ORE, Tempo & Inside Stream’s $93M Meltdown

Transcript

What's up, guys? Just wanted to give a quick shout out to today's sponsor, Apptos. We'll hear more about how Bitcoin, DeFi, and Apptos is heating up later today. But for now, let's get into the episode. Nothing said on Zox Research is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only, and any views expressed by anyone on the show are solely our opinions, not financial advice. Pokio, Ryan, and our guests may hold positions in the company's funds or projects discussed. Hey, good morning. Welcome back. Another live stream 0x research on a Friday morning uh or afternoon or evening depending on where you're at. Joined by my co-host, Triple Pacio, Pocket Picacio. How you doing,

Buck? >> I'm good, Daddy. How you doing? >> Doing pretty good. Markets are, as the title says, uh Chop City turbulent seas. um a select few assets are doing doing crazy runups and while everything else chops. Um so it's kind of an interesting time. >> Sorry, I'm trying to I'm trying to look at the market before I give any >> say anything.

>> It's like the price is always the same, right? I I checked two days ago and hype I only look at the hype and BTC price and the hype price was 38. I think it's 40 now and then like four days ago it was 42. So it's like there's not much there's not a lot to go off of. Um it is Chop City, but there's also two tokens that I am sidelined into. One of them being Zcash, which I cannot bring myself in to buy. And when I do buy, I'll probably make a tweet on it so that people know to exit. Um, and the other one is or another one of those tokens. This is the first token that Ian Unsworth, shout out my goat, >> bought.

>> He bought the lows. Huh? >> First token he ever bought. >> No, maybe. I don't know. I've never seen him shill a token to me. And it's the first time that he's ever shield a token to me. Hey man, poor is going to go up. I was like, no, stupid. And then it's ripped faces. It's up like 8x. It's ridiculous. The two like randomest tokens as well. Who's like, "Oh yeah, I'm bidding ore again. Oh, I'm bidding Zcash again." Well, I will at least for ore, they made the classic rotation from uh sort of valueless thing to casino.

uh and and the market is rerating it on the on the premise of casino. Uh >> yeah, this is Yeah, I mean >> we've seen >> we've seen from a few like I don't know there's a lot of I I guess what I would say there's like some sentiment or some there's a trend that's happening where some teams are you know entering into ICOs, entering into launchpads, entering into casino because that's that's that's like one of the few sort of revenue opportunities that are very clear in the space. But it's working out. It's working out for ore. I mean, Dan Smith's been posting the uh ORE daily revenues at all-time highs for like the 15th day in the past month or something.

>> Let me see if I can find it. Um, we we have it in a dashboard. I know that >> it's almost as good as when he's when he was posting Salana Rev new alltime high every day for >> I think this one's a little bit better. The Solana REB one like >> it was like such a slow grind up, right? It's like over two years like Solana like quote unquote dies because of the FDX collapse and then very slowly it upticks like it never dies out really and then like rev local tops let's say at the Trump thing and he was posting all throughout that but with ore it was really funny because one week it's making zero money the next week it's making like 300k a day and then he just starts bull posting it and again

huge shout out might go Ian Unsworth who actually surprisingly made a very good not surprisingly I don't want to be mean to him but those are good calls >> Ian Unsworth and uh our very own Nick Carponito on the analyst team for >> I told him not to write I told him he wanted to write a uh he wanted to write a research report I was like no we're not doing that buddy it's dead it died out like because ore died three times right it it was like originally had killed.

>> You didn't see the vision, man. They went to the casino. >> I didn't see the vision. I remember he brought it up to like, "No, we're not doing this." >> I'm actually not sure. I think he sold too early if if I'm >> if I'm not mistaken. So, maybe it's turn working out better for for Ian Unsworth. >> Yeah. Well, let's not say Nick sold too early on the pot. I'm pretty sure he held it until the top. Whenever the top, he will sell it there. That's not That's not Let's tell people that he actually 10xed his net worth and now uh he they should put a target on him, a very clear public target rather than that he lost his money and is actually not worth going after.

