Leverage, Restaking, and Ethereum ETF Demand | Roundup

Transcript

you know it's pretty cut and dry for trafi you know this is the next ETF crack they're going to get there's not going to be one for a while after this you know probably like a couple of years you know maybe three years something like that but you know price is going to drive narrative and when you see that Bitcoin is doing so well on the back of these ETF flows people are just going to get up to the plate and swing um it's it's going to be pretty cut and dry and like I think the things that matter with eth are it's a name brand it's going to be one of the two that has an ETF and it's going to be basically the beneficiary of of these flows alongside Bitcoin hey everyone wanted to give a quick shout out to the Wormhole Foundation if you're a bell curve

listener you know that transferring across chains can be a massive pain I certainly do I complain about it on this program all the time that's why we are super pumped to have partnered with the Wormhole Foundation the stewards of the Wormhole protocol the Wormhole protocol connects over 30 blockchains and six different run times including salana soie ethereum layer 2os and more and the coolest part about this particular partnership is that they have made custom bell curve nfts which you can get and Min for free you can claim that by just going down into the show notes and clicking on the link all right guys I'm with the show he everyone this episode is brought to you by swell a team leading the reaking future with their liquid reaking token r s now I've talked about liquid reaking on this program before I think it is going to be a

massive tectonic shift for ethereum and I am super super excited about it and I like the swell team a lot goes without saying do your own research this is not Financial advice you guys all know the drill again I like this team and if you stick around I'm going to describe how you can restake your eth in swell earn pearls I layer points and a whole bunch of future rewards so thank you very much for swell for making this episode possible hey everyone wanted to give a quick shout out to this episode sponsor flood protocol the optimal decks aggregator now if you are a listener of bell curve you know that me is a massive problem which is why we are so pumped to partner up with flood on this season flood is the only gasless and meev free aggregator that not only gets you the

best execution but also Al gives you back all the extra Surplus that you create every single time you swap now this is relevant for both swappers and developers but you're going to be hearing all about them later in the program so for now thank you flood and back to the show all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone welcome back to another Roundup edition of B curve

you got Michaels one and two Vance and Miles fellas welcome GM here we are jam Jam J Jam you El h a couple GMS this week oh yeah yeah do you guys see on farcaster you can actually do a you do instead of liking something you can just toss a little GM I don't know how that actually works but have you guys been messing around on farcaster now that we're like two weeks into this type I need to get on farcaster I've been slacking on that I think Michael's maybe a bit further along yeah well I had uh I think a similar situation to yo where I signed up a long time ago like the whole Dan DM got in then my Apple ID got

hacked in December and literally with everything uh that goes your Apple ID so does your all of your apps It's associated with your Apple ID which means I had to restart so no I'm back but it is tough frames is actually pretty cool I I like you know some of the narrative around headless marketplaces and kind of headless advertising um head transactions but it's going to be really it's like a just came out and people are going to start experimen with it um it's uh I'm actually talking with a guy who did the uh Girl Scout cookie uh frame just I think he's working on something new um apparently he had to fulfill like a

thousand girl shout tricky orders you know crypto cryp Twitter hry for some th um but I mean there's there's people experimenting it's cool stuff I think it's cool I've talked about the me advance covered it when frames sort of came out but it solves actually a lot of problems pretty unironically for Block works like some big problem so I'm just rooting for it I I really hope it ends up working and a good portion of crypto Twitter migrates over there I think it'd be yeah com Commerce plus consumer is a powerful concept that nobody's really tapped yet yeah totally agree um so in terms of Stories of the week I actually wanted to

start with the uh I wanted to talk about the ETFs I I don't really want to spend too much time on the Bitcoin ETFs you know suffice to say there have been a lot of uh the the tide has turned on the the flow both in narrative and in actual um repeated inflows we've been having 500 and I think yesterday on Thursday we had over 750 million in net inflows for Bitcoin by the way I you guys might have seen this because it was floating around on Twitter but you guys you guys if you had to guess on what year-to-date flows look like for gold ETFs what would you say that looks like I I I I cheated on this one because I read that tweet but I mean let me if I can pull up the chart from Zero Hedge but like gold inflows

have been getting crushed and Bitcoin been just absolutely ramping um like if you're holding gold right now you must be a little bit nervous if you don't have a Bitcoin or crypto hedge like someone checked on has someone checked on Peter shiff lately like like a well a wellness check maybe wellness check yeah uh I mean this is kind of like the the switch right where the Boomers just kind of get rugged by something that they didn't quite see coming but it's just like so empirically clear based on flows that if this train keeps moving it's not the numbers the numbers by the way Michael before you go is the

year-to-date flows for for the Bitcoin ETF complex which only again launched like mid January is 4.1 billion so that's net including the grayscale outpos that's net exactly net that's net and for gold the inflow or the there have been 2.4 billion in outflows since the beginning of the year which is that's pretty wild um so assume a couple of things number one what what is the total outflows from gbtc like five five and a half something along those lines yeah I'll get I think it's actually closer to six at this point maybe six at this point um so assume that that was a lot of pent up you know basically sell demand where

people wanted to get out of the gbt see based off of a number of reasons the closing of the the spread trade the you know fact that it's 3x higher than the highest other cost uh structure but assume that that is going to slow down so maybe in future months you kind of remove a lot of that hent up sell demand and net net we're still talking about something that's over 10 billion of net inflows into these new products the uh Bloomberg guys Eric and James said that when they were and I don't know who they talked to but one of the things that they referenced uh early on is that a lot of the people who are in gbtc are not people who are looking to necessarily rotate into new products

they're looking to close their their their spread trade or they're looking to kind of move on and kind of cash out um and so the flows I don't think are out of gbtc into the other nine products or the other eight however many it is I think it's really net new into these new products with some people leaving the gbtc pool and and so if we extrapolate this out even further what we're really talking about here is something that's on the order of like 10 billion dollars of net inflows over the first month obviously that breaks all the records like G GLD um you know it took them like three or four years I was reading to get to those level of daily inflows to get to this level of size um but the other

thing to keep in mind here is number one there's a lot of platforms that these independent advisers and financial institutions have you know basically as their systems that they have to deal with and a lot of those platforms have not even integrated these products yet and so there's still the capability for a lot of the and and if you talk to a lot of the athlet managers a lot of them are sitting there saying we're going to wait for three months to see where these products net settle so we know which ones to go in on and we know which ones to trade there's a lot of people still waiting in the wing that I think is really interest and probably will keep the inflows coming um but I mean if we're talking1 billion a month like it's 120 billion dollars a year that's way

higher than anyone's highest that's meant by a factor M Mike share share the what I've got on my screen at the moment um I mean this gives Just A visual representation to what some of Michael's talking about like does that if you're holding gold does that chart make you nervous wow 100% um and it's just like I was watching the Gary Gensler CNBC interview yesterday where he's like it's just an accounting Ledger like talk about coping and you can kind of see how people who would be holding gold would be S kind of saying the same things but if this trickle turns into a flood it's going to be really interesting to see the market caps of

