The final chapter of the electric vehicle price war ignited by Tesla’s Elon Musk could hinge on the outcome of the November elections, especially if former President Trump wins.

Trump has expressed no issues with EVs and recently stated, “I will end the Electric Vehicle Mandate on Day One — thereby saving the US auto industry from complete obliteration, and saving US customers thousands of dollars per car.” 

Translation: The former president states that all federal EV subsidies will end if he wins in November. 

But why would Musk support a complete reversal in the federal government’s policy on EV subsidies if Tesla relied so heavily on the EV credits to stoke demand? Unless Tesla is at the point where it no longer needs the taxpayer-funded gravy train. 

Last week, X user Whole Mars Catalog wrote on X:

“Tesla doesn’t need subsidies. The other unprofitable EV makers do. We are giving $7,500 to people who buy GAS cars with a small battery. We are capping the price of EVs, hurting the profitability of the industry. If the EV tax credit dies I won’t shed a tear for it.”

Musk responded: “Take away the subsidies. It will only help Tesla. Also, remove subsidies from all industries!” 

Take away the subsidies. It will only help Tesla.

Also, remove subsidies from all industries!

— Elon Musk (@elonmusk) July 16, 2024

In 2023, Tesla accounted for 55% of total US EV sales. As the dominant player in the market, Adam Jonas at Morgan Stanley noted earlier this year that consolidation was coming to weaker EV rivals of Tesla. 

Musk’s key to winning the EV price war appears to hinge on supporting Trump, whose position on cutting EV subsidies would only crush the competition, whether small EV startups or legacy OEMs. This means Tesla will easily defend its market share and remain dominant.  

In recent weeks, it has only become evident that Musk and Trump have held discussions behind the scenes. After all, Musk endorsed Trump following the attempted assassination of the former president last week by committing $45 million a month to a pro-Trump super PAC. 

Last month, Trump told the audience at a rally that Musk is “great” and “brilliant guy.” He even said, “I’m a big fan of electric cars.” 

“I like him, and I think a lot of people are going to want to buy electric cars but…if you want to buy a different type of car you have to have a choice—some people need to go far,” Trump said. 

Donald Trump last night on EVs and Elon Musk: “I’m a big fan of electric cars. I’m a big fan of Elon Musk. I like Elon. And I think a lot of people are going to want to buy electric cars, but if you want to buy a different type of car you have to have a choice.” pic.twitter.com/WDXoXhAEON

— Sawyer Merritt (@SawyerMerritt) June 7, 2024

Musk’s strategy to win the EV price war: Build the largest EV business with taxpayer dollars, popularize EVs, allow other startups and OEMs to enter the market, and then support politicians who want to end EV subsidies, crushing the competition and leaving Tesla reigning supreme.

Well you can add this to a list of reasons Democrats just can’t seem to stomach Elon Musk any more.

The U.S. subsidiary of Chinese electric vehicle manufacturer BYD and its top executive, Stella Li, have donated hundreds of thousands of dollars to Democratic candidates and organizations over the past decade.

A review of federal and state political spending records by the Daily Caller News Foundation reveals these contributions.

They found that between 2020 and 2023, BYD and Stella Li contributed over $40,000 to the Democratic National Committee (DNC).

Additionally, they have invested more than $30,000 into organizations supporting President Joe Biden’s 2024 reelection campaign.

BYD, the world’s largest EV producer, was recently banned by Congress from selling batteries to the Pentagon due to security concerns, according to Bloomberg News.

The report says that between 2018 and 2023, Democratic California Gov. Gavin Newsom received about $60,000 from Li and BYD USA. Newsom faced criticism for awarding BYD a $1 billion no-bid contract for protective equipment during the pandemic and later test-drove a BYD vehicle in China in 2023.

Former Los Angeles Mayor Antonio Villaraigosa received over $10,000 from Li for his unsuccessful 2018 gubernatorial campaign, while the California Democratic Party got about $19,000 from Li and BYD USA between 2018 and 2020.

In 2015 and 2016, BYD USA and its executives donated over $11,000 to Michael Antonovich, former Chair of the Los Angeles County Board of Supervisors, who often supported BYD-friendly initiatives.