>> We're getting very very intense on it. Um >> he doesn't have any money. Don't worry about him chat. Um >> call him broke on the bot. Um, but no, like I mean they died out three times, so they killed Salana. The first time around I was like I remember >> the first time I was trying to mine it and it like it was impossible to mine. Um, and then the second time around it did something new. I think it changed its inflation mechanics. Someone will correct me if I'm wrong somewhere. Um, and then the third time is this time. I think it's the gambling meta and I think they finally hit it. Um, I'm not sure how sustainable it will be again. Um, but I mean it's been doing really well,

so there's not much to you can't really I'm trying to pull up the thing still, but um yeah, I think um I guess maybe another thing we can talk about um not live yet, but uh interesting topic or point of discussion is we saw Kone come out and state that Monad lock tokens will not acrue or be eligible for staking rewards, which was a big problem for a lot of proof ofstake networks over the past four or five years. Um, obviously that's you get a lot of people upset on the timeline over the past few years from kind of TIA and various other like

Cosmos chains that sort of had that model. um maybe like unknowingly by the retail public uh that they could have just been getting, you know, been buying into unlock not unlocking but staking rewards from locked entities. So, it's a good signal from them. Um my hard take here is that this should have never even been a discussion. Like this is a purely Cosmos thing. Sorry.

>> They're coming for you. >> That's the Cosmos guys. They're coming for me. >> That was Ke calling you right now. >> Well, I'm not saying anything against K. >> They're cutting your head up in half actually for this based on the statement. >> I'm just like this should have never been a thing, right? Um, this is like purely a Cosmos thing for some reason. Like Cosmos chains have this the way the Cosmos SDK works. I think it's pre-enabled such that um stake tokens or lock tokens can earn rewards.

I don't know why the Cosmos ecosystem decided that this was a good way to approach this. Um maybe back in the day it wasn't as big of a deal. I don't know how many Cosmos chains raised significant amounts from VCs. So maybe like it was never a concern, but it became a huge thing um with Celestia I think. When did Celestia launch? 23 23 yeah >> 24 let's say 24 just in case >> end of 23 but yeah >> um became a huge thing I remember there was this like spreadsheet floating around and it was um one of the big argument like it ran up to 2022 right I don't know what I guess like let's say that's like 22 billion FTV um and then

like around 15 16 billion the spreadsheet came out and it was like oh like poly chain is earning whatever amount because The staking rate is also super high. It's like 12% and if you put a 100% commission on it and you're running your own validators, you're essentially taking that 12%. Um, and then you you can just dump that into the market, which is obviously horrible because like you're supposed to not make any money off of this investment. Um, but you're making 12% of your investment and like whatever the in the percentages change throughout the years, but should have never been a thing. Um, I'm glad that they announced it. I guess

like it's like a easy way to say that to go against the FUD. Um, like Barchain also had it, but they were a Cosmos based chain. Like they had stake tokens, earned rewards or locked tokens could be staked to earn rewards is the right way to put it, I think. Yeah, I think that I think I mean I don't have any crazy takes on this. I I think the you know effective sort of like marketing now for projects is to basically get ahead of these things. So to come out with a statement early and say that this won't be a thing uh is just like that's like a plus one like a job. Um, and to not do it and maybe have to like address, you know, that question mark someday in the future would be like

a minus one. Uh, so I think, you know, shout out to Ke for getting ahead of it. Um, don't think it materially like changes anything for like this was probably like a rough expectation for, you know, most people going in to Monet. like I don't think it materially changed anything but just I think props to them at least for for for being early to it. I guess the only only other thing I'll mention on Monet is they did announce as well their like early >> uh rewards program for EOS from apps in the ecosystem. So there will be like some you know points or tokens or what

have you for interacting with they've got like a cohort of like 12 or so apps uh from when Maynut goes live turn rewards. So, um I think kind of a requirement as well like not too surprising, right? I don't I don't know if you disagree with that. Like I don't know. Plasma rewards program, bar chain, you know, early pie incentives, monad rewards program, incentives program. I I think it's kind of an accepted thing that um you have to do something to to get some early capital in. >> Yeah. I mean, or else you just immediately die out, right? you you need to have you need to incentivize just like off the top of my head. Um Ky is you wrote about all of these Dan so

maybe like you'll have a better take but like in my mind I know that Ky is relatively interesting. Um I know that Kuru is relatively interesting. Two very different protocols by the way. >> Um and I think that those two are the only ones I recognize. I know there's like Drake Exchange, right? That D is Drake Exchange, which is also a club. >> Yeah. So, Drake, one of the one of the notable clubb or per teams building there. Kuru, like the probably most notable decks building on Monad. Kizzy interesting just because it's like um kind of like a gamified like gambling on like views and like attention of like you know social media markets almost

