WEBVTT - Wait, What's 'The Merge'?

0:00:02.720 --> 0:00:05.920
<v Speaker 1>This is Bloomberg Crypto and Daily Bloomberg. I heard podcast

0:00:06.120 --> 0:00:09.079
<v Speaker 1>and I'm Stacy Marie Ishmael, Managing editor of Crypto for

0:00:09.119 --> 0:00:29.640
<v Speaker 1>Bloomberg News. It's Tuesday, August. For crypto enthusiasts, a big

0:00:29.760 --> 0:00:31.800
<v Speaker 1>change is in the air, and it's not just the

0:00:31.880 --> 0:00:36.440
<v Speaker 1>change of seasons. The merge is a phrase on everyone's lips.

0:00:37.280 --> 0:00:41.120
<v Speaker 1>It would be the Ethereum blockchain's most ambitious software upgrade ever,

0:00:41.920 --> 0:00:46.600
<v Speaker 1>coming after years of delays. This upgrade would represent a

0:00:46.600 --> 0:00:50.200
<v Speaker 1>fundamental overhaul of how the Ethereum blockchain works, and would,

0:00:50.520 --> 0:00:54.120
<v Speaker 1>if all goes according to this very ambitious plan, a

0:00:54.240 --> 0:00:57.200
<v Speaker 1>major shift away from the current approach that's known as

0:00:57.320 --> 0:01:01.400
<v Speaker 1>proof of work. In its place, Ethereum would adopt the

0:01:01.400 --> 0:01:05.319
<v Speaker 1>proof of steak model, which proponents say is significantly more

0:01:05.440 --> 0:01:08.880
<v Speaker 1>energy efficient than proof of work, but skeptics worry is

0:01:08.959 --> 0:01:14.399
<v Speaker 1>less secure. Ether has sold about six since June as

0:01:14.440 --> 0:01:18.360
<v Speaker 1>traders and developers alike positioned themselves for this big transition.

0:01:19.000 --> 0:01:22.319
<v Speaker 1>So what does the merge mean for users? What are

0:01:22.360 --> 0:01:25.440
<v Speaker 1>the risks associated with this upgrade? And why is it

0:01:25.480 --> 0:01:29.880
<v Speaker 1>finally happening now after all these years. Bloomberg Crypto reposes

0:01:29.920 --> 0:01:33.360
<v Speaker 1>Olga Carey, pretty much everybody in this system will be affected,

0:01:33.360 --> 0:01:36.000
<v Speaker 1>and David Pan, the amount of money involved in this

0:01:36.080 --> 0:01:40.480
<v Speaker 1>is very, very striking. Join me today to tackle these questions.

0:01:47.440 --> 0:01:50.280
<v Speaker 1>Hello and welcome. So today we're just gonna I'm just

0:01:50.320 --> 0:01:51.960
<v Speaker 1>gonna say it, We're gonna get a little bit nerdy,

0:01:52.760 --> 0:01:54.960
<v Speaker 1>but no one who's listening should be worried. I've got

0:01:55.000 --> 0:01:58.920
<v Speaker 1>two of the foremost professionals as it comes to reporting

0:01:59.000 --> 0:02:02.320
<v Speaker 1>on Ethereum and the merge in various studios today. I

0:02:02.320 --> 0:02:04.720
<v Speaker 1>think we're in like three different states right now, such

0:02:04.760 --> 0:02:06.960
<v Speaker 1>as the power of audio. But Olga, I'm going to

0:02:07.040 --> 0:02:10.320
<v Speaker 1>start with you. We've said the word of the merge

0:02:10.520 --> 0:02:13.600
<v Speaker 1>several times on this on this podcast, we've mentioned that

0:02:14.240 --> 0:02:18.639
<v Speaker 1>it relates to what is basically a huge software upgrade

0:02:19.120 --> 0:02:23.360
<v Speaker 1>for the Ethereum blockchain. But when we talk about the merge,

0:02:23.400 --> 0:02:27.080
<v Speaker 1>what are we actually talking about? So we are talking

0:02:27.120 --> 0:02:31.320
<v Speaker 1>about the change over in the way transactions on Ethereum

0:02:31.360 --> 0:02:37.600
<v Speaker 1>are ordered. So today, uh, this very powerful computers called

0:02:37.680 --> 0:02:42.519
<v Speaker 1>miners essentially do the job. And with the merge, we're

0:02:42.520 --> 0:02:46.400
<v Speaker 1>going to switch to a much more energy efiicient system

0:02:46.520 --> 0:02:52.400
<v Speaker 1>using essentially wallets with staked coins. This wallets are called validators.

