# The ETH Standard |  Ermin Nurovic - dHedge

- Speakers: Ermin Nurovic
- Channel: [Ethereum Denver](https://streameth.org/ethereum-denver)
- Date: 2024-10-09
- Duration: 12:17
- Topics: blockchain, web3, ethereum, Entertainment
- Watch: https://streameth.org/watch/yt-9FgbBA4ZwQQ
- YouTube: https://www.youtube.com/watch?v=9FgbBA4ZwQQ

## Description

Legacy finance is slowly co-opting DeFi as more protocols bring TradFi risks onto Ethereum. To return to our cypherpunk roots and untether ourselves, DeFi needs scalable, censorship resistant money. The ETH standard presents a path to create onchain money free from offchain risks.

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## Transcript

uh hello uh my name is man and I'm here with flat money uh and today I'd like to talk to you about eth um so so we think that eth the value of eth how eth is used the utility of it is actually really important especially now since we've made the switch to the proof of stake because at the end of the day that's what's securing the ethereum network um so and I I'll talk a little bit about the history of e how it used to be used especially you know with users uh the io days the the first initial deps and how that's kind of evolved over time and the role that usdc or stable coins have have started to play Within defi especially and how that's impacted the ethereum network and kind of what we can do better some of the risks and what we can do better going forward um but one of the questions I really like to ask because this is always interesting for me uh and people sometimes feel very passionately about this is this is e money Sal get a show of hands from anyone who who thinks that eth is money got a lot of hands a few people with their hands down okay that's best most of the people let's go the other way around who thinks that eth is not money we got a couple couple of contrarians there okay well this is like the consensus basically you know within ethereum that you know most of us do believe that eth is money and um maybe the question to ask is you know what makes good money what are the sort of good attributes of money and some of the things you know classic things like you know is it durable is it portable is it divisible and and you know crypto Assets in general you know have this attribute by default which is great as we sort of go down the list there it's like store or value and actually you could apply this to many different tokens and assets and actually you know there are many legitimate crypto Assets Now that that do have you know a store of value and and and are valued on chain but as you go down this list you know you start to look at the unit of account the medium of exchange you know what what a crypto natives transacting in what do they want to get paid in you know when you do the de denomination of your you know the assets and the services and the applications you know in what units are you thinking so you know just going back in time a little bit you know going back to the Ico boom days you know a lot of projects rais a lot of money and they mostly raised in eth so this was really great you know through 2017 you know eth was going up in price the treasuries were looking really good the runways were looking long and the early stage applications and this is the first this is a the first predictions Market that went um live on ethereum Network and and you can see like everything is denominated underneath you know the estimated cost the fees the limit prices everything is priced underneath and this was the norm back in those days and of course this was great you know during the the the early 2017 Ico boom e price was going up everything was looking Rosy and then of course you know the icoo bus came and at that time you know things are not looking so good you know a lot of people lost a lot of money but a lot of projects that were funded with E and stayed in eth their runways dwindled and many of them couldn't even launch their projects this is also a problem for the applications that had eth integrated it wasn't a great user experience to see the value of your assets um declin so rapidly and then of course you know the rest is history defi summer um you know the winter and and I don't know what we call this next cycle but you know if we call it this that would that would make me pretty happy but the point is there's a lot of volatility in eth and and and people want to have control over the volatility of their assets and you know they want to decide you know when they want this sort of volatility and when they don't and and that was really that's really what was the Catalyst for the rise of stable coins and stable coins really started to you know jump up especially the centralized ones like usdc and usdt and they saw a lot of use cases um coming through and you know we started to see the decent CED applications start to integrate a lot more of these um centralized stable coins to improve the user experience and you know and even even regular people that we're using you know crypto to transact with there are some people that talk about you know countries with high inflation you know like Argentina you know that that the crypto natives there what do they use what do what sort of crypto would they like to receive as payment and you know usually they're going to come back and they're going to say well stable coins and and even people in this room all the service providers out here they accept crypto payments you know what do they want to accept and usually it's stable coins and and as a result we've really seeing this the market cap of the stable coins you know rise and you can compare that against the eth market cap and it's up to 35% I believe over 100 billion 140 billion now and you know some people are saying that the stable coins are set to Boom even from here that the stable coin market cap is going to jump up another you know 10x and and the thing is um you know the the stable coin market cap is kind of uncorrelated it's not directly correlated to the eth market cap so you could have this scenario where the value on chain that's being settled and transacted every day is a lot higher than the eat market cap there's nothing you know theoretically tying them together and where that could create an issue is really a small portion of that is what's securing the network so if ideally what we should be striving for is to have our assets as they scale that they also directly scale the security of ethereum along with it and of course you know with centralized stable coins a year ago you know I woke up look at the news and like this was all over the news globally you know we had you know bank failures Bank Run and you know a real crisis and I thought oh okay you know there's a there's there's a bank there's a bank run in the US that's fine of course until I looked at the usdc price and I was in shock and of course part part of the collateral was in these Banks and you know it's