How Arbitrum Landed Robinhood

Transcript

It's the most ambitious vision I've seen of somebody using crypto rails in like crypto history and and that flexibility and I think they had confidence in our team as a partner because of like I think both the relationship we've built and also I think the ethos of how we build at arbitum at offchain labs um that we're going to be really good partners um in that flexibility in that journey. This episode is brought to you by scale the next evolution in layer 1 blockchains. Explore the gas-free ecosystem at scale.space/ecosystem and follow their journey on X atcale network. Thanks to Scale for making today's episode possible. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only

and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Block Works team may hold positions in the company's funds or projects discussed. All right, everyone. Welcome back to Empire. We have a very special one hot off the presses. We've got uh AJ and Stephen from Offchain Labs, contributors to Arbitum. Um very excited about this. AJ, I think it's probably like 11:30 or midnight for you. So, we'll give you some graces on the show. And Stephen, I think uh I don't know if if you're still out at ECC, but yeah, welcome to the show, guys. Thank you for having us.

It's great to be here. Yeah. Thanks. Yeah. Really excited for this. Yeah. AJ, you got a little energy? Are you uh dead after the week? I'm so ready for this. I'm I'm hyped. It's been an incredible week and I'm ready to to talk about it. Good, good, good, good. Um, okay. So, we are obviously talking about I mean, you guys just had, I think, one of the biggest like uh crypto meets tradi meets capital markets announcements probably in the history of crypto. um which is that you guys are working with Robin Hood uh to bring Robin Hood really to bring Robin Hood on chain I' onchain I'd say there was a tweet that uh from this guy who I don't know who it is his name is Kaido um his bio just says like Ian layer essentially previously unis swap and uh gitcoin and he says if there's

ever a book on arbitum I for sure want to read the chapter on Robin Hood not many know the challenges that AJ and the team faced to pull this off I'm familiar with the timeline but it's still a bit of a guessing game uh just two months ago. Actually, we'll we'll we'll pause on that for a second, but he just says AJ AJ did an amazing job bringing Robin Hood to Ethereum. This is a huge win for Arbitrum, huge win for Ethereum. Um congrats Arbitum. Congrats AJ. So AJ, I want to just tell us everything that you can tell us about this deal. Like how did this come together? Was this inbound or outbound? Was there a previous relationship? Like tell us the whole story of how this whole deal came together.

Um yeah, sure. So, um I I saw that tweet. It was um it was definitely an interesting tweet, but um we've had a really close working relationship for a very long time. Um Joe and I have done like multiple fireside chats. We did an ETH Denver announcement where Robin Hood added support for Arbitrum native deck support in their wallet. Um and we've had a vision together of how we can continue um to grow our working relationship. Um there's been a really close relationship really for about two years at this point. Um we heard about this vision that they had around tokenized stocks um a while ago. I think there was some evolution generally um in

their vision around you know the timeline for that ambition for what they want to do with the rest of maybe the Robin Hood suite of products, how much they want to be lean to going into onchain. Um, and as that evolved, I think it turned into conversations around should Robin Hood be building a chain. Um, we spoke a lot about sort of the trade-offs between launching on public chains versus building your own chain. I'm sure we'll get into that because I think like that was a critical part of this story and this journey and I think a critical part of why they they chose to work with us. Um, so yeah, I mean we got a really close relationship.

I think it's like one of those things where if you're like on the inside, you know, it feels like just like a, you know, a a close partnership, close relationship. And um you know maybe on the outside there's there's rumors and stuff but um yeah I think it came together largely probably around this idea of how arbitum um as a platform um has both like a very robust public chain and also a very mature and featurerich um environment to launch your own chain.

And as Robin Hood was thinking through their strategy of the evolution of what they want to do on chain, that was very appealing to them. Um, so I think like yeah, it's we've been working on this for like quite some time. Um, and finally really excited that it got announced. Yeah. When did this So it sounds like you have this two-year relationship. When did like this part of the deal come together of like, okay guys, we're actually we're actually doing this tokenized equity, you know, crypto native trading, Bitstamp integration, PERPS, the whole deal. So, like when did this part come together? Um, a few months ago. Yeah, it's been like a it's been like a few months. Yeah. So, yeah, we've been working on this for a while. Um, all out sprint. Pardon? I said all out sprint. Yeah, I mean um I

think there are even things like I didn't even know about the purpose component about this until like it went like I think three days before. So, like some of this stuff because it wasn't like um a core component of like that's still like offchain. on on the on the on the Robin Hood uh platform, right? So, um yeah, I mean we we aligned really around like the vision of how we can support their broad roadmap over a long time horizon and and and the rest sort of kind of fell into place after that. I think that they really appreciated. One thing they really appreciated was Stylus. Um I think they really liked the EVM, but there's components of the fact that Stylus lets you code in Rust that um they viewed to be like really beneficial and really helpful for them.

So that was like a a feature that like they really um appreciated about the arbitrage hack. So part of this tweet said uh you know quote just two months ago Robin Hood planned to build on Salana as their main platform with no immediate plans for Ethereum and um just people I talked to. I I actually don't think that's true from from from people I talked to. Do you guys get the sense that there was like a broader RFP or that they were, you know, were they talking to like Optimism and Arbitum and Polygon and ZKYNC and Salana and Bass? And I mean, obviously they would build on base because of Coinbase, so I guess that one's eliminated, but um do you get the sense there was a big RFP or like how did they make this decision?

Um I'm sure they spoke with many different teams like it's a very huge decision for the future of their business. Um, I don't like know if that tweet is accurate in the sense that like I don't think they had this like committed plan. I think they obviously were doing their due diligence and um yeah, they they ended up obviously choosing to work with us, but I I I think it would be um pretty silly if they didn't do diligence and talk to like many different like platforms just because of how the magnitude of the decision. Do you know if it came down to like you guys verse Salana or I mean this tweet says they were building on Salana 60 days ago but do you know if it came down to you guys versus someone else? Um not like not like firsthand. I mean I'm sure like they had like a

narrowing process but like I don't have any like formal information on that. Yeah. Let's get into maybe um like why do you think they from folks that I spoke with it seems like the ability for you so they had an interesting model which um I was a little confused at first but it kind of seems like this kind of like launch and migrate model where my understanding is they're launching so you've got these stock tokens that are launching on arbitum and then uh they're actually planning to migrate to their own proprietary Robin Hood L2 which is built on your guys' stack and uh like in in in very dumb terms Like for anyone who doesn't know the arbitum platform, you've got like arbitrum one and then you've got arbitum the orbit stack. So it seems like they're they're basically launching on

arbitum and then you know as they scale up and they get more users and like more products shipped they're actually pivoting off to the arbitum orbit stack. Is this uh like how did this come together? How did this plan happen? I think that's actually one of the core benefits of the arbitrum stack. It's uh you know what AJ was telling you before. The arbitrum stack is actually the only stack that has both a credibly neutral uh top five blockchain if you will and a cred and also a top blockchain stack where you can go ahead and build your own blockchain. If you look for uh an institution or really anyone that wants to maintain optionality like the absolute best place to build is arbitum because you know we can grow with you.

What Robin Hood actually did was they said, "Hey, we're launching immediately quickly today uh on Arbitum one deep liquid platform with deep liquidity and one that's available right away. You know, they didn't have to do all this pre-work to build the chain before it was announced, which would have been very difficult of course to get all the partners on on board without this leaking publicly. So, they could announce the live day one and arbitrum one and then migrate when they're ready to their own chain and do that using the exact same software stack. So, they don't have to change their contracts. If you imagine they used a different plat stack, you know, which has a different programming languages or just different features, it would be actually much much more difficult to migrate. And this is actually something, you know, we've seen with other projects as well, uh, where

they, you know, everyone thinks they're going to, everyone wants to get to a point where they're going to launch, you know, their own chain. Uh, for Robin Hood, it clearly makes sense and they're at that scale, but not for everyone. It is for everyone, you know, for many people, it actually makes sense to begin with their own chain, but everyone has that vision that they want to get there. And the question is like do you have to decide that on day one and sort of lock yourself into one of these two worlds. In most stacks you do. You know if you talk to our competitors uh there are those that have a public a public credibly neutral chain and there are those that have a blockchain stack but there's no one else that has both. And those that have a chain will tell you no

matter who you are you should build your own chain. And those that don't will say no matter who you are you really don't want to build your own chain. We actually have the ability to work with you and say maybe you should build your own chain today. maybe not. And even if you decide not to, uh, you can actually always revisit that decision tomorrow, which is a really unique feature of what we do. Yeah, I'll just add in some things that, you know, um, you know, Vlad shared publicly and and I know from my conversations with them, it was really important for them to get this product out ASAP and like obviously when they did at like HCC, right, they launched tokenized stocks in the EU.