0:02:52.480 --> 0:02:56.560
<v Speaker 1>The new system is called proof of steak, and essentially

0:02:56.720 --> 0:03:02.840
<v Speaker 1>it's gonna reduce energy consumption of ethereum by which is huge.

0:03:02.919 --> 0:03:07.320
<v Speaker 1>And uh, it's also gonna mean sort of a number

0:03:07.360 --> 0:03:15.000
<v Speaker 1>of major shifts for the whole etherorum ecosystem. So there's

0:03:15.040 --> 0:03:16.919
<v Speaker 1>a couple of things there that I want to dive

0:03:17.160 --> 0:03:20.480
<v Speaker 1>more deeply into. And I'm going to start with the

0:03:20.520 --> 0:03:22.600
<v Speaker 1>big macro, which is what you say, is the whole

0:03:22.600 --> 0:03:25.960
<v Speaker 1>ethereum ecosystem. Well, who is in that ecosystem? You know,

0:03:26.000 --> 0:03:27.959
<v Speaker 1>Folks might know for example that to like buy a

0:03:28.000 --> 0:03:29.520
<v Speaker 1>certain n f T S you have to pay an

0:03:29.520 --> 0:03:32.919
<v Speaker 1>ether But what are the other elements of this ecosystem

0:03:32.919 --> 0:03:35.640
<v Speaker 1>that are going to be affected? Pretty much everybody in

0:03:35.680 --> 0:03:40.240
<v Speaker 1>this system will be affected. We are gonna see validators,

0:03:40.280 --> 0:03:43.920
<v Speaker 1>of course, who are going to be key to ordering transactions.

0:03:43.920 --> 0:03:46.640
<v Speaker 1>We're going to see builders who are going to be

0:03:47.080 --> 0:03:54.320
<v Speaker 1>essentially packaging transactions into blocks and h Essentially, this change

0:03:54.720 --> 0:03:59.040
<v Speaker 1>could attract more developers and more investors to etheroryum because

0:03:59.240 --> 0:04:02.960
<v Speaker 1>it's very importan for a lot of investors to invest

0:04:03.040 --> 0:04:07.760
<v Speaker 1>in energy efficient projects. They want to comply with their

0:04:07.880 --> 0:04:10.480
<v Speaker 1>e s G requirements and the same is true with

0:04:10.520 --> 0:04:14.120
<v Speaker 1>a lot of developers who are environmentally conscious, and so

0:04:14.760 --> 0:04:20.240
<v Speaker 1>it's believed that once Ethereum switches over to this new system,

0:04:20.440 --> 0:04:24.320
<v Speaker 1>this could potentially lead to an influx of new investors,

0:04:24.440 --> 0:04:27.599
<v Speaker 1>new developers, and just new users who will be to

0:04:27.720 --> 0:04:32.320
<v Speaker 1>whom this this idea of an environmentally friendly Ethereum will

0:04:32.440 --> 0:04:37.240
<v Speaker 1>appeal to. Got it? So? Right now, Ethereum is on

0:04:37.720 --> 0:04:40.200
<v Speaker 1>something that you described as proof of work, which is

0:04:40.240 --> 0:04:43.240
<v Speaker 1>the same system that Bitcoin is on. So, David, I'm

0:04:43.240 --> 0:04:46.160
<v Speaker 1>just gonna ask you if you had to explain the

0:04:46.200 --> 0:04:48.520
<v Speaker 1>difference between proof of work and proof of stake to

0:04:48.600 --> 0:04:52.640
<v Speaker 1>somebody without using a crypto example, what would you say.

0:04:52.680 --> 0:04:54.479
<v Speaker 1>I think, at the end of the day, it's a

0:04:54.560 --> 0:04:58.520
<v Speaker 1>it's a software. So the blockchain Ethereum is a blockchain.

