The New Stablecoin Race, Hyperliquid’s Growth & Solana’s Revival

Transcript

We have a new stable coin entrant. Um this time it's another consortium approach with Open Standard. Uh a number of big partners that are joining in on the launch. Um the list is kind of too big to name. As you can see here, but Visa, Stripe, MasterCard, Amex, BlackRock mentioned, B&W, I Standard Chartered, Coinbase Tempo Solana Base.

Nothing said on ZeroEx 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. Luke, Danny, and our guests may hold positions in the companies, funds, or projects discussed. Everyone, welcome back to another episode of ZeroEx Research. Joined today with my trusty co-host Danny and Sam and Shonda from the Blockworks Research team.

How are you guys doing? >> Doing good. GM GM. >> Doing fantastic, man. Great to be on. >> Doing well. Thanks for having me. >> Yeah, it's a it's a shorter week coming up into the holiday weekend and July 4th. That being said, uh still action-packed in the markets with number of big announcements basically each day throughout the week. Um perhaps going through chronologically, I guess Monday we got big news from Strategy with their digital credit capital framework. Um basically they're stepping in to address a lot of the

concerns that we've seen in the market that were reflected both in strategy commons price and stretch trading down to 70 handles. Um big picture they they announced a a number of levers that they intend to pull. Uh one they want um at least one year's worth of dividend coverage in cash on their balance sheet. Uh they increased the dividend on stretch to 12% yield um up from 11 and a half.

They announced 1 billion in um authorized preferred repurchases in addition to up to a billion in common stock repurchases. And then this last one which I think is a kind of funny in how they worded it, a Bitcoin monetization program which really was just a nice way of saying uh we we're going to sell Bitcoin to cover these other other four obligations here. So at large I kind of think this is exactly what the market needed to see. Um they increased the effective yield on on stretch.

Uh They're willing and able to to sell Bitcoin to both hold more cash on the balance sheet. And then they're also willing and able to buy back some of the preferreds on the market which I I think goes a long way in reducing kind of the outstanding liability on their balance sheet. So we're looking at like how the market responded to this when the announcement came out Monday morning. Uh we've seen MicroStrategy commons and stretch both rally pretty hard um and outperform Bitcoin over the week as well. So, Bitcoin didn't really sell off on this.

It's it's trading trading green since the announcement. But the big picture, I think this is really a step in the right direction to kind of quell what the market was concerned or alarmed about over the past month and while like some of these flows may have yet to hit the tape, whether it's the Bitcoin sales or the preferred repurchases, I still think actually executing on those policy levers and actually buying back the preferred is going to be what's needed to I guess actually take down the the liability side of the balance sheet exposure at the moment. So,

yeah, curious what your guys' read is on on strategy here and the levers that they've pulled. >> Yeah, I'll echo some thoughts and some some takeaways we had over on Lightspeed a couple days ago. I I had thought that maybe this was kind of a marker, another sort of bottom signal as you've put it recently, Luke, in the sense that the it seems like the market was looking for some forward guidance from you know, Saylor and strategy basically to say like when how do we stop the bleeding and when? And I think them Obviously, I think they don't want to hit that BTC selling you know, option, but if they had to, they could and they're just sort of indicating that

that's sort of a possibility now and I think that sort of puts a like you've like you've mentioned now, puts like a kind of a stopper in there to prevent further unwind of of stretch and and maybe even to the equity a little bit. You know, less less potential future possible downside for the equity if they can also sell some BTC even though that might be like an absolute last case option for them. But yeah, I don't know. I said I said on Monday when we recorded for Lightspeed that that maybe who knows this could be a little little bit of a bottoming type of moment here if this gives the market some more confidence.

>> Yeah, I largely agree with that. Looking at like the guidance this year looks like we've been slowly been heading into this direction and like as you mentioned like it helps fund the dividends of it shows STR investors that they're not relying on new equity issuance. And lastly let's strategy buyback STRC below par if needed. So I feel like this is definitely a positive direction. >> I think it's also just important that they're signaling that they are willing to defend the price, right? And I think in the best case they won't have to because other investors other flows going to have confidence that they are willing to protect it so they're going to arbitrage it themselves. But I do

think people are definitely under emphasizing the risk that they do actually need to sell BTC. Like for a long time I think that was like the biggest risk that everyone was pricing in that Saylor is going to have to sell. And now I think people are kind of hoping and pricing in that because he signaled he's willing to step in he's not going to have to actually sell. But I do think like if he needs to start selling BTC in size like things can get really ugly. >> Yeah, at large the whole announcement kind of just it looks like a form of forward guidance to the market. Like we we've been running the analogy where strategy is almost like the central bank or or the bond issuer for Bitcoin but I think like these these moves buy them

some time it still carry a large liability with the preferreds and converts and the dividend obligations they they carry on those. Um so beyond just forward guidance, yeah, that the flows need to hit the tape. They need to in the long run, likely take down some of that preferred exposure. And I don't I don't particularly have a high time frame bottom signal chart for for the episode this week, but I will say like when stretch trades down um to the the 70s handle, that's basically credit spreads blowing out.

