Finding Bullish Themes in the Crypto Wreckage | Analyst Round Table

Transcript

I think I agree on on the defi Moe particularly but what I see for PayPal is them not explicitly going after the defi mode it's going after these the sort of traditional Business Payment transfer rail mode that Circle does not have today um that's sort of an open market that needs to be fought over in the future because it's it's not here yet and whoever can capitalize on that is pro it's potentially and most likely a greater opportunity than the existing sort of like def5 usdc stable coin market today nothing said on zerox reseearch is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and any

views expressed by anyone on the show are solely our opinions not Financial advice Pacho Ryan and our guests May hold positions in the company's funds or projects discussed what's up guys welcome back to another episode of ZX research today I'm joined by Danny nikil and mark from blockworks research to talk about the blood bath that is happening in crypto um guys thanks for hopping on thanks for having me to big thing today um all of crypto is down down double digits in one day I feel like I haven't had a day like this in quite some time um I'm not going to macro lar we have other podcasts that actually do macro but as far as I understand something seems to have broken um

somewhere I think Japan um but what this has led to is kind of the amplification of some movements that are happening on chain I think the big one is that jump is clipping out of a lot of crypto like over the past five days um and as far as I can tell they're also kind of I'm not sure if they're closing shop but I I don't think that would make a lot of sense but they did stop a lot of like Market making activity on Solana um and that led to like a pretty big decrease in stable coin volumes stable coin volumes on so I'm going to share um this because it honestly looks pretty

ridiculous so for our listeners it's just the stable coin volume chart and the decrease is honestly really really massive it goes from like usdc volume being 75 billion to usdc volume being sub1 billion doll per day and so I'm not sure as far I've been told that it's partly because obviously people are just like stopping Market making but it's also partly because these were counted not wrongly but Phoenix um on Solana requires uh stable coin transactions and trans transferring uh for Market making so I think those volumes are a bit boosted

either way but um curious to hear what you guys think of what's been happening first thing I'm curious about is uh what are what are usct volumes looking like on chain like for example on Tron I'm just curious on how that was impacted since usdc is used a lot uh from more institutional audience or for crypto Market making activities but I know that usdt on especially on Tron is being more heavily used by uh you know individual folks so interested to see if that that activity was hit at all by this blood bath I'm not sure but no on Tron it looks the same um honestly like it's in fact it's growing but on usd's never been popular on Solana if you look at

the chart it's like it's almost NE negligible I don't think it's a stable coin issue I think they just I don't know the you can get really conspiratorial like get really into the conspiracies on that side if you want to I don't know if that's something that we should do yeah right shouldn't go up against tether on this podcast no not with tether but more so like what's been happening with usdc on salana sure yeah especially with the amount of volume that they have yeah I I've heard a lot on both sides of this particularly with the volumes of stable coins on salana I think it I mean from discussions it sounds like part of this was maybe like some double counting

occurring like you mentioned with Phoenix it maybe some other apps as well um that maybe was corrected or accounted for U more appropriately the other portion I've heard is that perhaps there was just massive wash stable coin volume happening but um I guess I would question where the money is in in doing that like just paying out those fees because I I can only imagine doing billions and billions like tens of billions in in transfers um over months like that's not cheap so I I fail to see the reason for doing so um unless they think you know that actor had massive Soul bags and they thought that that was directly you know improving their their valuation there

which I don't really think it was yeah I don't know like what you brought up is going to lead to conspiracy thought so I'm just going to ignore that um but what is kind of interesting is that you couldn't kind of you couldn't find jumps Wallets on Solana for quite sometime like I mean obviously you can tell their Wallets on ethereum relatively easily but that like chain and trying to read it is nearly impossible still to this day they don't have like a proper block Explorer and I'm not sure how going to fix that issue yeah I think um you know the markets are down um people are maybe feeling some pain at the moment um but I think there's still reason to be

optimistic for the future um coinbase just had their earnings recently um and then Brian Armstrong was incredibly optimistic about what he sees for this base going forward um one idea in particular and I think we've seen others kind of try to EK into this direction a little bit um with with the kind of increase in regulatory Clarity is um you know a mention of like a coinbase 500 um similar to the likes of like an S&P 500 index for crypto essentially for for crypto tokens so um you know I think it's an interesting thought I mean I think when you if you consider many investors within the space and a lot of the advice within the space it's like you know allocate to bitcoin allocate to eth and then you know maybe consider a small portion in other tokens that are out there um so similarly if you want to

see massive retail or institutional flows like that's probably the type of activity that they're looking to do is proportional allocation based on market cap waiting so I mean a coinbase 500 makes sense it's really just a question of the regulatory conditions is that going to be possible um you know how does that get viewed in terms of like being security or not but I think ultimately they're heads in space um if you see this Market you know in the in the sector growing at massive um a massive magnitude into the future and and that's probably what institutions would be looking for honestly I would I would love that as well I mean I remember when I was I think it was summer 2020 def summer and I wanted a a way to get exposure to all of it I was um I used

index coups T5 pulse which in retrospect wasn't a good way to get exposure because I mean you realize that crypto isn't looking for diversification the whole industry but you know on on your point institutions are um there's I mean to get a coinbase 500 to get 500 companies related to to crypto would be a feat but I know there's a there's an Invesco coin shares industy so coin has the industy and I think Invesco has an ETF product it's not it's not like S&P 500 because it's more Global and I think it has like 40 something companies in it um but then again you know no offense to the industry makers they're working with

limited options but it has you know it has things like meta which I don't know how much that has to do with crypto anymore obviously it has like the Bitcoin miners PayPal some of stuff but like it's not really like a true crypto index in my opinion I'd rather see something with maybe less stocks and more like higher beta exposure to crypto and I mean I would I mean and even if you could conbine it with now the ethereum and Bitcoin ETFs as well you know maybe not market cap we but maybe like that portion is in itself more cap rated and the stocks portion is in itself like two separate market cap waiting and we can do that now in the us because we have you know the regular I think it was last year when they're