0:04:59.080 --> 0:05:01.839
<v Speaker 1>A proof of work is one way to secure the network,

0:05:01.920 --> 0:05:05.400
<v Speaker 1>and also, you know, to validate the transaction data on

0:05:05.520 --> 0:05:08.680
<v Speaker 1>the digital ledger. And from proof of work to proof

0:05:08.720 --> 0:05:12.040
<v Speaker 1>of steak, I would say, like, how exactly we secured

0:05:12.080 --> 0:05:14.760
<v Speaker 1>the network validate the data on the blockchain. On the

0:05:14.839 --> 0:05:17.960
<v Speaker 1>proof of work, we use computers. On the proof of steake,

0:05:18.240 --> 0:05:22.560
<v Speaker 1>we use validators who are essentially, you know, the people

0:05:22.600 --> 0:05:26.240
<v Speaker 1>who are holding Etherem in the note. Okay, so on

0:05:26.360 --> 0:05:31.120
<v Speaker 1>proof of work on current ethereum blockchain, on Bitcoin, you

0:05:31.600 --> 0:05:35.919
<v Speaker 1>David send a bitcoin to Olga, which you can't actually

0:05:35.960 --> 0:05:37.799
<v Speaker 1>because you don't hold any but you know, different, different

0:05:37.800 --> 0:05:41.120
<v Speaker 1>disclosure story. But in theory, you send a bitcoin to

0:05:41.160 --> 0:05:44.520
<v Speaker 1>Olga because you just have twenty dollars lying around and

0:05:45.600 --> 0:05:48.800
<v Speaker 1>for that transaction to kind of go through and be validated,

0:05:48.880 --> 0:05:52.960
<v Speaker 1>there's a bunch of computers somewhere that are kind of

0:05:53.000 --> 0:05:55.880
<v Speaker 1>processing the existence of that transaction and saying like, yes,

0:05:55.960 --> 0:05:59.120
<v Speaker 1>this thing is valid. This has moved from you David

0:05:59.320 --> 0:06:02.360
<v Speaker 1>to your wallet David to your wallet Bulga. And that's

0:06:02.400 --> 0:06:06.760
<v Speaker 1>kind of like simplistically the proof of work conversation. Right

0:06:06.760 --> 0:06:12.560
<v Speaker 1>there are like computers figuring out computationally that this thing,

0:06:12.720 --> 0:06:16.400
<v Speaker 1>this transaction is valid. If you on a proof of

0:06:16.440 --> 0:06:22.400
<v Speaker 1>steak blockchain move one ether from your wallet David to Olga.

0:06:23.000 --> 0:06:27.760
<v Speaker 1>What is it that the the validators do exactly that's

0:06:27.800 --> 0:06:31.440
<v Speaker 1>different from what the computers and bitcoin do. So the

0:06:31.520 --> 0:06:36.160
<v Speaker 1>new softwaware, the updated software will randomly assign, you know,

0:06:36.279 --> 0:06:40.880
<v Speaker 1>the task of validating this particular data to a specific

0:06:40.920 --> 0:06:44.960
<v Speaker 1>group of Um validators. You know, people who are holding

0:06:45.120 --> 0:06:49.839
<v Speaker 1>essentially people who are holding the ether cryptocurrency, and they

0:06:49.839 --> 0:06:53.840
<v Speaker 1>will perform the task of validating the data in the

0:06:53.960 --> 0:06:57.479
<v Speaker 1>servers that belonged to them. So that's one of the

0:06:57.520 --> 0:07:02.279
<v Speaker 1>reasons why proof of steak could have higher speed transaction speed.

0:07:02.400 --> 0:07:06.960
<v Speaker 1>It's because improved work. You have to update this data

0:07:07.040 --> 0:07:09.680
<v Speaker 1>among millions of computers and they have to be in

0:07:09.720 --> 0:07:12.240
<v Speaker 1>sync of the same data at the same time. That's

0:07:12.240 --> 0:07:15.880
<v Speaker 1>why we call it decentralized proof of work mechanism. But

0:07:16.000 --> 0:07:19.480
<v Speaker 1>like under proof a stake, it's like you have this

0:07:20.080 --> 0:07:24.000
<v Speaker 1>like a selected group of validators who are validating the

0:07:24.360 --> 0:07:28.040
<v Speaker 1>data on blockchain, which is faster and which is like

0:07:28.160 --> 0:07:32.360
<v Speaker 1>easier to prove the transactions. How do you become a validator?

