The Open Networks Path Forward | Analyst Round Table

Transcript

and then someone was like no you know what we're going to do we're going to have we're forget about fees we are going to try to accomplish like the one business model that has not been successful for anything other than a nation state in human history we are going to create money like it's kind of like an absurd proposition what private company has been like you know what I'm going to create some money and that's going to be my go to market like it's never worked out nothing said on zerox Research is a recommendation to buy or sell to Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial advice Pacho Ryan and our guests May hold positions in the company's funds or

projects discussed hey guys welcome back to another episode of ox research today I am joined by Ryan Daniel Shapiro and Hayden from the blockworks research team how you doing guys hey how's it going glad to have you all on today um we've you know the markets have been um interesting the past couple weeks I guess I'll just say that um maybe some people are crying a little bit looking at their portfolio numbers maybe um others are just hoping for uh October the end of the year to come sooner who knows um but there are some interesting kind of topics floating around in the in the ethers of uh CT and online discussions so um one of those um that that popped up last week was

related to maker Dows rebranding to Sky um as well as to just rebrands in general but um basically maker announced um this this new Rebrand um fitting themselves out as as Sky um with you know new new logos new designs um new name all in um it's it's a bit unique we we don't often see like full naming product like company renames um usually you know maybe logos logos branding colors Etc um for like a fresh feel but this is like an entirely New Look feel name for the for the team so um I'm curious your guys thoughts there is is there something deeper to this um is it

interesting or is this you know just a you know we get a new token we get a new chart and it maybe gets gets people excited to to come and come and look at you know Sky instead of maker I'll I'll take this one first um I think I think um what maker Dow realized is that um like if feels like crypto native demand for stable coin coins might have been saturated and obviously right there's you know trillions of dollars um of Fiat that exist Beyond crypto um that they want that they want access to right so I think um currently or previously they were appealing to a Crypton native audience but U right if you look at like

tether's business model or circles right clearly they need to start appealing to trafi and so so um I think in the context of trying to you know s signal that right they're now branching out beyond their like you know original um their original purpose which right was like the you know crypto collateralized stable coin I think it makes a lot of sense um and then you know obviously who doesn't love a new chart right you know similar as stock split so I think you know I think that all makes sense um I like the timing um doing it now um just to kind of get people familiar uh heading into you know what theoretically

could be um a good environment for risk assets um at the election and and maybe in 2025 yeah I mean I think those are good points you bring up um new new tokens is an interesting topic as well I think you know like some other big examples are like polygon and maic they're they're kind of working on this move to the poll token P token instead um and we've got sort of some other rebrands as well like from op to sort of like the super chain environment um another maybe more interesting one as well is like redact cartel to daero um I think their like sort of brand name change um is similar to what you mentioned Daniel like going from more of this crypto maybe CT focused audience to

you know maybe wanting to you know get partnered up with institutions you you can't really call yourself the redacted cartel obviously maker da is is not on the same level there um but uh yeah it opens up new opportunities right um printing you know not printing but coming up with a new token um having a fresh chart I I do question a little bit like are the incentives always positive for maybe that existing Community you drop a new chart and maybe you're offering up you know maybe brand new incentives and um potentially looking at diluting those existing token holders for the sake of like new adoption and new new rewards offerings um that's maybe a question contend to for sort of

like the existing um Community versus like the new community that that team's going after I don't know how impactful rebrands have been historically um like rebrands take time I don't think that they like happen when the logo changes moreover like I can't really think of any like product significant like product oriented rebrands other than Twitter 2x which like I think the evidence there is like Elon just really likes that name since he already had a company called x.com um but like most rebrands that I've seen tend to be more investor

focused like the Rebrand from Facebook to meta was not a Rebrand of the Facebook product but was actually a Rebrand of like the value prop of what that holding company is they have Instagram they have Facebook they have WhatsApp they have all these things and that they they were focused on the metaverse and AI um the Google to alphabet one is similar like Google didn't change but like alphabet this holding company and new strategy to communicate to investors did change um this one the maker Rebrand seems like both right when you change the token that someone's interacting with like you're touching investors and consumers

maybe it's just a consequence of the industry that we're in so I think it's like interesting for that reason um for what it's worth I think it's kind of slick um I I I saw it get a lot of hate I think sky is a cool name uh I think that the tokens like the tickers like you know I think that they hit a little better um I think makerd is the worst name on the planet especially if you want to connect with investors like no one knows what a DA is I don't think investors want to know right now um so I don't know it it's a big thing because maker is such a high-profile project I don't know how much impact it'll have but I think on the margin it

does make maker a little more palatable to trafy investor types which I think is important yeah seeing some overall agreement there on kind of the the Rebrand for maybe investor or you know institutional appetite which U makes sense it's a little it's a little cleaner Slicker like generally you know Sky kind of like a a spotless name not not really related to anything um the more interesting thing is sorry how how um like everyone loves maker like it's so undervalued and I don't know market cap keeps going down like why like why is that

happening I don't think the Rebrand can save it but I mean for what like 18 months this has been a liquid token fund favorite um the incremental buyer isn't there you guys have any thoughts on why that is yeah I mean I think every I mean everything's been going down for the past um couple months for the most part you know except for a few coins um I thought maker was one of the um the few coins throughout 2023 and and um earlier in 2024 that um actually kind of moved idiosyncratically um apart from from Bitcoin um it was um one of the least correlated coins like if you just look

