How to Value L1s, L2s, and Crypto Assets | Kyle Samani

Transcript

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M O N A D. Monad. Hey everyone, Santi and I have been talking about Solana a lot recently and we're excited to have a Solana sponsor of Empire, Marinade. Marinade is a staking protocol on Solana and the only stake pool that delivers auto rebalancing, MEV rewards, and automatic downside protection with their new protected staking rewards. Optimize your SOL stake with Marinade by hitting the link in the show notes. Big thanks to Marinade. We'll talk more about them later in the show. This episode is brought to you by Mantle. Mantle is an L2 backed by over a $4 billion treasury, obviously one of the largest in the industry. They recently launched their airdrop program called the rewards station to distribute

both presale token allocations or listed tokens to MNT holders who stake their MNT. Mantle has nailed their rewards program recently. Would highly encourage folks to check out the Mantle rewards program at mantle.xyz/rewards-station. Although our guest this week is a managing partner of a registered investment advisor, nothing in this podcast should be considered an offer of Multicoin's investment advisory services or should otherwise be confused for investment, tax, legal, or other financial advice.

All right, everyone. Welcome back. We got the roundup. Uh we got special guest Kyle Samani from Multicoin Capital. Welcome to the show, man. Jason and Santi, good to be back. Good to see y'all boys. Yeah. Repeat. I mean, you guys have been four or five times now on Empire? Something like that. Yeah, we're regular in the in the block party. Kyle, you're looking very tan. Is it all the biking or Uh a little a little bit of cycling. I was in Hawaii for my birthday a couple weeks ago. Uh I just in Portugal with my mom walking. So, just been been outside a lot. Nice. Nice.

Touching grass, as they say. Yeah. Touching grass. I'm looking very pale. I got to get outside. I was I was about to say something and I was like, that's not appropriate. He's hosting the podcast. I'm looking at myself next to you. It's honestly Kyle, first of all, I don't think you've ever hold held back on the appropriateness of like Well, Santi's got a face for radio over here. So, you know. Uh all right guys, well, I'm the reason we wanted to do this is um I made this comment on the roundup like a week or two ago where I said we were talking about Santi and I were talking about how to value these crypto assets and I said, um look, maybe for these L1s and L2s, you should really just value them like a

commodity. Like everyone's talking about revenues and expenses for L1s and I think that might be the wrong way to look at it. I think you should probably just value these things like they're commodities. And if you look at how commodities trade, so whether it's wheat or gold or whatever it is, there's it's just a supply and demand game. So, like the price of wheat will really move when there's like um a drought in a place where that produces wheat and there's like a supply shock in the in the in the quote L1 asset basically in the in the commodity. Um and I said, maybe these things should just trade like that. And Kyle, you had you you DM'd me and said, "Hey look, I think you're thinking about it in kind of the right way, but also kind of the wrong way. Like you're missing a few things here." So, Kyle,

I'd love to just hear like maybe you can just lead us into this conversation, like how do you think about valuing these L1 and L2 these protocol assets? Yeah, thanks for queuing up the question Jason with some good context. So actually we have a full presentation on this. Tushar gave a keynote at the Multicoin Summit a couple years ago, 2022, covering covering this. So encourage you hopefully we can get that added to the show notes or whatever. Sure. But for those that don't want to watch that, the way that we at Multicoin think about valuing asset ledgers and that means L1s, L2s, L3s.

Pick your number of of layers. But if if the purpose of the system is to keep track of who has how many tokens and presumably people are trading tokens back and forth on the system. Then in our view the primary way you should think about value accrual is MEV. For those for those systems. MEV will always exist in financial markets for for all kinds of structural reasons. There's obviously good forms of MEV, there's bad forms of I should say there's malicious and benign forms. I don't we can get into the, you know, malicious versus benign, but for we can maybe skip that for now and just understand that like this MEV exists.

And then therefore if you are a holder of an L1 asset like for example SOL or ETH. You are entitled to some of those those rewards MEV fees both as a function of return yield via staking from your staking provider. So you can, you know, directly profit from that. I will note that there are some asset ledgers that do not share MEV back to their token holders. Probably the most notable of which is OP. I think Arbitrum does theoretically. Maybe maybe I'm wrong on that one.

if you're running the sequencer then you're keeping all of the MEV to yourself, right? Yeah, the Arbitrum DAO collects some fees somewhere and it is accruing in there. I don't remember the source of those fees. Yeah. But I obviously Theoretically it's like it's like it's like Uniswap. Like they'll the fees are there, they're not distributing them, but like, you know, it's accruing. Well, in Uniswap the fees aren't being accrued at all. That In in the case of Arbitrum there are fees accruing somewhere. I don't remember the source of the fees. But um see but yeah but I think most of the L2s perhaps all of the L2s although they could theoretically accrue tokens to um respective token holders, they do not in practice today. Mhm. Um L1s like Solana, Ethereum, Aptos, Sui, etc. Um all do

have that direct uh value attribution. Kyle, how do you think about the like evolution of how we will how these things will start to get valued? And what I mean by that is like right now we can say they are valued on MEV. Um but they're not really. They're about All all these things are trading on on just narratives right now. Um they're like trading on mainly speculation and narratives. I I would argue maybe dis- disagree with me. And then maybe there's an evolution to valuing these things on MEV and then maybe it evolves into valuing them on on something else. Um yeah, I mean, how do you think about that?

Um hard to So I agree there's a lot of narrative component to it for sure. And I I don't Well, let me take a step back. So I think MEV is the primary thing we think about and I think as the ecosystem matures that will become more prevalent and and more of industry observers will also generally come to that agreement because it maps to generally how people think about finance and I think it's kind of first order correct. The weird thing about L1 assets in particular and or L2 or L3, but I'm going to call them asset ledger assets is they do tend to exhibit this premium.

Some people call it the monetary premia. I'm not sure I I like that term. Um I I would more call it like the non-sovereign store of value premia. I think that's maybe a better term for it. Um, they do tend to exhibit that. And that that at least empirically seems to add some value to the you know, to which it trades and which all that does in terms of MEV is reduce the yield basically that you earn for for holding the asset. Um, you know, over time I generally think you move more from speculation towards fundamentals. I think, you know, I've been doing this for six and a half years.

And six and a half years ago there was zero discourse at all about fundamentals. Um, and today there's a whole bunch of people who at least attempts to have productive discourse about fundamentals. Obviously we got all the Dune dashboards and token terminal dashboards and all that stuff now. So, you know, people are generally trying to quantify these things. Um, and I think if you go forward another six years, I think, you know, that will continue to mature. So, I'd say it's been slower than I would have expected if you asked me from six and a half years ago like, "Hey, is there going to be confusion about, you know, how to value ETH or SOL?" I would have expected less confusion, but you know, we're moving in the right direction. Mhm.

