Binance Meltdown Review, Coinbase Regulation Win, RaaS Developments & More | Round Up

Transcript

all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode hey everyone this episode is brought to you by Maverick protocol awe of liquidity tools built around an Innovative amm Maverick helps token projects Dow treasuries LPS or basically anyone in defi shape their liquidity with efficiency and flexibility how you might ask stick around and you're going

to be hearing about them more later now on with the show all right everyone welcome back to another bell curve Roundup you got Michaels one and two and Miles our sixth man standing in BS welcome it's really just the third man because it's really just about the Michael here I know but with any sports reference I don't want to change too much because I don't want to get it wrong play it safe play it safe you had that one written out beforehand Mike yeah I'm like looking at my hand six man that's his go-to just stick with it all right we got we actually got a bunch of stuff to cover this week so why don't we just get right into it I maybe a a bit of a feel-good story here would be maybe Feelgood is not the right word but coinbase has gotten regulatory

approval to enable retails perpetuals future trading so just the the history I mean most of us think about coinbase as being the The Entity that's doled here in the US publicly listed company in May of this year they launched coinbase International which is an international entity which um yeah they basically moved offshore and they allowed institutional Traders uh to trade via API so they started with BTC and eth perss um that are settled in usdc uh today um and that's going to be for retail Traders coming later this year so um it's pretty interesting coinbase is making moves this is just the latest in a series of data points which is

companies that are based out of the US but trying to capitalize on International demand so this past this past quarter just again on the institutional segment coinbase International did over Ju Just around five and a half billion in terms of volume so that's not an enormous amount compared to the rest of their business but that's not nothing either especially in their first quarter that's pretty impressive so I mean yeah what do you guys what do you guys think about this I think even further it kind of highlights the differences between what US customers are uh allowed to do and what non- US customers are allowed to do um obviously this is a non- US product um but if we look at it and just looking at coin

glass the last 24 hours there was almost 75 billion in pers volume and obviously most of that are uh I would probably say 70 80 % just looking at the charts is is maybe maybe a little 60 50 60% is binance so at the same time when you have at least at this point kind of rumors of action against binance or or you know some sort of um process there you've got coinbase making moves um and we saw this with institutions uh yeah may I think or June um it'll be really interest interesting to see the interest uh from the retail side as well so I I think very exciting overall um it'll become an interesting

data point to watch over the next few months I would just add you know I think coinbase has struggled with this challenge of trying to keep up with the pace of their competitors um you know if you think about like the asset listings that took a long time for them to come around on kind of opening that up and I could see this just kind of being the blueprint for more products where they don't feel that comfortable in the US but you can you know basically test it out get it used and battle tested and you know with International customers and then kind of use that as supporting evidence you know when you try to get this approved in the US um say this has been working for a very long time right um so yeah I think it I think it's interesting and definitely the timing of

it couldn't be better with some of these you know incumbents I would say like we don't really know what's going on but sentiment is definitely a little shaky on them um but yeah it will be very interesting to see where they're able to get adoption kind of interesting point anybody who's been in crypto the last 3 four years knows this but just the product differences between a Perpetual future versus an option um and obviously retail you know we I think the movie comes out like literally tomorrow dumb money um you know you've got retail options being a flavor dour product for retail uh equities Traders it it's going to be interesting to see if any of that ever carries over into equities markets

but it seems like perss at least for the time being until you have a strong enough product capability to enable real options it pers is going to be the the product of favor for crypto and I think that's another point of recognition for coinbase you know doubling down into retail Futures uh yeah it'll be interesting well have you I don't know how much you've looked into zero day till XPR options but isn't that pretty similar to perss and I I think it's kind of the same thing right like there there's sort of a funny path dependenc here in terms of like options became the instrument dour for retail day Traders and speculators but to be H like options are a much more complicated product than

something like a Perpetual where you know there's like the there's you know you could I actually I remember listening to an interview with Jim O shanesy Father Patrick of oanes asset management he was like I'm old enough uh to remember when options were used for hedging and that's that's why you had them to to start with but they what they've morphed into is this vehicle forp speculation just because the dynamic of you put up a certain amount of Premium there's leverage embedded in the products they're really good for gambling too but maybe perpetuals are just a much simpler uh product and especially in crypto where you want to concentrate liquidity yeah it's I think it's tough to see a world in the in the short to even midterm where options you know take off that much I mean you hit the nail on the head it's leverage it's

implied leverage right and the F the first products that I ever I guess you could call traded the first products that I ever bought were long-dated options on tech companies in college and that was because you know if you did some basic math you just had to kick out the XBR for two years and you said okay well I've got enough coverage here for the next year and a half before they actually expire and it's kind of an implied like three to 5x leverage and what better way to do that when your Capital base is small like a you know college kid um but I I think you you're going to see perss become you know that that same desired product I agree I think another I think especially like maybe to maybe to add a

little bit of nuance it probably makes sense at some point for there to be an options market for the majors like Bitcoin or ether but I think when you start to talk about options for shitcoins that's where it really doesn't make that much sense to me because the investment profile of a let's call what it is in a liquid shitcoin is already kind of like an option so it's kind of like a dress on a dress type thing I I just don't think it makes a lot of sense uh I don't know 100x on 100x is a lot do that math 10,000 I'm looking forward to seeing the dumb money movie I it's interest it could have gone either way in terms of the narrative and it seems like based on what I've seen in terms of the trailer