allowing for active ETFs now and then we see Arc as like private Equity um ETF so you could even get maybe things like cracking or Circle and stuff inside of it so yeah you know I I think the space desperately needs that yeah what do you think they could put like obviously they can't put 500 um that would be insane but well I maybe maybe like 30 right maximum 40 how many Bitcoin publicly traded Bitcoin miners are there maybe like what between five and 10 I'm asking yeah probably on the order of 10 or so yeah so I mean that's maybe that's I don't know if

that's if you want all of the Bitcoin miners if that's too overexposure I do this is this is what I think about Bitcoin minners I think they are a way to play yeah bitcoin price obviously because it's correlated but also more so maybe some Bitcoin me because Bitcoin doesn't really have a way to like track get that on protocol and so a lot of it happens offchain and gets captured by those MV miners I think that's a nice way to play it I know PayPal is another good one if you want to if if if and if we're still thinking about it maybe the chips tsmc because I mean they're they're supplying it it starts to get really less pure play as you start to add more and more to the list what about instead of companies like not equities

but we're building a token one how many do you think we can go to like realistically without people having to rebalance it every three months let's say I don't know how often these are rebalanced by the way I just it's kind of partially why I'm asking I think they're rebalanced and typically every quarter um in Europe there's there's an ETP what let's just call it an ETF right they function to the same way at the end of the day but um they have have the top 10 proof of stake blockchains on it and and it it excludes Bitcoin there's one with Bitcoin as well but it excludes Bitcoin and it's zero management fee

because the issuers instead get their fees from the staking revenue and you know they might they might pass a portion or none of it on to the to the the the buyer of these ETFs you know depending on whatever whatever you know the marketing or the you know operations think is right but um I think I just based on that I think I think you can get like at least five I mean I think if you're adding I don't want to call names but if you're adding some of those just market cap rated I think that might not be the best exposure but I think I think look to Europe for what the US can do with their ETFs in the future you can look at there's the bitwise 10 um index

fund as well that's been created and I mean just specifically like they've IGN excluded memes from that um so it's and basically the description on on what this product is is they kind of filter for questionable or things with you know questionable volatility or questionable you know maybe it's regulatory concerns or um you know call it your similar with maybe how stocks view things around like environmental and related concerns I think they're kind of taking a similar approach here from the um kind of Regulatory Compliance perspective perhaps but um they've got you know it's Bitcoin eth and then when you go down the list you've got things from Soul and x xrp and cardano all the way down to

polka dot and Unis swap so um they've actually skipped out on Litecoin to put in uni which is an interesting choice because it's I mean it looks like they're attempting to be market cap weighted based um but they've kind of selectively chosen some over others here in the top um of the market cap range but on the whole it's basically looks like you take the top coins take out stable coins take out meme coins and that's kind of the list that you get do do we do we think that taking out meme coins is maybe is it too subjective I mean Vanek has Van Market Vector has their own mem coin index now like is that too subjective should that be included because I mean you can argue S no mean to offend anybody but you can argue that Bitcoin is a meme coin right

like just like gold is a meme Rock like what's why if it's going to be market cap weight weighted index why exclude what is it Doge I guess Doge would be the top 10 one yeah if you're gonna exclude you should also like like if you have the power to exclude and you're not doing it based on pure market cap exclude other stuff as well like xrp xrp cardano yeah to be fair cardano did beat Stark net in fees over the past like three weeks I that really surprised me the like last time I checked Stark net was earning $200 in fees per day while cardano earned four grand it's what I'll say is it's interesting because there's

not to me there is not a clear Direction here because they've excluded Doge they've also excluded ton um ton coin they've also excluded Tron so I think you know you could probably make the case for as well as BNB so you could I I could see as like a US product you could probably make some case related to BNB and and Tron um the ton one is is more interesting is and then obviously the you know Dogecoin and and shib as well actually is is larger than Bitcoin cash chain link polka dot uni are all in the index so yeah um they've definitely you know kind of selectively gone after a few here that to not include the same case you can make for Tron and BNB you can make for

tond though as well just for a different country um but I agree with you it's just like a weird approach I think I wonder how much of this is ruled by one guy do you know what I he's just like yeah I think like xrp bch these are all doing relatively well like back in the day or whatever they've always liked it so they're like we're just going to include these I guess maybe another Factor here is um looks like coin base is the custodian so we may also be looking at what do they have listed or available Mark one thing you brought up was potentially doing private Equity ETFs um with C with circle Etc and and this is something that I know Danny is quite passionate about um and one of the things that he keeps reminding people is

positive that we should look forward to is that these stable coin companies are doing really really well Danny you can take over but I just want to say like before we get started one thing that really upsets me every time people bring this up is that there's no way to get exposure to these companies and I guess the ETF kind of comes that but it's the greatest business in the world like you keep every sing like all of the yield and you just give out like whatever you know it's fantas yeah I agree um I think if I could be invested into some of these businesses I would um I guess arguably you have an option now um with something like well there there are options right decentralized options but they're not the ones that are outperforming um

significantly to the upside so you know there's that point but um yeah I guess just to talk to the numbers real quick Circle was just recently reported to be valued around 5 ion ahead of an IPO um you know they attempted to IPO I think a few years ago as well and that did not succeed so this seems like maybe they're going they second chance here um but despite that valuation um tether reported their H1 profits for the year uh being 5.2 billion so um we're seeing the massive Behemoth that is tether um the ability to just earn yields on um the the Holdings that they have related to the backing for their stable coin being incredibly successful as a business um um like you said

