LIVE: War and Geopolitical Takes + HIP-3 | 0xResearch

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[music] [music] Hey [music] [music] hey hey. >> [music] >> Wow, that was an abrupt ending. What's

up, guys? Welcome back to another episode of Xerx Research. Today, I'm joined by my co-host, Danny. Danny, how the hell are you? >> I'm doing great. I was looking away when you ended the music uh hearing the dogs fighting in the background. So, >> actually didn't mean to do that. Uh I don't know what happened. I probably messed something up at some point, but I can't let something so small ruin my mood even though I really want to let it. Um I think before we get started and we have not a lot to discuss in crypto, but a lot to discuss in terms of war.

Um, I want to give a massive shout out to my editor, our editor, um, Steph, who is going to be getting married over the next few months, I think next month or the month after. Um, so I just want to wish him and his fiance all the best. Okay. Um, more serious note, Danny actually, how are you doing? >> Uh, doing good. I feel like recent conversations internally here have been they've been a little bit of a whipssaw. Uh we were just talking before people are saying you know asking the other day what are

you guys buying? And now I feel like I had the opposite conversation this morning people saying uh you know I could really see more downside. So, >> I mean, look, I I'm not a big bottom caller, but this is like the type of conversation that you have. I think I don't know. Everyone's super like trigger happy to sell all the time. And I'm a buy like sub 70. I've already said it on the pod. I'm a buyer. It can go lower. I've heard some people say 58k.

Whoa. another 20% draw down. Oh no. Like it's, you know, if you think it's like, if you think there is a meaningful use case for cryptocurrencies, which I think there is, maybe it's not digital gold, maybe it's not inflation hedge, but it sure as hell is tokenization and settlement layer. um that's what people that's what our large traditional financial overlords have decided upon um being the main goal and mission of cryptocurrencies and I'm very happy to just play ball uh in that sense and yeah like it seems like every discussion that I have and not just internally um very good are they going to fight again a

little bit we'll see um I feel like every chat we've had internally at Blockworks like on these morning calls it's very much like Oh, one week you're buying, one week you're selling. Um, I think every chat in general I've had on crypto has been like, oh, one week you're buying, one week you're selling. And oftentimes when it's like high, people are buying. When it's low, they're like, "Oh, it's going to go lower. I got I think like at this point you just want to be there's a Swanson Benson tweet that is sarcastic, but I think it speaks the truth, which is like you kind of just want to be DC spot and chilling a little bit, like relaxing a bit, just like I don't know. I think it'll be fine at this point. you can hold it down a little bit.

>> Yeah. I think um you you realize that there's like maybe different archetypes. I think the the difficulty is that there's a lot of conversation that happens in this industry especially because everything is uh you know speculation adjacent and or tokenized and hasn't a tradable like asset or if it doesn't have a tradable asset it has like a a tradable market for it now with prediction markets. So everything is like can always be a trade if you want it to be. Um, and I think you there's definitely like archetypes of people like I think if you are the type of person where you believe in something and you know you like a company or you like Bitcoin or whatever it is. Um, you're probably the type of person who like you just said, you know, just buy

some spot and chill and you you shouldn't really be thinking about, okay, I should sell some here and then, oh, we just broke, you know, went back above 70K, I should buy some here. And then, oh, we broke back below 69, like maybe I should sell some here. like, you know, you're probably just not like a leveltole or like momentum trader guy if you have like more of a long-term view. But I think these like those views and those conversations kind of get they get criss-crossed like in the in the narratives and like you just have different people kind of talking past each other um that have like different ways that they approach markets. So, I don't know. I just think it's an interesting it's not something we talk about. That's probably more of like a thousandx conversation because I think they're more like the active trading

>> show, but uh we talk about assets in the space and like certainly like momentum is a big factor here. You know, you can love stuff, but if you decide that you love a protocol at the top of the market and then we trend down for six months in a row, like it doesn't really matter. You know, you'll probably start asking yourself these questions of like, oh, maybe uh you know, how how long-term is my view? Like was I correct in the assessment of the valuation at that time? Um, and then maybe you get kind of gold into playing the momentum game at that point and and kind of following the more of the day-to-day, week- toeek movements. Um, which I think personally is what I've I've tried to avoid more of. Um, understanding that I'm not I'm

not some super trader or anything. Obviously, when uh when the markets are being absolutely stupid um and just like things go up day after day, you know, it's a great time to kind of like ride the wave, but uh I feel like we've been in a bit more of, you know, it's it's generally speaking, crypto's been down, but I feel like more recently it's been sort of choppy. Um and I think you just probably if like individually you need to recognize like what type of investor you are. Are you a trader or are do you have like a long-term view and you're zoomed out and you're like a spot and chill kind of guy?

>> Yeah, I will also just say one more thing. I think crypto kind of forces you a little bit to be a trader because of exactly what you said. Like there are guys who really started loving Hyperlquid at $50. It's like you know what man like it's great. I love it too, but you probably shouldn't start really loving it at 50 bucks. Um, and I think we see this a lot actually with um these funds sometimes, and I'm sure that they're not actually trading the like the the fund this way, and I'm sure it's like the way that they're just tweeting that is this way, but sometimes you'll see like a guy who is very clearly like ex well, not XCFA because he still has a CFA, but like ex-traditional financial fund, like an ex hedge fund tradition that trades like traditional equities or

whatever. And then they come into Hyperlquid. They come into crypto and they like look at Hype or look at pump or whatever and it's like BTC's at 110K and they're like, "Oh, like these are the only things that make money. I should buy them." It's like, you know what? Like it does crypto just doesn't work that way. It pro the ideal way to trade crypto is probably just to like have maximum a year or two years time horizon. Um, and even then I feel like that's quite long for certain assets. And I think a lot of people come in halfway through that, like at year one, and they are like, "Okay, well, you know, there's actual assets that make money here, so I'm going to become an investor." When

