Deep Dive: Token Design | Guy Young & Kain Warwick

Transcript

yeah I think um my perhaps like slightly cynical view on this stuff is that uh they're all memes they're just memes that appeal to different people so the meme of like maker or Lio or Ave being cheap that just appeals to the guy who's running the liquid fund and used to work and try and those numbers that of make sense and it's something that he's comfortable with while the meme of like an L1 or piece of infra just appeals to different people um so I think like ultimately all of these assets are memes to some degree and it's just sort of picking which uh which sort of cult or group of people are you getting behind your meme uh to believe in it hey everyone this episode is brought to you by Supra the vertically integrated L1 for super daps uh they have a very cool

new product coming out called Supra containers so head over to supra.com that's supra.com containers so if you're building on an L1 and it feels a little bit crowded or the complexity of L2 and l3s are getting you down just head over to Supra they'll get you sorted thank me later all right everyone this is a message for my dgen listeners out there if you are getting scalped paying expensive fees to per dexes I highly recommend that you check out index co-op's new leverage Suite now whenever it comes to leverage do your own research this is not Financial advice don't bet more than you can lose all that good stuff but if you are going to lever up you might as well not pay an arm and a leg for it you can get leverage on BTC and E with built-in liquidation Perfection uh now available

on Bas mainnet and arbitrum so click the link in the bottom of the show notes and head over and check them out today and you'll hear more from them later in the program all right everyone welcome back to another episode of bellur 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 all right everyone welcome back to another episode of B CRI today I'm joined by Guy young and Kane Warrick guys welcome to the shout thanks for having me yeah thanks for

thanks for having us excited thanks guys pumped to be here um this is going to be a fun one we're talking about everyone's favorite uh subject we're talking about tokens so we're going to be talking about design value creation value capture all of that good stuff uh I'm going to say at the top of this just as a caveat none of this is financial advice uh Kane and guy are not talking about specific tokens that they may or may not be associated with we're all just talking kind of highle philosophy here um and before we get into some of the specifics around uh maybe more minutia of design I just wanted to get your guys take on some highle Frameworks uh and some debates that I've heard people engage in over the years and maybe we could start with just how you think about tokens relative to the

products that protocols um actually create and there are two schools of thought here there's one which is the token is actually the product and you should actually bake the token into the design of the protocol in some way shape or form so ethereum does this in a sense right the ethereum token which you use in staking is actually has a purpose it's Cil resistance right it meters who can participate in consensus of the network another example of this might be igen layer with their inner subjectivity um there's actually the token actually provides some core functionality to the protocol right and that's the way that it delivers value right because you have to buy the token to get the functionality the other way of looking at this is just that you know tokens are more Equity like right they provide some sort of governance rights maybe you

could look through towards the future and say hey there's going to be some sort of cash flow associated with this and you should value it basically based off of that right and that the secondary debate here is you know should return cash to token holders so you know in between those two general philosophies where do the two of you fall yeah I think uh for me it's a pretty uh simple distinction just between networks and I guess Financial applications um so I think networks as you said L1 tokens have a very clear linkage between what is the product that they're offering I.E selling box Bas and then the token itself um securing it I think the further that you drift from those L1 tokens uh the harder it is to actually tie the product and the token together in such a clear way it's not to

say that people don't do it and they there are intelligent examples of how that is being done uh but I think as you sort of Drift from that L1 token where it's just so natural that the token is plugged into the product uh they do tend to resemble things that look a little bit more Equity or Equity like or at least the market actually uh wants that from them so obviously some of these Financial applications trade just like memes because there is no real like legal claim on any of the cash flows that are below that and we can obviously jump into um whether that's right or wrong or how that might change in the future uh but I think at the moment uh the honest answer is that most of the space whether it is applications or infra trades is sort of a meme um and

even if you are trying to look at it through a cash flow lens or like Equity uh it doesn't make sense on any Equity multiple even for like the cheap defi applications um so yeah I think that's my simplistic view between the two yeah I I broadly agree with that I do think that the it's it's sort of a Continuum and we we've got some kind of arbitrary lines that we've drawn right um you know ultimately tokens are a coordination mechanism um and you know they have multiple uh dimensions on which they can coordinate people you know they can just coordinate people financially where everyone's looking at the same price of the same thing even though it doesn't actually do anything

other than price right you know that's like the the mem coin approach to the world right um and then you have you know things like uh eth or Saul or whatever that are actually validating the network you know you said um I do think that as you go further along the Continuum there are other things right you know so like guy you said Financial applications I sort of think of that as like the protocol band of the Continuum um you know something like uh sky or Athena or a you know where the token is intrinsically needed to make the protocol work right uh you know it does it does something uh that is is not just just you know a pure governance token or

or whatever like it's actually there to coordinate or back stop or you know um have some uh some kind of deeper interaction as you go further along that Spectrum though I think you actually get into actual applications right so not protocols but like a website that does a thing right you know maybe friend Tech is a good example here right um and you know the interesting thing about that or even like fantasy. toop right they a token yet but eventually they probably will you know it's a game they've got cards they've got assets uh you know what would the token uh you know be if you launch a token for something like that it would be more of like a meme style thing unless you embedded uh some

kind of Revenue uh distribution or you know uh dividends or or something like that and that's where I think you know to your point guy you become very much just like uh pseudo equity you know you have a you have a product it's a website people do stuff they pay to use the website and the token captures some of that revenue or all of the revenue and then somehow passes it back to people and you know it's various different ways you could do that um but it doesn't have anything to do with how the revenue is generated right it's completely divorced from that um and so I think like along that Spectrum there's various different degrees and and you know nuances um but but that's kind of in my mind like the

the important uh Spectrum to by which to measure these these things you know all the way from the network on exist without e it just you know it's not possible sort of thing to to you know fantasy. toop is doing just fine without a token and where do you guys like here's another thing that people have debated about for a long time and it's manifested like in between different l1s like uh Bitcoin versus eth or even in nft land it's kind of pure meme or do we want to try to bake in utility here right and I've kind of seen it work both ways and this is manifested in in a bunch of different instances like even between something like board apes and uh punks right and this was a big debate

around hey should these things just be work of works of art uh and something that's very cool and culture or should we actually try to make this thing useful right and board Apes kind of tried to make I mean you can debate about it right I don't know if they executed super well but they went down the utility route and punks were just like we're just going to be cool these are going to be punks and you know even ethereum I think the some of the the critiques of like real hardcore eth people is like Bitcoin is kind of a pet rock right it doesn't do that much you can't do anything with it other than hold it is kind of the ultimate OG original meme coin and in ethland we're actually going to make ether useful right because it's the Bedrock of this new economy and there's a bunch of

different examples of this right but where do you guys generally fall on the like utility versus the Russ hanaman like potential Pure Play me stuff because honestly if you're doing scoreboard a lot of like kind of the meme uh the meme pure play thing I think ends up winning out more in crypto than not so yeah I think um my perhaps like slightly cynical view on this stuff is that uh they're all memes they're just memes that appeal to different people so the meme of like maker or Lio or arve being cheap that just appeals to the guy who's running the liquid fund and used to work and Trad find those numbers sort of make sense and it's something that he's comfortable with while the meme of like an L1 or piece of infra just appeals to different people um so I think like ultimately all of these

assets are memes to some degree and it's just sort of picking which uh which sort of cult or group of people are you getting behind Your Meme uh to believe in it I mean I you know I you could take the like Ultra cical view right and say that like you know Google's a meme right like everything's you know like countries are memes you know on on some like on some like deep philosophical level everything's a meme right it's some collective belief or shared belief right um you know the her uh view of the world or or whatever um I I do I think Bitcoin is not just a meme right and maybe this is like my Bitcoin maximalism coming through here right but like I I think Bitcoin is not just a

