Kaito’s Airdrop: Genius or Giveaway Gone Wrong? | Analyst Round Table

Transcript

I like to think of like when you have token in equity now as Schrodinger's cash flows where everyone believes the cash flows are going to both the token and the equity at the same time but I think over time again with like efficient markets like the Market's going to figure out whether the token has any actual value or not nothing said on zerox Research is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial advice Pacho Ryan and our guests May hold positions in the company funds or projects discussed hey guys welcome back to zerox research today we have some relative ogs from the blockworks

research team on today or I guess across research data and advisory now um we've got Westy our uh relatively frequent favorite Dan Smith and then David effort Capital um on with us today uh I guess before we get into things I do want to do a another quick highlight for Das um it's coming next month it'll be in New York um there'll be a ton of great speakers there there'll be some live podcasts folks from the research and various blockworks teams will be there I know a couple of you guys will be there um I'm curious maybe if you want to do a quick shout out like if there's one thing you're super excited about for das yeah I'm pretty pumped to meet James Kristoff longtime passion member of the of the Pod not sure if he he claims to work at a bank but I'm not believing it

because he's in that telegram chat just as often as me so I'm just not buying it um now I'm also giving a talk on RV a fundamental truth of crypto so that'll be fun as well and uh I guess while we're doing the the blockwork shows here we're hiring across a lot of different functions across not only blockworks research but also the broader blockworks company uh if you Google you know careers at blockworks you know it'll take you to an ashb link and ring across sales engineering content and podcasts as well as research so looking for some protocol uh analysts over on David's team with the advisory offer offering as well as some research analysts to build investor focused content so be sure to check that out if you think uh if you think you're you know a good fit for

that reach out to any of us on this pod Twitter is probably your best bet there but telegram as well and uh definitely apply awesome and to maybe close out the shill on Das uh we have a code 0x10 if you want to make a trip out to New York um meet some folks from from blockworks meet some folks from the industry get 10% off your tickets 0x10 at the link in the show notes check it out hopefully we'll see you next month um let's jump into some topics for today uh I think the markets have been a little bit of you know it's so over we're so back it's so over again today um the big big sort of news on the timeline right now is the bybit hack something like 1.4 billion plus worth of eth um from their cold wallet was confirmed to be U basically

transferred to some exploiters wallet on chain and then split up among you know various addresses whatever they're going to do to try to you know either capitalize on that or offboard it somehow maybe that's possible maybe it's not um curious on some any highle takeaways I know there's there's kind of questions percolating around like are we screwed are the markets exploding is this FTX 2.0 what's up with Athena um any thoughts guys yeah it's definitely interesting to see a hack of this size it's been a while to be well at least it feels like it's been a while since we had one of these major exploits defen does a great job of tracking some of the largest exploits maybe I'll pull that up here in a second but um this one uh this one's kind of is interesting so it seems like there was a nois safe that bybit

used to control one of its cold wallets uh this had again about $ 1.4 billion do of eth in it and uh the team put out a tweet that basically stated something to the effect of the addresses that we were looking at appeared to be the right addresses but then when they after they signed the transaction it became very clear that that was not the right address uh so the point being here is their actual devices were likely compromised um again this happened you know within the hour so a lot of news will change in the next couple hours and likely before this pod gets out but that's the information we kind of have right now uh it seems like the exploiter basically funneled the funds out of the H or excuse me out of the C bybit cold wallet into uh the first wallet and then

is now like dispersing them across 10K eth clips into a series of other wallets so it does look like a pretty sophisticated hack you know in the past we've seen similar things where the same type of occurrence will happen you'll see this major outflow from an exploited wallet and then you see like more uh let's call it atypical Behavior where uh you know you'll see them like farming in defi applications right like there was the famous one that the funds went into the curve three pool uh or there was another one was actually the jump uh Wormhole exploit for the rap eth on salana and ended up coming back to ethereum and they were farming with that in uh God now I'm totally blanking on that Oasis which was like the maker uh

crypto lending tool at the time and that actually got you know ended up getting counter exploited and they took the funds back from Oasis right and that's like exactly why when you see these like very large scale professional exploit shops uh you never see them farming with it because it's very possible to lose those funds again and that's not the intent of why they exploited it in the first place versus it was like a more casual you know cracked smart contract Dev who went black hat on us um that's when you'll see kind of this like deing or or farming with the funds because there's really nothing you can do with it at Point at that point it's because it's very hard to offboard uh size in especially stolen funds um so yeah it's pretty interesting I think my my big

takeaway from this is bybit will probably be fine you know they make a [ __ ] ton of money it's a massive exchange they probably do more than $ 1.4 billion do in Revenue a year uh they'll be able to repair this whole as my gut feel of course again this happened an hour ago so it's pretty early to tell but that's that's kind of my initial reaction and then secondly big props to Athena's off exchange uh off exchange custody solution right that was like how their product was meaningfully different from other products that we've seen uh that are doing this delta neutral strategy in the past and um they're using copper clear Loop for this excuse me and uh yeah if if you know they already came out and said hey our custody solution prevented us from having an impact to

our custody in this and like you know that this is why we built the system the way we built the system so it's actually really cool to see it feels like a big Pro it moment for the the the tech behind Athena which again I think it's like the fifth largest crypto protocol by tvl these days and yeah it feels like a big win for them um now they still have like I don't know probably somewhere in the order of like a billion dollars of pers notional open on byit and again I think bit will be totally fine but it kind of sprung the question like okay you know imagine that they weren't fine and they had to basically go bankrupt and shut down I I feel like I don't know what that looks like to unwind uh the pers positions or all the other spot

positions but I my base case is just not in orderly unwind and so that was kind of something interesting it's like all right if it were to go south what does that actually look like and I guess that's kind of a good Credence for why you know you want to be on the biggest and best exchanges because they can repair these holes yeah interestingly enough I saw um the Athena Twitter account tweet out actually probably 15 20 minutes ago um so they had their collateral assets from the customer deposits are not they don't reside on the exchange they reside with copper or seu which I think was uh last year rebranded from binance custody um and they you know do off exchange settlement uh between the custody of you know Athena and and the centralized