Can we double click on MEV itself? Like, um, a lot of you hear a lot of people in the ETH community say, "Well, you know, fees are extremely low in Solana. Therefore, like, you need orders of magnitude more activity to justify what are high fees in the L1 and then L2 in Ethereum." My counter argument to that is, "Well, there's still MEV in Solana, but like I generally think of valuing these things of like, well, what do you think most the activity is going to happen in which network?" And then you kind of discount that back. But like, what would you say to that criticism when you're thinking about MEV in context of the fees that are being generated by networks?

Yeah, yeah, fairly strongly held views here. Um, I'll answer this both from the perspective you asked it and from the inverse perspective. I'll start the inverse perspective. Um blockchains are supposed to be like maximally permissionless. Like kind of everything boils down to like cost of compute or or cost of hardware. That's kind of the the long run end game for a lot of these things. This is why Uniswap has existed for 4 years without a fee switch is because it turns out the fee switch is entirely optional for making the system work. Uh like we have empirical proof that it works, right?

Without a fee switch. Um I think if you take that it's fairly easy to reason about what a zero-fee DeFi look like. Um it's harder to envision what zero-fee uh L1 looks like. But like the answer would be what is the cost of signature verification and memory and storage and bandwidth to compute a transaction. And then you need to obviously amortize that across the hardware and the like for electricity cost.

Right? But like my general I have an old tweet. Oh, I'll find it and send it to you guys. You can put it in the show notes that like tries to ballpark this within four orders of magnitude. Like I'm not trying to be super precise here. But like it's pretty obvious when you think of like what is the cost of electricity to do that kind of a thing. It's like on the order of a trillionth of a penny. Like it's kind of in that price range is like the actual COGS. Um and so then I look at like Ethereum and they're like, "Hey, it's a dollar or $10 or whatever." And I'm like, "I don't know, man. You're overpricing the COG by a factor of a trillion." Like that just seems like a little fat to me.

And so I I have this like fairly deeply held belief that the cost of using the L1 should be approaching the COGS. Um this is generally true in capitalism across all industries. Obviously, generally things get cheaper and COGS go down and you right margins compress and all that stuff. Um I assume that you know, in the long run the profit margins will approach zero. So meaning like the cost of signature verification and executing a transaction should be even several orders of magnitude lower than it is now. I I I think even on Solana today, it's a few orders of magnitude too high.

Um And so yeah, I don't think that that fee stream, come back to your question, Santi, I don't think that fee stream is relevant at all. Um because it should go to zero. Uh the history of of software is history of zero marginal cost, right? I mean this is like the defining feature of software for the last 40 years. Um we're not there in crypto, but like we should be approaching that. To me, the only revenue stream that matters is MEV. Uh and the beauty of MEV is MEV has nothing to do with the cost of signature verification and updating your memory and your bandwidth.

MEV is a function of what are the state of financial markets. Um and producing, you know, arbitrage's and whatever else that come naturally from the inherent heterogeneity uh and entropy in financial markets. Uh and that that's like crystal clear to us that the value of MEV uh is substantial today like on the order of single-digit billions across all of the ecosystems. Uh and I see a pretty clear path for that to grow 100x to 1,000x over the next 5 to 10 years. That again, from Ivan's point is not a terribly controversial um perspective, so. I was going to say so just for So, listen to understand what you're talking about cuz MEV in Solana has like spiked up pretty substantially. Um And the reason is like

as there are more meme coins, there are more like, you know, things to trade, there's more usage in the chain than or demand then there's going to be certain types of transactions where it would become someone out there is going to pay a substantial premium for it to be for block inclusion. Correct. Um Now, can you like maybe just double-click on like when you talk about like the sharing mechanism? So, like if you're for instance you have your soul holder, you're validating that with G through Gito or marinade or some other you know, validator. How much of that is actually shared back to versus kept? Like what is that distribution and does it vary cuz I Yeah, maybe if you could just

focus on that. Yeah, so the vast majority of MEV of is going back to stakers. Um validators whenever they If you're running a Solana validator, you set your commission rate. That is actually a a number you commit to and is on chain. Fun fact, Gito actually they have this thing called stakenet. They will actually show you the history of every validator and what their historical commission rates have been over time and stuff. It's pretty sure it's live on their website. Um you can go check it out and you can see how people have fluctuated and stuff.

Uh So any who, so validators set a commission rate. I believe the median commission rate is something like 5%. Um so that means you know, 5% of the MEV profits so to speak would be going to the validator and 95% would be going to uh you know, to the staker. There are a handful of uh validators that recently have gone to 0% commission rates. Most notably Helius announced this like a week or two ago. Uh they went to a 0% commission rate. What are the economics there for that? Like for instance Helius like if you're running zero commission then what is kind of their viable business model at that point?

Yeah, so so implicitly that means that they look at validation as a loss leader which I generally think is a reasonable assumption. And I think what that probably means is they they I don't I don't know what Helius's specific business plan is. I have not asked Mert. I am an angel investor in in Helius but I do not know the answer but I I will speculate and I there's two fairly obvious speculative answers. Um one is they want to improve their own as Solana of to stake with a quality of service. They want to maximize the amount of stake they have to maximize the transaction inclusion guarantees so that they can offer a better RPC service to application developers. That seems fairly intuitive.

Um and then the other way that you can monetize running a validator with 0% commission, which is via via order flow auctions. Um so those two things make the most sense to me. I don't know. I suspect over time all validators will generally move in this direction. I think it's inevitable that commission rates if they don't go to zero as the equilibria, it will be like .5% 1%. I don't think I don't think the median commission rate's going to be 5% in 5 years.

Is a proper analogy like Robinhood? Like when they obviously don't charge fees, but they make a lot of money on order flow. Like Citadel is printing. Yes. That's correct. Got it. Can Can you just for our listeners, you mentioned this transition to stake weighted uh uh for Solana? Like can you just make the distinction cuz people might not be aware of it. Yeah, so this is an idea that Solana rolled out actually. They They put out the code into mainnet in 2022. Uh it has I think not been turned on or basically not been used and and that certainly not been hardened over the last couple of years, but it is turning on now.

Uh the core idea in stake weighted quality of service is A there's a validator or has open RPC connection. Anyone in the world can send them transaction any time and by definition you cannot know what the contents of the transaction are prior to receiving the contents of the transaction. So if people are sending you garbage, like it costs Forget even about compute or memory, it costs you bandwidth as a validator to just receive the content. Um when the cost of sending transactions is very close to zero, um a lot of arbitrage bots are incentivized to just spam validators.

And so, the the vast majority of Solana network traffic is arbitrage bots just spamming validators. Um the the problem here is that like there's no way to run a market over bandwidth based on discriminating what what the content is. Because you can't know what the content is. The whole notion of parallel fee markets, for example, is predicated on understanding this thing goes in lane A, this thing goes in lane B, and this thing goes in lane C. Right? But that means you have to be able to know A, B, and C are separate.