And in the same way in equity markets, when you see credit spreads blow out, that that tends to coincide with high time frame lows. Um So, given that stretch is rallying, uh credit spreads are closing. Uh mar- markets much more constructive on these instruments now. So, think we can see some some renewed optimism um given that this overhang is clearing. >> Yeah, I think and maybe one last thing to Shona's point around you know, them actually selling or or needing to sell at some point. Like I think we've gone from prior to this kind of indication by the company around the ability to sell BTC, it was the market

trying to price in what does it look like if they if they were I think we were we're going into this spiral of okay, we think maybe they do have to sell. Okay, they really do need to sell now. Um to pricing that in. Like what does that look like for BTC if they unload a few billion onto the tape cuz we know as a buyer, they're not the most discreet with the purchases either. So, uh you know, maybe factor that into how low BTC could go on a quick unwind of of some you know, a yard or two. Um so, I think releasing that guidance is kind of in the immediate term, it takes away some of those fears, but to Shona's point, you know, if Bitcoin only goes sideways for you know, 6 12 months, then what we might be having this conversation again around okay, is it

now the time where they tap the BTC uh market and say okay, we need another billion um to fund stretch for some period, but there's a lot of path dependency there, right? If if we see Bitcoin go up, they could and you know, they and the strategy stock appreciates then you know, maybe they hit the ATM again and they don't need to touch the Bitcoin. That's probably like there their best case scenario. >> Yeah, band-aid fix for now, but all the problems that came up over the past month could easily come up again if if Bitcoin continues to draw down. Uh up next still on the institutional theme perhaps. We have a new stablecoin entrant.

Um this time it's another consortium approach with open standard. Uh a number of big partners that are joining in on the launch. Um the list is kind of too big to name as you can see here, but Visa, Stripe, MasterCard, Amex, BlackRock mentioned, BNY, Standard Chartered Coinbase Tempo Solana Base. So, one thing that's been pretty clear during this bear market is stablecoin demand, stablecoin issuance is still up into the right. There there's really been no drawdown in the

total stablecoin supply and still huge momentum um from the issuer side and getting new entrants in the space. So, I'm I'm curious what your guys read is on uh you know, whether or not this this new player might have legs in the stablecoin market or what do you think the benefits or limitations are of the consortium approach? >> I definitely think it's going to do well. Like I think the unique thing about this stablecoin is that it actually shares all the treasury yield with the protocols that use it, right?

And I think that was like one of the key things that we saw in terms of stable coins and protocols that as protocols became bigger, it was an opportunity cost for them to hold their user deposits and like USDC and earn none of it, right? So, we see like the Circle-Coinbase deal where they split it 50/50 and then even more recently the hyper liquid um USDC deal where hyper liquid gets 90%. Like the writing was already on the wall that these protocols and users are going to want to internalize the treasury yield more and more. So, this makes it really straightforward, right?

You don't need to get an agreement with the USDC or any stable coin issuers. Just automatically you get you're entitled to all the treasury yield. Um so, yeah, I feel like that's really good for the protocols using it. I also think it's going to really increase stable coin adoption cuz now as a protocol you have an incentive to use a stable coin, right? Because if you're using a stable coin, you earn that treasury yield on it. And another thing that I've been thinking about is that under the current legislation, it's hard to get yield on your stable coin as a user, right? You can't pass the yield through. But what we do see is that with these protocols that have like revenue sharing agreement with the treasury yield, they're taking that treasury yield and then giving it to users as

rewards. So, I think for users they're also going to get a benefit cuz they're going to get a like a portion of that treasury yield back to them. >> Yeah, I really like that last point. Like if this creates something where we can actually give users um yield directly, I feel like that could be like the highest value proposition for stable coins. Essentially to have these dollars, whatever protocol they're a part of, um but be able to continuously earn yield while it is super liquid is super interesting. Um and it makes it So, I believe there's 140 companies that are part of this. Um so, it does make a lot of sense to join together um essentially to fight back to earn those year year earn that yield. Uh the only risk I could see is if if

there's too many companies a part of this, they may struggle to agree on certain things. Um and if that could affect how stuff actually plays out over the next year with these developments. Um but yeah, it's definitely very interesting. >> Yeah, uh a 140 launch partners, um governance might start to look like a DAO almost. Uh would hate to see that. But I I don't know. Looking at Looking at this list, so I'd say in a post-genius world, I would I was really constructive on yes, new entrants and issuers entering the market, but also kind of uh kind of bearish that these new single issuers could get material share or

traction. But running through this list of 140 at the start, like these names account for over 99% of global card networks, 70% plus of payment processors, 60% plus of merchant checkout software, 70% plus of enterprise payment infrastructure, and 80% plus of crypto payment infrastructure. So just the names that they have on the list like ready to go.