unfortunately we cannot invest in tether um so that's that's sad for all of us here that want to ride along with them but I think the positive thing that this is showcasing is that um this is a serious like stable coins are a serious and valuable like part of this industry and I think you'd be silly to suggest that larger institutions and companies and Banks and others would not be interested to come in and take a piece of that pie for themselves we're seeing it with PayPal um I'm sure we will see it with other to attempt to do the same and and gain traction and build up a stable coin because I mean right now with rates so high and them not having to really these these companies are not forced to offer any of that return back to Holders like you see with money

market accounts and others um and even like savings accounts at the moment so they get to keep all of that cash basically for the most part um and you know it would just be like I said I think it would be silly to suggest that others will not be enticed to come in and and go after it once I think the regulation kind of piece of the picture clears up up a little bit more um obviously we have Circle here but the just the the level of value relative to like the amount of employees that work at tether is pretty insane so um I see this as just being an opportunity for the space to grow as a whole um when you know more accepted and and larger players just from the trafi space um kind of come in and push this even further along the road yeah I want to

add two things to that like a they're they're very rich and they make a lot of money they don't have to give any of it back but B they also buy Bitcoin quite often like Paulo was announcing that he was buying Bitcoin with all uh profits well not all profits but most of their profits which is I mean that just makes it levered um BTC one more thing I was going to say it's the5 billion do IPO is half of cardano's current market cap and usdc is like it's not everything like usct is very dominant obviously especially like in forms of payment but all of defi is usdc and it was like very predominantly during the bear it was all

usdc now it's a bit less I feel like people are using it a bit less now I mean obviously they're more exposed to actual risk assets but there's such good money that payal is paying 20% or 22% on margin fi and Kamina um just for people to use them so it's kind of crazy that they're actually coming for it like the stable coin yeah I mean we've talked about how these companies aren't forced to pay out any of their you know treasury yields or anything else to Holders but and they and are they forced not to If by regulatory like if they pay it out if they give you you know let's just say 1% of the four or five they're collecting

does does it doesn't that make it a security uh and then there's like that kind of entr the already existing leaders through Network effects and then you you're forced to do things like give people 20% on these D5 protocols and order to incentivize growth yeah it's a good point um it it probably goes both ways there right like if if this is the direction for stable coins is becoming like regulated Securities potentially then um that's where that competition would come into play right of you know right now they don't really have to compete with anyone because other players aren't really able to get into the space in the way that they would like to seems like so because of you know maybe the regulatory uncertainty

um if that clears up whether it be in a positive like simplified Direction in that you know they're not they're not Securities or that they do become Securities either way it lays down the framework for you know this is how you go about doing it and then others can do it and compete um and we can see you know probably their margins compress as you know others come in to take a piece of that buy though um it's probably worth mentioning that you know the success and dominance of tether has mostly been probably less in the US and more um in the Eastern world so um I don't know if any us companies would be competing directly with some of tether's volumes but um I think your point is fair and to that point as well like what do we what do we think about the growth

strategy for different stable coins for example like you mentioned Circle you know has this sort of strangle hold on defi well I guess losing strangle hold and then you've got tether more on the sort of retail payments side in countries outside of the West PayPal is trying to go after def5 as well but with highly incentivized sort of markets like on Camino and I was talking about this before I think uh I think on the previous CX research pod uh you know about PayPal where most of the merchants and vendors that they support are predominantly in Europe the US and Canada and so they are basically going to be fighting directly with you know basically circles market share more or less and so generally curious on like how will different stable coins enter

the race and kind of make an edge for themselves because for I see that the only way that it would make sense for them to make a significant Dent is if they start to make venmo and PayPal settle certain payments using stable coins uh otherwise they're basically going against you know Circle and I'm not sure how well they'll NE they'll necessarily perform again it's early days and their total stable coins issued are climbing again a lot of that is because of their uh program with Cino and margin fi but that's what I'm interested to hear is that you know what will actually allow for different stable coin protocols or different stable coins that are issued by companies to gain an edge from the Legacy ones yeah I think to jump on that real quick I think to

the point around them competing with circle I do agree with you at the moment like in the short term um PayPal does have to compete with circle right if the the people that use their applications today are not using stable coins for those for to use PayPal or venmo so obviously you know they need to seed liquidity for people to be able to do that um and the only way they're going to get that is from people who are already on chain and using things like usdc so they do need to compete with them right now to kind of seed um liquidity and the ability to actually Swap and and hold and use PayPal USD but I think going forward like the future case does not necessarily require them to compete directly with circle right if they can onboard every one of their their users and consumers to use PUSD

then um they've you know Su successfully just grown you know market cap and tvl out of what was previously not a market for this space um so I think for companies that have like kind of a mode around their business today like these payment processors who could just onboard their consumers that that don't currently use stable coins like that's just a win for them unless Circle or these other guys that are kind of currently in the defi space can can pull them away somehow which you know they don't have really an inherent Edge there because it's their currencies are just available within you know defi kind of natively Within These ecosystems it's it's a little bit less than like logging into PayPal and I can either use py USD or just real dollarss I wonder what PayPal will do for that like what's going to be the use case that kind of

gets unlocked there are they going to start making vendors support py USD is it going to be primarily in specific regions that they unlock this in uh we'll be interesting to see what they can do because if they can that's definitely going to be a huge unlock but that's the only thing I'm thinking about because the main retail use case that we've seen for stable coin so far have been in you know nation states outside of the West more or less and specifically with tether and that's not what PayPal's current user base is or the client bases either so it'll be interesting to see what they do maybe it's I know Danny mentioned this before as well maybe it's just taking off a couple of bips off of like the fees that they have to basically spend for you know intermediary payment processors maybe it's that and offering a better

user experience to the end user but if that's the case I wonder how worth it is is that is that worth it to the end user or is it worth it more to maybe PayPal to kind of pocket that extra and just keep charging the same amount of fees not too sure yeah I'm going to Echo that I think PayPal kind of has a similar a similar issue what G scale has now they have an existing product that's making a lot of money and then they they're trying to create something new that also that they see others have that's also generating massive revenues but they also don't want to cannibalize their existing business because I mean PayPal from what I've he charges a lot of fees a lot of extortionate fees especially for like cross border transmitting so I I think I think that's going to be the