They wanted to do a whole show here. They wanted to have a bang that goes live. um they want to this is like what they called phase one. They have a very ambitious roadmap for what they want to be doing on chain to serve their core business and designing the chain is not something they want to rush. And so like what Stephen said and which is a critical point is they can be building on arbitum and not rush that component of it without having to sort of add complexities that they would have to have if like it was it was a different sort of migration. Right? So they wanted to announce the chain because they want to think about how do we attract the business you know infrastructure architecture very hard to do that in stealth. Um so this ability is like I think a very valuable feature that they

had in this whole product road map because like getting this product out was critical like you saw like you know other tokenized stocks you know are coming to market and it's becoming a very competitive space. They want to put their foot down. I think they're the best position to win. Um, which is which is awesome and we want to be there for that journey, but like they don't want to rush the chain, right? So like phase two, phase three, everything beyond is, you know, could probably go to Robin Hood chain if it doesn't start there, but like they were they're able to do that while like not saying, "Oh my god, we're like we're delayed on our core product and and capturing market share." Did they from the from the outset, did they know they wanted to build on a public chain or was this a conversation? I think AJ you

mentioned like public chain versus private chain like tell me about those conversations of uh because if I'm then I mean you got to think about doing a private chain like that's just a natural thought I think especially for someone who's maybe coming into crypto from the outside not from the inside. So take me into those conversations. Yeah, I think that like the questions about public chain versus private chain were probably somewhat related to what they ended up doing which is they knew they wanted to launch like on June 30th which is when they did and like the question of can they get the public chain ready by then was like a critical like product question right and sort of what arbitum solve for them is you don't have to make that decision right like you know if they wanted to use a stack

but it wasn't ready and they used the public chain equivalent of that sort of stack back and it you know and it was like going to be poorly received as like a as like an ecosystem or an environment where like it's unlikely to be successful that wouldn't have been helpful for them right so what arbitum really allowed them to do is like recognize all the benefits and we can talk about them now um because I think it's like pretty important like from a thought process perspective recognize the benefits of why you would want to launch your own chain if you're Robin Hood but also not have to like sort of wait on it so they that that was probably like in the to the extent that they were wavering on this question I think it's related to just like timelines. um obviously probably a better question you know for them than

for us but the reason why if you're Robin Hood um and I think L2 architectures and this is a really important thing to understand about L2 L2 architectures the reason why if you have your own users like at the size and magnitude of Robin Hood that having your own chain makes a lot of sense is um critically like you're turning operating expenses into revenue right especially if you're planning on abstracting it from your user base right like they might not want to pay transaction fees on behalf of their users or they might want to I mean and if they do that like it's really an operating expense versus a revenue opportunity and L2s like on Ethereum right now are like a 93% gross profit margin business you have things like and then that's even forgetting like you know me focused revenue right which if you're on a public chain you're

you're basically leaking out to external validators versus internalizing into your business and in many ways that might be core to a business right so it's a really I think critical decision and also um if your intention is to sort of bring mult multiple products on chain. Um there are compounding effects from a user experience and what you can do in an application front end if all of this is sitting on sort of infrastructure that you own and control. Um and I think like you know I think Bass did a great job with this and they're they're continuing to do it like sort of like in the interactions between the exchange and the chain. I think um you know you're seeing even like Binance do this more frequently now with like all the Binance Alpha components. So I think this is a model that like logistically

um is going to continue to be um like mimicked in some sense but like it makes a lot of sense and um you know I think a lot of people and this is goes back to like wait a can you summarize that again I followed everything until the end what's what's the model that will get that will get mimicked what you're going to see is um one of the most frequent um decisions about whether or not you should be launching your own chain be a be a function of the compounding of your different business lines. Um, right. Like if you want to be owning an exchange product, if you want to be offering lending products, if you want to do all of these things, if you want to earn yield from the fact that there are stable coins sitting on your

platform, right? All of these things will have a compounding effect on growing your business lines, if you're thinking about wallet adoption, right? Um, so like, you know, these things have like very strong network effects if you own the user already. um that I think are actually going to be like really valuable and they're much more valuable um in a world in which the profit margins are as high as they are for building sort of an L2 architecture. That's I think one of the most misunderstood components of like the modular versus monolithic like debate. I think if you had a blockchain that theoretically like had all the scale and throughput in the world, it doesn't solve this. it doesn't solve the point of both um turning operating expenses

into revenue, right? Like because the reason to launch on a public chain, any public chain, whether it's arbitrary, Ethereum, Salana, etc., is the value that you generate from having like composability and access to liquidity in your eyes is greater than the costs that you're paying in operating expenses versus having it be revenue. And that's a function of your ability to attract users as a standalone, right? So you can have a blockchain that has all the capacity and all the throughput in the world and you don't really solve that in an elegant way, right? So I I think that we sometimes like in the conversations that we're seeing and this is sort of like not even about Robin Hood, just generally in the conversations we're

seeing like this is coming up much more frequently. It's coming up not just in the context of users, it's also coming up in the context of asset managers and issuers, right? Like if you control the ability to issue billions of dollars in assets, you have a lot of power in thinking about the economics of the sort of um tangential business revenue drivers that are associated with with the assets that you have. Interesting. Yeah. And the other I guess just to add a a few points like another you know another core differentiator between like uh you know an public chain and you know launching your own chain is they're certainly going to drive a lot of other adoption to this chain be it from their own products like said and other people

and other people will definitely want to build and be colllocated with Robin Hood and their products and it's kind of like you know the analogy it's like you know having a shop in a hotel versus like owning the entire hotel right so if you have like this particular uh you know item that you sell on a chain, right? If if some user comes to, you know, if they launch on some other public chain and now they brought other users there, they actually capture zero from from all those other users that they brought in their transactions when you don't own the platform. So, you're driving a lot of value. They're actually paying value, right? Because they're paying fees on behalf of users. Fee consistency is also an important one, right? We've seen what happens when uh someone famous goes ahead and launches does a launch on a

platform, everyone else's fees go ahead and rise with this. If you have, you know, a 247 uptime product, that means and you're paying user fees. That's, you know, what AJ is referring to by these, you know, operating costs, expenses that you have, you have to continue paying those fees. If you actually own the chain, you're basically taking the funds from one pocket and putting them into your other pocket. And you can have fee consistency. You can actually have continued revenue. All this other activity that's coming to the platform because of you, you're continuing, you know, to drive. And, you know, in Robin Hood's case, you know, another theme people like to talk about in this context is like distribution.