like you know how many views is a Mr. beast video going to get things like that kind of like I don't know I think it fits into like sort of the Ryan Connor you know net new assets um kind of viewpoint and maybe maybe some some are rel related to like a prediction markets kind of uh kind of trading app >> so uh similar to that that type of thing some of the other ones I I recognize as well like they've got a few like web three web three like gaming projects which I mean who knows maybe maybe interesting maybe not that's been a really tough category in general forever. Um, and some like rare bet sports I recognize as like a sports betting app. Um, not surprising like I think a lot of the the typical things

you'd expect to see, gambling, trading apps, um, all the classics. So, >> what what do you think about the Ryan Connor new assets pieces year maybe not year end, maybe like six, eight months in? >> Should I give a background what it is or >> Yeah, maybe tee it up a little more. Um, so Ryan Caret new assets thesis is that the crypto ecosystem is fundamentally going to change the way that assets are issued and that we don't really need to care too much about well we should still care about real world assets etc. but it's also about like creating new forms of asset issuance on chain. I think the ones that he mentioned were like like one of the big ones was believe but

I don't think he was like a huge fan of believe. I think he was just more so a fan of like tokenized startups. Um, and like prediction markets was obviously a big one. He also really liked creator stuff and content stuff. Um, yeah, I think that's probably good enough background. >> Yeah. Yeah. I think um it's unsurprising to me that like you know you can look at some of like the creator coins to date and like you know maybe they're not like meaningfully doing anything. Uh I guess what I would say is that like a lot of a lot of some of these categories are still basically just like meme coins sort of lightly rebranded and not really

like not quite like in the realm of being like totally new assets. Um, so I think there's probably still some time to like iterate on that idea because because something I would say like while I don't think that like Pump Fun has like cracked some massively new revolutionized form of live streaming by putting a token on the stream. I I do think there's something there in the realm of like a combination of like the financial incentives that go along with live streaming that hasn't like maybe quite been fully tapped into. Um because you see creators on other platforms that you know do interactive things with their chats and like their chats can donate that to them. They can send them

money and like that causes interactable things to happen on live streams. So you know maybe that doesn't really like you know just creating a memecoin maybe doesn't really like truly amplify or capture the value of that. But there might be another way to go about it like a different type of asset that um plays into that a little bit better. But yeah, I think kind of this like light masking of just like meme coins in a variety of different flavors is like maybe or maybe we're just like not quite there yet. But >> yeah, >> prediction markets is like maybe an interesting like net new asset in that we're seeing like different type of types of markets be traded that never would before. And I think we were kind of like maybe even as like a team we

were a little bit a little bit too bearish on prediction markets like post election. >> Yeah, I think so. I think we got too bearish. I mean he was not bearish and he was correct about that with tokenized startups. I actually think like that version of what existed back then is not alive like believe the flywheel whatever is dead but I mean metad is essentially tokenized >> right >> it's like they call ownership token so like if you think about it that way that was correct um prediction markets prediction markets just caught me so by like such surprise um now it seems super obvious and it's like oh yeah these make so much sense man like prediction markets are the future, but back then it

was like I don't know, maybe it was less like I saw kind of the utility of it, but it was more like just did not make a lot of sense to me as as like a financial um revenue generating product. I was just like like who's gonna and also like liquidity back then was very low. Volumes were very very low except for like the election basically. Um, and now we're seeing like I guess distribution improved quite a bit in that like Kelshi is doing really well in volumes because of the Robin Hood NFL partnership. Um, creator coins, I've been kind of turning to that idea.

I don't want to talk too much about all this stuff because we we cover it essentially like once a month. But um I've been seeing more and more like timeline bait of like pump fun stuff. Um and I think like that kind of stuff catches on really really quickly and because it gets really viral. Um, Pump Fun Streamer are doing stupid stuff like you know those guys on the the microphones and they ask people questions like bother women and men and like cute college students and like oh what do you do this this this um I've been seeing more of those with Pump Fun and I think those guys are making a lot of money through Pump Fun because

you get the views but you also get whatever trading fees um and I think part of the reason why I might miss this like thing catching on and you might miss it as well. I don't Do you watch any of those videos in real life? No, you see them on Twitter accidentally and then you just scroll past them. >> Like live streams, you mean? >> Yeah, but like not like not like us. Everybody watches us, but like you know what I mean? Like like the really cringe live streams that Zoomers do. You don't really watch those.