meme because it is a coordination game right it's a self-contained coordination game and maybe the game is a meme but like Bitcoin the asset allows you to play that coordination game and if you don't have the asset the coordination game doesn't work like without Bitcoin the network token there's no Bitcoin Network right like it it's intrinsically uh connected to to the mechanism design now whether you think that the Bitcoin network has value or not that's a meme for sure right like 100% the the game is a meme right in the same way that you know Monopoly is a meme I suppose right um you know but you need Monopoly money and you need little pieces to play if you remove the pieces

you can't play Monopoly you just got a board that sits there with some cash on it right um so we need the little Bitcoin to be able to move around on the board for it to actually work right um you know it it's um it's different I think to uh you know just an an equity right like you know Google Shares or something like that right like Google the company could kind of work fine without like having shares in Google you know it it um obviously it's it's the ownership of it right um but like Equity is really just intrinsically about ownership in in a way that Bitcoin is not just about ownership of the network right it's it's

actually an intrinsic part of the the the scheme the coordination game so k for you and by the way I also think you know using the word Meme here it intrinsically it like lines people up right because about half of people in crypto say hey that's stupid right memes there these are serious things that we're talking about and you're watering it down by calling it memes but if you just called memes ideas right that's that actually is a little bit easier to digest right like a company is kind of an idea it's like what is a company it's a collection of people and contracts that are all you know you're coordinating people on the same shared mission right this is why it's so important as a Founder to come up with a mission that's inspiring it's the meme it's the idea uh countries are the same

way right like there are all these hardcore values that we believe in but when you really get down to the infrastructure it's you know it's not as big as a lot of people ultimately think um I think I think meme I think the problem is right now that Meme coins have actually created this like uh Flowback effect onto the concept of memes right like meme coins are giving memes a bad name uh because everyone's mad about meme coins or like a lot of people are mad about meme coins so they're like memes are bad it's like well meme coins are not me like it's a it's a you know manifestation of the idea of memes right it's it's tokenizing an idea in and of itself right I mean the guy that coined the term meme is Richard

do and it came from you know the selfish Gene I mean this like this wasn't you know internet Deens that came up with this term and this idea right I mean it it comes from a pretty legitimate Source um yeah but Kan I wanted to uh pick apart um and I want to get into the question of like should you know how do you guys think about returning uh Capital to token holders because this is another one that gets debated quite a bit but where do you draw the line in between uh like protocol versus application um in terms of where the because I mean even if you look at something like a uh it's pretty interesting like this is something that I've been thinking about we just had sty on the show I talked to Mark Zeller earlier this year but you know a sorry

if your lost on that one it was great it was a very interesting show uh Mark's got a lot of strong opinions um yeah but you know if you looked at a it looked to me more protocol like right it's like it is this kind of very flat thing you can create these markets pretty permissionless and alve actually did have a lot of use originally as part of the protocol right it was the stop right in case there was ever bad debt now they're changing this with the umbrella uh safety module they're actually you know aligning you know they're taking out that use for a and look the price of A's gone up quite a bit and maybe that's because Trump is forking it honestly that's probably what it is but still I'm gonna believe in the fundamental story here and so I would love to just and now it looks a little

bit more applike to me frankly and so I would love to just get a sense from the two of you like weird what is like protocol versus app in your mind how do you define that yeah it's hard I I like I genuinely think it's hard if you go back to eatand right eatand the token didn't do anything and then a made the token do something and now they've kind of come full circle and it's it's doing less I mean throughout this entire process though there was a concept of governance right and you know voting but right governance and voting via tokens really feels Equity like to me you know Equity also has voting rights right and you know it's it's a combination of voting rights plus economic ownership of the

thing um so you know it's it's it's a hard question to answer like how embedded does the token need to be in the mechanism design of the protocol for it to not just be pseudo Equity you know um and I don't have I don't have an easy answer for that yeah and I think on my side just picking up on the piece around the idea cash flows coming back to token holders and stuff like that um I do think that the market slightly over indexes a little bit on this point where we're obsessed with the idea of some sort of dividend or buyback or something coming back to the Token like we used to see with sushi and we do see with maker now

um I think the reality is that people aren't really in crypto to get a 2% dividend yield or a 5% dividend yield especially when you put it with reference to the underlies like underlying realized volatility of the asset so if something's a 100 to 200 Vol asset you're owning because you think it's going to 10 x not because you want like a two two 2% dividend yield uh the piece that I do have sympathy for though is token holders don't want to feel like there's an equity code that's sitting on the side which is siphoning away all of this cash and then they're just holding a complete meme on the side and I have a lot of sympathy for that view where I think we saw some really ugly examples actually last cycle where hundreds of millions of dollars were extracted to an equity code that was sort of owned by

team and investors uh with no intention really to to push that back to the Token uh so I think my my view here is actually slightly simplified where um I think token holders would actually be perfectly happy if you just made in a commitment that that cash is not going to that sort of side pocket that I described and it could even just be sitting there on a in a wallet on chain and um I sort of think about it in the context um just as one example here where doesn't make sense to Dividend out cash to Athena token holders I don't think it does now we're like so early in our life cycle and so nent with everything uh that we we've sort of done this year um there's big questions around like does it make sense to send $10 million to to token holders which is

a nothing dividend yield or is it maybe you useful to actually spend that on Business Development for example you might go to an exchange and say would you list our product uh for the next three years and we'll give you this cash to do that I think there's a very obvious one of those two which sort of makes a bigger impact on what you're doing long term and I'm not sure that this sort of like short-termist Obsession around getting dividend yields out uh makes a lot of sense yeah I I I sorry just to to double click on that for a second I I think you know there's so much poth dependency in crypto right and there's so much uh of what we care about because it's driven by you know sentiment on crypto Twitter uh that's oftentimes like a reaction to a prior

thing right you know so there was a period of time where everyone was too scared to do dividends right they would only do BuyBacks and the BuyBacks didn't really work that well and so then everyone was like we want you know we want real yield right like you know that became a meme and I'll put my hand up and say I was involved in that as well so you know sorry about that um and and when you think about it right if if we were go if the three of us were going to start a startup today right traditional startup outside of crypto right let's say we're going to start an AI startup right it would be utterly insane to imagine that six months into the lifestyle life cycle of that startup you know we're selling widgets whatever they are AI Widgets or something and you know

our our investors turn up and say where's my dividend why was there no dividend this quarter like it's just Madness right like it doesn't make any sense they would be saying like here I want to give you more money to plow it into more widget factories or whatever you guys are doing right that we like um because we're trying to grow this thing right like and so you know uh in in trafi it's like you have private startups and this has obviously been skewed over the last decade and a half I think but you know back in the old days you would have a early stage startup who would you know be in hypergrowth mode for like three to five years then it would IPO and then it would slowly transition into uh ge you know maybe that takes 20 years or whatever but like

you know it there's a slow transition right like um you know that's that's a bit different today I guess um but it's Madness to think that a six-month-old startup should be paying dividends like it it doesn't make sense it's it's the the demand for that in crypto is coming from a reaction to a prior time where there was no hope of Ever Getting dividends right so it's like well now we dividends now you know people were walking around with slogans right and and you know picketing right we want dividends now and it's like okay cool but you know maybe from maker or a but it doesn't make sense from a three-month-old protocol yeah I so let's all right there's three parts of this that I just

want to tease out so there's the you know when in the life cycle of you know a corporation or a dow does it make sense to return cash to investors right like that's the kind of people debate about this a lot then there's the separate e separate instruments right that are crew value so there's like maybe the equity of a Labs entity or something like that um versus the token and like the misalignment of incentives there and I want to talk about that actually last because that gets into regulation um a little bit uh and then there's the sort of specific mechanism actually of like buy and burn versus you distribute uh like dividends Etc uh I want to talk about the first point and I've like been hardcore in the camp can that you just espoused which is look

