So, we got a little bit of time to talk about basically what the economic activity on Ethereum looks like. It's been a pretty eventful decade. We've seen a crazy idea come to life and now even more. And if you haven't noticed, the theme this week and the last six months has been institutions are finally here, coming going full steam ahead. And one of the things I want to start off with is trying to sort of just level set a bit. There's been so many things that we've talked about Ethereum can do and we wanted people to do on Ethereum, and I'd love to kind of hear, maybe starting with Joe, on just what do you feel like is now finally possible on Ethereum that wasn't possible a year or two ago.
So much is possible on Ethereum. But I'll focus on two things because they're closely related to what we're doing at MetaMask and Consensys. So one thing that is possible on the wallet side is that everybody can now have real personal financial agency. You can have your entire financial life fully under your control, permissionless. You don't have to ask your bank manager if you can take out a little bit more money than they're comfortable with. And you can, via the MetaMask money account, put all of your assets into a single personal money operating system. When you put your money into that money operating system, it comes alive in the sense that it's suddenly earning quite a lot of yield, 6% or higher. It remains fully liquid, and you can make use of it in trading and perks and prediction markets, tokenized equities, etc. You can invest it in different other ways, and you can pay for things either with tokens from the account or via the debit card, which is a pure blockchain debit card, but it runs on the Mastercard rails.
On the Ethereum side, we are on the verge of unifying the entire Ethereum ecosystem. So we've been doing some proofs of concept at Consensys. I was speaking with Jordi Baylina of EAS and one of his colleagues also named Jordi last night, and they've been doing some really great proofs of concept. And the idea there is that we had to, in order to achieve scalability at layer one of Ethereum, and that is moving really well. We're doubling scalability, we're tripling scalability, and we'll see scalability grow at layer one by orders of magnitude over the next few years, mostly through zero-knowledge proof technology, but also the modular architecture, the roll-up roadmap, and actually private permissioned blockchains using Ethereum technology, using the Base execution technology, can now be all brought into a unified Ethereum ecosystem where, using zero-knowledge proofs on the different networks, you can compose a bunch of activity. You can take fragmented liquidity and bring it into a unified liquidity pool in an atomic execution context, and you can run a whole bunch of transactions across a bunch of different networks in real time without the use of dangerous bridges. And so we're about to see lots of corporate chains, lots of layer twos, and Ethereum will be the credibly neutral, reliable digital asset settlement platform.
I feel like you're just going to set the whole agenda. Let's just call it early. We got done. It's all, but I'll let Paul and Seb answer too. Like, from kind of your perspectives, I feel like a lot of the ideas are now finally coming to life. What do you feel like is super obvious that wasn't possible a year or two ago?
Yeah, I guess for me, taking the DeFi and financial products angle, the very historic difference compared to two years ago is that we have reached feature parity with Web2. What do I mean by this is that now that we have full account abstraction and we have lower gas fees, what that means is that you can build financial products for large-scale consumer distribution that you have no idea is powered by Ethereum behind the scenes, right? Like you could not tell. The only difference is that the financial product that you're going to use is actually of a better pricing, has deeper liquidity because the underlying infrastructure is open and is able to aggregate more liquidity, more competition, etc., etc. And I think the first example of that that we at Morpho built was like integrating into the Coinbases of the world or the Robin Hoods of the world, where the end users have literally no idea that the chain is behind the scenes, right? And this is only possible when you have a mature DeFi ecosystem, cheap gas fees, as well as like a full account abstraction stack, and you combine everything together and compose the action such that from the user perspective it's just one click that is like no additional cost, nothing. And I think to me this is like the real like zero to one. So that's one.
The second is purely just trust from like all those large like distribution platforms and Wall Street in general, where they now recognize blockchains and Ethereum in particular as like a reliable settlement platform where they can have all their user balances like on a DeFi protocol on Ethereum, right? Like if you take like a Coinbase for example, there is like probably like $3 billion of customers' assets that are on Morpho, right? Robin Hood has like a billion dollars of assets that are in the Morpho smart contract, right? So we're reaching this level of trust with the EVM and the code that has been built in the EVM that was definitely not there two years ago. And the good news is that this trust is compounding, right? Like people see the big logos like Robin Hood, Coinbase doing stuff and they're like, 'Oh, wow.' Like as a TradFi institution, all this distribution is coming on chain. It means that my ETF that I was distributing on TradFi rails is not going to be, you know, getting that much volume because volume is coming on chain. So if you're like a Fidelity, if you're a BlackRock, if you're an Apollo, you're thinking about how do I move on chain and I start to like operate those rails in order to myself, you know, curate, operate the financial services to offer to large distribution, and that's a complete zero to one that a year ago was not like a reality.