Bitcoin and gold converg and on the Flow side the last thing I'll say is there was an interview with on CNBC with a couple of large raas and they're pegging the first two years of demand for these crypto ETFs is 150 billion which would kind of foot with like the first 10 billion of inflows this month but like if Bitcoin breaks alltime highs and the marketing machine gets going like I could see it going far higher than that um well yeah and so I I think I think the story is just unprecedented demand and effectively everyone Mis misunderestimate what like how do you miss this large of investor demand for a product it kind of does not look

favorably upon the ETF industry as a whole so well you mean the SEC not the ETF industry right but but I mean everyone in their mother in the ETF industry outside of like James safer balunis was like these things are gonna have no demand yeah I actually to advance this point if you remember uh so State Street has sort of famously they were doing things in in crypto and then they they pulled out and you go but if you rewind the the tape back a couple of years you know when people at these big institutions were interviewed you know it was like there's no client demand for this you know that's why we're not investing in the space because there's no client demand in I think that's been proven Incorrect and do do you remember that Vanguard literally has blocked these products yeah yeah I I guess

that's a brand thing from their standpoint but Fidelity got I don't know tens of thousands of new accounts within the first couple days which makes me very happy as a Fidelity Alum um but you know I think I I'll be super curious to see just like uh even on the Fidelity platform I guess what the AUM of you know Bitcoin held directly because you can do that now you can hold buy Bitcoin and directly versus the ETF side I'm sure it's very different for retail versus anything you know it institutional like with on the advisor side or even even on the asset management side um but yeah it does feel like the cost structure is very different right there's like zero zero

fees on on the direct versus at least something on the ETF um it will be super interesting to see just how that might shift over time or maybe it never does but you point well it's interesting so Robin Hood reported their results and they have all 11 ETFs listed and they're still saying that 90% of their volume is coming through like people actually buying Bitcoin and not the ETFs so there's going to be some sort of age divide between these brokerage houses where the Boomers just want a security and you know the kind of want the real thing and I think that balance is nice you don't want like I kind of view like all of this Bitcoin going into these ETFs as like coins that are being siphoned out of our industry which is kind of like cool and and kind of sad

but like we should try to hold on to the physical as much as possible for long possible especially if we ever get to like an e ETF I think that becomes even more you know I I don't know it's closer to home right because we actually use this stuff and feel like there's more that can be done with it but so so not exact what I was going to say which is I wonder if there's some advantage to holding Securities in a Fidelity account like you can borrow against it you can use it as margin versus the core Bitcoin itself which you may not be able to use um so you you you touched on it earlier with these you know like compatibility with backend systems right and so I think that is a big part of it and a big part of like what we were trying to

figure out at the time is okay great we want basically people want everything on one screen right and they want no sort of friction in terms of their workflows and processes and how do you basically you know map over all of that to holding the asset direct it's a lot more challenging than uh you know an ETF right um but it's possible and it's already you know we've already kind of figure that out but that definitely plays into it um at least for the institutional whether it's you know a fiduciary right holding on Beyond somebody else one other thing you know Vance you just mentioned uh sort of the mental framework of the the underlying that goes into these ETF just being sort of moved into this this like Black Hole

uh but another way that you could look at it as well is like if you looked at this is kind GNA be kind of a silly analogy but like trafi is an L1 right and what eth is sort of doing is you know eth exports wrapped versions of itself up to op like optimism and arbitrum and there are certain properties there like you get the more Direct Security assurances of eth but you can actually use the eth to to do things and then in the uh in this other rap version that exporting now into trafi then it has these other properties and it's like custodi by you know Fidelity or bny melon or whoever ends up custody it and like the kind of shitty part of that property is you have to pay management fee on it but it's also like pretty safe and you get some of the

legal assurances of being in the US so that's that's like another mental framework that you could maybe have for the ETFs yep and and I I think um the reason I kind of referred to it as a black hole is because there's no in kind redemp exemptions it's going to actually be like pretty hard to get coins like out of the ETFs back onto the exchanges um and and maybe some additional kind of inside baseball commentary on just like how impactful these flows have been and and could continue to be is that like the the coin allocation process of getting coins from exchanges to you know basically the ETF C custodians is like one thing but you know we have market makers reaching out to us saying like hey can we borrow can

we borrow Bitcoin for 12 hours and you know we give it to us now and we'll sell it to the ETFs tomorrow morning and we'll give you like you know some yield on it in in the next 18 hours and it's like the inventory levels of these market makers is becoming extremely constrained it's like SEC lending yeah wait can I tell you another so I was on a call this week with a large Market maker and one of the things that they were extremely focused on was this idea of yields um and the underlying that they're holding so their goal is like I don't want to be to basically be holding anything in inventory that I'm not earning yield on but most of the liquidity is in the Bitcoin and eth trading Pairs and so what they're

basically trying to do is create a system and to lower the amount of time that they can go from you know instead of holding eth they're going to hold Ste um and what they're going to do is they want to move the amount of time if like if they want to conduct a trade or something they'll go from Ste into eth back into something that bears yield and they're trying to minimize the amount of time where they're holding the underlying and I I just think you guys I've been sort of banging this drama and I feel like people are underestimating the degree to which trafi just freaking loves yield and I feel like that um as that's G to be a massive part of the narrative um moving forward y crypto loves yield too yeah we love actually kto loves yield we love not as much as

air drops but but yeah yeah you can love but but we're starting to build this kind of like repo Market within crypto and and the first use case of this Market is filling this ETF demand that is basically overwhelming the balance sheet of the Crypton native market makers like you have to remember you have the authorized contract participants on the ETF side and then you have basically the crypto native people who are like taking coins from binance and putting them in in coinbase or you know from okx to coinbase and like those are the people who are balance sheet constrained just because like the biggest market makers in the industry are wintermute GSR jump not So Much Anymore like the Cumberland um and Cumberland is like a huge you know multi-asset desk but

there's just not enough Capital right now to fulfill these these BTC buys um it's interesting so guys maybe we could um you know transition to from the Bitcoin part of this into the eth story here and I would love to get your guys take on I think a debate that I've started to see for him a little bit on at least Twitter which is is there going to be similar amount of institutional demand for a spot eth ETF the same as there was for a spot Bitcoin ETF and I have my own thoughts on this but I kind of wanted to te it up and get your guys thoughts on this so I don't think there's G to be the same brand appeal um I mean look at

what we're talking about in relation to Gold I think Bitcoin is is pretty representative of digital gold at least that's the Z guys that most in maybe like Boomer investors think about it in um but I think what is baked into whatever the eth ETF you know seems to have at least at this point based on a lot of the applications that we've seen is the ability to state which creates this whole different type of product which I I think is going to be pretty unique to the entire industry where the ability to say hey I want to have exposure to this ecosystem I know ethereum is something that I've heard of I don't really know that much about it buty it's spitting off you know 4% yield and that could be a base case a downside protection a margin of safety wow that's

pretty interesting it's like upside huge downside protected in in a lot of ways so I think the devil will be in the details in terms of what they can get past with the SEC um anecdotally though I I've heard that you it it most likely will not be in May um and it'll probably be something it's like 5050 it'll be in May but it's like 80% chance it'll be by the end of the year um and so I think for us to be able to get the product that we want um you know it's actually going to be you know what we need um but it's not going to be you know something that happens in the timeline that people are expecting and even like all the pundants that I see on Twitter are kind of coming to this

