Analyst Table: Is Token Issuance a Cost?

Transcript

read the room guys it's like it's a bear Market 63 million dollars in this market like come on guys like after after essentially telling like LPS that they're getting screwed over and over and that we're just gonna create like a whole off-chain market for liquidity provision and and like the the users of your protocol are ultimately going to get uh armed away through toxic flow like I don't know it's not a good look all right everyone welcome back to another episode of zero X research we have a great analyst episode lined up for you today because as a reminder we did change up the format a bit just to split out the analyst Roundtable from the interview segment um you know the comments were saying that you guys were loving the analyst section and we love just talking about this space so we figured why not bring

some more content to the people definitely keep letting us know your thoughts on this if you prefer it if you hate it let us know in the comments or the DMS we'd love to get your take before we jump into the thick of today's episode a quick word from our sponsor the hexins the most hardcore security team in web3 pioneering in ZK and novel cryptography hexins is trusted by tier one projects like polygon including new work on their ZK evm mantle risk zero Lido one inch new bank and more today is September 29th so recording this on the Friday the episode goes out on the following Wednesday so put down the pitchforks if something we stay gets a little bit stale we're just giving you our thoughts on the matter given the information currently available

available to us I wish we could try time travel but haven't figured that one out yet so today we're joined by effort capital and Westie to jam on the latest Market happenings but Sam I'll throw things over to you to kick us off with a governance update absolutely so just as a reminder all of these updates go live in real time practically into govhub on blockworksresearch.com and you can get 10 off of that subscription service using Code 0x research 10 at checkout but uh yeah anyways on the governance Updates this week we saw uniswap Foundation the independent non-profit for uniswap request 63 million dollars worth of you need tokens to fund uh Innovation around uniswaps likely in

relation to hooks uh 30 for developers uh 15 for research 10 for LPS and institutions to encourage rooting trades through uniswap and 10 for governance engagement which I found particularly interesting um this proposal also looks to remove the uf's need to get a dow approval for Grants greater than two million dollars which was another interesting caveat and I'm actually in for that considering how difficult it is to get token holders to vote Yes on large spends but I'm curious do you guys have any thoughts on this proposal or is this a skip yeah this one's pretty interesting I think actually right so uh uh people were I don't know it's funny whenever money goes from like the Dow to

the foundation or vice versa there's always a controversy how much money is going how many people have control over this are token holders losing you know voting power control the protocol to a centralized group um and that's long been a debate for uni swap especially given this v-switch argument right should should the token holders should the Dow accrue the value generated by the protocol um and that's kind of what the core thesis of the the kind of the debate going around here is you know we're giving more money we're 63 million dollars plus the first uh the first grant is over 100 million dollars and like do you really need that much money uh I don't know yes or no so uh some of the some of the fact they're catching is really just the size of the amount of money and the fact that you know the Dow

is kind of yet again feels that they're losing control is still aren't earning any fees our token holders just continually going to be getting jipped here uh it's kind of tough to know and I guess there's like also this weird push and pull or at least what appears to be a push and pull I should say a between like you do swap Labs Equity holders and you need token holders like who's I don't know who's going to end up winning down that line but it's really like people love to say that there's even a debate there but you haven't seen any like concrete evidence in my opinion of the equity holders in unity swap Labs being truly favored over the token holders like just because the fee switches are not isn't enough in my opinion but I don't know if you guys feel differently I'm pretty against some

of this proposal so like there's as of today especially with unswap X and unswop V4 but the Singleton contract there's really no way for the uni token holders to accrue value at this point um you'd have to probably do it on a pool by pool basis and even then um liquidity providers or or pools can be forked uh and you can kind of remove any fee switch that I think uni uh token holders ultimately passed so um I think uni holders have really time and time again and I'm also pretty I don't know exactly like what the accountability structure looks like between the Dow and UF but the fact that they want to remove the need for doubt approval of Grants I'm in favor of that to a degree like you want um do you want to allow like agile

execution of subject matter experts in certain areas so like most uni token holders are not going to be subject better experts on how to allocate Grant Capital so I'm in favor of the idea but is it is it is it if it's uh so they like they have unanimous approval over grants of less than 2 million I believe so that's greater than 2 million I think a part of The Proposal basically is removing the need to go to the Dow when the grant is above 10 million dollars which I'm in favor of but I think the problem is like what is the accountability structure on the opposite side like what if the Dow is on favor of something that they out like what if there was actual misappropriation of funds does the Dow actually have the ability to veto and uh pullback funds from UF at any point

because if they don't I'm gonna get this proposal but if they actually do have that where they have the ability to veto and uh clawback funds when you up then like that's how it should be tokenholders should always have the right to veto remove a service provider or clawback funds um but they might not necessarily need the need to approve every single type of expenditure that a foundation or another committee um you know uh wants to allocate Capital to I believe the funds get streamed to the UF on like a basis in which they're requested because I think they got funded with like 20 million uni tokens a little while ago like about a year um so I don't know exactly the structure I'll be completely honest but I am pretty sure there are safeguards in place to make sure that they're not just

willy-nilly spending money on nothing they also need to read the room read the room guys it's like it's a bear Market 63 million dollars in this market like come on guys like after after essentially telling like LPS that they're getting screwed over and over and that we're just gonna create like a whole off-chain market for liquidity provision and and like the the users of your protocol are ultimately going to get uh armed away through toxic flow like I don't know it's not a good look so I guess this goes like are you bullish or bearish Dows in general and like what does the future of Taos look like like you you mentioned it earlier like are are is the Dow as a token holders more capable of allocating Grant Capital to their correct party or you know or token holders or if you look at

something like a lending protocol like who can better set risk parameters uh centralized entity that does this professionally or a dow of token holders that are you know may or may not even vote on the proposal it's I don't know it's hard not to be bearish dials in a lot of ways but I think we just really need to see the evolution of Dao's continue bullish service providers that's the main takeaway here for me at least uh that vote actually goes live on October 10th too so we got some time to mull it over but moving on to uh the next one in the governance update we have the arbitrum grants program uh the short-term incentives program is what they're calling it stip I actually really like that name it flows off the tongue well but they received over 100 applications