>> Oh, I see what you're saying. Yeah. >> So, I feel like I would miss out on that completely. But this idea of like people doing stuff for fame and making money on it. It's like no one's afraid to put their face and their name on the internet anymore. So they can just get as crazy as they want with it and become a content creator. And I don't know. I don't think it doesn't make I think it didn't make any sense to me like a few months back. Now it's like it makes more and more sense. don't know if Pump will be the one to capture it, but I also don't think it's like it's kind of like the worst thing that you can imagine in terms of like human psyche and um like good for society ends up happening and it might happen. There's no there's

nothing that says it won't happen. >> Yeah. The um I go back and forth on this and I'll say that like I just I don't know how this might shake out. I would be inclined to believe that like you know I mean we we've not seen any of these creator coins like not just effectively look like kind of pump and dump type of tokens because of how attention sort of works like it's the same as a lot of meme coins like they go viral for one week and then and then the price goes down. um which isn't really like aligned with maybe the idea of like being a consistent live streamer and like maybe you give your audience exposure to like some asset that

represents the growth of you as a creator or something along those lines. Like I don't know. You'd have to I think one we need to we would need to see like more of a transition transition from like a short-term based outcome of these things to a longer term focused outcome. Uh, I'm not super convinced that like the average normie consumer cares to trade an asset that's associated with like Kaisenat. Uh, I think they just like watching him because they are lonely and they're online all day and they just like, you know, they connect with his who he is, his generation like and the things he says.

Uh I'm not convinced that they like want to ape their their hundred bucks into his coin necessarily, but uh I could be wrong about that, but like to me I guess what I see in some of the traditional platforms is like people are already willing to just like give the money for free basically like just raw donations to streamers is like an active part of the platforms today and there's no monetary incentive back for them. It's just like purely capitalizing on users wanting to interact. I think is basically what like you know people talk about parasocial relations relationships a lot and I think that's kind of a piece of that puzzle. So I don't know if it's necessarily like this revolutionary platform is around like trading the assets associated with them. But if you can tap a little more deeply into like that interactivity and like you know

take a take a piece of the dollars that flow through that um then there could be something there because the you know the existing platforms take huge cuts of you know like subrevenues and tip revenues and things like that you know 50% plus in some cases um for streamers. So uh not that just like you know reducing your t take rate is going to make you competitive. Uh we've seen a lot of platforms try even and even like stake with kick uh and it's not really working. So I don't know if that's enough but I think if you can maybe drill into more about like why people interact with these streams and like make that better. I'm not sure if crypto is really the outlet to do that or not. Um,

maybe open access to like different types of assets can play into it, but yeah, I'd say I'm I'm firmly in the camp of like unsure today, but I think it's like an interesting thing to uh play around in at least. >> Yeah, I I agree with that parasocial thing. Um, I think people mostly do it so that people can read out their names, right? >> Um, >> yeah. or it'll make, you know, funny sounds or like play play noise or like read out a text message on the screen or something. Yeah, >> I think pump fun does that like it shows like Danny Nettle bought $10 of ticker bak at you now, you know. But I guess it just hasn't hit that much yet. I don't know.

It's so difficult because I also don't understand people who tip streamers. Like I don't tip streamers. I don't even watch streamers, but if I did watch I would have tipped them. Um, >> yeah. I guess the point I'm making there is more so that like a lot of users already do it today in mass and there's no financial incentive. So like if the if the financial incentive isn't the reason that they do it today, like I don't know why that is going to be the reason that they'll do it tomorrow. Unless there's something else there that I'm missing, >> but it could be it could be a part of it if they can like tap more wholly into this like interactivity >> piece which I think they're like they're I mean it's still a relatively new platform. are like I think overall behind on in terms of like the broader

kind of like streaming and like viewer tool set if you want to call it that or like feature set. Um but they could work towards that. >> Yeah, I think yeah I agree with you. I mean they are quick still we're still super early. Um unironically um Danny what do you want to talk about tempo or prediction trading terminals? Um, I mean, do you have thoughts on tempo? This is a very it's outside my wheelhouse. I would say >> it's >> I don't have a lot to say. >> Very difficult to have like a super cohesive thought process on it because it's it's an L1 that runs REF that just announced a partnership of Commonwe um or like that they're working with