perspective yeah I disagree with that um I think it will be a May date um just based on the different types of applications that are being put forward and and just how aggressive they are with including staking um and whether it's in May or whether it's you know what I'm saying is for staking in particular staking is yeah for staking in particular that will probably be like a 2025 thing I think you see the base level spot approval this year and then you kind of like haggle with The Regulators um to to get more kind of full featured staking products put in there but you know the the interviews that I've been watching recently have been with Hester Pur and she's been pretty unequivocal that like

look we're not going to do this like court court thing again and even if we do it's going to be a truncated process the DC Circuit Court starts in August uh but it would be a truncated court case ruling based on all of the grayscale priors so you're not going to have that same like year you know maybe if it goes to court it's like three or four months in our opinion um and I I bias with a lot of what the Bloomberg panel on on this week was where you know I think one person was at 50/50 and one person was at 7525 and I think that's kind of like representative of of where the odds are um I will say that like you know it's pretty cut and dry for

trafi you know this is the next ETF crack they're going to get there's not going to be one for a while after this you know probably like a couple of years you know maybe three years something like that but you know price is going to drive narrative and when you see that Bitcoin is doing so well on the back of these ETF flows people are just going to get up to the plate and swing um it's it's going to be pretty cut and dry and like I think the things that matter with eth are it's a name brand it's going to be one of the two that has an ETF and it's going to be basically the beneficiary of of these flows alongside Bitcoin and I see it less as Bitcoin versus eth going forward I think you're going to have kind of like the second

wind of you know Michael talked about this but products getting into National Prime brokerage accounts that's going to be led by Bitcoin in the next three months like they're going to put all the leg work in they're going to get get access to all these different raas and and distribution channels and then it's going to be like you know do you want to buy the 50/50 Bitcoin and eth combination ETF that we have do you only want to go buy eth you know like maybe we do this thing where Bitcoin runs so high that there's like now this massive cashup trade but like all the priors are going to be very favorable and so I think we're kind of like rerunning this thing where it was like oh yeah there's going to be no demand for Bitcoin it's like well guess what there's a ton of

demand for these things um and if you don't have anything else coming down the pike after that like it feels like the game is going to be pretty easy yeah keep in mind you're going to have to have a futur product before you have a spot product for any other asset and and we're not even really and we're not even really close to anything else being there the the other thing I'll say is that um if you look at the liquidity of eth versus Bitcoin it's probably about 60% you know there's a lot less of the eth on exchanges the last time I checked there was about 12.5 million down from almost 27 million Ion at the middle of last year you know you have reaking you have you know the nft comeback which we can talk about like there's just a lot of supply syns for this eth yeah and you

don't really have that with Bitcoin I was G and do you think that will play into like the demand for the ETF just because I guess for starters eth and Bitcoin are very different products right um and and so maybe they have different places within a broader allocation um and then two I think you would hope over time people realize there's you know a lot you can do with your eth and there's you know I'd say like the the difference between holding a Bitcoin ETF and versus direct versus holding eth versus direct is is way bigger right um well yeah so I I think that that is the question of when okay so I think you know one of the things that we're seeing in some of these applications right now is the ability to stake I think that that is a total

scarecrow argument and they're they're putting it in there basically as a negotiation tactic to be like okay fine like we'll take out the state but we're going to move forward with the rest and so you're going to have you know basically these ETF spot ETFs e spot ETFs move first and then it's a question of okay what can you do afterwards and so the products will add features they'll add capabilities and I think that that's where like it sort of is just like the catnip that draws you in and it's like oh this is interesting but in the same way you have the happening you have the same Supply scenes or or even more Supply scenes on the each side and I think you know you're going to any increase in demand is going to drive this reflexive cycle that I think draws attention to it just as you're seeing

with Bitcoin right now and so you're going to get the same price action kind of narrative driving effects of what the spot ETF launch will look like but then it's it's sort of like okay I've been educated on what this asset is I've been educated on the fact that it's an Institutional class institutional grade it has all the distribution that we've that we've you know been able to enable with all the E with all the Bitcoin spot ETF products now what can I do with it and I think there's going to be some Financial products that do that on behalf of you know people basically tied within a a security wrapper but I think just anything where you can educate more people on what ethereum is and and how it works and what you can do with it is a positive Catalyst because then you can

start to build onchain products that maybe people want to go discover as well and the the psychology of investors as well is like you know if you want to be long tech you're going to buy the mag it's not like you're going to have like this super principled like o I want 40% apple and I'm going to underweight Netflix and then I'm going to go you know overweight Microsoft when a new asset class pops up it's just like I need allocation um and so I don't think investors are going to basically you know distinguish between eth and Bitcoin they're just going to be the name asset crypto Brands um like like for instance like you know imagine a conversation with an adviser you got Bitcoin you got eth you've got a 50-50 Bitcoin and E ETF like what's that

conversation like you know maybe it's like you have a bunch of gold so you want to be overweight Bitcoin maybe but I think it's more so like look interest rates are going down Bitcoin and ether are the standard bearers for this industry you're probably better just like you know 50/50 allocating last thing I'll say on bitcoin right now is is um the flows have been absolutely shocking and so positively encouraging for the industry but ebtc bought them basically on the day that these ETFs came out and so you know what that tells me is that in the face of billions of dollars of inflows this catchup trade is already starting but also like what you're probably seeing manifest right now is just a

supply scarcity of actual eth and I think one of the things that Michael and I got wrong in 2023 was like there was this huge overhang from proof of work ethereum miners dumping all of their eth like we we didn't really consider how pissed off these people were at basically this gravy train being shut down but that whole year was basically them selling this SE and them selling calls on this SE and and kind of dampening the volatility but right now what you see is like this the supply shrinkage playing out and you're starting to see in the options market like eth calls are cheaper than Bitcoin relative to upside and so like I think a lot of the options activity is going to be super important here and options on on uh on the ibit and you know BTC ETF

products launch in in June and I I think that's when you're going to see this next kind of kick higher where people start to get really interested in the options market and people are eventually just going to be like look um Bitcoin options are great uh we obviously want those but like these are more expensive than eth options relative to the road map relative to the ETF flows that are to come all that stuff yeah I agree with so much of that Vance and just to underscore the point that I think just to drive it home I agree I feel like a lot of the sort of bickering about e you know is it ultrasound money or is it not ultrasound money and how does it you know stack up against bit no those are for crypto natives to argue about those are not conversations that are going to be had

you know in uh in The Brokerage wherever yeah it's that's not what trafi is thinking about they're just goingon to i' be look at it like yep I want broad exposure to this oh and by the way um eth is kind of smaller and newer and I want to catch the next Bitcoin and I the other thing that I would say as well is like we've talked about on the show like I'm sure there was a minor selling Dy DC last year but also the you know eth Bitcoin is playing out exactly like it did last cycle I mean Bitcoin ran last cycle Bitcoin dominance always spikes around this time this is like super typical Market behavior for as far as crypto Cycles is confirmed and kind of the next thing to happen is like okay Bitcoin has its run and then it's eth and then alts right that's if it just