reality is at that point, you probably just don't want to be an investor anymore. Um, do you know what I like I think you and I kind of expose ourselves. That doesn't sound right. I think we get exposure to crypto in a similar manner which is like buy some tokens large caps um long like at some place at some price it seems cheap enough you buy it at some price it seems relatively expensive you sell it and then in between you just like buy and sell certain things um I think a lot of people trade that way for what it's worth um I just like I I always find it really interesting when there's a leveltole guy who puts everything that he has into like a trade for like one week or it's like the people who are like, "Oh, I'm just going to buy this

and hold it for whatever, like [ __ ] four years." And then they always end up doing that at 50 bucks hyper liquid or whatever, like four bill, six bill pump or whatever. Um, so yeah, long-winded way of saying I think because crypto is super retail dominated still, it's actually and there isn't a lot of structural flow, I think it still is very much like a trader thing. Um, which is why on our morning calls people are like, "Oh, should we buy or should we sell?" I think it's just the intrinsic reaction to the market the way that it is set up with the way >> I think that's fair too and something that um that James Kristoff shout out friend of the pot has always said is that uh

everything within crypto is a trade uh except maybe Bitcoin I think there's typically an exclusion there but I think you know you can on the on the four-ear cycle basis or whatever you want to call it if that's still in continuation you could maybe call that uh a trade as well if you want to look at it that way unless you zoomed out, you know, very far. It uh I feel like I do kind of have a similar view to what you just described in the sense that like I know we've just had these such strong periods of like massive growth and then kind of like, you know, massive pullback disappointment for kind of multiple years in a row from, you know, over a decade at this point. And so I I like the point you made that it's like there are times where stuff looks really bleak

and it's like okay you know maybe it's time to like look for what do you think that next thing is um and make bets there. I feel like you know in 2022 and three that was you know it was like the Salanas it was like um you know Hyperlid wasn't even around back then uh it wasn't even a token until in 24. So um but there were certainly things that like in that period when people were debating on the day-to-day like oh should I be getting long? How long should I be getting short? It's like who knows if that's right now or if we need to go crab mode or down for another six months. I you know I'm not going to tell you the future. But it's I I think to me personally it's like the market is always much more interesting uh when I'm

looking at lows than when I'm looking at like a new all-time high in terms of >> making a decision about like you know put putting a big bet into something and then just like deciding to hold it. Yeah, I think I agree with you first of all and like it's always been historically harder for me to sell than it is for me to buy. Like I I think and I specifically mean like at at when Bitcoin drops below a certain level that I have in my mind, I think it's easier. But even in that case, it's 22 23. I also did the thing that was like, oh, like BTC's at 25K. Well, I missed it at 20, so I'll just wait for it to go back, you know, like and I

think everybody kind of did it with like certain amount, like certain tokens. Um, and it just rips in your face and it's like now when you look back at it, like what is Bitcoin at? 70 grand like 25 20 to 25K difference is minimal. Um, and it went up to 125. So, I agree with you in that sense. And like everybody was arguing about the minutia and people were saying, "Oh, like Sailor needs to get liquidated first." Like Binance, you know, they need to go down um about soul. They were like, "Oh, like it's eight. I want to buy it at free because that's the golden level." Like cuz Sam tweeted at one point like, "Oh, sell me all of your soul." Like these things are so stupid that I think a lot of people

forget that there's actually no I don't think there's like a perfect entry or at least like there might be some lucky ones that you get a perfect entry in. But most of the time I think just got to close your eyes, click the button and kind of just not get shaken out if it is at a good price which I think it worth at a fine price. >> I think that's a good point as well around levels too in that there's very There's very few assets within this space that consistently, you know, if you look out over a wide enough time horizon, set like an actual high or low on like a 5-year basis and then continue up from there. It's much more common to see like basically pick any altcoin in existence.

Sure, it rips in your face, but then it also like kind of shits on your face in the opposite direction. And that can happen over a month. that could happen over a year and where you're just grinding it like all the way back down to where it was when you bought it. Um, you know, there's Bitcoin and there's like a few other assets that you could call out that historically have kind of like grinded up and to the right over the longer term. And so, um, that that probably also lends itself to just the trading atmosphere. It's like if you're looking at kind of all the shitcoins that tend to rip in your face, like I mean it just lends itself to, you know, this is a depressed time. Maybe I do want to be getting long because if it does rip like I stand to still make a

bunch of money. >> Yeah. >> No, I And I think my favorite is and I've done this so much as well is when like we're going up and to the right and I'm like, "Oh, I should have bought like whatever it's 28k BTC. Oh, I should have bought." And it goes back down to 25. I'm like, "Yes, I'm waiting for 20 still." [snorts] You know, it's like I don't know. Like I think everybody does this. I'm sure that even like the really because I'm retail Danny. I don't mean to hurt your feelings. You're retail and I can imagine I can imagine like all like even the professionals are like constantly dealing with like trying to get past this and trying to say like okay I need

to buy because it's just so easy to anchor yourself to a price level and you're like I have to buy it. Which is also why sometimes it's not great to like be in these chats and be on Twitter because some idiots like, "Oh, there are people who made other people not buy Bitcoin on Twitter in 2022 because they were like, oh, like we need to hit the 12 and a halfk level or whatever. >> We got we got to liquidate at 12, man. It's like BTC's at 16." Like, who are you, bro? Like, just buy the [ __ ] token at this point and, you know, see what's good. And if like I don't know DCA helps you maybe that's the way to go. Um yeah a whole lot of I don't know I could do an entire maybe I'll do this for next

time or the time after just like because sometimes I notice that I'm doing stuff that I very well shouldn't do like the I need to wait for a lower price thing is obviously a very obvious one. Um I did this with I'm doing this with VVV right now. I don't know if you're like very clued into them, but they cuz I was like >> I we talked about it on the pod. I don't know if you remember and I was like I have to buy this token and then it went up to eight and I was like I'm not going to buy this token now. I'll buy it when it goes back down to five and now it's at 5.8 and now I'm like you know what I'm >> now you don't want to buy it.