exchange um but the p&l of those delta neutral positions are on the exchange so it was $30 million at the time of the attack of uh unrealized pnl um Athena just confirmed that they have reduced that to 10 million and with within the next hour it's going to be zero so effectively Athena will have nothing at risk on buybit and God forbid even if all 30 million dollars of P unrealized p&l was stolen which is not the case uh Athena is sitting on I believe about 70ish millionar in their Reserve fund uh which is specifically for these types of you know events got forid of Black Swan event they can cover the funds um that are potentially stolen so Athena is

actually over collateralized in a really healthy position yeah kudos uh every single time there's a black spawn event or marker wide nuke or something like this they continue to show that they have like really anti- fragile um infrastructure and are becoming lender and lender by the day uh so really bullish them yeah okay so I just pulled up that defi llama dashboard that I was talking about I'll go ahead and share screen here as well but one thing I was not expecting to see is this is actually the largest explo by size of all time um the last one was ran in in 2022 March of 2022 for 600 million uh so this is more than double the previous

all-time high in terms of the total amount lost right because this was 1.4 billion now I don't we don't know if those funds will be recovered and candidly I don't know how recoveries impact the numbers displayed on this dashboard uh but that does feel pretty meaningful right like o but and to to my earlier Point yeah it feels like hasn't been a while because it hasn't been a while uh the top five largest exploits all happened in 2021 or 2022 with the sixth largest being DMM Bitcoin for 305 million back in May of 2024 so not even a year ago I actually don't remember that at all to be completely honest but it looks like some Bitcoin custody

solution even though we don't have full information on exactly um like what the actual attack Factor was we do have some information from Ben from byit and we were talking about this morning on like the analyst call and Danny I think you hit it right on the head it's pretty scary how they were actually to be able to actually pull off this kind of attack it sounds like the individual Hardware wallets uh who were the signers of uh the warm wallet or the eventual cold wallet that was that was hacked their Hardware wallets were hacked uh so they were able to infiltrate potentially the entire bybit like employee uh population you never know at this point like you misclick a link you download a you think Zoom link

and it ends up not being one um and you connect your Hardware wallet to a non-air gap device and there you know North Korea hacker hackers or whoever these you know actual hackers are they're just waiting for everyone to slip up at the exact same time um this was very similar and D I know we couldn't remember the protocol at the time but I think Jacob from the data team brought it up in the chat earlier today this is almost the exact same type of hack as it seems from radiant few months back yeah and sticking on with the def Lama shout outs here their sex transparency dashboard is pretty sweet in times like these uh so bit still has $15.26 billion dollar of assets and theyve seen about a 1.7 billion of

24-hour outflow again with the hack being about 1.4 billion of that so they still have uh withdrawals enabled again as David alluded to earlier with Athena being able to pull off another 20 million from The Exchange U so looks like we've seen rough about $200 million of additional inflows and users just reacting to the fact that this this exchange was exploited it was interesting to see the reaction on socials you had a lot of people especially I mean with money in bybit having sort of like FTX PTSD where as soon as they saw an exploit they just rushed to withdraw and like when they just saw like pending in their inbox they assumed oh like the the stuff is like [ __ ] like our money is stuck um

but it seems like withdrawals are being processed uh pretty quickly and the other interesting reaction that I thought was funny was like oh this has got to be bullish eth because now they need to buy back $1.4 billion in eth in order to make uh themselves whole so I thought that was super funny as well anything for an eth bull Catalyst uh also a huge shout out to the bit team they were very vocal on their comms throughout this whole process which is pretty cool to see it's very easy to go like dark mode on this and and just be like oh we're solving the problem and forget to communicate to the world uh but especially when these can create these like you know bankr run es situations it's very important to be commun communicative and vocal and loud and let people know what's happening and

display confidence and I think they did a great job of doing that um the other piece on like the pending withdrawals point so the infrastructure about like how these withdrawals get processed is actually fascinating you know I mentioned earlier there's about 15.2 billion on Exchange they have to physically store that somewhere well digitally store that some across different chains um and so when you have you know let's say you know a billion dollars on uh on a random chain let's say arbitrum and then you know I I had funds on arbitrum let's say I panicked and I wanted to withdraw them from bit you know I go and do that and then when wesy tries to do that and if all the funds are gone but he's has funds that he's trying to withdraw from arbitrum you know on the exchange back and they have to move funds between hot and cold

wallets they have to actually Bridge these funds themselves and then get them back onto arbitr before they can process those pending withdrawals so it actually is pretty interesting to kind of see uh the back end of how all of these things work right and if you like go look at any pivate hot wallets or even cold wallets like they're super active right now again because they're just having to balance their funds based on where the the user demand is coming from to withdraw to those those chains 100% And I great call I think David on the um sort of radiant hack similarity um this whatever this like Trend in um if it's social engineering or if it's just fishing to gain access to like you know critical parties within organizations that seems I mean we're just getting to

the sort of web 2 level of hacking now where a lot of the easy smart contract stuff has been kind of cleared up for the most part you know you're not going to get one billion for free for like bugging a smart contract anymore at least you know generally speaking um and now it's it's got into the social engineering and and fishing and other typical forms of hacks that we see where if you can gain access to like the key individual in the multisig then that's how you're going to get access to ons like this so it's it really speaks to like having to be vigilant about this type of stuff and um I'm sure bit and others will probably be reviewing like their internal security processes following this event one thing that I know we're talking about bit uh I I did say this like

tongue and cheek in the chat but and I said it on Twitter too but uh hyper liquid obviously is like the Talk of the Town this entire cycle um Great Exchange great product um I was like what what are the chances hyper liquid has better security than the buyit top two top three exchange by derivatives volume in the entire world um huge company hundreds if not thousand plus employees I'd have to imagine um hyper liquids ran by what five five people 10 people like I really couldn't tell you but it's nowhere near by bit size uh and I was like what are the chances by again what chance hyper liquid has is strongest security as byit and somebody tweeted a reply me was like well at least hyper liquid is