Additionally, BYD USA contributed $25,000 in 2018 to Californians For Safe, Reliable Infrastructure, a group opposing Proposition 6, which aimed to repeal a gas tax.

In 2017 and 2018, BYD USA and Stella Li donated over $19,000 to Los Angeles City Councilman Kevin de Leon. De Leon, then President pro Tempore of the California Senate, praised BYD at a 2017 ribbon-cutting for its Lancaster manufacturing facility, emphasizing the company’s role in job creation.

BYD is one of the world’s largest EV manufacturers and direct competition to U.S. based Tesla.

It focuses its Americas subsidiary on electric trucks, forklifts, and buses. The company is exploring entry into the U.S. EV market via Mexico and may benefit from the EPA’s new tailpipe emissions standards for heavy-duty vehicles.

BYD has expanded globally under China’s Belt and Road Initiative (BRI), a $1 trillion effort to build infrastructure and increase China’s economic influence, potentially challenging U.S. geopolitical influence.

The company is frequently highlighted on the Chinese government’s “Belt and Road Portal” website.

Authored by Jonathan Turley,

President Joe Biden’s decision to withdraw as the Democratic Party’s nominee solved an immediate problem for his party. Biden has plummeted in the polls as the vast majority of voters concluded that he is too diminished by age to serve another term. Yet, it has now created several new problems, including the obvious problem of a president who is viewed as incapable of running for an office that he continues to hold.

The Democratic Party essentially created its own political version of the 25th Amendment in forcing Biden off the ticket. This decision was about as voluntary as leaving a building by way of a window on the 46th floor. That is particularly the case when you are thrown out of the window by your closest friends.

The unseemly image of succession by defenestration will soon be whitewashed by a media that will praise Biden after weeks of declaring him incompetent and enfeebled.

That, however, leaves the lingering question after the fall. How can Biden remain in office when he is incapable of running for the office?

Biden is notably vague about the reason for his withdrawal after maintaining for days that he will be the party’s nominee. He simply says that it is in the best interests of the country.

The Democratic establishment has two equally unappealing options.

• First, it could argue that Biden was withdrawing out of recognition that he is no longer politically viable. But that makes a mockery out of the democratic process. Millions of people went through the primary elections to select him as their nominee. Now he would be set aside and replaced by a vote of the party establishment like a shift in the Russian politburo.

• Second, it could admit that Biden was, as stated for weeks in the media and by figures like Special Counsel Robert Hur, greatly diminished both mentally and physically. However, that makes this withdrawal an admission that could trigger a fight under the 25th Amendment.

The development could create a new constitutional controversy. The 25th Amendment was written with largely physical disabilities in mind. If a president is comatose, the incapacity is obvious and Section 4 allows the vice president and a majority of the Cabinet to sign a declaration to Congress that a president is incapable of holding office.

However, Harris is eager to avoid the image of Brutus in the dispatching of the president. To support such a declaration would risk Biden proclaiming “Et tu, Kamala?” to the nation. The key to succession by defenestration is not to be seen as the hand that pushes the president out the window. Politics follows the same rules as the mafia for capo di tutti i capi: Kill a don, never be a don. While sometimes honored in the breach in the mob, it is hardly an auspicious path for a politician.

There is, however, another intriguing possibility.

Section 4 provides that a president’s fitness can be put before Congress when the “Vice President and a majority of either the principal officers of the executive departments or such other body as Congress may by law provide.”

Previously Democrats have cited that language to suggest that they could create their own body to force former President Donald Trump out of office. Indeed, Rep. Jaime Raskin (D-Md.) sponsored legislation called the Oversight Commission on Presidential Capacity Act to create a commission empowered to examine a president to Congress on the president’s capacity. It would circumvent the necessity of getting Harris to be the primary hand that dispatched a president.

The question is whether Congress will now make this decision to warrant an investigation or even a Raskin-like bill.

This is different than President Lyndon Johnson’s decision on March 31, 1968, that “I shall not seek, and I will not accept the nomination of my party for another term as your president.”

That was before any primaries.

In this case, Biden won a primary in which the Democratic Party obstructed anyone who would challenge him and barred any debate.

Millions voted for him, and tens of millions of dollars were contributed to his campaign.