Um it and like ship in this vertical is they they're basically like already a a majority in terms of the incumbent payment space. So uh I would say I'm more constructive on this issuer than um some of the other ones we've seen enter over the past year because they they have the legacy market share as needed. Um and I kind of think this sort of approach might be what's needed to crack the the payments use case for for stablecoins. So >> Yeah.

Uh I'll just to add some color. I don't have a strong view on like level of success or whatnot. I I do think it it reminds me and feels similar to something like USDG or the Global Global Dollar Consortium, but uh like a complete opposite set of partners in the sense that the partner like group for USDG is very crypto and DeFi native. You know, if you go through that list, it's you know, Aave's and a bunch of DeFi protocols and you know, a few larger centralized exchanges like like Robinhood and OKX among them.

Whereas on this side, it's payment processors and larger TradFi names. Um so maybe just kind of hitting that that newer entering cohort of payment focused uh issuers and apps and uh service offers. Uh I could see like a hitting these different niches and verticals. I could see like a lot of these different models working in a different in sort of different senses. Like they may not necessarily capture the entire market, but they might capture uh a ton of share like within their niche, so to speak.

>> You uh you mentioned uh Global Dollar there. Um kind of more on the Robinhood news, uh we got Robinhood chain announcement and mainnet yesterday. Uh bunch of different things in that announcement. Uh one I thought was an incredibly well put together um event from but stock tokens, uh perpetual futures, and uh an earn product powered by Morpheus on the back end. So, Danny, I'm curious, are you comfy in Hood coin in in Hood equity right now? And what's what's your read on this announcement?

>> Uh yeah, yeah. I mean, you can if you've been following the Blockworks financial disclosures since I joined the company, you'll know that uh the Hood position is the only one that's never changed on there. For me, I have been in comfy in it for a long time. I don't think this announcement changes much or anything much for me. I think it's in line with kind of the direction that the the business has been going. But, um yeah, I don't know. I think I think generally speaking, like a few thoughts just to kind of lay the table a little bit. Hood chain, I think was well understood that this was coming and the general implications around, you know, trading tokenized equities.

Obviously, it's not going to be available for the US, but my guess is that you can use this to kind of enable broader broadening the platform to uh, you know, foreign uh, users. It'll enable them to trade stocks kind of equivalently to buying shares without maybe necessarily having to get um, all of the licenses that might necessarily be required to enable traditional stock trading like brokerage style. Um, you might be able to enable a larger customer base to trade stock tokens um, more easily or in more quickly across a broader set of jurisdictions. So, we'll see how that goes. I think like they've been kind of expanding in the EU, UK. They just got like a Singapore license. They're they're getting some license licenses in

some different places, but um, still, I mean, like 90 8% of the customer base is US based. So, it's not going to be a a big material piece of of what's going on there yet. The other announcements like expanding perps trading in the US to to more pairs like jumping on this train of doing uh, offering commodities and um, some of the FX markets and probably some of the tokenized equities like perps offerings as well uh, in their perps product. That's probably more material. Still also only EU based. Um, and I'd expect that like regulations maybe easing in the US are probably like the biggest potential upside case that you could make for Robinhood in the sense that all these products that they're building kind of rest of world, they could enable for their entire US

like 28 million something customer base in, you know, one click or what you know, a one week deployment type of outcome and um you could see a material boost to revenues um from just enabling all those use cases to them, but uh it's interesting final like point here, it's really interesting to see them kind of take the Coinbase approach um enable a bunch of the stuff Morpho for borrow land natively in the app with with earn um and some of these other initiatives uh much later, but I think potentially I don't know if this is a hot take, but my my take would be that probably to much greater success. I don't know. I I think that Coinbase is kind of despite generally like I would say good roll out of of their product alongside Morpho and um working through the base app, I would

say that I don't know they the the general reputation there from within the crypto community and maybe even their user base is that like that they've just not been great operators and executors and I think I don't know that reflects in the stock price, it reflects in how the business is doing. Um I don't know. I think Hood has just been doing better in these types of rollouts and enablements of products. >> Yeah, so so Danny is still going to be long the Hood coin pair. But I think for the for the time being for this roll out, I I think the the fact it's it's for the EU, it's not you know, US at the moment it is a pretty important nuance um cuz Robinhood's user base international just is much smaller than uh the US base as you mentioned, but I

think it it goes to show like who they're selecting for for launch partners and then who's going to be first in line should we ultimately get clarity passed in the US and Robinhood can start rolling out these features to US entities. Um So yeah, there are number mentioned there like Lighter uh Morpho I think on the Morpho angle uh I'm I'm pretty in agreement with your framing um on Coinbase. We we've seen the Coinbase CBTC product on Morpheus be instrumental and Morpheus total deposits and and and loans outstanding and I would expect

to see something pretty similar play out with this USDG earn product. They're offering 7% estimated 7% API on that, so um yeah could could bolster a lot of stablecoin inflows for Morpheus. One thing I'm particularly interested about and Shonda I'd love to hear your thoughts on this is the selection of lighter as the partner for perpetual futures. I'm curious like if you were in in Vlad's position, like what would you see in lighter to is select them as the partner for perps as opposed to hyperliquid for example.