Distribution. I think this is like the silliest thing that people talk about like, "Oh, which chain will Robin Hood choose because of distribution?" Like, no, no, no. The blockchain isn't providing Robin Hood distribution. Robin Hood has the distribution. They need to choose the absolutely best blockchain platform for that because they're coming with a product and they're bringing all their users on chain onto this platform. They don't need the uh necessarily adjacent distribution that the platform adds to it. This episode is brought to you by Scale, the next evolution in layer 1 blockchains. With a gas-free, invisible user experience, instant finality, and robust security, Scale allows for limitless scalability, and has already saved its $50 million users over 11 billion in gas fees. scales, high

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Great points. Uh, okay. Lot to discuss there. What did Robin Hood want the most out of arbitum? Like because you're you're right. Like, so I think if uh if blockchains blockchains are used to pitching these crypto founders and they're the pitch has been distribution, right? If you're Bass or Arbitum or Salana, you're like, "Hey, come build on us cuz we've got pump. fun here and we've got the distribution, but in this case, Robin Hood's like, "Guys, like, don't even I'm way bigger than you guys from a from a user distribution perspective." So, what is it that they wanted? Is it the customizability? Is it the was it a fee? Did it come down to like fees and fee splits and things like that? And specifically, if it's like the customiz the customizations,

um what what kind of customizations did they want? I'd love to get into like the nitty-gritty details here. Yeah. So I think like the nitty-gritty details are like things that we're I think still like designing with their team. Like obviously the chain's not launched and you know we could launch a chain tomorrow if we wanted to. We'll talk about the customizations that we might think. I think that the most important thing for them was this flexibility, right? This idea that first of all like if you even just think about like Arbitrum as a platform and we could talk about all the ways that we're flexible. Um like the orbit product as it's constructed, it doesn't opt to you into shared governance. It doesn't require you to be part of an interoperability set. You can do whatever you want with it. You can make any customizations you

want to it if you can figure out, you know, what sort of um do you want custom gas fee token? Do you want to use ETH? Do you want to use an alternative DA? Do you want to use Ethereum blobs? Do you want to have like a KYC layer built into it? Do you want to have specific ordering flows? Whether it's time boost or PGA or first come, first serve, like you can do whatever you want. Um, that was I think really important and it was also and and Johan mentioned this specifically, they get full EVM compatibility with arbitrum. If there's things they want to write in Rust, they still can using stylus. We're the only one from a flexibility perspective that gave the ability to write in both Solidity um and Rust. And you know, Johan um I think he was like kind of

tongue and cheek, but when we were on the on the stage together, he said, "I have a really hard time finding Solidity developers." Um, I think the way he thinks about this, because again, he's not trying to build a product that appeals to crypto people. He's trying to use crypto rails to appeal and build his business for his user base that he wants to grow, right? So, the fact that I give him that flexibility and say you can build in Rust, right? And if it's easier for you to find Rust engineers, that's fantastic. I think that flexibility like throughout the decision-m process, launch an arbitrum one or launch in orbit or do both and migrate later, right? Write in Rust or write in solidity. Design the chain for the revenue structures that you want. Like I think that flexibility throughout

because there's so many unknowns moving forward, right? Like they don't know what this feature is going to look like. It's it's an ambit it's the most ambitious vision I've seen of somebody using crypto rails in like crypto history. and and that flexibility and I think they had confidence in our team as a partner um because of like I think both the relationship we've built and also I think the ethos of how we build at arbitrum at offchain labs um that we're going to be really good partners um in that flexibility in that journey to zero on the last point it's the optionality is actually the core thing so the full set of features like I probably don't know what's going to exist today but the idea is it's the arbitrum stack allows you to govern yourself and give you the optionality that tomorrow or in a week or in a year

or in five years, you can go ahead and modify the code at will without asking us or anyone else permission to go ahead and uh add the features that you want. And even if you know on launch, and I'm not saying it will, but even if on launch it looks very vanilla, the fact that at any point you can go ahead and make these deep customizations in the arbitra stack is actually uh very valuable. Um this is u like probably the big like if you're if you're sitting down at the beginning of the year you're like you know what what are the dream logos and uh that will like really drive value for the business. This is probably like one of the dream logos I would say is is a Robin Hood. How do you think about what the business model is of this right?

Because you've got the chain. Robin Hood's building on the chain. Then you've got the stack so that they can build the chain. What's the especially for someone maybe who's listening to this and they uh they're not super crypton native they don't they're not they're just trying to think of a P&L and maybe they're familiar with like the normal SAS business model like how do you think about the business model of what this is here for arbitum it's actually a very simple business model um and the bottom line is the arbitrum dow uh has economic alignment with all the activity in the arbitum ecosystem and the way that it works is uh for arbitrum one so the chain you mentioned the chain that Robin Hood launched on and is live on today. Uh the arbitron dow collects the fees for that.

Those don't go to some foundation wallet. Those don't go to offchain labs. Those go directly to the onchain treasury uh that's controlled by the token holders. All those fees generated by the product today. But looking forward to orbit. So what happens when they launch their own chain? How how does uh how do token holders uh how does the DAO, I should say, um see um revenue from that? And the answer is um the way that orbit is set up is there's uh there are two different models. There's L an L3 and arbitration one. If you're an L3 and arbitration one, you don't pay any fee. And the reason is you're naturally paying fees. You're settling on arbitration one. So all of your fees are being paid on arbitration one.

Naturally, the ecosystem is collecting from you. But let's say you're taking the arbit orbit stack and building an L2 and Ethereum like Robin Hood is doing or you're building an L3 on base like you know say Blackbird or DJ chain are doing. Uh the arbitum ecosystem doesn't naturally get any fees from this arrangement. So the way that the licensing works is you pay 10% of your uh onchain revenue to the arbitum DAO and uh that's it very basic model there's a 10% profit share that goes to uh to the onchain treasury 80% of it actually goes Robin Hood is doing here is 10% everyone does it that's just the arbit everyone who launches an L2 or an L3 that settles elsewhere um pays a 10% under the arbitum expansion program it's

called Got So Robin Hood makes a billion dollars in 2027 on their new chain. They they're paying arbitrage of hund00 million into and it goes into the DAO. Yeah. To be clear, it's making it on transaction fees and like the the priority access, right? It's not like if they charge users a swapping fee or something. No, that makes sense. That makes sense. Cool. Um to break it down just like to be pardon me. It could be a billion. Oh, it could be 10.

Sorry. Go ahead, Stephen. I was saying just for a sake of accuracy. So, of that 10% that comes in, 80% of that, so 8% goes to the onchain treasury. And then there's something called the arbitrant developer guild to fuel further building of the protocol which makes which gets 20%. But all this is completely transparent onchain. You can track the funds as they go from again like AJ said, it's from every arbitrum chain. They're either on arbitrum one or they're paying fees to the DAO. That's just just how the arbitum expansion program works. Got it. Nice. Um the the main there's a big there's a question going around Twitter which I saw in the comments which was like how much did Arbitum pay to get this or like what is the grant? Um and I guess I would contextualize this question with

um with my own personal thoughts around grants actually which is that they get a really bad rap in crypto because um uh just because it feels like a people hate paytoplay and stuff like that but it's actually a very triedand-true model in like web 2. Like if you look at the like uh like am I was just reading about uh this Amazon book about like Bezos and the growth of Amazon and when they grew Alexa what they did to get companies to go build on Alexa like Nike was they gave them a grant to come build something new on on Alexa and that kickstarts the growth for the ecosystem.

Then Alexa gets big and then they don't have to do that. So, um I don't I don't know again I don't know how much you can share here how much I'm like if you're how much you're comfortable, but I'd love to hear like how if you if you gave them a grant and how big of a grant it was and what that looked like. Um yeah, so unfortunately like uh my policy I can't share the specifics of the uh you know partnership arrangement with them uh with Robin Hood and the Arbit Foundation. Um what I can say is that ultimately I think this is a very good deal for both parties. Obviously, Robin Hood uh is benefiting by getting access to the best blockchain technology available and you know, one that's flexible to meet their needs and the

arbitrage ecosystem is ecosystem is benefiting directly um as we mentioned before both financially but also obviously from the uh large effects ecosystem and community effects that and the rippling effects that will happen you know from from this announcement. Um, so ultimately I could say that I think it's uh, you know, uh, without without getting into specifics, I think it was a very fair deal that uh, both sides are will benefit from. Can you say if it's the biggest one in history, Stephen? Um, I can't unfortunately comment on that. Okay, that's fair. Um, sorry. The la last thing on this, I know you're not interested in these questions, but I I gotta ask them, is um is uh you guys did the thing in I forget the exact date was like the fall of 2024, which was the um

the AIP. It was like funds to bolster Foundation Strategic Partnerships Budget. I forget if that went through. I should have looked at that before this, but I think you guys uh it it did go through. So, there's like 200 250 million ARB, I think, with the main objective to go out and get these strategic partnerships. And yeah, I mean, hats off to you guys. Like, you you clearly landed the the big one with Robin Hood. And um so I'm curious if this played a role. And then the follow-up question is like, okay, you got Robin Hood. I'm guessing you didn't spend all of the 250 million ARB to do this. Like how who do you go get next?

