Network REV, the Sui MEV Scene, and AIs Evolution | Analyst Round Table

Transcript

when I look at who's leading that I see a couple things right first and foremost look at Bitcoin we're in a block space bare market for Bitcoin I think like the runes and ordinals thing never really took off this episode is sponsored by scale scale has differentiated itself from other layer ones by offering users a network of gas-free interoperable evml ones where the user experience comes first explore the gas-free ecosystem at scale. space ecosystem and follow their Journey on X at scale Network to learn more about the gas free architecture and growth of scale ecosystem visit the scale research Hub at scale. space research nothing set on zerox Research is a recommendation to buy or sell

Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial advice bacho Ryan and our guests May hold positions in the company's funds four projects discussed he's always gone for the intro hey guys welcome back to another episode of ox research today I am joined by Ryan and Dan Smith uh from the data team at blockworks how's it going guys glad to have you on pleasure to be back zerox or Ox the the question that will live into Affinity I've always said zerox never said o it gets it it it a minimizes the uncertainty zero straight

into the point I think I probably adapt based on the person who said it before me so I'm gonna say zerox We'll blame picachio there we go I'll respect Ryan on this we'll blame Picacho and we and we'll move on um I guess speaking of uncertainty the markets are certainly uncertain at the moment certainly uncertain um Bitcoin and other charts are looking a little red at the moment I think people you know past month or two were very excited and I'm seeing that some folks are maybe not so excited today or concerned uncertain heading into the new year um we'll see how that shapes out I don't know if you guys have any any deep or specific thoughts there but certainly there's been a shift in in the mood and

the attitude going um into the you know into the new year yeah I I got a thought um kind of two observations from the re recent draw down one is that um it seemed to be pretty in line with trafi markets there's like a little shift in uncertainty and trafy markets with with respect to rates and kind of growth trajectory you know that's fine there's also some like year-end price action that just like always happens as people move the book around so I kind of I pretty personally heavily discount December volume August volume July volume so like I wouldn't take it too seriously but like the the takeaway with the the trafi stuff is that you know Bitcoin is traded

in trafi markets now it's part of it's in going to be increasingly correlated or increasingly integrated to trafi portfolios and so which should look like what happens to risk assets when trafi markets move typically when you experience like this is the extreme scenario when you experience a VAR shock you're just told to sell the highest volatile things in your book so that you can get your value at risk in line you minimize your kind of tail risk and Bitcoin is that classic tail asset so if you need to trim risk you can sell a little bit of Bitcoin and trim a lot of risk so um just these like you know Trad fight Dynamics I think are going to increasingly influence um crypto Dynamics and obviously it's not going to all happen in one day but

you should see that in the price action going forward and like you saw today like the market sold off at 9:30 when cryp when trii markets opened at 9:30 right so um kind of like no surprise there the other um takeaway is just um kind of an observation about the timeline I don't see people in crypto using draw down charts they're pretty common in like trafi like orienting around like what's happening in markets and you know when to deploy risk Capital long term um so what a draw down chart is is just you take the current price and you see the percentage change from the all-time high price on a look on a on a Looking Backward basis so what you'll see is

just uh you know kind of like straight lines and then when you have a dip below all-time high as you go down and um it kind of puts in perspective like the current draw down in context of the historical draw downs and you know if you were trading NASDAQ uh in 2223 and you saw it was down 30% you saw that that was like a typical draw down for the NASDAQ you deployed Capital um the Bitcoin draw down right now is like very very shallow 10 perish when historical draw Downs are you know obviously um you know 70 80% but in like during bull markets they can get as high as like 40% or sorry as low as 40% so um I don't know a lot of consternation on the timeline in the in

in the context of a historically shallow draw down um would be the takeaway um but like all in all I don't know they're bumps in the road it's crypto these things happen yeah I actually just pulled up the draw down chart when you said that I'm going to try to share screen here um but it's funny that's like the very right curve answer and I've been telling myself a very left curve story over the past week or so um which is I feel like general con census view was probably that the market is going to experience you know this like an uh inauguration Centric draw down because this recent runup has been so uh

presidency and inauguration focused right like the the the narrative has been Trump won and he's bringing in like Ai and crypto heavy people and that is going to fix the regulation issue that is holding back crypto in the US and therefore um kind of push the entire entire industry forward and because of that I was like okay that's a hype and speculation piece of this inauguration Jan 20 we'll probably see that draw draw down in mid Jan and like we're just a couple weeks before that and and now this is basically the draw down we're seeing that we thought we would see then and so that's the story I've been telling me telling myself at least um but if we can add in this uh the chart I got pulled up I think it's actually pretty cool for the

context of this so I know go back to like 2016 but this red draw is the the red area chart here is the draw down the black line is is bitcoin price and to Ryan's point you know we've seen draw Downs of 80% in January 19 uh even like in between those those two peaks of the July all-time highs draw down of 51% and then in 23 70ish 75% and you know right now we're I guess I need to zoom in a little bit more here to get an accurate version on the the now you know we're looking at 7% down from alltime High um so yeah to your point Ryan uh we're really haven't