He is now withdrawing weeks before accepting the nomination. That unprecedented decision alone would warrant a House investigation into Biden’s continuing capacity to serve in an office that he no longer believes he can run to occupy after January 2025.

Before this decision, a special counsel cited President Biden’s diminished faculties as a reason not to indict him for unlawfully retaining and handling classified material.

Now, the president is effectively saying that, in addition to being allegedly too diminished to be prosecuted, he is too diminished to run for the office that he currently holds.

The question is whether Biden has ended the fight to retain his nomination only to trigger a fight to retain his office.

New satellite images show the massive extent of the Saturday airstrikes by Israel on the Houthi-controlled port of Hodeida in Yemen. Teams are fighting the large blazes for the third day, after the port was essentially leveled. 

Regional reports say firefighters have made little progress, and that the blaze could soon reach food storage facilities, which would be devastating given much of the Yemeni population has for years faced an acute hunger crisis and relies heavily on external aid.

The Israeli Air Force launched the unprecedented operation in response to a prior deadly drone attack on Tel Aviv launched from Yemen. From Israel’s perspective, the drone strike which hit near foreign embassies was the last straw after months of hostile actions from the Houthis.

According to AFP analysis based on Maxar satellite imagery from Monday:

An analysis of satellite imagery by the Dutch peace organization PAX showed at least 33 destroyed oil storage tankers, said Wim Zwijnenburg, a project leader with the group.

“We expect (to find) more damage, as not all storage tanks are visible because of heavy smoke” from the fire and burning fuel, Zwijnenburg told AFP.

At least six were killed from the weekend attack, and over 80 injured. The Yemen Petroleum Company – which runs the destroyed fuel depot, says the six deceased were its employees.

Satellite images released by Maxar Technologies show the damage to the Port of Hodeidah in Yemen following Israel’s attack. pic.twitter.com/bJVLd2HFoS

— The Cradle (@TheCradleMedia) July 21, 2024

The fuel depot is run by the Yemen Petroleum Company, which said late Sunday that the six people killed in the strike were its employees.

Port official Nasr Al-Nusairi was quoted in regional media on Sunday as saying, “We are working around the clock to receive all ships and there is no concern about the supply chain and supplies of food, medicine, and oil derivatives.”

This after some humanitarian groups sounded the alarm that vital supplies could be blocked due to the emergency situation. “Hodeidah port is a vital lifeline for delivering humanitarian aid to Yemen,” the International Rescue Committee (IRC) told AFP. “Any impact on this infrastructure jeopardizes the entry of essential goods and hampers aid efforts.”

Authored by Eric Lundrum via American Greatness,

According to the latest polling, a clear majority of Americans want to see immigration levels reduced, not increased.

Axios reports that the latest poll from Gallup shows that 55% of American adults want legal immigration lowered. This marks the highest percentage of Americans in favor of this immigration stance since 58% said so back in 2001. Last June, that number was down to just 41%.

The previous record high percentage in favor of reduced immigration was 65%, which was recorded in both 1993 and 1995.

While the stance is more broadly shared among Republican and independent respondents, the poll indicates that even Democrats are starting to shift towards a stricter position on immigration.

The poll found that 88% of Republicans are in favor of lower immigration (a 15-point increase from the previous poll last June), as are 50% of independents (an 11-point increase).

Although the percentage among Democrats is just 28%, this marks a noticeable 10-point shift from the prior results.

Polling throughout the year has consistently shown immigration to be the top issue for primary voters, even ahead of other concerns such as the economy.

Gallup also reported that 42% of respondents considered the border issue to be a “crisis.”

The noticeable shift on the immigration issue is likely to benefit the campaign of former President Donald Trump, who has consistently made immigration one of the top focuses of his campaigns for the presidency.

Politico reported on Sunday that Israeli Prime Minister Benjamin Netanyahu will likely delay Gaza ceasefire talks for at least another three months until after the US presidential election. In 2020 Netanyahu called Trump “the best friend that Israel has ever had in the White House.”

And as WSJ is now warning of the Dangers of a Lame-Duck President, Israel’s Gaza operations look to intensify even as the Biden administration just days ago claimed that a Hamas-Israel deal is “inside the 10-yard line and driving toward the goal line in getting an agreement that would produce a cease-fire,” according to the words of Secretary Blinken.