0:07:33.040 --> 0:07:35.320
<v Speaker 1>I mean there are a couple of ways. Ideally you

0:07:35.400 --> 0:07:40.280
<v Speaker 1>can stake at least a thirty two either tokens um

0:07:40.320 --> 0:07:43.640
<v Speaker 1>you can operate as a note. But like as far

0:07:43.680 --> 0:07:45.400
<v Speaker 1>as I know, a lot of these people do not

0:07:45.560 --> 0:07:48.960
<v Speaker 1>have thirty two either, because that's a lot of money

0:07:48.960 --> 0:07:53.920
<v Speaker 1>for average person. So people put their holdings into centralized

0:07:53.960 --> 0:07:58.280
<v Speaker 1>exchanges like coin based and cracking, and they will stake

0:07:58.360 --> 0:08:02.280
<v Speaker 1>the tokens for investors for the users, and the users

0:08:02.520 --> 0:08:07.160
<v Speaker 1>can enjoy the yields, and the other major way is decentralized.

0:08:07.200 --> 0:08:11.760
<v Speaker 1>The platforms were also providing staking services for either holders.

0:08:11.840 --> 0:08:13.720
<v Speaker 1>The biggest the one it is called Little It's a

0:08:13.760 --> 0:08:17.680
<v Speaker 1>protocol and investors can put their either into the protocol

0:08:17.800 --> 0:08:20.800
<v Speaker 1>and and aren't yield from from it. So, Olga, I'm

0:08:20.840 --> 0:08:24.520
<v Speaker 1>going to go back to you. What's about moving from

0:08:24.560 --> 0:08:27.200
<v Speaker 1>proof of work to proof of steak leads to that

0:08:27.640 --> 0:08:34.559
<v Speaker 1>supposed increase in energy efficiency. So today to mine etheryum,

0:08:34.600 --> 0:08:37.880
<v Speaker 1>people use very powerful computers. When you move to proof

0:08:37.880 --> 0:08:40.439
<v Speaker 1>of steak, you will be able to use essentially a

0:08:40.559 --> 0:08:44.240
<v Speaker 1>laptop to be a validator on the network. Basically you

0:08:44.280 --> 0:08:47.440
<v Speaker 1>don't need as much computing power and so that makes

0:08:47.559 --> 0:08:51.640
<v Speaker 1>the whole system much more energy efficient. To be a

0:08:51.800 --> 0:08:54.640
<v Speaker 1>minor you have to have a data center to be

0:08:54.679 --> 0:08:58.520
<v Speaker 1>a validator, you can have like a MacBook exact pretty much, yea,

0:08:59.040 --> 0:09:02.280
<v Speaker 1>pretty much. Yeah, that's a pretty significant jump. And you know,

0:09:02.320 --> 0:09:04.240
<v Speaker 1>oor go one of the you know, we've we sort

0:09:04.240 --> 0:09:06.199
<v Speaker 1>of talked about the mechanics here, but I want to

0:09:06.240 --> 0:09:08.720
<v Speaker 1>go back to the idea of this being a gigantic

0:09:08.760 --> 0:09:10.560
<v Speaker 1>software upgrade. I don't know if any of you have

0:09:10.600 --> 0:09:13.800
<v Speaker 1>ever like upgraded your computer or your phone, and then

0:09:13.800 --> 0:09:16.440
<v Speaker 1>suddenly nothing works anymore, and it's just really frustrating, and

0:09:16.480 --> 0:09:18.839
<v Speaker 1>you're like, why is this software upgrade going to go

0:09:18.880 --> 0:09:21.360
<v Speaker 1>completely smoothly? Like is everything just gonna be totally fine?

0:09:22.200 --> 0:09:24.840
<v Speaker 1>You know? That's the funny thing. I think a lot

0:09:24.920 --> 0:09:28.880
<v Speaker 1>of people today expect that it's gonna just be a

0:09:28.920 --> 0:09:32.920
<v Speaker 1>switch over. One second it's one system, another second it's

0:09:32.920 --> 0:09:36.320
<v Speaker 1>another system. Nobody even noticed anything, and ideally this is

0:09:36.360 --> 0:09:39.280
<v Speaker 1>exactly what's going to happen. Nobody will notice the thing.

0:09:40.480 --> 0:09:46.400
<v Speaker 1>But uh, if if we go by past experience, chances

0:09:46.440 --> 0:09:49.319
<v Speaker 1>are things are not gonna go as smoothly as that.