is that the narrative is the sort of marauding evil SL weirdly incompetent at the same time time Wall Street guys get their lunch eaten by this clever retail Trader you know uh clever internet sleuth guy who you want to identify with beat a rig game is the narrative they went with and it could have gone the other way too I think one of the narratives is community wins hey everyone wanted to take a quick second to shout out this season's partner Maverick protocol now many of you probably know Maverick is an Innovative amm which they are but in reality there're a lot more than that as well Maverick is a suite of tools for defi users and builders that allows them to put liquidity where it will get the most work done since Maverick launched in March they've been gobbling up market

share and at the time of this recording which is the end of September on a trailing 7-Day volume basis Maverick is now a top three decks by volume and they support over 50% of the volume on the L2 ZK sync AA chain Maverick enables LPS and token pairs to process higher volume with limited tvl which allows them to support some of the highest levels of capital efficiency for lsts like rap Ste another very cool feature is something called Maverick boosted positions so that allows protocols looking to bootstrap their token liquidity to Target the shape of liquidity of any token pair with surgical Precision Maverick is backed by some of the leading institutions in crypto Founders fund panta coinbase Ventures Finance labs they are all backing Maverick in

their Vision to revolutionize the next generation of defi daps and helping them build their liquidity in all market conditions click the link at the bottom of this episode let them know that I sent you thanks guys what do you guys make of there was there was an article in the Wall Street Journal this week about binance melting down and um and HBY you know there's been some there's been a speculation about HBY for a very long time Adam cochr wrote a big big tweet Thread about how he doesn't think they're solvent anymore to be H yeah we've been hearing these rumors for a while my Baseline assumption is that a lot of these exchanges aren't always 100% above board if we're just being totally honest so it

wouldn't surprise me but I don't know how to diligence that that risk anymore in in terms of the the or handicap that risk rather I I think in terms of the media I actually was talking to a someone who's been in marketing coms for a long time both in web 2 finance and crypto and she expressed this this sentiment which is you know it the only coverage that is hitting in mainstream media right now is negative stuff because that's the only thing that's getting the headlines and even a lot of the really good reporters who work in mainstream media they also have editors right and your editor might not be bought in so we're we're at the we're at the the point in the cycle where the only stuff that is making it through the

editorial sort of a head wall of mainstream press is just roundly negative stuff so on the one hand could there be something to this binance news absolutely on the other hand could it be kind of this Quirk of media I think it could also be that um I don't know if you guys have any more thoughts or insights there yeah I mean it also it depends let's say like this goes from Beyond speculation and maybe we start seeing like actual like withdrawals or like let's just imagine customers really really care about this you know full Sol solvency thing I think you know that they've got two new options or at least like at least one new option in coinbase and then dydx you know like that launch

is going to be interesting as well right um and at least coinbase like you can trust that they're solvent DX you don't have to trust anybody um can hold your own right so we could if that actually turns out to be like you know something customers really care about then we'll see I think these market share numbers change over the next six to 12 months um it typically hasn't been something that customers care about until it's almost too late unfortunately um so it's not something I necessarily like am expecting in the near term but I think it's not you know outside of the realm of possibility no comments on specific exchanges or their solvency I think there's just this tendency to you know left of the bell curve it and say looks

like FTX therefore it should be similar and I think moving past that narrative will be important um I mean just looking at it right now uh Bitcoin and eth number three number four and number five is the CME so you also have an option uh from a from a perpetuals exchange that's obviously regulated highly regulated in the US to be able to trade on the CME but it's still at three billion for Bitcoin and binance yesterday was 13 so like you know those options do exist I think there's there's definitely just kind of like an interest there's an interest to be able to trade in a safe manner obviously and trust your counterparty um but I think

there's also just a a an effect of all your assets are on binance and and maybe you know most people don't trade the long tail of assets other than Bitcoin and eath but you know if you've got assets there that becomes your cross margin capability to be able to go off and trade perpetuals and you could have that cross margin in and that collateral be based in something that's not US dollar denominated you know it could be in any of the longtail ass so I think there's an element of the the product is really good um and and I think that's not really changing anytime soon you know maybe some of the smoke becomes fire from all the rumors that we've all heard but I'm I don't know no it is super interesting where I think like product capabilities have been

prioritized over trust in this market um but in all other traditional markets you know like I spent the first six and a half years of my career at Fidelity and all we did is sell trust right like we did not push the envelope on products you could you could we absolutely could have many times right but I think that that's when you know it's maybe like going after a slightly different sort of Market that has different preferences that that do value like trust above all um and we know that that's likely going to be like the larger long-term Market uh anyways maybe we're also talking about two different markets you know people who don't who value product capabilities right now and and maybe we've seen that that top or or the relative size of that but the L much

much larger you know there was something that he was talking about at the D dtcc and they they settled uh four quadrillion dollars worth of value last year um you know like we're talking about markets that are just orders of magnitude larger ultimately yeah I agree with you what do you think about I I saw Ari Paul actually do a tweet thread this week about sort of expressing with with more detail a theory that I've heard bandi about in crypto which is basically there's going to be I'm paraphrasing here so if I get some stuff exactly wrong but there are going to be two markets for crypto you could get a scenario where crypto is bifurcated into a more regulated and a more

permissionless market and you know we've heard about this a lot I think in the past where there's sort of a called kyc fi you know there are attempts at kyc l2s to be honest is probably an opportunity for base to do some amount of uh kyc or proof of personhood or whatever so that you can avoid um you know sibling and that type of thing but and then there's going to be a more open permissionless sort of Casino Wild West portion of crypto what what do you guys think about that cleaving of those two worlds or do we end up more with a more generic compromise I'm I'm going to split it right down the middle and say I my vision for how ultimately a lot of this stuff will will end up working is you're never going to be able to get you