um it's actually pretty crazy uh most of the uh the requests are coming from the perp sector GMX with 14 million mucks for nine gns with seven vertex with four and a half uh it's by Far and Away the largest category I'm not sure how I feel about that to be honest but would love to get your guys's thoughts on the overall process and how you guys feel about uh their short-term incentives program definitely think there's a lot to be learned from a process standpoint I mean there's a hundred and five I think was the final count of of applications that came through the door that is an absolute nightmare for token holders and delegates have to go through so you know thankful to the couple people at blockworks research that spent uh quite a lot of time aggregating these into

like one Excel sheet and giving again those those voting parties the ability to at least have like a a quick overview of what's going on but the reality is like a quick overview is not enough you like this is because there was no framework on like here's how you can use the incentives uh now request the number it's like it's not as simple as just looking at a high level number and deeming whether or not this is like the protocol that requested that that number of ARB is worthy of receiving it like you have to actually tear into the mechanism they plan on using and like does this make sense are they just paying users to use their protocol are they kind of doing something a little more complex that has a bit more staying power and stickiness of the user that doesn't just immediately create ARB cell

pressure and I mean what a nightmare like again 105 proposals you're not going to get the average person to do this you're not even going to get the upper quartile of token holders and delegates to meaningfully go through these things uh so again this goes back to what I just said are you are you bearish or bullish Dows in the long term like this is a full-time job to go through these proposals and that's kind of what freaks me out about Dow governance in a lot of ways but Sam you mentioned that uh you know perps perps platforms led the way in the total grants requested and the dex's yield optimizers lending protocols and bridges kind of rounded out the top five there and in total the top five sectors that we just listed off

accounted for 64 of the total applications and 77 of the total ARB requested um so it's kind of like where the the ARB is categorized in this in this case and quite honestly like I feel like the protocols in those sectors are probably the most beneficial to defy with the exception of liquid staking I think that's they're kind of a little underrepresented here and if you really want to kind of take that next form of like ether's money narrative like it kind of is LSD so I was surprised that we only got what was I think three liquid staking protocols coming in with Lido being the the largest request there yeah I mean the first thing I pictured when I heard that there were over 100 applications was like a multi-sig trying to go one by one through each of these

applications and vote um and not only uh vote physically but also you have to think long and hard about which ones you're voting yes for which ones you're voting no for and so yeah I see a lot of parallels with the unit swap Foundation vote where having a service provider whose job it is to allocate that capital I think is just like way more efficient and on top of the fact that I mean looking through these proposals I see a lot of alpha um between the different protocols like I know Ramses is one that asks for I think like four times as much R than their market cap and we saw it pump pretty quickly despite the fact that like we don't know if it's actually going to pass or not but you know people

are definitely jumping at the gun to find which of these proposals you know gives a good amount of ARB and it's going to drive activity uh specifically but then also reading it you can also see some of these proposals that I think are just like not good and not actually like a good use of ARB for example like a lot of the bridges you're just asking for ARB to basically pay for the gas fee of users that bridge to the chain like I don't see how that actually helps in any way like I don't think you know send off giving you know a little bit of ARB for someone to to Bridge Over is gonna significantly increase the flow of funds right and I think they're just better you know uses of that capital and so yeah I mean I've read through some of

these but definitely not all 105 but I'm definitely going to read through them find where the alpha is also on that point West you're like okay I'm a user I just bridge this ecosystem you rebated me for the gas that it took to get there now I have a token I didn't ask for and I still need East to pay transaction fees what am I going to do with that token I didn't ask for so it's like all right I don't know and this I I know effort you I know how you feel on this so maybe I'll tee you up here but do we do we need to be giving an incentive program in the heat of a bear Market no and like no uh yeah I'll say like I do cut even though it's a pain in the ass like 100

105 rolls I think you said something ridiculous um I I think that doing this is actually pretty interesting because instead of creating like a framework saying here's how we're going to accept a grant or or here's how we're going to distribute Capital across like these certain metrics you're kind of creating like an open source like Innovative way of figuring out new ways to attract arbitrary capital and and unlock I guess like the arbitrary economy overall so like I kind of like the idea of having like almost no framework and like everyone throw a bunch of [ __ ] ideas at the wall and seeing like what sex kind of thing so and you probably should only need to do this one or two times because eventually you figure out like the right mode of how to allocate capital in the future so it is a pain in the ass up

front but I kind of like it uh to figure out like what works and what doesn't uh for future like programs like this but I think like does mucks need nine million dollars does gains in seven million dollars no like do we need all these different perpetual future protocols no almost all of them copied like the GMX model initially I'm not saying I'm in favor of the 14 million for GMX but I could also see the point that's like look without GMX arbitrum really had nothing going for it so many other protocols built on top of gmx's v1's initial model with the glp vaults um you can kind of see this is like a retroactive Grant going to GMX for what they were able to do to jumpstart the arbitrome economy and you're kind of betting on the team like the you should be betting on a product per se you

should be betting on the team like a lot of VCS bet on the teams teams ultimately like a lot of times ideas don't work 99.9 startups fail but if you believe in the team they iterate they um you know go into a different direction they ultimately find success and I think like the GMX team is shown time and time again that whether or not you believe in the V2 model itself is like regardless of the point but GMX was a first mover advantage in this space everyone else almost ultimately like copied their model and maybe made some some very small design changes here and there um I would not be giving a bunch of capital to anyone else outside of GMX at least in the purpose of space uh on our Patrol specifically that's my personal opinion I I will say like within the perf space I can understand why they're

asking for so much Capital when you look at the biggest competitors and synthetics and dydx and the fact that they've been so successful recently is because of incentives because of token sentence right synthetics has been using a lot of op rewards and will continue to do to do so when that uh program comes back up and so like they kind of have to play the game in order to stay competitive which is super annoying and it's definitely somewhat a waste of capital but at the same time like you kind of have to play yeah that's a good point and like when you look at you know GMX mux gns vertex they all have like slightly different you know models that I I hear your point about GMX being in that bass layer that everyone kind of forked and iterated on

um so it's like it's hard to it's hard to like pick which one's like oh this you know protocol a is more worthy than protocol B uh if you're just like taking the right now moments of being like okay like you know this model maybe is more sustainable than the other one or something like it's gonna be really really tough for delegates and token holders to come to decisions here on on how they feel and I I actually really liked your point something I hadn't considered uh effort which was this is actually a great way to figure out which is like the best way to incentivize activity in the most sticky way I I didn't think about that at all and just thought about the headache it was creating but that's a 10 out of 10 point I love that yeah they also have like data and