It's like suddenly and then instantly it's just everybody on it. And Sam, I'll let you comment as well.
So the question is, what can you repeat the question?
Just what was not possible a year or two ago on Ethereum that now you're seeing everybody sort of do things and it's sort of really kind of coming to life from the early vision of.
Yeah, I would never have imagined. I mean, we've come a long way in just one year. So I guess three things have occurred over the past year that I would not have imagined would have happened anytime in the near future at the time, which is, well, first of all, with respect to the financial institutions, we've seen JP Morgan and BlackRock tokenize their money market funds. You know, that would have been a mind-blowing statement to say just a number of years ago. That happened over the past year. I mean, secondly, you know, we see now the rise of the agentic economy, and I have a lot to say about that today. But I think that there is a huge convergence and an intersection with agents. Agents need compute to think, and they need money, and that is basically stablecoins, and we'll talk more about how that intersection will play out for Ethereum and ETH. And lastly, you know, businesses are now using crypto to borrow against and build massive data centers. Bit Digital is the first company in history to use its crypto to borrow against it and build out a 1 million square foot data center in North Carolina to service a $1 billion dollar contract with Enskill that's I think IPOing soon. No company has ever done that. And so I think these are, you know, these are major moves happening that have a connection to Ethereum, and these are statements that would have been pretty impossible to say just a couple of years ago.
That's awesome. I want to get back to Paul here. So you're building Morpho into an open credit network, and there's a pretty big vision behind this thing. I'd love to kind of have the audience understand how you think about the future of Morpho and what does that unlock?
Yeah, I guess like first, we think of Morpho as like, you know, what we call the open credit network for the world. Like concretely, what does that mean is like you have people that have an excess of capital, they want to generate interest. You have people that have a need for financing, you know, they have ambitions, they want to realize for the world, and our goal is to match the two, right? Like people that are willing to trust the ambition of someone else with capital and fund them. And the goal of Morpho is to establish the most efficient matching between the two parties, right? And then you, so the reason why you want to do this is basically you want to reduce the cost that people have to trust each other, right? And in order to do that, you're thinking, hey, we need like a shared settlement layer where this is going to be able to happen to aggregate all the lenders and all the borrowers in one place in order to make things happen, right? And so blockchains are obviously a very natural environment for that, where by definition the infrastructure is open, and so as a result you have much more competition, right? I really think like, you know, I like to think of the killer case of blockchain being openness, and openness fosters two interesting things for financial infrastructure: competition on pricing and accessibility, right? So very concrete example, and coming back to like, you know, how Coinbase built loans on Morpho, they used to have a centralized service for loans, right? That was not built on blockchains, etc. In order to issue the loans, they had like intermediaries, and the rate was very high. What happens now is that they settle directly on blockchain. And so when this happens, you have tens of thousands of lenders that are going to come on the other side and that are going to compete to give Coinbase like the best interest rate possible. So what effectively we're doing as Morpho is we're collapsing the spread between the lending rate and the borrowing rate. And that spread today in the economy is very high. Like that's the net interest margin that you have, you know, of banks. That's approximately 3% on the global economy, right? And so we think of our mission at collapsing that cost of trust, right? Collapsing the spread between the lending rate and the borrowing to have cheap funding. And obviously the only way to do this is through like open infrastructure and like this core protocol Morpho that is like built on top that can aggregate intents of both parties.
Yeah. Can I just follow on on what Paul said? What's really going on here is that we are at the point where we're scalable and usable and reliable enough so that we can transform how business works on this planet. Essentially, the way trust has worked is top-down command and control systems. You got authorities, you got trusted third parties. And we are replacing that kind of trust, which is somewhat abused at times, somewhat capricious at times, and generally rewards the centralized controlling parties more than all the rest of us. And so we're replacing that with a new form of trust. Satoshi invented the most powerful form of trust, decentralized trust. And what now we're able to, now we've attracted the attention of governments and financial institutions, and they recognize that, hey, this is good, this is really powerful. We can, instead of being your trusted counterparty with all sorts of regulations to make sure that we don't steal your money, we can imbue the trust of a decentralized protocol in market-based systems like Morpho, where you're interacting with your peer counterparties rather than the house. As we all know, the house always wins. And essentially we're moving into a much more decentralized economy.