this just doesn't make sense from a yeah you would never ask a three-month-old startup right to return cash to investors because it's just a capital allocation question right like the idea is that you if you if you six months into your company can't allocate cash better than the average investor then why do you give the money in the first place right this makes sense once a company has reached maturity and in theory like your CFO is looking out into the market maret and saying look this is kind of the Core Business you know the risk return of allocating into other things that isn't the core business is worse than investors could just get with money so we're going to Dividend that out and give investors their money back okay like I'm 100% on board with that here's one wrinkle that I would I would love to get your guys' opinion on is

tokens are a little bit more of a uh low trust environment right so in US equities especially right there's so many examples of you know you have all of these uh laws that protect you you have all you have these very uh specific weal spelled out rights as an investor and you've got numerous examples that you can point to and just say okay I'm going to give you money now it's going to take x amount of years but on average there are lots of examples that I can point to where I get my money back right in crypto with tokens and protocols there are way fewer examples of that right and so I guess I actually do kind of stand it's a it's a lower trust environment um I don't have any rights as a token holder as an investor and maybe I do want some demonstration that

hey there's a light at the end of the tunnel and the best way to do that outside of a contract would be demonstrate a little good faith like some money back like what do you guys think about that as a maybe different dynamic between token investing versus Equity investing yeah I mean I I think it circles back to the point I was making ear which is like the minimum that someone is actually looking out of this is just that you're not taking that to a side entity and and siphoning it away um I think even something as basic as that cash is sitting in a wallet that's on chain and people can look at uh it might not might not be used for anything in the short term but that's at least um something that you can s give to people and show that that's not taking place um

and I speak about that as as someone who's been on the other side of this obviously for the last few years I used to hold synthetics and all these defi tokens back in 2020 and that's all I kind of wanted out of this I I didn't think dividends made sense I didn't think all of that made sense just based on the life cycle that those projects were at the time uh but you did want some sort of uh minimum level of assurance uh that you weren't being completely taken for a ride I think yeah I you know one of the reasons why I think that we get ourselves into situations like this in in crypto is the the regulatory uncertainty right um you know if if we're trying to make a case that uh a token is not Equity right um for reasons uh which you know I believe

we can ignore those reasons for now but you know tokens are not Equity there there's needs to be a different set of rules and some of the rules can be the same some might need to be different whatever um but you know there particularly for things like protocols right it's just not the same thing um if it looks the the more similar it looks the harder it is to to make the case for new rules you know so if it's like hey don't return money to investors because this is the common Enterprise that needs money to do things to make the common Enterprise better more valuable in the future well that really sounds a lot like Equity right if it's like hey we're runting some software and then we're

going to throw it out into the world and you know disappear that feels less like a company right that feels like some different thing I think the reality is we all had this idea that you could just write some software throw it out into the world and you know the world would go amazing software let's use it right and just start using it and and the world doesn't work like that right there is a need for uh you know BD and uh and you know go to market I mean guys example of like going to a potential customer and doing a deal with them and saying hey we've got a really good service that your customers Downstream would really like to use um you know there's going to be a cost for you to

integrate that we'll pay that cost UPF front because we think that it's going to be really useful like if no one does that then you know it's unlikely that that potential customer turns up and says oh wow what amazing software like I'm just going to throw 10 guys at this and we're going to integrate it like that's just not how the world work works right um so so where we dance around this issue of like what do we do with all the money right do we pay it you know do we pay it back or whatever and I think back in the day with icos you raised all this money up front right to do a thing um and it was like that's your pot of money that you have forever right there's no more money really that you're ever going to get you just you have to you know use that money

um and I think a lot of this kind of came from that environment of like well once you've done the thing whatever money's left return right you know you raised $100 million it cost you 50 to do the thing you got 50 left to return it right like nice job you know um and then the world will do whatever it wants to do with your weird thing that you build right um but that's just that was fanciful and and it didn't play out like that and that's why you know a today is still here doing things right doing business development and doing you know product design and marketing and you know it needs money to do those things um and and it's still a startup in a very real sense right um you know if we if we think about startup life cycles in in

the current environment the the startup life cycle is much much longer than it used to be you know it's 10 plus years right a is still a startup by that metric and it still needs growth funding to go out and ensure that it works and that people are using it so I just I have two things to respond to that one is maybe less of a question more of an observation or hope uh you know maybe this is like a ridic iully idealistic hope but I actually hope that tokens just make us rethink how we think about equity in the US because you're starting to see that's kind of broken right there's like public markets and private markets and you know public markets have all of these things which are really good disclosures you know very explicit rights Etc but guess what no one is

choosing to go public because you know there's so much money in private markets and it's too arduous and too expensive to go public these days so what is the purpose and I my my hope would just be that crypto just shows how easy it is now to is and Costless should be to issue equity and like if you ever dealt with startup Equity it's so confusing it's so ass backwards you can't even get a lawyer to tell you what's what I mean it just needs to change right like this is one of those things we should just throw it out and actually start from scratch uh for the most part it would be my hope um and yeah I've got like a lot of anecdotes about just early stage startup Equity but it's it's very confusing and maybe some people who've dealt with it you know have experiened

the same thing I wanted to ask though about one other thing as well which is that funding model for icos which is just this idea you raise a bunch of money and this is the amount of money that you have and that's that's it and that's not really actually how it works in startup funding right like this might be another thing that we borrowed from Bitcoin which is just this is the supply it's 21 million it's never going to change I would love to see people question that a little bit more like in startups it's kind of like hey there's some arbitrary amount of shares that you create out of nothing this is the amount that exists today and when the business model evolves because maybe for blockworks case we started as a media company but now we do research and data and all this other stuff it's gone in a

different direction and guess what that has different funding requirements and like we changed the business model and we adapted and now you issue more shares but it's still worth it for everyone because you're getting a lot uh for issuing those shares and it just feels like this type of thing where everyone's like really obsessed with what is the amount of you know shares or tokens in the protocol and I need to know this and it's never going to change that just has never really made sense to me I feel like that's something forward from Bitcoin agree I mean and you know synthetics did this right like we had 100 million tokens and we were like YOLO let's make at 330 million right like we we changed the rules we were one of the first people to do that um because it just didn't really make that much sense

to have like a finite Supply you know we did the Ico thing and we're like okay we actually don't have tokens to incentivize people to do the thing that we want let's inflate the supply and pay people to do the thing which is not exactly what you're describing you know we didn't inflate the supply and dude everyone to sell them to someone to raise money to do stuff we just intrinsically did it um but I I think that you know to an earlier point that you made around like the uncertainty of a lawless you know environment like crypto right uh is it's what kind of anchors people to this idea of like well at least it's you know the number of tokens is encoded in math and I can't be rugged right no one could

delute right um but we all know now that that's actually not even the case right like you know in theory you could change the supply Bitcoin right like it's not it's a meme like in that sense that you know the the 21 million Supply cap is a meme that could be changed right and so you know I I I sort of feel like uh I I agree with you and I think as what we're doing in crypto as the different types of things that we're coordinating you know grows and there's a wider kind of number of things we're trying to do we need to adapt to that and you know just a fixed Supply token you know with emissions out to 100 years is is just one way of doing that and I