decentralized it's like is it though is it actually more decentralized than bit bit probably has 10 plus senior officials that control the multi to unlock $ 1.4 billion doll in assets for gold clearly that failed whatever their security practices it failed do we think that hyper liquids 204 multisig or whatever it is it's has to be it's almost definitely least less secure than bybit uh I do have some funds on hyper liquid currently I am not withdrawing them because I trust in uh Jeff the God but you never know at this point uh so I I do think that it will be interesting to see um I think how the market reacts to hyper liquid

are people could actually flock to it because is decentralized or is it actually going to create scare and say actually it has uh a larger attack surface than a central exchange I think it's a fair take um there I think there's a lot of ways that you could take this Viewpoint you know there are still a lot of risks when it comes to Bridges various like if it's chains that you think or say are decentralized like if you have your funds within protocols or in certain assets like I mean you have to be realistic with yourself about like what are what are the actual capabilities of you know either the managers or like the people that run those things are the contracts upgradeable can can things be changed

without your knowing despite you know you having self cust of things on some decentralized Network um it's not always as clearcut as like I can always you know have access to these funds and withdraw them or swap them out um it just it just it really isn't the case in all cases um I think I will say I think Bach is g to have you at the throat a little bit for talking about his hype in this way but it's it's a fair criticism for probably a lot of the like Stacks chains assets and infrastructure that just exists out there generally um and I don't want to we don't have to turn this whole pod into a bit hack one but um it also does look like like you said Dan um they have been very upfront about covering like what's going on the bit CEO's currently live

right now um talking about this as well about the incident so um at the very least they're being very upfront with information it it I would say it feels very different from the FTX situation where the messaging was very much like everything is fine while it wasn't and in this case it's like no like we did get hacked there you know here's the thing here's as far as We Know today um and we'll see what we can do going forward but um I think we can move on those were good points uh the the reason we kind of gathered the blockworks cabal today um was actually to talk about airdrops token mechanisms things like that the the other big piece of news um sort of fresh in people's minds is the kaido air drop um just recently came out um a bunch of CT yappers got a a bunch

of free money for basically just doing what they already do um tweeting and talking about crap [ __ ] posting online every day um and that's great for them uh there's a little bit of back and forth in terms of like you know I think people had very high expectations of how large this drop would be um and they were maybe disappointed in the actual realized value of those drops even though it was still a significant sum for some of the largest like CT creators out there you know mult you know six figs Plus for um large creators the the question that it has sort of spawned is and there's sort of two sides to this is do do airdrops like make sense actually um I I think people are questioning this in terms of like just giving away all of

that assumed Equity if we want to call it that um to people who essentially haven't really done anything right you just if you went on Twitter and you connected your account to Kito apps you got paid money for doing what you were already going to do um and there's some back and forth on whether this actually makes sense or not um I think people debate airdrops all the time generally like oh that that was too much oh that was too little like what a waste um I'm curious like just opening this up guys do we have any like strong General thoughts on like you know does it make sense that kaido did an air drop does it make sense that other protocols like give air drops to early users why yes why no let's get into it I feel pretty strongly that airdrops let it take a step back I got

into this industry because I think that there's an opportunity to um typically in traditional businesses there's two different types of stakeholders there's like investors and then there's like users um or stakeholders that actually have put Capital front in is like feel use a product or a service um and those usually aren't aligned uh and those two types of individuals usually have different um goals or they they whatever they have different like outcomes that they want to see when they use a product or service one wants to make money wants one wants just use a good uh service um I think that I one of the reason why I got into the industry is actually to align those two stakeholders I want like user owned protocols uh user owned businesses um and I do think like

ultimately you do want to give ownership rights over these protocols uh I do think it creates like more sustainable um businesses long in the long term um I think I have a problem with like the amount of size that people are airdropping to their early adopters and not necessarily like the fact of airdropping itself dude who hates free money no and and that's the thing like kaido I got a decent airdrop they everyone that did anything over the past eight weeks of tweeting like got between a Toyota Camry and like a Porsche mccon or upwards of like a you know Bas level Lamborghini uh it's crazy and it was for eight weeks of tweeting um like that is I don't know how to explain that to my

wife um regardless if it makes sense or not like I think that it wasn't it's not good for kaido the business or kaido the the protocol to airdrop that much money 10% of Supply to people that did nothing but tweet or even bought an nft what they probably should have done is give like 1% or something give a very very small portion just to like incentivize them a littleit to continue using uh and say thanks for you know being an early user uh and growing our M shair as a platform and then either continuously stream portions of the aird drop over years or give people the option to buy at a discount and obviously there's a whole regulatory reason why that probably isn't allowed

especially in the United States today which I'm sure we'll get into but uh I think airdrops as we know them today need to significantly change in order to create more sustainable businesses for this industry moving forward yeah I completely strongly agree with everything you just said I mean as a power user of these protocols like more air drops the better for me but if I look at it through the lens of the protocols themselves like these teams it's pretty clear that we need sort of a reframing on how we think about aird drops entirely like basically this comes from sort of the history of airdrops and why they exist like at first it was it was basically this regulatory Arbitrage this

like give Community ownership like we're actually owned by like Community around the world distributed Etc and a lot of these things um and so like that's where I think the the idea of airdropping a significant percentage to the community came from and I think this like this kind of does still make sense in some particular cases if you're let's say launching an Lon and you're trying to be money and you're trying to have like a strong Genie coefficient like maybe it might make sense to have like a solid Community percentage ownership at tge but I think for a majority of these protocols it doesn't make sense and like if you act like if you just look at it

from first principles and do the math like let's say you have a billion dollar FTV and you're air dropping 10% that's a $100 million you're just you're just giving out right and so you want to make sure you're getting at least $100 million in future value uh VI like via those tokens and so I think there's going to be a reframing from like these things as aird drops and more like incentive programs and I think you've you've seen this progression over time where you know it started as airdrop just like General Air drops like retrospective based on like certain activity on the Chain but then that migrated to point systems where you could actually specifically Target certain types of

