Coinbase Earnings and Our Thoughts on Ethena's High Yield Synthetic Dollar | Analyst Round Table

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like they're not trying to say this doesn't have any risks they're just trying to build something that can kind of intertwine interest rate differentials between trfi and defi so I think what they're trying to do is super super cool and I think that they've gone about it the completely right way and their launch video had a Kendrick gar song in it which I was a huge fan of so I think they're doing everything right honestly what's up everyone welcome back to another episode of zerox research March is just around the corner and I want to make sure to give you a quick reminder to not top tick your prices of your D London tickets if you use codes 0x10 at checkout you can lock in a 10% discount on your ticket don't miss out on your chance to get ahead of the curve I'll see you in London all right guys

welcome back to another episode of zerx research the browick research team is back to bring you another an on this round table today is Tuesday February 20th and we're joined by Matt and brick from the Brock Wick's research team to jam on the latest Market happenings I'll kick it over to you Sam for the news and governance updates first yeah yeah yeah I'll kick it over to Matt actually because he's a little more in tune with this stuff than I am but Unis swap incentives for new deployments what you got Matt so there's a current proposal live on tally or live on chain for UNIS swap governance it looks to create launch packages for new chains that uh receive a Unis swap deployment so although this proposal just allocates our existing chains such as Linea scroll the polygon

zkm um blast Tao and a few others the plan is to have this be like a further program so that when new chains in the future receive a unisoft deployment they'll receive this launch package as well the launch package comes with comes with between $250,000 and a million dollars in incentives um for a few months after launch and it additionally comes with a deployment on oku which is a uh a foundation funded project that has a front end Integrations for UNIS swap so a lot of time when Unis swap deploys on a new chain it will not be included on Unis swap. org so oku is an alternative uh user interface that allows for trading of it this proposal is really cool uh Unis swap has actually seen a few Chains It's launched on and it doesn't receive the same success or

the same um you know it's not the king of dexes on that chain like it is on ethereum or on arbitr and plenty of other chains so this launch package will hopefully help mitigate that with the future chains that Launches on as well that a good precedent as far as um you know allowing Unis swap to work well with the chains that it's that it's you know that that it's benefiting from and that are benefiting from its deployment how did they choose or ad okay like between 250,000 and 1 million how much allocate to each of these chains because obviously there may be some like CIS of bias here like for example base gets like $1 million and for example scr only gets like $250,000 like one would think that unisoft is trying to align with one of these like how do they overcome those

biases or how do they decide how much to allocate so for this original experiment there was snapshot votes ahead of time that you know ask should we allocate I think the numbers were between 20 I think like 25500 or 1 million and then the onchain proposal included you know the the sentiment from the temp checks so I think most of the chains were 250 with binance smart chain being a million um there might be some other outliers in there that I'm missing but again this is an experiment so I think in the future like the actual uh framework for how to quantify how much each chain should get and how it should actually be allocated on those chains of change today the actual allocation which is another interesting aspect of it is being done by Merkel which is an angle protocol

uh product I actually don't know very much about it but I think that there'll probably be a lot of lessons learned where in the future you know these allocations will be done differently as far as the amount and which which pools actually get incentives as well I haven't used uh I think you called them oku front end is it look and feel the exact same as Unis swap or is it different and then tagging along on that do they get the front end fee similar to how they do with like Unis swap. org so they have no fee as far as you know uh actually on Exchange currently but they could definitely integrate one in the future I'm pretty sure in the prop proposal it's included that $60,000 a year or $5,000 a month something like that will we pay to oku

for those Integrations so it's kind of like snuck in The Proposal a little bit um it just so happens proposal was made by gfx Labs who also created oku so there's definitely a lot of benefit in this from them but I still think it's a great idea and at the end of the day it's necessary to have those Integrations as far as the look and feel to The Exchange it's very different than unisoft front end and Jill is more in line with like a centralized exchange gotcha awesome um next up back to you Matt actually again the arc you want to talk about that a little bit sure so the irdc is one near and dear to my heart it's an arbitrum proposal that already passed tally and will soon be having a uh you know a second step or a second part of it a milestone on on

Snapshot so the ardc was look is a group the arbitra research and development Collective it looks to bring service providers into the orbit from Dow to help governance operate more efficiently so there's four seats included in it there's a research seat which we've actually applied to be a part of there's a risk seat and there's only one applicant for that that's chaos labs and there's uh there's a security seat where I think almost like 15 or 14 different security firms including some of the the top tier ones and the best ones in the space such as Trail bits open zeppin celic uh nether mind the list goes on and on I've applied for this seat and there's an Advocate the Dow Advocate which is a position who there's three applicants for who actually leads these

roles as to what they should be working on so should they be doing you know review what what should they be auditing what should they be doing research on what should they be doing risk assessment around and that's The Advocates job there was I believe 17 maybe 19 total applicants um and soon on Snapshot there'll be a vote to decide who actually fulfills each seat so it's a pretty cool proposal first of its kind I believe the total budget allocated to it was something like uh 2 million ARB so $4 million at current prices so there's a lot of money at stake and it's an RFP process where these service priers could come in and I think it should actually help the Dow operate more efficiently and smoothly it'll be interesting to see who gets included obviously we're hopeful that blockb research is including the seip so

if you have our votes please go out and vote for us next week when it goes live um we actually partnered with Deli on this initiative which is kind of a first oods kind partnership and it's kind of all of it is is a first firstwood kind experiment that hopefully will lead to you know a more efficient and effective governance for arbitr in the future maybe other DS as well in the scenario that um for like the risk because you say there's only one applicant that being chaos Labs does the dowas still have to vote that in or do they get like no choice and they basically have to take chaos so the rumor I heard is that there'll be like a ratification like a yes or no for voting chaos in but at the end of the day that'll be up to uh a

mutable lawyer who actually created The Proposal as well as the multisig that the funds been allocated to which has five signers on it so I'm not sure what they decided but the rumor I heard was that it'll be like a yes or no ratification process all right if no one else has any thoughts on that I can move on to the next update we have we have vertex launching Edge I'm personally very excited about this I know listeners are used to listening to me talk about vertex but this is actually really cool uh it enables other Peres to basically Fork their code and plug into their sequencer uh to gain access to their order book liquidity on arbitrum which has over $50 million of liquidity in there I think this is a 10 out of 10 Direction and move and I think people are kind of sleeping on vertex their