But the Politico report observes something closer to the reality, “With the U.S. presidential election now a little more than three months away, Netanyahu may believe he can escape the pressure he’s getting from Biden to stop the war and that Trump will go easier on Israel and also be far tougher on Iran and its proxies, especially Hezbollah in Israel’s north.”

One senior foreign diplomat from the region was also cited as saying, “Our assessment is that Netanyahu wants to buy time until the November election.” And further:

The Lebanese newspaper Al-Akhbar reported last week that a separate intelligence assessment provided to Egyptian President Abdel Fattah El-Sisi also concludes the Doha talks may not progress until November because of Netanyahu’s belief that he’ll have more maneuvering room under Trump. (The Egyptian embassy in Washington did not immediately respond to a request for comment.)

After Biden announced he’s dropping out the presidential race Sunday, this changes the nature of Netanyahu’s expected meeting with the US president at the White House this week.

Israeli media says the prime minister struck a bipartisan tone in statements just before boarding a plane to Washington, where’s he’s also set to make a controversial address to Congress.

“This will be an opportunity to thank him for the things he did for Israel in the war and during his long and distinguished career in public service, as senator, vice president, and president,” the Netanyahu statement said of Biden, reacting to the Sunday announcement. 

The prime minister said he further intends to reaffirm to the US that “regardless of who the American people choose as their next president, Israel remains its most indispensable and strongest ally in the Middle East.”

The Netanyahu government in the recent past has been fiercely critical of Biden’s shifting policy approach to Gaza, especially after the US administration temporarily withheld shipments of bombs to Israel. But this criticism is now expected to calm down as Israel looks to a likely Trump administration to take to reins. 

#Netanyahu heads to #Washington amid #Biden‘s #withdrawal decision; #GazaWar, #Iran on agenda 🗞️ Catch the day’s latest news and updates ➠ https://t.co/Hik1HuGZZc pic.twitter.com/t23hoMNBNS

— Economic Times (@EconomicTimes) July 22, 2024

Israel meanwhile is now focusing its southern operations on Khan Younis, with reports of heavy airstrikes as fighting there, amid the continuing humanitarian catastrophe as civilians flee the city.

By Patrick McDonald of CampusReform

Scrutiny of diversity, equity, and inclusion (DEI) initiatives in higher education has been increasing for months, with more opponents finding what they see as radical or harmful aspects of the ideology. 

The latest example is a recently uncovered Duke University School of Medicine DEI plan that states that concepts such as “individualism” and “timeliness” can be a part of what the school describes as “white supremacy culture.”  

The 2021 report, “Dismantling Racism and Advancing Equity, Diversity and Inclusion in the School of Medicine,” was uncovered at a time of increasing scrutiny into DEI in higher education. 

The University of North Carolina, for example, is currently being required to give an account of how its different campuses are enforcing a Board of Governors directive to cut down DEI programs. Moreover, multiple other states, such as Utah and Alabama, have recently passed anti-DEI legislation. 

“White supremacy culture is the idea (ideology) that white people and the ideas, thoughts, beliefs, and actions of white people are superior to People of Color and their ideas, thoughts, beliefs, and actions,” the Duke report explains, before providing specific instances of what can supposedly contribute to so-called “white supremacy culture.”

“In the workplace, white supremacy culture explicitly and implicitly privileges whiteness and discriminates against non-Western and non-white professionalism standards related to dress code, speech, work style, and timeliness,” the report continues. “Some identifiable characteristics of this culture includes [sic] perfectionism, belief that there’s only one right way, power hoarding, individualism, sense of urgency and defensiveness.”

“Duke Medical’s DEI plan says ‘timeliness’ is white supremacist,” Steve McGuire, Paul & Karen Levy Fellow in Campus Freedom at the American Council of Trustees and Alumni, posted to X on Tuesday. “The same plan identifies a lack of timely responses to discrimination complaints as a top concern among constituents.”

Additionally, the report lists five goals for “Dismantling Racism and Advancing Equity, Diversity and Inclusion” in what the school terms a “strategic plan framework.”