issue since you brought it up I wanted to mention on the crossb fee portion of it I I do think nikil you asked like what's that potential you know growth driver for them I mean if they charge fees on traditional rails today that are you know exorbitant if if they can you know kind of change over their International rails for like International merchants and um you know payments between customers to stable coin rails where the fees to actually operate those and and the time to complete those is is much better than you know traditional um Legacy systems there um it might be a case where they can still earn massive ly on the fees um but make the you know the product experience overall so much better for

merchants that you know it might grow their business as a result if people see that you know my option is between paying you know exorbitant fees to this company and I have to wait you know three five seven days or whatever to settle these you know crossb transactions versus instantly and very low fees um I mean that's a reason to switch I will say one thing um I don't think that PayPal or frankly anybody could come for Ted um I like I think the spot out there is usdc spot and I think if Circle allows that that would be just like the fumble of the century probably because it's just it makes no sense and I like I would bet that we saw a few moves that

Circle made over the bear um if you were like on CT constantly you would have seen some legal moves some regulatory moves that they went for just to like ensure that C usdc was spent um and was used across Defi and just in crypto in general so I don't think that they would even let that happen with PayPal like PayPal's USC I don't think they would what I'm basically trying to say is I don't think any n stable coin has that like PayPal could do whatever they want to I think cires is gonna end up winning whatever the d West is and I don't think tether's even in competition with anybody I was like

to beat tether you would have to understand what tether does and I don't think anybody understands what tether does to the point that you can't really beat them yeah I I think I agree on on the defi mode particularly but what I see for PayPal is them not explicitly going after the defi mode it's going after these the sort of traditional Business Payment transfer rail mode that Circle does not have today um that's sort of an open market that needs to be fought over in the future because it's it's not here yet um and whoever can capitalize on that is pro it's potentially and most likely a greater opportunity than the existing sort of like defi

usdc stable coin market today all of it seems like tether's Us's market cap is at alltime highs circle is not at all-time high still growing Pi USD is at alltime highs and I think tether is already the 18th largest treasury holder um from what I've read and I think as if all of these stable coins I mean what I the total total market cap is still probably sub2 200 billion right and if all of these if if if this starts to grow adoption across multiple competitors with this kind of narrow banking model is going to start to put some kind of a strain on like Financial system the existing Banks something kind of maybe similar a potential risks that

we saw similar last year whenever that US Mini banking crisis was I think I think that's something something we're going to have to start to rethink as well this and especially like the the lack of unity of money like everybody knows now they holding usdc instead of usdt instead instead of just one US dollar and and each one might have a different risk and then you might have to have like an ETF version a basket of all of these dollars and whatever else we're going to complicate it with further but yeah I think I think I think as stable coins continue to grow and I and I do think they will both in Defi and outside I think that's something elide um Regulators are going to need to think about because the because tether isn't has PayPal's um I guess adoption

outside of crypto been growing because as far as I understand it's probably been going down no I haven't seen anybody use PayPal in years so it might just be anecdotal but I have no idea uh if their if their adoptions been going down I know that their funnel from their existing user base to crypto has been relatively weak uh where you can use the PayPal wallet but they're not trying to actively funnel their existing users I'd be curious to see that too um if their actual Web Two user base is going down because what I would think of is that like in terms of payments it would be mostly stripe now um or other like newer payments rails um and for I guess remittance SL like sending money across

borders I imagine it's revolute or like local Alternatives um I know there's like big country by country remittance apps maybe remitly but I'm not sure like if PayPal's fees are that bad that exorbitant that we know about it and are talking about it then I imagine that it's like because I feel like PayPal's a 20 like it's probably lost quite a bit of share over the past few years is what I would imagine but that's also kind of why I I mean a lot of people view it as oh like industry leaders coming into crypto I'm also view it as oh these guys they're like they're kind of losing market share so they're trying to open up some new form of business um I mean if it works out for them good for them I

just don't see how Paulo or Jeremy would ever allow this like for me this would be just life for that you have the greatest business in the world I'm not losing like a single beep Beat of that absolutely no way like I would whatever I need to do I would just throw as much money at it as possible yeah maybe to add some color here um maybe PayPal is a little bit of a overlooked Sleeping Giant in that sense then um I mean they're just running through some metrics and looking at previous earnings like they're up only on quarterly revenues for the past decade and a half um annual revenues have been up only they basically doubled in nearly all metrics

it looks like since 2019 so um I think they're continuing to see growth um maybe they're being overlooked by these other businesses who are you know like stripe like you mentioned um kind of upand comers that have done a great job but um whatever their existing you know user base is it seems like it's very strong healthy and and growing going forward wow that's crazy they've actually beaten everything over the past year except for like one month their daily active users are up as well yeah it's this actually kind of an incredible resilience and growth from them to be quite honest this also kind of I don't want to like say I'm still right but I

will say one thing it shows that users that are relying on a service for their money are sticky and I don't see why so we can just say that with crypto and then Bach is not wrong in both way so we can no I I think you're right but I think what the benefit that they'll have there is I mean we're seeing them innovate by trying to go down this py USD route so for them like if it's a success they can be incredibly successful because as we just mentioned like the user basee is growing the revenues are growing like they're doing all the right things in the Trad kind of business side of the world so I mean if they figure it out in crypto as well then I mean we you know we're we see like we're just saying we see how well

tether is doing um yeah we see how the potential for what someone like a PayPal could do is is quite enormous as well yeah actually that's shocked me so much I I would have put money on the fact that they would have been down and have not been doing anything over the past few years what's up guys for this week's million snippet I'm joined by Alex who's the co-founder and CEO of million thanks for joining us Alex great to be here Bach uh just to start us off what is neillian and what was the inspiration behind it sure so at Nilan what we're building is what we call the blind computer and essentially what the blind computer is is a network of nodes that allows you to take information or data that you want to run computation on