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episode possible all right last sort of uh question just in terms of uh maybe a little bit more mechanical but in terms of like okay let's say that in theory there's a protocol that is uh Advanced and mature enough to the point where they do want to start redistributing value in some way sheap perform to token holders what do you think is the best mechanism right like in Stockland it's uh it's a BuyBacks right and yeah know that's like the more uh tax efficient way to redist like to Dividend out cash to token holder or to shareholders because it's effectively the same thing right you're just reducing the amount of shares and then the EPS goes up and more people buy Etc right so uh but in crypto it hasn't necessarily worked out like that for a number of reasons right there is no there's not a huge body of investors

looking at uh earnings per share right there's not you don't necessarily change the markets aren't super efficient and so I don't know buy back in Burns or just burns in general like haven't I don't think always necessarily translated to the return of value that a lot of investors thought they might and so it's kind of evolved over the years there's been more actually go back out into the market and buy the token and then just actually distribute that to people that are doing something in the protocol like what are the different mechanisms that you guys have looked at what do you think is the most effective for returning value if you did want to go down that route yeah I think the uh my simplistic view on this is um it's probably slightly irrelevant um I think if a protocol is producing 100 million of

cash people can look through see that cash and whether it's coming through as a dividend or a buyback I think it's slightly irrelevant like the tax pie side I think if you're going to go like extremely detailed I think a dividend has slightly more optionality in it because technically you could take a dividend and then just buy back the token as well if if you thought that that made sense while you don't obviously have that option if the protocol is doing that on your behalf um I think uh the one interesting take on this that I saw which again isn't miles off what you described there but I thought was an interesting twist was the way that maker essentially buys back and then adds liquidity to the token on chain and so essentially the liquidity of the token is sort of growing through time as the the protocol is buying back

its own token I just thought that was an interesting twist where you're sort of solving two problems that a protocol is trying to deal with uh in one go uh but I think the broad perspective on this is that if a protocol is doing well and it's generating a lot of value I don't think people care too much about uh sort of the nuances of of how that's distributed yeah I I I tend to agree with that um and I think something that um you said earlier gu uh about this like dichotomy between uh you know a Labs entity or some Equity you know Co and then and then the tokens and that split I think this also kind of impacts that as well right because if the thing's making money and it's like well there's only

one place it can go even if it hasn't gone there yet or even if we don't know exactly how we get it there I think everyone's probably kind of okay with that right um but you know it would be weird like imagine if a a startup right like or even you know something that's that's larger scale um you know stripe or something like that it would be super weird if stripe did the inverse of what we do in crypto where there's like an equity code that launches a token that doesn't do anything if stripe just created a striped meme coin essentially and just like threw it out into the world and said like hey guys buy this thing right but it doesn't do anything it doesn't give you any rights it doesn't you know acre any value like that that would be super bizarre I mean

I'm saying it won't happen this cycle I'm sure someone will have a good good idea around that but um it it feels uh it feels like a little bit of what we've done is is kind of that right you've got an equity company that's capturing value I mean frch did this you know uh capture a bunch of money in in the equity and then the token is effectively like a meme coin that just rugs you right it doesn't do anything um and once people kind of figure that out it it falls apart really quickly um so you know the the point that that guy made earlier about like you know these extremely volatile assets uh a 2% dividend yield whether it's a buyb and burn or whatever

is not really what you're going for you're going for you know does this thing have traction right like revenue is more of a indicator of early traction and so the mechanism of how you display that early traction or whether you give it back or don't or store it or put it into liquidity or put it into an insurance fund or anything like that is is kind of irrelevant it's just a proxy for is this thing working and you know does it have parabolic growth potential right that's that's what people really want to know right um and so you know I'm I'm kind of of the opinion that like it doesn't really matter you know it doesn't really matter how you do it it it's it's you know uh are you are you AC you know are you demonstrating that

people are using the thing so maybe we could start to get into the question of Regulation here um because I think there are a couple of different examples of different like equity instruments versus tokens and maybe examples that are not super great or people questioned and didn't love at the time just pick on a bad example that no one's going to stick up for is like FTX right there was ftt the token and then there is FTX equity and everyone even at the time before even before the sort of shro all fell down about Sam everyone was like what am I really getting here you know like does this actually make a lot of sense that and people people use this feels like double dipping uh right and now we found out he was pledging that as collateral at a bunch of exchanges or at a bunch of uh you know

credit shops so yeah that wasn't great but then there are other examples I would say like people debate this about Unis swap a lot as well right which is kind of like okay there's a I'm not picking on Unis swap here there are lots of pro there's like a a sort of a front end right and fees do that go to the the labs entity and then there's the protocol itself um and I think this is just Mike's personal opinion not legal advice right I'm not qualified to speak on this at all but I think there's a huge you know they're a us-based company and there's a lot of Regulation around this and everyone gets a ton of advice from lawyers in terms of what you can and what you cannot do and so you know I'd be curious how much of these these different kind of entities and you know

Labs entities that have uh equity and versus actual like the Dow and there's a token that's associated with that I mean how much of that is driven by regulation right like even for someone like me I kind of have this idea that you know a lot of this is shaped by regulation but I don't know the specifics and would love to get your guys take on how much regulation especially us-based regulation is informing a lot of these weird structures yeah I think a huge amount um uh I think half of these decisions that you're describing there are all just trying to stay in compliance with with what you're describing there in the US and as soon as you start like promising or offering some sort of return that's actually attached to it I think you start to cross over into Waters where it looks exactly like a security

essentially um to me it feels like the the fix here is is basically just a simplified framework that actually tokens could go under where they could potentially ACR this type of value but it has a very basic uh framework that a team has to sort of stick within uh it doesn't have to be quite as detailed as as going through a full like Securities offering that you see um in the US but I think there needs to be some acknowledgement of these are fundamentally different um assets or instruments versus what you see with normal equities uh so yeah I think a huge amount of decision- making is actually driven by that and I think the unint sort of second order impact of that is actually it sort of harms users more on the other side because you're you're in many cases buying something which is so fundamentally worthless uh

and there's always this sort of like dangling piece in front of you of maybe it'll come at some point in the future maybe it will and so it's sort of set up there to protect people in the beginning but I think where we've landed now is it's actually net harmful for the people who who are um sort of buying these things which are essentially worthless yeah I I agree with all that I think uh it's it's a attempts at Regulatory Compliance it's attempts at regulatory Arbitrage it you know it's it's just driven a lot by uh you know the regulatory uncertainty um and and you know again there's probably a lot of people that like there isn't regulatory uncertainty all tokens are equities uh

you know my view is that uh this is new technology and like you know something that someone cooked up in 193 before may not quite apply to it like there's a reason why we have legislative bodies to like make new rules for the world because the world changes like it's kind of insane to be like no no this is exactly the same as what we had 100 years ago um there's no need for any new stuff this is totally fine um in my mind that's a bit insane as a posture right um you know this is a new way of coordinating people and we just need some rules that make it clear um so that we're not jumping through the wrong hoops and doing the wrong things or you know trying to um anticipate what some

enforcement action or rule change might be in the future it's just like no no okay if you're Unis Swap and you're doing this thing you don't need a Labs entity because it's actually okay for you to have a token that is the coordination mechanism and a cruise value and that's the thing you pay people in and you know it all kind of works and it's fine so I completely agree with that and you know maybe a couple of examples of how I think that this is actually it kind of goes back actually to that whole like utility versus meme narrative that we talked about at the beginning of the show because there have been attempts right I I'll keep talking about Unis swap here just because I you know relatively informed about it but you know there always these question when are they going to turn the fee switch on

right and there are these proposals uh there have been many proposals over the years and you know I I think a big part of why these proposals again just my opinion no inside knowledge or whatever I think a big part of why they don't end up passing is because because people are concerned about the regulatory implications of returning cash to token holders and so yeah there is this very weird incentive of yeah that the way the current regulations set up are actually they encourage this meme Dynamic right and that's why you hear people saying you know Meme coins are the purest form of all this stuff and other areas where it's less obvious because there was never a huge Market here before but you know there's a lot of equity funding that essentially happens in crypto there's not very much debt based funding uh which starts to make sense for

protocols as they get more and more mature so you've seen over the years like um volts was an early attempt at like interest rate swaps and I think Pendle is doing this now but you know we're trying to actually create uh like a yield curve and uh you know the ability to borrow and lend in in fixed uh fixed rates and you could do that on chain but a huge issue with that is just that it starts to look like debt which is a security and then people just don't do it and so those markets never really take off and mature right so it's just another way that protocols get stared for Capital and so yeah it just it feels like a huge weight on the entire industry so less of a question more a rant but yeah I like I guess one point around