experienced much pain yet but it does feel like sentiment on the timeline is you wouldn't think it was only 7% which probably shows uh that General portfolio balancing is like very skewed to tail tail assets and AI agent coins that you know fluctuate 30% on a on a slow day yeah it's not surprising to see I think it's you know expected that uh the niche kind of participants in the niche Community um investing in the in the super super risky assets you know they're they're probably further down than 7% on um some of their tokens um that are not BTC um maybe for a spot of good news though or just interesting you know

we're seeing a a comeback of meme coins in a lot of different ways um this cycle one is using memes as like a Launchpad for you know building out a product um using that as kind of like the initial funding mechanism rather than an Ico um another that had been attempted or used as a gimmick in the past was um using meme coins as a way to raise money for Charities um I think a lot of those you know maybe in 2021 were not with the best intentions um or did not at least get carried out in that way but um we did recently have this past week over the kind of the holidays um a the Mira coin was 50% of the supply was donated to um a man with a daughter with brain

cancer and he has Comm committed to I guess eventually I think you know it's quite a bit of the supply of this token so has to sell it off bit by bit but selling it and donating that to a Hinson lab um that is specially researches researches this type of brain cancer potentially others um so you know a spot of good news some Joy um going into the New Year's I don't know if you guys I mean anything deeper on this point the one thing that I do find interesting is this kind of comeback of like meme coins as like launch pads for Building Products as well as I mean we see this charity thing I think pop up it it happened quite a bit in 2021 maybe some dubious maybe some you know actually for the cause um we're we're seeing a lot of those those

Dynamics play out again at least yeah this one was interesting um I don't know it feels really like gimmicky like if you want to donate to the guy donate to the guy U I feel like there's much better ways to do this both onchain and offchain uh but he did raise like a million bucks and that's incredible and um I you probably wouldn't have gotten that had it not been like this the question is like from a more moral or ethical standpoint like did everybody actually know that this was the game being played like I don't probably to be honest I think everybody buying a pump fund token at this point in the cycle is very aware of what they're doing um and this one was like this virality piece in nature to it so I

I do think that from a moral and ethical point like I don't know I think there's Foul Play here any of that and I think you can just kind of zoom out a bit and see that this um obviously great thing which is a million dollar for rare disease research has been secured um that said it's still just like a what what are we doing here this is a very strange I don't know it's like it doesn't sit right with me for some reason but um I do think like all Market participants were well aware of what was going on and I do think it worked out great in the end result as well yeah um I like it I think I think it's pretty interesting right like imagine if you were scrolling through Twitter and you saw like just a

link to donate to a GoFundMe I don't know there's a sea of GoFundMe like it's not that interesting but like to inject that onto the coin gecko feed or the Dex or the Dex screener feed I think is a pretty interesting way of getting attention uh I'm not saying that like I think that it should be this new form of charitable donations but like to gamify a thing is often like very successful and getting people to participate more so perhaps like I don't know like uh meme impact investing or some forms of it is pretty interesting where you can inject the speculative game to drive like goodness in the world because like everyone who lost money on that thing um was very happy too and it

probably I I mean this is just like silly calar fractual right but like it probably got more attention than it otherwise would have um so so you know that's good yeah I I think Fair points both sides it's hard to say you know on an ongoing basis how repeatable like to this extent and to this positive extent this could be done you know obviously if you had 50,000 you know charity meme coin launches a day it would not instill quite the same effect but at least you know in this one case that catches you know the attention um in the bid it's you know can be put to good use um I think maybe hinging off of this topic um you know everyone knows at this

point mem coins are a very significant driver of onchain activity fee revenues um and rev has become a very meaningful metric to us at blockworks and I think is starting to become um more widely interesting to the the industry broadly but I love this chart um that we have showcasing the kind of historical Network RV by Chain um and you can really see like in 2021 the significant dominance of ethereum um as a chain at that point in time um and then now looking ahead to this cycle you can really see the dent that salana has made in sort of this market share of rev um and I think this kind of the Mania

over tokens and pump fun and related um has certainly contributed but um this the kind of Shifting of the Seas um is is really apparent I think when you look at this chart and Broad Strokes um especially if we click over and look at it on a percentage basis as well um Dan I'm curious what your thoughts are just generally about kind of the the shifting of RV that we've seen over the past years yeah when I look at this chart I actually have a couple takeaways uh first I want to start with like a quick definition um and why rev matters so rev is real economic value or the amount that users are paying to transact on a chain it does not matter if it is a base fee it doesn't matter if it's priority

fee it does not matter if it's an outof protocol tip paid to somebody to paid to a validator to land your transaction it is the amount that users are paying to transact on chain it is a measure of demand this metric also doubles as the like Topline number for a blockchain right people love to know like the the revenue and and like of a business and blockchains are not businesses they are networks So when you say Revenue to who right are you talking about Revenue to token holders Revenue to stakers revenue to um validators Revenue to thirdparty infrastructure providers it's very unclear uh so you need this more broader term and rev is that number so the idea is to you can then take rev subtract out any operator expenses and the rest is