and you can send it to a decentralized network of noes that run computation on that data but the important piece is that they do it blindly and what I mean by that is that the the nodes cannot see the inputs that you put in where the result that comes out all they do is just a computation and so they're doing it blindly and we accomplish that by using cryptographic Primitives like multi-party computation FHA garbled circuits to basically mask Data before it ends up going onto the network but that masking and that security on the data still allows for computation to be done by the nodes so it's a whole new way of doing computation on SEC on private data on sensitive data in a decentralized way and why is it important for these

notes to be blind what new use cases does this enable so we see a wide range of use cases for blind computation both in web 2 and in web 3 in web 3 we come into the ecosystem with expectations about what our trust assumptions will be for any network that we interact with when you look at Bitcoin or ethereum we expect a certain level of decentralization that minimizes the amount of trust that we have to put into any one entity to get something done that's why you have multiple nodes on chain so that you don't have to trust any one of them too much with blind computer we're going after the same thing we want to have a network where there's enough decentralization so that you don't have to trust any one node

with highly sensitive data a perfect example of this would be say utilizing a private key you want to store your private key in a way where it's very secure and you want it to be able to sign transactions but if you trust all of that to one party then there's a risk that that private key could be exposed when you take that private key and you decentralize it across several nodes now you have minimized trust with all of those nodes on the network but in a a system like the blind computer you can still use those pieces of your private key to sign transactions so not only is your data highly secure but it's actually still useful as well that makes sense and what are some key steps that you guys are taking to achieve this Vision sure so right now we've been really focused on building

the base infrastructure for the network um this is down to basically launching our test net putting out our first SDK allowing the first proof of Concepts from the partners in our ecosystem to go onto the test net and start basically playing around with the use cases that they've built but it's also important for us to make sure that the blind computer is something that you can access from any ecosystem you know at the end of the day we're not a blockchain so we don't need somebody to come on to specifically our chain to use our Tech what we want to do is we want to have connection points to other ecosystems so that it's really easy for developers in Solano or Aptos or ethereum or any of the ecosystems that exist out there to come and use the blind computer for the private compute

that they need and then return to their ecosystem and bring that information back on chain so right now we're really focused on getting those proof of Concepts out there and then also making these connection points so that developers across web 3 can use us that makes a lot of sense and what has the experience of working on those proof of Concepts and building over the past year been like do you have any yeah I'd say what's been really exciting is actually how many use cases that are unique that we didn't even think of that people have brought up through our hackathons or through you know meeting people at conferences or through fees that have come and said hey this really solves a an important use case for me that I want to be building in web 3 I didn't expect that there

would be that much of a ground swell now for us as a project we've always looked at ecosystem and working with projects and doing the design Partnerships to build technology that people wanted to use as a core facet of how we built the network but as we've been going through that I've been completely surprised by just how many awesome ideas have come out of nowhere and are now building building on our Network and are part of our ecosystem today and why do you you think neillian has been able to Foster that type of community and um ideation and how do you plan on fostering that going forward so I think a big reason for that has been one we have an incredible team and if you listen to anybody on our team talk you can just

understand like how smart the people are that are focusing on building this technology a big focus of of build of building the million network has been how can we close the gap between building with privacy enhancing technology and running computation without any security and as we've started closing that Gap with the technology that we've been releasing that's where developers start to come out they start to realize okay wait I can actually accomplish what I want and there's not this massive trade-off that used to exist between doing it without privacy or doing it with that makes sense and how do you see million developing over the next year so what are some key Milestones that you guys want to achieve we've been moving very quickly towards getting to a mainnet and production ready version of our Network

right now we're really focused on getting proof of Concepts deployed from our ecosystem because we know that at the end of the day the only way to really test the uh strength of our network is to have applications on there that are running that are basically testing their ability to accomplish the use cases that they want so our big Focus has been there but over the course of the next year you know I expect as we see these examples come out even more projects are going to show up with ideas of what they want to be building on million and we'll also be adding more and more functionality to our SDK that allows developers to do even more things than they already can you know along with that what I'm really excited about is that on the AI side we are making a lot of progress in creating Innovations

for private AI that will allow us to eventually be running small llms inside of nilon with private inference and private outputs um that kind of stuff is really exciting to me and I know there's a lot of people in the web through ecosystem that want to be building with that so we are focused on developing the technologies that allow for that to happen in a decentralized and private way that's super exciting and lastly for from both developers and users what can they do to meaningfully engage with neillian what should they look forward to what should they be doing right now yeah I mean for the developers that are out there check out our SDK check out our documentation download it connect to the test net play around with it look at the examples that we've put up there um

and and really get into the Discord and engage our devs and our other developers that are hanging out in there because you know it is it is new tech at the end of the day and going through and kind of playing around with the different facets will lead to some interesting ideas and we're also there to help you if you get unstuck um so you can find all that documentation at milan.com you can also find the link to our Discord there and if you're just interested in what we're building you know what Partnerships are coming up what releases are coming out on our test net when our main net is going to be you can follow us on Twitter at nilon Network or go to nan.com find the link for our Discord and you can always engage with the team there fantastic Alex thank you so much for

coming on thank you moving on let's talk about I don't know what do you guys want to talk about mem coins going away or um Avalanche being useless these are my two hot takes for the today so I'm happy with either one want to do I want to hear nille debate this let's talk aaac it's gonna be heated do it do it I don't I don't know how heated it will be but I'll just give my basic basic understanding of avalanche and then Nik you can say that I'm wrong and stupid um this all came about when ax brought the California DMV onchain crazy stuff and I I was thinking about it a bit and truthfully I looked