>> So, yeah, it's a good question. Firstly, I think it's important to note that lighter and Robinhood have had like a pretty good relationship together and I think the one thing that was very clear with Robinhood is they want to keep as much value as they can and they want everything to be on their own chain, right? I think lighter is going to be on Robinhood chain. I think they have to create a new instance and there's no way that hyperliquid would have done that. Like if if Robinhood wanted to integrate hyperliquid, they could have used builder codes, but hyperliquid is a more neutral platform.

They're not going to bend over backwards and create a new instance for you. They're going to be like neutral. They're not going to give you a special treatment. So, it makes sense that Robinhood from their perspective, right? I wouldn't I would have used hyperliquid, but like looking at it from the perspective of Robinhood that wants to keep all the value on their own chain, they want these protocols to create new instances so that value stays for Robinhood. I mean, Hyperliquid really isn't an option in that regard. >> I think that's exactly the point I wanted to hit on there as well, Sean. I Even in the announcement, they were very clear in their wording as well that um you know, we're integrating with Lighter, but the trading and settlement will happen on Robinhood chain. Um so, you know, I

don't know that they necessarily got into the specifics about them having to issue new instance and all that, but they were quite explicit about, "Okay, we understand that execution in the trading activity and the settlement, um that's valuable and we want to own it. We don't want Lighter to own that." So, uh I think they understand the game here, like you're saying, in the sense that they want the activity, whether it's like called Robinhood chain or whether it's Robinhood instance or whether it's you know, the Robinhood order book. Like it I don't I don't know that it necessarily matters what it's called or what's under the hood powering it but um you know, they want to own that and they want to take their fees on it.

>> Yeah, and I mean, the fact that Lighter's giving them 11 million tokens as incentives definitely doesn't hurt, right? >> And to your point about the relationship, I believe they've also invested in Lighter. So, there's like a you know, kind of adding reasons for why they would integrate. >> Yeah, but Vlad is, I believe, personally an investor in Lighter. Um The The incentives don't hurt on the go-to-market either, but that is a cost to to the LIT holders. >> I will say, and this is something we maybe we talked about internally, but there's it's a case where to the point we mentioned earlier about a lot of these updates being kind of EU user specific, not being super material to Hood's, you know,

you know, revenues in the immediate term, unless it comes to the US base. Um it could be more material for Lighter in the immediate term if that drives a a ton more activity to Lighter, but longer term, I think the bigger question there is like we're we're having this conversation right now is um you know, we've seen how Robinhood approached prediction markets, you know, work with Kalshi, integrate with them, say, "Hey, this is great. What if we did more of it in-house and captured more of the upside?" Uh could you see the same scenario with Lighter? Maybe, maybe not, I don't know. The I feel like you're almost already in a scenario where if they're saying they're going to build a separate instance and all the execution and the settlement is on Robinhood's chain, um I don't know how much more upside there is beyond

that other than, you know, routing all the flow through like Bitstamp, their own, um you know, their own uh perps like market, but for now it seems like they're really getting as much as they can out of this, but could that change in the future? Perhaps. >> Yeah, I mean, it's it's basically like they don't need to build it in-house cuz Lighter's going to build it for them, right? >> Perhaps more on the uh Hyperliquid versus Lighter theme or um perps exchanges that are monetizing well. Another chart that is making all-time highs uh during this bear is Hyperliquid priority fees. Um launched, implemented not too long ago, but seeing incredibly

promising traction. I know Shanda, you've been going deep into uh priority fees on Hyperliquid. I'm curious, you know, what what what you're seeing emerge here. >> Yeah, so first I kind of want to break it down and talk about the difference between priority fees and base fees on like general L1 block chains like ETH and Solana. And the mental framework I have is basically that as a blockchain, you're selling access to your ordering, and you do that with base fees. So, that's a base fee you got to pay just to be included into any block to do any transaction, but within your blockchain, you also have like high-value opportunities that bots,

traders are going to fight to exploit, right? That can be like arbitrage, liquidation, um and because as a blockchain you control the sequencing, you control the block order, you can basically force these searcher bots that want to take advantage of the opportunity to pay you a percentage of their expected return in order to get the favorable placement that they can run the trade, right? Because it's not just one bot that's trying to exploit these opportunities, it's going to be like 10. Like right? And then the one bot that pays the most is going to get access to it. So, because of this we see that like priority fees are basically the internalization of blockchain opportunities that searchers, traders need to pay to get access to the