volume has dropped off over the past couple months due to declining value of incentives as well as post tge hype which you know we're pretty used to at this point but I do find it really interesting that if a new chain pops up you can just launch a launch a pers front end basically Fork their contracts and then plug into like very deep liquidity and ideally this will increase the amount of volume rooted through arbitrum liquidity base and increase revenue for the arbitrum Dow so I think it's a big win for arbitrum um but then it's also a big win for vertex and vertex users because depositors will likely earn higher yields on those assets that are deposited and it's just generally a really clean uh user experience in my opinion the cross margin setup as well as uh the the

embedded money market as well as per borrowing spot Etc so pretty cool development there not sure if anyone has any thoughts on vertex I think one thing that comes to mind for me is you're seeing a lot of these apps like Vertex or synthetics law Launch Cross chain like interoperability for lack of a better term Solutions like verism order order book liquidity which will be accessible on multiple chains and it kind of begs the question you know like on one hand I think a lot of us want to figure out interoperability between rooll of whether that's like Atomic asynchronous synchronous composability pick and choose your combination of words but on the other

hand you could also argue that some of these apps may make that type of interoperability redundant however like there is a cavey out there that this is only within one protocol but for example if someone were to build like a cross chain like derivative margining and like sequencing layer then perhaps like you don't need the rollups themselves to figure out inoperability that interoperability could occur at like a protocol slash app level and I think that's like a interesting possibility I gotta say vertex has become an interesting token to me again to keep an eye on um like you know two and a half whatever three months ago I was trading at 600 mil fdv and at the time it seemed like a very rich valuation it's had a lot of pullback in

price action recently I think it's down to something like a $300 million fdv the fact that they keep shipping law and products and in my in my opinion it's one of the best uxs of any exchange um additionally has some interesting tokenomics it's making me want to pay some attention to it um I don't own any and I don't plan on buying it anytime soon but I definitely one that has now re-entered my radar and SP essential purchases um in the coming months I think that $300 million doesn't seem as bad for a perch exchange that's you know constantly shipping products has real yield to its token and uh yeah yeah as like the shared sequencer narrative heats up I could see vertex getting a reating especially as those tokens La of like espresso and Astria

cuz honestly that's kind of what they're doing it's still going to be centralized in offchain and you're definitely trusting like the vertex team there but it's kind of Falls within the same narrative Basket in my opinion so curious to see what happens after those token launches but uh moving on GMX in actually in in line with the pers theme GMX is looking to reduce the APR multiplier of points in an effort to make the base fees more attractive to new users so people who aren't familiar with GMX basically you can stake GMX get es GMX uh and then you get a lot of points which multiplies the amount of yield you earn from the fees paid from Traders but I think they're starting to realize it's hard to attract new Traders because people have those points stacked so high that you know the base fee for

new people coming in isn't very attractive so they're trying to alleviate that I look at this as like a very good move for GMX GMX has fallen off pretty substantially over the past year uh and losing market share to more of the order book design so I think this is a 10 out of 10 move and hopefully this can Revitalize some of the activity occurring over there yeah it's even it's interesting that even with such an insane amount of incentives over the last few months that it still hasn't really been able to make a dent in its market share um at least not that I've noticed I haven't looked the numbers in a bit of time so there definitely needs to be some changes to GMX like you know they pioneered the glp model SL you know per amm they brought

D5 dgs to arbitrum and like there's a lot of amazing things about GMX but it does seem like with the launch of you know quenta SL first we2 and and vertex and all these other Peres of late you know GMX really has falling off um so I'll definitely be looking for more for more ideas coming out of that team and and hopefully some some big changes in the future so GMX has like the new GMX like V2 vaults and which are a lot more siloed how do you guys think that performs in aable Market I mean we've seen the market rip up like atle like onx or whatever for most Majors uh and a lot more for like slightly smaller altcoins and obviously like in a bare Market where people were getting chopped

up I think GMX did relatively okay um but then with the blue Market coming up you know like liquidity providers will probably like experienced a lot of realized profits from the traders who are trading and I think you saw something wrong with Hyper liquid just last week but that was probably a little adjacent and it just seems like the liquidity provider model is not that sustainable especially as you head into a raging boom market I'll disagree with that at a at a high level I think that there's ways to build you know LP per like per Ms that work I think it's all about balancing open interest so that LPS don't have as reduced exposure to you know per to

trade or p&l as possible I think last I look GMX still had an absurd amount of long oi compared to short oi something like um I don't remember the numbers but they tried to you know create mechanisms to balance open interest and it kind of just didn't work likewise per we2 has created a lot of mechanisms to try to balance open interest and as the B market is heating up it's not working so well so that said you know I don't think it's an easy task to create mechanisms to balance open interest but if you look at you know traditional sports betting and how they balance lines like how they move lines to balance the amount of money coming in um you know betting on both sides of it I think that there's a lot of lessons to be learned there and in the future like you know per amm for

longtale assets definitely do have a place in our industry SL for gambling um but yeah no one figured it out perfectly yet for sure to me it just comes down with um like if you look at Majors or if you want to trade something like eth or BTC now we have order books on chain like why not just use don't don't like com over complicate things um but then when it comes to longtail assets I do see the um appeal of these amm but then again it comes back to like yeah having to design a system where LPS don't get screwed over which is going to be a hard problem to solve I just look at dydx and you know

you've got really really cheap fees and you've got 100% of that Revenue being passed on to stakers like if you have an LP base that you have to incentivized to actually provide liquidity to make it a useful product you have to charge higher fees so like I just don't see how that model is sustainable other than longtail assets potentially um but even then getting deposits on those longtail assets it's like a very difficult task so I'm definitely on team order book I guess I mean one thing that maybe could work is I've been actually lately looking at those Moses quite a lot and if more and more of these like amm decide to or would decide to build a cosmos chain then you could inake into

the chain like this different types of like transaction fees and um me fees and whatever that could be channeled to like native token token stakers or even those that provide liquidity to the amm and by that um like method increase the yield that they are getting I would just Echo your guys's thoughts that you know for anything in the top 100 definitely for Bitcoin eth and likely anything in the top 100 there's no way that per hand M make more sense than an order book at least from my perspective but I don't think it's worth discounting the value of perms Al together like if you look at the total value of that market of course it's going to be bigger than for trading