at the Avalanche chart and I was surprised at where it was at because soluna aack Luna's dead um Solana's up guillians um and Avalanche was at 25 at the time I think it's like 17 18 now but just thinking more about it their main they went hard with subnets um which kind of lend itself to real world assets and gaming which are both good like they're good narratives to left yourself on to um the issue is that crypto is very short term and games take a long time like games good games take five six years um and they're also like I don't want to say thankless I don't know the

actual word to use here but it's more so that like if a game hits it hits but like let's say 30 out of 35 games won't work out like they won't be good and this is something that we see in traditional gaming as well so on crypto gaming I would assume that actually like 34 out of 35 don't work out um but it does also only take one so that's that's a risk that they're willing to take um apart from that on the tech side I I don't have any thing to say I think that C chain hasn't adopted everything that they've brought on subnet but they're working on doing that um and then with the real world asset side they had that JPM PC a year back maybe a year and a half back and since then this is also I understand uh

institutions move slow um but I just think that it's like they've never they there there isn't much to do there like what's what's there to do on aun they had some misguided attempt that uh building culture with like some lavs backed meme coin fund it didn't do well I think that left a sour taste in people's mouths as well like that was we saw a lot of people try to do that to be fair so I don't know if that's really their fault um a lot of chains tried to do something I think they were just a bit more open about it um but yeah I'm happy like in no way am I on the tech I think the tech is fine I just think it's which is the saddest bit I think a lot of these blockchains the tech is fine it's just and the something

that I was talking to Ryan as well he would have agreed if he was on here um is that we're seeing less we will continue to see less differentiation between the tech and more differentiation between just adoption and like whatever like BD uh go to market strategies like who you are bringing into the chain maybe even a bit about culture and like the atmosphere of the chain um but yeah so that's my I'm bearish aack um at the lows pitch all right fair enough I mean I I'll take the other side of that and I do agree with your point and Ryan's that I think that we're increasingly seeing a lot of commonalities between all the different l1s right like even at a very granular level like Aptos uses block STM

block STM is finding its way into like into movement uh the hyp SDK has from Avalanche has got some inspiration from the gapos and sui ecosystems we see W in the ethereum ecosystem taking like notes from substrate on polka dot and even a lot of stuff from Aptos sui so we'll increasingly see I think the technical side of things have a lot of uh you know convergence on each other uh from infrastructure standpoint but that's why I increasingly think that Avalanche is interestingly positioned because uh for example with this DMV deal I was actually unaware of this before this call but uh they the DMV originally was going to launch the this sort of piloted product on tesos which was very

interesting I think this was announced maybe a year ago or so and I was diving a little bit into you know what are the reasons for the migration what's going on there and it looked like it was a couple of reasons but the one that sort of stood out was that the DMV essentially wanted their own Sovereign Network more or less uh their idea was that they want to have as much control over the stack they want to obfuscate this experience for users and they want to be able to like customize the fees keep it as low as possible because they don't want any other dap potentially to cause like fee spikes or something like that and it's likely again this information is not out there but my speculation is likely going to be that the DMV will probably subsidize the transaction fees as well it doesn't make

sense for them to put that directly onto the onto the user and because of that uh they probably don't want some random nft Mint or something like that to spike the gas fees by a little bit you know kind of pulls into the DMV's predictability on gas costs so uh that was something that was you know interesting but I think that avalanche's team has shown that they are strong on the BD side when it comes to institutional Enterprise and on gaming I do agree with Bach that I think where they have a lot to improve on is with the sort of building of culture on the ecosystem itself on the community side and the last thing is also that crypto like you said is very shortsighted I think there's not enough in the avalanch ecosystem that caters to

that audience which is currently all of crypto which is the entire audience more or less and that's a bit of an issue because RW Enterprise institutional gaming these are all very slow Burns it's going to take a long time for a lot of these things to you know kind of build up even like avalanche's JP Morgan deal with Onyx and they have a I think another institutional subnet or I should say L1 I think they rebranded um which is basically Spruce yeah which includes a bunch of different trafi companies want to basically make it a whitelisted defi ecosystem which is very interesting again that was announced a while ago it's been some time since it's uh it's not actually fully formally launched yet again to their credit those things take a lot of time a lot of moving Parts a lot of slow moving actors but still the

main thing that I agree there is that takes one thing to hit one thing to pump up those metrics and one good case study and so they have a lot of good names they've got a lot of good bones on the BD side and from the technical angle I think they have a lot of interesting positioning as almost like the the cosmos ecosystem without the mistakes and the baggage of being Cosmos and so if they can kind of pull things off I think they have an interesting positioning going into next cycle well one more thing I wanted to add is that you said Cosmos without the mistakes you know what I um I Think It's just tough also if you go for modular architecture that you ACR value and I'm not sure how Avalanche is approaching

that from subus from what I remember you had to stake a certain amount of avalanche a certain amount of avax aox um I don't know what the official pronunciation is now but I heard people say it all types of ways I have no idea how are they approaching it now do you know or is it is it yeah so so it's like it's similar so like uh the the general syns for uh however you want to call it ax a Vox I'll call it aox right now but uh is one you you stake a Vox right now it's 2,000 aox and then there was a proposal to reduce it to 50 and now there's ACP 77 which makes it almost like a pay as you go sort of system but regardless you're basically using a Vox to pay for uh the validators on a subnet

more or less the P chain is like this Hub and you direct that Capital to different subnets that's like lock number one for Value cool for Avalanche so if you are under the idea that there's going to be a ton of different app chains and they are going to be launching on Avalanche then that's bull bullish a Vox because a lot of a Vox getting locked up the second thing is oh yeah go ahead go ahead I was just gonna say if it's 2,000 aack that's $4,000 no it's more it's $40,000 40,000 that's true yeah yeah like so like the few things here so this also depends on how many validators you think will be the average per subnet right it's it's not going to be one validator