at it like a basket of all coins and so it it was interesting like I think it really was trading um in accordance to like it's fundamentals right as opposed to speculation so um yeah maybe that that trade is starting to um unwind a little and I mean right in a in a speculatory environment maker is probably not going to be the fastest horse so I think now it's like all right like they had really strong fundamentals the coin did really well maybe the past 12 to 18 months but now it's like they need to show another stage of growth before um you know price goes higher maybe that's part of the Rebrand right like they want to make the

coin um kind of easier or just you know a little little shinier uh new chart something that that people want to speculate on as opposed to just being like a pure fundamentally driven token that right like funds might invest in but like retail isn't buying you know maker Dow they're buying meme coins on pump. Fun right yeah I I think that um well there are well first and foremost I'm not like a maker Dow analyst or expert so I'm not sure exactly like you know I don't know what specific metrics look like but it strikes me that the stablecoin protocol Ling protocol like Market is is extremely competitive um and it's just obviously like I I try

to remind myself that you know bitcoin's been around for a decade or or more than a decade and the smart contract platforms I guess you could say they've been around since you know 20 the early the mid 2020s but really like in my mind um 2020 that's when kind of like def that's why that's when like ethereum and defi summer you know made a dent in people's you know mind share um so it's only we're only three we're only four years into these L1 smart contract platforms and um yeah I think it's hard to have conviction in any One Lending protocol SL stable coin protocol at this G at this point in time um and so yeah it's just a competitive market I think it's

hard to see like more than six months into the future um when it comes to this like like short-term narrative driven Catalyst and then like even more broadly um I guess like I could speak for myself and the coins that I track um eth having eth exposure in your portfolio hasn't really done well Bitcoin is still like somehow at least year to date like outperforming eth and soul um and soul is obviously outperforming eth um and so I think like broadly speaking if you're a liquid token fund or if you're just like an investor in crypto in general and you have a lot of exposure to eth um which includes all the defi that sit on top

you're not really having a great year um Maybe I'm Wrong maybe it's just the tokens that I'm tracking but I'm thinking about ldo I'm thinking about uni I'm thinking about um maker I'm thinking about eth itself um and so I think like it's possible that people just want to diversify like people are looking a little bit more you know outside of the realm of eth and then if they are thinking about eth they have to really think about like not only what I driving the shortterm but like how they fit into this long-term picture um where you know chains like salana can can can you know um compete yeah I think maybe one other point to tap on for maker as well as this you know focus on subd Dows and maybe splitting out separate tokens

for these you know different future potential products um underneath kind of the main protocol and and maybe that raises questions as to like what's the true future value of maker if like we're going to be breaking out all these different tokens that are each going to be you know governed and have their own different revenues um you know I don't know if the the full clear model of um how all that circulates or connects back to the main protocol is fully defined as of yet right these are pretty long-term plans so um maybe there's just some uncertainty and doubt in terms of how that plays out long term um and whether that maybe fully accru to the kind of existing token or if the new tokens are going to be the you know uh primary

benefit instead of these newer products introducing like a second or third token to a project always adds like additional complexity that um you know I don't I don't know that there are many cases where we see this super successful for like both tokens at least you know and maybe you know there's I could pull some up but like helium might be an example where like the h&t token is doing quite well but like if you look at mobile for example like you know it's it's not quite the same um and obviously there's different the mechanisms are entirely different it's not quite the same same thing but um it's more complexity it's more risks that that people looking at these tokens have to consider and if you're going to if you're planning to have you know five six subd Dows and drop all these different tokens and have

all those that interplay it's that's a lot to consider yeah I think subd Dows make a lot of sense depending on how they're structured helium has a lot of really interesting things going on and maker has those plans as well I think that practically for the the where we are in the market and the cycle of adoption and who the crypto Market participants are um it's not great um you see this fragmentation in the cosmos ecosystem where there's like clearly isn't like one thing to bet on to bet on that ecosystem um like it they tried to make it at them but it didn't capture value then they added some things it didn't capture enough value so

like it's it's just really hard like it's very easy for everyone who participates in Solana or eth to find the single that really represents who they are and like create a narrative around it um it's much harder to do that with like these splintered like the splintered subow like go to market and like I think that's BS like I I think it's silly that people buying are buying coins for that reason I think it's silly that like you have to kind of rally people around these singular Financial objects to like make the project go I don't think that that is a long-term thing but it is like it is the reality for now so when you have these subd Dows like I don't know you have to tread lightly and and and um like the the messaging

around that token matters like if you're one of the helium subow things do you even want to like talk about how you're part of the subow like I don't know it's not clear to me that that is going to drive mind share to your token and to your project I think it's best that you like I you you can't you can't go to market with a fragmented message and historically that's what kind of these like multi-token systems have done so we'll see what they do doing forward uh going forward I also I also feel like the Rebrand uh is kind of just kind of this overall trend of of um the

ethereum um narrative shifting um and so thus the protocols that have been built on top of it are also shifting and changing so I think I first like noted this when Unis swap um literally started to take their transactions offchain like I thought that was the writing on the wall where the most ethereum aligned application on you know on mainnet is literally taking execution offchain um I thought that was like riding on the wall that oh if Unis swap is taking transactions off chain then transactions will not happen happen will will will increasingly happen in another