>> I don't want to buy this token anymore. like just tons of this stuff that >> I think that I think that's a natural feeling though when a lot of a lot of the assets I we talked about kind of the volatility but also just the raw momentum and like kind of the I don't know the attention it's it's similar I'm not going to say that it's a memecoin but I think a lot of assets in the space move like memecoins in the sense that it's like you get the you get the 10,000 active people who are you know moving money around in the shitcoins in space to all look at something for a week and then when they all decide to stop looking at it, it like it could just grind down uh forever until it c it captures the narrative again. Um, and a

lot of the assets here kind of tend to work like that. So it it can be hard to get on, you know, riding the upward momentum and just like saying screw it, like it's up 20% like I'm buying right now can often be like more effective than saying I'm going to look for, you know, a bounce at some lower level because that that bounce might never come. Like that might just be that that downward momentum might carry it for a long time. >> Yeah. That especially in probably like right now when attention is like so limited and >> Yeah. just don't want to deploy. Um I think at the Yeah, I think unironically at the bottom it's sometimes better to like you said to

just buy the thing that's like it's pumped 10%. Um you should probably just like get into it because it clearly has attention. Um okay. I want to chat a bit about >> Yeah, let's talk about war instead. I don't know how to do this one because I do actually want to talk about it, but I also like obviously don't know much about geopolitics in general. But I guess what maybe like the best way to start this is Bitcoin is actually not that um it's a relatively big war in the Middle East that's happening. Um last time this happened, I don't know if you remember actually I think GCR tweeted last time this happened, right? Was it Russia, Ukraine, or or what?

>> No, no, no. It was um it was Israel, Iran. He's like, I believe that this is a good spot to >> DCA and some tokens or something. Um I don't know. This time we didn't dump. Um I watched this video of this is what I want. Do did you see that video of Dr. Jiang on? It doesn't work if you didn't see it, so I'll just have to describe it to you. So it's this guy and he does this lecture in 2024 and he is a politics professor in the US and he says he has three predictions. Trump will win in November.

Uh they will start a war with Iran and US will lose that war. Um so now he's doing a media circuit because his first two predictions have done well. But I can't stop thinking about the fact that this guy is like he's clearly very well educated. But I can imagine there's a lot of people who could have seen that Iran war would have started. But now he's doing this massive tour. And I know we had this the reason I've been thinking about this a lot is like one of the reasons that prediction markets got popular, I don't want to bring up prediction markets again, week four now, but is because it was supposed to like dismiss these types of people

who are like sometimes get lucky. Do you remember like the whole thing happened with Nate Silver during the because he was wrong about his predictions about who was he brought Camala Camala Camala was going to win. Um we have all of this like data about Iran on prediction markets now and it's been largely correct but right now everywhere I just see like again political experts and whatnot like subject m experts etc. Um, what I'm trying to say is that whole thing has kind of shifted away because two years ago that was a very big thing for prediction markets if

you remember like it was supposed to be the arbiter of truth and to show but it's very clearly gone from that to like trading and I just thought it was really interesting because we're once again like two years ago we lost this credibility from like these subject matter experts versus now we're getting it back again kind of if that makes sense. like we don't have poly marker going on and saying oh we actually predicted all of this like six times because this would have been a great opportunity for them. I'm like jumping around a lot and I I don't have a very coherent thing about this but I just thought it was like semiinteresting the fact that this happened. Also I wanted to talk a bit about oil and HIV.

>> Yeah, I think that's fair. maybe some thoughts I have on this like I think you're right like we did see um what's the right word almost like a push back against there was definitely like a very clear push back against like the elite if that is the right word but like >> educated the educated like science and like elite community um we saw this with COVID we saw this. I think you're right on like the like prediction of who's going to win the presidency in 2024. I think um I don't know that I have anything strong

to say about like where that trend is going, but I do just think the I don't know tides tend to kind of like you know roll in different directions and then at some point you start you start going the other way and and people change their mind and once you know once a trend maybe has gone on for too long. I do think part of the the the interesting thing around like oh Nate Silver was wrong is that uh it's not really I don't know it's it's not the I find it so funny we've talked about this before probably that like you know it's not that the prediction markets are always right it's just that they have the ability to constantly be updating the number like if if Nate Silver was putting out a new number every day based

on the updated information from you know the votes that were coming like he would not have been incorrect at the conclusion of the election. He was just wrong at that point in time based on the input that he uses as his input. And so, um, I do find that whole point just like it's just kind of silly. I'm not saying that, but I do agree that like the markets make sense for that reason, right? It's just a it's just a live open poll basically with dollars to decide what we think a chance of something happening is. Um so there is there is certainly some value there for uh for certain markets like this um to you know have information related to events and occurrences and whatnot. Um but I agree