I'm seeing the floor at somewhere between five to 10 validators as a typical floor uh per per subnet so far and so again is that mandatory no but I'm just seeing that as like a general like Trend that that's what it is but to your point again Bach there is 2,000 Vo per validator but they're planning on producing it so like you know that is still something to kind of keep in mind where I think that they're prioritizing you know kind of growth of the number of subnets in the short term uh over maybe like long-term uh you know long-term fundamentals because they saw the 2,000 avox per valider as being kind of prohibitive to people wanting to launch a chain the second area where you lock the evox or not lock but is a sync is for Avalanche warp messaging which is

kind of like avalanche's version of IBC which is you know unting between different subnets whether it's cross chain transactions Oracle messages there's a variety of different use cases that they're trying to work on that you know you could be utilizing it for that also will leverage a box basically as a fee and so those are the two main areas and then the last is basically any subnet that is using Avalanche as the gas which I honestly don't anticipate many other subnets doing that besides the SE chain I don't necessarily see what you know sense that would make um but that's currently what the three main areas are for Value there uh my only skepticism is that right now they are going to be lowering the requirements to launch an actual subnet itself so it's no longer 2 avox so it's not like oh wow

all this like aox is going to start getting locked up but the benefit here I think that they want to kind of angle here for is that we only have like four or five subnets live maybe 20 30 like maximum uh with this amount of 2,000 of box per validator locked up we want to reduce that so that we can see an explosion of subnets we want hundreds or thousands which makes sense they want to compete with the L2 ecosystems and so they want to make the fees basically comparable there and then they say let's monetize later on like as we kind of reach scale maybe we can increase the requirements then or whatever that is but let's get to that point there which I I generally agree and I think it's a good approach do they have an idea of what they want to reduce it to from 2000 to

like what so it was from 2000 to then there was an ACP basically Avalanche Community proposal reduce to 50 of ox per validator and now there's basically a different class of valers which is called ACP 77 which is this sort of pay as you go system where essentially one it makes valers more lighter because right now the way it works in avalanche is that if you want to validate you are validating the primary Network which includes the pchain the xchain and the C chain and by doing that then you can also validate your own subnet it's kind of like this way to kind of lock value into this Hub but what they saw is that it's a little bit prohibitive for people because one it's a little bit intense on the capital side a little intense the resources side so now they're basically creating this Asser second class of

validators where if you don't care about the primary Network which is fine you can just validate your subnet alone and it's a pay as you go system kind of like with l2s where there is minimal upfront cost essentially but you are kind of paying this ongoing marginal cost and then it's up to then the validators later on in the future if they want to switch and say hey okay like we're done with this pay as you go system we become quite successful we don't want to pay this small fee we'd rather just pay a a bulk lump suum fee in the future in in the like upfront Pro process that's cool too but that's kind of the looks like the D dichotomy right now of the Avalanche validator set I'll just offer my opinion here on one particular piece of this that I think is maybe worth

considering is I can't comment too much on like the economics or the reasons to go with an avalanche subnet versus like you know anyone who's building like an OPC chain or an arbitrum chain like there's a lot of offerings these days for like the similar Point around launching your own chain to like Do Your Own Thing whether that's like a just an chain or just have your own ecosystem it's whatever the reason may be um so I think there's a lot of competition there and it's it's really hard to reason about like who's going to win that kind of area of the market share but what I will say is the DMV thing is particularly interesting from the perspective that like if Ava if avax offers this somewhat differentiated means to I I don't know what the specifics here would be but I mean we're

like you mentioned we're seeing it with with companies like JP Morgan and others um and governments now um with with businesses like the DMV um if there's something unique there that is relevant for governments that that is quite interesting because it's a little bit different than just like decentralized permissionless blockchains um that like eth and all these other ecosystems are competing for in general um you know if if people decide that they want to have like you know easily available like transparent information related to like government businesses that run their countries on blockchains um and if AAC is like the home for that um for whatever reason and and others don't step into that space um I mean that could be quite bullish I think even if

you disregard like gaming and other things um I mean governments are massive and um I think they're they're the really the main one that I I haven't seen much else like in other chains other ecosystems getting so directly into that space now obviously the DMV thing you know they were going to go with tezos and now they're going with AAC so really like how much weight does it hold but going into the future if that becomes like a point of focus is you know other go government entities and just making you know information related to um like local and and federal and state and National governments like transparent and easily accessible by putting them on blockchains um it's it's an interesting kind of growth opportunity um because right now

governments spend a ton of money on Services um and you know they're not they're not tech companies using like the most up-to-date best systems um they're they're kind of working with Legacy things and and not keeping up so frequently with with the change of play no definitely definitely agree with that like last point on this from my side is that this is a bit of a shout out to David from blockworks research who did a review on ACP 77 this was to your first point Danny where I I was actually surprised at seeing the numbers here but he basically did an analysis on one of avalanche's subnets that are live today called Dex aot and he compared it on if it would be a Cosmos app chain if it was no P stack rollup with using Celestia's

da no P stack rollup using ethereum as da or as this sort of like pay as you go subnet and it was interesting the cost breakdown kind of came down to essentially the pay as you go ACP 77 subnet being the most affordable option kind of averaging around almost like $50 a day in like onchain costs compared to I think the next cheapest was Celestia which was at its best $50 a day but it was kind of floating closer to the $100 a day Mark and then you kind of go to op stack rollups uh whether it was on on U you know ethereum or as a cosmo saap chain and that was like significantly more expensive so that was interesting and cool analysis on David's side from blockworks what about Nik I I don't want to take away too much time from the