activity um I think there's there's a problem with the points program and that like as Danny alluded to earlier there's like certain expectations that get created as a result of points and like one of the things that I think is a problem with the current airdrop meta and points is the mismatch between expectations and reality and that's typically what creates negative sentiment is when like there's super high expectations and reality does not meet meet those expectations whether or not the team like made any indication it could just be Market preferences or or just the fact that crypto participants love to dream and like love to like think that they're getting the like hyper liquid type air drop this time I

mean great evidence of that is every uh kaido airdrop you know spreadsheet that was circulating around uh the lowest price was higher than the actual perap value right um so that to your point about dreaming I mean I completely agree with that and this one was especially hilarious to me because all you had to do is tweet most people didn't even change the style okay I probably won't say most people but a lot of people like didn't really change the style or frequency of their tweeting and I disagree okay maybe but maybe that's a stretch but nonetheless like you literally just had to tweet like there was Zero Capital At Risk the even if you did change your style of tweeting what

you spend 30 minutes a day tweeting like I don't know and so to to do that little effort and then receive an airdrop and then the do the typical like w I didn't get enough I'm pissed I don't know this one especially was bothersome to me um you always see that again to your point about dreaming like when you have huge when you set a high bar and reality punches you in the mouth you're going to be piss that's just like human nature but I don't know I I think airdrops are cool and I think they're useful right if you think about like modern web two businesses or just businesses full stop like how do you you know um incentivize activity well you go out you sell you solicit your equity for your idea you

raise cash and then you like use that cash to either subsidize your users or like pay them directly in some cases um right like Uber's shut out Monae supply for the two great examples but Uber in Uber in the early days right you could get across college campus for like three bucks or you could get across Manhattan for like five bucks right and that that was not Uber was losing money they had to pay the driver more um and you know postco I think they had to hit the shell shock button there and now it costs like 18 bucks to go get tacos at this point um and that's the reality of what the rides actually cost right and so that you kind of saw it there like YouTube with free ads the same thing right they just weren't monetizing you and then you got addicted to the product and

everybody posted stuff there and now every 30 seconds you get a new ad um so I think those are like two kind of like real world examples there and crypto kind of gives you the edge to do that with this token now if the token is like pseudo Equity it's pretty interesting because you're just cutting out the VC and you know that's kind of one of the core ethos is cutting out the middleman of crypto right you don't have to go raise the cash when you can just give them the token um which is pretty cool but to the I I tweeted about this yesterday and this really like I don't know every time you get an air drop it's like you try to go explain it to your friends that like don't do crypto just normal average people and you explain all right yeah like so I was an early

power user and this business wanted to reward me for my loyalty and like the you know the effort that I put in to using this application like okay like yeah that makes sense like so you got a rewarded though like for just being a customer like yeah it's crazy but I was really really early so you know like I was one of the first 100 people using you like oh cool like what'd you get like oh then you tell them a number and they're like what the [ __ ] because it doesn't make any sense right right it it doesn't make any sense like in web 2 you know you get a hundred bucks for being a crazy power user right and uh and in crypto web a product with 100 users was able to give a hundred million dollars back to the teers it's completely

unheard of it's completely unheard possible they don't have the money because we create Magic internet coins that and so it's definitely cool like as again as a power user of the industries you're I'm not complaining about me personally but when I think about it from the uh the shoes of this business that just gave me all this money and you know candidly if you look at the history of aird drops you should sell your airdrops immediately when you receive them um I don't know it's like how is this model going to change and I feel like long-term incentives are the clear answer there but like we said that three years ago and we're in 2025 and like hype and kaido were two massive aird drops this this year yeah I think I don't have like the per I wish I had the perfect solution to solve this

for the industry and maybe one day block Works advisory will but I I would like to see some kind of combination of a points program and you can convert those points to create a Deeper Discount on what you can do to buy into the protocol so if I have a thousand points I get a 10% discount uh compared to what the the private markets are G to get or maybe it's going tge at if I have a million points I get a 70% discount um and obviously points are going to be based on driving after specific actions that you want your power users to do to be something that that makes sense and it maybe do like a again a 1% air drop they gave it 1% again people would be upset because of what the industry has been ingrained to

think air drop should be but my wife for like a normal user if we want to onboard the next billion users or the first billion users on CH like they are going to expect a hyper liquid size air drop nor should they because that is not normal uh and I think we just need to think everyone just playing the same Playbook that like Unis swap did four five years ago um and Kudos ATM for doing that again has changed a lot of people's lives in general but it's not it's not good it's not a net good for the industry that we keep doing this I don't think it's not that good it's in that good for me and you and all of us on this call on on this uh pod but like and a lot many people listening but I don't think it's it's not sustainable is

what I'm really trying to drive that and when we're trying to create sustainable businesses like this the say it un swap air drop was 5 years ago and we're still doing it Unis swap still around they're still new products yeah you're right the lab engine is killing it well we mentioned the rarb right the rarb still exists like nothing fundamentally has changed from 2021 I think it it's still entirely up in the air as to whether like a utility token a utility token is like something that is actually legally allowed from like us Securities laws perspective um and some are doing that on chain today many are like laring as utility tokens they're you know they might actually it might actually just be

a meme and like people just speculate on the narrative or like what the category is doing um I I'm curious on your guys thoughts because I was having a little conversation on this uh on Twitter the other day as well around this idea that just like what is the reason for teams not to keep doing this when like that regulatory uncertainty still exists today they can raise private rounds based on whatever they're building and then at some point if they can no longer like do an up in private they can launch a token and that can serve as a raise as well and they can capture some portion of basically fundraising money and like VI vesting from the token itself too um you know you could argue about like whether giving away more or less of the token like that's a cost to them but you

know kaito objectively like they're getting a ton of Mind share from just running this program at all and if they didn't do yaps then like we would be talking about it much less the apps thing is super interesting I want to get into what the evolution of that will be in a minute but um I don't know like okay I think I could also make a better argument for a hyper liquid esque protocol to do a huge airdrop right because uh perss are trading and like let's Loosely tie that to to gambling right okay if you're trading anything on Leverage it's like basically gambling right a 50x position that's a [ __ ] that's gambling and so if you are a casino you absolutely want Rich users if you are a Bas layer that matters a lot