But if you don't yet know what A or B or C is, then you can't even really run a functional market. So, stake-weighted quality of service is a way to create a market for bandwidth to reach the the leader. Um and the way they do it is they say, "Hey, look, if you own 1% of the if if 1% of SOL is staked to your validator, then all of the other validators need to respect that 1% of their they need to allocate up to 1% of their incoming bandwidth to you." Um and so, this is basically a way to introduce Sybil resistance for the network layer of Solana.

Um and in doing so, it implicitly creates a market for bandwidth to reach the validator. There's a bunch of discourse happening now on like, "Should we actually formalize that market in the protocol somehow, or should we not?" Unclear exactly where those discussions will net out. But but the zooming out, what as stake-weighted quality of service does is it basically dramatically increase the probability that uh a given piece of content from a known validator will in fact reach the leader. Mhm. Kyle, I want to get back to this idea of like the valuation side of things. So, if you are Do you think an L1 token needs MEV to be valuable?

Yes. Okay. So, the other side of this argument, if I were maybe arguing another camp, would say that an L1 token can simply can basically just accrue value from two things from increased demand from the L1 block space and from the monetary from in like ETH land like ETH is money that this whole narrative like so it can it'll get value from increased demand from the L1 block space and the monetary premium from being like ETH is money from being a de facto money across this entire ecosystem. What would you say to to that side of the argument?

Um I think ETH is money is total nonsense. It's just this Uh the look to be to be the litmus test for being money is you need to price assets in it and like people need to to conduct commerce in you know in that pair. Uh the only real assets that are priced in ETH or in SOL are NFTs. Um there are a handful of pairs that are ETH denominated trading pairs for fungible tokens but like if you just look at AMM pools the substantial majority of quote pairs are USDC and USDT not ETH.

Mhm. Um so like just the empirical evidence suggests that that statement's false. So it's just like a fun thing people say cuz they have bags. Mhm. Um I don't think SOL is money at all. I think it is a non-sovereign store of wealth um but it is very volatile it is not money. Yeah. I think so everything needs to be clear in that designation. Mhm. That was half the question. What what was the other half? No that No that was the That was it. It it was actually a leading question to get to one thing that you actually had a really good call on was um talking about like the price action of ETH in this cycle and I remember you we had a conversation at the first permissionless back in May 2022 and you were explaining to me how your your belief that rollups

were going to be and L2s were going to be very parasitic to the uh to the price to the price of ETH basically because the L2 tokens end up capturing a lot of the MEV which therefore does not accrue back to the L1 token, aka ETH. So, it was um it was that it was your comments combined with that comment that you made to me a couple years ago at the at permissionless. I was just thinking about that. Uh yeah, I mean we still continue to believe that. But by the way, the L2 tokens are generally not capturing it. It's the L2 sequencers. So, I my my my my theory was directionally correct, but mechanically incorrect.

Right. Yeah. Um Kyle, I've I want to get your updated thesis on Solana. I've seen you also as a firm invested in, you know, other ecosystems. Um in this context of like MEV and just every I mean it's it's a bundle question, right? Cuz there's been you know, people may looked recently at the, you know, spam issue in Solana and say, "Oh, this is why, you know, we need Monad or we need other ecosystems or Sui, say Aptos or whatever." Um as a firm, how do you how do you think about investing? Um like if if you were to redraw the portfolio from scratch today, um like what are you still as excited about Solana versus everything else? How do you think about

and yeah, other ecosystems that are kind of getting attention? Um yeah, I think Solana's the fastest horse. I think it I think it's either in the lead or pretty close to being in the lead on most of the metrics that matter. And in my opinion, the two most important metrics are trading volumes and MEV. And those two are very directly correlated with one another. Um I think that high degree of probability by the end of this calendar year Solana is like blowing all other ecosystems out of the water on trading volume and MEV. Kyle, what are the other metrics that matter?

Just out of curiosity. MEV, trading volume, what are other ones that you care about? I mean like amount of interest being paid by borrowers is like interesting. Um but trading volume is like far and away the most important. Um but yeah, those are the main ones. Um in terms of like redrawing a portfolio from scratch and like thinking about what I'm excited about, uh I'd say our our general conviction in the integrated approach has increased over the last couple of years as we've seen the modular stuff start to play out.

Um and so that means we we're pretty bullish Solana and Aptos. We are investors in both. We're and say. Um we're obviously following Monad, we're following Sui. Those are probably the other two kind of like major contenders um in that thesis. Um but generally we we are increasingly convinced that's the right approach. And I think a lot of what's Again, I'll answer that from two perspectives. One from the challenges of the modular thing and the second from the strengths of the integrated thing. On the the strengths of the integrated thing, what all of the network spam stuff in Solana has has shown in the last 3 months is as you grow demand to use these systems, transaction times increase.

That's kind of tautological. Uh and like things break and you can't know ahead of time all of the things that are going to break by definition. No No company has ever scaled a software system without it things breaking. And like as a general statement, every 10x like things break in meaningful ways that you can't expect in any you know, like this is pretty common knowledge in software engineering. And so um I look at, you know, the challenges the Solana teams have faced back starting back in 2022 when they introduced Quick and state of quality service and now looking at the scheduler problems they're having and now they're redoing Quick cuz like whatever Quick had some problems in it and there's a bug in it.

Whatever, all these things that they're they're dealing with. We thought that like they addressed the core problems in 2022 and like they partially addressed them, but they didn't completely address them. And then like, you know, new problems surfaced later as demand load increased. Um the more modular your system is and and and specifically the more there are different teams who do not or are not like bound to coordinate with one another and in some cases who are directly competitive with one another and who have diverging economic incentives because those people their net worths are denominated primarily in different tokens.

Like it's going to be harder to coordinate to implement the fixes. Um and like the fixes are never singular in nature like the problem spans some combination of networking, software uh engineering and economics. And like maybe there is a problem that does in fact isolate to like one of those domains, but collectively thinking about like the entirety of the system requires you to be thinking across all of those domains.

And so you know, splitting up like the decision-making between different teams with diverging economics seems like you're effective to the guaranteed to a suboptimal outcome. Um and and you have you want you know, all of the you want the system to be aligned, right? Around a single uh set of integrated economics so to speak. So that that's one vantage point to your question of why we've become you know, watching Solana's growing pains has made us more convicted in that approach. Because I don't know how you deal with this problem in uh in the context of of Ethereum and I I can give some interesting counterfactuals on that if you're curious.