replayed again same as it did last time that that's what you kind of expect right so I feel like we're seeing pretty typical Behavior the economics are are also undeniable and that eth is more reflexive than Bitcoin and so smaller moves in eth will have more price action in eth which has more price action in eth which has more price action in eth it feeds off of itself two two two truisms that are always at the top of my mind is number one there's always a market to being early or earlier to something like if Bitcoin hits you know 150k and and eth is like at you know six or sevenk like there's going to be this massive like okay cool I want to be new to this thing and the second one is that you know we

can debate ultrasound money and Mev and all the intricacies of blockchains but a lot of the stuff when it really gets going is that price drives narrative which which drives price um and so I think they're especially in the bare Market people are in crypto hyper Discerning this thing's a scam this thing's not a scam this is good this is bad you kind of have more of like a peanut butter spread when it's a bull market when it's just like look these two things are going to work and and you know whatever issues you have with the protocol or ultrasound money or The Branding or whoever it's like it kind of goes out the window the bar gets lower is another way of saying that yeah I would call this eth ETF uh disbel is

like the last remnants of bare Market PTSD that'll get blown out um so we'll we'll see um all right let's let's any other um I kind of wanted to to to move into this debate about something again that I've been seeing pop up on Twitter advance I saw you commenting on this and Miles frankly I know you're um pretty deep in the Weeds on on this stuff but you know I wanted to have this debate about whether or not reaking equals leverage right there's there's been sort of increasing calls I know I know Chris berinsky uh whose opinion I respect an enormous amount kind of tweeted out that a lot of the leverage that sneakily entered the system during the last cycle that we didn't necessarily notice at the time was through CI uh CI lending desks

but also the the gbtc uh or the grayscale trades eth e And gbtc Trades um and he implied that maybe this this time it's going to be through reaking and to sort of set the debate up um and then maybe miles I'll turn it over to you and get your take here but the way that the way that this could be seen as Leverage is um you know you kind of have the same pot of eth right the eth isn't necessarily expanding but through staking and then opting into additional slashing conditions you are sort of increasing the the claims on that eth or the amount of uh stuff that that eth supports so in that sense it sort of looks like Leverage but in a lot of cases and igen has actually specifically

outlined this on their on their docs this is very different from how like rehypothecation would work uh in a prime brokerage type setting right because you have much more transparency you know in the in the the PB or like kind of brokerage case they will take your assets and they don't have to tell you what they're doing with it they can um they have much more discretion there so in some senses it's very different but I miles can you kind of what's your take on all this I think there's like um think the whole debate is is very you know it's just kind of around semantics and I think it's kind of important but also kind of asking the wrong questions and I can kind of touch on that later I think so first of all rehypothecation versus leverage kind of different um financial leverage versus say you know

whatever we're calling this security Leverage is is very different right so the price of you know an asset goes down you're not going to get slashed so that's very different than say taking a margin position um now if you are looping you know your LRT position or looping your deposits into more of a actual like Leverage position um then yeah I think you could you could get liquidated right um but to me this looks more like uh bonds honestly uh it's more like okay I have you know some range of risk that I can take on here uh I'm not lending out Capital right I'm lending Out Security to some extent um and maybe

the ability to draw on Capital but it's not really the ability to draw on Capital because I think it's all going to get burned right if something if if uh there's a slashing event and so I would just look at it like you know anything from uh just you know I would say incremental risk that you add as you go across the r risk Spectrum from like a treasury to a AAA to like a junk bond right and so you have like 20 avss and all of them have very different slashing conditions they're all very you know heterogeneous probably um it's kind of like you know different different loans within different fix fixed income products um and so I would think of it more like you

know default risk rather than uh maybe liquidation risk because there is I would say the only the only if you're in the camp of like this is rehypothecation this is leverage I mean you could argue that they kind of act like binary options as well because the slashing at the moment at least is like all 32 if your eth or you're all good it's there's no like you know partial slashing sort of component here and so the more sort of AVS as you add the higher you know a risk you're taking on with this binary option um but yeah I think I think the better questions to ask are really

around like what are you signing up for depending on the AVS um you know what what happens with this with this like you know in the case of a slashing event is this all this pulled collateral just like burned or can the avss you know have this sort of like option to redistribute you know to say like uh the validator that you know flagged the the slashing event or maybe the users that got screwed right I think that actually makes a huge difference as well because then I think the overall cost of capital goes up if people have incentive now to for these slashing events to happen right um so yeah I would I would say that it's it's more

like a you know the spectrum of risk across different bonds um and I think it really does matter on like an AVS the AVS basis what what you're signing up for and how they design the slashing you know rules and and also if igen layer like Steps in and sets almost Global standards of like how you know slashing should work similar to how like you know defaults right like on on loans have processes or bankruptcies like as as Pro as like processes around you know who gets this collateral first um so yeah I'll pause there but definitely curious to hear your thoughts it it is like can't argue it's not like looks like Leverage you know talks like Leverage so it's probably leverage but

it's not leverage though there there there there is no inherent leverage in reaking please repeat after me if you're listening to this conversation so like we we restake um and how we think of it is you know we've taken our eth we put it into the igen layer deposit Q um and you know right now there is no ABS there is no slashing like the is no risk yeah um I think once uh you know and of course you know if you take your liquid staking tokens you put them in there and you get a liquid reaking token back and then you then put it on a lending Marketplace and then you borrow money against it and then you put it back in you are creating leverage that's that's the looping

leverage yes right but we're we're we're not there and and like borrowing borrowing against your assets is a totally different thing that restake assets so I think like the creation of Leverage is like it doesn't even exist today I think where the point gets more fine is you know like I assume that we're all farming the agen layer token right now I think there will be a time where that moves to we're all farming maybe like a combination of ABS tokens and the igen layer token and your point like whatever the slashing conditions that the ABS is impose on your eth you know again it's not leverage but like you know if you if you get slash you might lose 5% of your eth if you're on some shitty abs and so like ABS

selection is important as you think about what is the downside here but again there's no leverage unless you put leverage on that's the thing about Leverage is like you need to go borrow money and buy more and restake to add leverage that that's the leverage component I mean miles that description I think is a pretty apt one in into how we think about the future potential of what this would look like but here here's the thing that I think people will we'll look back on and what you just described as a very complicated process for an individual person to go through you've got to evaluate multiple abss you got to see their unique heterogeneous staking Sol staking uh conditions you got to understand their

slashing conditions you got to be able to like allocate the capital I mean we don't even know exactly how that's going to work and you know to use the same analogy it's like you do you want to be your own you know like CDO manager um obviously not um I think that this is actually where all of the lrp solutions could step in uh where just in the same way that you have you know with with some of the L LST Solutions like Li out where they're making choices on which validators to actually you know bring you to the queue obviously you know Lido for instance is moving into a more decentralized way of selecting the the node operators um but you can imagine a a place where there is sort of like