What flows to token holders uh and so you do get this like token holder aggregate position of stakers and non-sters um so people who stake their tokens ver just hold them plainly and you can get this like uh net income number as well so that's why R matters um I guess one core difference here is it does count out of protocol tips so that's like if you look at a Topline number on most other data providers you're only going to see base fees priority fees which is the the in protocol piece of this but again the reason why out of protocol is just as useful is because it goes to the Token holder and it was paid to transact um so again if you don't have that other piece you're not measuring the full picture the full spectrum of demand to transact

on a chain when I look at this chart I noticed a couple things this is kind of uh what I'm using as my where are we in the cycle chart actually so it's when I look at this and I see you know I think it was like mid 2021 late 2021 where we had that $2 billion month of people transacting on chain um that was stemmed by ethereum and some like crazy high gas prices at the time like multiple hundred dollars to send a transaction so it is like a little bit of a misnomer to say oh wow there was that much demand then and there's this much now there's far more computation happening on chain now whether that's transaction count whether that's Dex volumes whether that's um more Assets in lending protocols and being borrowed

from those protocols there's way more things happening on chain today the price to execute transactions on chain has just uh decreased um by you know multiple orders of magnitude and so that is like one important piece when I look at this chart but net net with cheaper transactions you need to be selling more units right when you decrease the price of something by 99% to have the same net value you need to increase the units sold by 100x um and we're starting to see the the very early Innings of that and so to me when I look at this chart and I say yeah there was $2 billion uh spent in a month to transact on chain back in 21 uh but today we see far less than that about you know two and a half times

lower um yes there's more transaction activity on chain but the that user monetary demand has not eclipsed that previous high and so I do think this cycle we're going to hit a new High um likely in 2025 um and probably the early half of that and when I look at who's leading that I see a couple things right first and foremost look at Bitcoin we're in a block space bare market for Bitcoin I think like the runes and orinal thing never really took off uh there was that uh Twitter recap like your your Twitter wrapped and I think it was by EXA EXA and one of the quotes it had for me was uh you mentioned runes were stupid like really really stupid and I was that was

true I was kind of loud about that because it made literally no sense um and we looked at the demand for Bitcoin block space it is very much in a bare market today uh so that just like failed to take off I think the upside of things is probably what's going to be needed to make that more interesting again when I look at ethereum uh I see a successful transition to execution happening on l2s um base I think has flipped ethereum and Dex volumes on multiple days now and is doing incredibly well uh I have another chart I tweeted out earlier this week that was uh ethusd so only looking at the usdc and usdt pairs uh on all ethereum l2s and ethereum main net and E the the

eth usdc volume on ethereum Main net is still about 40 to 50% off its highs from 2021 where that same amount of volume on l2s specifically arbitrum and base who go head-to-head for this volume uh is like blown past all-time highs so to me I see a lot of this sex Dex Arbitrage has actually moved from mainnet to the liquidity pools on arbitrum and base specifically and very interestingly it's mostly being driven by a single address um it's like a 0 1xf uh address you'll probably see on every single block on either of those chains um not sure exactly who it is but uh they are clearly running sexx ARB on both base and arbitrum and so to me

that's that was kind of the goal was to push execution of the l2s and that's where we've seen and from an RV standpoint that has been costly uh market share has decreased total value uh has decreased as well and the clear you know bright spot on this chart if you will of a a current market participant that has massively grown their market share at salana um you know rev is at blown past all-time highs by many multiples it is now the most rev generating chain in the industry um mostly driven by ordering fees or those Priority Access to State fees which would be jeto tips and uh priority fees and uh they're kind of battling some of those east2 22 problems

now with uh sandwiching and and harmful me uh but most of that isn't actually reflected in RV as there's a single actor who has a monopoly over that space and keeps very very large profit margins uh but net net you know salana has absolutely crush it they proved the thesis is true that you can do exactly what I mentioned earlier decrease cost by 99% and increase units sold by 100x and if you increase Beyond 100x you actually generate more uh so the the idea is you significantly reduce the cost and you'll have a that induced demand narrative so very interesting to see that play out as well so it's kind of like my three high level Thoughts with Bitcoin ethereum and salana and just to put a bow on that I think the one thing that's really interesting is

there's been a huge discussion around comparing base Dex volumes to salonex volumes as those are really the two heavy weights today in the industry of also when you're factoring growth from here um ethereum is very much in the conversation of the the Dex volume heavy weights but a little harder to create that growth narrative uh when you look more forward looking again because that intention of pushing execution onto the l2s um and so when comparing these volumes Salon still has a very material lead over base uh but I think like you can create a very concrete and sound argument for why that might flip uh however when you look at rev it is not even in the spectrum of flippable right now which is very very interesting so

it's kind of like the one metric I like to use as if you know gun to your head you got to pick one metric to analyze a chain like to me it's R because that is what is being paid to transact on chain that is like the monetary demand to interact with your economy and two that is the ultimately the top line that will flow back to the Token holder so there is some valuation side to this as well I I've got one more chart for you Dan that I I think um is meaningfully interesting as part of this discussion okay this is Spence incredible that we just did that there we go um and if we look at um newly created tokens by blockchain I think

this this highlights a lot of the points that you were making um you can actually see what I find interesting is that in 2021 um the BC chain um like quickly and significantly you know usurped ethereum as far as like you know new tokens being created and traded but ethereum gas fees were you know 100x if not more higher than that of BSC and so they contined to dominate from an RV standpoint um by a significant margin and if we look today like those those two massive kind of contributors um this isn't go all the way to present but if you updated it I mean the so the so numbers would continue um to grow there but you know salana and Bas um the two chains you just mentioned kind of like the top