know a permissionless protocol to abide by all the different rules and regulations for every single country around the world and and you know it's not just the US there's now going to be you know Micah in the EU there's gonna be regulations in Singapore Japan Korea I mean everybody's coming out with their own flavor of all of this and I think you're going to see not the separation horizontally you're going to see the separation vertically and it's not going to be something where you know you've got permissioned and permissionless it's you've got permissionless protocols which have you know capabilities and features and controls in place and then you've got user experiences or applications that have the customer relationship that then access the

protocols and I think that delineates probably makes more sense I mean obviously this would I think part of this would also require regulatory changes where you everybody starts to agree hey if you're not accessing this directly and it's a interface that owns the customer relationship that owns the customer therefore the kyc AML and then the protocols are permissionless I don't know if that is totally clear with most Regulators right now but ultimately I think that's where we're heading so I I would kind of flip it around 90 degrees Michael I largely agree age with you um and I think it's super interesting to think about you know H are what sort of there's going to be a range of these requirements um and which ones can you satisfy you know at that front end level

or like outside of the protocol itself right and something that you know we were thinking about is with with Micah like one of those requirements that's non obvious is having like emergency response action uh processes in place if there's ever something wrong that's fundamentally not something you could do at the UI level right like if they're in that world you could you could make the argument that to be compliant like a protocol needs to be able to have circuit breakers if there is ever an exploit going on or something like that and that that is where I think like you know it's a little bit less obvious how we're going to navigate that um and where you could see just like splits maybe um when it actually has to touch

the protocol but I think things like kyc and all that stuff like I I totally agree that can be layered on um and there could be two very different you know types of experiences while interacting and the protocol is kind of like the back end and it's also possible you've got uis that don't do kyc and those are just permissionless uis and and they're accessing the protocol as well um but that's an interesting point on on having the emergency response circuit breaker um I I would imagine you know that's where like regulate regulatory uh um confines meet permissionless protocol it's going to be interesting no I think I think there will be really cool solutions that come out you know specifically to address these uh challenges because you know otherwise

you know we don't really get to the best version of this I tend to agree with that that's probably a you know there there is a part of me whenever we talk about this and there's I think this conversation is being had a little bit around the intense uh part of crypto right now but what what I think people are coming to the conclusion is that these navigating this is extremely navigating being onchain is very difficult Mo most people will not like navigate and directly interface with a bunch of these protocols so instead we're going to re architect this where uh third parties on your behalf interface with protocols for you and a a little part of me is like man that makes so much sense because I mean a just look

at the security concerns are being on chain B it's already too complicated even for someone like me who spends a lot of time doing stuff like this it's it's it's very difficult it's not a good user experience so I feel nervous when I'm doing it most of the time but on the other hand as you know as soon as you start to reintroduce uh third parties who act on your behalf and one thing I've always you know you hear this a lot which is a as long as the back end is decentralized that's the important thing and little voice in the back of my head has always been like yeah but if everything is built around the frontend and you know at some point it becomes too difficult or technical to interface with the back end like what's the major difference there for certain people

they're going to really want that they want the handholding they're going to want to be able to call someone they're going to want to you know know that every that all all of their money and all the value that they have in their wallet is is you know staying put uh and for other people who may be more crypto native it'll be more like hey I just need a a clean UI to be able to access this with my non-custodial wallet like it's going to be all and this is also kind of the point there's going to be rules and regulations for geographies and we can't get around that but I also think there's going to be different flavors of all the different types of interfaces that people will want there'll be something kind of for everybody let's move on to our next story here maybe miles I can pick on you

you just wrote a great very timely as it turns out post on revery about this what I would sort of called the the RAS landscape and the the interaction that rollup as a service has with their Frameworks and then also shired sequencing so um I'd like to poke at you to just describe sort of why you wrote that post um what the post says and then also Andrew hang the the founder at conduit uh released something yeah two days ago so on Tuesday um which is the conduit elector which is a new standard for sequencers which kind of opens up the door to the possibility of shared sequencing in the future but you start by just giving us an overview of how you

see rollup as a service um and sort of the the tendency to vertic or the incentives to vertically integrate totally just give a little bit of context of why this is super interesting to me I mean we are very active on the cosmo side and so we've been thinking about like the benefits of what you get with an app chain but we also have seen like really all the pain points um and in particular the fact that you know despite everything you can do there are very few teams like with the competence and the desire to operate all the backend infrastructure of a chain um and there are very few teams that actually know how to harness that infrastructure for like like the application itself um that said you know the benefits clearly

resonate with with developers um and so we now have app chains on ethereum that have basically created um you know a combination of these app chain Frameworks and roll up as a service providers have created a much lighter weight way to get in your app chain like to into prod um you don't need to have you know like chain experts on your team in order to stand up your rollup anymore you don't need to have devops you know which are resources that are taking away from time spent or Capital invested into the core product and you know growing the user base right so these are you know like in general I just don't think the majority of future application teams

are going to be experts on you know rollup Frameworks I think they're going to I see a future where they love this idea they love having the control the value capture like the customization but they're going to want some help um and so you go to a rollup as a service provider this rollup as a service provider initially is like an IT consultant telling you okay here are the you know the the stack that I think best fits your use case uh here are all of the third-party Integrations that would bring like basically the user experience and the developer experience to parody with you know if you were building on a big L1 right um and we're going to make sure like a lot of what we're selling

you as well is reliability right we're going to make sure that your rollup does not go down you know as you grow from zero users to a thousand to 10,000 to 100,00 right um and we've seen a lot of rollups go down frankly um so this is like it's a very Web Two sort of uh approach to solving this which is always like very resonated with me a lot um like let the developers you know work on what they're good at which is building products and growing user bases we'll handle everything else that's undifferentiated um but it also puts these Ras providers you know in um in a in a position really I would say like desirable position of the sequencer operators um and so I guess part of what