0:09:50.000 --> 0:09:55.280
<v Speaker 1>So if we'll look at ethereums sixteen major staftware upgrade,

0:09:55.760 --> 0:09:59.600
<v Speaker 1>back then, there were literally weak sort of an uh

0:10:00.000 --> 0:10:04.160
<v Speaker 1>puple of months of problems that arose from that switch.

0:10:05.520 --> 0:10:12.160
<v Speaker 1>The main issue was replay attacks, because when a blockchain

0:10:12.400 --> 0:10:15.960
<v Speaker 1>upgrades to new software, very often there is a contingent

0:10:16.120 --> 0:10:20.120
<v Speaker 1>of people who likes the system just the way it

0:10:20.280 --> 0:10:22.840
<v Speaker 1>was and they don't want to upgrade and they don't

0:10:22.840 --> 0:10:25.160
<v Speaker 1>want to switch to a new system, and so they

0:10:25.360 --> 0:10:31.800
<v Speaker 1>essentially copy the software and uh start running what is

0:10:31.800 --> 0:10:36.720
<v Speaker 1>called a fork. So essentially, it's it's the same Ethereum

0:10:36.800 --> 0:10:41.720
<v Speaker 1>with the same coins, with the same applications, but it's

0:10:41.720 --> 0:10:44.240
<v Speaker 1>going to be using say proof of work instead of

0:10:44.280 --> 0:10:47.520
<v Speaker 1>proof of stake this time. And what can happen in

0:10:47.600 --> 0:10:51.520
<v Speaker 1>a replay attack is that a hacker can use users

0:10:51.600 --> 0:10:54.920
<v Speaker 1>transaction on one of those chains that that look very

0:10:54.960 --> 0:10:58.280
<v Speaker 1>similar to each other and replay it on on the

0:10:58.280 --> 0:11:02.720
<v Speaker 1>other chain, and the user can lose coins. This was

0:11:03.040 --> 0:11:08.560
<v Speaker 1>rampant in Ethereum implemented some protections against this since then,

0:11:09.200 --> 0:11:12.240
<v Speaker 1>but we could still still see some replay attack is

0:11:12.360 --> 0:11:15.720
<v Speaker 1>if some of the applications hadn't sort of implemented the

0:11:15.880 --> 0:11:19.720
<v Speaker 1>protections properly. And in addition to that, we could also

0:11:19.760 --> 0:11:23.520
<v Speaker 1>see some other glitches which came up during the last

0:11:23.760 --> 0:11:27.680
<v Speaker 1>test before the merge was announced. It was called the

0:11:27.720 --> 0:11:32.800
<v Speaker 1>Girly merge test. And during that test, some of the

0:11:32.880 --> 0:11:37.280
<v Speaker 1>validator's nodes sort of didn't quite sink properly, and there

0:11:37.280 --> 0:11:41.600
<v Speaker 1>were several blocks that sort of said that I am

0:11:41.760 --> 0:11:46.040
<v Speaker 1>the block when the merge happened, So so very curious.

0:11:46.240 --> 0:11:50.760
<v Speaker 1>Strange things happened basically during the last test before the merge,

0:11:50.760 --> 0:11:54.400
<v Speaker 1>and the same kind of strange things could occur during

0:11:54.440 --> 0:11:57.880
<v Speaker 1>the merge, and in the most sort of extreme scenario,

0:11:57.960 --> 0:12:01.360
<v Speaker 1>we could potentially see the need for the network to

0:12:01.440 --> 0:12:05.720
<v Speaker 1>be paused and for some blocks to be redone. So

0:12:05.880 --> 0:12:08.280
<v Speaker 1>there could be a lot of issues that come up,

0:12:08.320 --> 0:12:11.360
<v Speaker 1>and in fact, a lot of experts say, you know,

0:12:11.559 --> 0:12:13.880
<v Speaker 1>if you're a user trying to do as little as

0:12:14.000 --> 0:12:17.880
<v Speaker 1>possible around the merge, don't do anything if you don't

0:12:17.880 --> 0:12:22.800
<v Speaker 1>need to, and just be very very careful. Up next,

0:12:22.920 --> 0:12:26.040
<v Speaker 1>Bloomberg reporters Olga Karif and David pan unpacked some of

0:12:26.080 --> 0:12:43.440
<v Speaker 1>the risks involved in the merge and what could go wrong. So,

0:12:43.480 --> 0:12:46.720
<v Speaker 1>if I'm hearing you correctly, a replay attack is like

0:12:46.800 --> 0:12:48.600
<v Speaker 1>the clue is in the name. So let's let's say

0:12:48.640 --> 0:12:52.679
<v Speaker 1>I am on the one version I'm on, like the

0:12:52.760 --> 0:12:58.240
<v Speaker 1>upgraded software, and I sell an n f T, or

0:12:58.360 --> 0:13:01.480
<v Speaker 1>I buy something or do some kind of defied transaction.