with you. Yeah, we've we've seen kind of some changes there. And um I don't know how to tie this into oil except maybe by saying that I have seen I mean there has been a big uh the the war tensions obviously and this issue around like the straight of hormones being blocked and like shipment of of things around the world being disrupted. Oil prices have jumped a bunch. I I was looking at poly market earlier and there's a bunch of markets right now for you know will the price of oil reach you know x price by June 30th December 30th and they're you know there's markets for like you know 90 bucks 110 bucks 150 bucks 250 bucks like they're really like trying to price in this like asymmetric rise in the

price of oil and uh tell me how that gets HIPP3 [laughter] >> okay I will tell you how it is the third most traded asset on HIPP3 free more. God, this I need to go I need to start using dark mode more often. That's my like 2026 resolution. Um crude oil is uh 24hour volume is 400 mil, open interest at 90. Um it is furred after XYZ 100 which is NASDAQ 100 launched by trade XYZ and it is after silver as well. I also wanted to share this. This is actually a sneak peek from our analyst hours. I don't know if I'm allowed to show this, but

anyway, this is like I also think this is quite interesting. We did a I did a HIP free update and um just the figures of these uh HIP free markets and how much they're trading I think is quite insane. Um Bitcoin's 44% of total per volume. Silver was 10% of total per volume over on in February. That's kind of ridiculous to think about. um XYZ at 100 is 5.3% or was 5.3% in February and some of these other figures are um silver was more silver was traded more than um soul which like on hyperlquid um so these things are

like genuine assets that are being that have become increasingly more popular on hyperl um something that I think not a lot of people expected for it to happen at this rate. And the rate is actually pretty ridiculous because in December, first week of December, total HIPP volume was sub one bill. At peak, it was 25 bill. This is per week. And now the floor is at I think 12 maybe 14 billion per week. Um, insane growth. Um, and it's really picked up, I think, on every on everywhere. Um, you know who was actually asking me about this? Um, James Kristoff. He was wondering if Osteium has ended up picking up a lot of this volume. And I think I already chatted

about this on the pod one time, but I just want to like reiterate it. Osteium has actually gotten significantly higher volume, especially they did during the during the copper and silver boom, late Feb, midFeb. Um I don't know if they are I don't think they're doing as well as Hyperlid is now with everything. But one per stex that never got it was lighter. And I also mentioned this on an analyst hours I think last time but maybe also on the pod. But just something to think about is like if the next evolution of these perpetuals dexes is allowing 247 trading for

traditional markets. um be it equities, be it uh ETFs, be it um commodities, you really want to like long what is actually seeing trading volume from that. One caveat here is Hyperlquid is in growth mode, which means that they're they've cut down fees by 90%. So a lot of this like increased volume is actually not showing up in revenues yet. Revenues are relatively stable over the past few months. Decean, February, March, no December, January, February have all been like around 50 55 mil per month. Um, so not tremendously uh impressive right now, but I don't know.

I think this is where like majority of people I know who are super interested in crypto believe that crypto is going going forward and fits our narrative as well, right? Like it's becoming the settlement layer. um it's increasingly the back end of traditional finance um and I think it works in this sense for hyperlquid um and oium to an extent which was surprising to me when I first saw the data I was also a bit sad that lighter didn't get any bump from it. >> Yeah, seeing seeing the fees come down makes sense to me. I mean, I do recall Noah having some questions about their revenue run rate and like relative to the amount of assets on the platform.

Um, and there was an interesting like, you know, how can you be making, you know, 20 to 30% annually of the total value uh that's even on the platform, you'd you'd run out of customer assets at some point if you're making that much money off of them. Um, so this I I think that makes sense, but it is interesting to see the growth just take off as a result of that. I'm curious like how how much have you thought through like it feels to me maybe there's um like a little bit of a multiple compression that needs to occur in terms of the market's feelings on where to price some of these exchanges. Um, and maybe that's that's been actively

happening, but that's maybe a hard part to to grapple with. >> Multiple compression here as in across crypto, multiple compression such that is that what you're trying to say? Are you trying to say like >> Yeah, in the case of these per exchanges specifically? >> Yeah. I um >> I mean it could be offset by growth from like these new categories and more volume there. But if if you know like you said the it's not being really reflected in the revenue the growth of these volumes because fees are coming down. So is there a period here where um we have to find maybe like a new norm at at where they're priced based on you know the growth may still be good but maybe the revenue can't grow as quickly.

>> I I I completely get what you mean. Um, I don't have much to say about this except for the fact that yes, probably there needs to be like it might be pricing in people might be pricing it the wrong way and that they might be assuming that when growth mode is off, so fees are back at 100%. the revenues might not boost up by whatever they imagine it's going to because when the fees go up um trades or like trading volume might come down. Um, on the other hand, I don't know about multiple compression too much because I

actually think Hyperlquid is semi mispriced because of the data available about their token and the way that like I I looked at circulating supply plus one year, which I think is at a 33x, which is not bad. Um, and if like there's continued growth, I think that just means that the price just keeps going higher and higher. Um, What I more so mean is like there are people out there who are really bulling hype because they're like, "Oh, is that 11x or 12x?" Because they're only taking circulating supply, which I think is wrong. Like I think the circulating supply figure going around is wrong. Um, and I think also there are like perma bears out there who are like, "Oh, like

you have to price everything on full FTV." And it's like a lot of those tokens probably just won't ever hit the market. Um, and we've seen Hyperlid be relatively active about this. Like I think either last month or the month before and this led to like a pretty big jump in hype price um they lowered emissions by 90%. To like lowered emissions to lowered unlocks to team members by 90%. So like they're clearly very cognizant of how much supply they want to to bring on like how much they want to increase supply by. um long-winded way of saying I think you're right, but I think there's other things to consider here.