I wrote the piece about is you know if you were a rollup framework you know ideally you'd want your own Ras provider because this is kind of a way to monetize your framework in a without putting any burden through like Revenue shares or licensing fees you know for like that probably act as a like you know basically impedes adoption um and so I just think it's a really interesting dynamic between all these different stakeholders and then of course shared sequencers come in um so what conduit put out earlier this week is definitely it's I want to be clear here it's not saying that conduit is putting out a shared sequencer um it is more saying here we we've got this

basically a consensus a rotating consensus of sequencers that we operate um and this ensures that if one goes down it immediately you know goes to the next like within the set we can increase your uptime and you know reliability relative to if you running this yourself um or even if you were you know hired a different Ras provider who's just running one sequencer for you uh that said it does you know open up the possibility that Ras providers could you know break into a shared sequencer Market because all they have to do is say you know here's our like rotating consensus today it's just us but we'll actually like open this up to to third parties um and so you can see how like I

think Ras has you know planted itself in kind of like backend infrastructure services and Consulting but it can quickly expand into like shared sequencers if it wants to um I think shared sequencers are trying to go like the other way around and I think think they will try to expand into you know different sort of infrastructure services or maybe integration you know uh services so I think all of like the Frameworks the RAS providers and the shared sequencers I think you know they're they're on relatively friendly terms today but like we're in the starting to see the early signs of how these are you know inevitably going to compete for for Value capture um and so yeah I think that's a a brief overview I

can I can we can post the uh my my piece of content in the show notes here as a self shill one question I mean we talked about internally but also I've been thinking a lot about is like at the steady state or the maybe not the terminal state but like steady state how many rups do you think they're going to be I think that is at the core of what we're talking about here my general uh view on this is that the incentives to own more of the stack become stronger as you grow I would say when you're first launching a project the incentives are like like really Point towards launching on a general purpose chain because like the benefits you get are at their like absolute

lowest point when you have zero users and the tradeoffs are at their highest point you know you are you're doing a lot of work basically to own your own block space um that said so I'm not super bullish on there being like an immediately a huge long tail of app specific rollups um that said I think it's you could see this sort of like pyramid here where you have these layer one you know like launchpads or maybe it's general purpose l2s and then you know as projects grow if they they have the leverage to take their users with them um they will and I think a lot of this also kind of depends on breaking some trade-offs that currently exist

around interoperability and um if you can do that then this path be like maybe it opens up a longer tail um as as well but yeah Mike and I have been kind of going back and forth on that same question ourselves this week um you know eclipse is kind of like the opposite right eclipse is now saying like hey uh we were doing these app specific rollups for a long time um you know honestly we've we've talked to customers out there and we think we can get the 80% of the benefits that matter by having like local fee markets and parallelization the problem is not you know the fact that you need your own block space the problem is these single threaded evm chains if you can just get away from that then you know you don't

like need your own blockchain necessarily um yeah so I think that there is a difference in like this equation what we're talking about evm versus S svm and um as also obviously like what size you are I I don't know I've waffled a little bit on this I I feel like probably the I don't know about ultimate end state I don't know about 20 years I just think that's I'd be making stuff up but like let's just say five like foreseeable sort of future fiveyear time frame I feel like it depends on depends on how effective upgrades like dank sharting are a lot of it's going to come down to cost a lot of it's going to come

down to how comfortable the market becomes with Outsourcing da to Solutions like Celestia or ail or whatever but even with that I would guess it's somewhere between two and four big rollups roll up rollup Frameworks or like roll up Frameworks roll up framewor those Frameworks like how much of the activity is centered on their general purpose platform Chain versus spread across a roll app uh I think I actually think there's a going to be a diversity of different business models there uh I I've recently gone a little my mental framework has shifted a little bit I did I was very I at one point I thought everyone was going to copy the op stat

and that was clearly going to be the the way to go and now I'm less convinced about that and partially it is the the local fee markets of the svm and and frankly like you could I mean even monad a team like monad they're they're rearching the evm and I think there's going to be a way that we can figure out the the Noisy Neighbor problem with local fee markets and you trade off some amount of uh customizability like the big thing that you're giving on the table that that's obvious like you can't decide your own block time for instance um but you get composability and it's going to really depend on your application but I think I think multiple different models will flourish there I don't think it has to be like one or the other miles you and I were looking at

there's actually a really great even between something like arbitrum and optimism uh Stephen goldfeder I believe it was tweeted something we'll we'll link it in the show notes it was a really good breakdown of the different approach uh between arbitrum and optimism he actually used the analogy of amusement parks and a part of this hinges on licensing but basically there are two models of amusement park one would be a sixf flag model where you or Disney where you pay a lot to get in once but then everything inside is free and then there are other models where it's free entrance but you have to pay for every single thing like Coney Island and so arbitrum would be approaching something that's like the first model

where you have to pay a licensing fee but then you can kind of create your own L2 and you can use the open source code that's how they're getting value acral by the way you can still do an L3 that settles through orbit um and that would be completely free but if you want to do an L2 like you'd be like for like what Bas did with the op stack you have to you have to pay a licensing fee and optimism on the other hand has approached the Coney Island sort of measure where hey like it's free come on in use the op stack but if you want to ride the law of chains and get you know 90% of the benefit to being in this you know distribution or easy Integrations or whatever it is then you have to pay and they're just very different models

and I guess we'll I guess we'll see but I I sort of feel like there's room for for all of these um but what I don't see as a world of like 10 general purpose Frameworks uh you know with multiple there's probably one or two there might be a very dominant model or you could maybe see like three or or Frameworks and they have different models and maybe one's a little bit better than the other but they all sort of work but that's what I would guess yep I mean I asked a question but I don't have an answer uh I don't think anybody does but one way that I think about it is um based off of application category yeah and you know if you really break it down it's