longtails um but I definitely think that there's a lot of money to be made in burp amm just far as long Tales then one thing that we've never seen that I really hope we do in the future is you know these perp amms integrate a more Campbell F Type Outlook like for example and this sounds so djen but you should be able to trade you should be able to play Blackjack against you know pers amm L pers amm LPS oh my gosh so like I don't understand why that's not something we've integrated yet um you should be able to you know gamble against them like with sports betting and things of that nature so I don't think that you know per amm should look like exchanges and I don't think they should try to become you know uh Market leaders for trading Bitcoin or ether

anything of that nature but I do think that there is a huge Market especially as we see gambling increase every year over year like gambling I think is like an all-time high as far as the amount of people how much money they're gambling in the real world um I think pers amm actually do have the ability to like capture a large portion of that market in the future that's the um the winner model right like winr they have a basket of liquidity that people can trade against I'm really surprised that there hasn't been a a partnership between GMX and one of these arbitrum native gambling platforms where they just set up a GM pool with usdc and that's what people bet against and then that team builds the UI that's actually a really good idea Matt yeah I honestly know nothing about

wintering it's one I need to look into for sure yeah the liquidity just is is not great but moving on we've got pyth just established their Dow Constitution via vote pyth is is killing it pith pyth however you pronounce it not sure but nevertheless they are uh the first chain link competitor that we've actually seen that's uh seems to have some actual legs underneath it so that's pretty exciting and then we also had goo lower the proposal Thresh old to submit uh or sorry the token threshold to submit proposals to 10 million goo tokens from 30 million uh and the foundation just delegated 12 million tokens to 20 different addresses and excitingly enough blockworks research was on the receiving end here so we're super excited to uh be stewards in the jto Dow

because we view that as one of the most promising projects in the salana ecosystem um but aside from that we have some spark updates brick you want to take that one yeah sure so um maker recently passed a proposal to increase the kind of the D the die that spark and borrow from 1.2 Bill to 1.5 Bill uh still needs to pass an executive proposal um to be implemented but um it's pretty sure to go through and this just helps or will help spark grow more uh during the year and they've been doing pretty well um my prediction for

this year was to uh for spark to reach three billion um dollars in supplied capital and it's looking better and better all right we uh we got a segment of hot sea cool throne but first let's go to our uh daily section with dyx all right for this week's dyx segment we have David the VP of strategy and operations at the dyx foundation could you please uh start by telling us what exactly the dydx foundation is absolutely thanks for having me uh so the dydx foundation is an independent nonprofit uh based in Switzerland whose main purpose is to support and grow uh the dydx prot protocol ecosystem by

enabling communities developers and decentralized governance uh the foundation has been around for about two and a half years now uh and was established in June 2021 all right yeah and blockwick recently posted that the foundation has being allocated 30 million in dydx from the community treasury could you briefly walk through how that would be used and maybe the threee Strategic road map of the foundation absolutely so yeah the foundation put together a pretty extensive proposal that was posted on the forums about two weeks ago uh you know the foundation now has appro or had approximately six months of Runway left after about two and a half years of

operation and as a nonprofit uh the foundation was looking to seek Community funding to continue to operate and deliver on a three-year strategic road map the foundation's vision is that the dydx chain will become the underlying infrastructure of the largest D5 protocol in the world uh where really any asset that has a price feed can be traded um and the dydx foundation wants to help support um and accelerate the growth of a robust dydx ecosystems so um how do we do that um there's really you know seven different uh verticals that that we explore um the first is really enhancing The dyd Exchange governance

velocity and impact the second is around fostering Dow enablement uh the third is around supporting Technical and strategic Integrations with the chain infrastructure and applications um helping to scale the adoption of the dydx chain um enhancing Global Marketing and Communications around the brand more broadly um and then lastly hiring and retaining an a player that we built uh an a player team that we've built at the foundation and supporting operational excellence across the the ecosystem um so the proposal went up about two weeks ago um and the voting period ended with really pretty

overwhelmingly positive support um I think there was about 98% uh of the the stake weight in favor and 86% voter turnout um so you know we're we're really excited that the community is uh supportive of of our threee strategic plan and we can't wait for what's to come next yeah congrats on that funding by the way that's super cool to see the community kind of rally support around its foundation that's uh not not exactly what you'd see in every doubt potentially so congrats but um I feel like one of the big uh unlocks of going from V to V4 was really the added utility to the dydx Token can you dive into that a little bit absolutely so yeah the community uh decided to adopt

the the dydx token as the layer one token of the dydx chain which effectively expanded the utility of the token um so once the ethereum dydx token is migrated to the dydx chain and stake to validators uh that dydx chain dydx token then secures the network uh and allows for its holders to take part in governance um and so you know to date there's about 95 million tokens that have been staked um and contributing to the security of the network and allowing stakers to participate in uh governance we've seen over 11 governance proposals uh already um and as a reward for uh

securing uh the the proof of stake blockchain uh all protocol fees generated uh flow to validators and two stakers and there's been a bit uh over 5 million usdc uh in rewards that have been uh distributed to to validators and and stakers all right yeah I mean it's always really interesting to see a token that so much uidity and it being like genuinely integrated with an ecosystem that's pretty rare to come about and I know dydx has a lot of plans for 2024 so I would love to hear what the road map is for dydx chain for 2024 absolutely so yeah the the dydx uh trading team and and really one of the the core contributors to the open source

software uh recently released a blog post around their 2024 product road map um that went into really great details around three big product improvements the first is around permissionless markets second is improving the trading experience and the third is around enhancing the the overall user experience um you know the the post goes into really great depth on all three of those but those are some of the major catalysts for you know 10x improvements on on product Market fit and continuing to drive uh Innovation for for the ecosystem uh you know beyond that personally pretty excited about uh an upcoming Android uh application new