I guess like context or stack um and so I'm not saying like correlation is causation here with like the rebrands um but there might be this element of like how ethereum mayet and the The Narrative around mayet has has has sort of caused or help influence like some of the defi apps changing their brands as they expand beyond the etherum ethereum main net and even into thing even into change like meeral is going to uh salana I guess they're using an svm thing I again I don't know the specifics of that of that um um decision or development but also like avara with a going to opas um you know things are

changing things are expanding to new chains and so I think you kind of do want to be a little bit less ethereum like Centric I think that's a great great maybe way into uh another topic as well that's been getting some some traction and some some heat um lately among founders of different different protocols different chains even um around the topic of whether l2s or parasitic I think Hayden you kind of started to comment on something related here like the eth ecosystem has sort of evolved like the messaging around like different tokens and different projects and like how they kind of Market themselves and how they're thinking about expanding and building has kind of

shifted as as people consider like you know weighing out the token itself versus like what the product is and what that's offering to users versus you know maybe investors or or you know institutions and I think we're seeing this same kind of um you know thinking going on with you know the this kind of constant war that we've seen between you know the messaging of like eth l2s being parasitic to mainnet because you know they're they're capturing a way fees that maybe would have otherwise had gone to eth um versus you know the folks over in salana um trying to keep everything as much as possible on their main net um there's been some discussion I guess

I'll I'll try to frame this up a little bit from the conversation that occurred but um you know we had some some folks including toly um with salana and to from the scroll team um as well as Kyle Sani kind of weigh in on this topic around you know basically the discussion really boiled down to defining things that could have happened on the L1 but but didn't um I.E because they happened on some generalized L2 instead um they're kind of arguing over whether or not this is parasitic to that to that L1 you know if you can if you have ethereum and it's this generalized you know smart contract layer and then someone else drops their generalized smart contract L2 right on top and then you just copy all the apps over and the activity is

happening there like are you just you're just taking away and and you know you get the benefit of only having to pay the the low You Know da costs and you keep all that sequence of revenue for yourself I think this is kind of maybe the point of contention um and there's a little bit of back and forth here around um folks in maybe the salana ecosystem saying that some projects building there are um different because um they're maybe not going after this generalized route they're going maybe more in a unique differentiated Way by building maybe more app specific um chains that aren't you know things that would not be possible to build on today um curious on all thoughts here whether we think generalized l2s are just generally parasitic to the L1 for example I think

that there's a um I think this this question is a lot more complicated than just yes or no um right like if you know mult couple years ago the idea is that they wouldn't be or they would be slightly parasitic but the net benefit from having a lower cost exec tion environment that's going to drive significantly more um transactions and then those l2s would be you know paying um rent to ethereum right so in 2022 per month um or sometimes even per day right you're seeing 65 thou you know arbitrum paying $65,000 um I think at some points per day to ethereum right now post 4844 that

numberers dropped significantly and so um right the the amount that they are parasitic has increased and the relative value that they added through right let's say um some type of monetary premium by people needing to buy eth on all these l2s eth op or arbitrum op base Etc to um transact and that and purchasing of that eth um increases the the cost of that asset um which then in turn Ben in turn benefits ethereum right like clearly um there hasn't been enough demand for eth to the point where these l2s are not parasitic right so I think

um it it's interesting right like if if eth the eth would have to win by such a large degree and usage would have to increase by um you know 10 100,000x on these l2s I think in aggregate for like real value to be returned into eth from just like a pure like monetary premium um perspective but like you know obviously right now here we're in the dog days and that's not happening so um I know yeah we have a couple Salon experts here so I'll you know let you guys talk about that but I think from the eth side um you know this is a dynamic that yeah it's great for users right that fees are super cheap and you can you know just go straight to

base and I think you know even right now um gas gas is comped by base but terms of e the asset U they have proven to be parasitic so far so I think this is going to be a very interesting thing to monitor I think it's highly reflexive and if there and if price does go up let's say we have election you know better regulatory environment um eth ETF flows pick up I think this conversation is going to change a lot but I think we'll have a good framing for all right how much does activity truly uh matter for the price of eth um and I think that's going to be interesting to see what is your thinking around if if price goes up l2s are less

parasitic like like could you help me connect those dots yeah so not necessarily price goes up but right like a large increase in number of transactions so um anytime someone buys eth right uh someone also sells e right anytime you exchange any type of asset the selling is always di Minimus um what matters is did that exchange happen above current market price or below current or below current market price right so in the case of this let's say you have to buy eth to go you know buy some nfts or do some defi stuff on base or arbitrum um right and by buying that eth you're causing the price to go up eth is interesting because the asset is

pretty inelastic so a lot of eth is staked a lot of eth is bridged l2s um a lot of eth is um is deposited in money markets right and so I think that as usage as all this us usage occurs um the supply becomes even more in elastic and so when you have this kind of indiscriminate price insensitive buyer right that's just downloading a wallet and clicking Market by um the more an elastic and asset the greater the spread and so that market by right moving into a passive bid above current market price higher the spread the more price goes up

and so also but as price goes up um the more you can take you know the more you can the more you're earning um in yield that you can then re hypothecate the more U money you can take out in loans that you can then you know re hypothecate into other activities right so um it's an it's an interesting case where price being higher actually does increase the fundamental uity of the asset but it all starts with there needs to be some demand shock um to kind of start that flywheel okay I see I see um I don't I feel like where the reason why I think that l2s in their current form are

parasitic is that the that demand like that demand shock you're talking about is I mean the way I think about it is that a demand shock to an nft on arbitrum or base um is to have in order to have that Dien you need to create you know there needs to be like an internal sort of I guess um shift toward using these rollups um that are that aren't external necessarily they're they're internal right there's like this application that is you know built on base that is attracting all these users for some new like type of Crypton native like application