The university’s DEI goals include: “Enhance racial diversity and equity, inclusion and respect for all of our constituents,” “Catalyze anti-racist practice through education of our current and future workforce,” and “Establish our School as a transformative leader in anti-racism and social justice education and research.”

The medical school’s report also contains a section about Critical Race Theory.

“Critical Race Theory (CRT) is a theoretical framework and movement that examines how the appearance of race and racism is expressed across the dominant culture,” the paper states. “CRT scholars note that the social construction of race and racism is a regular component of American society; it is embedded in structures such as law, culture, and economics, which supports the interests of white people.”

Campus Reform has contacted Duke University for comment. This article will be updated accordingly.

We reported earlier that the Ukrainian side seemed to react positively to former President Donald Trump’s phone call with President Zelensky on Friday, as the Republican nominee for president conveyed that upon taking the White House his priority will be to explore achieving peace with Russia.

Trump wrote in the call aftermath that “I, as your next President of the United States, will bring peace to the world and end the war that has cost so many lives and devastated countless innocent families.” He added that “Both sides will be able to come together and negotiate a deal that ends the violence and paves a path forward to prosperity.”

But some influential Ukrainian officials are already warning Zelensky against too hastily taking to the negotiating table. Zelensky has in the past consistently rejected the idea of sitting down with Moscow, and has openly stated he intends to refuse so long as Putin is leader of Russia.

But amid ongoing devastating troop losses, lack of artillery ammunition compared to much better-armed Russian forces, and a general war fatigue setting in, Zelensky could eventually welcome the kind of opening toward peace that a potential Trump presidency provides.

Kyiv’s mayor said on Sunday that Zelensky risks “political suicide” should he pursue a peace deal which ends in Ukraine ceding territory to Russia. 

Mayor Vitali Klitschko said in an interview with the Italian daily Corriere della Sera on Sunday:

“How can we explain to the country that we need to give up pieces of our territory that cost the lives of thousands of our fighting heroes? Whatever move he makes, our president risks political suicide.”

He admitted that the coming few months will be “very difficult” for Zelensky, and that the Ukrainian populace will want a say in the country’s fate. So the scenario of holding a referendum on the question of a deal with Moscow would be likely at some future point.

“I don’t think he can reach such painful and important agreements on his own without popular legitimization,” Klitschko said of the question of territorial concessions. He said this could be a “way out” for Zelensky, as well as the creation of a national unity government.

Zelensky has stayed in power, extending a term which would have ended this past spring, through martial law, and Mayor Klitschko expressed that it’s anything but clear whether Zelensky is willing to give up power in order to achieve peace.

But, Klitschko explained, the reality is that the situation on the ground is “more and more complicated” given success depends on the constant delivery of foreign aid, and ultimately “It would be a nightmare if we had to fight for another two years.”

Among those factions within Ukraine likely to take revenge on Zelensky if he ever opted for a path of peace and negotiation includes Azov Brigade and others among hardline, neo-Nazi linked political coalitions such as Right Sector.

Authored by Omid Malekan via Medium.com,

Satoshi Nakamoto had multiple insights, but the most profound may have been the use of circular logic to address an unsolved problem in the decades old field of distributed consensus.

Before Bitcoin, there was no known way to secure a permissionless system where participants were free to come and go. Nakamoto Consensus does it with incentives, the economics of which are circular.

Why is the decentralized Bitcoin network secure? Because the bitcoin currency has value. But why does the currency have value? Because its decentralized network is secure.

The critics who call this a ponzi don’t realize the circularity is a feature, not a bug. It allows for the system’s network effects to go to its users, as opposed to an authority. Bitcoin is a trillion-dollar asset that nobody controls but anyone can own. If it weren’t independent and decentralized it would just be a bad database.

Bitcoin Isn’t Perfect

Bitcoin is awesome, but there’s not much that you can do with it other than owning it. You can’t use it in DeFi — not natively anyway. The Bitcoin protocol is too limited to build DeFi on top of: block times are too slow and unpredictable, and the scripting language can’t do much.

There’s hope that a new generation of L2s or additional covenants can change this, but I remain skeptical.

The soul of Bitcoin is to solve a different problem than collateralized lending or DEX trading.