basically like two variables it's user experience and Technology now user experience is going to be everything from you know the cost to the end user to like wear your assets so like if it's you know it if you're launching an nft it probably makes the most sense to have it on eth mainnet just because that's where the hot ball of money at least was for nfts um and so I think you know games are going to have to abstract away the blockchain as much as possible and that's really you know the user experience is going to have to be abstracted that and and therefore technology becomes kind of the driving Point how many users how many concurrent players how how much you know throughput

can you put through a chain is kind of the variable that at least when we talk to games that's what they care about defi or or financial services on the flip side is going to be something that cares more about where is the money and how do we protect it and so security becomes you know the the core variable as well as user experience because if you're building a defi app you want to go where people already are transacting so I I kind of think about it in terms of application categories but I agree it's going to be you know multiple totally fair the distribution piece plays into like the strategy right and in the relative tradeoffs um I couldn't agree more I I I am interested to hear like to see where some use cases that we don't see as like um that aren't I guess

as mature today like payments you know does does Visa like end up needing its own rollup um if so like I would imagine yes right or like maybe its own chain right um and like I think it is interesting to kind of look at uh maybe Bas um versus Noble which is the you know uh usdc powered chain over in Cosmos and the decisions there I mean Bas is basically a general purpose as possible and permissionless right which allows coinbase to kind of overlay trusted services that you can charge for um whereas Noble wanted that control at the chain level and wanted to control like basically maximize control right

they they can't have like you know usdc being minted and sent to blacklisted addresses and things like that right so I can I can see kind of from an Enterprise standpoint like two sort of you know approaches there as well um I'm not sure where they'll they'll play out but I I want to say that most people care about control more so than like trying to Overlay a trust you know trusted product on a permissionless network yeah and that's kind of how I think about technology or the very of Technology it really comes down to like what is the transaction throughput and and what is the security model and like within that you know you can basically Define you know whether or not you need your own roll app whether or not your general purpose roll app orever or if

you need your own chain yeah I agree with that and it'll be interesting to see as well you know Ben Jones talked about this at permission list this year but the bet on more homogeneous block space that like an OP law of chains bundle is making versus the uh the cosmos completely Sovereign app chain and frankly like we're all just we're all just guessing you know a lot of people would come down with a very strong opinion like this is what blockchains need like we gota wait for the apps to to see what they actually need I think it's a lot of guess what and the same thing happened also I mean the the reason why I asked the question is because I I don't know how I got down this rabbit hole but I was looking at service now uh who went public in like

March of 2012 they went public by the way with 119 million in Vue in their last 12 months and then are now $11 billion company and really like the the thought process there yeah staggering over the last decade wow go look at their stock chart it's pretty fun um the the kind of the threadline here is back then a lot of what the narrative was was essentially is SAS real for all businesses or is it real for some businesses and would you ever get rid of your it Department would you ever get rid of your mainframe computers would you ever become Cloud dominant and be based in the cloud and I think obviously we know how that story plays but you

know that's kind of the same question here it's like what is the infrastructure servicing going to need to be for these different applications over the next five 10 years we don't know but you know it's going to come in different flavors and maybe you do need that full it department and the main frame in the basement reason why I found this this announcement from conduit interesting I I now it's I can't even remember it was an invest like the best podcast I heard it a while ago but they were describing the competitive Dynamics within Tech and the quote that I'm paraphrasing was sometimes like the biggest competition is not actually horizontally competing across categories but it's within the same stack competing for margin and I think that you're starting to see that play out with the

framework rollup as a service and shared sequencer and the rollup as a service is interest it I think it's anyone's game at this point but the strategy I would guess from conduits point of view with absolutely no Insight really other than what I've just podcast and stuff I've listened to is you you use infrastructure Services as a little bit of a loss leader get your foot in the door now you have something that looks like a more robust you know I I bet the internal sales pitches for this this uh you know leader election mechanism is increase your uptime right that's probably a killer paino metric for these rooll and then it's like hey well we're already running this thing for you I mean we should really just SE share the

sequence here by the way we have viewpoints into all these different meem pools we know how to extract Mev better you know we we have like Best in Class because we have views into all these different meem pools so you know we'll charge you 15% but you know with how much more efficiently we can extract it you you'll see a return anyway something like that I mean that that's what I would guess would be the The Playbook from their perspective I guess maybe just two reactions like one I totally agree with that and maybe another like I don't know web tube Playbook has always been commoditize your compliment right uh and that's typically when you're in the same same stack and um I think you know that's part of the motivation for like why I've been looking at this it's super fun to think about these

competitive Dynamics um and I guess yeah I think we'll see increased competition uh just over the the next year or two um there's no chance we're not going to I think guys I want to talk about Pudgy Penguins I have been pudgy pilled I was pudgy pilled a while ago we did a spaces with Luca Nets David Hoffman and I and I got back I like you know I haven't interacted with the nft side of the market is a little bit of a blind spot for me there was an NF there was an article that went live saying nft projects 95% are worthless which probably means this is the time to start looking at nfts again super reliable indicator but uh it it it did seem like a lot of there was definitely it was the

froy part of this Market cycle right so there's a lot of kind of get-rich quick or taking taking money and then not really executing on a a plan but the the pudgy plan has been very interesting because a little while ago you know they you took an an nft product and they actually started selling penguin little penguins on online and they sold I don't actually know the I don't know if it was originally 500,000 or they sold a good amount of these these penguins online and then this week you know you come to find out that 2,000 Walmarts are now going to be stocked with p Penguins and the model that is emerging that makes a lot more sense to me than decentralized Disney which never made any sense to me is there it's just a it's just a