Reporting requirements that they have to submit every like two weeks I think throughout the incentives period so it's going to be super interesting to see the data that these protocols all publish onto the Forum the ones that actually win the allocations just to see like are the incentives working and then also looking at that same data you know months after the incentives end um so I think we're going to learn a a like a ton to be honest I something I would like to see more of though would be like are blowns things that you know get loaned out get more liquidity for ARB and then maybe return to the Dow Treasury and then the service provider who borrowed that R gets to make trading fees on that like I think that's great I'd also like to see like more uh Focus around who's actually generating revenue

for the Dow obviously that would be gas consumers considering the revenue for l2s is going to be the Delta between L2 fees paid and L1 settlement costs so I mean Lara zero and Stargate make up like 20 of gas yet they're a very small portion of of the the requested ARB so I don't know I think this is going to be a great learning experience but I also think there'll be some failures from it as well I'm really bullish on the idea of like liquidity as a service lending out liquidity not necessarily like handing it out I think this is one thing that like uh going to curve for example like I think curve the their vote escrow model I think is right in the sense like you got incentivized liquidity but the problem is they're giving they're liquidity away whereas like they're I wish you know I think Rory they were

already tried to do this a little bit it was obviously like a failed model um om does this to a certain degree but I think like lending out your liquidity to jumpstart an economy but not necessarily giving it out is probably the right way like I fully believe in the protocol and liquidity model it just again there's such like a wide design space there that it just hasn't been figured out yet but I'm very bullish on the concepts in general and I'm interested in seeing if somebody actually figures it out over the next year or so yeah mux has actually done some interesting stuff with protocol and liquidity that I stumbled across the other day I think that's pretty genius for approach platform if you're thinking like really long term time Horizon another one I just want to shout out because I've seen people on CT talking

about it is jonesdale I think they applied for a pretty hefty some of our I'm not sure exactly how much it is but they just initiated a Buy-Back program and that thing's up like two times over the last week alone so maybe that's one worth uh looking into I'll just add some add the number there Jones dial requested a maximum of three million are Wanna Give a quick shout out to hexins as we explore today's blockchain landscape let's take a moment to recognize them as a premier cyber security provider in web 3. hexins is trusted by tier one projects like polygon including a Security review on their new polygon ZK evm mantle risk zero Lino one-inch new bank and more get a deep dive into your technology stack with the most comprehensive analysis in cyber security Consulting hexins not

only uses widely known methodologies and flows but discovers an introduced uses new ones on a day-to-day basis with over 55 billion dollars secured they cover everything from Smart contracts to blockchain to web 2 pen tests foreign yeah there's been nearly seven billion dollars of total value hacked in crypto's nascent history so it's safe to say your team has a lot on the line don't skimp out take your security seriously and reach out to hexins don't forget to mention Xerox research for a free web 2 pen test with your partnership and reach out to hexins at hexins.io find them in the links in the show notes or reach out to them at permissionless they'll be at Booth 832 but without further Ado let's get back to today's episode this next one uh is pretty exciting in my opinion the dydx

proposal for 20 million dollars of incentives over a six-month period once V4 is deployed at current prices that's only 10 million tokens uh assuming a two two dollar dydx which is only one percent of the supply and only like 17 to 20 percent of that is circulating uh with the caveat that there are some large investor unlocks in December my takeaway from this honestly I think High float or sorry low float High fdv tokens got a lot of slack from the FTX Alameda era but I do think there's a serious argument to be made for like really long vesting schedules really low flow gradually increasing that float so the value of your incentives can go a lot

longer like dydx's fdv is two billion dollars that is 5 10x the next closest I think GMX is at 300 million like that and they don't have any dry powder of incentives which is why they need 14 million ARB it's like dydx set themselves up in this position where they can now incentivize with just one percent of the supply and it's going to be 20 million dollars over six months and that's going to have a very meaningful impact so my biggest takeaway from this prop is just like don't hate or fade the you know the meme of you know low float High FTV coins I I think that's really not the as bad as people make it out to be whoa to Westy's point you got to play the game if you're a perps platform and here we see it again

I don't know if I completely agree with you Sam that the low flow high fdv can be a good thing I think you just need to sort of manage that ratio and that if it's too big you almost have too much Capital to use this incentives and as you keep giving those out it just drives the price down and no one wants to hold a token that they know it's going to continue to emit basically almost what it feels like to Infinity like over many years um so there's you have to strike a balance but at the same time I think you are correct in that having a portion of the supply used for incentives and figuring out which buttons you need to push to get sticky users I think is a good thing and shouldn't be overlooked

but again that you sort of have to strike a balance there yeah my my one addition I would say there is I think with those longer term time horizons with the low float High fdv setup like you need Founders and investors to also have the same long-term mindset like obviously you don't want ten percent flow then all of a sudden 20 of investor and Founders Supply hit the market that would be terrible so I think the challenge there is just getting a team that actually wants to to build and not get paid for for a decade honestly because right now everyone starts vesting in one or two year cliffs I'm so pumped for dydx E4 I think it's going to be such a killer product and