One solution is to bridge Bitcoin to other L1s, and there’s already $10b worth on Ethereum alone. But this too is imperfect. Secure bridges remain an unsolved problem in crypto and I doubt we’ll find a decentralized approach that is not bottlenecked anytime soon. The other solution is to use Bitcoin custodially, but that’s moving backwards.

Put together, these limitations mean that the most valuable and liquid asset in crypto can’t be used as the economic foundation for a new financial system. It will always be a part of that system — there’s plenty of bridged Bitcoin in Ethereum DeFi — but it can’t be the core of it. The core asset must be fully secure and completely decentralized.

The HQLA of Crypto

In traditional finance, a High Quality Liquid Asset is one that has broadly recognized value and substantial liquidity. The concept was introduced after the 2008 financial crisis to force banks to always hold a certain amount of safe assets that they can sell in a pinch without tanking the market. The most obvious example of HQLAs are US government bonds, which form the backbone of the international dollar system. Nobody questions their value, they can be bought and sold easily, and there’s seemingly endless capital willing to lend against them.

DeFi needs a crypto-native equivalent. Debt and derivatives are safer when built on top of an HQLA. Given the inherent risks of leverage, the one thing market participants shouldn’t have to think about is the quality of the collateral. HQLAs can fluctuate in value the way all assets do, but their reliability and liquidity should never be in question, even in a bear market. A crypto-native HQLA enables decentralized stablecoins, safer credit, and more scalable derivatives.

The most likely candidate for a crypto HQLA is the native coin of an L1 chain — a currency minted and controlled by a protocol that can only be altered via a fork. Native tokens offer the greatest property rights and monetary assurances. Tokens tied to dApps, on the other hand, may have smart contract risk and usually involve some kind of governance risk. Ceteris paribus, the token of a dApp will always be less valuable than the native token of the chain it rides on.

So will any individual L2 token. L2s inherit some of the security of the base layer so they lack full circularity — some of their activity will always accrue value to the L1. Stablecoins and other assets issued by a centralized entity have too much censorship risk. A truly permissionless CBDC might work, but is unlikely. Everything else in crypto is low quality.

That leaves us with ETH and SOL, the native assets of the two most valuable smart contract platforms, each of which has a robust native DeFi ecosystem. Each coin is the HQLA coin of its own chain, but financial systems have a winner-take-most tendency, so one is more likely to become the HQLA of the decentralized financial system. Despite the success and staying power of Solana, the platform, SOL the asset is of only medium quality.

Cryptoeconomics is not a meme

ETH is a lot more liquid than SOL, in part because ETH is more distributed and widely held than SOL. Its initial distribution happened almost a decade ago, and was modest by contemporary standards. Years of Proof of Work dampened concentration. Tokens that have only ever been Proof of Stake tend to have greater concentration because stakers don’t have to sell their income to fund operations the way miners do. Ethereum did not have any VC rounds and the Foundation took a small initial stake (again, by contemporary standards). There was no Labs or Ecosystem Fund. There are still concentrated pockets of ownership, but the overall distribution is broad.

SOL is a younger asset that had staking from launch. It began life more concentrated than ETH due to its VC rounds and gave allocations to the Labs, Foundation, and Ecosystem Fund. The FTX collapse helped diversify ownership, but wider distribution will always be capped by the fact that unlike ETH, SOL is not an appealing economic asset in of itself. People may want to own it for narrative reasons or to speculate, but its fundamentals are weak.

Solana has relatively high inflation, north of 5%. That rate will ratchet down every year until it hits a steady state of 1.5%, but supply will grow by 25% by then. This means that SOL has a high nominal interest rate, and that’s problematic for DeFi integration. Any asset backed by it (like a decentralized stablecoin) or margined with it (like a perp) will have a high cost of capital.

You can see this dynamic in action by contrasting the market rate for ETH in Aave to that of SOL on Kamino.

SOL owners can always stake to protect themselves from dilution — they’d be foolish not to. Inflation is sometimes argued to not be a problem in crypto because it’s just a wealth transfer from non-stakers to stakers. But it is a problem for HQLA consideration. Not only does it increase the cost of capital of DeFi, it also reduces liquidity. DeFi has to compete with staking to attract the native asset. Thus: most of the SOL in existence is currently staked.