traditional funnel right so what you have is social media at the top Luc has talked about this there's a great Empire episode Jason interviewed him but there's social media at the top there's like uh medium term which is kind of like their um like what they sell through like wholesale through Amazon or or uh Walmart and then at the bottom of their funnel is the nft and part of the value acral actually is royalties there are royalties every time a pudgy penguin gets sold in the Walmart that get directed back to the nfts at the bottom of the funnel I mean that's kind of a neat I mean that's a pretty simple I can grock that that makes a lot of sense to me so pretty cool it's really great to see Walmart register as as a licensed

security exchange as well sorry had to add it ultimately it's awesome I think uh you know it's it's the realization I one of the biggest things that we've thought about I've thought about you know even back to you know the company that Vance and I started prior to um prior to framework was a company called hash Leets and it was digital Collectibles for professional athletes and one of the the things that we really stressed and and built product around was how do you bridge the digital analog divide like how do you make this real and it's a really hard thing to do from a product perspective it's like this thing's on your phone it feels real because you're always looking at your phone but Sports is in person athletes are in person like

how do you connect that is a really hard thing to do um and I think that you know the brands the nft brands that are able to do that best are going to be obviously the most successful but I think that's really kind of where like look at Disney you just referen It Disney you know a major part of their business is theme parks you know everybody remembers the time that they went to Disneyland or Disney World but that it it materializes something that lives on a stream um so it's very exciting to see them do this like probably the most like Lucid commercial strategy I've seen from a like fun first I would say culture first nft project um I think the other way to connect us to the real world is like what blackbird's

doing uh which is also super interesting on like the Loyalty side and giving you like real world benefits but just Define what what black word is by no means an expert on the blackberg product but it's essentially letting restaurants either like crowdfund uh some bootstrapping like funding to get their restaurant off the ground um I think that's like a one use case the other that is more like the original use case is for loyalty uh points and so you know you walk into the restaurant you just like put up your phone it's it scans it sees that you've you know basically come into this restaurant it gives you that attribute on an nft that represents like you know basically your profile um and then you can start getting like you know you get

a free dessert every other time you go or something like that right so it's just starting to get into I guess you know real world business cases and like a an interesting Commercial Business potentially um this is like the resi founder has this is his new project so you know this guy has a very good understanding of the landscape um but this one's super interesting too I mean I like definitely had written off pudgy Penguins for a while before Mike started you know telling me how like actually interesting the strategy is and who knows maybe in five years like we saw a Lego's movie and we got like pudgy Penguins movie it's like the despicables yeah well that's going the opposite direction that's dig that's analog to digital you know what pudgy does is have

you I don't know if you guys know Howard Linden but he has this eight and 80 rule where when you're explaining an investment you should be able to do it to an eight-year-old and to an 80-year-old this pass that test with flying colors Penguins everybody loves Penguins I don't know how many of our investment thesis would pass that test in the last couple years so shared sequence and Grandma you're gonna love it hold on um yeah it's just cool it's a little bit of a feel good so it's minor wins uh green shoots and nfts is a category obviously not Financial advice none of this ever is but yeah whenever there's a magazine cover that that makes the rounds that says this thing is dead

that's usually the time to start looking at again so magazine cover cover indicator right tested tried and true let's talk a little bit about Gary gendler so he had um there was a gendler hearing there were 40 plus crypto Founders in DC talking with congress with the general sentiment being there's been pretty egregious overreach from the SEC and gendler himself uh was sort of deposed by this um I I don't know what you would call it like a this group of of policy makers and obviously the the Dems tend to be a little bit more friendly uh to the gendler SEC Administration and some of

the Republicans are a little bit less friendly there was a really great what Michael was alluding to before is there's a really great question about whether or not a Pokemon is a security card or is a Pokemon card Pokemon card yeah because part of that was you know if I buy a Pokemon card is that a security next question if I buy a tokenized Pokemon is that a security wasn't able to answer that which is really interest I mean yeah the nft you know if I'm being totally honest I mean crypto does especially you know front ends and exchanges and stable coins and things like that that does need regulation and and I'm usually on the side of like yeah I want to

encourage Innovation but some amount of Regulation here clearly makes sense with nfts I I I'm scratching my head being I really feel like they're flexing the definition of what a security is it's tough for me to there are some there are some that should just be prosecuted as fraud because but but I you know calling an nft a security doesn't make a lot of sense to me um any any other takeaways from the gendler Gensler hearing I honestly just think it's the exact same story of every other time he's gone in front of Congress um he has the same points the people who ask the same questions or people who ask questions ask the same questions um nobody gets

anywhere um yeah it it does feel kind of like uh we're at just a an impass and there's not really anything that can change at this point other than regulation and lo and behold the people who are asking the questions have a couple of proposed bills you know that would change a lot of the the rules around how you know this this process would work obviously very supportive of that I agree I think you know we're pro regulation but we're pro the right regulation and I think there's a huge difference there um there definitely needs to be some controls and some things to change or people just entrepreneurs need to be able to know

what to do um you know when we talk with companies that uh are based in the US it's like what do we do and we don't have any perspectives because nobody knows um so I think that part is tough but um yeah the the other thing that I'll say is and this is not obviously from the um the hearing itself but seems to be like there's a lot of movement uh from the SEC on the ETF front they've kind of processed a lot of paperwork um they've delayed some decisions uh which sounds like the spot Bitcoin ETF is going to at least get delayed until you know January probably March at this point um but it looks like they're processing a lot of the eth