0:13:02.080 --> 0:13:05.920
<v Speaker 1>Somebody can look at my transaction history and effectively like

0:13:06.440 --> 0:13:09.880
<v Speaker 1>spoof me on the fork and make it look like

0:13:09.920 --> 0:13:13.280
<v Speaker 1>I'm selling that n f T again, or you know,

0:13:13.320 --> 0:13:16.720
<v Speaker 1>I'm doing that transaction again. So as a as a

0:13:16.840 --> 0:13:19.840
<v Speaker 1>user and potentially exposed to like twice as much financial

0:13:19.960 --> 0:13:22.360
<v Speaker 1>risk than I was when I did it the first time.

0:13:22.360 --> 0:13:24.400
<v Speaker 1>It's like if somebody clones your credit card and then

0:13:24.559 --> 0:13:27.240
<v Speaker 1>you know, it's just like repeating everything that you've done previously,

0:13:27.400 --> 0:13:32.559
<v Speaker 1>other than like not doing anything while while this upgrade

0:13:32.640 --> 0:13:35.400
<v Speaker 1>is happening. What do you do to protect yourself if

0:13:35.400 --> 0:13:37.080
<v Speaker 1>you're kind of a user and you're worried about this.

0:13:38.679 --> 0:13:41.680
<v Speaker 1>One idea that people suggested was that, okay, if you

0:13:41.760 --> 0:13:44.880
<v Speaker 1>want to do something on the fork chain, before you

0:13:44.960 --> 0:13:48.360
<v Speaker 1>do anything, just move all your coins into a different

0:13:48.360 --> 0:13:53.120
<v Speaker 1>wallet so that the wallet that is assigned to you

0:13:53.200 --> 0:13:55.920
<v Speaker 1>on the fork chain does not look the same as

0:13:55.960 --> 0:13:59.680
<v Speaker 1>the wallet that you now have, and then every player

0:13:59.679 --> 0:14:04.400
<v Speaker 1>attack cannot really happen. So that's that's one idea, But

0:14:04.640 --> 0:14:08.640
<v Speaker 1>a lot of people just caution people to just stay

0:14:08.679 --> 0:14:13.480
<v Speaker 1>away from from from doing anything if you can. Neither

0:14:13.520 --> 0:14:17.720
<v Speaker 1>of those sounds like the best possible outcome for for

0:14:17.760 --> 0:14:20.200
<v Speaker 1>an end user. So what is it supposed to happen.

0:14:20.360 --> 0:14:25.120
<v Speaker 1>There's a clock tracking this, and the timing could still change,

0:14:25.200 --> 0:14:28.240
<v Speaker 1>but for right now, it's supposed to be September fifteen.

0:14:28.560 --> 0:14:32.760
<v Speaker 1>But the thing is the timing will depend on how

0:14:32.880 --> 0:14:37.160
<v Speaker 1>much computing power is supporting ethereum, how much minor support

0:14:37.200 --> 0:14:40.960
<v Speaker 1>it has. It is possible that really close to the

0:14:41.000 --> 0:14:43.960
<v Speaker 1>time of the merge, a bunch of miners will decide

0:14:44.000 --> 0:14:48.280
<v Speaker 1>to sell their equipment or switch to supporting another chain,

0:14:48.480 --> 0:14:51.240
<v Speaker 1>and all of a sudden, Ethereum loses a bunch of

0:14:51.280 --> 0:14:55.520
<v Speaker 1>minor support and then the merge could be pulled forward.

0:14:56.160 --> 0:14:59.480
<v Speaker 1>So the timing is still very much in flux, but

0:14:59.480 --> 0:15:02.520
<v Speaker 1>but it's would hopefully happen in the next few weeks.