And like how how do you think about like growing beyond that? Multiple questions in one there. But uh you want to take this one, Stephen? You want me to? Thanks, Go for it. I'll add it if any, but you Yeah. So I I think that um like the the bucket is utilized like alongside like existing funds that exist at the arbitrary foundation. they don't view them as like sort of I mean they pull from there um for for different opportunities but it's like they budget across both because they they obviously give grants out of their their traditional um funding as well but it definitely the fact that um the arbitrum DAO recognized that sort of and just for maybe take a step back I think this is really important for your users to

understand um most L2s L1's this like foundations have control of a very large portion of the treasury of tokens. Like usually it's frequently in the range of like 30 to like 50% of the token supply. In the arbitum case, the arbitum foundation only has um about 7% of the token supply that vests over four years, right? So they get um somewhere in the range of I think 175 million tokens a year for four years per per year for four years, right? Um and they're are frequently um competing against you know ecosystems that have the foundations

have most of it. The rest of the treasury of the arbitum dow which is about 2.7 billion tokens sits in a the same wallet that is controlled by token holders and the only way for those tokens to move is for a token holder approved vote. Right? So what the arbitr and then just to add one more detail and Stephen mentioned it earlier is other L2 ecosystems the revenue generated from transaction fees flows into foundation wallets in arbitum the foundation actually gets no revenue the DAO gets the revenue right so for the foundation it actually has it's a really nice checks in place to make sure they're continuing to be effective but it also has a much more limited ability for them to continue to support themselves and

sustain themselves um when we structured the or when the foundation and the DAO structured the um strategic growth bucket, it was a recognition that there's going to be opportunities that are extremely valuable and obviously you're not going to be able to share them on a DAO forum and say like we were trying to close X and Y deal, we need funding for it. Please give it to us. It was a recognition that like we should think about a pool of capital that there's very specific requirements like it's not used for operational expenses. it has to be if the grant is between A and B amount or whatever like the stipulations were that we want to be able to pull to be able to close these things right so that was like the structure right so again even if you added it to the foundation's budget it's

still basically an order of magnitude less than this the percentage of token supply that foundations typically have um so they've been drawing from it if I remember correctly on like certain occasions and I think they're going to continue to do it and we're going to continue to Um when I say we, I mean obviously the arbitrum collective and the arbitrary community utilize it for more opportunities, right? Like if you look at the arbitrum mandate, it's extremely broad, right? Robin Hood's a major fintech chain. We um announced a few months ago like Converge, which is Athena and securitizes chain, I think like it's obviously, you know, a huge opportunity for asset issuance um on that chain as well. Most of the major gaming chains that launch use the arbitum stack as well. So there's a really we've got a very broad mandate

and also for you know arbitrum one opportunities right there's some amazing teams that are building on arbitrum one that you might want to support or attract to that ecosystem right so um I think we've got a very broad and just to sort of tell you I think where our strategic priorities are today um we think arbitum is positioned extremely well in two like broad but defined categories one is being at the connectivity between tradfi and crypto Right. We think that DeFi and crypto rails are going to be the thing that powers finance in a decade from now.

We're not going to call things RWAS. We're not going to call things like DeFi. I think it's all just going to be finance powered by crypto. And I think arbitrum with like a lot of the stuff we've discussed about like the stack and the and the chain has like really good infrastructure for that. And then very specific use cases that want to make specific tailored decisions around product. So like gaming the reason why arbitrum like all the gaming chains use arbitrum is because of the power of the stack. So the reason why we see a lot of deep pin chains using arbitrum is because of the customization of the stack. So like those are the two I would say core things that we think arbitrum is uniquely positioned for. again like do I know what we're going to work to pull capital from on the strategic

bucket I moving forward like you know I think we're looking at other opportunities but um probably somewhere that follows our strategic vision uh just to add like one like brief reflective moment you you'll remember better than than anyone Yano that there was some questions early on around the foundation around why do we need a foundation why does the foundation you know need a budget um you know why doesn't this all just happen in the DAO at the time I remember like saying the response put out hypothetically was there will be deals out there that there will be opport you know companies that want to have NDAs that won't talk on a on a Dow forum and I think this is like a perfect example of that came out right obviously as AJ told you before this was a deal that was years in the making you

know if you look at the initial relationship but certainly many months in the making and obviously the moment it was released to the public there was a live product that already existed and this like sort of is validation of that model that you know even Dows need uh legs and arms and eyes that can go into rooms and sign NDAs and actually represent the community. But the nice thing in the Dow structure is of course that the Dow has checks and balances and if the foundation isn't doing a good job, if it's not actually making good use of it resources, it can pull that back and assign those elsewhere. But I think this is a very good validation that hey uh this model is working um and that the DAO is being well represented uh in private in private meetings as well. Yeah. Yeah. I have something to

add. I don't want to like take this conversation in a totally different way, but the structure of the arbitum dao in which the power actually stems from the DAO is extremely powerful and unique. And you know, I've spoken with, you know, Mike about this actually on on his podcast. And the the critical thing is that like I said, all of the revenue and all the mandate for growth is a DAO authorized decision, right? So the DAO has 23,000 ETH. The Dow owns like 50s something million dollars in stables. It has $2.7 billion dollars in ARB and you can't move that without a Dow vote. And like you can't authorize growth incentive programs without a Dow vote outside of sort of what was already

allocated to the foundation for its core thing and that checks balance is extremely powerful but more importantly it gives a lot of authority to token holders. Like this idea that L2 like tokens are like governance memes is like extremely untrue in arbitum because in many ways especially like when you consider it compared to like an L1 token or you know other forms of utility tokens like an L2 governance token like you you literally cannot make some decisions without the token holder's consent and it gives you authority and a mandate to make bold decisions and take risks. Like for example like the arbitum gaming ventures like that's like the equivalent of having like the DAO be

like the LP of a fund even if it's structured a little bit differently and it's a very powerful concept that is uniquely enabled by sort of where the power structure stems from in arbitum. This episode is brought to you by Scale, the next evolution in layer 1 blockchains. With a gas-free, invisible user experience, instant finality, and robust security, Scale allows for limitless scalability and has already saved its $50 million users over 11 billion in gas fees. scale's high throughput, zero transaction costs, and powerful web 3 infrastructure make it the ideal platform for gaming, AI, and other high throughput apps. To explore

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There is a post that you wrote AJ back in April that this just reminds me of which is uh it's called my personal hope for for the future of arbitum, the largest digital nation. And there's a paragraph in there that's called I think it was authority over assets. And uh it uh it actually like reading that post actually is probably the clearest um kind of wake up for me when I unders helped me understand what you and Stephen are trying to build and and you know and everyone else over there obviously. So yeah, we can we can link that in the show notes. It's very uh clear kind of like this is why we are honestly better than better positioned than other people. So yeah, and I think it's it's it's very uniquely positioned for a

snowball effect, right? Again, it's it it's multiple different revenue streams of very high gross profit margin businesses. Um, we have a huge mandate like in arbitum to like continue to expand the relevancy of where we can be deploying capital and investment opportunity and yeah, I mean, yeah, not to like toot my own horn, I think I think that post is a very clear way of of of describing like my personal hope for this vision. Yeah. Yeah. Um maybe getting on to a different topic for a sec. Stephen mentioned uh like whoa crazy thought like you know we actually need like people with eyes and ears and arms like to go into the room and like talk to the Robin Hoods and the you know the banks which is uh so obvious in hindsight of course. Um this is maybe

just a weirdly niche question that nobody will care about except for me but I'll ask it anyways. Like who who is in the room? Like Stephen, is this uh you know Stephen we got lunch like a couple months ago. Like is this like you and Vlad getting lunch and like chopping it up? Is this like AJ and uh Joe like uh you know figuring out the deals? Is this like your product managers getting together? Like how do who who does this kind of deal? Yeah, I think it's a little bit of of all the above. Um but you know uh definitely a lot of credit to AJ uh who who actually on our side uh built a lot of that relationship over the course of many years. But um the deal happened uh basically on every on every level you know uh in person virtually working

working together in sessions to to to figure things out. It was it was quite quite complex and really um as you could tell from the event it had you know a lot of details thought in at every level and buyin obviously from the very very top of the company and that's something which uh everyone participated in but I'll let AJ I don't know AJ if you want to you want to add yeah it's like again like a deal in a relationship of this magnitude requires a lot of trust in a lot of places so um team effort I would say 100%. Yeah. Um, all right. There was a tweet that OpenAI sent where it says, uh, so one of the things that's happening that Robin Hood's doing is like I think secondary markets on their chain tokenized.