futures or combined eth BTC Futures ETFs um maybe this is in lie of uh or or in ahead of a potential government shutdown which you know could happen in the next 48 hours but I think you know it is interesting to see kind of all of this perspective happening on the front in the hearing and then in the background there's a lot of movement I'm just looking at Eric balunas who's for all intents and purposes these days the crypto ETF Zar and it looks like to to your point Michael they're they're trying to accelerate the um you know the decision on this to before a potential government shut down and that what I'm looking at here from from Eric is that the eth Futures ETF could be trading as

early as Tuesday so crazy crazy yeah I mean who knows whether or not we get that the we were talking about this a little bit offline but the question is is this is this a good thing be excited about this if you go and find the day that the Bitcoin Futures ETF launched it nearly top ticks the market I actually remember so love the folks that see me they they do a really good job in the space and I do remember I can't remember it was uh yeah there's Bitcoin Futures and they were launching something else this was in 2021 there was another big product launch and we're like we joking on a call with them like all right guys we're not going to repeat what happened last time right and right right right right um yeah I I'm not really an expert

on the Dynamics of Futures ETFs and what that does to spot I think there is a a school of thought around there that that's not necessarily bullish for the spot price action and it's kind of a combination of a carry trade that people can run where they short Futures and long spot it also just in a sense increases the supply it's more paper claims it's more ways to speculate on an asset and it's easier to go short so there are lots of people that are on the other side of that and would take the opposite I'm not an expert on this I just there are there is a group of people out there who think like that I think empirically if you looked at the the launches of these products in the past in crypto it has not been excellent for spot price action but I think it's

good over over long time it would be no I'm just saying regardless of like uh just from an adopt or like a volume standpoint it would be interesting to see you know how it ends up comparing to bitcoin because I feel like today or they there equivalent Bitcoin product um because I feel like that is just a signal of like you know potentially how much more attention ethereum has from that investor class than it did you know basically like before the last cycle um so yeah I don't again I'm also not an expert on these eth Futures Dynamics um I don't know how you know what that will do to price action or if it'll have any impact but it will be interesting to see just like how many people are now looking at ethereum you know on par with

Bitcoin um in terms of its importance what what would that data tell you I like I I'm just like scratching my head who right now is like trading an eth future ETF I'm just trying I'm just like scratching my head I think I don't think it's trading I mean so I I will tell you exactly who it is uh it is literally my uncle who for the last two years has been asking me when he can buy eth in his 401k it's actually Yo's Uncle too there's always ancle miles got a great parental crypto text to no it it's incredible it was like holy have you heard about this thing World coin this is going to change the world yes I have you too can scan your

eyeballs yeah Celestia got a shout out in there like the first modular blockchain coming live I'm proud of you but I'll say yes a knowledgeable mom proud proud moment I could see both sides of the argument for this e Futures ETF I mean obviously like the carry trade is you know painstakingly simple you buy Spot you stake it you make three to 5% and then you short the price risk with the Futures pretty easy so does require you to buy Spot which you know there's that um but I I I think that you know would obviously be the negative the positive I mean sure more attention same level as Bitcoin uh you know just more potential for our our uncles to buy um the other

one that I I find kind of interesting is what does this do to the sec's uh ambivalence around whether or not eth is a security does this totally negate it does this basically say they're they're now uh looking at eth as a non-security that that's kind of one of my questions around and I'm obviously not a Securities lawyer but you know does this sort of implicitly say um you know that they have come to the realization that it's not um so I I think that could be kind of an interesting moment in time as well it's really hard I have no idea I for so long I've just been operating on the assumption that it's not and now they're

questioning it again it feels to me like they're trying to move the goalpost so far that we're like whoa whoa and definitely not eth is not a security but I I have no idea I'm really just talking way I have no idea how these games are played so one one topic that I wanted to get your guys take on was we've got this Celestia or the Tia airdrop that got announced this week and we talked about it a little bit on this show but obviously Celestia a project with you know a lot a lot of great people a lot of hype around it definitely targeting I would say a paino within sort of blockchain uh you know set of Duties right data availability I think is going to become a much harder topic and that's

what they're optimized for so some details around the airdrop um the total supply of the airdrop is billion Tia at Genesis um it's 8% inflation for the first year decreasing 10% uh per year until reaching an inflation floor of 1.5% annually um the public allocation is 20% so the test net is 7.4% Futures initi oh wait no this is the whole yeah sorry this is the entire breakdown so the public allocation 20% uh the Futures initiative is 12.6 R&D and ecosystem is 26.8 early backer is 19.7 early backer seed okay so actually a combined of about uh 35 35% I was gonna say they

definitely sold more than yeah about 35% uh and the initial core contributors to the team 17.6% um and so I I mean look I guess it's it's interesting I mean I think this this has the potential to be you know a pretty big event Vance would say it's recapitalizing the degens in a sense um I I I also think a a very useful like da is a and and a lot of the eth rollup ecosystem does depend on getting cheaper da costs um so yeah I don't know what your guys what your guys thoughts are here one like if you just look at the the airdrop distribution I think it reflects Celestia's at least like how

they're thinking about their strategic positioning right they want to be completely ecosystem agnostic they want to appeal to rollup developers and you know push basically make the market feel like you can be ethereum aligned if you use eth for settlement but Celestia for da still right um at the same time they are a tender you know Cosmos chain they are Cosmos in the sense that they are like have one single purpose to their chain and they're specializing to do that as well as possible um and of course they're IBC enabled so you can see like why you'd have stakers and IPC Rel layers and uh in that included in there um I guess the other thing I would say is

you know it it will be interesting because it's unlike optimism or arbitrum some of the other big launches there's no you know Degen way to farm this asset uh and the only sort of like there's it's there's going to be a lot less noise around what's considered like real traction versus I would say speculative traction right because the only way you're actually you know these fundamentals are going to improve for Celestia is if rollups use them for settlement and like that's a high switching cost that's not going to be uh that's that's quite a commitment right and so I'm it's great I'm really excited because we'll be able to like it's always nice when there's less noise around actually like fundamentally