opportunities. And if we look at like the breakdown of priority fees to base fees, both Solana and ETH is kind of the same, it's around 80% of their REV is in priority fees. So, that's like much higher value because you're getting a cut of these opportunities. Um obviously HFT, like high-frequency trading on traditional exchanges, is the exact same it's like incredibly lucrative, billions of dollars a year, but because traditional exchanges don't control the ordering, it's just time priority, you can't monetize that in the same way that you could with a L1 where you have the validator that controls the sequencing, right? You do have some way to monetize with latency, like allow them allow traders to collocate, but a

lot of the competition, which normally in L1 would be based on who pays the most fees, in chat fights who's the fastest, who has the best latency. And that means that a lot of value leaks out to one the traders and two infrastructure costs, right? So, the question then for Hyperliquid, which for a long time didn't have priority fees, is how do you get access to this like incredibly lucrative layer of monetization while still making sure that your blockchain is neutral and doesn't hurt market makers, right? Like for example, if they were to just let people front-run and prioritize their transactions, that would mean that like any aggressive flow could pick off stale liquidity and market makers would get hurt.

>> [snorts] >> So, the way that they do it is within each block, Hyperliquid first structures the transaction type. So, you have passive liquidity orders, which is like adding liquidity into the book, canceling liquidity, removing stale orders. All of those are always going to be processed first, and only after that you allow aggressive traders to take liquidity from the book. So, you can kind of imagine that each block is split into different parts. The first updates the protocol state, that makes sure all quotes are not stale and everyone has a chance to refresh, and then you allow people to hit it. But, within those aggressive orders, transactions would be structured the same way like in TradFi, which is just based on when they're put

in, right? So, latency matters. Now, what Hyperliquid did with these aggressive orders is allow traders to attach a priority fee, ranging from 1 to 8 basis points of executed volume, and each basis points buys the trader around 45 millisecond improvement in their time. So, let's say you're 45 milliseconds after another order, you basically can attach one basis points and then you'd be equivalent to that. So, the logic here is that you're one internalizing a lot of these latency wars, which in traditional finance leaks externally, and another interesting dynamic, which is kind of mirroring what we see in MEV

on L1s, is that eventually traders are going to be forced to share a priority of profits with you, because obviously the trader that's willing to share and internalize the most of his expected edge is going to be the one who gets executed and everyone doesn't. So, they're going to be forced to either up their priority fee, um lose access to the opportunity. And yeah, we've seen basically that this is kind of nascent. It just started. It also takes a while for like market makers to start integrating it, but um it's already doing pretty well.

It's around 6% of base fees if you look at the past 7 days. >> So, looking at this chart here, um believe my my read is, you know, you can pay one, two, three, four bips, and then that's kind of the the reduction in latency you can get on the effective time here. >> Yeah, exactly. It goes up to eight basis points. And each basis points gives you around 45 ms um improvement in time. >> So, I guess zooming back to like the Solana example perhaps where, you know, majority of rev perhaps is attributable to

priority in excess of of base fee. Um while these priority fees on hyper liquid are accounting for, it looks like um you know, over 100k a few days. Uh I'm curious like how big do you think this becomes? >> Yeah, so we looked into it, and one thing we found is that the amount of people paying is still very little. So, it's only around 244 wallets in total that have paid for priority fees.

But, what we did find is that when we looked at these traders, so we took the top traders in the top markets, and we wanted to see how much of their expected return are they internalizing to the platform. It was around 30% of their edge was going back into the platform because of the priority fees that they paid. Um the nuance is that it depends a lot on how competitive the individual block is. Like, for example, you're only going to pay for priority if you expect someone else to front run you. And right now we're seeing that the majority of blocks still only have like one fillable order, so there's not really that much competition cuz the blocks are really quick. They're less than 100 milliseconds.

Um I wouldn't I definitely wouldn't say it's going to be as lucrative as like L1s in the sense that priority fees aren't going to be more than base fees, but I definitely think it's still very early days and we can expect it to grow like 10x from here. >> How How do you think Sean, how do you think that balances between um I don't know in terms of like any road map to like for example shorten the length of those block times for example like if if block times becomes 50 or 25 or 10 milliseconds in the future like that obviously changes the dynamics around like paying a priority fee to then move even faster than that time frame. Like I don't know, do you do you think those kind of counterweight each other or will the market always just be trying to move a little bit faster then

obviously it's competition. >> So, the thing is it's basically priority within a block. So, I think it doesn't really matter how long each block is, but within that block you get priority over the other orders. But yeah, again the amount of priority fees depends on a lot of things and one thing is the more efficient the market gets, the less priority fees you're going to pay because the less of an edge there is. So, we see that especially in like HIP-3 markets like SpaceX and other equities, the priority fees are actually more than the base fees that Hyperliquid earns, which is like a really positive thing especially because I feel like there's like a lot of discussion on how can HIP-3 effectively monetize with the