I'm like really excited to see to actually mess around with it um as I guess as a U.S citizen I guess I'm not allowed to say that but uh but I'm definitely gonna be using that product I hope it's as good and honestly like an incentive program makes so much sense like going back to like the Arboretum uh grant program really briefly like all that money all that liquidity or all that uh Capital to be allocated to these guys mostly these could just come exit liquidity because our gym doesn't really have like a sink it doesn't have a supply sink for all that new Supply comes onto the market but like uidx well you're going to take those incentives if people are smart they should notice that dyd executive Cash Cow we're gonna be able to take those dydx incentives restake it back to the dydx chain and then get you know

additional issuance plus uh trading Revenue so um I'm really bullish on P4 I hope it's as good of a product as I think it's going to be and if not then the option thesis is probably Ted but um I really hope that the dydx team knocks out of the park you're gonna be using it on testnet there to fix that for you there you go yeah I would also agree with that I think it's going to be a really cool experiment to yeah see how they used Cosmos like like look at how the order book is split up between validators and sort of see if they really are solving Mev in the way that they think like there's a lot of cool experiments going on that I am excited to see and I'm also

interested to see how it impacts the greater Cosmos ecosystem because like you said like having a dydx LST with a high yield of real yield and using that you know within D5 areas Elsewhere on Neutron on osmosis Etc like it could spark what like a D5 Bull Run within the cosmos if done correctly and yeah I'm just excited overall to see what impact it has in trouble for Adam though trouble for Adam I mean why would you ever hold St Adam if you can hold stdydx one's interchange money and one is just a there you go like the equity token of an

app chain uh stay with your chest down all right well if I can get paid out in Stables on a token LST like I'm taking that any day of the week over effort talk about that uh that chart you cooked up for the osmosis thing that's actually really really cool uh the transaction fee yes Market Diamond or dominance yeah so randomly um so I'm giving a talking cosm versus I said a lot on on a prior podcast but I'm gonna be talking about why like I believe Adam's money even though it hasn't been forced on the rest of the interchange economy for a gas fees or what have you but I was curious I'm like osmosis accepts uh essentially any token that traded on osmosis can be used as Gas payment and then what Osmos does in the background is it swaps it for osmo

and then gives the osmo to the osmosis stakers um and I was like well you know let me just do a quick flip side query what percentage of gas fees are actually being paid in osmo versus other other tokens and what I realized is like over the past 25 to 30 days approximately um there's been a drastic increase in number of transaction fees that have been paid in Adam um so like Adam right now went from one percent of all transaction fees on osmosis being paid an atom too now it's like 14 to 15 so there's been like an absolute parabolic usage of atom asgas on on the osmosis chain which I think is really interesting especially when you kind of consider like Osmos is like the number one uh app chain in the cosmos ecosystem and if Adam can like find proliferation as like the major Gas

payment token on that Network then it probably will see that naturally progress or proliferate throughout the rest of the interchange uh but it was something I just like randomly wanted to check up on and be like oh like how's that doing and it actually exceeds far exceeding my expectations and everyone was when I posted on Twitter um yeah sure everyone's pretty shocked by that stat so it got good amount of Attraction so um we'll see hopefully Adam continues to kind of grow as as like the major dominant gas usage or Gatsby token on the network it makes sense more people hold Adam than almost any other token in the cosmos ecosystem so you would think it would be be that um but uh yeah I asked I want to say it was Sam Hart Nathan Buckman I might be putting words in their mouth but I have someone in the

cosmos if they thought that would be like the end game for Adam as a token um and they were like no that's the only thing that that really makes sense so I don't know I just kind of put that thesis to bed after I was told that but it's cool to see Osmos is gaining traction with Adam his transaction fees and this is probably like a hot take especially like I know I I guess I have a decent following in the cosmos ecosystem um I think the cosmos Eco people like the OG's over index for sovereignty they're like sovereignty is everything that means like you gotta pay in like these tokens that nobody wants to hold that means like they they took sovereignty to the nth degree and I am much I think I'm more like pragmatic and I'm like look like to me sovereignty

means custom execution environment of your block space you can do whatever you want with your block space if your token holders want to use uh want a background want to front run their users like to get older should be able to decide like how their block space is managed that doesn't necessarily mean that I need to use your token for gas that doesn't necessarily mean I need to like do everything by the book like I should be able to use Adam as gas or I should be able to use usdc as gas like anywhere I want essentially because it just makes good user experience sense and ultimately we want to bring on new users to the cosmos ecosystem so I think historically they've over next for solvency sovereignty and I'm hoping like right now you start seeing like a coalesce of the ecosystem around like

one asset as at least like maybe not the only gas token but it's like the dominant uh asset that everyone wants to see succeed and then I think you're going to see wealth effects kind of grow go out from there kind of similar to what you saw with the ethereum ecosystem I'm I see my thing with like all right I mean ethereum's kind of hard to use as a good example here just because it you know it had a meaningful first mover Advantage for a smart Contracting platform but I it's still hard for me to be like look at everything that's happened and say the adoption of eth as money throughout defy being the base pair for many of the largest Pairs and being used as a media exchange throughout nft markets it's hard for me to like look at that and be like oh like

because there was this one asset to Rally around that had nothing to do with the fact that it grew like I can't I can't get to that point and like it's also hard for me to take the other side of that and be like oh that's the only reason why like no there's definitely multiple things at play here but having an asset that's like deemed as money is a very like you get a monetary premium you do there's no way around it that's part of the reason why a blockchain can be valuable especially at the L1 level um it gets a little weirder in AB chains but like for the cosmos sub specifically like yes I think it's important for that ecosystem to have that one form of money that it can rally around um and I think that should be Adam as well I'm on the same page as you there

I think Security money go hand in hand like you can't have a good flourishing economy without like in the real world without like strong borders strong property rights right like that ultimately leads like a flourishing economy uh and hopefully using your native currency like the US dollar or the Euro or what have you uh and I think like you're I think you're starting to see a transition now from like the cosmos Hub minimalism idea allowed like strong security rights The Hub is the most secure chain in the cosmos ecosystem and now they can start renting out of security I see that as like now they're strong digital property rights for chains that leverage Cosmos Hub security now that you have shrunk digital property rights and you can actually build a really strong economy On Top of the Hub security and it makes sense that the atom as a native currency

for the cosmos Hub has a security provider is like the currency the obviously people are going to want to use stable coins like that's that's obvious but Adam could be like this major pairing of a liquidity Rider uh pools uh it could be like the major asset people want to use as collateral um it is like the money um and yes the data Master can extend far beyond the cosmos of security rights but I think the fact that like Cosmos hub goes from a Security First Chain to now like a Security Plus monetary asset with the atom being its major product is like the the maturation of the Hub in general so we'll see if the narrative plays out or if it actually it has any legs so we'll see Tim I'm just looking at our game script for this episode again I just can't find find the section