Integrations at the dydx chain level and then uh the launch of liquid staking that just happened about two weeks ago and then uh other really novel uh Integrations in in the pipeline awesome that sounds great I know we're really excited to keep following dydx closely but David thank you so much for coming on we'll have to do a full episode sometime in the future because obviously we could talk about this stuff for quite a while but thanks a lot we'll link to that blog post in the show notes uh as well as your Twitter um but we will catch you next time over the hot SE cool Throne yeah sure let's do it uh this week on the cool Throne I have coinbase so coinbase announced the Q for earnings last Thursday proceeded to rip like 15 20% after market hours just because it

beat earnings pretty hard I don't think any of us were surprised by this but evidently Wall Street was still very surprised by this so just ripping off some numbers here transaction based Revenue came in at 529 million for Q4 which represented a 64% year on-year increase and within that consumer accounted for roughly 490 million which was a 59% yeary year increase at institutions accounted for 37 minut which was a 174% y your increase I think within that there's some really interesting numbers institutional volume came in at 125 billion in Q4 2023 and that's the exact same number as it was

one year ago in Q4 2022 but for 2023 transaction Revenue came in at 36.7 million versus 13.4 million a year ago so on the back of like the same transaction volume they made like 3x more from institutions than what they did a year ago and then consumer also ripped up 59% year on year I think it's attributable to one main thing actually it's existing users trading significantly higher volumes qu on quarter which means it's really good for us because it's more so like existing participants trading more rather than new participants uh coming in and trading more on coinbase which is good you know like there's a coinbase store

at rank that people use as a barometer for where we are in a cycle and it seems like we're just not that far in in the cycle yet and I think it's crazy right like coinbase St makes an average fee of 1.7% on these consumer retail trades which is like a crazy high fee granted that probably comes down over time as more centralized exchanges build up their reputation and there sort of like a fee competition going on as is what happened in chadf um but I at least with this cycle coinbase will still maintain that branding and reputation and that trust premium that perhaps other exchanges just don't have right now um there's a whole bunch of other things

they blew away earnings coming at 1.04 earnings per share versus consensus estimates of negative 9 cents earnings per share and another interesting St was that for much of the bare Market coinbase has had subscription and services Revenue slowly be a larger and larger percentage of their total revenue and at Peak it reached more than 50% but I think that has finally reversed and I think it'll continue to reverse heading into slightly more increased Market activity and yeah it seems like all of the stars are aligning retail volume on coinbase is still 80% vetto Peak uh there's a lot of growth that we're seeing in coinbase international which is sort of the purose exchange and

there's a whole bunch of like accounting things that we can talk more about later where coin base will finally be able to account for their crypto assets at fair value instead of at cost which should be a pretty significant boost to earnings per share but I'll take a bre dur and if you guys have any thoughts i' love to hear them I think one interesting perspective that I haven't heard talked about much is uh you know if coin base is the custodian for the ethereum ET ethereum ETFs or a large portion of the EFS and the EFS get approved in summer obviously there's a lot of ifs here and staking language is included so staking is included in these eth ETFs all of a sudden coinbase might have like an extremely large Revenue stream from

these e ETFs as far as like you know whatever take crate they have on the staking reward from the eeld and ETFs so there's a lot of ifs there you know none of it's guaranteed but I just think that's one interesting Catalyst for coinbase that I had never thought about until recently but as the chatter about an eth ETF come summer uh you know Trends upward it is something that I'll be paying attention to I thought one cool takeaway and it's just tangential but they're like posting their earnings on chain and I saw Brian tweet like I'm going to try and post these on chain like literally right at 4:00 so that way all the analysts are going to have to try and figure out like how to view the earnings on chain like in that moment which is like super cool to force people to actually look at the

chain thought that was kind of fun and also minting the nft um that they dropped for the earnings is is kind of interesting because he he said like I'm sure you can guess like what this might win you in the future with like a little smiley face so that's like super cryptic but in my opinion Brian is directly telling people hey make sure to Mint this nft because there might be some goodies for you later on so be sure to do that if you haven't yet me to takeway here was that Redi markets are still kind of Bamboozled when it comes to crypto stuff or like they don't really know how to Value these things and right now at this price I think there's still a lot a lot a lot

of like growth expectations in baked and nobody really knows what's going to happen in the next five years especially on the trfi side um and yeah if like revenue or like EPS or profits start reaping suddenly um in the next few quarters like I could see tread fine markets going absolutely h on this thing and just bidding it to follow up on that point the fast be change I'm not an accountant this is not account ing advice um but based on what I what what I understand it would allow coinbase to record any unrealized gain on the crypto assets at fair value right um so if you were looking at their Q4 2023 sort of

financial statements they have $780 million in unrealized gains and they did like buy the DI at the end of 2022 they had 202 22 million in Bitcoin a cost basis and at the end of 2023 they had 127 million in Bitcoin at cost basis same thing for Eve and at the end of 2022 they had 47 million at the end of 2023 they had 129 million and so if you allow coinbase to quote unquote like Mark the crypto assets at fair value today or at the end of 2023 on December 31st they would have recorded 780 million in unrealized gains and that would equal to $325 5 cents earning per

share and that's compared to the earnings of $1 and like 04 cents last quarter like 3x increase in earnings for share obviously like that's kind of reflexive like when crypto asset prices go down they're going to have to like Mark that down to and there's going to be a really really big negative impact on earnings for share but at least in the bull market it looks great right um and I just think a lot of that probably is being priced in already like I wouldn't be too surprised if you're watching anal you have to be looking at coin bases like balance sheet and these accounting rules and how it would potentially affect like how they're marking all of these assets on the balance sheet and how that affects like earnings for sh but yeah I think it's still like even now the narrative feels

like it's really focused on coin bases like spot exchange or even like base but it feels like their International Exchange isn't even really talked about a lot sure volume is still like really really small compared to other other exchanges it only sees like one billion in Daily volume but but they recently increased their leverage from 5x to 10x they're listing more assets and just given the brand that coinbase has you know if you're trading spot on coinbase maybe like it's probably easy to set up like an international account if you have an non us-based entity and yeah it just seems like they're probably going to do pretty well this cycle again I also think on the perss front like that market is going to mature and expand Beyond just Bitcoin and eth and

longtail crypto assets like perss could be applied to so many different Financial items like and I think coinbase is prime to capture that growth so I'm super excited to see how International grows as well as how the pers Market matures and as more products and assets are added yeah that's an interesting point because I think burs have been tried before um but they never caught attention or they never got adoption in like the tread Market but then here comes like crypto and suddenly everybody and their moms are using burs which is an interesting setup um and I'm not sure why that is like because yeah per are a nice product and they're EAS it to use

like why not get the option in try mat I think I might be stealing this Theory from you but uh didn't you at one point in the past say like it's really weird you just cited the same thing brick just said like why haven't they got an adoption and you kind of cited well CME is making bank on rolling the contracts and in per land you know the the Longs pay the shorts or the shorts pay the Longs and then yeah you have your opening and closing fees but it's probably not nearly as large as the rolling fees that commodity producers actually have to do now I'm getting off on a tangent but I just thought that was like an interesting thesis as to why perss didn't take off yeah that's been my ongoing Theory but I remember like