I got to dig into the announcement honestly a little more, but um, something along those lines and Open I tweeted said these quote OpenAI tokens are not OpenAI equity. We did not partner with Robin Hood. We're not involved in this. We do not endorse it. any transfer of OpenAI equity requires our approval. Uh we did not approve any transfer. Please be careful. Um I I have my personal takes on on this tweet, but I'm curious uh to get your guys' commentary. I know it just dropped literally like an hour before we hit record, but yeah, so I did see that. Um, of course I uh all I saw was that I haven't seen any commentary from anyone in Robin Hood, so I don't want to speak for them, of course, but what I what I can say is and the product that you mentioned is this idea that not only are

we tokenizing uh public are they tokenizing public uh equities on chain but also private equities and you know Open AI and SpaceX were the two that they that they did. Um and I think the the larger point is investors want access uh to these assets, right? More and more uh recently we're seeing companies uh either delay going public or never go public and the most liquid and highv value deals are happening often on on the private markets and retail investors feel cut out and retail investors want access to those deals and ultimately uh I believe we need to build a system and find a system where retail investors can get get access to these deals and you know um minor spat aside what's clear is we've never had rails

before that could power something like this and now um you know drama aside we do have uh rails that can power this and it's clear to me that we'll need to that we'll need to figure out you know how this works and uh figure out the mechanics over time but it's clear to me that this is something that won't go away the demand for these assets is going to go up and it will be crypto rails that they are offered on long term yeah I I think that's the right take I think uh there's a phenomenal episode with Bill Gurley and um uh Patrick Oshanaughnessy uh just the most recent like Bill Gurley episode with Patrick Oannessy and he talks about just uh how private markets are becoming bigger and bigger and bigger and it's one of the fastest like upon only trends right now

is that companies are staying private longer and longer and we're going to have these trillion dollar private companies with like SpaceX and um Stripe and stuff like that and I'm I'm sure you get the same emails that I do where it's like people offering and shares and uh SpaceX shares and OpenAI shares pairs and um uh I mean it's just crazy. It's like such you're like going back to the 1970s like pink slips market pink sheets or whatever it's called like markets. It's like there should clear basically the idea is like there should clearly be a market a liquid open market for p for these companies for p these like secondaries and private shares or whatever should that be built onchain or offchain and we're going to figure it out and it's obviously going to be on chain. Yeah, I think onchain is going to

be way easier to do it. The irony for me is that this was the number one reason why I got into crypto. Um I remember when I was in like so it was 2014. I was like a law school student at the time obviously not an accredited investor and um very little money. And the thing that I was kept thinking about was and this was like when social media companies were getting huge and like none of them were yet going really going public or they were going public at like $150 billion valuations which was then like you know like a trillion dollars today. Um, and I'm like, I have no way of ever getting access to anything with like a 100x return. And then I discovered Bitcoin and I'm like, this is like the kind of thing that as a venture bet, even though it's like already a billion

dollar thing, it's like a clearly a trillion dollar idea. And I'm just like, okay, I got to get access to this. So like for me it's like you know there's a lot of irony in these things about like how crypto rails can power these things because that was legitimately the reason why I got into crypto was because of Bitcoin as an opportunity that was like the only thing accessible to somebody who was sort of in like my financial position. Yeah. Nice to see it come full circle then. Um maybe one or two more questions on this and then we can actually just move past the Robin Hood deal. I have a few other just arbitrum related questions. Um, uh, do you have any sense of, um, or dream like dreams of who is next? Obviously, you can't tell us, but like is there anyone that

you guys are working on right now? Like any potential deals where it's like of the Robin Hood magnitude? And obviously, you can't name names, but like is it a bank? Is it a gaming company? Is it a like do you have a sense of what that could look like, AJ? Yeah, I'll take this one. Um, so I'll talk in broad strokes um for like a number of reasons obviously. Um the two areas where we're starting to see more um excitement and like acceleration I would say is financial institutions just being extremely curious and like being extremely concerned potentially about getting like disrupted by like a huge opportunity that like they've owned for like two centuries. Um that's been moving very quickly um across like

banks, asset managers um like globally, not even just like in the United States. So we've been seeing like a lot more in that category. And the second area where we've been seeing a lot is large enterprises that are thinking about um and again this is also very quite global actually large enterprises that are thinking about like you know how like social media kind of disrupted the advertising business in many ways like what is the thing in their core businesses as enterprises that crypto will disrupt and if they're early they might be able to be like the disruptor instead of the disrupted and we're seeing it in terms of like stable coin payments remittances um thinking about like you know like

distribution for like ad revenues um all these kind of like more like in many ways like plumbing for like an enterprise but things that can massively potentially change the structure of the businesses. Um those are like that actually really surprised me. I wasn't expecting this sort of level of of relevancy. It's maybe something that's like adjacent to like sort of the stable coin craze that we're seeing, but it's actually much more targeted in terms of like strategic business decisions than I would have expected. Um, and it's coming together like quite quickly and like in quite like varied ways. So, that's been like really really cool to see. Nice.

Um, anything else on the Robin Hood deal that you guys want to talk about? I guess one thing which we didn't really uh cover too much here just to to stress like the coolest thing to me of this whole thing um is there are many actually like um I think many who who think that crypto is sort of this like fringe asset you know AJ mentioned before about DeFi and merging which is what we're seeing here um and in particular like hard to access like hey you have like you know crypto is only accessible if you can figure out how to get out get a wallet and like you know back up your seed phrase and like connect to an RPC service. And I think you know for many like that's that's what crypto is and crypto will always be

this like you know kind of almost like alternative system but the coolest thing what we're seeing with Robin Hood which we have really haven't seen from anyone else at this scale is build using crypto to build a product that's accessible to both cryptonative users and non-crypto native users uh at the same time. Um, you know, they showed at the at the event this side by side between the US product and the European product. And if we didn't tell you that the Europe product was different, you would think that they were exactly the same and have no idea that it was built on crypto. And that to me like is the absolutely like mind-boggling zero to one moment here.

Um, because you know when I got into crypto and I first encountered smart contracts in 2013, it wasn't like the NFTts and the new verticals that I imagined. it was how do we rebuild and reinvent the current system you know which was the appeal of this technology and I think kind of that got diluted over the past decade or so and many almost sort of gave up on that and said okay no crypto will always be its own thing but the answer is no no like whether or not you know how to use a crypto wallet or even know what crypto is you know we could bring a new product to hundreds of millions of European users that simply wouldn't be possible without these crypto rails and you can benefit from them and it might be like surprising to hear someone like me say oh like you know disparage like using a

crypto wallet, but actually I think like the optionality of being able to take self-s sovereign custody of your assets is all that you need, right? The idea is that there are going to be some power users that want to do it and everyone should have the optionality to do it. But I'm not delusional delusional enough to believe that the next billion users of crypto are going to uh engage with these low-level technical details. And we're seeing validated the crypto vision for the first time that crypto is the next evolution of infrastructure to rebuild the current system and you don't have to be cryptonative to reap the benefits of it. That to me is like the most exciting thing about uh this deal.