contenders for activity and volume today um have have taken up the helm um and this doesn't like you said it doesn't fully illustrate the picture that you know we're since this is percent of newly you know traded tokens um we're talking about in order of magnitude of more you know tokens and trading activity occurring um to fuel you know cheaper transactions leading to an aggregate you know significant amount of RV for the for the chain um which I think is interesting I think this chart is just it's an interesting sort of like you can see the compounding factors in terms of like cost to transact um and you know like relative throughput I guess if you want to consider it that way um that that sort of interplay into the the r metric yeah I think um I think the I think an

interesting overarching observation for everything that you guys just pointed out was um that trading is what matters to the profitability of these things and like so what are the implications people got really excited about um poly market right but it didn't drive a lot of trading volume so the value didn't necessarily flow to polyon or wasn't noticeable on the Rev charts right um so yeah just something to think about as you know you get bullish on the chain or you get bullish on the app where the value flows and and what matters what really matters to to the chains valuation yeah that's a good flag that's that's definitely the game that is being played today so that is very much so what matters um the question is like how

will that evolve going forward um I think Dex activity will probably always be in the discussion uh no matter how it it it shakes out however I think there's like a decent opportunity or decent likelihood that it's you know you know today it's meme coins but I think we'll get more interesting Assets in the future so the other thing to look at is you know where are not necessarily just like uh you know pump fund style churning them out meme coins being uh launched but also like the interesting assets um so whether that's like the top AI agents today whether that's rwas whether that's you know anything that's just like T tied to a project more broadly yeah there's um there's good

research from [Music] um how Arbitrage opportunity scales with market cap so like the higher market cap um things on exchanges the more Arbitrage activity there ends up being because basically you can do two things you AR the fundamentals so like play a long-term game and then you can ARB the The Exchange to exchange activity uh I think the study was on the the London Stock Exchange so like you can see it's just like a super linear relationship Arbitrage opportunities with with with market cap so I guess another to frame it or like the yeah the interesting assets right it's like the the the assets that can cons that can maintain these multi-billion dollar valuations right they're going to drive a good amount of rep for these chains as

well yeah I think that actually gives like a pretty good nod to the L2 ecosystem right because like the one asset that you get this trustless bridge with um if you build on an El you know traditional R up on top of ethereum is is eth right you're going to get your own native stable coin implementations if you're doing like anything semi-interesting right we've seen that already with like every major L2 uh but you can't just arbitrarily admit eth anywhere so eth is actually a very interesting asset for exactly that conversation um and again like I'm going to pull up that tweet that I was talking about because I think it does illustrate the point of like seeing the amount of success that arbitrum and uh base are both having because of that asset specifically being on chain there so

like yeah here's here's the example so this is just the uh dollar value of e SDC across the ethereum ecosystem as we have like other chains grouped all into one because very interestingly that's just like a non-material portion of the volume um and then you have base arbitrum in ethereum and you can see ethereum again still about 40 50% off that uh previous all-time high in 2021 and Bas and arbitrum just absolutely crushing it right now um again largely driven by this this one single actor which is pretty interesting as well uh so yeah there's like this one entity that is doing 20% of fees paid on base and about 30% of eth usdc volumes on base and they're doing about 12 or

excuse me 14% of ethusd volumes uh on arbitrum as well so it's pretty interesting to see that this this player is like absolutely eating um and here's a quick glance at some activity from this player across both of those two chains uh so basically this chart is a little bit confusing but on the top if anything is positive or above the line that is a purchase of eth on either chain and anything below the line is a sale of eth on either chain uh specifically looking at the eth USD pair and what you'll notice is all of these lines move together like they're either buying eth on both chains or they're selling eth on both chains and what that signals to me is this is not cross chain Arbitrage right you'd imagine these be

going the opposite directions if that was the case if you buy on eth you'd immediately be selling on base but instead this is uh sex toex on both chains so basically the price will move on binance or whatever exchange and then this account will like basically buy take liquidity from both chains almost equally and then bring that back to binance again whatever centralized exchange and ARB the price that way so that was kind of an interesting observation I had going through this the other day did have you I guess I would assume the answer is yes but have you looked in and seen like the transfer volumes there as well like you know withdrawals and deposits to in from um centralized exchanges from this address uh no I I didn't dig through which exchange it is but that would be pretty interesting but I don't know if you're

going to see it really because my understanding of how this works is you basically just have you know imagine you have a billion dollars you just park you wouldn't have that all in one exchange first of all and then you would park that you know you put $10 million on base $10 million on uh arbitrum and then you just like occasionally rebalance that $10 million uh so that could be you know your let's say you're arbing against binance because they've got the best uh prices and then you keep your liquidity on coinbase because that's who you trust the most I'm obviously just making up this example but it's not super easy to see exactly where they're arbing against but we're going to build out some more interesting data around just the m space more broadly um I don't know there's just like such an untapped