control at a central uh layer that then eventually gets decentralized to select and choose I think that actually like there will be I'm sure there will be someone who blows themselves up just because of the fact that they didn't understand putting money on this abs and you know restating that one and not doing something or another led to them losing their Capital like oh no I blew up because of Beverage um like well no that's not true it's just bad selection but the selection is going to be tough and and I think that that's kind of crypto Twitter loves to pick you know points of Leverage now that we've had multiple blowups sort of like selecting you know five out of the last two recessions you know if you have that that mentality you're just going to be

looking for it the whole time um it's not going to be leverage of those people up it's just be a bad selection yeah I I couldn't couldn't agree more and that's like why the value prop of lrts is so clear right now even more even more clear than like I I'd say like you know the friction that it kind of you know abstracts away from a reaker is even more significant than maybe the friction that Lio abstracts away from you know a normal Staker right because the like had it's like so heterogeneous in like how you could actually you know interact with this with this network um but I also think that's why those are two different products um and that's why I think precisely we have a huge huge spectrum of different lrts and I

actually don't think anyone in particular is going to be able to actually Loop that much because there's going to be so many of them under one entity could you know have a family of like different funds right and and so I think that the whole looping thing is a bit overblown I mean there will be like dumb sort of you know new lending protocols that come out and allow for it and but I think it'll be like small enough that it's not catastrophic blowup um and then I think the other point of complexity is actually on the ABS side it's like how the hell do I know what's actually securing my protocol in terms of like both the underlying collateral and where else it's hanging out on the weekends uh you know and could be slashed at any given

time that is pushing a lot of like potential value capture you know up the stack by creating these you know opportunities to to remove that friction and so I think it's good but we need a lot more tooling 100% so here's here's my thesis as to how LST versus LRT is going to play out LST has historically been a game of who can Mass the most amount of e because your point it it's very much a it's a much more homogeneous selection criteria for which node operators to go after and the process is pretty homogenous in of itself whereas I think it's the one uh protocol or group that has the best connections to the ABS is understanding of which ones to choose um

and and sort of can manage the complexity best not necessarily the one that can amass the most amount of e that's going to win the LRT G uh it's going to be harder to figure that out because it's not going to be like a dune dashboard that you can use to track it's going to be something else um and in invariably people are going to want to push boundaries in terms of the RIS gr they're want they're going to want to go back to ABS it's spitting off the most amount of yield because they want to have that high metric but there's more blowup rest so I I don't think we have a standardized metric yet but um it's going to be a very different game than I I totally agree and I've been banging on this drum to Mike for a little while that um you know I just think they're

different products lrts compete on total risk adjusted return lsts compete on basically you know achieving parity with with eth in terms of moneyness and utility right so it's the network effects of like an asset are much much stronger than the network effects of like a mutual fund or like Oneal fund right and the preferences around funds are are are much wider um so I don't think that there's going to be like and I think the more the more an LR tries to compete directly with steth by being everything to everyone like you know we're going to basically accept every kind of collateral asset on this side we're going to you know try to have an AVS criteria that like is perfect for

everybody I just think they're going to be they're not going to be good at either um so yeah it's super interesting that's a little bit of a tangent from like the original question but um Ju Just to bring it back to the original question just again there is no inherent leverage in reaking I think your actual biggest risk is if you decide to add leverage that's on you number one number two I I think the biggest security vector and and Threat Vector is getting hacked still um and it changes and it gets less risky is Igan lir gets more Lindy but to your point about like how Igan Lair enforces these Global kind of governance standards or at least like ABS quality standards like if an ABS is shittily constructed does that lead to

an increased risk of of slashing I'm honestly not worried about if we lost 5% of our eth in a slashing event I think you kind of need to bake that into the cake if you're like out on the risk curve farming these abss but if you get hacked and you get a zero that's gonna be really tough yeah so I don't know how that stuff works yet I think we're going to have more details in the next couple months but ABS selection feels like it's going to be Paramount to yeah how secure your is human back stop of the slashing veto committee is not going away you know anytime soon um for those reasons like because the hack is actually probably even just a bug in the slashing software like rather than you know some

sort of exploit right um I think that that matters and I think it does matter that like just by the way it's designed because it's not part of eth itself you know it is all 32 of your eth or nothing right like that that there is no partial slashing quite yet and I think that's you know probably something that should get figured out because it doesn't make sense that you know a double sign should result in 32 e Slash from an ABS where a double sign on on eth is like you know very small fraction of of your stake right so there's a lot to figure out but um I think I think I think we're all on the same page it's not leverage until you you know start looping

this this reminds me of like you know will Lio soft commit to to you know 33% valid just like I feel like eth people sometimes get worked up about the wrong stuff I think this is one of them yeah now it's a different question though if like like your point Advance like why is why is there already five or six was is it like six billion of capital you know deposited in Diagon layer it's not for yield because I don't think there is you know let's say even uh like $300 million of security spend from avss right now cumulatively like ready to go um and that that'll get you like that that would basically double you know the

the sort of native staking yield if you restake to every single AVS and so like I'm curious to see how this mercenary Capital like how sticky it is because it's not like an LP pool where you can just go like all right got that air drop let's move it over to the next one there is some like kind of unwinding that you're going to have to do here that's that's you know adds a little bit of we'll see the vast majority of the capital is going live I I I think I I think we're going to see I don't know we think it's going to launch in Q2 or Q3 I layer something like that and you know assume there's going to be like a minimum oneyear Cliff like kind of like Celestia has today where the FTV is just going to be super high

because there's not a lot of float and like then you have all these abss coming out and you know maybe that's another year a year and a half of these tokens like I don't think you're really going to see the Igan lir Capital move for the first year after launch sub subsidies on subsidies on subsidies but like you know there's always G to be this new game to play like oh you're in igel or will are you in this ABS because it's yielding 500% per year it's like that that is there's going to be a long taale of opportunities to keep people interested combined with you know just these these tokens not having a lot of float meaning that rewards are going to be super valuable I feel like it's it's funny because like the more they pay out the more the value prop of Ian lay actually

doesn't really make sense versus just launching your own L1 right but then maybe they're just on igen layer for like distribution and marketing and and things like that right that that's what we've noticed it's like projects are star for distribution yeah yeah exactly exactly so they hop on the back like the I lay bandwagon that you know you want to be a hot IG lay project you know that it's probably better odds for your project than just launching you know as this like unaffiliated thing yeah I think the more like longer term term all these native like staking opportunities if we actually do get a propose you know a percentage of the proposer set that can actually be meaningful right for these commitments whether it's something like

selling block space futures or like pre-ms for l2s like these are like the sort of just you know like meev boost was to some degree just net win-win versus like this tension of supply side I want yield you know demand side I want cheap security um but we have a long way to get there hey everyone wanted to give a quick shout out to the Wormhole Foundation if you a bell curve listener you know that transferring across chains can be a massive pain I certainly do I complain about it on this program all the time that's why we are super pumped to have partnered with the Wormhole Foundation the stewards of the Wormhole protocol the Wormhole protocol connects over 30 blockchains and six different run times including salana SOI ethereum layer twos and more and the coolest part about this