um in that scenario I don't see how base is I don't see how ethereum gains from the execution and all of that that activity um on base I do see like I guess you could say that oh because Bas is bringing all these users and in order to use the app they have to buy eth I can see that um but I think that's just still the L2 is gaining way more from that like rollup deployment and that application um by having an L2 where they are not sharing any sort of like meev or execution fees

with the L1 um I think that's a a mostly parasitic relationship um it's still it would still be mostly parasitic yeah no I I agree I'm just saying like the the degree to that it's parasitic will decrease and also I I do think you have have to take into account as well that the future State um I think of applications is that they're going to be chain agnostic right and they're going to use some type of interoperability infrastructure to create cross-chain applications and so under that scenario um they probably use some type of like intent based framework where um execution is going to go to wherever it's cheapest at that you know

current moment of time whether that's on you know it could be literally any chain it doesn't necessarily have to be an L2 but um in that scenario right like you have all these l2s that are competing for that um for that user demand um and I guess like the still like the one constant would be they they'd all have to buy eth so um yeah I I mean this is something that i' I I wrote about back in like March of 2022 because um uh the founder of avalanche uh Iman gonur like he he used an analogy of like uh actually like l2s or like iguanas and um iguanas would um or competing male

iguanas would go on to other iguanas rocks and steal their um their like I don't know their like mating privileges or whatever um and so he compared l2s to iguanas and that's actually like really proven out today um but like I said clearly parasitic but I I do think that that the narrative and and that Dynamic could start to change if there is a if there is a large demand shock but you're right like the l2s are going to make way more value from that shock in terms of like a relative basis then e what's up guys for this week's neillian snippet I am joined by Ilia from near uh thanks for coming onia for sure thanks for inviting me um

before we get started uh do you want to kind of go over what you guys are building over at near specifically in regard to AI yeah for sure um I mean as many may know near is you know a big ecosystem with a lot of kind of different pillars uh on the AI side which we think is one of the fundamental technologies that going to change how we interact with Computing the kind of important Viewpoint that we took is how do you build a user owned AI like AI systems that are actually belong to the individuals and communities not to for profit companies and uh there's a lot of exciting companies in the ecosystem that

are building different components right there's a data uh you know curation there's crowd sourcing there's different compute providers inference providers and so what we focused on is how to bring all of the pieces together as well as attract uh kind of tradition AI researchers and web to companies to start using all of the Technologies together and this would be relevant kind of how million fits into this as well perfect and um that's another thing I want to ask about is how are you guys working together with nilon yeah so neillian is a kind of private compute and storage Network um and so there are quite a few use cases that uh you can leverage it on uh kind

of to continue is the AI story right uh as we build this user on AI it's really important that your you know private data as a user is stored in you know encrypted way there's nobody else who can have access to it meanwhile you're still able to compute over it you're still able to you know retrieve it for uh you know in the applications that uh need to have access to it or uh you know in the simplest case right it's part of your memory for the agents that are able to you know give you uh various um kind of uh capabilities and so kind of it starts with you know integrating nean uh kind of as this part of private storage

for uh private data as well as compute over it uh providing this kind of private access for data um on thei cases but it also expands beyond that right um so near being focused a lot on chain obstruction kind of defi that is uh abstract it out from which exact chain you're using it on but the other part of this kind of chain abstraction is enhancing privacy and so this is the other side where neillian uh can be contributing and will be contributing with uh for example you're able to have um private kind of encrypted order book where you can submit uh encrypted orders it uh and it settles already uh on chain

in decrypted way so you know in this way nilon kind of uh where the private computation happens and near is where the settlement kind of decryption happens uh near blockchain so there's few different kind of use cases across the board of you know the scope of near uh but uh you know it will start by kind of integrating uh nean Tech to be able to kind of interact with near and decrypted and then also allow the other way where kind of near accounts and smart contracts will be able to uh pretty much request for some type of compute uh in the new network what are some exciting things coming up for near over the next

six to 12 months and maybe specifically what near a million will be working on over the next six to 12 months for sure yeah I think again on kind of this multiple Dimensions right the this chain chain abstracted kind of uh use cases and defi specifically is something that we focused a lot and uh we have a whole cohort of companies building uh various Technologies there and privacy will be one of the critical pieces because the competition actually is binance where everything is private right like nobody actually sees your balances in binance but everything is visible in blockchain so we do need a way to uh have a more uh

kind of private compute and private interactions there obviously as we going into Ai and kind of creating you know a way to interact with blockchain with this chain abstracted application through natural language through AI agents you want to start uh again having this private data inside AI agents accessible without anybody else seeing that so like if AI agents computes over your private data retrieves some contacts that you have and forms a transaction that um you know will be executed you want to make sure that happens in a private privacy first way uh I think think there's you know all this like private data storage and computation over it as well as use cases of kind of coordinating people you know

be that da or uh just in general deciding on uh something again this is where you probably want uh private voting uh in a moment and then potenti should reveal results or reveal the votes afterwards right to reduce this kind of peer pressure that happens right now uh and then then again on the ey side I think we'll see uh interesting use cases around kind of uh potentially fine-tuning and other stuff as well over private data right imagine you have a model that uh contains private data that nobody else seen that you know it's fine tuned on uh that now runs either you know on your behalf or on or autonomous

completely as a kind of fully autonomous AI agent and you can parir you can assume that is almost like this AI characters that exists on chain that you can interact with uh I mean they don't need to be like fully on chain but their information and DNA is stored on chain and kind of accessible uh for people under certain conditions so I think there's like a whole wide spectrum and kind of all of this is really exciting because we kind of now just have a lot more tools than just pure smart contracts to really create this Rich experiences perfect well thanks so much for coming on IIA is there any place that listen should go to to read more about near and near and neillian partnership um I'm sure there will be a