potential there and uh there's a couple great teams that write good papers on this like flash Bots uh the Cella guys are great as well uh but I don't know there's just like a lot of this is again this is a majority of onchain activity and it's like just a bit of an underexplored area in my opinion yeah it's a it's definitely a big deal it's also interesting how it um you know I understand some things are different in crypto than trfi but one of the things that here that similar is that one big player will be a lot of the volume so I think citadel's like as of March of 24 they were someone estimated them as 26% of us Equity Market volume um I think for two in the past has been a Sim similar size so yeah the

analoges hold hey everyone we'd like to give a special shout out to to the sponsors of today's episode scale scale is built different unlike other layer ones scale is offering users a network of gas-free interoperable evm l1s where user experience comes first scale operates like the AWS infrastructure model where developers pay for space in the network in skl tokens to validators essentially scale has chain fees and not gas fees this allows for free transactions on scale and has saved 46 million users over 9 billion in gas fees explore the gas free ecosystem at scale. space ecosystem and follow their Journey on X at scale Network visit the scale research Hub to learn more about the gas free architecture and growth of the ecosystem that's scale dospace SL research speaking of meev then Dan I

know we have some maybe interesting things to discuss in terms ofu or you know theu MV scene I guess you know we just kind of discussed you know the the eth side the salana side um talked a little bit about Bas and arbitrum I guess what's interesting on the S side of things um obviously we're working with move in a in a different sort of architecture there um as far as M goes like what what what are the unique things or the interesting things that you're seeing there yeah I'm I'm definitely not an expert on I mean me broadly but specific specifically on S me I think it's interesting and emergent which is why it's fascinating and I would call this like a gen 3 chain right like you had ethereum and then you had you know solunac so salana got to learn off all

of ethereum's learnings going you know being let's say a full cycle or two ahead of where it was and then you had these gen 3 chains like Aptos andu that have the same opportunity but now not only ethereum but also salana um and they're a little bit more relatable in different capacities to either chain uh so they kind of have this like broad spectrum of knowledge to build on top of and that I think is the really interesting aspect here is saying okay like what are they going to do differently to avoid some of those headaches that the other chains had that predated them um so specifically on S and I think on Aptos as well there's like The Ordering of of transactions is much different um andu specifically is uh a dag based chain so it's like a

leaderless chain there's not like one person who has a monopoly Over The Ordering of the transactions in a block uh so that like already changes the meev landscape a bit um you've seen you know Max Resnick toly uh and even a lot of the ethereum folks saying like all right yeah multiple concurrent proposers is probably a good idea because you have a higher likelihood of someone that's going to do the right thing for you uh being the the block producer and so I think um the dag based piece is super underexplored by the industry broadly I think the sweet team is obviously very in the weeds of what that looks like I just honestly don't have a good view into that uh but there's a proposal right now I think it's sip 45 that basically wants to like

introduce the notion of priority fees and priority ordering pretty standard stuff I think that you know you'd expect to see on most chains um versus like block STM used by I think it was originally created by the Sasha and the Aptos folks uh but it's also live on polygon today and with like block STM I don't think you have like super deterministic ordering so like if a priority fee is or if a gas fee is higher you have like an increased likelihood of being higher in the block but it's not like guaranteed um and so that's like this interesting element and I could be a little bit off there I'm not 100% POS positive again this is just like an undere exort area for me uh but it's just interesting to see that you

know we're starting to see a shift in like okay once you have transaction activity you are going to have me and this is something you have to deal with or else you're going to have troubles um and the risk of not having priority ordering is you can just Spam the out of the chain and you know like we just saw this on salana earlier in the year if if you're not going to like put my transaction where I want it I'm going to send you so many transactions that the probability of it being where I want is going to be so high the rest will fail um and it's your problem not mine because transactions are so cheap I the one being executed was profitable to send you 10,000 of them um so that's kind of like the risk you're trying to avoid here there's also two really good

me teams building oh I say really good I'm I'm not super familiar there's two me teams building on uh sweet today uh shio and aftermath the aftermath team I chat with a bit and I'm I'm pretty like bullish on them as a team I think they're very intelligent and like critically thinking about problems which is fascinating to see um but yeah if you wanted to like dive more that's probably where I would start is like sip 45 and then like what is aftermath building and what is shio building yeah I do think it's interesting to see a lot of the sort of cutting edge of of tech that's being you know sort of chased after in the industry has you know we're trending in a lot of the same directions right um the discussion of priority fees there um

that you know trying to parallelize certain things um you know the research around meev like a lot of you see a lot of little bits and pieces get adapted and like you know utilized in different architectures in different ways um but ultimately it comes back to the same idea of kind of chasing after these same opportunities that kind of like represent themselves over and over again yeah there's also this super interesting um thing that I I just noticed happening um I think it was zerox Evan on Twitter who posted about this but basically so there's on like these high througha chains you need uh State access becomes like this bottleneck for execution so you basically need to make people pay for it uh salana s aptose

they all have this where there's a fee to place a deposit yeah nice there's a fee to place a deposit on uh opening or creating a new piece of State uh and that fee is like a mostly a deposit that you'll receive back once you close that piece of State I um onu what's happening right now is they figured out a way to swap the owner of who paid that storage fee and why that's interesting is like an order book so you know let's say I'm a maker and I want to buy like one sui at four bucks or whatever and I place this order I create this piece of state that contains this order you know I paid some small amount to um execute the transaction and there's an additional fee that's this like storage