particular partnership is that they have made custom bell curve nfts which you can get and Min for free you can claim that by just going down into the show notes and clicking on the link all right guys on with the show hey everyone this episode is brought to you by swell a liquid reaking protocol in the issue of the RW liquid reaking token now if you're a listener of bker if you know that I am just so fascinated by reaking and liquid reaking I think it is going to be one of the most important Trends in ethereum and I am really excited for the benefit that it unlocks both users and also ethereum the protocol itself now disclaimer whenever there's build involved in a product do your own research this is not Financial advice you guys know the drill but swell is a great team they have a non-custodial

product and they are mission driven on giving you the best liquid staking experience if you take one benefit away from using liquid reaking make it be Capital efficiency now you can earn passive yield from ethereum you can earn yield from multiple actively validated services that stack on top of that and then you can still use our S as collateral in D5 and because I know y'all are a bunch of DG there's a points angle here as well but in swell we call them pearls so pearls equal points and if you stake your e with swell you can earn pearls and future IG layer rewards when there's a token generation event you can swap your pearls for swell tokens head over click the link at the bottom of this episode again just pause what you're doing right now go click the link at the bottom of this episode check

out swell thank you later hey everyone want to give a quick shout out to this episode sponsor flood protocol the optimal decks aggregator now flood is the perfect partner for this episode on the multi-chain future because flood is solving so many of the issues that we're going to be talking about this season and this is relevant for both Traders and devs so if you are a Trader you should definitely head over to flood Swap and start trading because they solve three massive problems one gasless trading no more pesky trading fees two you don't have to worry about getting front run me free and then three they have excellent order routing so that you know that you are getting the best price so head over to flood Swap and click the link in the bottom of the show notes we're going to send you right there for

the devs out there you can leverage floods flexible hooks allowing you to make swapping a first class primitive by adding custom order types like T wops or if you're a wallet Builder or something like that you can actually build your own orderflow auction in and start recapturing a bunch of that me if you want to reach out to them go to devs flood. bid or just jump right in the Discord all right guys thanks very much appreciate you flood what do you guys think if I had to hold your feet to what do you think the igen layer when it goes live what do you think that FTV looks like on day one 20 billion I'm gonna say around 20 who knows I I I think it launches a lot lower than that but it's like yeah day day one who knows a month a month in or you know six

months in I probably agree with Michael but I don't know there there's going to be a lot of these l1s that are launching at roughly the same valuations so I don't see it going that high that that fast yeah be yeah like an L1 valuation or is it more like a Lido valuation or somewhere somewhere in between there I I don't know I think it's probably closer to the number that you gave out Michael but I mean but it's going to look wonky and and you know the TBL and igen lay is somewhat double counted just because a lot of it is Ste that is the largest LST in there so you're GNA see weird things happen where it's like if aan is at 10 and Lio is at I think it's at like three or four today you know people are just gonna are going to think about catching

or catching up and and those trades and how much they're worth and what the road maps are respectively or Celestia is at whatever 1920 and say I da launches with more through yeah but it's not mod money Celestia feels like a natural comp and Lio feels like a natural comp and one other thing that I was starting to think about is like does this end up putting a lot of pressure on Lio in some ways um there's like a co-op petition dynamic in between the two of them and I do Wonder miles you and I talked about this a lot in our liquid staking season but L's always had this opportunity to spin up their own raking uh I forget what it's called like unit within the

staking router yeah module yeah module thank you yeah there you go do they do that yeah um I don't know it feels like a lot of folks uh kind of faded reaking at least like uh to some degree um for a while and I think people are a little bit surprised of just how much mind share and like flows uh we're seeing right now and just you know I think I'd be curious to get your thoughts but I think it's just I mean I don't know I it is just the airdrop Farm without that airdrop farm and without Celestia at 20 billion this would not be the same effect so we we're also have like this minimum viable issuance sort of discussion going on in the background

right which could like push the stake rate closer to zero at like you know some Target right and then then I think Lio is going to be looking at like okay we got to do something um but I think we're we're entering that that like potential acceleration of of you know of Lido's involvement here um it'll be that that'll be super interesting to see yeah and and those two teams are close to Ian and Lio so it wouldn't be kind of like direct competition but definitely understand what you mean yeah uh just to maybe round this off and then I wanted to close on you know we've been talking a lot about air drops here in general and starkware had their air drop this this week and um I'd love to get

your guys take on that but just to maybe uh so it sounds like we're we're sort of in agreement that it's not exactly financial leverage but I think one thing that um and probably the the single greatest data point that this won't be the hidden leverage that blows crypto up is that everyone thinks that this is where it's going to be which is the single strongest data point to indicate that it's probably not going to come from here although like this is where if you talk to like trafi types looking at crypto like they're always super interested in where the Leverage is because this is is just like a one of those lessons of financial gravity that just repeats itself over and over it doesn't really doesn't really uh matter what the market is but like even Vance in that description where you were

describing you guys reaking it is I think helpful at least for me to understand like what your balance sheet looked like like you as framework like what did your balance sheet look like pre and post um the restake because or like let's just actually approach it from like the perspective of a solo Staker you know in a in a Solo Staker it's very simplified balance sheet they're assets would be the hardware and then the software that they've I guess invested in um but then on the the liability side it's like whatever risk you're taking on from uh like slashing risks like that's how those things balance out and whatever is left is the equity and so like what does your balance sheet look like after you've opted into like after you've done some reaking well you have an additional

income stream but you also have additional liabilities that you've taken on uh in the form of more slashing risks and I'm making the assumption that eventually there are going to be slashing risks because otherwise this mechanism makes absolutely no sense so it's I the way that I would describe it is it's less of a form of like traditional financial leverage because no one's giving you a loan but something is happening there right you can't create something from nothing and what it kind of looks like to me is more of a form of operational leverage where you you're basically taking like accepting some ability to generate more Revenue at the cost of um a very real liability which is the the SL I don't I don't think I would call it operational leverage I think we're

conflating leverage and risk what you're doing is you're putting on you're putting on more risk you're not Levering up and that's that's like a very kind of specific difference yes there's more operational risk ABS is you have to S I mean we talked about this but but there's not any inherent leverage you can lever ostensively in LRT but you know that that would require you to go to a or you know some lending protocol and and B against it and L up but that's that's a choice you can make but there there is an increased Risk by participating in these avss and right now it's not slashing risk it's like you know we're solo staking through you know our own validator it's very easy to do it's one click through basically any custodian or

exchange and so like a lot of the operational risk has been offloaded to the most Savvy technical teams on the planet um and so like you know we feel comfortable with that where you know we will reassess is like what are these abs slashing conditions um yeah and that'll be a different phase of the game that we may or may not participate in but there is no leverage here um right what's the yield uplift right for what the slat that's a good question I think that's more correlated to like you know if we if we think there's like you know call it 5% more risk than just like having Ste in our wallet versus like putting that into I Lair um you know we think that you know eth

yields are probably 4% eth dominated and we're bullish on eth obviously and so like you know if that goes up a lot we'll benefit in kind on the ABS and Igan lay side I think it's probably another I don't know Michael 10 to 15% would be my guess I mean maybe maybe higher than that all depends on where it comes out right right you know if it's if it's at 20 billion maybe it's like 30% or 40% um AP APR at like interest apy I mean yeah like why do you how do you get to that I mean think about this here here's the basic math there's six billion right now uh worth of e that's being staked let's assume everybody's been in the entire time and and you know the snapshot