Liquid staking tokens can serve as a workaround but are suboptimal. They have their own credit/counterparty risks and are less quality than the native asset, by definition. The problem on Solana is exacerbated by the fact that there’s no clear LST winner, so even the liquidity of its LSTs is fragmented. DeFi always prefers the native asset, but Solana doesn’t have a lot of it.

To be fair, liquid staking tokens are also popular on Ethereum, and Lido’s stETH features prominently in DeFi. But Ethereum has half the staking participation rate of Solana, thanks in part to its lower staking yield, which translates to a lower opportunity cost to doing other things with the native coin. These dynamics mean there will always be proportionally more free-floating ETH than SOL.

The other problem with SOL as an asset is that Solana transaction fees are too low. This might sound counterintuitive, but it’s important to remember that while fees are a cost to users, they are an additional source of revenues for validators. A chain that can pay its validators via fees doesn’t have to rely as much on issuance and can be secured with less inflation. Users on such a chain would also want to hold more of the native asset today to cover potential gas expenses in the future — sometimes referred to as the convenience yield.

High fees on a smart contract platform enable less new supply (because validators are paid with fees) and more current demand (because users need to hold at least some) for its coin — up to a point. High fees improve the moneyness of an L1 token, and moneyness is important for this conversation. The highest quality assets are derived from the best money.

The interplay between issuance and fees determine the real yield of a cryptocoin. Chains that have low inflation and high fees have a positive real yield: stakers earn a solid rate of interest without having their coin debased. ETH is the best asset in crypto in this category — even better than Bitcoin. The current ~3.5% staking rate comes mostly from fees (Bitcoin also has low issuance and high fees, but the fees go to miners, not coin holders). Solana has high issuance and low fees, so it has a borderline negative real yield. Almost all of the return stakers earn comes from debasement.

Note that MEV is also a factor in the nominal vs real calculation, but beyond the scope of this analysis. My guess is that Ethereum will always have higher MEV capture for stakers than Solana, but the situation for both chains is in flux.

Ethereum also has a burn mechanism that makes it deflationary during periods of high activity, increasing its positive real yield. The ability to earn interest in a potentially deflationary asset is special. Such an asset is in some ways the perfect HQLA, even better than US Treasuries, whose yield has to be viewed against the backdrop of increasing money supply. Ethereum’s burn mechanism also returns value to non-stakers, helping keep staking participation down. Solana used to have a burn mechanism but decided to get rid of it.

This is a complicated argument with multiple moving parts, some of which may change over time. But the overarching point that I’m trying to make is that the economic factors that make a cryptocoin appealing as an HQLA are separate from the technical ones that make chains useful. Sometimes they are in conflict.

Solana’s hardware-centric consensus mechanism further hurts SOL’s chances for HQLA consideration, because the cost of running a validator is a vector for centralization, and the more centralized the chain, the less appealing its native coin. As validators scale up their hardware to meet demand, they will also extract more value for themselves, suppressing the real return to stakers.

Tellingly, Solana’s own design and branding has always reflected its optimization for performance over moneyness. Its network requirements are already high and may go higher with greater demand or the introduction of Firedancer. No less an influential figure than its founder has argued that SOL is not money, inflation doesn’t matter, and that cryptoeconomic security is a meme. I have a lot of respect for Toly for taking this stance, it shows his intentions are pure as a builder.

But if cryptoeconomic security is only a meme, then the value of the native coin is not all that important. The circularity of decentralization that I mentioned above, where the value of the token secures the network and the security of the network improves the value of the token, is not as cogent. I’ve written extensively about why I don’t believe in the monolithic design philosophy. One of the consequences of its internal conflict is that the asset of a monolithic PoS chain has weak value capture.

ETH is the high-quality liquid asset of crypto. Thanks to modular scaling, it will be bridgeable to countless rollups with minimum trust assumptions. If this thesis is correct then it may even overtake Bitcoin someday. It’s still early, and memetics and momentum trump fundamentals in crypto valuations.

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In a move seemingly timed to ease the immediate pressure on Secret Service Director Kimberly Cheatle,  Homeland Security Secretary Alejandro Mayorkas on Sunday night announced the formation of an independent review panel charged with examining the attempted assassination of Donald Trump, which appeared to illuminate an astonishing degree of Secret Service incompetence. 