that is when you think about how you know going back to the buyback uh you know versus dividend sort of thing a lot of BuyBacks are driven by borrowing yeah you know it's not it's it's using future cash flows to borrow to then go out and buy back shares right you know um look I think that would be ultra bullish for a if it was able to go and borrow you know a couple billion dollars uh based on you know potential future cash flow and over the next five or 10 years at you know 4% interest rate or 7% interest rate and go back and and go out to the market and buy up a couple billion dollars worth of a tokens I'm I be I'm all for that I I'd love to see that and like last one too I mean how I mean neither of you guys are us-based

and I know that neither of you are from here but you know it's impossible like we you know we do the Roundup with the framework gu um you know Santiago's on Empire and the constant reframe that we've heard is like there's less and less funding going to us-based Founders and so I don't know do you guys feel like that's real there would be a lot more activity going on in the US if it wasn't such a restrictive regulatory regime do you think that just in general crypto's pretty Global and it was always going to shake out like this or you know how much do you think the regulatory scrutiny is keeping Founders out of the US I personally think a huge amount and it's taken a bit of time to sort of wash through but I think it was clear it was really when I think the SEC went after

coinbase where the writing was on the wall which is like you have one of the most compliant businesses in the world did everything as squeaky clean as you could possibly imagine within crypto and they still went after them and I think it's actually worse than since then in terms of everything you saw with Kraken and businesses after that and so I think when you get that kind of messaging uh it's just becoming clear that it doesn't really matter um how well you operate within the country they're going to have an issue with what you're doing um so yeah I I have friends who are founders and have sort of moved out of the US uh in the last couple years as they've been doing this and I think um unless we see a significant shift there it's going to continue in terms of the the dev talent

and it's a bit of a shame I think even from a developers perspective in terms of blocking off the us as an entire country which we at Athena do do it's literally the largest financial Market in the world with the large richest retail and institutional user base in the entire world which you've just had to knock out of out of your product and user base so I think it's it's a huge piece but I think maybe the slightly Rosy piece around that is that once it eventually does change and I think it will um that's actually a huge like Boon for crypto in general because you've just got a lot of capital and a lot of talent that I think can come back into the space yeah I mean a US pivot to you know not trying to kill us all would be amazing at this point right like it's a

low bar but um you know I I um I remember catching up with uh a couple of other defi OG Founders um you know now it's going back like three years ago um and we were like you know we've haven't done as much as we could do to educate Regulators like we need to do more um and thankfully you know a couple of the people at that dinner stepped up and and really you know tried to actually uh you know put their money where their mouth was and and educate us Regulators on you know the value of Defi and then we all came back together like a little bit later and we're like oh actually no they know everything about us they just want us to to be dead so um you know it's it's a bit dark right but um I think

that the the thing that gives me some level of Hope is like there is demand from uh from the market for access to these products and and you know access to crypto um and ultimately demand is what will shift the regulatory posture right um you know if you look at products like uber um you know there's a whole bunch of vested interests that wanted to kill Uber um you know uh and and a lot of uh a lot of different startups in that like early 2000s uh you know um kind of cohort that that grew there were a lot of people that were like no no no we don't want to change this this this is working well for us

right um and so yeah my my view is that the more we build for the masses and and the further we get away from just being a weird little Enthusiast Community that's doing this weird thing um you know albe it with a lot of money uh you know the more the more actual users we have out in the world uh the the safer will be um and the harder it will be for Regulators to to try and shut us down yeah I think that one of the mistakes actually that because especially you know the the early ogs in crypto were so ideologically driven which is awesome right that's why if you were messing around with Bitcoin in 2011 right there's no reason to do that unless you were pretty hardcore ideue about wanting

it to exist uh and now it's getting more and more mainstream and there's a little bit less of that but it ideology isn't what wins Regulators in general right like you need to provide especially in America it's capitalist right you got to provide a business case when when the US tried to classify encryptions as Munitions grade weapons you know it wasn't a ideology that ended up winning that fight it was the K you know businesses there was actually a business businesses wanted privacy right um so they can make more money and you can view that as like very sad that that's the way that the world works or you can just say that is the way that the world works and construct your arguments to get what you want um which is why I actually don't love people leading with like censorship resistance because that's there is zero uh support for that

right in Congress at the moment so you got to provide a business case and I think it's got to be demand um so I want to ask you maybe guy I actually want to kick this over to you here because this was uh this whole podcast was inspired by a tweet uh from you and you said that BNB in terms of token design is I can't remember the that you used exactly but like it was it's an extremely great uh token design and then I want to transition from some of these high level Frameworks that we're talking about into some of the nitty-gritty of actually designing uh a token so can you just explained like why do you think B&B in general um is you know a good token design and maybe we could talk about some others as well that you guys think are welld designed out there in the

market are interesting examples of token designs yeah sure I think um maybe before just jumping into B&B specifically I think uh it's important to just say that you you can have good products and good tokens but it's difficult to have like a good token unless there's really a good product that's actually tied to it and I think binance is actually the canonical example of this where uh the very basic mechanics of how B&B works is essentially uh when you're staking it and you have new launch pools that are coming to launch on pance Exchange they put aside some amount of their token Supply uh to B&B holders and that's just part of like the process to to get listed on their exchange um and so you can sort of think about that as a quasi dividend yield but it's denominated in in EXO

tokens uh rather than their own um and so the B&B model is pretty simple it's like if cash flows for binance are going up the burn on BNB uh increases and the supply is coming down and then on the other side of that uh if you believe that their platform is valuable and tokens want to continue launching on binance and being traded there you're going to get this continuous stream of external tokens sort of being paid back to to BNB so if if you just look over like the last five years of data uh it's the most one of the most insane things which I think isn't actually that well understood in the west it's like pretty well known um in in the East but you basically held like B&B and got 50 to 80% uh APR in other people's tokens like per year and this is over a time period

while B&B has uh whatever it has like 400x or something since uh Ico um and so I just think it's a very good example of the product is so powerful and the platform is so good that uh they always have this power to to sort of capture that value from from people who are launching on binance and it's just a very clear tie that sort of comes back to the Token where early buyers of binance and and BNB don't actually feel the need to ever sell their B&B because uh they can sort of consistently clip this income and that they Happ it is holding the position uh K before you respond I just got a couple quick can you just explain what like binance launchpads are for folks who might not be familiar and then if you're literally I actually didn't even know this until you flagged it as

well because I've never owned any B&B but when if you hold B&B do you just get this like stream to your wallet or how do those dividends end up getting paid out yeah it's literally just when when you've seen these token launches that have come out this year uh you basically just take your BNB and you stake it on binance and uh you just get paid the tokens into your wallet uh some of them do have different unstaking periods and they try and avoid you being able to game it by shorting with your B&B collateral to hedge out position and that kind of stuff but it's a very simple you know two clicks to to just take your B&B and and be part of that and I think it was part of you know the whole um High FDB matter and stuff that I think people have been complaining

about quite a bit this year um really one of the main beneficiaries of that has been uh token holders of of these exchanges who essentially sort of get those tokens uh liquid when they do launch um and so they're one of the main beneficiaries I think of the uh successful token launches you've seen this year I think uh I think that that um you know makes a lot of sense right like binance is one of the most successful uh organizations in crypto right um you know it's going to be a bit sad when uh infinex kills them but you know that's that's what needs to happen right um I think like there's there's a an

interesting uh thing when when you know if we think about like let's say 2050 right and we look back at crypto you know right now we feel like we're so deep into it you know it's like 13 years into crypto 14 years into crypto right um a lot of stuff's happened um but we're still in the early phases of like working out this stuff right um and there's still things that exist today because they needed to to bootstrap the industry whatever right um you know we're we're just finally connected to trafi with the instruments that they understand right in the form of ETFs and stuff like that you know prior to that it was like our only connection to trafi was through you know payment gateways basically um which is you know very small pipe right versus

you know ETFs which is a giant pipe um and so you know I I I've been thinking a lot about this lately like you know something like binance uh there are a lot of companies that you you look back in like the last century right um you know that really dominated uh for reasons and then the world shifts and you know they're they're less dominant and this is happen you know I think this is over time this has become you know much more rapid this cycle um but the idea that uh you know uh an entity like binance has so much Market power that it can command access to early stage you know projects tokens