to you as well right you want a wealth of effect we've seen that time and time again matter a lot in this industry um so I can like really see good Arguments for like okay like yeah you know you're probably not going to get that dollar in dollar out return in any near time but like it's going to be useful for you so like Let It Rip whereas something like kaido like I don't think they need Rich users I think the yaps leaderboard is kind of like exactly the tool that they needed to build right and now they have this like every crypto CMO loves that tool it tells them exactly who they need to like it's their kol list and that's like they talk to those people they can like Drive the the outcome that they want on on social media so I think they kind of did

achieve that and then I think that the way the token will play a role here is also pretty interesting if it's this like pseudo Equity thing then again I think the airdrop is harder to rationalize but if it's a community token right like a meme coin attached to a business like jelly jelly but actually actually a thing um then I then yeah like okay it should have been like quadruple the airdrop right and it's pretty unclear to me like which side of that Spectrum the kaido token's going to fall on I I was really hoping to get more from the team around like what the token is what it will be used for like we know it'll be used for like governance voting and things of that nature and it also they called it a

medium of exchange which is fascinating and again I think that they're trying to monetize this this leaderboard um and right like there's this uh there's the uh the kaido connect thing where like you're pay uh you're you're playing this game of getting the Yap voters to vote for your protocol and it's almost like this you know C convex was built on top of curve to be this like bribery system to get ve curve voters to do some intended action and I like I don't know and then you saw Aerodrome and the other metad Dees I think uh sley was the first one to do this they saw the curve and convex relationship and said well why are those two separate protocols let's put those together um and then you know th like that model is working quite well

Aero drum's had a ton of success on base of internalizing that bribery engine uh and so like it would make sense for for kaido to do the same thing uh they have like the ve staking thing and I think that look that seems different to me uh but there's a protocol called like tunnel that is is kind of doing this already for the app uh kaido connect thing so I don't know I think you can go a lot of different ways on how the token gets kind of evolves from here uh and it'll be extremely interesting like I'm pretty excited about what they're doing um the token's been trading pretty positively in between like 1.2 and 1.8 billion uh which is massive so like so far everything's been a success I have to say you know it's a bare Market when

Dan's talking about be toomics again I haven't heard him mention curve convex and all those in a minute early zerox research podcast listeners probably remember that the Glory Days yeah yeah I definitely want to touch on the like sustainability of the air drops I'm actually not arguing that it's like not sustainable if you give out a big airdrop I'm I'm a believer that the markets are like somewhat efficient and markets are going to price the protocol effectively regardless of like whether it's some random participant selling the token or it's the team selling the token like the Market's going to find the valuation I just think these team like you're just not optimizing the resources you have available and you're likely

missing out a market share and growth because you're giving giving away these resources so that's my take and then there's also the thing you touched on Dan of like this like equity and token structure where there's two different things and it depends entirely how you structure the token whether it actually does have value or it's like this meme coin and I think right now going back to like the market always having this high expectations I like to think of like when you have token and Equity now as Schrodinger's cash flows where everyone believes the cash flows are going to both the token and the equity at the same time um but I think over time again with like efficient markets like the

Market's going to figure out whether the token has any actual value or not um and and to me the only way token can have value is if it has some sort of cash flow or unique like tokenomics like like the VOD escro type model where there's like there's some economics going on specific to the Token that in which like participants in the network or the products like benefit financially through that mechanism um and and I think there's a lot to explore here like if you are doing this like this kaido type like your company launches a token I'm curious to see how like tokenomics in that world evolves over time have you been getting silon chain this year

farming on 10 plus wallets across different different ecosystems well Crypt tax calculator is here to help Crypt tax calculator has 3,000 Plus in Integrations to support all of your wallets Exchange accounts and onchain activity and a custom pricing Oracle to handle even the most chaotic portfolios get started today and make tax season easy you can use our exclusive discount code BW 2025 to enjoy 30% off all paid CTC plans until April 15th of this year follow the link in the show notes below to get started I want to share something because it's so relevant to what wesy just said here but uh like I said I was having a bit of an argument the other day on Twitter and I used this exact analogy um in discussing tokens and calling them like a Schrodinger's cat in

the term that they both utility and memes at the same time um this like regulatory ARB that exists is what allows that to stay um but if we had clear regulations on if the cash flows for example could be legally passed back to token holders um then that kind of forces that to collapse and it's you you get to make a decision on like if they can do it then you know then you do have these like actual you know legal utility tokens and if you can't do it then they are actually all memes um so I love that you brought up that point wesy I think that's like exactly the state that we're in and it it plays into the fact that like the I mean everything in crypto gets like speculated on to the Max and we see Wild swings in valuations of

everything um Kaio is a good example of just like people look at comps in the industry it it doesn't really necessarily matter if if cash flows are going to go to the Token today or not we don't really care we're going to look at like what are the relevant comps you know people we discussed on a previous pod or just recently um about Arkham being like maybe a relevant comp for Kaio um you know like you said the market acts like rationally within like the bounds of what is like normal today and like this is just the norm um so it's just it's not crazy to see this continue to happen again and again because nothing nothing has changed to allow like one outcome to Prevail you know we're we're not in the state yet

where like us Regulators for example are willing quite yet to say that like all utility tokens are a okay like go ahead and do it you know drop a token maybe even do a you know an actual Ico and let people buy it um they're they're not at that stage yet and so we're just going to continue to sit in this gray zone is where I'm feeling I think some referred to the gray Zone as crime season just a few months ago uh kind of related to that though uh the SEC is pending a withdraw on against it in its suit against coinbase I don't know that exact specifics here I just saw it right before we hopped on the Pod but that feels like a massive win as well right they've been basically attacking coinbase for the last three to five years and an official withdrawal is like