Um which is primarily that if they keep onboarding more and more cuz more and retail trading volume is going up a lot and hyperlid is one of the main venues for that. um at this point in cryp in crypto it's one of the main venues to speculate on equities. So, I think if I don't really see it going down in the long term um from the figure that it is right now, I do think that the February bump was probably a lot like the 25 26 billion weekly volume because of the silver thing. I think that was too much.

But right now, I think it's from this level of like 12 mil. I can see it just steadily grinding up. Although, I might be wrong. Like, it depends on their listing strategy. Depends on how many fees they collect from the HIPP3 providers. Depends on growth mode. Like, yeah, I don't have a great answer, so I'm just kind of rambling. >> Depends on how much war activity we get. Seems like war is a good motivator for markets, you know. >> Yeah, that's that's >> there's a there's a classic, you know, the powers of the world have to have war to feed the defense companies, but it may be that we actually need war to feed the trading exchanges.

>> Yeah. Um I actually had a friend say something today and it was that uh retail increasingly acts like their hedge fund managers and they're like, "Oh, I see a war coming on so I'm going to buy oil and stuff." Like if you think of this is something that I think normal people did and well maybe like very active retail but it feels like more and more people are very active retail and I think the data supports this. Um so yeah like you know you have people who see war activity and they're like slamming into oil and now oil is at 93 bucks. Acred oil is at 93 bucks I think in crude. Um, so yeah, war is great for

Hyperl. Yeah, I think it's like um it's like an an artifact of this shift that's been going on for probably a few decades now of like a kind of passive management um domination of the markets to like more active and when I say active management I just mean exactly what you're saying in that like you know you see the numbers around active retail traders and increasing sort of year-over-year in their share of of trading activity and so Yeah, I mean, if those folks are just like following the news like anyone else is, they can make a decision to say, "Hey, I guess I'm going to go long oil here or or short oil here or, you know, I'm long war

fears or short war fears, something along those lines." Um, I'd agree with you. I feel like we are seeing that be reflected sort of generally within markets. Uh, and maybe that explains just like I, you know, gold had kind of it's well maybe silver is the better comparison in that it had a pretty insane run uh what was that like a month or two ago now and a massive blowoff top there. Um, and that's I think for a long time been uh kind of like a favorite asset of like maybe too deep in the weeds like retail speculators saying like oh yeah, you got to be long silver. It's it's, you know, the second best after gold and uh

someday it's going to get its crazy run and uh I guess that did happen. But yeah, I guess it it just makes you wonder like to what extent that's just >> Yeah, I wonder to what extent like just more active retail traders in the market like kind of exemplifying these like crazy speculative moves is like is playing into some of that. I mean, the market's definitely not what it used to be for 20 years ago. I think you can like >> it's much easier for for for anyone to participate in that as well. It's, you know, it's not like you need to uh call your broker and like it's going to cost you, you know, 15 bucks to place the trade. You know, you can just >> you got your phone out and you can just,

you know, freaking get long on your favorite app. >> Yeah. I really, one thing I will say is that I think I know a few people who work through brokers and I think it's the like the funniest thing in the world when you're like reaching out to your broker to buy stocks for you and sell stocks for you cuz just use a [ __ ] app, dude. Who are you? Um, yeah, for better or worse, we've allowed all types of people, everybody to gain access to the intricacies of the financial system. um specifically buying and selling stocks and securities. We'll find out what the effects of it are in 10 to 15 years, maybe 20. The same way that we found out what the effects of

tobacco were like 20 years later. I I don't want to say it's the same thing, but like uh the funniest is when you see like after crypto crashes, you see all of those guys go on like whatever like the Verge or Wired or something and they're looking at the camera like this and they're like, "Yeah, I lost all my money in crypto, you know, because it like a crypto crash." Do you remember? I think there was like a very big wave of these postcoid and they were like, "Oh, like I started day trading before CO and then COVID hit and then all markets went down 60%. It's just people like looking really sad at cameras." Um, I wonder if I wonder if that's a general experience.

I imagine it is from like people that I've chatted to and I wonder if it's if it was the right thing for everybody for us to democratize finance this much. Um, it's kind of a dark turn to to an otherwise happy day, but apart from the war but >> when when AGI takes everyone's jobs, we we can all be employed in the prediction markets trenches. So, >> it's it's so funny that like everyone's like, "Oh, when do you want to be owning assets when AGIS take all jobs?" Like when if AGI take all jobs or robots take all of the jobs, it's like, "It's done, dude. this now like I I don't know how you can even make something that's very interesting to me that I haven't been able to think

through yet. Um I have a few more topics um talking a little bit about uh we already kind of covered this which was um the settlement layer. This was actually also from our analyst hours and I'm going to kind of butcher Kunal wrote about them. I don't think it's out yet but it will be out. So, if you're not a Block Works Research subscriber, you should subscribe to read more about our thoughts on Countdown. But I pitched this to you before today's episode, Danny, and we both said the same thing, which is that we agree with James Kristoff's thoughts, which I'm sure he'd be very happy about.