0:15:02.880 --> 0:15:06.560
<v Speaker 1>There were expectations that the march would happen years ago

0:15:06.640 --> 0:15:11.440
<v Speaker 1>and even you know this June and it didn't. But

0:15:11.440 --> 0:15:14.320
<v Speaker 1>but this is the first time when it's actually bench caeduled,

0:15:14.320 --> 0:15:17.200
<v Speaker 1>officially scheduled. So, David, who's going to make money on this?

0:15:17.280 --> 0:15:19.680
<v Speaker 1>And who's gonna lose money on this? So the biggest

0:15:19.800 --> 0:15:24.400
<v Speaker 1>winners are some of these centralized exchanges who are facilitating staking.

0:15:24.880 --> 0:15:28.400
<v Speaker 1>They are charging a fee by providing staking services to

0:15:28.560 --> 0:15:31.800
<v Speaker 1>their users. Most of the exchanges they don't have their

0:15:31.840 --> 0:15:36.560
<v Speaker 1>own staking infrastructure, which you know where like you can

0:15:36.960 --> 0:15:42.040
<v Speaker 1>operate the software to a stake the tokens directly. Coin

0:15:42.120 --> 0:15:45.120
<v Speaker 1>base is is a good example. It doesn't have the

0:15:45.200 --> 0:15:50.360
<v Speaker 1>staking infrastructure, but like it provides very attractive yields to

0:15:50.600 --> 0:15:53.960
<v Speaker 1>its users through the Staking programs. Its source of staking

0:15:54.080 --> 0:15:58.840
<v Speaker 1>infrastructure from a third party company called kim k I

0:15:59.080 --> 0:16:01.760
<v Speaker 1>L and they are they're the winners after the merge

0:16:02.040 --> 0:16:06.600
<v Speaker 1>and then of course cracking for instance, they actually bought

0:16:06.880 --> 0:16:10.600
<v Speaker 1>Staking infrastructure provider about a year and a half ago,

0:16:10.680 --> 0:16:15.080
<v Speaker 1>so they also have their hand in that business as well.

0:16:15.320 --> 0:16:18.840
<v Speaker 1>The amount of money involved in this is very, very striking.

0:16:19.360 --> 0:16:22.160
<v Speaker 1>One analysts expected that there there's going to be over

0:16:22.320 --> 0:16:26.840
<v Speaker 1>one hundred and forty billion dollars worth of the tokens

0:16:26.880 --> 0:16:29.720
<v Speaker 1>being staked in the protocol because if we look at

0:16:29.960 --> 0:16:33.800
<v Speaker 1>the other major proof of state networks like Salana and Cardano,

0:16:34.000 --> 0:16:39.680
<v Speaker 1>they have a ratio of anywhere between six of the

0:16:39.720 --> 0:16:43.560
<v Speaker 1>total supply being staked in their protocol were like in

0:16:43.680 --> 0:16:45.880
<v Speaker 1>the Staking programs. One thing that occurs to me that

0:16:45.920 --> 0:16:49.720
<v Speaker 1>we should probably define is just what staking is sure

0:16:49.880 --> 0:16:55.840
<v Speaker 1>so so, Staking is essentially using your coins to order

0:16:55.920 --> 0:16:58.880
<v Speaker 1>transactions on the network. And what's cool about staking is

0:16:58.960 --> 0:17:01.760
<v Speaker 1>that it's a very good way for the network to

0:17:02.360 --> 0:17:06.960
<v Speaker 1>keep tabs on validators that order transactions and make and

0:17:06.960 --> 0:17:11.280
<v Speaker 1>and keep them honest essentially, because if a steaker is

0:17:11.320 --> 0:17:14.560
<v Speaker 1>doing something bad for the network is not being honest.

0:17:14.600 --> 0:17:18.800
<v Speaker 1>It's not verifye you know, or ordering transactions correctly, then

0:17:19.040 --> 0:17:23.840
<v Speaker 1>that validator can potentially lose its steak. It's coins could

0:17:23.880 --> 0:17:27.879
<v Speaker 1>be taken away. And that's a very effective way of

0:17:28.560 --> 0:17:32.400
<v Speaker 1>making sure that validators don't do something they shouldn't. For example,

0:17:32.760 --> 0:17:36.040
<v Speaker 1>you know, attack the network, try to to push through

0:17:36.280 --> 0:17:41.320
<v Speaker 1>a transaction using the same coin twice, that sort of thing.