not a settlement this isn't like coinbase paying them off this is the SEC saying all right we were wrong we're done and like let's move on uh which is huge so it's also to it's it's the issue with regulation and you know that being a catalyst is governments move so damn slow so yes all these things are changing but we're going to be saying that for the next 12 months and uh the question is like when do those things come into effect in my mind yeah and with with positive regulatory Catalyst like this you're going to see a shift in basically everything we've been talking about like the fact that you need this regulatory Arbitrage once we get more clarity it's like that Arbitrage goes away and rules become more defined and

the like expectations of the market changes and then there's also this piece of we've we've kind of touched on it but it's like okay if airdrops aren't the perfect model what is like icos to me seem like like a way better model for for a lot of reasons um one it's just like the participants like to me air drops like leak value in a certain way like in both scenarios the like the token ends up with like a willing buyer is bullish on the products but in the case of an airdrop the like the cash that's being sold ends up in the hands of someone that just like doesn't care about the protocol just leaves um and also the person that's buying the token ends up with the worst price versus an

Ico where like it's the protocol that ends up with the cash that they can in then invest in growth um and like the person that's buying gets it a great valuation um and then there's also this like this sentiment piece of like a I mentioned earlier this mismatch between expectations and reality with icos it's very clear what reality is there's no like there's no possible way in which expectations can get like out of their skis because it's like this this is the valuation you're getting it at um what you expect it to grow to is is on you but there's no like there's no it's very clear um and then again with like buying at a good price another key to sentiment is allowing your community to be rich

but like getting price Discovery for people is super important especially when like this whole year people have been screaming about like VC coins launching at like crazy ftvs and the only way retail can get a piece is like yeah like on the public markets after they're marked up 100x from the private s so to me icos solve like so many problems with like the current landscape in terms of air drops and the way tokens are launched in general it's actually one of the core reasons why I became initially very interested in crypto is I thought that these rails could serve as you know this decentralized method of of fundraising and you know provide access to other you

know markets that otherwise you know individuals could not have access to I quickly learned that that was not going to be the case for us residents in in most scenarios unless you're willing to like fake your identity um but either way I think we've kind of seen this argument play out and what I do actually find interesting is that it's still very common to hear that this idea that I icos are a worse model I'm curious like let's dive deeper into that like what are you guys thoughts but every time people go down this Rabbit Hole of like well we used to do icos and like now everything is just memes like and you have to wait until things hit the public market like you said and they're at an insane FTV nobody wants to buy them and then we have to sit around and let the

market like wait for the price to become reasonable for Willing buyers while while tokens unlock and they get dumped onto the market you said an important word there with the word weight right icos are early stage Venture bets but it's very felt right those take time to develop um whereas a lot of these other things like you just immediate uh the product like think about okay so kaido I think is three years old maybe two and then the airdrop token goes live the product's already there you can feel it you can interact with it you can do things with it versus an icoo is Gen I think back to the Ico era right that was like uh tokens with white papers right there's nothing there other than this

one PDF so I think that was actually one of these weird things now and you can think about human more broadly at least in the US specifically right everybody's super addicted to their phones now and attention spans have gone to total [ __ ] so I think that actually plays a pretty serious role into why things like the pump fun meme era has been so popular uh with people on chain is because you get these like repeated dopamine hits of like up down up down down up down and I I think that's like that's weird reality of like that's why like I call it a game right because it is a game you're literally playing a game versus a true investment into an Ico for like an

actual company and an actual product is like democratizing early stage Venture bets and that that's completely different than some of the other things that we've been seeing over the over the last bit in my mind what's the difference between icos and pump Fon I mean not a ton other than the fact that it's a what's behind the token right like the intent of an Ico is that it should be a real product whereas like pump fund is inherently supposed to be a useless token yeah there's also a difference in the mechanism that I think is pretty interesting it's with icos the protocol sets the price versus like in a pump Fon let's say like a new protocol like bundles like a bunch of the supply for themselves and they're selling off a

bunch that like would be for an Ico they're selling it in the open market depending on what like the current price is in that liquid market so it allows basically the liquid Market to to to price but like obviously like there's probably inefficiencies with that of like people front running the selling and like there's not that much liquidity when things like exit off pump fund so there's there's obviously issues but I do think it's like an interesting take on the Ico model I think pump fun is an awful way to launch a real product token horrible I would agree I think the mechanics just don't make sense pump fun is a great way to trade attention and Trends right you're literally seeing things get priced in real time based on

how many people care or think like it's going to go up because it'll get attention um but for an Ico that doesn't really make sense right the the goal should be to like object like probably to raise funds at like some relatively agreed upon you know current rough market price for what your thing or idea is um that doesn't happen on pump fun the mechanics don't really support it you know who thinks a lot about this feel like I've said this so many times over the last like three weeks that you'd think this dude is like paying me under the table to keep talking about his thing but not at all uh is Austin Adams is he uh was like a Unis swap researcher for quite some time and then he founded wetstone and they're building

pure markets on uni chain and basically the idea tldr is like to build a better environment for launching real tokens uh I say like real meaning like project tokens um and like they're trying to solve a lot of the inefficiencies for a team trying to do that today right and again I he he walks through much more uh intelligently the shortcomings of why pump fund is not great for launching a real project token today and he has two podcasts that he recently did on bell curve I 100% recommend you check those out one's with Jesse Walden and then one is just more of like a Roundup style that he was in on uh both are great both are really great I think it really sets the scene for how these things are going to change um and after listening to those I immediately tweeted something to the

effect of like if anyone's going to like rip the meme coin ball out of Sal's hands right now it feels like it can be uni chain because of what V4 hooks enables and people like Austin are building today um now I think there's like a pretty good argument to be made that pump fun is the most efficient and beautiful beautiful simp uh simplistic design for launching these like attention style meme coins now and the reason being it's quick hitter and like yes that is absolutely in increases the number of scams you're going to encounter uh but like to the the players of this weird game like that they understand that for the most part um so it's weird I I mean like I again I said it on the light speed episode I'm