Um The the other side of this is like what have we learned about the modular stuff in the last call it 12-18 months? Um 18 months ago we were pretty skeptical that there was like a what I would call an A+ solution. Um there are like lots of B to B+ solutions. Um I'm pretty confident an A+ solution is intractable at this point. Um and in In mind A+ means zero slippage to end users. So, meaning, you know, your $10 on this starting chain is $10 on the receiving chain and you don't get 9.9.

Um that that's damn near impossible for anything that's that's not a a centrally issued stablecoin. Um obviously latency is a huge problem um on on all of these and and then gas costs and then getting all of the wallets to integrate and support it and all these other compounding things. Um what we've generally seen in that space is more IQ has shown up to tackle it. Kind of the most interesting recent uh batch of that's been I think probably the chain abstraction stuff led by the near folks, which I actually find to be quite architecturally elegant.

Uh the problem is just like it's another standard. And the the the the meta problem with all of the modularity stuff is that there is no standard. Um like it's explicitly a standards problem. You've got whatever, OP stack, Arb Arb stack, Espresso and Astria now, I don't know how those impact. You've got Monad, you've got Sweet uh Say, you've got StarkWare, you've got ZK Sync, you've got Scroll, you have all these different things. All of these things have very subtle unique subtlety or Polygon to their respective systems. Um none of them are sitting down in a room together and like trying to create a common standard between all of them.

And so, uh everything it within their ecosystems, they promise theoretically will be will be magical and will be A+. Uh look, none of them have delivered that yet. We'll see if any of them do. But, it seems somewhere between distant and impossible to get all of these teams that have built their own standards to then also build kind of like a meta standard. Um that that seems really hard. So, our conviction has increased generally that the fragmentation of standards um is effectively guaranteed to produce a worse user experience.

When you say that, you're mostly looking at through the lens of like composability or like user experience or all of the above is just pretty fragmented or something. Yeah, yeah, this is really UX for users and like there's a couple of items that So, to me probably the single most important item is what does my If I make a $100 transfer, do I get $100 on the other side? Or do I make a whatever two ETH transfer, do I get two ETH on the other side? Um, you can complain about how shitty TradFi is all you want, but like I can move my Apple stock from Morgan Stanley to Robinhood and I don't lose Apple shares along the way. Now, it's slow and the paperwork is terrible, but like I don't reset my tax basis.

There's no question about that and like I all of the shares transfer. Um and like crypto today is is like it doesn't even seem like the teams building these systems care about preserving that property. And I think given the prevalence of Venmo and other basic consumer financial services, it's very hard to me to see large-scale acceptance when your $100 turns into 99.5. It just It just like rubs people the wrong way. They're like, "What What do you mean? Where did my You know, I just Yeah. So. Yeah.

You guys I think recently did a announced a big round of Wormhole, I believe, right? That's correct. What was the thesis there? Is it just more flow into ecosystems away from Ethereum into Solana and then capturing that some way or Yeah, the I mean, like the world is clearly multi-chain. It's clearly going to be multi-chain. There's a tremendous amount of inertia in the EVM specifically. I think the amount of inertia is generally growing in the SVM. Uh, and you need to connect all these systems. I spent the last 10 minutes complaining about connecting all of these systems. And like I stand by the fact that I believe it's fundamentally intractable to build a connective layer that is equivalent to uh intra asset ledger movements.

But, like look, the world the world is not homogeneous. And and so, like just for sheer political reasons and other weird historical path dependency reasons, there will be multiple ecosystems. I'm not saying it like everyone will agree on Solana or Aptos or Sei or whatever. Uh so, I do recognize like yeah, there's going to be multiple of these things. And and Wormhole is I think certainly has the most kind of robust product package today in all offering the connectivity tools for multiple different kinds of uh uh interop not just pegged assets, but a bunch of other cool things you can do cross-chain.

Uh you've been in the space for uh quite a long time. I remember perhaps uh talking to you in the early days. And how do you think about IBC when you look at Wormhole? And is Cosmos anything happening in the Cosmos ecosystem or just IBC in particular um interesting to you or um Yeah. The more the more time that goes by, the the more I appreciate the design goals of IBC and the fact that at least technically they like they did what they said they were going to do. Um IBC feels irrelevant not for technology reasons, but for go to you go to market reasons.

It's just the the amount of adoption of of Tendermint Cosmos chains is limited. Um and it doesn't seem like there's a super clear path for that to change in the in the foreseeable future. Um but generally technically it's pretty elegant. Um Wormhole and LayerZero and Axelar and Across and all of these other things are all directly response to the fact to two things. One, that Ethereum specifically has effectively eschewed any notion of a of an IBC equivalent standard for the EVM. I I don't fully appreciate why that's been the case, but I mean like like this hasn't even made it up into like public discourse of like a thing that should be considered in a serious way in the last 7 years.

And given Cosmos has been around for all that time, um I suspect there's like some pretty, you know, deep, uh views held by some core folks at the foundation who like, you know, basically poo-pooed on that anytime someone's tried to to bring it up in E3 search forms or whatever. Um And then the obvious other the other major reason why we're holding Axelar and Near Zero and these guys exist is to then deal with the the lack of a standard between EVM, SVM, Move, and then all of the EVM flavors. So, there's always going to be a market there for that stuff, um just just given the inherent lack of standards.

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Big thanks to Monad for sponsoring Empire. Hey everyone, Santi and I have been talking about Solana a lot recently, and we're excited to have a Solana sponsor of Empire. Marinade is a staking protocol on Solana. I remember when they launched, I think it was back at the Solana hackathon, and they were funded with this ADK grant. It's super cool to see how far they've come. They're the only stake pool today that delivers auto rebalancing, MEV rewards, and automatic downside protection with their new protected staking rewards. You can stake natively or liquid stake with Marinade and get the same high-performance delegation strategy that thousands are using already to stake your SOL to over 100 of the best Solana validators.

Marinade has been live for over two years, and they have audits completed by four of the top security firms in crypto. The delegation strategy is a first of its kind. So, if you're staking your Solana, if you want to start staking your Solana, if you want to get some yield from your SOL, start staking today with Marinade. Go hit the link in the show notes. Big thanks to Marinade for everything that they've done in Solana staking land. Go check them out. Go stake your Solana with Marinade today. This episode is brought to you by Mantle. Mantle is an L2 backed by one of the industry's largest treasuries. At the time of recording, it's valued at 4.4 billion dollars. The Mantle ecosystem engages in a lot of early stage exciting projects such as Athena and EigenLayer.

And they give out actually the rewards to the Mantle community. There are two airdrops I want to tell you about. The first one, it was with Athena. They offered 2.5 billion Athena shards to holders of their native token MNT. So the reward station program distributes these pre-sale token allocations to MNT holders who stake the tokens. The second one they have going on is with Myso, MYSO. That gives out over 90,000 MYSO tokens worth about $50,000 today. That starts on April 25th, runs through May 2nd. If you want to check that out, you got to stake your MNT and you can check out the reward station at mantle.xyz/rewardstation.