Yeah agreed. Hey everyone, Jason here. Wanted to uh just take a quick break and highlight everything that's been going on in the Mantle ecosystem. In just one year, Mantle has seen its TVL surge by over$1,100%, now reaching $1.69 billion. That's just such a crazy amount to think about. More than 225 protocols have made Mantle their home, while the platform's ecound has invested $ 38.5 million in 51 pioneering projects through strategic partnerships with Bybit, including Mnt as collateral, supporting Athena to scale and the first

Ethereum L2 to integrate Ono Finance. They just continue to be on the bleeding edge of L2s. Be sure to stay up todate with what's going on by giving them a follow on X at0xmantle. Special thanks to the incredible Mantle team for sponsoring today's episode. I wanted to take a moment to tell you about today's sponsor, Zenrock, the permissionless decentralized custody network backed by one roundt partners 10T, Maven 11, and Spartan. Now available on Jupiter. Rock is the native token for transactions within the Zenrock ecosystem and secures Zenrock's decentralized custody network. The first application launching on Zenrock is ZenBTC yieldbearing Bitcoin on Salana.

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get in trouble for for getting people. Optimism. Optimism, don't forget. Yeah. Yeah. And uh and um and now you and you guys like have kind of zigged and zagged and some people went more the stack route and some people went more the chain route and some people went trying trying to partner with hundreds of people. Some people kind of picked someone and you know kind of like you know tied themselves to the hip w with with with like a single partner and stuff like that. How do you guys think about the L2 ecosystem like large right now? AJ, I'm I'm asking you, AJ, because I know it's like 12. It's like midnight right now, and I'm hoping you're tired enough to give a spicy take. So, there you go. I I've got I have like They're not spicy, but I think like I've thought about this a lot. Um maybe they're

spicy. So, I think that the mistake is that people were thinking of L1's and L2s um in like differentiated ways, right? I actually think that the the point is is that they're execution environments and like for arbitum it's an execution environment that doesn't need to have inflation to pay for security. It relies on Ethereum for its security. It's a more cost-effective mechanism. There might be trade-offs like for example some people would probably not like the fact that you know ARB is not the native gas fee token. Like these are like the questions of like they're almost like design decisions and I think we got way too focused on if something's an L1 or

an L2 versus it being extremely like product focused. Um I think that when you think this through like the end result in reality is that in many ways and not like the only like technology and product like are really the things that come to the forefront for me. um when we thought about like stack versus um chain like my opinions on this have evolved completely. Like when the first sort of like when the chain wars evolved into stack wars I was extremely cynical um about the whole thing. To me it felt like us just trying to build the narrative. I'm like none of our chains are like congested or saturated right.

What evolved my thinking is two things. One is like teams like Robin Hood that are like we have enough users. We don't want to be on a public chain in perpetuity and like do this whole like revenue operating expense analysis that we discussed before. And the second is people started doing things that were like way more creative in terms of how they want to design the chains. So like I never recommend unless you like want to launch a play chain because you have all the users in the world. You should launch probably on arbitrum one or another L1 or L2 like I just call them execution environments like a shared composable liquid execution environment unless you have a justification not to, right? And I think that what happened was um and I think it was a result of competitive dynamics and in some way

like one of the things that happens and maybe this is my spicy take on you got me. One of the things that happens in crypto is like product romance deolved because of like broader narratives in crypto like there was a time where everybody wanted to be in L2, right? So like they evolved from like focusing on an application product that was like critical to the success of their product and they got like very distracted by the fact that they're now running a chain infrastructure even if you're using a RAS like it's still like a huge added thing to think about from a product perspective and then when L2s became less hot people are like oh we want to be L1's and then it's like wait like now our token instead of like being used for like growth and this is like now we have to give it to validators and it's like

people make these decisions that have very long-term consequences as a result of like 3 to six month shifts in narratives. I think it's a again spicy point. I think it's a broader criticism of our industry that we have investors um stakeholders that have influences on like a very short-term time horizon. Um one of the things I like to I'm really going down the rabbit hole now. You got me. crypto companies, even if like tokens are not like going public, it's like you have to be much more responsive than like if you were a private organization.

Yeah. And it it it does influence in my opinion like a lot of like product decisions that I think causes that. To bring it back to us and arbitrum, the way we've thought about this is we've tried our best to be extremely product focused to solve problems. And once it became very clear that people wanted their own chains, we thought about like what is the most logical way that we can provide that and also build a sustainable business. So that's why we talked about like the arbitration expansion program thing of like L3s versus L2s like that's like a SAS business, right? And the idea of having like an SDK that is featurerich, robust, like modular, you can turn off and on features, that's like a very strong

product decision. So, we've tried to remain very focused. I think that's probably one of the areas where um we've got a good reputation, which is like, you know, we're probably not like the sexiest name in crypto generally, but I think we have a sterling reputation for for focusing on delivering what what people want at a product level. Um, that answer your question, by the way? Yeah, it does. It does. There's just a lot there. Um, I was just thinking about that that that response. Um, every Okay, so this guy Austin from Dragonfly had an interesting tweet that I'm going to read. It's kind of a long one, but I I'm going to read a decent chunk of it and then I just want you guys to respond and comment on it. Um, so Austin said, "Robin Hood is joining

Arbitum as base is abandoning the super chain." Um, the pendulum is swinging back. Here's a trip down memory lane. Arbitum was dominating optimism in 2021. OP whitelisted developers while arbitrum was open to everyone and ARB quickly became the home of DeFi with GMX Dopeex and others. Then in 2023, Coinbase chose the super chain. Base became so successful that they monopolized developer attention including from optimism. OP mainet became a complete ghost chain, forcing them to pivot into only prioritizing the super chain while their canonical L2 became neutral block space for governance. This strategy actually worked well for a while while other huge names chose the super chain like unis swap and kraken and worldcoin.

But now that base has most of the assets and apps, they have zero incentive to opt into the native superchain interop. So obviously they won't. They've already announced their own security council which directly conflicts with being in the chain. My personal take here is that it's very clear at this point that base is leaving uh the superchain. Um, back to his thing, he says, "And now, Arbitum, which spent two years being looked down on, has a a canonical chain that still has a lot of DeFi apps and activity, and b has landed Robin Hood, who rivals Coinbase and retail presence, to build their app chain using arbitum orbit." I would love to just I mean, this is really a commentary on like Arbitum versus verse optimism, which for years I've thought of Optimism as your

guys' biggest competitor. So, I'm I'm curious to just get your commentary here. Yeah. Um, a few things. Um first of all I think you know the it's interesting how he mentions like um you know the in the case of optimism he says like they abandon their chain and we'll go all in all in there. I think this is the important all into the stack. This is the importance of the dual strategy that we have that it's very very actually important to have a very uh very liquid public neutral right credibly neutral chain in the ecosystem and that is arbitrum one and to have a stack and actually having both of these you know is an extremely important value proposition and again having it public and incredibly neutral infrastructure is um extraordinarily valuable and that's

something which um you know I don't think that we'd want to um you know give give up and it's something that's important for us to continue to build. Um in terms of like um I don't want to speculate on rumors of base leaving the chain or not. I don't know. So I I'm not going to comment on that. But I'll say that there's a very difference uh core difference in the business model of these two of these two stacks which is uh very um uh you know I guess a bit of nuance but pretty important in this context. And the the actual like maybe somewhat spicy take in is like people in crypto are are very afraid to have business models. It's like almost embarrassing. It's how you're going to make money. Like that's that's that's shameful. Like why would you do that? I remember the most like one of the light

bulb moments for me was we were one of our earliest deals. We were talking to an early enterprise and the deal didn't actually end up working out. It was early on. It was a huge company and they were saying to us, "How much are you going to charge us?" And this is before we had anything. We're like, "Oh, whatever. It's free. Don't worry about it. We'll" And they're like, "No, no, no. You don't understand. We want you guys to charge us because the mo the biggest risk to us is not you guys making a few dollars. The biggest risk to us is you guys not actually having a good business model. So, you're not actually going to be able to be here. And that was like the aha moment for me. That's it's not bad to have a business model. It's actually important and it's

actually good to have a business model. When it comes to the differences in the business model, you know, in the arbitrum business model, we we charge for the things that people want, right? To use the execution environment. That's it. Simple model. That's what you pay for. um in the OP case the o actual execution environment is free to use and it's additional services that they charge for like uh governance as a service and interop as a service and personally actually I don't think that those are very useful services I think most institutions are actually going to want to govern themselves like for example and I don't think people want to pay for that long term so I actually think having an aligned business model which you can align with the teams that are building with you share in their business model charge directly for the