right especially given this you know as as guy pointed out this High fdv meta that's going on right like the only people with liquidity are B&B holders like that's an incredibly good position to be in right um but what's interesting is binance is doing nothing arguably for these projects from like a demand side right all they're doing is just injecting liquidity into the token um they're not actually creating any like underlying activity in the project itself um other than through attention right it's very it's a very inefficient mechanism right by which um and so you know it feels to me fairly obvious that if someone turns up and actually offers these projects a better way of getting

intrinsic activity rather than just uh um you know juicing the token uh liquidity that um you know we can we can kind of shift this away so um it's one of the reasons why you know I'm I'm obviously you know uh working on infinex I think that we need to get away from centralized databases as like the main mechanism for people interacting with with crypto and and you know uh move to something else but like if you have Monopoly power as bance has had for the last like five years or whatever right in in an industry or or you know oligopoly power you can really distort markets and this to me feels like a huge Market Distortion um well played to CZ I think he's he's done a good job but you know I

don't think it's a sustainable uh equilibrium uh at all yeah I I was actually going to get to this a little bit later but you know since the sort of come up binance and low float High FTV token meta um you know there's a lot of reasons like obviously the product is incredibly important right but there are there are examples of right like hey good product but bad token um and that can be that usually comes down to supply Dynamics and a lot of that is around this argument of kind of like low float high fdv and you know VCS get a lot there's always a blame game here right like who is responsible for this low float high fdv and VCS get a lot of the blame um and I don't know I I I'm not 100% sure they really deserve that blame I I'm not sure exactly who get what's

unclear to me and I would love to get more of an understanding from you guys is how does price Discovery happen on these tokens it wouldn't make as much sense to me that VCS were really deeply involved there there's probably some amount of influence from the pro project but I never really hear the influence of market makers and exchanges here and you know like all this is conjecture rumor Etc you know from my perspective but like I think binance actually has a big part in price Discovery as well it's the most important deepest most liquid exchange and right they kind of extract their pound of Flesh right from new token offerings right like God this is where the yield comes from right I don't know if all these projects actually want to give that yield to BNB holders right so how much of uh you know kind of

binance is behind M curtain in terms of some of this low low float High fdv meta or exchanges in general right like I don't want to pick on anyone in general but yeah yeah I think it's a it's a difficult one and we always tend to want to point the finger at like one person and Flame one when I think like the Nuance is is somewhere like in the middle between a bunch of different parties so um I think just speaking from my own experience uh VCS and the team have almost no input as to to where their valuation is um because then every team would be coming out and and sort of thinking that the valued are 10x where they are and obviously that just can't be the case um I think it's a collective sort of decision by market makers exchanges sort of a feeling in the air

of of where that should be and if the price is fundamentally wrong when it does list immediately the market eventually does bring bring that in line right and like you can't fight gravity uh forever um I would say that actually just speaking on our behalf and obviously um Athena I think was was within this bucket of like the low low FL high ftvs in the beginning of the year um I think the one thing people don't appreciate is that we don't actually have that many different options or leevers to pull uh to to um address what you're describing there uh so really as a team you only have two two pieces you can be changing which is what is the air drop that's coming out in the beginning and what percentage are you putting into these launch pools for the exchanges that's on the assumption

that you're not going to be doing um an Ico type sale where you're where you're selling tokens that can be liquid within the first 12 months so there's no real other bucket of tokens that can actually be liquid outside of those two leevers to pull um and so I think it's it's a slightly different difficult decision which is um you can't really Flex each of those those two variables that I described there in in a massive way um and then I think the other piece that people um forget is that there's actually like a long-term view to this whole thing which is actually your token or Equity within a business is one of the most like preious resources that you have to try and incentivize different things or try and grow through time and just getting as much of a out in the very beginning uh just to appease a

group of people around like the float Dynamics I'm just not sure that that's like the most efficient use of resources so I said uh like as I mentioned I think the market would have sort itself out pretty quickly when when there's one of these discrepancies and uh you you'll eventually find out what that claring price is pretty quickly um having said that I do think that the one solution to this really like multivariate difficult problem to solve between a bunch of different parties is actually trying to find some way to to get more tokens which are sold in into the market for the first 12 months and so I think something where you have a basic framework for compliant icos where where a foundation or team can sell tokens to increase that Supply to something that's closer to call it 20 to 50% um I think would actually be ideal

for a bunch of different um market dynamics but at the moment it's just unclear to me whether you can sort of achieve that within the current sort of regulatory environment yeah I I don't think you can and I think this is the problem uh is that you know it's it's quite interesting right if you go back to like historical equities markets um you know there is a long-term Trend and when I say longterm I mean like over the last like3 years or something right of uh companies waiting longer and longer uh before they're available to the public right and so you know you can reframe this as like price Discovery happening in private right like you know basically back in the olden days like

the late 1800s early early 1900 unds right uh company would like form and the stock just appeared and was tradable right like you know they had they had all kinds of uh weird places uh you know where you could basically list things and an IPO cost nothing right um and so so you know people would form new uh joint stock companies and all kinds of stuff you know really quickly um and there was a there was price Discovery right like it was it was out there and you know there was but at the same time uh there were all kinds of very interesting games uh that people played cornering markets right um you know where they buy up all of the outstanding shares and then you

know they pump the price because they can they basically turn a liquid stock into a lowf float stock right um and you know like all things being equal any amount of demand into you know few less Supply right is gonna it's going to you know create that Dynamic right um and so this is not a novel thing right like we didn't just discover this in crypto uh it's just the market responding to distorted incentives I would say right it's it's all of the market participants responding to the existing incentives but the incentives create uh an equilibrium that is bad for everyone but no one can really break out of it right that's the problem you know like to guy

point you need something you need to be able to sell tokens to someone that are liquid and there is no structure for that right like there's no structure for going on doing that um and so we need to experiment and people need to be willing to like do weird stuff to try and solve this problem um I think um because price Discovery happening in the public eye is just going to be more efficient right yeah there's a trade there there there's 100% a trade there but it will be more efficient it's better for everyone for Price Discovery to happen in public uh you know it's it's Matt LaVine has this like uh interesting um point that he makes

around these things right that there's like a dial you can have right um and you know you can dial uh the the you know IPO dial down to zero fraud right which means you have no IPOs if you if you if you cannot accept any IPO fraud or any issues like if if no retail user can ever buy an equity that has been like improperly disclosed and you've turned the dial down to zero then shut down the public equities markets you just can't do it right that's where we are in crypto right we went from like a lot of fraud in icos right and then someone came and turned the dial

down to zero and then got a sledgehammer and smashed the whole thing apart right and now we're stuck here and so it's like well actually like what we really need is for the the Ico for dial to be like three not 93 just three right like three is fine it's okay that is a cost you know the the I mean look at spacks right like the IPO Market the public like the public equities markets in like the largest market in the world in the US there was a period where like the fraud dollar was at like 25 and people were like yeah YOLO like whatever right like it's fine like and you know it's not great now it's dial back to 10 or something and you know people are shutting down spacks and whatever but like it's okay for it to

not be zero zero is not a number that is compatible with having a market right so we need we need to get back to a place where the crypto Market has an ability to sell tokens and the the fraud dial is at seven and yeah you're going to get some frauds but like the market sorts it out and it's not too impactful and at the end of the day you get better price Discovery and you know everyone is better off you you have a much better equilibrium that's where we need to get to someone needs needs to figure that how to rebuild the fraud dial and and turn it back up a little bit because uh you know it's it's it's not working for anyone right now so you know another uh actually just on the point of like the