What's Happening Here is it gaining traction and usage um and yeah I don't know you know where it's going to trade I I can tell you that it will trade on osmosis um at launch but uh and that's a lot of because of the IBC connection which is great um but yeah I think those are couple couple quick takeaways we'll we'll we'll see how much traction it gets we can finally start to see you know the the comparisons um and you know one of the things I've been looking forward to honestly for years now is everybody can pontificate on Twitter and have their own philosophical arguments uh but ultimately comes down to traction and numbers uh and so frankly I'm just

excited to see what those num me too like we have so all these rollup Frameworks we've been talking about shared sequencers we've been talking about all da Solutions and you know we're actually going to go live pretty soon uh for the most part Ian layer as well and and you can start we'll start to see what's real what's was you know we got a little bit too hyped up about um and ultimately it's like the developers will kind of answer that right with their choices I don't know I'm I'm pumped for that team I I hope it ends up working I would be a proponent overall if reducing reducing cost for apps I think is the thing that we should be optimizing for um so power to him power exactly the uh the infrastructure

buildout has been nothing but impressive over the last few years and I mean once again as we were talking about you could have this flavor you could have that flavor you can do kind of you know mix and match whatever you want but choice is ultimately what I think will drive a lot of optionality for developers and it's just going to build a diversity of different types of applications it's wickedly difficult it's it's just so tough I mean in some cases like I was talking to a a friend of mine on one of these share sequencer teams recently and we were having actually the exact same debate Michael that you posed which is like how many rollups are they're going to be and I I think it matters an enormous amount and it's kind of this unknowable thing right because I guess

in in the situation again if I was just sitting from the perspective of shared sequencer you know if there a couple big rollups probably actually then it does make sense to decentralize and yeah you have like a sh a set of shared sequencers right because like there's enough economy sort of built on that that you do want to increase the moneyness of that asset and it's an additional layer of security and all this stuff but if there's you know a thousand individual chains with a moderate amount of economic activity I don't think you need to have a decentralized sequencer on all those and and and how could you possibly like we're all just sitting here guessing so we're all like all right baby this infrastructure are getting built out but man if you are in building out one of these sets of infrastructure I mean It's

just tough my heart goes out to you it is it's brutal it's very competitive um and it's hard to know it's just hard to know how this stuff's gonna play out logically but it can be highly lucrative if it works out yeah baby it's hard yeah you need to have a plan B I think if you're one of these players um like okay things go this way that's this is how we're positioning but you know if it doesn't if we turn out to be wrong like we can't be dead right we need to be able to like pivot quickly um and I think that that's what folks are thinking about right now when it's now like a little bit the app chain thesis is like kind of come back down to earth a little bit just a side question there miles do you think that there's now I

mean one of the conversations that we would have in 2019 and 2020 was um what blockchain do we build on and then it was okay well what infrastructure should be we be using and the level of platform risk that you took on in making that choice was gargantuan now I I don't find that it's that high or it's not as big as it once was and I don't think it ever goes away you're always you know if you build on the wrong operating system like you're just not going to be able to access a certain amount of people but I you know I'm old enough to remember when Mac didn't have all the fun games whereas Windows did um and you know I I do think that that you know the

emulators of the world are come together and and make it really simple and simplified um so you don't have that same platform RIS but like where are we on curve it's kind of similar like I you know that saying like you won't get fired for picking like XYZ like you won't get fired for going with an evm single threaded like rollup right the timing of like but at the same time we're no one's like arguing that there aren't huge downsides to like solidity and the evm um I think we saw that with like curve right there there are more secure languages there are more performative languages in VMS um the timing of when that like you know Lindy kind of tips I I I just can't say for sure I don't know I've been wrong in the

past I thought I wouldn't have thought that EVMS are like still the like dominant dominant option by now um if you ask me two years ago so yeah two two years well I mean two three four years ago it was like oh we've got we've got uh we've got some big upand cominging blockchains that are Ste show exactly and now but I will say the switching costs are a little or like the platform risk is a little bit lower um because you know let's say you're like yeah you know picking a couple different components you can switch out the da you can switch out the settlement you can switch out the VM pretty easily um right so yeah I think it'll be interesting to see like if this like op super chain all makes decisions together like when are they G to feel good enough

to go say like all right now we can do like ZK or now we can do move or you know whatever the sort of VM um yeah we'll see it's tough I remember listening to Antonio talk about this years ago I Antonio Giuliano of dydx who I've always thought is a very long-term pretty Visionary founder and yeah he's like I think people overplay the role of distribution when you're picking an ecosystem and it really should be what does the ecosystem actually allow you to do from product standpoint and I'm with him in the long term but man it would suck to get the timing wrong on that like it I I I really think that you're seeing that distribution matters quite a bit and the

reality is the most valuable customers for onchain products are in the eth ecosystem and you see that with the early traction that the rollups are getting it's just true and there this is the classic saying it's like firsttime Founders think about product second time Founders think about distribution it's like yeah classic mistake that everyone makes and I don't know it there another flipping that happened this week was Bas just flipped salana in TBL and I say that as a supporter of you know salana but I mean you can you can watch the the rollup thesis playing out in real time and it's distribution and and I think it was still right to to focus on that for

the time being totally agree friend Tech's great doesn't mean that it'll be that way forever but I think for now that was the right decision but anyway all right guys this was a fun one I think we can wrap it here [Music]