50/50 deploy fee share and the fact that like generally traditional instruments have lower fees in crypto, so you can't justify helping the base fee to nine basis point points and like removing growth mode. So, I feel like this is a a good solution for that. Well, like in in terms of like BTC, the priority fees is only like 14K, right? Which is very little just because it's not worth it. The edge is so small in those efficient markets. >> So, a super efficient market that's deep and liquid, such as Bitcoin, might not generate a lot in priority. I'm curious which which markets in particular are um uh attributable for for most of the

priority fees at the moment? Is it longer tail stuff, less liquid, or >> Um I think the majority of um priority fees concentrate about around HYB3 equities because you see there's still a lot of flow because a lot of people want to trade them, but just in terms of liquidity, they're not as efficient as like BTC. Um so, there's still a lot of edge and demand. And what you need is there can't just be edge, right? There needs to be competition for that same edge within a block because otherwise you're just going to harvest it yourself. You're not going to pay for priority. So, that's why like we see SpaceX where there are multiple market makers trying to access the same opportunities. There it's higher.

Whereas other equities which still probably have edge, but it's just not enough competition to justify them paying the fees. >> And I guess kind of big picture thinking, um I'm not too familiar with Hyperliquid's road map, but in terms of the value that it sets, would you say like priority fees are essentially like an alternative to spreading validators globally? Um like how do you think this? >> I think it's it's two different things, and I think the different thing of Hyperliquid and other L1s is that the priority fees are not going to go to validators, they're going to go to the protocol itself, right? So, these are not payments to validators, it's just going to be paid in hype and burn similar to the system fund and other fee sinks in Hyperliquid.

>> So, it's doing 100K daily. You said there's there's 10 at 10x upside to that. So, you think this could be you know, uh nine nine-figure line item for hyperliquid? >> Yeah, so I mean don't get too excited just yet. Like we're in the process of writing the report. I'm modeling it right now. Um probably we better like wait a week, see the findings we have, but like it looks pretty I'm pretty optimistic. >> Comfy and comfy and hype here. Good to hear.

Anything else you guys want to riff on on hyperliquid priority fees, or should we uh talk about some trenches? >> Trenches, I think. >> All right, let's talk about some trenches. So, uh broadly as we we get some signs of life in the majors, Bitcoin, ETH, and SOL all green uh into this holiday weekend. Um we're also seeing revival in the trenches, uh particularly on Solana. So, the moment we start uh bull posting tokenized equities on chain, and Solana's market share in that, and the declining share of meme coin volume, they ran back uh the memes on Solana.

Um so, yeah, Sam Sam, I'm curious what you're seeing uh in the in the fast fast-moving, fast-evolving Solana DEX landscape. >> Yeah, like like you said, like around a week 2 weeks ago, tokenized equities flipped memes. Now memes are back a bit. Um but yeah, if you look at like the latest monthly chart, slide four, um they are notable player now, tokenized assets. And in my opinion, that's just going to continue to grow. Um it's a lot more sustainable activity than memes, and it makes sense. And just keep in mind, this is only based on like four stocks by Backpack, um a couple others that are doing any volume by X stocks.

Um and now with just today, I believe, um BOT was released, the like private robotics ETF, um which is interesting. Um so, I feel like the trend is still going to flip towards tokenized equities, um and that's going to become a lot more sustainable activity. And if you go to slide seven as well, um these are just tokenized equities by Sunrise and Backpack. Um you can see that when we're grouping like SpaceX and three of the AI infrastructure plays, I believe that's the only ones um tokenized at the moment. The activity is fairly sustainable, um even though we like we see the saw a big launch of SpaceX in week one, um activity is looking pretty sustainable week to week.

Um so, this is my bull case is like this chart is just going to keep growing. Um is the market can essentially rate it as a lot more sustainable activity. Um and yeah, that's where I see it heading. >> Definitely had the strongest urge to uh [ __ ] fund my Phantom wallet with some sole and start hunting memes again. Um I I'm definitely big picture, it's a sign of uh kind of renewed optimism and and on-chained degeneracy coming back, but I I big picture, it also just ties into your Solana market structure thesis, Sam, where doesn't matter if it's a meme coin or um

tokenized equity, if the the environment market implementation is like so constructive for great execution, great trading on these assets, then can all happen on Solana. So. >> Yeah, exactly. And like we saw like Anson's token, I believe it's nearly 200 mil, so it's keeping going. Usually, that's an indicator of sentiment, um if you want to have some read-through from it, which is interesting. Um but yeah, like well, like the other coins we saw like back 2 years ago, like Dogwifhat on um um Filecoin and stuff, whenever they had big rallies, there's obviously a sentiment that the market's really euphoric. So, maybe this Ansem coin is