where it says effort Capital Shields Cosmos in this one but I appreciate it we all knew it was coming no matter what sorry guys no I love it I love it you keep us balanced we need that all right so last one on the governance uh section I'll make this one quick because we actually missed it this is from last week but uh GMX the core contributors are requesting 250 000 tokens to be vested over a two-year period to continue funding like themselves to build out the protocol it's roughly nine million dollars at current prices um and they actually had 250 000 streamed to them over the past two years as well so honestly it seems pretty standard feel like nine million dollars over two years is not unreasonable to any degree so we can just leave that one

at that but on to the next section and do let us know in the comments what you think about this this is a new segment Alert in this segment alert this is uh zero X Pebbles idea so definitely let us know if you guys have any other section ideas or things you want to hear us talk about in the comments but we've got movers and uh top Losers of the week um actually that those aren't plural either those are singular we just got one of each but nonetheless uh Dan do you wanna do you want to kick this one off yeah for sure for sure we'll stop with the uh start with the top mover upwards right so we have maker down here again this is the you know the section where we slap NFA d-y-o-r we're not like we're just making observations here we're not

telling you to go buy things we're not telling you to sell things this is just you know we live in a space where we trade or see like everything is liquid in trade so there's interesting observations to be had that's what I'm getting at here make it out been on an absolute Ripper there's no doubt about it mkr is up significantly in the past day week month whatever time frame you want uh it's looking good and better than the rest of the market and there's a couple reasons why for that I think but largely it's driven around the refreshed narrative around like Hey we're not just these this old you know Dyno token that isn't going to do anything interesting there's like other things to be had there and it's like they're pushing forward the rwa narrative and what that not only what that is but they're like kind of

defining what that means for on-chain protocols and you see frax kind of going right there with them and doing a very different not very different but a meaningfully different approach as well so it's gonna be great to see those two protocols duke it out um but I I just love the idea of them bringing real world assets on chain in what seems to be a fairly scalable way so lots of be learned here but I think honestly what it boils down for maker now over the last couple days weeks and months is refresh narrative around you know maybe we're going to end up on a new chain we're going to have new tokens not only just a new governance token but also a new stable coin uh so the refresh narrative and then of course our rwas are going to be the premier topic of

2024 at this point yeah I mean to be more specific I know I think it was this past week There's a proposal to increase like the two biggest rdway vaults their debt ceilings so you have monotalis Clydesdale and block tower Andromeda I think are what they're called and increasing the debt ceilings from 1.3 billion to 3 billion die so a big increase so I think that like could be specifically what's a catalyst at the moment but yeah they're definitely benefiting from a general like hire for a longer stance from the FED in that like if we see rates continue to be this high and potentially higher then they are like the sole beneficiary through these rwa instruments uh of

yield and that's going back to die holders and that is accruing to maker in some way shape or form so yeah they're definitely benefiting a lot recently Degen Spartan and shambles I do worry a little bit though because like you know we saw and I'm not like a macro guy by any means but everyone always talks about how the US government kind of like weaponizes its debt and you know when it's convenient for them then they you know basically sees the assets that the the other Sovereign Nation is holding we saw this with uh um the the Russian sanctions uh so I don't know it just kind of scares me because if dye grows to be this huge Behemoth in our one decentralized quotation you know around the centralized uh stable coin and it's

embedded on every chain and every protocol relies on it and then all of a sudden one day those assets are frozen that's just like pretty scary and I mean I think we gotta like realize this isn't a utopian thing and we got to do regulation and like we got to go by the book and we do need real world assets on chain but it definitely makes that uh threat more of a reality yeah I mean that'd be rugging the users at the end point right like if you held the diet that was backed by treasuries that got seized like yeah so I I don't know it gets really tough it's sort of like the same I mean it's obviously different but in some ways that's like kind of the same concept as uh you know fracks using curve pools to hold their usdc because it's like all right if you know if you

want to rug the entire curve pool then you can also rug cracks uh that's it's definitely different but like you know they're trying I don't know I hear you and I don't know the macro side of things right now at all so I'm not gonna pretend like I do in any way shape or form just don't pay any attention there I I trust my boys like feijo on Twitter to tell me when shit's blowing up and I did recently see that he was like I'm buying January spy puts so maybe maybe you're on something here that's so confusing because I saw him say he was buying TLT TLT sorry I don't yeah no you're right all right see there we go I don't know what I'm talking about no yeah and actually though Jack Farley number go down uh over Jack come on man that's our

forward guidance leader that's true I respect them both those are that's like literally the only source of macro knowledge I get it's just like every now and then I'll hit up Jack number up number down what are we working with then of course he's a very straightforward guy he's like hey I don't I don't uh what's this quote uh I call balls and Strikes not winners or something like that it's incredible this also brings the second half of the segment which is the The Biggest Loser of the week and so uh here we go here's the stats first and then the ticker second 30 day down 79 14 day down 61 percent seven day 48 24 hour 49.9 uh that's what happens when you run an exchange and suzu gets arrested so rip to Ox token we

lost a another one uh we're really slaying off the the formerly Heroes now villains one by one and uh good to see it so I don't know on to the next I will say when when Ox was pumping that was probably the most hated rally I've ever had like seeing that token do well and knowing it was off the back of suzu and Kyle probably bidding it up themselves like it infuriated me that they were still free and another observation is like as soon as the suzu news hit I didn't check the aux price I checked his ft Keys price his friend Tech Keys like which maybe that means that you know that's a good sign for front Tech

adoption that that was the first thing I thought about but yeah overall like happy with the news did the keys nuke as well yes if you look at like there's like a feed of all the people who buy and sells Keys it's just like sold sold sold sold sold like yeah it was bad hyper efficient markets over there in frontec land I'm gonna be honest I could see Ox continuing down only but I could say maybe buying opportunity on these Keys like that is that's history right there that's true it becomes a meme at this point yeah yeah you get a phone in jail can you can he bring uh the chat come to the chat live from jail I don't know he probably sold his keys right while the cops are like knocking on his door