Commonwe Avalanche. Um but it's like all the knowledge we have right now is super infrastructure level which I don't think is particularly important at this like right now given that chainsaw live we don't know what that >> I would frame the question as like would you do anything differently today based on you know the news that we've received on on tempo's you know getting it working with commonwealth investing >> I would not I would not I think Um I would not but there is this like I guess I want I guess it's like more so I was more so thinking of like these

guys announced massive massive partnerships right um like a very long list something that it's like one of those ones that Hideera announces sometimes and it's like 85 blog like companies you know it's like oh like the IMF runs for us like but like this one is actually semi believable. Um very big names. Um I guess like the thought process here is what do you think is internally we're working on neo banks report? Um we've done some work on stable coin chains. Um, where do you like do you have any strong opinions on either of those where you're like because I think this is slightly out of

your wheelhouse because you're an American and I think you guys already have very existing ways to get Venmo and Cash App and very good online banking. I'm surprised that like I'm I guess like I'm wondering if if you're at all interested in using either of these like any of these platforms, the NEO banks or the stable coin chains to do your daily banking or is this something that is like completely out of the question for you? >> Um I I love stable coins and onchain for like settlement purposes. So like, yeah, as a US resident, I have plenty of options to send money in between places with no fees and have it arrive in the other

location, you know, either instantly or like maybe same day or maybe like next day. Um, don't really have like problems moving money around or like having to pay egregious fees to do it in the first place. So, it's not really like a huge pain point. Um, but I do think I don't know like I I actually had to send a wire like a week ago or at least I thought I needed to send a wire and then I turns out I didn't need to send a wire. Um, but then I sat there and it was supposed to be same day but there was some number that was wrong uh on the receiving end of that wire. So then they had to revert it. And so then I actually had to wait like seven days to see the money arrive back in my account.

uh I I had to wait a week to see money come back to my account even though it never left and the transaction was reverted entirely. Um so I guess for some of those things like you know I'm excited to see like stable coin onchain transfers like enable a more seamless just like okay I have money here and I want to send it there and I just would love for it to happen immediately. Um, but like I I don't this isn't like a huge pain point as a US user. Like for the most part I can generally do that.

Um, even like an a transfer or something like maybe you have to wait two days if that. Um, there's two things here. It's like first of all on the blockchain if you had made that mistake you would never get the money back. I guess you didn't make a mistake. it was a mistake on their end, but >> yeah, >> it would be completely cooked. >> Um, >> but yeah, like the US the US doesn't make a lot of sense, but I think like I I was thinking a lot about this with plasma. Um, and I think I don't even think it's particularly important for like emerging countries um, who like I I imagine will always use

like sexis because it's just so easy to use and it's very simple and it has like built-in guard rail guard rails and that that shift will be very difficult but there is this like new I don't want to say class but like there's this new like portion within like human society now that works online gets paid in stable coins or makes money online makes that through stable coins. Like a lot of traders, um people who yield farm, I don't know how significant of a demographic it is right now, but like the modern banking system, I don't think can really accommodate these people that well. Like especially nomads and stuff like you have to have bank accounts all across. Um, sending money from like

country A to country B is difficult, but also proving that that money is yours is very, very difficult as well, especially if you're in crypto. Like I have a friend who withdrew money into Revolute and they flagged it for months like because he withdrew it from a from like onchain. I think he withdrew BTC or ETH, one of the two, and they flagged it. >> And that demographic isn't massive, and it's not as like sexy to say as like, oh, we're going to bring the entire world on chain or like we're going to settle all of stable coins, like all of finance using stable coins, but it's still, I would say, like a meaningful

amount of people. And these people like I would argue that the ven diagram of like the people who spend most of the money on chain excluding bots who spend most of the money on chain and like the these this portion of people is like probably as circular as you can get. Um do you know what I mean? Like there's that like small >> small section. Like I said, I don't know how meaningful it is, but I think neo banks are probably like crypto and neo banks will probably serve those users first. Um, and then we'll see if they get further adoption after that from emerging markets. I I don't really get the emerging market play that much. Um, coming from an emerging market, I know

that it it's very nice to be able to hold stable coins, but also people want to hold them on things that they know and they don't want to mess around with their money too much if they're not sophisticated users. H yeah, I guess I've had this I think I I want to say I've had broadly the same view on this for a while, but I think in the US the unlock for stable coins is probably more of like on the business side, you know, like the operational efficiencies or like like almost like existing, you know, red tape or like process arbitrage essentially. Um, like I can see this clearly for, you know, businesses like Robin Hood where it's like, okay, we'll facilitate some trades like in 24-hour markets and use, you

know, stable coins on the back end to uh kind of like handle payouts or or process the process the payments, things along those lines. Uh, and I think that I think that makes a lot of sense. And whereas like for the average consumer, it's like not super meaningful today. And then but I I do agree with you like outside or like maybe from like more of a foreign perspective. I don't know like just like general like international perspective of like swapping between currencies like if I wanted to get some pick your favorite currency like pesos or yen or something right now. Um, I'm not really sure what the best method like. Maybe call my bank and like have them prepare it for me and I have to wait a week or two and like they're