thing that you're good at and also give the teams the confidence that Hey, we'll do well together, so you don't have to worry about it. Like that's actually going to be very very uh um welcome uh to to many of these teams. So, um you know, core difference in our business model, which I think is important, but AJ, let me let me pass it to you if you have anything to to add there. Yeah. Um I think you largely covered I mean, we've spent a lot of time internally, me and you, like thinking through the strategic stuff about like the chain and the stack. Um the thing I would add is like is it's really important in this industry um to make sure you have a close touch point to the developers. Um because if you lose that or you outsource that um you lose your funnel,

right? And then when you lose your funnel, you lose the money ways, your mandate and your leverage. Um, and we've tried to optimize across like all the verticals, making sure that we're the relevant touch point for whoever wants to build or create anything. Um and that's like the main I would say sort of distinction which is um we in our mandate because we have both products we can talk to everyone and we might be in a position where we can like recommend them what their original decision was was wrong. So I've convinced many teams that want to launch a chain to launch an arbitrum one and I've convinced many teams that want to launch an arbitrary one to launch a

chain. So, we haven't like outsourced any of the relationships that we have with the builders or the developers and the founders. And that's that's like a really critical component of this because it's hard to get that back. If you don't have that sort of funnel, it's like really hard to crawl back from it. And we we really prioritize in our strategy making sure that as people want to launch chains like um like a great example of this is like hyperlquid, right? So people like to joke that like arbitrum is the hyperlquid bridge. I promise you every single blockchain wishes they were the hyperlquid bridge right where we're getting incredible amounts of economic activity assets flowing through the chain. Arbitum is like New York in this sense, right? Um

if we didn't have arbitum one and we prioritized like Hyperlid was not looking to launch an L2 chain, right? But they still have an economic relationship in the sense not like a grant relationship but like in that they use Arbitrum one as as their source of liquidity with us. And I have a great relationship with that team. We we we chat all the time. we think about how we can help each other grow each other's businesses, but like even in something where you'd think that we don't have a funnel for developers, we do because of this, right? So that like to us is like a really really important of of of the strategy. Again, Austin used to by the way just Austin used to work at Offchain Labs just as a heads up. Um so I feel like that's like

worthwhile for disclosure. Uh actually the other thing that he mentioned which was it's the self-critical moment which I'll I'll just address as well is you know there always ups and downs and definitely you know um actually just as life of a founder like you know sometimes you'll feel fantastic and sometimes you feel like everything's crashing down and sometimes the highs and the lows are like you know days apart from each other. So u you know the one thing about arbitum is I think uh we've done offchain labs we've done a pretty good job at trying to like ignore the noise of of the moment and really be long-term focused on what we think matters. So like you know AJ mentioned this you know this deal and other other large deals going back many months. It was like you can imagine like you know in the depths

of like memecoin season where we're getting like you know um you know complaints every day. Why is why are there no memes in arbitum? is the future like you know we had a strong conviction that actually the future you know we believe um you know is is is is actually largely um by doing things like these deals rebuilding the system bringing big institutions on chain and actually being able to focus there and saying hey you can't always win every short-term narrative but we're here to build long-term sustainable value and actually just you know seeing through that so definitely there were ups and downs in the narrative and I'm sure there will always be no one's you know that's just the way that these cyclical uh you know these these cycles are but uh ultimately Having long-term focus on where the value is in crypto is something which

you know we've been uh you know very very laser focused on. Yeah. Somebody once told me I can't remember who it was like and maybe it's like a famous quote and I'm going to sound like an idiot like you never won or lost. You're either like winning or losing um and you can always flip that. And it's like I think very true in this industry. Yeah. We um we got a we had a quote we had one of our adviserss like you know three months into the business was like in an industry as vol so we were like talking to him about how do we compete with like CoinDesk back in the day because they were like the 800 pound gorilla we had like it was we had no employees actually at the time it was just Mike and me and then they had 180

employees we're like how do we compete with CoinDesk and they basic the adviser was like don't chase the shiny things in an industry as volatile as crypto sometimes all you need to do is survive and let your competitors kill themselves. And uh I I mean it just like if I could give one piece of advice to a founder in crypto, I don't know if it's still the same because now the industry is like I think that I think the cycles will smooth out a little bit, but like at least the last 10 years that that's been true. Um I have two last topics here as we think about wrapping this up.

One is um I mean you guys are doing well like you you've got a top five chain and you got a top five tech stack. I mean you could I probably top three for both. I don't I don't know that like the top three or top four or top five. Like you've got a top thing for the chain and you've got a top chain stack which is great, but the token is at an all-time low which like I mean if I were in you guys' shoes that'd be really frustrating. Like that that'd be annoying. And if I I would Is there another answer outside of like hey you can't look at the price and like the the the PR answer here is like look don't don't look at the price just keep building like the market will figure it out. Is there like a is there is there a

different answer that you could give there in terms of like how how do you really feel about the price of of arbitum and how do you really think about it? I think and you know it's gonna sound cliche and probably very reminiscent of kind of what you you know the the uh the answer you just uh foreshadowed but the I I can't tell you you know there's a lot that people do uh when it comes to like short-term narratives and like what a particular trader you know thinks on a daily basis. I literally don't think about that at all. I I can't and I it's nothing that I can optimize for and it's not what I think about. What I think about is how do I build long-term value? And by the way, how do I build long-term fundamental value? Like you know we discussed revenue. How do we grow

sources of revenue so there's like real truly trackable value that you can really put a number to and and the value is is quite high. Those are the things that I think are are important. And there's always going to be um short-term narratives that play in different ways. But the thing that I want to be are these and by the way, you know, is sorry, the thing that I want to be is a long-term steady narrative that the you know, arbitum is continuing to sustain and continuing to grow and over time uh that will become apparent and and it's just building actual real value. And you see this a lot when it comes to different chains. I won't name any but over the course of the years this happens like once or twice a year I'll get a phone call from from an investor and they'll say this particular chain

like look they're they're attracting all this investment they're going to they're going to dethrow an arbitrum and you know obviously as the game is never over but what typically happens is someone's throwing out like unsustainable incentives and their chart goes like this and looks like this and the arbitrum uh chart I mean here adoption right the adoption of the chain and the you know TVL of the chain all the metrics of adoption you know continues to to climb steadily. So there will always be these blips that are going like this as we're climbing. But my goal is to keep in climbing and keep building value and what I can tell you what I'm very confident in is looking forward three or five or 10 years from now.

Arbitum will be here. Arbitum will remain extremely relevant and arbitrum will power the absolute uh largest institutions of the world as they come on chain and rebuild the system on chain. when and how um you know individual investors or large investors take note of that, how they value that, I can't tell you. But I can tell you that we're building for the long term. Stephen, I have a a a slide from our annual kickoff that I'm going to show you, which is called be the line, which is basically just uh look, we're going to have competiti like in this industry is very volatile. There will be times when competitors look like they're growing faster than us, but oftentimes those that growth is extremely unsustainable.

I mean, we had a competitor who we we we had 30 employees, they had 30 employees. We woke up, we had 50 employees, they had 200. Turned out they were taking money under the table from uh you know, you know, like you know, FDX and SPF and stuff like that. So, um yeah, you just got to be the line and don't don't chase silly growth. So I that's the uh well the succinct way of saying the uh the uh long thing I just said. Yeah. Exactly. Be the line. Um um to put to just to go one step deeper in there just because I have to ask it like the thing that a lot of I talked to a lot of like the you know founders of different chains and stuff like that and protocols and the the really hot narrative right now is corporate treasuries. Um and like my my

my gut take on these things initially was like oh my god like what a money grab like what what a grift. Um, but actually like as I look into them a little bit more like they they're they kind of make sense. Like there's a big pool of institutional capital that wants to buy things like ARB token maybe, but they don't want to open a Coinbase account or they don't want to open a MetaMask wallet or something like that. So like maybe it actually does put an make sense to put an institutional equities wrapper around an arbitrum token. Um, do you guys have any AJ? I know you do a lot of like the corp dev or yeah like corporate development. Do you how do you think about these um treasury companies? Yeah. So I think there's like a gap between the two things you said which is one like