0:17:41.640 --> 0:17:43.879
<v Speaker 1>Because one of the insensives that we didn't describe in

0:17:44.040 --> 0:17:46.600
<v Speaker 1>terms of staking is the fact that if you as

0:17:46.640 --> 0:17:49.600
<v Speaker 1>a normal person, you know, like stakes your crypto on

0:17:49.640 --> 0:17:52.000
<v Speaker 1>and exchange, you get a yield on it. Right, So

0:17:52.040 --> 0:17:55.000
<v Speaker 1>if you like on the Cracking website for example, um,

0:17:55.119 --> 0:17:59.560
<v Speaker 1>they're advertising as of mid August or up to yearly

0:17:59.560 --> 0:18:02.560
<v Speaker 1>on your up too for as we this word that

0:18:02.560 --> 0:18:05.080
<v Speaker 1>we've been using for like staking your crypto on on

0:18:05.160 --> 0:18:08.080
<v Speaker 1>these exchanges. So there are lots of different incentives at

0:18:08.320 --> 0:18:11.480
<v Speaker 1>play here. Well, we will be watching it unfold, and

0:18:11.480 --> 0:18:13.040
<v Speaker 1>we've been writing about how it unfolds, and we'll be

0:18:13.080 --> 0:18:15.040
<v Speaker 1>talking about how it unfolds on the podcast, so you know,

0:18:15.240 --> 0:18:17.320
<v Speaker 1>I'm sure we'll I'll be talking to both of you

0:18:17.359 --> 0:18:21.520
<v Speaker 1>again in the coming weeks. Thank you, thank you, thank you.

0:18:21.520 --> 0:18:23.560
<v Speaker 1>You can find more of Olga and David's reporting on

0:18:23.600 --> 0:18:26.560
<v Speaker 1>the Bloomberg terminal on Bloomberg dot com or follow them

0:18:26.600 --> 0:18:30.639
<v Speaker 1>on Twitter. Olga is at Olga Karif that's k H

0:18:30.760 --> 0:18:33.880
<v Speaker 1>A R I F. And David is at David Pan

0:18:34.160 --> 0:18:40.560
<v Speaker 1>Underscore one. On the next episode of Bloomberg Crypto, We're

0:18:40.600 --> 0:18:43.080
<v Speaker 1>gonna get into stable coins, and into one of them

0:18:43.080 --> 0:18:46.160
<v Speaker 1>in particular. Tether is one of the largest and most

0:18:46.200 --> 0:18:49.679
<v Speaker 1>liquid digital assets trading today, and that market influence has

0:18:49.680 --> 0:18:54.679
<v Speaker 1>attracted both regulatory scrutiny and investors skepticism. We'll discuss Tether's

0:18:54.720 --> 0:18:57.200
<v Speaker 1>late just disclosures about its assets and what the market

0:18:57.320 --> 0:19:06.560
<v Speaker 1>is expecting next m This is Bloomberg Crypto, a daily

0:19:06.600 --> 0:19:10.000
<v Speaker 1>podcast from Bloomberg and I Heart Radio. For more shows

0:19:10.000 --> 0:19:12.359
<v Speaker 1>from I Heart Radio, visit the I Heart Radio app,

0:19:12.600 --> 0:19:16.719
<v Speaker 1>Apple Podcasts, or wherever you get your podcasts. Send us

0:19:16.720 --> 0:19:19.600
<v Speaker 1>your comments, questions, or suggestions for the show to Crypto

0:19:19.640 --> 0:19:22.760
<v Speaker 1>at Bloomberg dot net or find us on Twitter. We're

0:19:22.800 --> 0:19:29.040
<v Speaker 1>at Crypto. The supervising producer of Bloomberg Crypto is Vicky Verglina.

0:19:29.440 --> 0:19:33.160
<v Speaker 1>Our senior producer is Janet Babin. Our producer is Sharon Barriro.

0:19:33.720 --> 0:19:37.960
<v Speaker 1>Associate producer is Ty Butler desta wonder at is our engineer.

0:19:38.560 --> 0:19:44.000
<v Speaker 1>Original music by Leo Sidran. I'm Stacy Marie schmal We'll

0:19:44.040 --> 0:19:44.679
<v Speaker 1>be back tomorrow.