deposit um on like salana and Aptos and evenu historic all I've ever seen was that uh storage rebate goes back or the rebate for the storage fee goes back to the original owner that opened and created the state initially however I think it's the aftermath team created a way for that deposit to swap hands and so what this means is like a maker can open an order and the taker could close that order by you executing their trade and actually get the rebate and the rebate is sometimes larger than the transaction fee the execution fee so you basically get the like negative transaction fee or you're paid to execute the transaction because you are taking somebody else's storage fee um which is really really interesting for

market makers or just takers more generally um so I haven't like fully wrapped my head around this piece either but I have never seen that before and I'm always intrigued by like unique uses of blockchains and especially in this case the storage fee specifically and and in this case I'm not entirely certain but like could you liken it to something like like you know State rent on salana where you know you can burn an account and get back the soul for the state rent of that token or is this a different mechanism it's the same concept right you're making a deposit to create some new piece of state and then when you close that piece of State you get the deposit back in full um that exists on Salon it exists on abdos it exists on S I think the Innovation here is figuring out that you

can actually change the owner of who put that deposit down um and therefore like if you you know let's say I'm making up numbers but let's say you paid a dollar to execute the transaction you got a $3 rebate you actually just because somebody else initially paid that rebate that uh storage deposit that you're now getting as a rebate you know you actually made $2 by executing this transaction regardless of like what activity you took is there a so so this kind of concept exists on other change but chains but it's only being like done in mass onui today any is there any reason why that is I don't know if you can change the owner on of this storage uh deposit on other chains I haven't seen it before so I don't know like I generally just don't know if it's possible or not

um so yeah I don't have I don't have a good answer because I genuinely don't know yeah I guess that it would be an interesting question um the only like cases where I understand this on salana is if you know if you if you sell out of a token or you know get rid of an anft or what have you you know you could burn it and get back the state rent or um you know remove that the the token account associated with it for example yeah and Order books never really took off on salana uh Phoenix was the best implementation we've seen and you know they do about to 10% of of Dex volumes uh most of their activity comes from stable coin swaps which is interesting uh we break out that activity actually on the salana. blockworks research.com dasboard covering all of Sal's deck

activity um but you know I think most of their issues were convincing this is my interpretation I don't know for sure but it seems like market makers were pretty hesitant to Market make on chain it was expensive and there was this latency component um you know they didn't always get their transactions to land in a timely manner and that would cause them to have a worse experience and they just weren't interested in doing it I think this is why the ellipses team who built Phoenix is also building Atlas using the svm but you know kind of building their own construction as an L2 where you can get better latency insurances um so point being that market uh order books never really took off on salana as they seemed like that was kind of like an initial idea of something that could take off so one thing I'm definitely

paying attention to is does this happen on S and aptose great stuff um maybe one last topic for today then I think we've we've gone deep enough on me and uh getting back some State rent The Talk of the Town I guess more generally has been a lot of AI and AI agent related conversations um some people are absolutely crazy about them um we're seeing lots of people I think whether you're interested in just the developments of the llms um we had you know open AI their new model kind of make headlines with you know new sort of like math capabilities that were unexpected Maybe maybe this quickly um regardless I know the send AI team has just done a uh they're doing a salon AI hackathon um and there's been quite a

few submissions um you know with the speed with which a lot of these have come out I think it's you know it's a lot of quick like barebones attempts to you know put together Integrations and different things so um but hopefully we will see some interesting products kind of come out of these I know Ryan you've been sort of digging in the the AI and agent trenches a little bit be curious to hear your takes um on sort of maybe where we're at where we're going what you think yeah so spent a um a good chunk of time lately kind of diving into this AI agent space um I am I was a little late just on the narrative I kind of like well actually like we started out early remember Danny

like we actually had like an essay up saying like there's going to be a pump. fun of AI agents and then we just like didn't launch it was either in like late October early November something like that like this was all the team kind of first saw it unfortunately like we didn't publish it and we like weren't loud about it but then I think by the end of the month like AI 16z was ripping and like people were launching agents and a or axt I think is the name like that that was up in in making storm right so um A lot's happened uh we were early on it then we kind of forgot about it now we're back um after doing a deep dive um I gotta be honest like I'm bearish on what is um on the market

today but I'm pretty like I guess bullish on what's possible or like can be going forward um like I think what's objectively going on today is basically an extension of either the meme coin game or um you know it's just another subset of like Crypt native trading games where you have crypto native Capital that's very D gen that is very short-term time Horizon that wants to make return and play funny games on chain uh it drives a lot of the Builder attention in the space and right now it's driving that attention to AI I think that's like objectively true um if you're looking at the the things that these AI Bots can do today it's

basically just what they could always do they can talk to you they can you know print me media um they but they're talking to you from a Twitter account right and that's cool and it's exciting and sometimes they take on a life of their own but like from an investment perspective like you can't do much there other than trade other than play like the crypto native trading game with these coins right so if you think like that ai6 Z you know they have a team they have kind of a product Vision um you have to get in at like a $ 1.2 billion do valuation or something like that like um that's that's tough to justify I think for anyone so you have to play the trading game you can't play the investor game you know I think that