history of joint stock companies that like people should look into this pretty interesting right I think the first like big joint stock company was the Dutch East India Company um like way back in the day and then they actually fell out of favor for a long time and the the guy who brought like joint stock corporations back to the in a big way was actually uh John D Rockefeller with standard oil and a huge part of it was regulatory Arbitrage because at the time that he was operating you actually couldn't do business in multiple States at the same time so they came up with this whole uh Trust Company hence antitrust right the guy Sherman Act that eventually came after him and the one of the this guy pioneered so many things but he pioneered this idea of equity right and he used Equity uh to acquire

up a whole bunch of his competitors in the early days and so you know a lot of people might be looking this and saying hey you know Kane or M that's kind of unrealistic you're not you're not going to change the US Securities laws and it's like well actually that would fit right you can you absolutely can right this isn't written in you know this isn't biblical right like we came up with these laws we can change them WEA should it's not we're not talking about physics right we're not saying like we're going to exceed the speed of light right um you know or or you know be smaller than like you know the plank coner like this is not physics like we just like move the dials around a little bit and see what happens right no one's going to die like we got to a

point somehow where uh you know for reasons right like this is a a deep rabbit hole but we got to a point where someone got control of all of the dials and just started like ripping them off the walls and saying like no one gets to do anything right and no one is happy with this this is bad for everyone right like this is this is you know creating an environment where markets are not functioning you like it's it's like this asinine view of if one bad thing happens to someone then we need to stop that thing from ever happening again right like one car accident happens and now we need to

go and nuke all the car factories like that's just like that's idiotic it's so asinine and so frustrating it's like no okay like car accidents are a cost of having cars cars are good right like having you know interest State Trucking is really useful and if you shut down all the trucks because one guy fell asleep at the wheel we're going to be in a bad place like totally I I so here here's another question that I would love to get your guys perspective on is you know there's all right here's another thing that's floating around Twitter right now which is uh you know we should just unlock 100% of tokens at launch and at the token generation event and NADA actually did this you know credit to them uh because there were you know a team of

builders that actually wanted to experiment with this um I do see a lot of um like VCS advocating for this point of view and you know I like just as a Founder right like the whole point of equity also is is that it's supposed to align incentives internally right and like keep people motivated which you like just why you have things like lockups um and you know I just think about this from the perspective okay maybe you know it would solve the low float High FTV thing but man I just do not envy Founders having to keep you know a bunch of very young you know people motivated in an environment where everything is just unlocked at at kind of day one um I think there is a positive to this too which I'll kind of get to but like where do you guys sit on

the whole you know 100% unlock at day one but then you also have people advocating for like eight or nine year locks at the same time so you know is the original system not broken is four years pretty good should we be unlocking 100% of things day one like what are all the different lenses that you guys look at that question through yeah I think uh the people who are advocating for like 100% unlocked on day one have never run a business themselves I think the the comment that you're making about um employee incen incentivization trying to build like long-term blasting businesses doesn't happen when everyone's got liquidity on day one um I think the liquidity Cycles in crypto are even shorter than normal Equity markets where you don't touch anything for 7 to 10 years when you IPO and you know it's already happening

within like 12 months here in crypto um I think the other piece is just around trying to use tokens around your product um so clearly there's some level of incentivization and coordination that happens between tokens and trying to grow your product as you try and navigate and find product Market fit and to think that that's done on day one uh I think uh definitely under sales how difficult that is to to try and build that through time and build a lasting product so um I think it makes personally like almost no sense to me and uh the the optimal piece I think lies actually somewhere in the middle which is what I was trying to get to earlier where I think the structures now are actually fine but you need to be able to sell somewhere between 10 to 20% of a foundation Supply into the market

on on day one where you don't have something as ridiculous as 2% that's actually circulating but you don't like need to start with something that's more than 50 there's a natural sort of way that that tokens can sort of Hit the market over five years and it doesn't have to be quite as egregious as as we do see now yeah I I I agree with all of that and I think you know from a price Discovery perspective starting with 10 or 20 is a good number right um you know if you think about it right uh there's nothing actually wrong with starting at 2% right um if you start with 2% what happens you have a distortion of Demand right um and uh and Supply that leads to a price that is not reflective of the

current uh reality right that's that's ultimately what happens right so something that you know like if you draw out the supply and demand curve of the token right from 0% float to 100% float right you're going to get a price curve that's going to kind of de Cline down here right um that price curve that you have is for that day for that moment at tge let's say right ideally the price curve as execution happens should shift over time right yeah like the price curve should go up if the thing is working and doing things and you know there should be an equilibrium in a year or two years or five years that's far higher right for any given amount of float right so the issue is not so much like can you sustain a billion dollar

valuation uh on day one if you have a 1% float right and it would have been a a $10 million valuation if it was 100% float right like and that's where the price curve is it's like can you grow into that you know and how do you drisk it and this is where the price Discovery thing is up right like people should be able to buy that at $10 million right so that if it does turn into a billion dollars they get the price appreciation instead they're forced to buy at a billion because we've shifted the price curve in a in this you know demand and Supply imbalance thing right um and you know it doesn't need to be 100% 100% is probably too low and this is one of the challenges with 100% if it were 100% is at the bottom at the

trough of Despair that Plateau where it like declines you know ASM totically to zero right as you get more Supply unlocked um people go well this is bad because they're comparing it to other things right like there are other things in the market and they go well I mean you know uh project XY the is worth a billion dollars and this thing's worth 50 it must be bad right and so I'm not going to buy it um which I mean you know that's its own problem but like if everyone had 20% floats then you would get an efficient market and you get some good price Discovery and we would have the right curves and it would all line up yeah I think that's right and I think um we also seem to uh think that this

was like a new phenomenon on this Market this cycle where we didn't see this last cycle we've seen this all the time go go and look at like avalanche's float Sal's float when it came out and exactly to the point that Kane was making um in the beginning that looked pretty ugly in terms of a Flo Dynamic actually worse than what we've seen with some of the launches this year uh they did go down I think salana was down 70 or 80% versus BTC in 2020 but then at some point the market realized that it was growing into that valuation and it completely ripped into people's faces despite those Dynamics um so I think the piece that sort of came together this cycle which made it so obvious to people was a lot of these launches were coming out when BTC was at 70 to 74k and you know

naturally the market just prices up as like the base asset within within the system increases and so uh things that would have um had the same sort of float to FTB Dynamics in the past naturally there's just a stronger bid because there's more money in the system and things are worth more and so that initial price becomes extremely um uh sort of like eye-catching to people when they see it so um I think Kan spot on in terms of the Dynamics where somewhere in the middle of these extremely low floats and 100% it's probably where that makes sense and there's no reason why things that only have 20 30% of floats can quite easily grow into their valuations over a two threee period um and without sort of distorting the price in the wrong way yeah and I think the there sorry Micha the other thing is like you

talking about lockups right um I got no problem with someone who bought tokens being unlocked like this is a thing that we've sort of adopted from Trad right sorry with one caveat right if the price discovery of the thing that they bought is happening in real time and we haven't distorted the price Discovery right significantly whereby you know uh fund you know a gets to buy the token at $10 million and then you know they have in theory the ability to buy up to 10% of it or something like that or 15% of it in some private round right well there's good price Discovery right like if you're trying to sell 15% of the supply to someone you're going to get some price Discovery there right um if

everyone had access to that and you know there was some mechanism by which we were discovering what the price of the thing was right and and you know we had price Discovery from day one and the price ends up being let's say $3 right okay so the token's now $3 and everyone had a chance to place bids and you know no one none of this happened in back room deals that you know distorted the market um yeah sure unlock that person this feels like one of the weird things where we overlay you know IPO lockups and and you know stuff because we're assum we're assuming that like these guys are sophisticated these guys are unsophisticated we need to protect people from Goldman Sachs and like sure we probably do but like do we need to protect people from like I don't know

some random crypto hedge fund probably not like you know there's there's plenty of smart people in crypto that can you know figure this out uh just as well as them right the issue is the Distortion of the price Discovery so where I 100% agree with guy that you absolutely cannot have 100% unlocks is if people are getting tokens for free like if I say to you hey I'm GNA give you you know uh $100,000 worth of free tokens right um you know in this this speculative Enterprise and they're completely unlocked and you paid nothing for them like you probably want to hedge that a little bit right like and you know we don't want people who are building something to be hedging we want them to be all in that's what the market