he started like shorting his own shares his own keys using the proceeds to buy Ox probably a good time to segue into our final and richest most famous segment of Hot Seat cool Throne um Westy you got an absolute heater that we're just prepared to argue about so let's not waste any time let's get right into it yeah let's definitely get into it so on the hot seat I have people who say issuance isn't the cost to a network which me Dan and effort here have had are shared debates internally as well of our our share of debates on Twitter with others but basically like we've gone to the conclusion that issuance is

certainly a cost and I can sort of give my thoughts and let them speak as well but yeah I think first of all I'd say like it's this is definitely a complicated thing like a lot of different perspectives seem logical um because like these are complex systems like L ones yeah they're a business that facilitates the creation of blocks but they're they're also like basically decentralized Central Bank which makes things confusing that being said they're definitely wrong so I think most of the disagreement comes down from a matter of like perspective um so for us when we talk about issues being a cost we look at the perspective of the protocol as a cash flowing business or a non-profit and we're

looking to create like an income statement for it and in this case the chain creates Revenue through transaction fees internalize some of those fees in the form of burn or puts in a treasury somewhere and then sends the rest of those fees and some newly created issuance to the entities responsible for creating or proposing blocks and securing the network and in this case issuance is certainly a cost because it would be the equivalent of a business issuing new shares of equity and using that to pay for the service uh of the application in stock based compensation itself is a non-cash expense on a balance sheet and this would be the equivalent right um from like their perspective I think

where they get it wrong is that like what they see is that it isn't the cost because they say it's a closed loop nothing ever leaves the system because it's as a token holder you're able to opt in to receive this issuance um to me this this isn't looking at it from the perspective of the chain as like a business or non-profit is looking through the lens of a token holder um and so as a result of being a token holder you're able to opt in to this inflation but even then I still think it's wrong in that it's not a closed system it's it's not like net neutral in that uh basically uh this issuance

um yeah they need to opt in but they also need to take on additional slashing risk and they need to pay to run the hardware or pay commission to those that run it and in most cases become illiquid right um and so they need to sell that issuance in order to either run the hardware the hardware themselves or pay those that do and they need to sell it and in that case it actually leaves the system it's no longer a closed loop it needs to exit in order to pay Hardware along the lines of like validators look at the issuance as income and as a result so does the government and they have to pay taxes on the income and as a result they need to sell it right so it's no longer this closed loop system

that has to exit the system based on how it works so to me to act like it isn't a cost and that it's net neutral is just wrong and would love to open the floor to you guys to hear your opinion as well yeah yeah a couple things here so um I like how you mentioned that like using an income statement and like let's just note that this is like very specific to l1s I'm not talking about app chains I'm not talking about l2s I'm not talking about application layer uh services that have a token and like use it in a very similar way like a proof of State mechanism I'm literally talking about L1 blockchains Bitcoin Solana ethereum keep it simple like this is this is the Box we're exploring right now um the second thing is you mentioned

that you know we're looking at them as businesses that is the lens we're taking and that is not what we're saying blockchains are blockchains are not businesses they are much more than this and there are many reasons why blockchains are valuable and like why the token derives value and like here's like a non-exhaustive list but so probably the top four reasons in my mind it can be like a yield bearing cash flow generating asset right so ethereum as a Staker you are earning cash flows it can be in demand as a gas token there is much demand to hold eth to use it to transact on chain and to execute these transactions you you need the token so it's like kind of has this commodity value uh uses a medium exchange within a mark like the on-chain economy as a

whole right so you're going to see it as base pairings for dexes and used in nft marketplaces as this like quote asset um and then also it could be like a respective store value right so like kind of like the digital gold narrative that Bitcoin really holds on to and is its prime reason for having value so it's kind of like these four buckets of what drives value using an income statement is like again taking this business perspective of a blockchain and really to see how the protocol is using the cash flows that come in the door and that's transaction fees uh and no world is that not a revenue in this in this View and so when I guess there's two pieces here so then you get it like all right now we're in this bucket and when we're comparing Bitcoin and ethereum obviously

there are uh two different consensus mechanisms there proof of work proof of stake Wesley talked briefly about the you know how proof of stake is different a little bit I want to hit that again so in a proof of work X system you're paying an external third party in miners to control the network and operate it and yes as Westy mentioned that is an expense it is leaving the system very clearly uh and again it's a stop-based stock based comp uh comp comparison in traditional markets makes a lot of sense to me uh it's it's it it hits the income statement it is an expense it's plain and simple proof of stake is just where the debate is right and again the closed loop system work was also not an expense as we've had the whole conversation on

Twitter two days ago which that person was completely wrong but that's besides Point keep going sorry fair enough fair enough yeah I mean I just don't that it that that's delusion that's that's the word I'll use delusion yeah and but the proof of mistake argument like I hear it they're actually I think there's something there I just I can't wrap my head around why that makes more sense personally and like I've spent I think we've probably spent hundreds of hours from this ever since the day that John Sharp piece came out on it I I actually flipped I was like this makes so much sense like I am all in on this idea I I was a Believer and I remember yelling at you after we were like you're an idiot this is so wrong uh and now like again after spending literally hundreds of hours thinking about this I

know it's it's not the better way to think about it I think it is the better way to think about it in a perfectly rational world where a hundred percent of the token is staked and validators run their equipment for free and there's no taxes and it's like in this perfect box I get it but that is not earth and that is not any of the systems that we see today and you can't even have a proof of stake chain have a hundred percent stake that it wouldn't work how do you pay gas so yes I I think it's both to be completely honest I think it is a cost to the network and it is a value transfer from holders to stakers like that is it see like

depending on which angle you want to come from like it's both things but to say it is not inflation isn't a cost to the Token is is absolutely insane right so I'm a validator I sell my tokens they hit the open market which is generally a quite thin liquidity book and that has an outsized impact on the token price we've even seen uh protocols that like massively increase their inflation when not a lot of their tokens to token staked or even 70 80 of their token stake and still has outside of impacts like people price this stuff in and everything in the cosmos ecosystem inflation is a pernicious cost as Pauline has said before we'll link the posts I'm talking about in the show notes but I just think it's you you're you're doing mental gymnastics to try to say this isn't a cost to the network or