Big thanks to Mantle for sponsoring Empire. I want to get just your take generally on on fee markets. Uh just going back to that, uh feels like really suboptimal across it feels like the area where more innovation is going to be required. Um you're all basically pricing it in a suboptimal way. To your point around it's really hard to price these things when like you kind of have to constantly update them as you, you know, grow 10x. Um we've had Anatoly and Ban talk about it and, you know, it's something the Solana Foundation's kind of focused on, but when you compare kind of fee markets across ecosystems, is there one design that you really like?

Um or just, you know, teams that you think are thinking about it the right way? Um I'm not an expert in certainly especially the economics side of these and and thinking about designing fee systems or auctions and all that kind of stuff. There's people who study that professionally. Um I've never studied it at all. Uh so I definitely won't say I'm an expert here. Uh and I'll say like having observed the ecosystem over the last 6 years, the thing I've come to appreciate is there are more layers to the system.

I should say, there are more sub markets within the system than I originally appreciated. Um the best example of that would be the stake weighted quality of service thing that I just talked about a few minutes ago. I never thought about a market for bandwidth to reach the leader. Um but if you think about it in the extreme, that does It may not need to be a market explicitly with like bids and asks, but there is some problem you have to deal with there. It's a civil resistance problem, and one way to deal with civil resistance problems is to meter it with a market.

Um another example would be parallel fee markets. When we first invested in Solana, yeah, Anatoly was clear parallelism of execution, and I was like, cool, like I understood, you know, Moore's law and scaling horizontally in in silicon. So, that's why we got all excited in 2018. We didn't actually go a few steps forward though and say, let's think about the fee the fee markets and like localizing that to hotspots and like that kind of a thing. Uh and actually, I don't even think Anatoly did either. I think they built parallel fee markets after mainnet went live.

Um but like and so it was just kind of an emergent property that like because of the design of the system and the fact that that the transaction headers all include all of the state up front that you could it was you know fairly trivial to build yeah to build parallel fee markets localize fee markets later. So, uh you know, I look at obviously the blob store originality on Ethereum in the last couple months. So um I I think coming back to your original question of like, what's the correct way to design fee markets? I have no idea. I think as you continue to grow demand in these systems and things break in weird and funny ways, you wouldn't have thought about them ahead of time. And so, you need to kind of be like adjusting the fee systems over time. Um yeah, that that that's a generic answer.

The other thing I would say that I I generally find to be interesting, uh Tarun Chitra gave a talk at Breakpoint last year about multi-dimensional fee markets. Uh generally pretty good talk. I think he also wrote a paper on it. But the perhaps most interesting thing that he highlighted in that paper that is getting some discourse today in kind of Solana research forums is introducing a uh 1559-like fee system per unit of state in Solana. So So this would be like combining local fee markets in Solana with 1559. Um it's an interesting idea. I know there's some people in the Solana community who don't like it. There are some people who really do like it. Um but but we can clearly see that fee markets are just becoming inherently more more multi-dimensional. Um and I think we're probably 3 to 5 years away

from like getting to some equilibria uh state on this. I I don't think we're close to to the end of the iteration cycle around fees in these systems. Maybe last question on MEV and how you think about like expressing that view. Um you can perhaps invest in stuff like Jito. I I know you guys are investors in Jito. Um you know, you can invest in flashbots of the world. When you think about the relative like outperformance, like would you like if you have like 10 bucks, like would you rather invest in something like Jito? Uh obviously depends on the valuation and whatnot. But like versus the L1, um like what do you think has uh perhaps more interesting uh investment potential?

Yeah, so assets like LDO or JTO should be thought of They should be priced against ETH and SOL respectively. Um and so like we only look at those two assets internally specifically against ETH and against LDO. Um I'm obviously more familiar with the Jito roadmap than I am with the Lido roadmap. The Lido um So I I can't really comment on like what what I think is happening in Lido land. Also like all the restaking stuff is just weird and still too early to really know how it's going to play out.

Uh I can tell you in in Jito land the team is not done shipping. Um, they're going to continue to do stuff. Um, and I think that probably the stuff they will do will in general like be accretive to accruing justifying a higher JTO sole price. Um, the Jito guys know what they're doing and they're in a position to continue to figure out how to get more sole distributions to JTO holders. May Guys, maybe we can move into the next part of the convo about this um, this token terminal tweet that um, kind of sparked some conversations over the weekend. So, I can share it here.

So, this basically said the Token Terminal tweeted out uh, the income statements as they put it for base and Solana. And what it showed was that Solana I'll put quotes around this, lost $796 million in Q1 and base made $15 million. So, yeah, I mean ignoring the fact that we're kind of comparing an L1 with a token to an L2 without a token, um, it it brought up a conversation around like issuance as an expense basically or like what should the how should you categorize the cost of a token? Um, and Cob, actually I mean both you guys would love to hear love to hear how both you guys think about this and just maybe like the flaws in this Token Terminal tweet that obviously a lot of people

pointed out. Yeah, Sandeep, you want to go first here or you want me to take it? I'll lead the way sir. Um, yeah so a lot of problems with this methodology. One is it's it's showing emissions of Solana as 100% a cost to all sole holders. That's what's implied in the statement. Uh, and that's just wrong because like 85% of sole is staked. 80 to 85%. It's in that range.

So, like if you're staking your sole, then you're not eating that cost cuz you're accruing the inflationary SOL there. Um so that that that's like just incorrect for that reason. What what you are eating as a cost is the commission rate that you're paying to the validator, which by the way Helios and others now offer zero. Right? So, um that doesn't really capture like the economic reality of how people experience, you know, it as a SOL holder. Uh the second problem So, on that note, Kyle, just to make sure I understand that. So, is the is your idea that like at some point based on the amount of supply that's staked uh issuance should or should not be treated as an expense?

So, like let's say like if over 50% is of the supply staked, maybe new issuance should not be treated as an expense since it like what is your No, no, no, so that's not what I'm saying. I'm not saying that like there's some threshold you should use to counter. I'm just saying it like you can build these like aggregate network metric dashboards, which is what that that kind of is, but but like fails to capture the reality that like if you are an individual SOL holder, you can choose to stake your SOL. Yeah. If you're staking, you're not getting diluted. If you're Yeah, exactly. In fact, you're being reverse diluted Yeah.

because there are some percentage of people who aren't staking. Yeah. Exactly. No network has ever achieved 100% stake utilization, and no network ever will for a bunch of reasons. So, like it just like it just it ignores Like this is the funny thing that like all the Bitcoiners are like, "21 million hard cap. Yeah, no inflation." And that that's actually economically stupid to say because in any proof-of-stake network, if you stake your tokens, you are guaranteed to beat the rate of inflation. So, actually proof-of-stake networks in 100% of cases offer you better guarantees about your percentage ownership of the money supply than proof-of-work networks.

right, sorry. I interrupted. Go All right, so you're getting on to point number two. Yeah. Um second problem with that claim or that that dashboard thing is it's only a looking at fee revenue meaning like gas, it's not including MEV. Um which like we talked about earlier, my expectation is that gas revenue should go to effectively zero. You should we underwrite it as zero internally. Like we don't care how much money people are spending on gas as far as aggregate network valuation is concerned. Obviously, you care about it as an individual user of like what's the user experience.