not bearish the total number of pump fund coins over the next like 30 to 60 days like the people that were participating here already knew the leers of the world existed um um so I don't know I it's it's going to be weird to see I I guess the tough part to really tackle is that this sort of like regulatory uncertainty still impacts this potential for something like a an Ico Revival right you know you might at least within like for us users um for a lot of for the non-accredited you know us investors out there um historically like strong projects that do raises like you're not going to

be able to to get a seat at the table there unless you fall into this category um and that probably stays the same until kind of the regulatory uncertainty clears up if it ever does it may never clear up in a positive direction for like non- accredited investors maybe think that's right or wrong but um it you know I don't think that that part of the model can necessarily change now you might be able to open up the access to this you know back to people from other countries or other areas of the world and maybe that's totally fine and their front ends will allow that but um at least within the US this is going to be a lingering problem I feel or at least a lingering sort of battle that will be going back and forth on until some change comes I think it's

gonna happen to a lot of people expect I think you're going to see changes through accredited investor laws I think you're going to see centralized exchange regulated icos and by regulated I mean like they just do kyc KYB kind of thing um yeah I I don't want to say that the administration's a paradigm shift but I actually do think it will be and I think it's actually going to happen in within 12 months they TR Trump and like that admin has first of all they put very interesting people that are very progressively like crypto forward and to um I think Trump is and that admin is going to try to really make a mark in

their four years and I think they're going to try to do it sooner than later um I don't think it's G be something he waits four years to do I think it's G be something he waits doesn't wait to do uh it's G happen soon is my bet maybe not this year but I'd be surprised if we don't see strong movement on this front in 2026 yeah I guess the signal for that I mean Dan you mentioned I believe the coinbase SEC lawsuit getting dismissed like that is a good indicator at least of the the shifting kind of regulatory Viewpoint at the very least you know I think generally speaking you know we went from an environment of like the SEC not being willing to concede that anything is like most likely not a security um they were kind of it was

sort of like a you know well which ones do you think are securities and then you kind of have to like guess or be like well we we think in good faith that these are probably the best ones and then and then they come back and say well actually you're wrong because of XYZ reasons that are unclear um that seems to be clearing up at the very least um I guess going forward like what I mean David you gave your thoughts there I mean how do the how do you guys feel wesy Dan I mean we're seeing some movement on things but uh I'm curious like do you feel that like generally I would expect that these are longer term things that we would have to see materialize right we'd have to see legislation come through you

know the Cong come through Congress you know we'd expect that maybe the SEC or other like um executive agency might need to take some time and like survey the landscape a little bit to understand what even like meaningful you know rules and regulations should even look like in the first place I think it'll be like waves right if you were going to get like centralized exchange regulated icos or something like actually groundbreaking like that it's going to have to go through the boring long boring process but there'll be smaller things in between you know today and that right something as simple as like conferences coming back to the US shout out blockwork St um like those will bring the protocols back into the space who are willing to spend money on advertising and like participate in the

US uh side of the the crypto world so in like developers moving back to the US or founding companies within the US uh so you'll see like that Trend start to shift uh as people will become more and more willing to just like take the bet that these things will change over time but I don't know if you're not going to like I don't know how visible those things will be um over the next 12 months right like the the the the benefits of those take longer to come to fruition and then again like to get those groundbreaking changes whatever they may be whether it's accredited investor laws and then like echko opens up to everybody or if it's again like something interesting with how tokens launched through centralized exchanges in this like very permissioned but government approved way uh could also be interesting and uh something I'm

wouldn't be shocked to see at all and that that'll take longer for sure yeah it's going to take some time I think crypto participants are so used to like things moving fast because that's just the nature of our industry but the government does not move that fast and yeah I mean Dan basically hit the nail on the head I think pretty soon you do get some like foundational like good regulation for the industry um like like clear rules from the SEC for instance and some Market structure stuff um just like laying the ground rules and like allowing Innovation and for teams to come back to the US and feel comfortable but a lot of

the more detailed stuff is going to going to take some time but we it is like it effectively is a new paradigm from regulatory perspective like we have everyone in this Administration that we need to have to see positive change and so I feel very confident we're going to get it we just got to be a little patient uh on the time frames because we're so used to like stuff happening quick but it will happen you remember uh about two weeks ago there was news or I don't know if it's real or not rumor circulating about pump funds to potential token launch and they're supposedly working with our exchanges to create some type of like Dutch auction public offering model

um again the team Alon shot it down saying it's not true I I wouldn't I actually think it probably is putting my tin fo hat on but I actually think especially pump fun trying to do what it's trying to do which like democratize access to launching tokens and I I do think that they know like they need to become a launch platform Beyond just like attention meeme coin economy um they could be the first on to really try to do this in a big way like a more regulated way to Bar do a barbell approach right like they're meme coins but then they're like no we're to launch a first like real regulated Ico that would be super ironic it would be but usually the most interesting there's a

razor for this right the most insane outcome is always the outcome y if if pump fun does the biggest air drop ever do you sell it day one I mean it's if it's the biggest ever you probably sell it just because like it it would take a lot of buying pressure if it if it's that big like you probably do but yeah it entirely depends on like the market at the time the percentage of tokens what valuation it launch is at yeah depends a lot of parameters go into the decision but if they a drop me a a Porsche I'm I'm dumping that I'm sorry yeah I love like using airdrops in like car terms that's my

favorite yeah I feel like we need to talk about defi to cleanse ourselves from the meme coin and Regulatory conversation this was I've uh I don't know about you but I've been using Morpho a lot I I don't own the token I have no thoughts on the token um I've just honestly loved the product given the recent change in market conditions I have more Stables than I usually do and seeing that balance just sit there is actually infuriating uh again going back to the the deterioration of the human uh T attention span uh so I was looking for places to farm them and honestly like I love the Morpho model here I'm like kicking myself because people told me about Moro like long before it entered its its uh its new era and I just like