when I first came up with it our resident trfi expert Byron who writes our newsletter for Block Works kind of shut me down and it's like there's no way CME is thinking about pers but um yeah that's definitely been an ongoing theory for me there's no there's no question about it like perss would be worse for futures exchanges than futures or traditional Futures I also just got to shoot down the whole App Store ranking battle like that is such a dumb argument in my opinion like if you have 120 million verified coinbase users in the US then obviously there can't be another 120 million well I mean I guess there could be considering there's like 330 million Americans but I don't think the App Store raking really holds up that much because everyone already has it downloaded on their phone and yes it is

in part due to usage and downloads I actually Googled that because I was curious how the App Store algo worked but that being said if you're looking at the App Store rankings for top signals then you might be uh might be left holding the bag waiting for it to get to number one again do you know if it accounts for international downloads as well or is just for the US I do not know okay CU I know a lot of my friends who okay okay a lot of my friends don't trade crypto but those that did in the past cycle used to go to binance or ccken or whatever so I think there's some value still left in there if it accounts for international downloads because not a lot of people used to use coinbase uh back in the previous cycle but now things are

probably changing I think if you wanted to have like a coinbase related metric it either be sort of like verified User Group or monthly active users as a percentage of like total verified users because monthly active users right now is still like 7 million or something like ridiculously small verus there total verified user base of 110 or 120 million and yeah I do think that Sam has a point there and that like perhaps the coinbase absolute ranking is not the best barometer of like where the cyc tops Just One Last point on coinbase um I think

a lot of people have seen like the coinbase ventures portfolio and they think it's like the most insane Venture portfolio ever in the history of crypto which to be fair it kind of is if you go look at coinbase venters portfolio page it is incredibly incredibly stacked it's basically like every token above like a 10 billion market cap like coinbase ventes has probably um invested in it at some point but I think one thing to notice coin based ticket sizes I'm completely guessing here but coinbase ticket sizes probably aren't that big and they probably cut in like more so at like a later stage than at the C stage so not everything's going to be like a th X or like a 500x but it will probably be worth like a significant amount at the top of the bull market I don't know

whether they get to Mark those assets at a fair value but if they do I think that'll be pretty crazy what's up everyone March is approaching fast and I want to give you another reminder not to miss out on D London it is coming it's right around the corner and it's in March from the 18th to the 20th we have three full days of content this is your chance to bump shoulders with some of the world's top Executives and have open dialogue with both attendees and speakers we're going to be focusing on a range of topics that I'll let Ren discuss for you first on the list we have Bitcoin Catalyst the Haring and spot ETF next we have a view from the buy side from investors on things like strategy portfolio allocation and more we also have a topic on Aras tokenization and stable coins which I

think we can all agree are going to pay large vow in crypto's future we'll also talk about global regulatory Frameworks like compliance best practices and the evolution of global standards that is shaping the global investment landscape we'll also have someone from the institutional front to talk about infrastructure such as Banking and payments with financial giants like visa and JP Morgan and last on the list the macro case for digital assets so don't miss out on this Monumental event seats are limited so be sure to register today by hitting the link in the description and using the promo code 0x10 to save 10% on tickets see you in London how it's going to hop in with a with a hot seat unless anyone has more coinbase thoughts nah let's hear it so I'm I'm holding Stark strk token on the hot seat today

um they successfully did their airdrop for those that don't know starkware creates rollups um Stark Stark net is the main layer to rollup associated with starkware strk is the token related to this rollup so they launched Str strk and it's a lot of success I think it was trading around $2 last time I checked which put it something like a 20 billion doll fdv uh it after that pumped you know a good amount I think to almost $3 or almost above $4 potentially even and Tuesday February 20th so that was earlier today and yesterday um despite you know positive price action it being the highest fdv roll up at one point in the last 48 hours there is a huge overhang of an unlock coming up so in April mid April I believe 14th or the

15th 1.3 billion Str strk tokens will unlock um this is I think 180% increase in Supply versus circulating Supply today and you know two months from launch until until the biggest unlock and the supply increases by 2.5x almost like that is that is egregious um so they're in the hot seat you know I'm a huge fan of their team I'm a huge fan of what the products they built I think starx and Stark net are both uh you know revolutionary and a big step in the right direction for crypto but this decision with the unlocks is is absolutely absurd and uh they're getting a lot of heat for it as they should be so they get hot toat today yeah this kind of Blends into my

I'm not sure if I want to put this in my hot seat or cool drone but new shiny token investors overall like everybody going mad on these new launches um and valuations are going through the roof but especially with this um like how the Stark net or the S strk token is being released is quite um like interesting because you'd think they would want to keep their float pretty low because that has especially in the last few months has worked really well where like you keep the float low and then you just watch your native tokens price increase and then at some point start throwing in these unlocks

and uh even though they are coming to the market like not that many people care but now because the unlock is so close to the Token becoming liquid and the unlock being so huge that markets have definitely like picked up on this and especially on crypto Trader people seem to really be bashing the like the decision to do this stuff it's crazy that thatf SPF model of low float high fdv it's still in practice and still succeeding you know three years later it's a it's a crazy part of crypto that I think a lot of people outside this space don't realize like markting cap verus FTV and how we how we Define our our

valuations yeah exactly but yeah for my this kind of Blends together so I'll just hop into my hot seed coolr I don't know which one to put this on because it's cool to see prices rise but like this new regime is super interesting where like you look at some fdbs or even market caps and or mostly fdbs for new tokens that have just launched and they pretty much have no fundamental value cruel in place and uh they're trading at like 10 or 20 or five billion fdv and then you just have to kind of trust that the growth will be there or this new tech that being launched uh opens up

something really revolutionary that we haven't thought about um before and that's kind of the thesis I think that's driving these things okay as well as like stake this token and get the air drops that has been a good narrative recently but yeah if you look at like J Dimension recently launched pixel even Manta like all of this stuff is trading at such a high valuation like an fdv compared to like the underlying fundamentals and I guess it's true that like fdv is a meme especially in the bull market but it's good to remember that it's a meme until it isn't like when tokens really start unlocking you'll uh probably never see those