there isn't revenues being generated by the network yes there is fees come in the door we'll use eth as the example here so fees come in the door in the form of transaction fees um and let's say Let's ignore Mev boost for now so the only thing is the only revenue is transaction fees I have two types of fees that get split out by the protocol base fee priority fee priority fees flow straight to the validators that is like coming out as a cost of goods sold or production cost and then you kind of have like this uh gross profit line item if you're familiar with like an income statement then you also have this additional operating expense called eth issuance and you have to pay this out to operate the network and ultimately if you like really boil this calculation down all you're basically

taking burn minus like base fee bird minus issuance um which I don't think like jumping to the end result there makes a ton of sense but breaking it down like this I think it does and what you arrive at is this uh essentially this net change in in inflation or deflation and I think the biggest this is the part I really want to drive home I know I went on a long Grant here but just be like again we we listed out those four reasons why blockchains are valuable one of them is being a yield bearing asset or having like looking at it from a business lens and in Trad Phi if you have an unprofitable business you're doomed there is no like way out of that now like the Ubers of the world might argue with you and there you know there might be some like Tech Giants that want to

just lose money forever but the reality is you can't you can't lose money forever with a blockchain that's not true you can be as a token holder you could be A-Okay with eating one percent two percent three percent inflation if some of those other reasons on why blockchains are valuable are like hammering home just look at Bitcoin it's a great example of this so the the long-winded way of getting to the end conclusion here is a net profitable a net unprofitable blockchain does not guarantee unsustainability and using an income statement is a phenomenal way to understand how funds flow through an ecosystem that's it I'm not saying you should take a an income statement and plug it into a DCF you're going to get a ridiculous number because there's more

reasons for blockchain to be valuable end rant yeah I think if you just not to like belabor the point too much but if you assume that inflation's on expense and you actually start looking about like at the value flow or the uh from a protocol lens of like how inflation uh goes to token holders non-token holders and you like you can literally look at and be like Oh cardano and the COS most Hub or like they're doing fine like they're they're just as like economically sustainable as like ethereum it's like no that's clearly not the case like looking at fees is like a direct function of the on-chain activity that's happening on in that given ecosystem issuance is again like if 100 people were staked to the network the question everyone needs to ask

themselves is like if everyone's 100 staked and everyone would continue staking their rewards do you need to continue issuing new uh new tokens like why and people will be like well no like I guess you don't have to continue issuing new tokens because everyone's staked uh and now if you don't continue issuing new tokens people are going to unstake and it's like well why would they unstake It's like because they're getting paid to secure your network because ultimately a chain and a layer one is paying to for secure block space is absolutely a cost and people would go like no inflation is not a cost on anyone it's like okay tell all that to the people of Argentina Lebanon all the hyperinflationary currencies that are out there like there's a direct or an indirect cost maybe it's not like I obvious or where the costs are but like

there are costs of inflation and just because we've historically not looked at like inflation as an expense on government balance sheets but maybe we should like maybe history has shown like we should be looking at this maybe we should be running uh governments like businesses to a certain degree um so I think a lot of people in the space like to like act like they're thought leaders or like they're creating a new paradigm like yes I do believe like crypto is a new paradigm to a certain degree in certain aspects like that doesn't mean we need to reinvent the wheel like for every single thing out there like sometimes like it does make sense to leverage best practices that we've gathered as a human like Society over the past like couple hundred years on how to like look at like certain profit generating entities and like what is sustainable business

model and what's not yeah yeah I agree and it's just like again this is just a tool to understand what makes a blockchain tick nobody is saying go plug this into a DCF that that's ridiculous um and I yeah shout out to John Sharp on the very first piece or not the very first but really popularizing this topic of like I think his piece was titled eth is not ultrasound money like that was the thought-provoking piece for me that was like all right there's this is this is a debate worth having and he battled it out on Twitter and the second you know we started tweeting about it the same thing happened like people getting people get excited to talk about this stuff and it's because it's a really interesting topic of like how do you value a blockchain and like all right well maybe you can't just like

you know slap it into a DCF so are there any ways to just like glean some insights about how the protocol operates like that's all it is and if you look at the transition of ethereum from its proof of work days to uh adding eip1559 and creating the burn versus the priority fee uh and then lastly the transition to the merge you see meaningful changes in the when looking at a block space profitability income statement and that says a lot about the network and the changes it's undergone and now that it's like this more sustainable form of money like it all adds up to me I I just really struggle to see when you're like no no closed loop system we've created this new paradigm and you just don't understand

it it's like okay like there's been thousands of years of analysis like I think we can lean on some of the backbone that this world has created yeah no model is going to be perfect but it at least tells you something right and gives you a perspective and for us that's why we include block space profitability as well as value flow to give you different perspectives into like okay if we treat the chain like a business here's how you would see it here's how you would analyze it but also if you were to take a look at here are the different token holders or different subsets of token holders how much value they accrue or how much value they're getting diluted you can make a decision on whether you want to hold this token stake this token like it just gives you different perspectives and each is going

to give you a different Insight um and so yeah that's I think that that ends this conversation yeah I didn't even say a word because like the argument against it is just so dumb in my opinion so I feel like even going as deep as we did is not that necessary but we got very hyped up about this on Twitter over the past week so we did get we need to get I'm sorry yeah this is your show on my aggression for talking about this but I just like I want somebody to come on here and just be like no here's why you guys are dumb and like this is why it's this is why it's being a closed loop system exclusively makes it not an expense because all of the uh explanations I see they just like explain everything around it but it's

not a closing system can't get the last piece to handle like Hammer the nail in it's like uh yes I get that like token holders can opt into earning it but that doesn't like make it not an expense that means it's an expense to only some people it's not a closed loop system that's literally what it is you can't just assume people are going to continue restaking their instrument so they're never gonna sell it like get out of here with that that is absolute like baloney I'm with you guys thank you get us out of here all right I'll take a cool throne here uh coinbase launching retail perps to non-us customers I think that is absolutely huge news um we were talking about this the other day we really don't know the numbers in