ignored it at the time lending was just like super boring and it was just like the bare Market Blues um fast forward to today and like the product is incredible big shout outs to Gauntlet and Steakhouse I'm using both of their vaults and um they seem like it just seem like a great way to deposit Stables they do all the hard work for me and like obviously there's risks associated with that do your own research y y but um it's it's fascinating to see kind of how this is evolved so they're on Main net and Bas today I'm using their Bas deployment but it's it's been the I've used more of this product in the over the last couple weeks than I have anything else which has been pretty cool shift H me saana uh honestly my Stables are in my

coinbase wallet on base and I'm too damn lazy to move them I I'm sure you probably saw my admittedly aggressive complaints on Twitter about that stupid [ __ ] Bridge button on the coinbase wallet app uh okay so there's got great solutions to move things across chains today and they have like a very slow and horrible horrible ux in in on that button you're GNA get me riled up again you click that button and you just get like okay yeah your transaction went through cool and then your your funds are just gone as you're moving usdc across chains and then 30 minutes later they just reappear okay so like I was you know I'm capable enough to like click into the transaction see what it Ed and be like all right like I can my funds are not just like vanished into noville but like

didn't tell me that as a user so I'm still pissed and then B like things like uh Bungie or uh dbridge are great ways to move funds across chains instantaneously by using like leveraging market makers on the back end that button the bridge button should absolutely be using those Solutions on the back end or use your own market makers your coinbase like you can you can figure this out um I don't care what you use I just want it to be instant and I want to be fast and so after that Fiasco my funds were on base St on base you're not I'm not moving one thing want say really before Danny sorry Chan um if Jesse if you are watching this I am big coinbase bowl historically speaking but I will say uh using the coinbase wallet extension and

going to swap on that um it opens up a new tab on wallet. coinbase.com I believe not the best ux please just let me swap in wallet don't open up another tab like reduce the user uh friction blows in my opinion I think there's a a good irony here as well like Dan you brought up Moro and then you brought up pain points with coinbase products um they just recently did an integration where you can you know borrow usdc based on you know BTC collateral and it just I was looking for this button too I don't have it yet but I was base chain like or uses base just natively you know SWAT converts your Bitcoin to CBBC wraps it up and then deposes it and then withdraws usdc like all natively on base

using Moro and then you just I don't know I think you just bring up great point that like you go to bridge or swap or do other things and um there's a lot of pain points there and and you know they haven't quite gotten to the same like seamless level of making use of the onchain things that are available yeah 100% agree it's still my favorite mobile app I know um rabie has like a much better bridging button uh so I think they certainly haven't beat there but like I don't know about you guys but once I have like a wallet with funds on it takes a whole lot to rip me out of it like I I was a metamask user for far too long and then I switched like all my my laptop has my like I'm I'm I use I don't use metamask anymore um I don't know

yeah it's just like the hot wallage man management system is still a bit of a a disaster in my mind I'll show Phantom because it's it's the same experience now where I feel like people used to be you know everything is in metamask you do it all in metamask once it's on chain and I feel like Phantom has been killing it with you know they've got s they've got bass they've got obviously salana um they're kind of becoming like that Powerhouse and it's like I don't know it's nice to use it's Sleek it's it's easy um you know maybe pay some front-end swap fees if you use their swap feature but you can just as easily like pull up Juke or pull up whatever native thing in the in the Explorer um I feel like they're they're at that same strangle hold point where it's just

easier to use you know Phantom as like your your solution for everything yeah I I feel like they're probably the market leader right now but like if you really pull it apart like how much better is Phantom than metamask it's not like a huge difference they have a lot of better ux features right like dude I was using uh I had like a really a test wallet on my my PC that has like five bucks in it and I just use it for like test trans test transactions when I'm doing data work and and size check and um it's a metamask because again it's just been there and like I'm not [ __ ] changing it and like when you get a new coin still it's like hey you got a new coin like you should go add it like what

just show me the coin so there's like there's really small things like that Phantom does infinitely better like for example that like you buy a coin coin shows up in your wallet duh that's what the user wants um but like none of them feel like this awesome product yet and honestly I think the coinbase wallet's the closest piece to being that um again there's like some low hanging fruit in my mind of getting it closer like that bridge button but uh and I will continue campaigning on Twitter I've now resorted to telling Bungie and telling dbridge get get implemented here uh but it feels like the most Complete product right and like I I use coinbase as my centralized exchange so I can kind of like pair these two things together pretty cleanly um yeah I don't know I'm definitely a fan of pairing the products

together as well love it um I think that's probably a good place to leave off uh maybe one more shout out in terms of news is there's been a bit of a crazy Community CTO happening on the timeline for Aptos um we've had a a Buzz Lightyear buz lamic account really just putting Aptos on his back carrying them carrying the chart carrying everything really um and people love this guy I mean I think I mean I'm sidelined and I hate it but I have to like every one of his posts um the guy is just hilarious it's surprising to me that um maybe other teams haven't like gone this route so to speak in terms of marketing because like engaging the community in

this way is is really effective as we've seen every he's commenting on every large you know CT account um and it's just absolutely hilarious D he's been commenting for months on like so many posts and it took it just took one I think it was fasia like his post that went viral and it was just so funny that everyone was on board uh and he's had a bunch of like witty posts he's going back to like 2022 post of Kobe and like asking if he's sidelined it's the best thing to happen to CT in a long time like every time I see a tweet of his I crack up so yeah shout out to him we needed this we needed this this is what people stick around on

CT for great EP um hopefully everyone isn't sidelined out there like I am um if you are ZX research looks good here yeah maybe reconsider your positions uh otherwise we'll uh we'll see you guys next time appreciate you all for coming on we had the join the telegram the cabal we just talk [ __ ] in there it's fun and join the telegram cabal now that I'm mentioning the the blockworks cabal because I think most of the blockworks cabal is in the telegram cabal so hop in there you can also talk to uh James Kristoff classic classic we gotta start we gotta start charging this man for shout outs I don't I think I'm in love with him I don't know why I keep talking about him I I I think what I

would say the equivalency I'd make before we close out is James Christoff is probably the buz lamic of the ox research telegram chat so we'll in performance he ties it together don't stay sidelined we'll see you guys next time thanks for having us [Music]