prices come back again or I think Lio is a good example of this of like it trading at $6 um at an all-time high sometime in 2021 and currently like things are looking really good for Lio um like the leading in the market might be getting some tread fire adoption even if these ETFs can throw some money in stuff like that and it's still not trading even close to its all time I'm again and that's just because like the float isn't um that restricted anymore and yeah I think the prime example of a low float token is World coin which has recently G an absolute like um Mayhem um I think it's up like 150% or

something like that in the past seven days and trading at something like a 60 billion fdv uh which is pretty crazy to think for a token that yeah the value acrel is pretty unclear uh at the moment yeah I've been saying this for a while I personally don't have any tiffs with the lowf float High fdv Playbook assuming the vesting schedule for everyone isn't like a three to four year deal like if you want that to work I think it's got to be like a 30 to 40 year deal and unfortunately no one in crypto actually thinks in terms of decades we think in terms of months so I I I'm waiting on the day where we get regulatory Clarity and these type of token launches are

more normal but until then I think we'll get more of the same to be honest and you'll see people on Twitter either who were seed in you know who participated in the early rounds and you'll see people who didn't and it'll be highly controversial battles between the two for pretty much the remainder of the bull market I think at this point of time the market really doesn't care about valuations I mean like I don't think it ever really has to be honest it just sees like a new shiny token uh and then it just bids it up I think at least until the first unlock but also yeah I mean like like most of you guys like last cyle was my first cycle you know and I joined like the bandwagon like oh my God like s SPF like

salana low flow High FTB is like the most like predatory thing but then now like as air drop recipient like low flow uh low Market low flow and like high fdv is like the best thing ever because it means that your air jop launches are like some stupidly high like valuation and you make a lot of money you know and at the same time I bet those people who say like it's the worst thing is also the best thing because of sort of like the narrative between the air drops that they received and the long-term like Supply dilution that they experience if you do hold the token I don't think there's like a good in between right now to be honest but I I do expect this sort of like low float High FTB thing to just continue throughout the cycle just

because it's in a lot of parties like incentive to do so low to high FV gets a interest I don't think it's fair to label all coins that are trading at a low market cap high fdv as the same like to Sam's Point a 30 40 year vest on you know your outstanding Supply your non-circulating supply is so different than two months after launching a token you know increasing the circulating Supply by 180% and likewise you have to look at who those tokens are going to um is there like an incentive for holding them as far as like can they stake them and sell their the tokens that they're receiving as rewards for that so we kind of like to bucket this huge category of lowf flow High fdv when there's ways of

doing it that from my perspective are totally viable and valid and not predatory and then there's ways of doing it that uh there is no way to look at as not predatory so I I think that you know it's all about education and you know understanding token distributions token release schedules and things of that nature and unfortunately our Market doesn't care about these things so uh yeah I guess it's a it's an interesting predicament back to Stark too like it's at like a$ 24 billion FTV is that right like that's that's insane to me that's worth basically as much as arbitrum and optimism combined I think it's down to a 20 now um the token price has come down pretty heavily today and that's my point like I

think they uh especially um taking or accounting for this environment we're in right now like if they would have not released that many tokens immediately they probably would have seen the same playbook play out as with these tokens I mentioned earlier where like you see the token Louch at a super high price and then you're like okay this is not going to go up and then you open up I don't know your trading view next day and it's up like 2X or something like that um and yeah I think it's just the market kind of punishing them for that right now but we'll see what happens in the coming weeks like I think there's an interesting play to be made here if the token plummets enough like you just

scoop up some and hope for the best how do you guys think F launch Futures play into all of this I think they're like one of the products in 2023 that have seen relatively more product Market fit or like assemblance of f Market fit sure like volume and open interest is still like pretty small in the grand scheme of things but at least for me and I would guess a few other people too like pre-launch Futures have done a relative good job or an increasingly good job for recent air jopss and actually pricing what the token will launch at and at some point I don't know if this is the right term but it becomes like a self-fulfilling prophecy in some sense like people see that the pre-launch token is trading at

like the pre-launch future is trading at like a 20 billion valuation and it say The Token launches at like 15 billion dollars and then everyone's like oh but they should be trading at 20 billion because the prelaunch Futures indicated that was like 20 billion and so I do think that there's some like interesting Dynamics into how these air drop like price actions may be impacted in the future by what the pre-launch Futures are trading at before the air drop happens and I do think that there are certain shenanigans that a protoc could do to pre-launch Futures in order to influence the market price of the token if they wanted to yeah big agree there same as Welles Market too like you can trade points OTC like I think the same exact thing is going on there it's it's very easy to

spoof the numbers and try and inflate the valuation that people are expecting I think it's worth noting that pre-launched features aren't a new idea they're filling a hole in the market that you know FTX has has created um that was probably one of the most successful products the FTX ever offered as far as onboarding new users um getting deposits so I love prelaunch Futures I always have but it is worth noting that it's not new and it's been a successful product in crypto for a few years now yeah I just think it's super interesting that as you mentioned earlier that the volumes on these platforms aren't that large like there's not that much liquidity out there and still they manage to pretty much every

time hit the uh launch price or get pretty close to it so it's like who's trading this stuff is it insiders or who is it because it can't be that small group of people always manage to like um find uh or become or get pretty close to like the launch price yeah that's a good point like who is trading these things and how do they know um but if no one has any uh other thoughts on that I can head over to my hot seat or cool Throne that this one's controversial what does anyone have anything else no all right so I've got Athena I think most people would put him in the

hot seat based on sentiment on Twitter but basically it's a synthetic dollar that is yield bearing and right now it's 20 plus% interest paid out to USD e stakers so if that sounds a little scary rightfully so everyone's still got a little PTSD from terraluna and the US anchor ordeal where you got 20% fixed just for depositing into anchor but basically how it works is whitelisted users can mint the protocols stable coin by depositing Ste and in return mint usde but nonwhite listed users so people like o retail uh can only buy usde which interesting tidbit it's rooted through cow swap uh to various liquidity pool so maybe this is bullish cow um but holders of usde can stake their usde for sde as