happens right now let's assume they distribute 10% because that's typical air drop oh you're talking about air airdrop yield oh okay sorry I thought you're talking about AVS yield a AVS yield could be an excess of that you know that's probably when you're looking at 100 or 200% if if you you're playing with the right dollar size but I mean this is why eth is the perfect collateral asset especially for a fund like ours we can borrow extremely cheaply against it we can restake it and earn you know anywhere from call it 15% to 100% yields like it's going to be really hard you know like we hold Bitcoin too but like it's going to be really hard for a Bitcoin to outperform that actively or like quad ey actively managed approach especially when we can

you know as we've talked about if we want to lever things up in a way that you can't do with Bitcoin on chain I think I'm I'm GNA take the other side on that on the yield I think it'll be much lower than people think um because just you're looking at let's say again taking just the deposits at 10 billion you know um is there a billion dollars of you know cumulative spend on the a AVS side on security right if there is then they should just launch an out hold on that that that's the wrong question though so so the first the first question you have to ask is like let's let's just do some math let's say it launches it celesy evaluations the IG

layer token let's say they give 10% forget miles miles is saying independent of the IG layer steady state steady state steady state I think each AVS is like gonna be like less than 1% yield uplift that I mean how many the the question here isn't what's the value of of the IG token the question here is how much is the cumulative value of all the abss basically it's ABS demand and that frankly I don't I mean we we've seen pitches for probably close to like 10 15 different ABS Concepts you know the first oracal solution the first this the first that I think that those will come out and it depends on how big the iay in

like ecosystem itself can get if it becomes sort of the cumulative value of something like defi on East then yeah like the the yield could be pretty high in the steady state but I also think the the main point here is you know if you're staing right now or if you're you know contributing to right now you're going to get the IG layer airdrop and there's going to be IG layer distributions probably for you know a period of time after whenever those go away is what miles is saying it's like what's the C State who I was there one other one other wrinkle there miles it would be is lay going to be the only like there's i l is sort of the eth solution for shared security and

exporting security but there are other ecosystem specific Solutions like in Cosmos you have interchange security right and there was just a there was an integration this week even in between Babylon and the Hub so now there's there's an attempt to essentially do some form of Bitcoin shared security and it's unclear there's there's obviously demand for reaking in other ecosystems like skip has a really cool example of this with their new Ora which it's kind of leveraging ABCI Plus+ but they're calling it reaking it's very very similar but uh yeah it's sort of unclear whether or not other ecosystems will look to eth for security or their own sort of ecosystem homegrown Security Solutions it's another big question yeah basically is this all igen layer demand

or is it going to be segmented by ecosystem the the reality is that eth is the only asset that is big enough to get you the distribution that you would want or need as an ABS like we're looking at a bunch of l2s right now and you know some of them are like svm uh svm virtual machine uh you know secured by uh eth um da done by Celestia like they have like all of the kind of different amalgamations but like the go to market is we're going to give a bunch of money to eth Holders to get them to bridge over and it's like well why don't you start with you know salana and I think salana is part of it but you know there's the biggest LST protocol on salana right now is jto and there's about 8 million soul

staked it's you're you're just not even and and you know 8 million Soul Stak is about 800 million swell which is you know a a smaller liquid reaking token has about the same TBL as that and so as you think about like what the goals of your project are you have to address an asset base that is large enough to get the goals that are if it's distribution if it's um Community alignment if it's whatever um and so I think the reaking efforts on the other chains are going to be a lot smaller like we are investors in J we are investors in Babylon the one you just mentioned um the thing that I could see changing here is that like it is so easy to restake I mean it isn't that isn't that easy maybe that's a little overstatement but like doing it one click at a coinbase where a lot of

these like Bitcoin assets live maybe that gives you like an uptick there but people don't really use Bitcoin in the same way that they do eth I think that's just like a base fact I I think Bitcoin is a lot more sedentary just fault uh but but you know I I will say though and you know we're we're uh investors as well as well it's going to be like we said someone who can really build the relationships with the absis who's going to win this liquid Freestate market and is that going to be someone you in the Bitcoin ecosystem who's going after Bitcoin l2s and you know all these different kind of new narratives possible but if you're in the E ecosystem you can be relatively smaller

than the biggest opportunity in you know another competitive ecosystem L salana up and still have an opportunity to shine and so I I I think there's yeah there's gonna be a lot of stuff that we're figuring out with lrts in the next you know three to six months um what one last thing as well before I want I want to close on the Stark starkware airdrop but another thing that I feel like because we've all just had uh bare Market PTSD is that I don't know the one thing that at least I have gotten wrong when I'm trying to do business planning for Block works at this point in the cycle is just the raw amount of demand that shows up as bullish as you always think you are it's like you tend to underestimate the amount of demand that shows up like I've just tried I've done proor as and block

works on a rolling quarterly basis for six years and I'm like always wrong at this point um so there there is a possibility that it could take like a couple Cycles or a couple of uh churns so to speak to get steady state AVS demand to a certain point like I could see it not all coming online in time for to meet the amount of supply side from the igen lay Marketplace but like long term I sort of feel like it will be less of a less of a concern yeah yeah I think I think that's I think that's fair I think it also makes a difference if the avss are looking at this as just a security spend line item or also a growth line item right if there is a distribution aspect to being just in the igen layer Marketplace like you know I

think that that can you can justify something like okay I have you know 500 million doll sort of Treasury right I'm actually a pretty big project like maybe an espresso or a hyperlane and like I want to offer some decent size yield right um I can pay that looks like an L1 I think that that's actually going to be the meta theme of this cycle which is that we switch from having a I'm built on this for security I'm built on that for you know throughput or technical implementation details I I am built we're going to move towards I am built on this platform for growth reasons because I want to get to millions of users using my platform totally It's Gonna Happ GNA happen for games it's

going to happen for Consumer applications it's gonna happen for base it's like that this is going to be the The Meta narrative that I think we we all get to over the next year Nothing Else Matters unless you have distribution and we saw this play out in the last cycle where you had all the salon ecosystem projects all the Luna ecosystem projects like their whole thing was we're going to ride the coattails of this movement that's really picking up steam and I think the the Alli inment meme of like probably like last year is going to get flipped on its head because now you have an alignment mechanism yeah all right I wanna um I want to just move on to spend 10 Mike wants to talk darkware real bad no no no I don't really want to talk like well