No, I absolutely agree. And it's also just creating these systems that are not sort of giving the power to the other side, and the fact they now have the infrastructure to do so is, I'm pretty big on that. I do have a question for Sam before we kind of get to some of the other stuff around the economic activity on Ethereum. But Bit Digital to me is a very interesting sort of approach to the space. Could you tell us more about how you're set up? How does it work with White Fiber, and why is it different than just a traditional ETH treasury company that others may have heard of?
Yes. So, Bit Digital is a publicly listed company on NASDAQ, and it's a very simple company. It's just two line items on its balance sheet. It's a bunch of Ethereum. That's the first line item. The second line item is a 60% controlling stake of a company called White Fiber that IPOed last year also on NASDAQ. And White Fiber is a pure-play AI infrastructure company. It has a cloud business, a very successful one. It has a very successful colocation business on the data center side, servicing more than a billion dollars worth of contracts over the next few years. So the reason why we positioned ourselves this way is because we're not in the business of just accumulating ETH and putting it on our balance sheet. We think that that is not an alpha-producing posture. And we don't think that's actually a full-time job as well. So we felt that it's important to have an operating business as well, and we have an incredibly successful one through White Fiber. And it is servicing the AI economy. And that's really important because there's absolutely no company, no public company in the world that I know of that represents economically the convergence of artificial intelligence and Ethereum, which will eventually intersect in a huge way. Now, hopefully there'll be a moment to get into that later. So that's how we've set ourselves up. I think we're pretty unique in that manner. We do have our criticism of pure-play DATs. That's why we've sort of moved away from that category. I wish that category never was invented. I think that's a terrible category and a bad way to measure yourself, but here we are.
Sorry, I have to jump in. [laughter] There's going to be some tension. So while you're...
No, no tension. I have a huge amount of respect for Sam and their business model. I think the marriage of AI and ETH and decentralized protocols is a very powerful direction. So I fully understand what he's saying. But I do believe that pure-play DATs that choose the right token are incredibly valuable for their shareholders and for the ecosystem that they operate in.
Is it with the assumption that you have to actively deploy capital to increase the asset value, or just the fact that you need an institutional buyer for this and this is the easiest way to get that demand because it's the productivity of those assets that gets you that yield or alpha, or just the ecosystem to grow?
But Joe, I would challenge that a little bit. So if you believe...
Let me say something first before you challenge it. So, for Sharlink and for our friends at BMR, we are focused on collecting yield from staking into the protocol. So there's a risk-free yield that we can capture relatively easily. There are things that we can do over and above that risk-free yield that are very low risk, sitting in qualified custodians. And there are other things that we can do in terms of investing in companies that are aligned with the Ethereum mission that are designed to grow the value of the Ether token, grow the size of the Ethereum community. And so all of that is just really active activity, and we have 10 people with full-time jobs, really, really the best and the brightest people who do a great job on that. And the idea is that if you can grow the amount of Ether that you are exposed to in a sort of passive way from the shareholders' perspective, because we are working for the shareholder to grow how much ETH you're effectively in control of, this is really the start of the next generation economy, which is going to last decades or centuries, who knows. And so having a giant pile of the highest-powered money, collateral money, Ether, what will we be able to do in terms of giant businesses in the future? And from a personal perspective, being exposed to the next generation of highest-powered money is going to be very good for the shareholders.
I don't think you're on different sides at all.
Yeah. I don't argue against the... I mean, Ethereum is an incredible technology. Thank you for bringing it to life, Joe. I think the issue is that these DATs are trading at a discount to NAV, and so the markets are making their decision on the value...
...correlated with the Ether token.
Fair. But just to be clear, I don't argue against the value of ETH. Ethereum solves for escrow through atomic swap technology. That is very powerful. That takes away the middleman. I used to be a banker and a lawyer. So I was the ultimate middleman, and I'm very aware of how useless my value was in what I was doing for like a decade, being involved in those professions. And when Ethereum came out, I realized that my professions in banking and as a lawyer was redundant. And that's why I joined your movement. But my argument about the pure-play DATs have made up their mind that we're trading at a discount. Bit Digital trades at a premium if you remove the White Fiber aspect, but it's just a difficult yardstick, I think, to be measured on that front because...
...that's the view in a current, in a slice of time. So it's likely to cycle.