terms of purpose volume on binance for sure but gotta guess it's between five and six billion dollars a day getting two bips on that I have no idea off the top of my head what that is but you'd think that's five ten twenty million dollars a day somewhere around there um I think this is huge if if coinbase can even even steal like five percent market share that makes a very material impact to how much money they actually make um five to six billion I think perps is like 25 to 30 billion I think it's like five to six x spot right now approximately okay well anyways that re-solidifies the point I think this is pretty huge for for coinbase as a company and you know effort I know you're gonna love to hear

that I mean yeah like you love to see it right like as the top dog in the space is getting their hands slapped and potential like doj and like other government action being against them because of whether or not they act in nefarious over here you know historically I'm not one to pontificate on that but I mean you're seeing them using binance kind of uh slowly lose market share okx and vibed have honestly picked up a decent amount of it but I think at the same time you're seeing the the top dog in the space at least from an international perspective uh start start potentially Fading Into A relevance kind of like bitmax 2018 2019 or before the next Bull Run you're seeing coinbase kind of launch its International expansion plan they just like this retail product I think this could be huge

um to have the US residents are not allowed thanks Gary for that really appreciate the protection um but I mean it's it's a great story for coinbase I think they're International expansion is gonna make or break them outside of us regulation obviously it's gonna be a big like shadow that hangs over the entire crypto industry but I think that if coinbase and executions International strategy like that they could again be like a really big king maker of the next cycle and they potentially could be like the crypto related asset to hold outside of like specific um crypto assets themselves yeah strong agree there I I think this is perfect timing um and not only because of you know binance's regulatory problems but the reputation as well or like we see

threads I feel like every week of people calling binance and Hobie and solvents and like shady and like their reputation around the globe is dropping as coinbase is like getting into this market so I think it's great timing and like you said like expanding internationally how all I've done in the US like I can imagine they do well elsewhere you can also see like I can think Halloween efficient or how much Wall Street doesn't understand coinbase as a business because when this news was announced I want to say it was announced like nine o'clock in the morning give or take 15 minutes or so um Market opened up like one and a half percent up coin and we were talking about it on our morning call and I was like I can't believe the Market's not thinking that this is like a bigger deal

for coinbase knowing like how knowing us knowing like how large of a market purpose is compared to the spot and point this historically been a spot platform and institutions obviously are are I think a big Catalyst for purpose adoption over time but I think right now like it's mostly a retail product um and we saw like what Robin Hood's like uh UI did for like retail adoption of options right like in Trad five Market instruments so I think it was crazy like the first hour or so coinbase was up like one and a half percent and I was like this makes no sense like how is this possible this is an inefficient Market I should have known I should have probably bought more coin I didn't and then all of a sudden it came out of nowhere it was up like seven and a half

percent like a couple hours later uh I think it ended up closing like I don't know four and a half or five percent a little bit up so but it had a really good pop yesterday but I think that just goes to show like Wall Street is not looking they have no idea they don't understand like what this means for not just the industry as a whole having like a mature name in the space and like a well-trusted Brandon space launcher purpose product for retail but I just don't think they understand like coinbase's Market position in general and they don't understand like what perps can do for coinbase's Top Line and bottom line revenue revenue over time something interesting I noticed just logging the coinbase app the other day actually too was the usdc deposit program you can get five percent apy just by holding it there I didn't even

know that was a thing actually and I had money in there it was only like 100 bucks and over the last like two and a half years that that hundred bucks was just sitting there I made ten dollars I'm like that is so much better than your bank account it is ridiculous and that goes to show that coinbase is looking to scale this to like hundreds of millions of people and they think you know that grows the pie so they're okay just making that one or two percent spread as opposed to stealing all of that interest that they're earning on the underlying um away from the user so I don't know I just thought that was super cool yeah I do find that interesting because you're right like you know that yield is powered by treasuries uh but so they're like willing to return it to Holders

through the coinbase app but like why not just have like a susdc where you could have this like uh natively accruing you know the U.S like the S die version of usdc that just earns the yield as the token like that would be pretty interesting uh but I mean I get why they want to keep it on platform right they have they have their own incentives there to keep uh on platform usdc accruing more value to coinbase to company as well but I don't know pretty interesting yeah post a circle stake um 50 50 partnership or whatever it is I'm pretty sure they get 50 of Revenue on all usdc so I don't even think it matters that it's on their platform now

which I was like trying to make sense of that in my head I mean maybe they just haven't changed it yet um not really sure but nonetheless no I mean I think yeah there's still value in like people depositing money I'm yeah that makes sense to me all right people people Deposit New Capital coming for that five percent sure true but uh Dan do you have a hot seat or cool Throne lined up yeah I got a I got a cool throne for the old dog Thor chain baby uh we've had a couple of episodes with Chad bear Ford one of the lead developers over there and he's uh kind of come on to talk about a first time was to talk about Savers and that's doing quite well it's got about 25 million in tvl specifically and Savers earning some pretty solid yields on

Native tokens and that includes Bitcoin which is very hard to get native yield on actually borderline impossible uh and then more recently you know we've also had them on to discuss the lending protocol which is a little bit of a weird word for it's not exactly a lending protocol but at the end of the day the users deposit assets and get a stable coin back we've seen about uh one million dollars in borrow demand thus far and that is a burnt equivalent of about a million in roon um and so you're seeing good traction there strong protocol Building New Primitives getting continued adoption it's hard not to be excited about that yep I'm a big fan of uh Thor chain and what they're doing I mean Native asset swaps is something we need especially if

we want you know truly decentralized Finance um so rooting for those guys over there for sure I know they've had like a really long journey to get to where they are today yeah it's a great point the swap volume is absolutely up only over the last couple honestly since lending has launched it's just been continued continued growth in swap volume as well all right I think that is a good place to stop it uh effort capitals computer is at two percent and Westie has a voice uh that is currently hurting so we will put them out of their pain uh thanks for coming on guys it's always a lot of fun we'll be sure to do this again next week [Music]