I loaded to a minute ago and right now the yield is 27% and this yield comes from two sources it comes from the uh execution and consensus lay rewards on Ste as well as the funding and basis spread from the Delta hedging derivatives position um so as you can imagine sex's and dex's alike love this product probably they currently have 4% of all open interest across the supported exchanges such as synthetics dydx AO derit Kraken and others and so I guess you're probably asking now like what's the catch the docs do do a great job of kind of identifying some of the risks so we can link to those in the show notes but we have liquidation risk like what if their purpose position on

sex Sexes aren't maintained with the proper amount of uh collateral or funding risk like what happens if the market turns and the funding rate goes consistently negative um custody risk do we trust coppers the coppers of the world to actually custody these assets there's exchange risk what happens if one of the major exchanges goes insolvent there's collateral risk what happens if stpegs like there there's a lot of questions here and they're all really good questions to be honest uh they do have an insurance fund which is currently at 1 million right now but I think that's supposed to get seated with some of the uh funds they just raised they just raised $4 million from uh notable investors and they are planning on uh redirecting 10 to 20% of the

protocol Revenue to the Insurance Fund in my opinion like I I guess I see the hot seat case here because I don't understand why you wouldn't redirect 50% or more personally like during a Raging Bull Market no one really wants to be holding stables for 25% yield in my opinion people are much more interested in being risk on so you might as well just build up that war chest while people are risk on so that way you have a massive Insurance Fund When the tide turns so people have confidence in the stable Point stable coin and it doesn't just massively deeg as soon as that happens but I think the founder actually put it put It Best in my opinion he said that they're trying to create a vehicle through which interest rate differentials are forced to converge

between CI D5 and trafi and I I think that's really cool like this is like a novel design um people are saying that it's really just like a yield Vault and that this has been tried before and it's not going to work and you shouldn't call it a stable coin and maybe that's the case I don't know but we haven't seen a delta neutral stable coin like this at this scale pretty much ever um and I think it's going to be really interesting to watch play out yes there's concerns around scalability and if they already have 4% of open interest like what happens when this thing balloons to 1 billion two billion $3 billion of Supply but I guess that's why I'm in Camp increase the revenue take rate to the Insurance Fund but what do you guys have uh on Athena I really like Athena I think I

think it feel is an awesome idea um I do tend to agree with the sentiment that it's kind of like a a cash and carry delta neutral fund or yield vault laring as a stable coin but at the end of the day like that's not a big deal if the rebranding allows them to attract more capital and people want the stable coin aspect of it all of a sudden it's not laring it's an Innovative novel idea that's changing the game of stable coins right so um you know this the actual core tech there isn't something super novel like friction on salana used to offer something very similar which was a yield Vault that would long um spot salana shorted on Mango or one of the per Sexes on salana so it does look pretty similar this to that and I

thought it was really cool when that occurred um I don't think it's scalable so with the one strategy of uh basis trades of of delta neutral Cash and Carry trades so long Ste short eth um long long spot Ste short e burps I don't think you can like scale that to a multi-billion dollar stable coin U I actually know you can I've done a lot of research into catch and car trades and there's just not the liquidity to do that maybe at the peak of the bull but in a fa Market especially like a billion is already kind of pushing it that said if they cap this strategy in a couple hundred million or something of that nature and you know find new strategies to produce yields I do think that uh you know if they can grow to a couple hundred million tvl or a couple hundred

million vented in the stable coin they've already succeeded so I'm a huge fan I love it I love the idea of um you know creating a more efficient market and reducing these these funding rates that are so out of whack like for instance today ethon binance traded a negative funding rate meanwhile on quenta and AO where these where uh ethena has huge positions it's trading at like 80% annualized and these are these are both annualized so negative 11% on binance 80% on Avo and quenta so I think that it is uh filling an inefficiency the market today it is worth taking into account smart contract risk of course you know having money on Avo rollup does pose risks I'm a huge fan of AO but it's just factual that there's risks involved same with holding

on on sets but holding on debts even more so so I don't um I think it's important to look at very quantitatively and to assess all your risks at first the reward and see if it's actually worth it I would say that I agree with Sam completely that like there's no need to pay 27% in a bu Market especially most of these people are probably depositing collateral BR the stable coin to go buy more crypto and to leverage up on the crypto exposure rather than like buying a crypto stable coin for 21st 7% yield I think Luna and Tera create created this like mental hurdle like if anything offers me like more than 20% on the stable coin like immediately I just think of teral Luna USC and like I just think it's sketch you know like even like if your docs are like perfectly

explain everything makes sense but in my head that 20% mental hurdle is just so hard to get across and I think a lot of people still have very strong PTSD from last cycle and so there's no need to pay like 20% and I I think the ideal move here is to cap the amount paid out at I don't know like a 10% annualized yield save like an insane amount of that interest or like funding rate Revenue into like a protocol Trey and then basically do what D is doing with the DSR and edsr throughout like 2023 just to keep the momentum going and to keep the stable coin sort of market cap increase and yeah as Mt to I think last cycle in 2020 2021 you saw like a 100 or

like a stupid amount of like hedge funds get created and they're all like delta neutral crypto strategies you know they're like doing basis trades C trades whatever and I think that's like basically that but they're just fundraising in a decentralized manner you know they're saying like everyone can come in and sort of uh B NLP in this sort of like delta neutral carryer trade which I don't think is like the worst thing to be fair and as mad say like it helps Arbitrage some out some of like the market in efficiencies especially between C defy and chadf my first thought with this is that like if you look at some of the largest uh fund blowups historically it's

usually some kind of a carry trade or where you kind of lock your positioning and it's always like we did our research this can't backfire and then boom within a couple of days you lose your whole fund and I don't know that's I'm not saying it's going to happen here but that's just like my first thought and yeah as Ren said like every time you see these high high yields you immediately start thinking about like can this be sustainable and like there has to be something wrong here but I don't know we'll see what happens yeah it's like imagine if they were just paying out 4% right now and then all of that Revenue was flowing to the insurance fund and then you know you could have a dowal

vote in a year or two years whenever the bare Market hits and it's like okay this is our run rate like we can actually pay out 5% sent for 5 years with our current Insurance Fund and now all of a sudden in a bar Market you have the most attractive stable coin to hold and everyone's confident in the pck it's like why not take that approach over what they're doing today and paying out 27% to people in a bull market where clearly just farming the shards which is their points program for those not familiar yeah but I do get it what why they do it right now because yeah you they're probably like super super uh focused on growth and like you could argue that just the shards and invite links and stuff like that is enough to

like get Market um attention but here they're like I guess going full on with it I wouldn't blame them if they like in five months or four months decreased the yield and like made the take rate for the Insurance Fund much larger but I think it's super important for a project and something that's quite often overlooked by like non devs and non business people is to like quickly gain market share and then it's easier to grow from there than to have like low market share and then suddenly try and like penetrate the market I think there is a Black Swan of that potential like to your point of like how will this blow up um you know I

