stored on chain and you can compute over that information without revealing that information to parties that you don't want. So things like proving your identity or being able to prove that a certain document is accessible without necessarily making that document public. These are actually like multibillion dollar industries off chain. Um, the reason that these aren't, these applications aren't widespread now is because um, you know, because the sort of, the hooks into the real world economy haven't been, you know, haven't been developed yet.

Speaker A: Exactly. Yeah. And also people are super focused on the money right now. I feel like people flock to where the money is, especially in crypto and blockchain. And I had a, ah, really, Um, a woman I work with from uh, inatba, which is a pretty big association that I'm working with right now. She is always like, we really need to differentiate blockchain from crypto because I like crypto. But crypto definitely seems to obfuscate blockchain technology a lot because people just, there's a spotlight shining on crypto and people are thinking about the money, but they're not thinking about the technology and what we could use it for, like rwa, which is also financial. Like it's a crossover between the two. But um, yeah, she's, she's always like stressing that and I'm like she's actually right because we're missing out on some really good applications just because we're so focused on the money.

Speaker B: Yeah, I think, I really believe uh, I agree with that. The amount of money flooding into crypto and um, the casino aspect of it is really more of a curse than anything else because it has a tendency to starve uh many real projects of resources and capital, uh, because the focus becomes on all these gambling things that are just much easier, that are much easier to find finance, much easier to generate sort of a speculative return off of. Um, so I think that is ah, and I think to bring you back full circle to regulation uh, and SEC and all that. Uh, I think that this is one of the consequences of not having clear rules and having uh, shitty regulations is that it um, prevents people from doing the real things and focuses all the energy and attention on all the gambling stuff that is uh, happening and kind of yeah, offshore jurisdictions. Whereas alternatively you'd have more uh, of the real world applications being developed um, in uh, regulated properly run jurisdictions.

Speaker A: Definitely. So we're kind of up to the end of the episode and I always ask my guests at the end if there's a specific message or something they want to leave our listeners thinking about right before we go off.

Speaker B: Yeah, I mean the one thing that I'll say, and I've said this uh, uh, before another context is that um, whether it's investing or building products or um, uh, thinking where to put your time, generally the best approach is just to think about things long term. If you're buying something then uh, whether it's a crypto asset or whatever, think of it as like all right, am I comfortable buying and holding this thing for 10 years or 20 years? If I'm building something, do I think this is a thing that makes sense to build, uh, for the long term, is this something that's going to exist in 10 or 20 years? Uh, thinking about things like that just honestly has a tendency to make decision making a lot easier. Um, then you're not worried about trying to buy into some idiotic meme coin or whatever thing uh, that's not going to be around in five minutes. You're focused on asking uh, yourself and thinking about the right things, which is, is this a thing that actually makes sense, uh, over a long term time horizon and then you're not worried about what's happening kind of uh, as much on the day to day. So uh, that's uh, my advice for folks.

Speaker A: That's the second like you're the second person who, uh, told me that I think it was Azim Khan, who's, uh, currently working with Morph, who is the same. He was just like, you got to think about it in terms of a ten year, at least, uh, period of time. But, yeah, I think that's good advice. And I think that also brings that sobriety to crypto and blockchain, that it's okay to participate in the space, but don't do it for the casino aspect. Like, yeah, by all means, uh, have fun with dog with hat, like, if, you know, just for shits and giggles. But that's not the point. You know, that should be your kind of like, I'm joking around and I'm playing. Whereas the other thing is, I'm doing. I'm intentionally investing, I'm intentionally exploring. It's a different thing. Um, so I guess, yeah, like, be intentional, um, is like the vibe there. Um, and so with that, I guess we can, um, end our episode for the day. Uh, thanks everyone, for listening, and we'll catch you next time on the Social Block, possibly in a couple months after our little summer vacation. And thank you so much, Mike, for joining us.

Speaker B: Yeah, thanks for having me.