But it's just it just it doesn't matter. MEV is what matters and the MEV number is like something like 10 or 20 or 30x the um the gas number. So, you're missing the biggest revenue item. Um and then obviously, the third the third is you're comparing a system with a centralized sequencer against the system with 3,000 nodes around. Like it is an apples to orange apples to oranges comparison, you know, like you are getting a fundamentally different set of trust guarantees um between those two things. Yeah, just to reiterate that. Like if you look at on the right side, I don't know if you have it pulled open, but on the right side like you have for Solana transaction fees, like where are the priority fees?

You're not including those. So, you know, fundamentally flawed. So, revenue under fees revenue understated. Um then on the expense side, yeah, again, like issuance is not an expense. Like a whole line of that. People don't We keep coming back to this like and it's kind of like idiotic at some point. It just tells you how unsophisticated people are in crypto. It's like if you're staking, you're not being diluted. In fact, to your cost benefit, because there's not 100% issuance, you're actually benefiting from that. This analysis doesn't factor that in. So, it's kind of irrelevant.

It makes me more bullish on like investing behind Solana. It's just like, yeah, great. Okay, fine. People don't understand this and we're like, how many times do we have to bring it up again and again and again? But, you know Uh Santi, would you say this changes in proof of in a proof of work model? So, you could say in a proof of work model that issuance is absolutely an expense because uh the network is paying an external service provider aka the miners for a service which is the security, right? But maybe So so does that change in proof of work? I believe so. I don't know if you'd agree with that Kyle. Like in that case yes because the miner like you're not benefiting from that and not only that the issue that I have with proof of work moreover is it has a constant like you

have an actor in the system that is has an clear incentive to dump that token to recoup the cap ex which is electricity which is really really high relative to proof of stake. People should go listen to the episode the latest episode that we recorded with Anatoly and Ben. Where Anatoly goes back to like really like simplifies the P&L of Solana. Like here's the revenue and here are the different cogs. Like what are the cogs? The cogs point like bandwidth, storage, and something else. And just thinking about that today and going forward like the hardware requirements of Solana and at the actual costs here I don't know how they're like actually coming to that.

I think they're the again it's like I don't have the analysis fully like the detail of it but it's a common criticism of people looking at Solana. Like at a one point I was very stuck on a higher hardware requirements but like that episode with Anatoly really I think crystallizes the P&L of Solana in a very in a very useful way. People want to go listen to that they should. It's far more interesting than this analysis. I'm going to go into dangerous territory for myself here and try to play the other side against you guys here. So just uh All right, in proof of work if Bitcoin is if issuance is an expense in proof of

work with Bitcoin, right? You've got the network is paying an external service provider aka the miners for a service which is security. Maybe technical So technically yeah issuance is not an expense in proof of service or in uh With Solana it's not, but maybe if you modeled out a um a proof-of-stake I mean uh you can model out a blockchain as an equivalent business, like Anatoly was mentioning, Santi. Like the business sells block space, pays the validators to maintain the chain, and in that model, if you're trying to like map this out on a spreadsheet, the issuance to the validators I think would be an expense to the business, and the fees are burnt. The fees that are burnt plus the MEV is

Kyle's arguing would be income to the business. Is it Why Tell me Tell me one more time why that's wrong. The commission rate is is what you're paying to the validators to literally physically host a network. That is correct. Um so so that that is a real ex- And that's an expense that sole holders are paying. Like if you are Yeah, a holder of SOL, you are paying val- someone to run hardware to keep the network moving forward. Um so that's real. Um where I disagree is saying all inflation is a cost to SOL holders because you can just trivially opt in to staking your SOL.

The relationship I think you have to look at is um the commission that you're paying, the actual MEV, like the the amount, right? Like what is the profitability for a staker? If you're staking a Jito or staking a Helios, different, right? Based on the commission. And also like you're getting those rewards, and you know, part of those rewards uh that emission, that inflation, back to you, plus also some of this other like the other fee item, which is far more interesting as Kyle was mentioning, which is MEV. Mhm. So like I think you It's on a case-by-case basis, but generally speaking like if you if you're a SOL holder, you should probably just think about, okay, you're probably holding SOL because you believe the network, you know, is is interesting because it's

getting a lot of activity, therefore a lot of MEV, therefore you stand to You're You're going to be diluted cuz you're staking, plus you stand to benefit by, you know, getting Yeah. MEV rewards or, you know, part of the MEV you shared. Over to you. What do you think, um, Kyle, if you were designing, so we we've we've actually done this exercise a bunch of Blockworks Research, like maybe we're trying to shove a, you know, square peg in a round hole here, right? Maybe we're trying to put these like things into crypto terminology into like equities terminology with revenue and expenses. Like, if you were designing, uh, someone said, "Kyle, we're trying to standardize how we value these crypto assets. We know MEV plays a role here, but like what are the equivalent like revenue and expenses?" Like, maybe like maybe it's fees and emissions or you

know, like what like how would you basically, at some point we're going to have to like create these standards of metrics for for these crypto assets. Like, how do you think about that beyond just MEV? MEV is the only revenue driver that I care about. Mhm. Uh, I don't care about any other revenue driver. Um, and then the I think the other kind of just like source of confusion here is is like doing it at a network level versus at an EPS level or per token level. Yeah. Um, and that that kind of accounts for the second discrepancy in communication.

Kyle, what's the best way to think about like the evolution of MEV? Um, like how do you think like there's clearly a lot of MEV happening increasingly so in Solana, but like you talk about like, um, transaction fees kind of like going to the marginal cost and compressing really aggressively. How do you think about MEV, um, in that context? Like, as a percentage, like, uh, the amount of profitability over time? Um, I think two two Like there's always going to be arbitrage.

Two two trends that I think will hold true indefinitely. Uh, one is amount of heterogeneity in the market, excuse me, amount of entropy in the market will increase over time. I think this is What's the third law of thermodynamics or whatever? Like, you know, entropy increases in the universe. I I generally think that is also true in financial markets. Um there's more venues, there's more unsophisticated participants, there's more sophisticated participants. Um in the case of Solana, there's like literally more leader like more validators join, so there's more leaders rotating through the system.