But, um, yeah, I think like there's not like what I wanted to say here was this. In the world where tradfi uses us as tokenization rails or settlement layers and trading in the back end of financial infrastructure. Unfortunately, I feel like they will choose Canton and not Hyperlquid or Solana like some people want. I know you agree with this as well, right? I I think I have a more neutral view in the sense that I think I could see any outcome and it wouldn't surprise me in the sense that I don't know a lot of effort has gone into building these

large blockchain networks and ecosystems and like and yet you know despite the number of assets on Ethereum despite the amount of activity on Salana you look at the like kind of core token asset at the center of it. And uh I think they they still have like there's still problems in those models from like u you know wanting to own that and it being sort of like having some sense of value acrruel is like a problem that's not quite been solved for. So in the sense that you know Ethereum itself or like Salana itself is not necessarily like directly a profitable thing. I could see a world

in which a bunch of financial institutions say well hey if you know there's this network that's just going to operate basically unprofitably and people are willing to kind of like you know sort of pay into that to keep it running. um why wouldn't we just take advantage of it because that means we don't you know we don't have to spend money building that ourselves um but I can also see the same I could see I could see the reverse argument for something like you know like a can it doesn't have to be Canton but it could be any similar sort of like >> uh you know large grouped uh >> amalgamation of of businesses that like

form to make uh a a network that they sort of like maybe control some of the rules around. Um, if there's enough of a reason or impetus to want to have like full control over maybe like what are some of the core rules are for how things operate, then maybe there's enough of a reason to do that. But I don't know, you're you're trading two things. One, right? Like on one side there's enough there's enough of a proof point that some of the blockchain technology makes sense and has a use case because there's at least you know x billion number of dollars that people are willing to deploy on them today. Um and we haven't seen necessarily the same from something like a canton. Um so but but I could I could see things go either

way. Like I think it's just interesting that like this sort of open-sourced decentralized blockchain network is something that I don't know if you were to ask any business like hey do you want to run this and um kind of take on all the cost of you know maybe having to issue a token and like deflate it and maybe operate it as sort of like at a net loss to then kind of own everything else on top of it. Um, I don't know. It's just it's an interesting question on whether they would or wouldn't or whether it even it would even be possible because at that point if it's if it's like actually owned by a single entity, it sort of loses some of the properties that it had in the first place.

>> Yeah, I um I I I largely agree with you, but I think in particularly because kind of hedged everything you said one way or another, which I respect a lot. Um, but one thing I will say is to me it's like when I think about these things, I think Ethereum and Canton make sense as competitors, right? It's like they're issuing it doesn't need to be particularly fast finance. Like from what I understand, these guys are mainly issuing things that can move a little bit slower um that you just need like set background on and like trade settlement. I think I know Solon and Hyperliquid want to do it, but I also think probably Robin Hood

wants like Robin Hood chain wants to do that as well, right? So like that's how I've been thinking about it. Um I think the experiments that were done by providers like Avalanche and JPM Onyx or whatever it was that they worked with. Do you know what I'm talking about? That stuff just never worked out. And I think the KPA model makes more sense because if you can get buy in from I don't know 15 banks, it's much better than having just like one bank with its own infrastructure because that's very heavy. Um I think they did the right I think they did it the right way which I is why it's like kind of scary. I am very happy that there's a canon coin though because you can actually buy it.

I haven't um but you know I also know like layer zero is trying to get explicitly into this now as well like with zero blockchain. um kind of ties into the whole thing of like there's no need to doom and gloom. I think everything's going to be fine over the next like there's tons of these coins that you can buy that are either building towards becoming the settlement layer for trades and financial transactions. Um these things are actually being adopted. Um I didn't add much to what you said I think particularly because I agree with you.

Yeah, I think um I think part of it as well is that there's there's things that are different but also the same in terms of Tradfi and and DeFi operating systems as it comes to finance like you know since there's not necessarily like you know Salana or Ethereum are maybe the chain they're not necessar necessarily like the they don't they don't have full control over who could or could not list an asset, right?

And so it's like they don't get to then capture some of the other revenue streams that maybe like a NY or a NASDAQ would get to uh you know, they don't get necessarily like a listing fee or, you know, other kind of technological service revenue or, you know, providing market data, right? There's just like a variety of of companies that choose to build on top of that can then go out and, you know, offer the best product and receive that revenue instead. Um, so there's a difference there. I do wonder to what extent. Yeah, I don't know. There's there's just this constant trade-off in these things of like if you look at a Robin Hood or like a Coinbase and they say, "Hey, it's worth it. We should we should build our own chain. We should make make base chain. We should make Robin Hood chain."

Like clearly for them, they have, you know, enough customer lock in to where they think, you know, they they can get individuals to deploy assets and, you know, do some trading activity on there. and maybe they think there's like a broader network effect that can then happen where it it it pulls in other outside capital that's like currently in DeFi um and there's some value there. But there's just yeah there's a lot of competing forces to where I think it becomes quite difficult to like have a have a clear and accurate picture of the future in terms of you know if this brings down the general cost of you know operating some of these uh financial services then it's like they're in one way they might be like losing

revenue from customers who would have paid more in a in the more classic or tradi system that are now doing it on this newer system. But I guess if that enables you to bring in more customers, more volume, more activity, it can offset itself or maybe take down an incumbent. Um, but obviously not, you know, the world is always shifting that, you know, the if a if these newer entrance or, you know, blockchain technology enables you to take down kind of the the some of the prior giants and take some of that revenue for yourself even at a lower take rate compared to the old system, then it's a win for you and not and maybe not necessarily a win for them. So, but yeah, perfectly hedged as always.