something like that. And when you have tokenized equities and memes all in the same place, like it's pretty synergistic. You're one click away from doing one or the other. Um so, it wouldn't surprise me if they grow together. >> Yeah, I think the to make the upside case here on some of this meme activity, you really would have to point back to the Saylor conversation and say that that was maybe that that low that the market was looking for, and maybe we're going for, you know, a multi-month period of of a bit of a rally in the majors. Um you know, if if if you saw Solana, you know, SOL the asset and like broadly activity were to sort of sell off from here, I think you could see a lot of that meme activity retrace pretty quickly. But, to Sam's point, the the

tokenized equity trading could just remain consistent if not, you know, it continued to increase month over month. Um whereas, I mean, as anyone would expect, the meme the meme speculative trading activity is very dependent on general sentiment within the markets. And we can see just as quickly as we saw, you know, quite literally a 2x in like trading platform revenues on the chain from this Ansem coin, uh you could just as easily see a minus 50 or minus 75% uh in that in that activity. >> Yeah, exactly. And I feel like I'm like if you when you really look into like equities, especially like um very small cap equities, like it's a lot of similar dynamics. Like I used to work in the mining industry.

There's thousands of exploration companies that really are just like you're banking on a quarterly report finding gold or uranium in one of the drills that they're doing, and then the stock does a 10x um overnight because of that. So, like and in the healthcare industry, there's a lot of similar dynamics, whether like uh that they find something um some research within within the medical world. Um, so I do believe they can be quite synergistic if you're really thinking about the, um, the big punter. >> Yeah, I mean, like my controversial opinion is that no one wants to trade memes. And we were all basically forced into it just because like normally how it worked is tokens are like vehicles to express narratives and

you could just like punt a random altcoin and you'd finally get, you know, like I want to get exposure to the AI narrative. I'm going to buy like render. I have no idea what it does, but it's like an AI coin and it's on Solana, so I get like access to two narratives in one. And that used to work for previous cycles, but in like the last cycle and this one as well, like teams just got way too efficient at extracting the value from the token themselves. So it's not anymore a tool of speculation. It's just a tool where other people dump on you. And obviously people want to get upside. They want to trade. BTC's going up. You can't buy any alts. So you just end up creating your own meme coins cuz at least it's honest, right? Like at

least you don't have a dev team and market makers that are going to dump on you. And it's like very simple narrative to understand. But no one wants to do that in my opinion. Like it's way more fun to like feel smart buying some AI play with like some teasers that does like 10x and just buying a dog coin. But and then to that point is like even these meme coin plays ended up becoming like protocol tokens where the creators basically started creating coins and they realized how to extract value from meme coins instead of like pretending to be legit like you see with Trump coin like he extracted or like $1 billion as well. So like now meme coins are like not as fun as project tokens and they're also going to extract and

dump on your head. So I don't really see the value in them to be honest. Like I I feel like especially with when you can get like high leverage on like um chart by instruments that are anyways going up, that's way more fun. >> I would disagree. I think you explained all the reasons why people do want to trade them and why they stopped trading them. They stopped trading them because there was so much money involved that the insiders and the token creators realized that they could extract a lot more money out of the situation and that's how we ended up with, you know, I'm not not to say anything bad about Axiom in particular, but just like the applications that target like multi-walleting and like bundling up of supply across 100 wallets and then dumping the supply like kind of unknowingly on on people trading these

coins. Like I think originally, you know, earlier on kind of the meme cycle was it was much more like naive is probably the right word where people like court were quite literally just like buying spot on this on their main wallet. And then since everyone was doing that, they'd go up 100x, but I think as with anything like once the the opportunity for a a massive amount of profit becomes uh obvious to the market, they're going to find ways to uh to pull those dollars out and I I think that's effectively what happened where we saw big like a massive blow-off in like token deployers and supply basically supply of tokens onto the market and so it just became less attractive to to trade a meme in the first place and all the other points you made as well around like some of the memes became less like memes and they

became more like project tokens and just the the the things that people were trying to get away from by trading memes that were just supposed to be like kind of pure and there's not really anything there became you know, attached to some of the problems that came with the the project tokens before them. So, I don't know. I think you you you can't really like go back to that that more pure state. It's like sort of impossible, but I think at the time people did want to trade them. Like that was the whole point and there were 100x's and 1000x's happening in weeks and days and that's exactly what people wanted and they didn't want like any strings attached.

But I'll agree with you that like the market today is very different from that market then. Like it's not the same to walk into the pump and casino today as it was when it started. >> Yeah, I I got guess I can't agree with both of you. Um but in my opinion, like yeah, memes always going to stay there's always going to be a little bit, but I'd say in a year's time, I reckon tokenized assets are going to be 10 20 x the volume of memes on Solana. Um like that's where I see it heading. It's just a lot more sustainable. Um especially when you get big players um able to touch able to touch the chain with click parity and stuff like that.