Avalanche Shilling but what about ref where do we see that coming yeah of course uh so like ref is pretty interesting because in some ways we're we're seeing like to get all this activity uh on you know just excluding all the onchain activity on like it's on crypto Twitter everyone's talking about oh look like sana's onchain volume it's it's like up only it's eclipsing ethereum on like you know on day-to-day and which is really exciting and this has gotten a lot of ethereum folks up in arms on like okay what do we do like we need basically our l2s to pick up activity we need a catalyst we need the means the the pics and shovels to make this happen and W in some ways is positioned as that which I find very

interesting so like TLD rreth is basically that it is an ethereum node client uh basically the software that different ethereum nodes run many people know about G or nether mine WTH is basically just another version of that where reth differentiates a little bit is that they've created kind of like three main objectives for their actual product itself one's on the L1 side that's kind of the less you know sexy version of it which is just that okay we want to we want to bring client diversity to ethereum okay cool like that's great that's important that's their only goal on the L1 the L2 side is where things get interesting and position potential l2s for going up against salana and that's basically that how can we milk out as much performance as possible out of the evm and bring

that easily to different l2s and so basically what ref has developed is this sort of module this performance module for the paralyzed evm uh to be able to get be imported into any different L2 to start op stack rollups but eventually they want to open it up to any L2 so this for is possibly for folks like optimism mainnet base and other op stack rollups to go from the current transactions per second that they support today to hitting around 1,000 transactions per second is the is the Topline number that WTH is giving in the short term they want to hit 10,000 TPS as their sort of like end goal in the medium-term future but in the short-term future they're looking to hit 1,000 and so that's an interesting Catalyst

imagine seeing Bas being able to do 1,000 TPS and with with its current activity with you know on the memec coin side on the consumer side that could really position it as an interesting competitor to salana and salana if I'm not mistaken though it does quite a bit of TPS if you're taking out consensus messages it's pretty close to 10,000 TPS as well so suddenly in the short term you're evening the playing field again this is pre-fired answer numbers so you know things change quite a bit once that kind of comes into play but that's the interesting thing about WTH for l2s the interesting thing about WTH on the reaking side kind of comes to you know igir igir has you know become the front runner very clear front runner on the reaking side synonymous with it it has the most tvl but you see some folks like

uh symbiotics trying to come on board and you know compete with them and so WTH is very aligned with the symbiotic team via Paradigm and essentially provides this base for just iterating on abss and pumping them out basically and so in the event that symbiotic is able to increase the rate of development of abss there's potential that they can attract quite a bit of capital from Igan Lair essentially and vampire that over because right now there's a lot of capital just sitting in igen layer uh and there's not that many avss that are earning yields and so this capital is mostly idle in some ways and a symbiotic is able to just pump out a ton of abss and have them launch quicker generate yield a lot of the LRT providers might

start to redeploy so reth kind of makes this sort of interesting thing where he equips The Davids to kind of fight the gats basically and that's why I think it's very interesting and it helps that Paradigm is you know probably the expert at helping their portfolio companies uh which they clearly are doing by like you know optimism you know coinbase symbiotic they really know how to make sure that their portco are happy frch blast okay some of art gobblers I don't know I agreed with you most of that until we got to the very end I I don't know oh man oh man all right yeah fair enough fair enough that most of their okay not most some of their port Coast

they're good at supporting I mean look I I don't mean it in a bad way to parad them it's like if you're doing Venture investing you're taking risk that's primarily what you're doing it there's nothing that yeah like it's not bad yeah to be fair nobody could have seen friend coming or going so that's a tough one um I would one question nikil I have is there's there's some interplay here right like you're talking about a little bit the maybe shakeup that we could see in the reaking kind of gig um on the other hand this is you know this Tech should be meaningful for like new chains or new ecosystems or new apps that want to develop what do you think is more

impactful here is it really just the combination of both is so incredible or is this something that like new apps new developers like potentially new chains coming onto the scene should be more excited about or is it really more on like you know validators and and reaking is that really where the key kind of ideas at yeah good question so at least how I think of it is that I I I find it really attractive to existing l2s that already have a sign significant amount of activity and have like a price sensitive user base so this is in in particular for like arbitrum optimism and base these these l2s basically make up the top three of most onchain activity amongst ethereum l2s so far and so uh and also right after EIP 4844 where the da cost basically just sh

right down through the floor there was a spike in user activity so how I see this is basically that if there's another Catalyst to bring the transaction fees down significantly or basically cut the execution fees that will be really a big incentive for users to basically transact onchain for these different folks and I think that that's going to be a that's the most attractive Catalyst here uh if we can see a few ethereum l2s compete even a bit more with salana that's something that could really reignite the ethereum community basically to be like okay hey like we have the tools the picks and the shovels to go up against salana and I think iron sharpens iron this will naturally make the salana team also want to you know pick up what they're doing already with fire dancer they'll still push them way past what reth can achieve in the short

to medium term but I think this can be really interesting because right now you know still for a lot of different swaps on different l2s fees are still not like astronomically low they're low relative to before but they're not salana low and so if there's some sort of way to make that comparable to sana's user experience I think that could be very very interesting especially considering all these other different uh cool fee based catalysts in the uh elto ecosystem uh that's what I find more attractive so yeah reaking is cool don't get me wrong but I think that nobody has found a really strong use case for AVS is that are like hey this this really solves for something there's like talk about a lot of things like oh it decreases token emissions that's good less cell pressure or it brings more homogeneous security

to uh certain you know protocols that we want to internalize into like ethereum something sure but nothing's played out yet so I think it's still very cool but that's more like longer term but I think in the short term we could see some l2s competing with salana yeah I think the chain performance capability is I mean that's a really meaningful angle yeah 100% I want to give a special shout out to both nikil and Mark for joining um moving forward Danny will be my co-host uh Ryan will not come on the podcast ever again um I think that's it you're wrong Bach by Avalanche telling you I don't know about that one I don't know if I would bet myself on saying oh we're doing Cosmos but the right way I don't think you can do Cosmos the right way

and on that note thank you so much to our listeners for coming to listen to us have a good day [Music]