going to take a a weird spread on it. Or if I'm lazy, I'll just show up at the airport, like the international airport, and like arrive in, you know, a new country and like just get destroyed on the swap fee that they'll charge me at the desk. So >> like 15% spread. >> Exactly. like you you pay for them to like you know bend you over there. uh which is there it's like I think there's some areas for like disruption of those but it's a matter of like probably gradual adoption to the point where like there's enough meaningful liquidity in the markets to do that as well as like I don't know some of these countries where like maybe there's still some use of physical cash versus you know like

digital payment whether that means card or credit or whatever other or crypto it doesn't matter um like if you go to Japan like you you can still like a lot of places want paper bills from you and so it's like >> okay I'm gonna need the physical currency so just swapping it to yen on my phone isn't going to be enough like I need to then actually like get it from a machine so >> um I think there's kind of like a couple pieces of the process that have to get worked >> yeah it's not an easy puzzle to fix as well like it's quite a bit of stuff that needs to come together and work together very well um yeah that like money thing is exchanging money thing is a very big pain in the ass I think anywhere cuz nowhere really

stocks um paper notes anymore and also nowhere really stocks foreign paper notes anymore like it's very difficult to get your hands on these things so you have to ask them to bring it in essentially um best way to do it is for a bank but it's also like very much a pain in the ass so it it would like but the issue with onchain is that there's no onchain liquidity for anything about US dollars like even euros is I mean it exists but it's not enough and don't know if you really want to hold euros as well like like there's no Swiss Franks right like I don't I can pull up the Swiss Frank chart but like Swiss Frank to US dollar chart it's been up only um and maybe that's the that's the currency you want

to hold and it's it's not really >> B there's like maybe a bullcase there in that in all of that for you know sort of like an international payment processor to it. But it it's somewhat dependent on like you said some of these like local regions to like move more to digital payments for like all services like you kind of you know rely on that to some extent but you know I think the and it doesn't necessarily mean that they have to be doing crypto but like because you have some of these cards now right it's like you can fill a debit card with your crypto balance so I think just more more and more of these like other regions maybe coming to you know electronic payments and then bridging that gap from crypto to electronic payment like can be

pretty meaningful. But I do agree with you like you know there's probably maybe some difficulty in establishing liquidity for like you know Euro Swiss Franks onchain pools or like you know yen peso pools. Um so we'll see. >> It'll come just not yet not for a while I think but it will come. I I'm I'm firmly of the belief that I think that like market that I talked about of like young sophisticated digital nomads or people who make money through crypto or people who make money online some way or another is I think it'll grow enough that or it's like probably worth serving for two free protocols. I don't know how

many can like make a lot of money off of it. And I don't know what the TAM is like exactly because I think a lot of people just prefer traditional banking. Like I prefer traditional banking still. Um despite I would categorize myself as very crypto native. Um I I still prefer traditional banking at this point. It's just it's a pain in the ass to do wires, but that's really like the worst thing about it, right? You don't want to store all your money on chain given the events of the past several weeks and always have your cash yield farming. I don't think I would ever yield. I mean, I think there needs to be like one like there's very clearly like one big crypto app that

needs to exist, which is that one that like allows you to swap from currency to currency and allows you to get access to bonds across the world, right? Government bonds and like issued directly on it doesn't have to be issued directly on chain, just like backed bonds and that's it. And then maybe like you allow people to buy um whatever and like I would like Robin Hood but fully on chain and then I would use it. I already use Robin Hood but you get the point. Like then and if it's like a big enough company that I know that like there's one that I've been using now a little bit. It's called Pay P A Y. Um I like load it up with couple hundred

bucks and then like use it to buy groceries or buy coffee or whatever. Um, and it's great, but I'm so stressed out to use it for anything larger because I'm like, what if the chain goes down? It's not Polygon. Like, it's a Polygon L2. It's related to Polygon somehow, but it also uses Celestia underneath. Um, what if the chain goes down? Like, I can't hold I don't know who the developers are. Like, they raise from good VCs. Um, I think DBA and Sixman did their round, but it's like things go wrong all the time. I mean, FTX raised from the best VCs and things went wrong.

So, you know, things can get messy. Um, and with a bank, I have I have insurance. So, >> yep. >> Agree. We decided to do a bank talk. Um, >> yeah, they uh nobody on chain is is doing FDIC insurance on my deposits yet. um which is tough to compete against if you just want like your dollar to be a dollar tomorrow.