what Canen be after like poking around and giving giving this a think is that like you know there there's kind of two ways that you can think about the space there are like action based agents and Creator based agents um and actions still seem far away right so like from a web 2 perspective like actions would would you know be a sales agent a marketing agent in crypto space like a trading agent or you know Financial decision-making agent um if you listen what SAA Nadella says about actions like he doesn't instill confidence that they're going to happen in 2025 if you listen to the bg2 podcast um they had a good interview with him Brad gersner is

very excited about actions in 2025 saas doesn't seem to be he kind of tempered expectations so um I think actions are a little could be further away than people think um um then the other side of the spectrum you have like Creator agents which just like generate content and I think that that's like pretty interesting right so we're seeing what the zerro team is doing where they're generating content and they're like creating an AI native influencer and no it's not a perfect agent right there's some Flint stoning going on they're like you know making this puppet like work in the background but it's like pumping out real music it has like 100,000 monthly like listeners on Spotify it's selling nft like you can kind of see like the

beginning of something potentially interesting there um so like what's more near term these things can already create content I think like Creator agents are much more likely I think in 2025 they can drive a lot of attention because like they have a token and tokens are like really good at driving attention so um yeah not much today I'm excited to see who the winners of this Sendai hackathon are because there's there were a lot of submission and you have to Wade through like a lot of really thin thin rappers and and I don't want to disparage thin rappers I think a lot of thin rappers are going to be really really valuable but these are extra thin a lot of them so right they're just people trying to get in

quick quick submissions so I think the uh the judges will like do a good job of curating that for us and then when they announce that um in early gen we'll be able to get a good look at at what that hackathon was all about great points I think um maybe to your points about sort of the Creator creative versus um action-based agents um the thing that I would point out is like on this I do think that the you know a lot of the Creator based tokens have entered this like you know memec coin trading based uh kind of Paradigm where you know like you said at at a billion you know fdv today you know it's really hard to value that thing on like fundamentals or

whatever you're you're looking at the momentum you're looking at can this you know continue to grow its attention um via you know Integrations with you know if it's the music if it's other social media platforms what have you and can then that you know via the sort of you know trading tokens as an attention economy um can that drive its value higher in like this you know kind of reflexive flywheel thing where price drives the narrative a little bit um and I agree with you there and I think on the on the product side as well like it's very early but I do think that this there's this is an area here where like the the action-based agents and like products built off of that um I would not mention any of them here they're just they're all very low market cap and it's very early like very simple like

you said rappers on on models essentially to do things on chain but I do see that those eventually evolving into you know generalized products that one might use to interact on chain or with defi um kind of like how you might look at like a telegram trading bot today where you know users aren't in a lot of cases these people aren't going directly to like the deck's front end they just they open up program and they're like what are the trending tokens and they buy the token right there in the in the in the app um and I think that these rappers and these tools like the fact that so much of this is getting built open source like it's just it's really speeding up the development timelines and we can see a lot of this stuff get built out really quickly how you know good and successful it is might

depend on like can they get hallucination rates down like can the more powerful models you know get released to the public at you know cheaper prices basically for compute um that's going to be where like the real gains are made but at least you know building out all the Integrations makes more of these applications possible yeah I mean one of the things you also just said there which is very true is a lot of it's being built open source and that's great for development but generally not great for Value acral um so like that's the other thing here is how much of this price appreciation is rotational crypto games that we you know that we very much have in this industry versus you know pricing in the actual likelihood of this thing a being useful

B winning and C making money um it's probably way more of the former than the latter but like and that's that's also not to say like this is going to be the narrative probably for the rest of the cycle AI is very real and it's like Forefront of everybody's mind and the overlap with C crypto is certainly an obsession of the industry what do you guys think of um the the platform plays things like virtuals I think they probably have the best shot at that last piece there which is valoc Cru I think virtuals has done million in Revenue something around that um they take fees on the trading volume and and launching agents through their platform that kind of feels like something pretty interesting um versus an agent itself is which is sort of like

a problem I think it's like all right well you we can make money from launching these things but we aren't really sure what these things are going to do how good they're going to be at that thing and how that thing is going to make money so I don't know I uh you really got to squint at it and use your imagination which feels a ton like defi in 2021 where 95% of the launched was totally useless and circular ponies uh but they were fun and they got a lot of attention and they traded at ridiculous valuations but if you bought any of that stuff at the Pico top you are tremendously down still today many years later um this probably like my best mental model is 95% of it's going to not end up working and that's AOK uh that 5% is going to be really really

really really interesting 50 billion is a a lot um I'm actually pretty shocked by that number and the reason I'm shocked by it is I feel like like the AI agent tokens are like inherently like lower frequency from a launch perspective than meme coins where like you know a meme could be like a simple picture or a phrase and those are like you know you can spit those out infinitely whereas like AI agents are like a fine-tune thing that needs to you know act and can act kind of indefinitely to get attention and therefore you probably

need fewer of them or you need to launch fewer of them because fine-tuning everyone is tough and finding the compute to sustain everyone is tough and launching if infinite Twitter account like there's there's more frictions in in launching uh playing the meme coin game with these agents so I would think that naturally you should see less token curation and therefore Revenue coming out of virtuals than a pump fund but 50 million already is a very big number uh I wonder if the is the the pricing model just very different than what pump is doing now you're making me really second guess this number um but let me I'm

gonna try to pull it up I see I see it here on a dune uh sorry a dune picture or jpeg on Twitter but but I can't find the actual dashboard um yeah I mean okay you're right that is a big number and I cannot actually sit here and confirm it so because pump is only is 300 300 million right I think it's yeah just cross 300 and virtual has been around for like what six months and really seen traction the last two three um that does that does seem like a high number and it is lower frequency we have this on our uh public Dash for base which is optimism.