kind of blog post and everything coming out but uh I don't think we have a link yet fantastic well um thanks so much for coming on all right thank you the interesting thing about the discussion is that it often moves beyond the present right so then we get people's forecast into what the space looks like is it going to be app chains is it going to be are they going to juice the L1 and things come back like is there going to be an interrupt standard where like you don't even notice the change the the chains that the devs don't even notice the chains right um and those get muddy and those Futures are all probabilistic there's another future that I don't hear people talking too much about the um when when they frame these conversations

which is like if it is true that a token can get value simp for having it as the base payment within an ecosystem forcing that on users there is some nonzero chance that the regulatory environment loosens up and for the base team to want to drive more value to base they launch a token and they give you the option to pay for gas with base um exactly use eth or base and then there's the option of like oh now you just have to use base or you can use any token like it gets really muddy when we like put these like when we think about

these like Futures that are like so far away um but but my hunch today like is if the you know the holders of op could force their users to pay for gas in op or give them the option to do so um I think most people in crypto believe that that would drive more value to the op token and therefore that team would do so right so like it's not even clear to me in this future state that we're all reasoning about that people will be forced to buy eth to to you know use on these chains um and like you guys know how I feel about this I think it's all cash flows like give me the DCF I don't think it it matters that these people have that that

you have to buy the thing to transact as much as it does like the cash flows um but but but even if you were to assume that that matters a lot um it's still not clear that um eth can just like eth will just like circumvent all these l2s in some future State and then you have to use it in all scenarios like there is a non-zero chance that chains move to use their own gas tokens for like fee transactions and paying for tips and execution yeah Brian I think you bring up a good point and I think it kind of actually hearkens back to the Mak orow discussion in like the helium discussion around subd Dows it's like you know we're not really in the same place

anymore where all of the discussion is happening all the time directly in relation to like eth the network and the token um if we're getting to the point where like all the adoption is happening on on base or on arbitrum and at some point these you know these Dows and like the general you know Community focuses on kind of building out the value prop for those ecosystems those tokens um the the conversation will kind of continue to shift like in this this future state where you know if if the goal is to like expand you know arbitrum for example and the usage of you know arbitrum technology and its tchack and like maybe even the token and how it Acres value etc etc like you you just get this natural shift in in reasoning and

thought behind people like maybe running the arbit from Dao versus like what people are thinking about eth and ethereum um you know they need to look out for themselves and like you know if ARB wants to be successful they're going to do like what's in their best interest if that means they you know do whatever is possible to like pay the least amount in fees in da back to eth um then that's what they're going to do um future State this is like like Ryan said it's it's pretty hard to reason about like five 10 years down the road but I think the point he makes is is good in that if you have 10 20 of these like different ecosystems they're not directly ethereum anymore they're like their own like subow communities essentially like within this leveraging this ecosystem today like the teac um you know their

their particular paths forward might continue to diverge a little bit there might be things that they agree on like generally um about like you know best path forward for utilizing the network as like an L2 today um but differences in how they approach like value capture for their tokens and for their ecosystems might be very different and and in doing so they might go on like entirely different Pathways um in in capturing that value so um I think like the points you make are are good Ryan I think it it opens up like a lot of you know reasoning about these future discussions is really hard because it Like Anything Could Happen theoretically but um it it kind of shifts away this point around you know if you look at eth you know a few years ago versus today

it's just incredibly different we're not reasoning about like you know in all cases just improving eth the network itself and and everything you know acrs back to eth it's like we've got eth and then we've got these layers built on top or underneath however you want to visualize it and then kind of going on and on from there and you've got different groups of people making decisions every step of the way yeah I mean I think I think the one like the one rebuttal to that and um like the one important thing to keep in mind is that um yeah like Bas could make their own token and Branch off but now right they are now running uh layer one they need to run full consensus they need to incentivize um a large distributed validator set like the reason why eth

created rups in the first place is because let's say fraud proofs or ck proofs um Can compress a large number of transactions and theoretically are cheaper than any form of consensus right even if you have the most you know Advanced multi- propos proposer system right like at the end of the day when you separate execution from consensus you get all these benefits right and so this now creates a new competitive marketplace where users are going to choose the execution environment with the lowest fees right so like as a thought experiment if you clone salana and made it an an ethereum L2 this this ethereum L2 would have the same fees as

salana the same throughput as Solana but instead of paying $360 million um in inflation a month it's now paying whatever uh $5,000 right to to for its security and so that that spread between paying your for your security from eth as opposed to paying um your own your own validor set to generate your own security right that spread would result in that L2 now be able to lower its fees and then the end user is just going to go to the place with the lowest fees which would be the the rollup not the L1 and obviously this this is hypothetical this is a thought experiment if you could clone salana and made can L2 but I I think it's important to approach this from these discussions

from first principles because right that's how you that's how you make predictions about the future that's how you right think about the future State and so I think you know ethereum like it it it scaled the it's not capturing much value but like you look at gas cost right now and it kind of achieved its goal and it has all this you know really cheap block space so like I said I think we need to see what happens when when there's a demand shock but um there there is a reason for l2s right to exist which is to reduce execution costs that's just beyond like trying to capture its own value and so um you know in this scenario where block space or onchain