Um, no strong opinion in one direction or the other. I do think clearly we see that there is enough interest and like I think some something of an inevitability here just from a technological standpoint of, you know, having some of these benefits around instant settlement, instant, you know, the cash is there, you know, no need to work through, you know, T+1, T plus2 settlement, things of this nature. um instantly crediting the accounts. The trading can be happening constantly 247. There's there's benefits from like a customer and a platform standpoint to where um I don't know a lot of these institutions are are seeing the value in competing over that. It's just I think longer term it's a question of who

actually wins and I think customers will probably win in some way just because it's >> it's getting better >> there's better there's better benefits for being a user of these systems but um will all of the incumbents and new entrance all win together? That's probably not the case. It doesn't usually >> we'll probably have a few big winners and it's I think it's really hard to say who explicitly those will be at this point in time. One thing I want to say here is um you brought up like that NY um they take listing fees, they sell data, um they have different ways of monetizing their product and chains just don't do this at all. And I think the

general idea so far has been like, well, chains can monetize in other ways. it's fine. But there's nothing that says that chains can't monetize in the same way that these things do. Like at the end of the day, they could also be doing the data side and like selling data access. I don't think that's a crazy thought. Um, and more specifically, I think like I fought with Daniel Smith over this like maybe a year ago, maybe a year and a half ago. was hyperlquid when you pay a maker or taker fee or I guess what whenever you pay a trading fee that's you're making a transaction so that's that's gas like you're there's no gas cost in this

typical way of to send a transaction but if a transaction is putting in an order then you're paying gas right so like the way that I think a lot of people think about L1 ones is like, oh, you have to pay a certain amount of gas and it has to be in a native token and it has to be like be a transaction. So, the general point that I'm trying to make is Ethereum and Solana and whatever incumbent or whatever like new chains are coming up don't have to just monetize through the customer or like through the user by making them pay gas. There's a million ways to do it and I feel like it's relatively unexplored. like we came up

with a way to monetize the blockchain and it's like that's it. No one's ever tried to iterate on it. No one's ever We're seeing some now like Mega E has USDM. Um Hyperlid has their general fees as well which I would say it's like still relatively just the same thing but no one's really tried very hard. You know what I mean? And it's it's kind of a shame um because I feel like that is a very interesting part of at one point the technical side will be solved and I would say for the large part like apart from E block times being too long it's not a bad chain like it's I think it's good. Um cut it down to two seconds. I'm sure you'll do it in four

years but if you cut it down to two seconds I think it's fine. I think it's okay. Like Solana works fine. Um, but I feel like they really haven't figured out and you should talk to Ian about this on Lightseed because he has some very interesting thoughts on it. I would actually love to bring him on over here as well. But that's I think the main missing thing at this point, which is they're charging users through one mechanism when there are surely much better ways to figure out the economics of these of these businesses at this point. Like what what we're doing right now is probably not the right way to approach it.

Yeah, I think I have we have talked with Ian recently about sort of the value acrruel of blockchains. Uh I agree with a lot of points there. I think I feel like there are two big thoughts that come to mind for me. One is that you have to always maybe ask yourself the question of is now the time to really turn on turn on the revenue engine and like stop sort of like subsidizing for growth. Um, and I think that's probably a real question for these things when you have like massive tradents who could within the next six months say, "Hey, we've spun spun up a

network for all of our clients um, and they can use it." And um, so I think there's there's that open question of like, you know, if an Ethereum or if a soul or any other network says, "Hey, we're going to we have all these like nine 10 or maybe just a few different ways where we're going to like nickel and dime you now." additionally so that we can kind of like figure out the economics question here like does how much of the activity >> does that turn off >> um just because of what the act like incentives are today >> um and does it drive them to other solutions but then two I think to your point about um you know these chains being able to monetize in more ways being able to offer more services like I

agree with that point and I think part of it is there's this path dependency still to this this like idea that everything in blockchains like needs to be this decentralized ecosystem and you just like can't you can't have one like a business that runs it all at the center because that's like no better than the existing solutions but I mean it it is still better if you don't have T+1 settlement and you know make transactions so I do agree with you and I I mean I think there is a space there still for someone to like maybe compete more directly in that realm of, you know, you could take something like an an Ether, a Soul, or even a Hyperlid as they've they've kind of decentralized

more. But you could still take a more centralized approach and say, okay, you know, we control listing, we control the trading, we control the data, we control this, and maybe that kind of is what something like a Canton is, although um maybe not quite. That's, you know, it's still more of like the consortium approach. I think you could probably still have this more more opinionated centralized decision. Um, but I don't know I you know I I see I think the main thing that I see is like when you get to the mass the mass consumer or like user of financial products like I don't I don't know that they care care as much about any of this

stuff as the like 10,000 of us in this industry do today. And so like to me it just wouldn't be surprising if it's like someday in the future they're just using their Apple phone and it's and they can just send money to someone like they're not going to care if that transaction was settled on Ethereum or Salana or Hyperlid or JP Morgan you know clearing the chain. It just doesn't matter to them. >> Yeah. No, I agree. Um one thing you mentioned was like monetizing the consumer. Another thing is like you could char I said this to people and they always call me an idiot for saying it, but you could charge rent to some of these apps. Like we're now getting to a point where people don't want to use a billion apps. Like very clearly there's

four, five, no people don't want to use a million chains very clearly. Like there's four, five, six chains maybe maximum and out of those there's like two to three of them that are very dominant. So at some point this will just start getting smaller and smaller and every cycle um some of these chains die like some of the chains that we had two cycles ago didn't even come back last polygon avalanche these are >> y >> they didn't do well they just straight up didn't do anything so these things died out so every cycle it consolidates more and more and then eventually I think chains will be at this position where they don't have to It makes no sense to have

I don't know whatever like 150,000 customers on Salana. It makes way more sense to have however how many relevant apps are on so 10 12 charge them charge them a portion of their revenue. It's much better for you. I think it's like because then I don't know I I talked about this with people like oh it doesn't make any sense they'll just leave like yeah maybe now but I don't think next cycle they'll they'll leave because at some point you cement yourself as a chain. Um I'm cognizant that we're running over time and I want to do something very important but first I want to let you speak.