corporate treasuries and then making it available in an equity format, right? Because like I'm not sure if I was like running like a treasury management strategy it would make sense to have like a hugely volatile asset um on balance sheet. Um obviously like typically you have it in like much more safe and less volatile assets. Maybe treasury company is the wrong word, but like a vehicle that is own just arbitrum tokens or something. Yeah. Yeah. Yeah. So, um I think it's like part of a broader question of like how do we get and make sure that um traditional investors whether they're retail or non- retail um can have access and exposure in ways that they're familiar with. So, I think that they're interesting in that

sense. I think like some of like um the strategies that are employed are like overly complicated and like ripe for like these things kind of blowing up. But I think the broader principle of like how can we make sure that investors can you know invest in these assets in ways that they're familiar with on platforms that they're familiar with is like directionally like a very good idea. Um, I just hope we don't sort of do what we sometimes do in our industries, which is take a good idea and like turn it into a bad idea by extending it way too far. Um, so like you know, um, that's kind of like my take, right? Like, um, if in a regulatory compliant way you're able to

do these things, it's like a very interesting thing because like it's just helpful for people that want to invest. Um I'm just a little bit sort of maybe more cautious about like how it's going to play out. Um, if that makes sense because I think we are seeing people like view these things like this came up with like the Trump stuff in like the White House where it's like what should what should be in like the reserve like even though I love ETH like a Ethereum maxi like I don't know if it's crossed that chasm where like it's not like a multi- trillion dollar asset yet and maybe like I don't know just don't know if I want the government to be taking like speculative bets that it becomes one if that makes sense and then if there's any asset like besides for Bitcoin like I think ETH is the most

logical And obviously like you know but we're starting to see it with like sort of tokens that are like sub1 billion dollar like market cap which is like I think probably a little bit too far down that path. I don't know Stephen if you have like a different take but yes in the idea of like making things accessible but like let's just be prudent about it. Will you will you do one of these companies AJ for arbitum? Um I'm not personally um working on anything like it but it's like it might be makes sense for the foundation to explore. Yeah. Yeah. Yeah. I I would guess that all these chains get them by the end of the year. Like well I even if it's not you guys doing it I would guess someone like some someone will do it. Um yeah they don't even need our permission I don't

think to someone can go do it. Um what about on the acquisition side AJ? Like this is something actually we haven't really seen much of is um I mean you guys have a massive pool of capital and usually when companies have massive pools of capital they make acquisitions and um like we're seeing it like Coinbase acquired a company today. There were two acquisitions today. There's like like an acquisition a week right now in crypto. It's kind of I it's just extremely hot. So, do you do you think about acquiring I mean even acquire do you think about acquiring other chains? Do you think about acquiring wallets? Like how do you think about just acquisitions? I'll take this one because it's probably more relevant for work I do outside of offchain labs. So just for context, there's been like sort of a restructuring of how the arbitrum DAO

operates and we've introduced this concept called the operating company. Um, and that operating company has like an oversight board which I'm a member of like in my personal capacity. Um, and one of the core mandates that we're trying to do is build out diversified business lines that are owned by the arbitrum um, DAO on um, and its token holders essentially. Um, and I love this stuff. Like this is the kind of stuff that like keeps me up like thinking and dreaming all day long. Um, I think it's really cool. Um, I think from a strategic perspective, we we did the arbitrum gaming ventures. We've been building a treasury management strategy.

We've been starting to do actively managed DeFi stuff on behalf of the Arbitum Dow. The thing that I think um when I think about this is there are certain acquisition types that make a lot of sense or product offerings that make a lot of sense for Dows and certain ones that don't. Um I think Dows do very well or could do very well in capital intensive human capital light opportunities right because the um coordination layer of Dows is still very immature relatively. So if you want a very hightouch product offering it's a very hard structure for a Dow to own. Um but in a

in like a 100% owned capacity I do think that we've looked at different structures in which the DAO can be there's been proposals that we've looked at around fund of funds. There's been proposals around sort of investments into arbitrum ecosystem projects. So there's ways that you can do this but I would say the way I frame it typically is like the priority should be um to compound demand for our block space and de and the assets of the treasury. it's much harder to do in like human capital intense businesses than it is in in in capital intensive businesses. So that's like been our sort of core focus in how I've been thinking about it and others that I've been like jamming with on this like the entry guys former um you know block works team obviously um shout out

to them. So, um, yeah, like I love this stuff, but, um, I think you want to make sure that like the type of either whether it's an acquisition or whether it's like an investment in a new product, like we've been getting much more aggressive with Dazz Treasury, you want to be thoughtful about your capabilities and your core strengths and weaknesses. Yeah. Yeah. I've been thinking about it a lot, too, because um, it's funny. We I feel like this was supposed to be the year this year and last year where it's like the industry gets less fragmented, but the the industry feels more fragmented than ever. And um you know Robin Hood's launch fragmented. I'm not sure I understand that the what you mean by that. Um well what I was actually thinking of is not only with chains like there's a lot of chains but actually

with there's all these exchanges are launching tokenized stocks and I was like really hyped on that. I'm still very excited because it's awesome to bring equities on chain, but it's going to be like, you know, raw like it's I don't like cra's going to have like K Apple and Robin Hood's going to have like R Apple and it's gonna it just like it just feels like a crappy user experience and um I don't know like I don't know if there'll be I still don't know if there'll be like a thousand more chains than there are today in 10 years or if like there'll be a few chains like I don't have conviction on the app chain on the app chain thesis basically. But um I don't know the the industry just feels like still still decently fragmented.

Like new chains are still launching all the time. Uh all these exchanges are launching like different types of assets. So I don't know. So I'll tell you I'll tell you my take on this and I think you're thinking about this from like a cryptonative, right? I think like for example, let's just use the example you said of like our Apple and Kapple. I think 99% of Robin Hood users are never going to know that Kapple exists and 99% of Kraken users are never going to know that art exists. Yeah, that's a good point. That's a good point. It's just like stable coins. It's like there will be a lot of stable coins but like you won't actually know that you're using like PYUSD or XRPUSD, whatever their Ripple's thing RUSD or USC. Yeah.

Yeah. Right. There's the stable coins I think is actually a little bit more complicated in the sense that like those like I think show up in different UIs that like is very like mean like I assume Robin Hood's not going to list Kraken versions of Apple and vice versa, right? But like they might have like USDC, USDT, etc. What we're starting to see on the stable coin side though is they're becoming more specialized in what they're supposed to do, right? But I think like USDC, USDT, and like Athena, I think Athena's like crossed that chasm of like just like stable coins that are like generally proliferated in DeFi. I think what we've seen is like it's very hard for new stable coins to break into DeFi, right?

Um I also think that um what you'll see in payments is that the stable coin issuers and enterprises like if it's like a white label version like I mean this is probably like Stripe strategy I'm guessing based on their acquisitions is going to be like much more white label and um and abstracted right so like if you want to be like an you know if you're going to accept stable coins in like let's say like an online payment platform that might be the type of thing where it's like they're not going to show you USDC USDT py USD, etc. Like they're going to have like their payment platform provider. It's going to say US dollars and it's going to be stable coin rails underneath. So I think it really like it kind of is thematic of what we've all been talking about for the entire podcast, which is we've moved

from I think you know the paradigm of where we should be viewing things through the lens of cryptonative to what the user experience is that people are going to be seeing um you know sort of in like traditional sort of you know experiences that they interact with the Yeah. Um, AJ, I know it's 1 am and you guys have had a long six. We got four more minutes so we can so we can wrap this up. Um, any any closing thoughts, things that we didn't talk about um that that you guys want to cover. Um, no, just, you know, hit me up, reach out if you want to build with us. I'm going to plug, you know, Arbitum everywhere. We want to build and support, you know, all the different ecosystems um and and use cases. And um, thanks for having us on the show. That's a That's I gotta We're

gonna clip that and put it on. Any anything else you want to cover? AJ just goes, "No, just hit me up. Just hit me up." Yeah, it was great to be here. Thank you for having us. Um I think we covered a ton today. Cool. Well, congrats, guys. Monumental deal for the industry and yeah, big big win. So, thank you. Thanks. [Music]