But there's plenty of you know there's plenty of yield dgens. We see it over and over again. The yield dgens will come out. They'll look for the nastiest stinkiest yield on chain and then they they'll say the classic line if I full port into this I can make $100,000 a year and that's enough to retire. That is to be fair I that stream DeFi thing I wrote about it for the newsletter but it's so funny because they gave this guy did you read about the story >> yeah just generally speaking yeah >> they gave this guy money and he was like managing some offchain strategy using centralized exchanges um and then he got on his personal portfolio he got liquidated on October

10th and then he was he raided the whatever I think it was $93 million or whatever. He bought a house and then he raated whatever was left. Let's say like 80 million um dollars. He ra traded it to try and make it all back and then he lost it all and then obviously stream USD fell and struggled. >> I think we're going to talk about that with Matt and >> yeah as well. >> We have to discuss it with the CMT guys. I think um it's a pretty good one. I have to do I do have to I want to read this out uh just from from this Yam account talking about the uh the losses due to like sort of the the vault interdependencies with all these like

stable coins and different assets as part of that. But this classic line of like trees SCUSD uh elite rings SCUSD is backed by VUSD. VUSD is backed by locked stake SUSD. Stake SCUSD is backed by staked SUSD that is that specific SCUSD is rehypothecated to Mithris. Mithris SUSD about 92% equals 13 million is currently borrowed by XUSD collateral on silo and oiler. This is not an extensive list. There's likely more affected. Um >> yeah, I don't know. We're getting we're getting some classic memes out of this of just like quite literally like I don't know. It it it gives very much 3A

vibes of like let's take the money and like go long and then loop it and then rehypothecate it and then do it in another asset and then like loop and rehypothecate it and do that like six times over to get like 13% yield on our stable coin. >> Hello Arian, what is your take on did you hear what Danny said or >> just toss him right in it. How are you guys? >> Good. How are you? >> Good. Glad to have you guys on. >> Thank you for having us on.

>> Um, do you guys need to give a little disclaimer beforehand or can we just dive in? >> I don't know because people know you already. So, because you've been on the show before, so I'm just curious. Do you know what I'm talking about? >> Yeah, we can dive in. I the the only disclaimer would be obviously these are all our thoughts. Nothing that we say is investment advice. And uh yeah, we're here purely to talk about the tech, but I'm excited. >> Very good. We're also both very excited. Um I guess Daddy, I don't want you to have to give that over.

>> No, no, no. We just started talking about um I guess the sort of whole fiasco in the past uh week or two with stream defy and elixir dusd and sort of like all of the rehypothecation and kind of like leverage looping and basically just trying to offer up like this this yield product to people um these these different vault products that are taking on risks that are kind of unknown to lenders in the pool. curious like if you have specific maybe if you have specific takes on like those protocols or just like generally like what's going on here and your thoughts.

>> Yeah, I I I'd love to comment just generally and I know Matt will have thoughts on the specific protocols as well, but I think that reflexivity has been introduced into DeFi as a result of this. Um, and that is affecting the way that ADL is interacting with these protocols. you know, ADR systems were designed for localized risk. Um, and this sort of looping within DeFi across different protocols, especially what we saw with XUSD, C, XUSD and Elixir, um, I think makes them systematic in the sense that it ADL no longer can have a view on the broader scope of this

risk. um because it's in this loop, then every Oracle update will trigger kind of identical liquidation behavior across all of DeFi. And I think that's where the problem comes in. And so it's not necessarily about eliminating ADL because it's no longer relevant because I think it is still relevant, but it's about deciding where should ADL trigger and why, how should it trigger as a function of what and I don't think that function should necessarily be contained to an individual protocol anymore. it should be more broad um across all of the loops that are occurring.

>> I think the issue here too is that it may not even be an issue of ADL because we don't truly know where this hole exactly came from. There's been widespread speculation that it came from uh a trading group called Little Engine and a prop trader for Little Engine called uh Ryan. And we don't really truly know if this was a hole that was created as a form of ADL from the October 10th liquidity poll and subsequent blowup in the market or if it's outright fraud. There's been accusations by uh the the by the stream team regarding uh Ryan from Little Engine taking funds from stream and then using it to buy his own property. So it

it's really hard to know what exactly was the case here. But I I think at at the ultimate case is that you know there's this issue where um where the stream team took capital users USDC swap it on cow swap for tether use that to mint uh de USD bridged that over to avalanche to other markets and then use markets on avalanche to post the minted deusded against that took the staples uh bridged it back to their own wallet and and use that to mint uh XUSD. So is this highly highly risky uh rehypothecation of assets at the end of the day. And I

think this is like where like the true problem lied there. There's a few problems, but one of the many mechanical ones in this trade that was a problem was that um you're not just taking a looping strategy and having it sit idally within a earning yield and then borrowing and repeating the strategy through through pendal pts or whatnot. um you're you're minting it with leverage at the end of the day, which is why you saw you know I think it was around $2 million worth of stables that became I think it was 14.5 million of XUSD which is a crazy amount of risk and it was completely blurred by a a total lack of proof of reserves which I don't think we'll ever receive.