trust minimized computation is deflationary and continues to drop over time um and there is a further convergence between um you know certain types of rollups and all ones and um there is kind of a consensus around what is the best um consensus mechanism um as all those prices continue to drop do we actually need a security Hub like ethereum and is the best architecture actually separating execution um from consensus and so you know I think eth is the leader there and it's it's not clear whether a whether a monolithic or or modular architecture will produce you

know the the best experience for end users I.E lowest cost higher security and decentralized right coinbase is a single company and the reason why we're all here um which this is another topic but Daniel let you handle the transition is because of censorship resistance and that matters right and um you know I don't know how to value that but I can say for sure that it's it might be the one um it might be the one unique thing that blockchains have that can't be you know beaten out by centralized systems because if it's just all about speed and and value capture you know just make your own centralized

server I mean it depends what you're like talking about what you're referring to because like ethereum right now is not censorship resistant um like the way that the the PBS auction works is is is it's it's actually quite the opposite there's only two two builders that get to build blocks um at least two builders make up around 708 % of the entire market and so the way to get on chain at the moment um is to pay the highest amount to builders to include you in their block because the proposer is ultimately going to choose whichever block is has the has the highest amount of

me um and so like from that perspective ethereum mayet like not even thinking about the censorship problems that already exist on L2 which by the way like they're trusted assumptions like they they're ultimately multi um and so we're trusting them a lot they can censor us completely if they'd like to for some reason but obviously they're not um but like even on mainnet there's a high level of sensorship there's a there's sensorship resistant but there's also high level of censorship and right now like that's the whole discussion around like switching things to multiple concurrent proposers it's to reduce it's to increase the the sensors of resistance yeah no I I completely agree with all that I think that's like

another discussion I'm just saying in terms of the right the the clear benefits of separating consensus which obviously is right has its flaws but separate and the execution side which all these rollups are centralized right now they don't they have other than like Med they haven't decentralized their sequencers um but like in like theoretically by separating those two you can have a base layer that optimizes for low Hardware costs and high decentralization yeah I think I think like I think like looking ahead I think the thing that we'll just have to keep an eye out for is like how these l2s are going to share some side of some sort of

economic alignment with the L1 um like I'm not going to put any names out there but yeah I was talking to one of the team one of the rollup teams and um I did mention how like oh it would be it would be useful and I think like you guys would you know gain a lot of value if there was some sort of thought leadership on how the rollup will at some point like be less parasitic or you know become economically aligned with the L1 I think like the space would like benefit from that and even then it was still a question of how like decentralizing the sequencer right like there's rollup a and you decentralize rollup a sequencer to like several nodes now many people can run the sequencer still there's a question of how are you

going to like economically align those sequencers with the main net with main net and so like I guess this this difference between like decentralizing the sequencer and like shared sequencing um so you know I know Mike I know Mike was uh you know talking about how like it all boils down to or not all boils down but he was making some comments on Jared sequencing on Twitter I think it I think we'll just have to like follow how all of these like infrastructure um how all this additional infrastructure will enforce more economic alignment with L1 because right now there's Z it's just like you know virtue signaling like oh yeah like we're we're aligned with with L1 um

we're using eth to burn you know for execution um but like yeah you just played out the the the layer two would gain way more if they just have their own token th this is why the I think the conversation like we can all like these are ideas right so like this is how I feel about the ideas that we're that we're all expressing like in if you if you talk to an executive of a like a at Asher he's thinking about how to like make the best experience for his users right he's he's user facing all of these com like why should a rollup have to share value with eth like that's not the point

the point is to create some base layer where devs can like build cool stuff right and like the the the comment on on that the the point of these systems is is uh censorship resistance right like maybe that's a feature but the the point of them is actually to like build cool stuff um and the the and like empirically the they've been used to build new assets to trade that are not available on trafi Rails like I think the the question is incredibly backward looking it's like what do all the devs want to do that are a part of the ecosystem system in line with their values right in line with their like

political objectives and not like we have customers we should build these things so they're used by the max number of people like now maybe that's not the goal like I think it's clearly not the goal of the eth people they're clearly building they they're clearly building for like a political objective right like they want this maximally censorship resistant Cipher pug thing um like reality is like you're not touching the whole world with that thing like it's probably impossible so like who are you actually building for um and a lot of these framings they like they look as the built they look like the talic and the people around him are looking at themselves as themselves as the End

customer they're building for their ideology not and not like the usefulness for the End customer I think I think that that's a huge issue ultimately maybe maybe to round out the point here I think um maybe it's maybe it's where I step in and say we're still so early things things are very unclear undefined to uh communities across the board here in within the eth community within the salon Community um within other chain communities it's not clear how maybe the endgame incentives will play out and valuations will um will actually work out for different chains and apps um to the point around decentralization permissionless censorship resistance um there is a good point in terms of the

value prop there um we had some recent activity with um the founder of telegram the CEO founder of telegram um was recently arrested um in France um and it's somewhat related to you know telegram's maybe unwillingness to cooperate with the authorities give over maybe information on their users in some cases or provide details um in regards to investigations and other things um which which sort of goes you know directly against maybe some of the kind of the defi ethos that a lot of people have right um you know wanting to maybe be anonymous or um interact freely without you know question or scrutiny by governments for example um I think is

you know maybe a core tenant a lot of lot of folks have um I know vatal is certainly that's probably something in his mind and he's mentioned as much recently um with his comments on defi um it it does open up some questions here though you know you can build a decentralized protocol but um we've seen that it it's it's not enough to Simply build a nice protocol um the authorities can still you know arrest and detain founders of those protocols and people interacting with those protocols so um even if the thing is still running if um you know if Pavo and his whole team can get thrown in jail and and people aren't going to be developing the ton Network anymore um it there's still vulnerability there right you can't completely sidestep um you know the existing sort of um legal Frameworks in