it made me really question everything you know this shouldn't happen to usdc it should have happened to usdt cuz that's what everyone's talking about right and then I came to the sad realization that I'm probably just following the wrong crypto Twitter account so maybe I need to start again and even with the decentralized stable coins you know where they first started off you could just mint stable coins with eth it wasn't particularly Capital efficient you put in $200 of eth to me $100 of D but this is good in the bull market because eth is going up in price your collateral is safe but not so good in the bare Market where you're basically about to be liquidated so you either have to close your position or get liquidated and this wasn't particularly good for makad Dow and a die market cap so what they decided to do is say hey this doesn't really you know there's a lot of volatility here again it's a volatility problem why don't we why don't we collateralize die with real world Assets Now now what does that mean well essentially you know an institution can come along and say hey we want to borrow whatever 100 million die and look we're going to sell it we're going to put that USD in the bank we're going to Rend it to another company for more interest so we can make good money it makes sense or or we can buy short-term Securities and earn more interest and that's a good thing it's good for Mak AOW you know they can make the revenue these other institutions can make the revenue but once you dig deeper it's like what are we actually kind of what are we doing here and you know at the top layer the crypto layer the defi layer you know die goes out and eventually D comes back in but once you once you dig into the offchain the tradire layer and I'm not going to go through this but I just want to give you the sort of the picture you there's a whole lot of custodians trustees a lot of flows you know underneath all this and then you know the question is what does this look like and you got the defile layer on top and you got the Trad file layer down the bottom with all of the issues and and lack of transparency that comes with that and you know I you know I'm not an American I don't know what to make of all this but there's some there's some risks you know coming along with all this right and and at the end of the day Circle who issues usdc they have the ability on chain to to block any accounts and then the question is you know if the regulatory environment does change you know what does that mean for the holders but even more what does that mean for the def5 protocols where these stable coins are are integrated so deeply and then zooming out you know what what are we doing uh does it make sense that you know if a single Bank sneezes that the whole of defi catches a cold doesn't make sense that we're so tied and connected when originally we were supposed to be building a system that actually approves on the Legacy systems so like if again if we zoom out what should onchain money really look like you know what are the properties of money that we should be striving for it was even in the you know the you know the original do era you know companies were sort of dreaming of creating internet money and we finally have the opportunity to do it and to do it right so I mean for us it's really about low volatility but also maintaining or increasing purchasing power over time doing that in a decentralized way that cuts off the Legacy system and doing it purely um on with smart contracts you know can we make it accessible for everyone l2s are scaling you know the fees are coming down can we build it on something like b um and and I think this one the third that point is really important to the next one which is can we have these assets directly secure the ethereum network can we have these assets stake eth or increase the stake of eth so they scale together linearly and of course you know what what what many projects are striving for is really building the New Primitives and making sure well for us anyway it's about minimiz in ex dependencies to be able to do that properly so I won't go into details about what flam money is and unit but unit is essentially a flat coin which is flat purchasing power over time but we're backing 100% with rocket pool staked eth and we believe this to be the most decentralized liquid staking derivative of e that there is available today and essentially what we've done is we' created a two-sided Marketplace on one side we have the low volatility of eth where we completely strip out the eth volatility to create the flat coin and on the other side we have a Perpetual Futures market for staked e and and what we built out of this is essentially a new primitive that's built on eth you take your eth which is already fantastic collateral you stake it that's the new primitive that's being created um and and and we convert it into unit where we just strip the volatility but importantly we inherit all the all the decentralization the staking yield um and the Stak ether secures ethereum on top of that so so which direction you know there's a lot of presentations here about real world assets bringing the real world but there's like a Counterpoint to this as well what we could be building and of course we have eth it's great collateral onchain collateral of the internet and what we've been able to do in the past is reduce the volatility by minting stable coins and as mentioned it's less Capital efficient you still ride the volatility of eth it's it's less than ideal but hey we can do that but then of course you know once we switched to proof of stake we created new liquid staking tokens that um not only secure ethereum but a yield bearing which is really good and then we realized oh wait this is great collateral we can use this collateral to then restake and secure other networks which is fantastic still riding the volatility and at flat money we've realized hey we could actually take that asset fantastic collateral and just remove the volatility out of it and what you get is like low volatility collateral and there's no reason why you shouldn't be able to more Capital efficiently uh Min your stable coin or use that as collateral for reaking so so once again it's there's kind of the two camps here um you know there's a lot of people saying hey if you want legitimacy in crypto you got to go out to the Legacy world you have to go out to traditional Finance we need real world assets to scale to scale ethereum but you know we believe that actually these onchain derivatives we've only started scratching the surface this space is so young we can build assets that are or orders of magnitude better and actually impossible to build on the Legacy systems and this is what we've always strived for so thank you thank you for listening to the talk uh we're flat money we have a booth next to Bas next to the coffee shop if you're interested in what we're doing come say hi [Applause] cheers