Um that's obviously not a law of physics in the way that the thermodynamics law is, but my empirical observation is that the total amount of entropy in these systems is increasing over time. Uh and I think that will will be true and that entropy explicitly produces MEV. Um and then the second, I think, general thing that I expect to hold true indefinitely is uh application developers will work to minimize malicious MEV. Um which I think is great.

Um I think there's a very weird view that is held at prim- more in the Ethereum community that getting rid of MEV is the job of the L1 or the L2, whatever the the asset ledger. Um and like there are ways you can design the asset ledger to to minimize MEV. The most aggressive of which is like what Osmosis and others do where they encrypt the mempool ahead of time in the transactions and randomly order them in a block, which by the way has a lot its own serious problems in terms of guarantees you offer for users as well as uh performance on the system.

Uh but ignoring that, I I I've kind of come to the belief that application developers' job is the ones optimize for specifically for minimizing malicious MEV. Obviously, if you're being sandwiched, like that's bad. Um but like this is solvable at the UI layer and at the API layer. A bunch of people are working on this. Uniswap, Deflow, a bunch of others. Cow swap Yeah, yeah. There's there's there's a lot of approaches to this, but I believe that the total amount of entropy is growing and good faith application developers are trying to minimize uh malicious forms of MEV.

Which is great. And and those two things will uh well, for an individual user that their UX will generally improve because of that. Um and that will always bring more demand and that will hopefully grow the entire pie for everybody. Maybe you've said it before, but I just maybe stupid of me, but um how do you like characterize bad evil MEV? Like Locate the Malicious malicious MEV the most explicit form of this is sandwiching where you are quite literally like abusing the market structure to take money from someone.

Um sandwiching is is there may be Usually with swaps, right? You want to buy like a meme coin, whatever. So, you want to buy wif. And then someone front front front runs you and then you end up paying a higher price. Correct. That's explicitly like malicious. The most of the other forms of MEV are as far as I can understand pretty benign. Um so, liquidations I think benign. Like, hey, you're about to get liquidated, fine. Uh back running an oracle, again, fine. Like, once the oracle price is updated, like someone needs to bring systems in line. Seems reasonable. Dex dex arbitrage, totally reasonable. Like, the LPs are the ones being stupid quoting bad bad pairs and so great arbitrageurs, you know, need to pick their job as a paying the price in line. Sex dex arbitrage, again, same

thing. So, those all forms of of MEV I consider to be somewhere between benign and even positive. Like, they actually make the system work better. Uh and then obviously like anything involving front running is is bad. Yeah. No, that makes sense. When you I guess most recently people have been pretty critical of meme coins, particularly for this sandwiching kind of effect and you know but you're still of the mind like MEV in the aggregate continues to grow if there's more entropy you know heterogenei- geneity in the system but over time like maybe the user you know this malicious MEV goes down.

When you're doing a swap on Jupiter you know you could there's ways to like minimize sandwiching but there's still going to be a ton of MEV in the aggregate. Yes, that's correct. Yeah. What else should we talk about? Kyle, I want to get your take on this. Actually both your both your guys' take. I think I think I know the answer to this based on just this conversation that we just had but um You always know the answer to everything. Here's the here's the cost of these airdrops in on a Richard Chen Dune dashboard which is like if you basically just take the number of airdrops multiplied by the price of the token. Um So at the time of at the time of issuance or like or is the price of the token like smoothed out?

like the you know including price appreciation. So for anyone who's not watching on YouTube Arbitrum cost of airdrop 1.4 billion DYDX 1.45 billion ApeCoin 8.5 billion ENS 1.1 billion Blur 340 million Uniswap 658 million. If a portfolio company Kyle came to you and basically showed Wait a minute can can we tell Richard to like put it as a percentage of FDV? Cuz like I think that would be far more interesting like if you think about like Yeah that would be interesting.

So there's two ways to view this. One is holy this is like the most expensive marketing campaign of all time. That's like that's insane. That's a billion-dollar marketing campaign. The other way to view it is like wow this is a great marketing campaign it's basically free cuz the cost to you know create these tokens is is essentially free. How do you guys view this? Um elements of both. Um So, I think what one thing that is not captured in the discourse around this is um you need to have float.

Um Anyone who does a 1 2 3% float is criticized, low float, you know, high FDV classic thing. Part I like the primary reason most tokens launch with a small float is not because of the teams want to have a low float, it's because all of the other tokens are locked. All of the investors are locked, and all of the employees are locked, and the foundation is obviously not not dumping on day one. So, it's like, well, where where the hell does the float come from? Like um and and so I like I I I I really don't like the like statement of like the marketing cost of the drop because it ain't that that statement

implies like you could have cut the marketing cost in half, like there was some sort of discretion in like, you know, choosing to spend that much money on marketing. Right. Um We I really don't like I I I think it is entirely possible to get 10% of tokens floating um on day one. Um 20% is hard, not impossible, but it's hard. Um but I think any team if they if they care about like not distorting the the market too much. Uh I'm sorry. If they care about like trying to help the asset find true price discovery as effectively as is possible for a new asset then you you should game for a minimum of 10%.

Um And if you get the 20, that's spectacular. Very few people have gotten to 20. Um So, that's comment A. Like I I I think the the marketing framing it it implies too much discretion. B, um for better or for worse, there's an expectation that like people in crypto participate in in these things. Um I don't necessarily love that sense of entitlement, but like I it is clearly real. Um and for certain protocols justified and legitimate. For many protocols, I believe it is not justified and legitimate. For example, like if you're like getting tokens for like you joined the Discord, I don't know, man. Like that seems pretty weak to me.

Um but like if you put your capital in, you know, you know, like Margin and Kamino are both expected to like drop their tokens on Solana very soon. They're both borrow and lend protocols. They're comparable to Compound and Aave on Ethereum. With those systems, if you if you're the first money to deposit in those systems, like you are taking smart contract risk explicitly. There There's and there's no way around that fact. Um and like yeah, you'll earn a market rate for borrow and whatever in the early days. But like you're taking this risk that really you can't be compensated for by the lender or or by the borrower rather if if you're a lender.

And so, it makes sense to me that like you should get tokens for taking that risk. Right? Like that that like fundamentally is is justifiable. So, my point that is like you in some sense you want to reward people who genuinely contributed to your system. Because someone has to be the first person to take the risk that your contracts don't blow up. Um and like they should be compensated for that. In the case of DePIN, obviously like hey, if you help build the infrastructure, you should be compensated for that. You bought the hotspot, you laid out the cash, like you put it in, you know, whatever. You drove You drove more miles in your car in Hivemapper.