blockworks research. uh.com base and if I scroll to the Dex activity page and scroll towards the bottom we have a virtuals breakout and on this tab uh yeah I mean there's about a hundred new token mints a day right now relative to pump funds 40,000 I've heard I've heard I've heard the tens of millions of Revenue number for virtuals a bunch I just can't find the source if I I would have to maybe double check their sort of like bonding curve achieved mechanism but if they're able to keep the trading in the pools on their platform and they're capturing a

portion of volumes like pump fund does for example um there's there's an opportunity here where maybe they're they're capturing all the the sort of fees that maybe pump fund would be getting if all of their tokens did not graduate to radium yeah yeah that's a good point so there's there's a potential that funds mistake potentially yeah like if there are if they've and I think we have uh Dan do you have that one that shows uh percent of trading done on the platform uh so it's broken out by token and most tokens are 100% still on platform and then I think like axt is now about 50% um you know if you're

another decks you're going to try to pull some of that your way as as well so so maybe they did in this case learn from pump funds sort of if you want to call it a mistake in that if they're able to keep more of the volume like be the main deck basically for these tokens then they can you know continuously capture the fee revenue on the volume yeah I'm also just thinking out loud about like counting that Revenue number like what if someone on their Dune dashboard is applying the current virtuals price to the virtual denominated Revenue yeah I just found the the dashboard but I'd have to read through the query to know what the what they're doing which I'm not going to do live on a podcast and put everyone to sleep um but that's a good point too oh yeah okay they are it's the virtual

Daily Times the current price okay has a Time series or daily today this is actually the today so they are calculating it incorrectly I've looked at this query for 10 seconds I don't feel confident enough to to give you an answer live on a podcast well we'll do some we'll do some investigating and come back with it we'll do some DD we'll talk about this topic again another follow up on this one next week and maybe maybe the result of that combo is that uh virtuals is you know under overvalued based on these Reven I mean that says a lot about I mean like we were able to figure this out in like 30 seconds just like a little think we put a think together and uh I don't know I see a lot of Revenue

be posting on Twitter it it does open the interesting question for like the pump fun where you know I know there were comments a while back maybe a few months back where they had talked about kind of wanting to become the sort of the decks for all of the tokens that are launched on the platform um there is clearly quite a lot of Revenue that they're missing out on right that 1% fee on all the volumes that that make it off of pump fun and on radium like that would be I mean their their revenue today is has been incredible in the in this sort of first year like 300 million plus I think you mentioned Dan um I could not imagine what that figure would be um potentially side here they would have had to build fork and you know audit and whatever their own amm um and this got them you

know I think it's like two or three people they got to launch almost immediately with no other build um now should they have like brought that into themselves you could also argue no there uh because benef like driving value at radium is probably um socially positive EV and you're like lifting up the ecosystem grow the ply blah blah blah but I uh I think it's actually an intriguing way to get to Market at the bare minimum so like that's kind of the value of shared state right you get to just plug into other people and you don't have to build things yourself and if you like really zoom out and it's like yeah we made 300 million we could have made 375 it's like okay you made $300 million in less than a year that

that's a good point it probably really accelerated pumps go to market without without the existing infra it's pretty hard to to do what they did yeah and imagine they you know spent the time building it themselves and somebody else beat them to Market and then they never existed yeah to that point I think you know there's I think there's other ways that they're going after you know additional Revenue opportunities you know everyone in their and their best friend has built like a a telegram trading bot for example you know you've got Bonk bot there's a million of them um I'm you know I know pump will probably continue into product lines like this um it offers another way for them to you know capture continuous sort of like feeson volume um so there will be other opportunities for them that I

don't think they have to be sad that they only made 300 million so far um awesome yeah let's uh we'll double check these Revenue numbers on virtuals any other takeaways uh for the audience before I think we call it here no I mean just to put a bow on the AI agent stuff I mean I think the AI Trend will aggressively continue I think you can pragmatically look at everything that's there and it's like we don't have a ton today but it's like you can easily concoct why it's an interesting future and that is exactly what we did with defi in 2021 totally Coen totally fair lots of optimism you know people are people are excitedly speculating on future values so not surprising that's

kind of the standard for this industry we love you know very high prices for things um it gets us very excited so um thanks to everyone for listening uh we will see you all next time thanks for coming on guys thanks again to scale for sponsoring today's episode episod if you weren't already planning to make sure to go check out scales ecosystem explore the gas-free ecosystem at scale. and follow their Journey on X at scale Network and visit the scale research Hub to learn more about the gas-free architecture and growth of the ecosystem that's scale. space SL research [Music]