>> Yeah I I have one last thought on that. I feel like we we have seen the push and pull of these ideas like in Salana right now. I actually feel like we're seeing a bit of a centralizing trend happening where you've had things like, you know, Geto tips and like the block builders and these transaction landing services like kind of make some they've made revenue at sort of like at the expense of the protocol and made things more complex. And we're seeing a push in the opposite direction where it's like, okay, we're going to do we're going to have Alpenlow and we're going to do MCP and and then therefore all these like different ways of ordering blocks will be all decided within the protocol again. So it's like kind of recentralizing that thing which has been kind of a you know an open

market for a time. Um so that's like a specific instance where we're seeing that push and pull and and I do agree with you. There's like these other ways it's like you don't have to just charge the consumer. You can charge the businesses that operate on top of you. And that's kind of what I meant when I said it's like if you control the data, if you control there's a point now that I would maybe maybe the last point I'd make is that some of the blockchains that already exist today, some of the incumbents, it's like they're already at a point where it's become difficult for them to start going in the opposite direction and say, you know, for for for Salana to come out and say, "Oh, Helas, you guys have done such great work. Now we're we're going to build our own service that does exactly what you guys

do. Uh and maybe we'll undercut you and like we're going to try to wipe you out of the picture and just take back what you There's a difficult part where it's like one you have very talented teams that are like already doing that and so one it would be hard to compete with them um or even like if you have to make a a protocol like vote or governance decision to do so like that it might even be hard to get a yes right >> so I do think in some ways there are certain things that are that are kind of locked in but to your point about like rent and some of these other ideas like you know it's possible I I think there's a direction we could head here we just have to see you know, decentralized governance is a beast. So, uh to get an

outcome like that is you got to get a lot of people on board. >> Yeah. One more thing like apart from governance, all of these chains are permissionless. >> Um which doesn't work very well with legal documents. like you can't strongarm somebody into commercial agreements or like saying, "Oh, we're just going to work with there's a lot of things about >> Yeah. >> the way that crypto evolved that has made it very difficult to because a lot a large portion of how businesses make revenue is through commercial agreements. You just can't make some of things on like you can't have vendor lock in or like it just

doesn't work. And the other part of what these chains are today too is like it's an agreement on like a number of validators to run the same software. And so like if there's some in the same way that like Bitcoin kind of had and ETH have had their kind of moments where they they've split in the past. It's if if you have if you offer up a big enough change at like one moment in time, you know, maybe half the validators on the network say we don't want that. >> Yeah. >> I'm not gonna do it. It's just I don't know. Crypto is beautiful because it's very chaotic, but it's also horrible because it's very chaotic. And it's very chaotic because of the way that it's developed. And there's all of these like tiny little issues that just are so annoying and and regular

life. You don't really have to deal with it. Like, can you imagine a business with like half the your vendors are like, "Oh, like we actually don't want to do." [ __ ] you, dude. It's my business. You can't do that. Um, okay. I have >> big news. >> This week's analyst of the week is he did very very well on your podcast, Danny. >> Wow. >> This is >> Mr. Toma, please claim your prize at the Digital Asset Summit in New York, March 24th to 26. Make sure to be there.

I think this is the last week you can buy tickets. >> Do they close him off next week? I mean, it is it is like two weeks out now, so we're getting pretty close. Yeah. Oh, there he is. Let's go. >> There we go. Analyst of the week is Toma. I don't think we're actually flying him out to D because he's too junior, but you should still go because Danny will be there. Um, and use code 0x200 uh to get 200 bucks off your ticket. Um, but yeah, huge shout out to Toma. He went on the podcast. He did some some Solana reports and he's generally been very good. So, bravo to >> we talked about onchain equities. You would have loved it. You would have said

HIV3. >> I would probably would have liked it. I would love to be invited on Lightseed sometime. I don't know if that >> Do you want to [laughter] Okay, man. I don't know if that's something possible. I'd love to go on there with Carlos and just disagree with everything he says at all times. There's something about Carlos that makes me want to disagree with him. And I think it's particularly because he never says anything that he's not sure about. Like he's a he does a lot of research and b he will he won't like speak out of his ass the way that I do and the way that you also do sometimes. Like I sometimes catch you speak out of your ass, but what you do is you always hedge you, which I think is great, but I don't. I just say it. But Carlos never has to

hedge because he always speaks the truth. Um, those are my closing thoughts. I love Carlos. I love Toma. I love Danny. Um, guys, thank you so much for tuning in this week. Again, a shout out to my lovely producer, our lovely producer Steph, for getting married. Um, yeah, very good. Okay, enjoy your weekend. Thank you for listening and I will see you all next Friday. In two weeks, we're gonna have some CMT digital guys on. So, that'll be fun.

>> Yeah, >> Matt. >> No, not Matt. >> Not Matt. >> Wish you didn't say Matt because I forgot to invite Matt. So, now I have to Well, not now. I have to invite Matt. I wanted to invite. >> Sorry, Matt. It's not you. You're not coming on. I don't even know who it is. >> There's only two of them. Well, I think there's like more of them, but I only know two of them. Okay. Anything else you want to say, Danny? Or can we shut it off? It's very awkward and >> uh we can shut it off. I agree. Toma, Carlos, they're doing great stuff over on Light Speed. Carlos is always very sure of himself. I do like I do like pushing back against him though uh frequently as you mentioned that you said you would like to do. Um I think it's it's good to uh play devil's

advocate against someone who has very strong viewpoints about things. I feel like that one it it makes you a better thinker. Um but two, it also just makes for more interesting conversation. >> Yeah, definitely. And it also is like really funny to see Carlos kind of stress out a little bit. [laughter] >> He loves stressing you out, Carlos. Former former analyst of the week. >> Former analyst of the week this week is Toma. Okay. Have a nice weekend, everybody. >> See you guys.