don't foresee it but a Ste dpeg in combination with funding rates like overarching funding rates flipping extremely negative would probably uh be a very very bad event for how with UniFi protocols designed um I'm sure I would hope that they have mechanisms in place to mitigate this this is also like I said a Black Swan bent I don't F see cfd Peg anytime soon um you know we're deep in a bare Market I don't per funding rates flipping super negative any them soon but that would be one potential event that could cause a lot of trouble for you know Athena 5 protocol and it's LPS and I will give them credit like they did you know historical studies over the past three years which included you know the worst bare Market arguably

that we've seen with 3ac Luna Celsius blockfi like FTX Alam like everything blew up so like they they looked at that period and you know the funding was only negative for 13 straight days versus I think it was 108 of positive straight days so that deficit was definitely not that drastic even in the worst of times but my main thing is they're focusing solely on funding rates and historical dat which black swans typically don't include historical data and then on top of that you're not pricing in all of the other risks like liquidation risk like the funding or sorry the custody risk The Exchange risk the collateral risk like all of this is really looking at funding and maybe se's Peg like at the

deepest level and I think they need to prepare for something that could potentially be much worse because like like I said we've never had a delta neutral thing like this at scale and I think they have a really good chance to build something that's super super ingenuitive and actually scalable over the long term as perss mature as more markets are added as they dabble into Bitcoin as collateral or even perose for Bitcoin to to increase the yield and scalability of it so I would just like to see him take like a more thoughtful and conservative approach so that way that end result can actually be achieved one thing I actually haven't seen talked about yet is like what are the attack vectors here or if you look at Luna I guess you could argue that or there is some evidence that like the

stable coin was attacked by somebody um and could it be or could the stable coin here be attacked in a similar where where way where like I don't know on some specific exchanges they maintain the funding rate negative for like an extended period of time and then take another trade on another site which then like benefits the stackers um once everything breaks down yeah you could you could potentially like I don't know what the incentive would be there really is none with no governance token today but like you said you know all of Athena's per positions on are public like you can go look at them on their dashboard which is awesome

but you know if they have a disproportionate amount of their per or amount of their uh you know amount of their value and per position on one change you could potentially go and like Market you would you you know you'd uh Market short on that perfect exchange to in an attempt to drive the funding rate negative I don't see why there would be an incentive to do this for anyone but like that would be a potential way to you know cause some chaos or cause some trouble with h you know with Athena and if they do have a governance token the incentives could change in the future setting up a poly Market too it's like all right prediction Market does USD dpeg by a month from now and then you could cause some serious

chaos no I was just going to say I would not be very surprised if there's like some hedgman out there staring very very closely at Athena dogs and trying to figure out a howy profitable trading strategy and I think another thing that I'm wondering about is like sure increasing like the stable coin Supply and market cap is great but do they have any sort of plans in place to incentivize like onchain liquidity because ultimately I feel like these people want to use like the usce to go do something whether that's like buy more like tokens and like no just going to hold usde and they boom market and so I think that's another thing that they have to figure out and I think the last point I wanted to make was that I get the value of doing historical studies on

like exchange like tick by tick minute by minute like historical data but I also think that there's a reasonable argument to be made that market structures change over time in crypto right I bet you like if you did some historical study on like Bitcoins and Bitcoin whatever like metrics over the past five years like now with the BTC ETF there's like a fundamental shift in Market structure and it's very possible that something like that occurs for E for example if e ETF comes online with like e staking and then like all of these large Trad five funds come in to do the same like Cash and Carry trade assuming like the regulatory environment opens up blah blah blah then the market structure could fundamentally change and

all of those historical quantitative analysis that they've done like just get shown completely out of the window I think where the opportunity arises from is pretty obvious like there's a reason that on binance you know this this Arbitrage doesn't exist or Arbitrage is a is a stretch but this you know this trade doesn't exist that's because traditional Market MERS the Sig the jumps the Jan streets they're willing to trade there so you know it's an efficient market but when you look at onchain venues like AO and quento where they're trading it does seem that you know whether it because of a lack of liquidity or you know uh too much perceived smart contract risk or whatever maybe it's just a lack of knowledge about its ex its existence but these market makers clearly are not

plugged in there in the same in the same way that they are in other exchanges if in the future we see you know the reputation of these exchanges increase you know the perceived smart contract R decrease likely this type of trait will not exist I'm pretty confident in that but as always you know inefficiencies in crypto can exists a lot longer than anyone thinks and I am overall a huge fan of Athena so despite these you know criticisms it's I think it's an Nazi protocol yeah and as I said I think they're doing a good job on like marketing it and like with BD stuff um the Rens point about will there be liquidity or use cases for this in the future like I think they're doing EPO for the shards and each eoch is like you

get shards for different things so right now the best thing to do is like um buy the stable coin and then LP it on Cur and then lock the lp token but then next de they're if I've understood correctly they're doing something with like I don't know lending protocols or something where like if you lend against this asset you're getting more shards so I really like that aspect um how they're like approaching growth yeah and they said that this program will only go on for either three months or until usde hits a$1 billion market cap because they diagnosed Market fatigue on points program so I think all of the armor very much appreciate that and I I just want to Echo Matt's

sentiment too like I got on crypto Twitter I think it was yesterday when they announced this on Monday and everyone was so up in arms about this like kind of like angry at Athena for even trying something like this it's like come on like these guys have been nothing but transparent about the risks the the docs clearly state it they've been answering everyone's questions on Twitter like they're not trying to say this doesn't have any risks they're just trying to build something that can kind of intertwine interest rate differentials between trfi and Def and you know usde is just that mechanism that kind of is the liazon between all of that so I think what they're trying to do is super super cool and I think that they've gone about it the completely right way and their launch video had a kend gar song in it which I

was a huge fan of so I think they're doing everything right honestly Kendrick Kar bullish all right if we got nothing else on there are we all wrapped up with the hot seat C runs for this week all right well Matt brick thanks for coming on uh we will be sure to see you guys next week hey everyone thanks for watching today's zero X research episode I wanted to take a second and remind you about an upcoming 2024 digital asset Summit in London this March seats are limited so hit the link in the description and use the promo code 0x10 to save 10% on tickets see you in London

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