But people always going to want to hyper speculate and hyper gamble, so it wouldn't surprise me if meme coins still stay at that like this type of activity for a while. >> Yeah, I think when it comes to trading, like one of my favorite ways to think about is you don't want to step into the ring and box with Mike Tyson, right? It's the same thing. I don't want to try to like scalp BTC against some hedge fund that has like $1 billion data center and like uh cloud five on like max, right? I don't want to do that. I want to go trade where some guys like on his phone and finds a dog cute and like and he's like buying cuz he's an idiot and he put his life savings in and I'm just going to dump on his head and you know, cuz I have some edge over him. And

like that used to be crypto, like tokens more broadly. Then tokens became efficient, you got like VCs, you got market makers. So we had to kind of flee away from that into memes. And then memes had the exact same thing. You have like the devs that know what they're doing. They're going to sell it to insiders. They have like agreement with them. Centralized exchanges to like get hype. Um so now we got to flee away from that. Um yeah. There's always going to be people wanting to trade memes, but I just feel like that innocence as Danny said is lost, right? It's It's too efficient.

>> For now, but I think what I would say is that the market is pretty doomed to like repeat the mistakes of the past. Not that it's going to happen, you know, this year or next year, but 5 years from now, 10 years from now, like meme season could happen all over again in the same way that like, you know, we kind of have like rolling bubbles in the broader markets. There's Luke likes to say there's always a bubble somewhere and I think I don't know kind of speaks to that idea of like people learn something really they learn a hard lesson really hard and then they forget about it 4 years later and then they have to learn it all over again. So, uh I'm sure at some point you get a massive run in and just craziness around memes at some point.

>> Yeah, that there there's always a bull bull market somewhere. And Sean, I think you're exactly right. Like there's a there's a lot of edge and there's a lot of alpha just in table selection. And some games you don't need to play for for many people. That might be the meme coin game you don't need to play. Um there's nothing like the meme coin trenches to give me an appreciation for registered securities and equities. So, for I'm firmly in the long-term bull camp that whether it's tokenized equities um on Solana or equity perpetual futures on something like hyper liquid lighter, those have a much more durable long-term bull case and and like you said Sam, 10

to 20 X the volumes a year from now. Um So, from having played the meme coin game, I I just I find higher expected value and and risk-adjusted returns in in equities that are made to go up that that have revenue and and claims on cash flows and if I can trade them on hyper liquid on leverage um as opposed to options where I'm eating beta and decay, uh that's just going to be a much better product for me. And at the same time like uh >> [laughter] >> I love the game and I was a seller of fart coin at 10 mil market cap and I don't want to be the seller of the next fart coin at at 10 mil market cap. So, there's always going to be a a part of

me that's that's going to be wanting to play that that meme coin game no matter how uh how wrecked I get. >> It always finds different forms, right? Like I think last cycle it was NFTs, this cycle it was memes. Next cycle is going to look a little bit different. Like I feel like you could even make the argument that like that AI agent meta was the equivalent to meme coins. Just like meme coins with an AI team, you know, they get exposure to AI upside. Um But yeah, when it comes, I will be ready.

>> Yeah, when it comes, I'll be there, too. I was uh probably more on the buying side of Fart Coin when Luke was selling his, but uh I think bought and sold many times along that journey. Uh it was a wild ride that that season. >> Danny was my counterparty. >> To Shawn's point, maybe the the ultimate kind of set of or counterparty that existed was, you know, Trump Coin was uh it marked the absolute massive blow-off moment for meme coins. And to speak of knowing who your audience and who you're trading against, like buying Trump Coin on chain day of the announcement and knowing that there were centralized exchanges and retail offerings like trying to list that asset and get liquidity to their,

you know, audience who saw it on Fox News that wanted to buy it on Monday morning, it you know, there was information available to you if you're you're in the space uh where I think the outcome of that token was uh quite quite obvious in hindsight. You know, hindsight's 20/20, but there there were a lot of signals going on there. >> All right, lads. We got a green on the screen to close out the week into a a long holiday weekend. Y'all got any any good plans for the 3-day weekend or touch some grass or getting the order books? What's it looking like?

>> I didn't even know we get a 3-day weekend if we're not in the US, but um no many plans for me, to be honest. Keeping it chill. >> I got to I got to max out my free or five credits while I still have them. >> It's Yeah, I'm not going to do that. It's touch grass summer. We'll be swimming, we'll be biking, probably do some do some climbing. It'll be good. >> Yeah, max out max out the cloud credits and go touch some grass.

>> Not a bad way to spend some time. >> All right, all. Want to thank yeah, Danny, Sam, and Shonda for great and to our listeners for tuning in. We'll see you next week.