all cases um you you'll still get um essentially if you know maybe the authorities don't agree with what you're doing um they have still ways of sticking their hands in the pot so to say um curious on your guys thoughts there I mean ton has had some both positive and negative comments lately one you know there were some some information shared in regards to you know maybe their toal crypto Holdings um the amount of activity on their Network in um and like the value of telegram itself based on you know crypto related transactions and fees and payments um they're kind of proving out like a maybe a little bit of a unique use case there for a messenger app that we haven't seen before and that you know driving value

through like fees of a of a transaction Network um could you know maybe alleviate the fact that messenging apps kind of struggle from you know not being able to capture Revenue in the same way that other social platforms have been able to with with you know the usual ad placements and other deals um that normally work on places is like you know X or YouTube Etc pick your favorite curious what you guys think there like is is is ton proving out something ton and telegram I guess combined really um you know are they are they really proving out something novel here um and does you know does this scat with or you know scrap with the authorities kind of uh shake things up and question their their uh legitim me your path forward I

think the I think the T the importance of telegram needs reframing um telegram um first off like fantastic app it's one of my favorites it is incredibly smooth um what they've been able to achieve as far as like large like group message channels is like like WhatsApp and um and uh iMessage haven't been able to replicate that so like good on them like that that was their wedge um they're like I think I don't know if crypto knows this but like telegram chats like aren't by default encrypted um you have to flip that

switch on a per message basis and like one thing it'll like really do is like increase the latency of that chat um the other problem is that it's not endtoend encrypted so telegram can still see all the stuff that you send to a group they have it all on their centralized servers it's encrypted between you and their servers which is why the um which is why the authorities went after them because they have access to illegal things that are going on on their servers and they don't respond to those requests right so like I don't know there's like been this framing around telegram being like I don't know in crypto specifically like

this kind of like Cipher Punk app and like I don't know if it's necessarily true like I do think like that that by not responding to the Authority's request to kind of limit this activity like I don't know I don't know if that's great um if you can see it on your server and it's very very bad and it's easy for you to just put that bad person away like I it's hard to argue against that like there are obviously like First Amendment things it's thorny right it's like pretty thorny I don't even know where I stand on it but like I think that that context um is important um I think it's a shame that this had to happen because um there was a really good opportunity for telegram to build a crypto first like ecosystem which it

seemed like they were going to do like they came out with big announcements in Q4 of last year q1 of this year um they've made a significant amount in Revenue we find we found out from the financial times piece that leaked their financials uh on crypto related things um and frankly like when you look at the financials like they really needed crypto to monetize uh it's very hard to monetize a messaging app it does not have a feed and when you don't have a feed you can't put ads all over the place because people don't want ads in like their messages right so like they almost needed it to work it seemed like it was going to be a big priority and the the unfortunate thing is is like

now everyone on their team is like talking for lawyer talking with lawyers non-stop like you can't push product and go to market in that environment so whatever like T thesis you had I think it extends the time horizon or sorry ton thesis you had I think it really extends the time Horizon on it which is a shame because I think usdt usage like was picking up in Eastern Europe um you know maybe they can overcome that who knows but like I think that you have a lot of people in that ecosystem now that are like way more concerned about like the like like the knock on effects from this arrest and what it means for them personally um instead of like building things over there which which sucks um

to be honest you make a lot of really good points um I think my I'm just going off of like what my what my intuition from like experience is saying um and it's still too early to fate ton I think like their uh strategy which is starting with distribution um is something that like is it's an interesting experiment in within especially in the context that we're in right now which is like you know we we went from starting from Bitcoin and then like having The Cypher Funk perspective on decentralization and you know this whole cycle has been about salana um and you

know like l2s and you know me like you know parasitic relationships and does decentralization matter and if it does like what parts of it matter um I think like starting off with like the customer like Distributing like getting distribution first and then nailing down the consensus aspects of it which I feel like I look through their I I'm like still going through their white paper um on the ton blockchain ecosystem like what exactly it is um and it's it it seems like some sort of like sharding consensus um you know so bringing back like the ethereum sharting role map um but yeah like I think it's just interesting strategy to

just just have users and then from there like build out you know a decentralized you know ecosystem or you know apps on top um of the users yeah it's it's it's objectively like there aren't many ways to compete for an ecosystem um nowadays there are so many freaking blockchains like there's too many of them and you can't like salana could compete because there was this big fee difference like that's why it could compete there's a big fee and latency difference that no longer exists it's irrelevant to the end user in like Mo in like in many cases uh you can't compete on liquidity because ethereum has it all um you can't like so like what's your what's your go to

market like it's frankly like an existing its existing distribution like it's like this classic Tech play where like you have existing distribution so like okay I'm going to have a new product I'm going to bundle it or I'm going to like funnel my current users into it um base has that and ton has a lot more of a lot more of that so like really really interesting um yeah just like legal overhang is not good um it's really not good for Building Products um it's also a little complicated too because you're seeing so many successful Crypton native projects launch within the telegram app that are not using the

ton blockchain like that's another weird thing and like does that ramp up so much that the network effects are like too big that like does it make sense to offer more than just just ton chain within the ton wallet like I don't know I I I could see I could see some of these telegram apps getting to that status because like like if you're using a trading bot on telegram like that's effectively like Robin Hood Without Borders like like today Robin Hood has borders if you're Robin Hood you can't launch in China and like if you want to launch in India like you have to talk with the regulators and it takes like six to 18 months and then you have to like spend all this money but like if