The unusual Sunday night announcement came about 12 hours before Cheatle’s 10 am Monday appearance before the House Oversight Committee, which Republican Speaker of the House Mike Johnson has touted as “must-watch TV,” telling CNN, “She’s got a lot to answer for. And those concerns are bipartisan.” Underscoring that notion, Oversight Committee member and Democratic Pennsylvania Rep. Brendan Boyle has already demanded that Cheatle resign, via a statement released Saturday:  

“The evidence coming to light has shown unacceptable operational failures. I have no confidence in the leadership of the United States Secret Service if Director Cheatle chooses to remain in her position.

The creation of the panel will give Cheatle a flimsy shield she can use to try deflecting Monday’s pointed questions about the Secret Service’s damning actions and inactions surrounding the July 13 shooting at Trump’s rally that wounded Trump and two spectators and killed a third.  

“We are committed to getting to the bottom of what happened on July 13,” said Mayorkas. “This independent review will examine what happened and provide actionable recommendations to ensure they carry out their no-fail mission most effectively and to prevent something like this from ever happening again.”

In his Sunday night statement, Mayorkas also made the deeply dubious assertion that the Secret Service is “the greatest protective service in the world.” The victims and surviving family members of the shooting at Trump’s rally would likely quarrel with that poorly-timed chest-thumping. It’s also wildly inappropriate given the panel he just appointed should be at least theoretically free to reach an entirely different conclusion.  

“Our goal is a 30% female Secret Service by 2030” – Director Kimberly Cheatle

What could possibly go wrong? pic.twitter.com/ItlNZDMtZg

— End Wokeness (@EndWokeness) July 14, 2024

That panel has been given 45 days to perform its review. While new experts may be added shortly, it initially has four members: 

• Obama Homeland Security Secretary Janet Napolitano

• Fran Townsend, a homeland security advisor to President George W. Bush

• Mark Filip, who was deputy attorney general to George W. Bush

• David Mitchell, former Secretary of the Department of Public Safety and Homeland Security for the State of Delaware

Damning information about the Secret Service’s handling of Trump’s rally in Butler, Pennsylvania continues to emerge. On Saturday, the agency was caught in a lie: Having repeatedly denied that Trump’s campaign was denied additional security resources it had requested, the agency was exposed as having done just that, via a report from the Washington Post. 

On Friday, the world learned that would-be assassin Thomas Crooks was able to fly a drone over the event site just a few hours before he opened fire. The Secret Service typically bans drone flights at secured sites; but it’s unclear if such a prohibition was at least nominally imposed at the rally.

Crooks was identified as a suspicious individual more than an hour before he opened fire from a rooftop only about 450 feet from Trump’s podium. At the time, he’d already been observed in possession of a range finder and carrying a duffel bag. Later, he was spotted on a rooftop 20 minutes before all hell broke loose. As it did, female agents assigned to the DEI-focused protective detail appeared to falter under fire — even struggling with holstering a weapon. 

In the aftermath of the shooting, Cheatle’s credibility took a sharp downturn when, asked why no Secret Service agent was posted atop ideal sniper roost used by the shooter, she told ABC:

“That building in particular has a sloped roof at its highest point. And so, you know, there’s a safety factor that would be considered there that we wouldn’t want to put somebody up on a sloped roof.” 

SS sloped roof division. 🤣🤣 pic.twitter.com/dHgFCVrlFz

— 🇺🇸𝓒𝓱𝓪𝓭🇺🇸𝓗𝓪𝓻𝓻𝓲𝓼𝓸𝓷🇺🇸 (@Texas_jeep__guy) July 20, 2024

That flatly ridiculous rationale fueled a brewing public perception that an emphasis on stocking the Secret Service with diversity hires — including Cheatle — had greatly weakened the agency. “The initial excuses that [Cheatle] has given for the lapses that happened last Saturday are just unbelievable, so we’re going to get down to the bottom of it,” said Speaker Johnson. 

You can watch Cheatle’s 10am Monday appearance before the House Oversight Committee here. She’ll try dodging the fusillade of rhetorical bullets fired her way from both sides of the aisle, but could emerge more bloodied than Trump.