I'm just curious to see where you guys fall on this uh and I do because I do feel like we didn't get any so we I didn't get none either I got I got none either so bad yeah but all right so here's a I'm going to show a screenshot of what the distribution ultimately was and I feel like people were people were pretty divided on their drop so 51.3% went to Stark net users about 56,000 people got that um then there was spread like the next biggest group was eth stakers um which was uh 20 almost just under 22% there were some donations to the ethereum protocol Guild members which is decently low uh open source developers um Stark X users and uh yeah

ethereum devb so basically there is a you know some people thought this was a very well architected sort of airdrop there was another group of people that uh you know pushed back quite a bit and there always there's always going to be some amount of um unhappiness post airdrop but it there's like maybe I'll put it in two camps right there's kind of like and this is the way that I see it you guys can push back on me and I think there's um there's one group of people that says the way that we do aird drops today are stupid you are literally just giving money away like look at the overall cost of an airdrop like we have to find a way to either get this money into the right people's hands or to find a way to build organic demand and then there's this other group of people and I

agree with some parts of that and disagree with other parts and then there's another group of people which honestly in my opinion tends to be like a lot of a non sort of trading accounts which like there is kind of an airdrop entitlement which is like they just expect get expected to get dropped a massive amount of tokens that the implication is they're kind of going to sell it um and the maybe the the one other uh point that I'll bring up with regards to the specific airdrop is they didn't really do themselves any favors in this public messaging um which is how I think a lot of I think a lot of uh Founders feel like this privately but one of the starkware guys you know not to call anyone out here but this has been all over Twitter so I don't feel that bad is you know tweeted out a we

don't owe you anything B no one asked you to do anything C we care about Community much more than you think d we are here for the long run if you don't understand this garm useless products there are plenty of those so even though probably a lot of Founders feel like that you I feel like that has kind of blown back on them in a in a decent way and I just I'll stop there and I I would love to get your guys sense of how you thought about this aird drop and what do you think about aird drops sort of RIT large where you fall I mean stupid tweet by that guy what's what's theide there just like antagonizing your community for no reason yeah um I I I think that's actually pretty representative of the Stark uh perspective true very large they they they want to they want

to build an as Silo they don't really care about community and I think that that kind of shines through just the other thing I will say is like the the actual tge being two years in the past and all these investors are going to unlock in like three months and like we've talked a lot about Cliffs and and you know token Supply matters in a very real way because there's Financial gravity when people sell things um but like you're just going to hit this cliff in two or three months and you know on Avo right now it's trading at I think like 17 billion or something so you know I mean who knows if that's a real bit or not but like assume that this is not going to go well because of that tge question and you know usually what

happens when there's a TG is the token is generated and then you start the best this is like we started the best two years ago and it's going to hit in three months there's like the token Genesis event when you deploy the contracts on chain when the token is tradable all those things are are usually kind of bait into the same process where you have a live token it's aird dropped to people it's tradeable it gets implemented on its stages there's liquidity for it people are able to stake it do whatever they want to do with it whatever they can do with it and that's the like token Genesis event there is an element that happens before that which is like hey we put our token on chain nobody knows about it it's it's not contract it's worth nothing it's not even tradable but

like the software is on chain it's been audited Etc like it seems like they just mixed up which event was which and it's it's I mean good for the investors because they will get an exit put it eight two months the so so things they did well on this I think um number one they filtered out a lot of the Civil stuff just like you know any projects listening to this civil people are not your friends I don't care if you you have a bajillion you know transactions per day these people are just farming your and they're not going to give anything back to you these are mercenaries I think what they didn't do as well and I'd like to see more people do well is

like what was the highest allocation that somebody got I think it was like 200,000 or maybe like 100,000 starkware tokens I mean some some of like the some of like the actual like development shops within starkware like yep they I think they're much much bigger but yeah I mean users yes I I think like the development shops and giving tokens to like ecosystem teams like on balance like an okay use of tokens but you should really just be giving those to your users yeah like do not be gunshy31 I think $1.2 billion dollar of

starw tokens these prices damn so look like I think I remember when we got the uni V2 air drop Michael and we and we made just a shitload of money on that but it was just like we were the largest Unis swap LP for you know a year and a half like we have always used it for a lot of our liquidity Solutions like we are aligned with them like we probably brought more volume and value than that airdrop has given to us and I think that's how people should think about these things like the whales are your friends especially in Def and tvl type of of games so that that's my perspective at least maybe like agree with all that one observation I I was cracking up at um uh Hayden from uniswap

tweeted his tweets have been very spicy Lately by the way yeah um he said like gas fees me extraction deflationary economy not enough you now have to airdrop to eth stakers to be aligned you know um if you want to help ethereum air drop to you know you know swap users who are getting crushed by fees and whatnot um and I think this points to just like yeah it's interesting that the whole point of airdrop is to kind of bootstrap the demand side of both devs and users and yet you know you're rewarding like ethereum's like kind of supply side of stakers which sure there's overlap there um but yeah I think I'm not sure about this whole like I think I think Hayden

has one of the poorest senses of of the eth Community which is incredibly ironic given how much he's contributed but like the protocol guilds and we're going to you know re we should pay Unis swap you know instead of ethereum like I just basically have no that part I agree with that I agree with but I do you know it feels like he's kind of the the one voice calling for you know the the apps sometimes um or like maybe pushing back a little bit but I yeah well I I just I don't know I think he's uh in his own bubble in many ways yeah that's fair yeah it's just different perspectives different perspectives in the ecosystem I uh I I would generally be in the camp

of like I actually have enjoyed some of Hayden's spicier tweets at least we're at least we're yeah we're stir in the pot um which I think is always good but I also think probably I'd be less in favor generally of like whatever the equivalent is of uh what's it called in like value it's like you're shouting your values out um I forget I'm blanking on the sexual like virtue signaling thank you uh i' would be less less in favor of anything that even looks like virtual signaling like basically I think starkad should be doing things like making their users wealthy and aligned and sticky I feel like that's where almost like the richest design space is yet to be sort of thought out for airdrops and you know I I do remember a couple years ago all these you know

talking to def5 Founders and they were like yeah we messed air drops up you know it was impossible the expect was just to dump tokens without any investing schedule like I think that's going to be solved during the bare Market it's like didn't really get solved um and and I I do think it's totally reasonable to say hey if I'm gonna airdrop you 40 you know 100 $200,000 that this vests and you have to do some stuff with it afterwards like that just feels super reasonable and it shouldn't be wildly over overly complicated I don't think um but yeah it feels like there's still some some work to do in in that whole area about how to make people sticky so and that shouldn't be a problem for the real organic users right because they in theory they're there anyway I'm looking forward like

these are mostly tvl type aird drops I'm looking forward to seeing some of the gaming ones where it's like here's a token play a game here's a token do this Quest here's a token you know buy this nft like it's it's tough when you have that moment in time snapshot where it's like boom the air drops over here's all the money like it it works much better if it's um a user count focused airdrop that you can kind of drip over time and and make contingent on things like I think that's how we're going to see a 100 million people coming into the space in this in the next nine nine months it's just like you know what happens when you know the IMX air drop and all the games happens what happens when like these are the things that can really bring in different types of users and

and and they can be more sticky because they're not used to this like I just got an airdrop mentality yeah um not have to R guys yep I think we got a sh all right guys this was a really fun one guys appreciate you all all right awesome guys later hey everyone Mike here if you're a bell curve listener you know that transferring assets across chains can be a massive pain I certainly do I complain about it on this program all the time that is why we are incredibly excited to have teamed up with the Wormhole Foundation the stewards of the Wormhole protocol and the coolest part about this particular partnership is that they have made custom bell curve nfts which you can get and mint for free click the link at the bottom of this episode take you get your free

[Music] nft