Clearly you should be compensated. So, um I'm generally a a fan of using airdrops uh to get tokens in the hands of people. I think that they have been overused by teams that quite frankly don't have good ideas of of how to do like some notion of of after value attribution. Um and then and then it's just wasteful and then it just feels stupid. Um and like it any of these systems where people are clearly farming, you know, I know StarkWare and zkSync have gotten a bunch of for this. I don't know if it's true or not, but let's just assume that's true for a second that the the the rumors are true. The people who are like putting money in StarkWare and then like not doing anything, like they're not really

creating long-term durable value for StarkWare. You know, they're not making the the probably the fraud proofs or sorry, the you know, the validity proofs function. They're not improving the probability that happens. Um they're not improving liquidity in the system. So those those kinds of things I don't like. Um but I love the permissionless capital formation that crypto offers. Um and if you can airdrop things to people in a productive way, you absolutely should. Um yeah. And the other component you actually I heard you say once there was like a particular team in Solana in the very early days that airdropped a huge amount. And it was kind of like a vampire tactic and people who were getting interested in Solana at the time were like, you know, most networks to get them off

the ground like you have this like the activation energy that's required. And so I think I forget which particular project, but like the other component is in a parallel universe like what would have happened if you didn't have this incentive. Like you're in many ways kind of growing the pie. It's a way to attract attention. Everything is you're competing for attention in the space. So I definitely agree with Kyle. Like if it's very easy to think about like how to airdrop in a DeFi protocol, difficult for other systems. Uh what I really have liked um and there's also nuance, right? Like the way Jupiter's doing it I think is pretty clever. Same as Blur. Like there's different campaigns. UMA was a kind of the first one to introduce this concept of you don't have to airdrop everything all at once. Like you're going to blowing all your load. Like

you're going to probably regret that 5 years, 10 years down the road. Like, how are you going to pay partners? Like, YFI was a perfect example of this. Andre, being Andre, just, you know, all the YFI was in circulation. And then, oh, how are you going to incentivize apps to deposit into the vaults? How are you going to pay developers? How are you going to use these? So, like, I think like, um, you know, I understand why Bitcoin had to codify block emissions, but if you're a protocol like just uh you know, the I I I think, um, I don't know what how to solve it other than going back to maybe ICOs, where like you have just way more distribution. Meme coins don't have this problem. But, like, Worldcoin, 2% of all the supply is out. Like, good luck.

By the way, with with Worldcoin, it Worldcoin is actually the one project that I think it is explicitly justified to have a a tiny float, because the whole point of the system is that like every person gets one token. Right, yeah. Whatever, right. Yeah, yeah. Yeah, yeah. So, so, it's the control the high FDV, though. It's which is a shame. you can't. I'm just saying, that's the Look, by again, disclosure, we're invested in Worldcoin, but like, it it's the one project where I'm like, no, no, no, that's the whole point of the system. You can't criticize it for that. Um, but yeah, it's bad for teams to play the low float, high FDV game. You should generally aim for 10%. Um, if you don't want to airdrop all that up front, figure out how to do an LBP, figure out how to do an uh an offering with

CoinList, or or with Jupiter, or with a bunch of people out there. It is generally better to uh have people buy into your vision than to be airdropped tokens for free. Uh, it does increase people's commitments, um, if they have to put cash down to get it to get engaged. I think, uh, Curve was, uh, really good example. Like, I'm not of the mind So, like, if you're going to airdrop 20, there's going to be a lot of, you know, people that might sell out of the gate. Um, there are teams that come to me and say, should we lock it? Should it have some sort of lockup? Uh, you know, vesting per block, whatever.

I I know. I feel like it sort of defeats the purpose of having like low float. Whereas you the better more elegant solution might be incentivize people to lock it like a curve kind of mechanism where people can deposit that at earn if you know, more fees or whatever like blur. You know, you could do this right? You instead of selling your airdrop you can like stake it maybe earn blast rewards or whatever, you know. Um, there's just like better ways to do that. I think. Yeah, I I I mean one way to think about lockups is lockups explicitly distort the price. I don't mean that's like malicious. But like there there are people who are locked up

who would otherwise not be holding. And conversely, there are people who will not buy until the lockups have expired. Right. And so in both directions like when you have lockups, locked tokens, you are moving away from the organic price. Again, there is good reason to have lockups. Um but like just recognize that they distort reality. Um, and I generally think that like people need to to try to, you know, get these systems to be getting closer to uh you know, away from reality distortion as quickly as you can. Um Yeah, yeah. is real lot of token. Yeah.

If Richard or anyone else is listening, I'd love someone to like actually come up with cohort retention curves for these airdrops and campaigns. Uh cuz there's a lot of chatter, but like how expensive they are? Well, let's let's look at the retention. I remember talking to the Badger team super early on. And they I think were pretty clever in like pioneering like the criteria for the airdrop. And they had like pretty decent retention like, you know, 30-60 days out of the like after the airdrop like a lot of people actually held onto Badger. Um Then of course, you know, there's a lot of noise, right? Cuz you know, the markets can tank and there's volume and people will start getting liquidated.

What do you want to sell the airdrop, right? Thing that you get for free. Like common psychology, but yeah, I've been really nice So I I withdraw from Coinbase Prime to

Coinbase Consumer and then I withdraw from Coinbase Consumer in SPL. I have yelled at the Prime team many times. I I'm sure no one has complained about this feature to the Prime team more than I have. Okay, well, I'm publicly complaining. God damn it. Like I need to buy sole swap like It's like, come on guys, get your together. Yeah, very annoying. Anyways, Kyle, thanks for coming on, man. Anything else you want to talk about? It's a pleasure for having me back on the show. I think next time I'm on, we can just complain. Every every feature request we have for any product or service in crypto, we can just complain for an hour and a half. I have fun fact that Kyle, you've been cycling a lot. I love cycling.

When's the next race? When's the next uh you know, thing? Oh man, I think I decided that I'm done with endurance for a little while. I'm going to I'm not in a weight room for the like the summer at least. And I'm I'm going to I'm going to kick Anatoly's ass in the weight room. That's That's my goal. Oh wow. Okay. S- uh Anatoly's liftings are pretty pretty heavy stuff, so Anatoly and and and uh Keone. I think I'm going to I'm going to put both of them to shame. Okay. All right. I will not, so I'll just be silent.

Anyways, Kyle, really nice having you on. We'll have to have you on sometime soon and and keep the conversation going. Really treat. All right, guys. Santi, Jason, thanks so much. Awesome awesome to chat, guys. Thanks for having me on. Cheers. All right, you heard about Sei a couple times. Just want to give them one last shout-out. Big thanks to Sei for sponsoring this episode of Empire. There are a ton of reasons to build on Sei. If you want to get in touch with them, you can reach out to me. I'll put you in touch directly with the team. You can also get in touch with them on Twitter @SeiNetwork. You can follow the journey @SeiNetwork. They are currently live. They've got Sei V2 on public devnet today. Mainnet goes live later in Q2.

Really excited to have Sei sponsoring and partnering with us on this episode of Empire.