wants that's that's you know how we align incentives right yeah and I think that this this is one of those things where like this is evolving a little bit around a lot oftentimes this issue gets painted as like a Founder versus employee type thing um and over the years actually it's changed a little bit for even Founders like like when Jason and I sat down actually like we made our we had this whole like operating agreement where we made a bunch of agreements with each other a lot of people don't realize that you're actually more locked in like we chose to give each other lockups right we could have not done that but it's human nature uh and the two of us knew we were starting this thing out like hey uh I know I'm I say I'm committed you say you're committed but like let's make the

incentives aligned to that right so and a lot of people don't understand as well that as you take on investor money oftentimes that comes along with like sometimes your shares start to vest again uh it depends doesn't happen all the time but you know this issue really applies to everyone and the reason I'm very Pro festing is because yeah there's just human nature it's got to align um the reason though that I think the tokens are actually improvement with some drawbacks are it at the very least like if you're an employee at a company where there's Equity there's got to be a lot of trust in the founders right because they kind of call the shots at the end of the day it's not transparent not even by Design just by freaking you know it's not liquid and there are these weird laws about it and like tax

implications and stuff and it's very confusing but having a token just trade um you know it at least gives you a line of sight to ah okay this is a liquid thing that even if I got a four-year lock I know that this will be worth something and I can kind of look at that the drawback to that is that one I'm sure people pay a lot more attention at protocols to the price of the token which is really unhealthy and you also can't like fundamentally price discovery of early stage companies I think is impossible it's just like it's not you can't solve that with tech it's like you just can't value like a six-month-old company for right so it's just like it's pros and cons it's kind of like work from home right and like work remote it's like you lose you definitely lose stuff but you gain other stuff and

it's just a trade-off that you have to that you have to evolve um just in in the last five minutes actually uh not even necessarily around tokens but I just want to get your guys take on this whole like apps verse infrastructure uh meta and narrative change and I actually want to use guy the example that you used about BNB because I think it's pretty interesting because this exact model for value acral for tokens has been tried many many times over which is hey I'm going to create yield for my base underlying token in the form of other like basically taxes that get paid in in other tokens shitcoins right and like polka dot tried this uh with PA chain auctions right uh you had atom 2.0 which like kind of talked about this

idea as well uh you have ethereum and reaking of hey we're going to generate extra excess yield for E through reaking uh sky looks a lot like this right there's like usds and there's going to be stars and you're going to launch and they're gonna air drop to usds and that's how you're going to ACR value and yield and look sky is still an experim in the making and I'm rooting for him but a lot of these other experiments have failed right this has never worked and the reason is because people don't want to hold shitcoins it is interesting to me that BNB made this work and the difference between BNB and all these other attempts is that binance actually has a huge distribution and product behind it right so they actually have the leverage to be able to sustainably deliver this it's kind of interesting

that they're the only ones that have really successfully delivered on this model maybe I'm missing other examples like please have listeners inform me if I'm wrong about that but I I kind of think there's this shift in The Meta here a little bit and it used to be you know very Supply driven arguments we're going to build this thing and everyone's going to build on us and that's how we're going to crew value and now people are like wait actually we could build at the top get a whole bunch of users and then that's leverage uh to build things downwards and I would just love to get your guys take as you know some of the few like I would call like app builders in this space like when you hear all these arguments about like infra versus apps like what do you guys think about

this yeah well I think um maybe just addressing the binance ver others I think the reason that it hasn't worked elsewhere is because none of them are binance as you said and like they're just a very uniquely powerful sort of entity within the space that can actually sort of command that um I think if you dig one layer deeper layer layer ones actually look kind of similar it's just that the economic Arrangement is just not as explicit as we described so if you think about the whole of defi summer for example uh Kane stany uh you know all of these defi Founders were inflating their own token creating activity on eth and then becoming a supply sync for eth to go into those applications and so eth was just this Bas layer at the bottom that didn't necessarily need a huge inflation there was obviously some level of inflation

but all of that activity that was taking place on on on top of it was essentially sort of Quasi subsidized by all those applications doing things there and I think fundamentally that's actually what sort of drives value to these l1s and how they can become value in the end is that people talk about this idea of moneyness with with l1s uh which I'm I'm not sure I I sort of fully agree I think dollars on chain are money and we can look at all of the data and see that people use stable coins for money they don't use L1 tokens for money um but I think that there is this idea of can we collectively get behind a single Meme and bid this asset as the meme that we want to see grow if we are poition this ecosystem and we think uh it it has a

future and I think that's the one piece that that sort of e has lost the cycle which is uh it's not even this idea of moneyness um it's actually just that like ether's being composed into too many different pieces with too many different things that you can bid while salana is not used as money on salana it's just an asset that people wake up and they bid if if if they're bullish on the growth of salana so um I think a lot of these valuations are quite tenuous in the way that they come together but I think the answer is actually a little bit more simple which is we all are just looking for a collective meme to to agree on and bid together and the more that you sort of split this between different assets uh the harder it is to sort of collectively agree on things h

yeah I I think that's very much true for eth you know uh it's one of one of my favorite things about crypto that keeps it interesting is just unintended consequences right like you go and pull this lever and you think you know what's GNA happen and then like you know two years later your head blows up right and so um you know I think that uh kind of um maintaining a sense of uh like humility um is is really critical um and and openness right and you know this is going to be a big test I think for ethereum to figure out how open are we still you know have we alifi are we you know are we locked into this particular

thing that we've been you working towards or is there some unintended consequence you know that's in like and again you can sit there and say well this is dumb people are dumb and they shouldn't think like this right you know like come on guy like you know stop uh you know telling people to worry about the fact that there's 18 different L2 tokens that they could bid instead of e right like um you know they should know or they should figure it out or like what you know you can say all kinds of things right but the reality is the reality and and you know it's it's happening um the question then is like do we have the will to do anything about it you know can we coordinate to actually solve this problem somehow or

is it an intractable problem um you know and and I think people are starting to try and figure it out and be like okay well should we just charge more so that e works you know L1 works better or you know like where the value capture going to to fall Etc and you know these are very hard questions to answer and they will have their own unintended consequences and side effects that will come out of whatever decisions are made um but I do think that like the big test here for eth is can the the community still coordinate to land things and this was getting hard back in like 1559 days right yeah uh you know it was hard to get people to do things back then I

think it's even harder now because the status quo of do nothing is very you know like do nothing and hope right is is kind of the default for most people most people don't like to go out and do stuff um so you know I think the base the Baseline is do nothing and hope can we coordinate people to try and something I don't know I I hope so um I think it's one of the reasons why it's so critical that balic has kind of gotten his hands dirty again and and come out of uh you know uh semi retirement to really start agitating for like we should be thinking about these things there are problems here we needed to do this um you know it requires uh someone to coordinate this for sure so um I'm bullish I'm bullish on balic uh

helping to coordinate people to do stuff in ethereum and realize that we can't just coast along as we have um and that you know there are some things that that need to be solved yeah pH uh this was great unfortunately this is uh all the time we have I really appreciate the two of you coming on to uh chat about this um if folks want to I'm sure many of you uh many listeners will know you guys from Twitter or blog posts or wherever but if folks want to find out more about um I I didn't give you guys the chance to Shell Athena and infinex but uh infinex Athena like what's the best way to for folks to figure out what you guys are are up to yeah I think for us just on the Twitter on athore Labs with all the links there

and links to my my Twitter as well there awesome H yeah you can follow me at uh influencer F club uh oh yeah by the time this comes out Kane will have fought David Hoffman uh permission list so we'll know we'll know we'll know the result by then so yeah awesome that's gonna be a blast uh all right guys really appreciate the two of you coming on uh we'll have to do it again sometime soon amazing thank you this is super fun cheers see you