you could just launch a telegram bot like you effectively like you're you're you're end user bases whoever can access that user base within telegram like no regulatory stamp of approvement uh St stamp of approval required like that's super interesting so like I don't know if one of one of these apps if it can create that Robin Hood like experience within telegram like it's interesting to see how the telegram Foundation or like whatever that like the telegram business will treat like access to that new chain because like salana is all over telegram ethereum's all over telegram um and those things print so like they're

they're not irrelevant either yeah I was going to bring up the dexpot apps as well because I think like you're saying it's a perfect example of how telegram is being used today for like Crypt native apps um but those revenues are driving to those teams and not to like ton or or that chain in most cases um the top like Dex trading bot apps are like you said on ethereum on Soul um they're charging like maybe a 1% take rate on volumes for their users they're they're raking in a ton of money they've done like over three billion in aggregate volume and since like the Inception of that market category um which is just an absolute ton of money or sorry 30 I think 30 billion excess of 30 billion in total trading volume um since the Inception of that category so

like there is clearly a market for what I think maybe the right terming or designing of it is like putting the action where the users are interacting um we're seeing this with other things like forecaster frames like with Salon blinks like trying to get those experiences like directly into their users existing social feeds and networks right and and dexbot apps are the same thing right like you put people are using telegram like crazy they're they're chatting they're messaging they're talking about stuff they're talking about crypto in there you put their favorite Dex spot app within the app as well and so now it's like you know they're talking about meme coins and then they're trading them all within the telegram app um although like you're saying Ryan it's like not clear how some of these things acre to Telegram and ton

today because they don't most of them don't leverage that existing Network at least they're very very successful and popular ones um but maybe they have some levers to go after that you know like if you were to launch an app on the on the app Apple App Store like they're going to take a big cut um it's not that I don't think it's the same case today you know if you launch a telegram dexbot app they're not they're not skimming 30% off of you um but maybe that is a lever that they have we'll we'll kind of have to see I think they are I guess in sort of the power seat of if all the users are on Telegram and that's that's where they're using the apps you know um there's not really like the quick and easy you can't just go over to Facebook

Messenger and build you know your deck spot apps there if the people aren't using them in the same way so they do have a lever there if they need to you know have some means of of you know maybe forcing payments via like the apis that these people are using to build these apps within telegram um or have like more structured and detailed like payment or other plans to like kind of capture some of that value flow but today it's like not quite I think agre to them um just a just a quick Point um that might be um interesting to kind of see how the Market's positioning is um the news on um pavl getting arrested that was six days ago price is currently lower um

typically if you have some type of negative news event um P like regarding an asset um come out if price doesn't respond negatively to that news so there's like a failure on that um that could indicate that the asset's bullish so if ton can um you know it's currently around five bucks if it can recover 550 and show strength even with this negative news that would be um that would that would appear to be a pretty bullish setup not Financial advice gotta end always gotta end the show with uh price targets Financial advice sorry do your own research NFA of course as always any other any other

last comments ideas thoughts before we close out today boys I have a question I just want to wrap up on like what the thesis is around like how l2s are not parasitic if they take execution fees both execution fees and me so the the monetary premium that they add from people needing to buy eth has to be so great that it accounts that it's greater than like you could say the the the parasitic elements right um and so you could think of it as ethereum's failure to scale rapidly caus them to

lose out on all this additional potential Revenue um but then you know they still might be able to you know claw some value back through you know just that eth kind of like High Velocity monetary premium um argument but that would have to be significant and so that has potential to be insignificant if the asset's highly inelastic but it's entirely empirically based and we'd have to we'd have to see what happens there would have to be a demand shock to kind of empirically measure that I think that's pretty well explained like you're basic like one has to outweigh the other the monetary premium has to outweigh like the decline and execution fees at the L1 or whatever

I just think like if you're transacting if you have blockchain a and in order to use blockchain a you need to have asset a and that right there is just like why you would end up having a stronger a bigger monetary premium for asset a because you need to hold it in inventory in order to write state in order to update State um so they're like a there's like a cynical relationship basically like like need need need a to to write to blockchain a and you need to pay fees in a and then in order to do that need to buy more a and then that is just kind of you know like the cyclical

relationship um that I feel like does add to monetary premium yeah yeah that the mechanics around it for sure um it has to be it has to be that way it has to be a self-reinforcing mechanism um the interesting like my framing around this it's like kind of funny when you frame it this way right like the eth L1 was basically like having a discussion one day like all the key stakeholders and they were like you know how are we going to drive the most value to the eth token and there was all these ideas and a bunch of them boiled down to just like fees like we're gonna get fees like every other

business in the history of the planet like we are going to drive fees to the token and then someone was like no you know what we're going to do we're gonna have we're g forget about fees we are going to try to accomplish like the one business model that has not been successful for anything other than a nation state in human history we're going to create money like it's kind of like an absurd proposition right like what what what private company has been like you know what I'm going to create some money and that's going to be my go to market like it's never worked out um it's a it's a bold it's a bold move it's a very very bold move um and look maybe they accomplish it who knows I think that's a good place to end it I will say maybe on

the comment on what Corporation has tried to create their own money we maybe have the early example from Facebook but they um had a lot of pressure on their DM projects and now we have S and Aptos um as sort of a a spin out result of that um anyway thanks for coming on guys this was a great discussion um glad to have you all on and uh we will see you all next time get better picachio get better thanks guys ceer [Music]