One thing here is I understand that this is not any protocol's fault, but is this the way that these modular lending protocols are meant to serve customer? This like just somebody who took this vault um like who opened this vault permissionlessly and just decided to take too much risk. Like I agree that this like what they did I mean just bridging over free chains with assets to me seems like first of all a pain in the ass but second of all like huge huge risk to take on. uh is like how do you guys I guess like a better question here is how do you guys see this this form of modular lending develop going forward if you if I can deposit into these vaults and I don't even know what's going on at

the back end sometimes. >> Yeah. So I I have a few potential solutions. These aren't one-sizefits-all solutions and they may not be the best ones, but I think going forward some that should be at least considered across the board. So I I kind of break it down by three groups, right? The protocols, the curators, and then the the marketwide ecosystem. on the protocol side, you know, may perhaps, you know, allow lists should be implemented where there's an allow list and a cap that forces exposure sizing and you know, I think time locks might be a good mechanism here too to create this sort of observation window for um market participants to to observe how

their deposits are being utilized and if they want to react or not. Uh, another one too is, you know, that I've been thinking about is, you know, making oracles more liquidity aware and, uh, potentially adding some sort of band trigger. So let's say that um any of these sort of oracles that are being you utilized within these more modular lending solutions like Oiler and Morpho um where if there's like a enforced staleness bound where LTV LTV ratios or uh borrow rates are tightened when a certain pegged asset or quote unquote pegged is uh deviating between its bands then you freeze new borrow borrows across other larger bands. I think it's

worth noting on the Oracle side too that back in May um there was about half a mill that was liquidated within the DEUSD um market because the the Jared from Subway Mevbot swapped $200,000 of uh of assets into DEUSD in a buy on Curve and that moved the market enough to liquidate 500K of uh collateral. Um and I I think the the end result from there was that they hardcoded it one to one. Um, so I think that that kind of has some some yet to be seen from my perspective uh ramifications of of what happened, but it is something that I've been taking a look at um with historical context in mind. Um, a few other things

too that I think could be potentially helpful here would be, um, you know, some a more dynamic supply borrow cap where, um, they're sized with real liquidity to keep liquidation solvent and prevent these too large to liquidate um, positions from from forming at at a baseline could be something that uh, could be more rigorously implemented on the protocol side. And then I think it's like a practical UX one too is that have like a market badge with the with these vaults, right? Like tag them with badges that include the like what they are exogenous stable uh fund of funds may not a stable coin. Um they they just shouldn't ignore these exogenistic or

recursive yield strategies and people should be aware or at least see like what it is that they're depositing into before they click the deposit button. I think that um like a badge or like a toggle that shows what exactly they are would would help market participants at least be a little more in tune with what exactly they're depositing into. Um on the curator side like the the the big thing here is just like band collateral lineage loops and you know set friendly caps. Um for I you got to like out of this like situation you just I think you got to like be more tight around allocations where borrower collateral is directly or you know through a few different loop transactions it's

financed by the same vault or sister vault interest strategy. Uh I know you probably need like some sort of proof of reserve here, but um I think that sort of like killing of collateral lineage should in fact, you know, kill this exact reflexivity blowout that happened with DEUSD and and NXUSD. And then on on the ecosystem side, the last thing I want to say here is um I think they just you got to standardize some sort of proof of backing signal for collateral eligibility. I understand the execution side's a bit difficult there and there's been a few different solutions that haven't been exactly widely implemented but it has to be something that you think about going

forward or at least at a minimum like give curators the ability in market participants too the ability to to have some sort of readonly API feed that can tell you what exactly these protocols are plugging into. >> Yeah. >> Yeah. Sorry, I was just gonna add add to what Matt was saying. Um on the >> So, we were talking about this internally. Um I sent I sent a graphic that I want to talk about as well. >> There's a so all of these are structured products, right? And we're moving towards more and more structured products and I expect this not to slow down. I expect this to continue. Um now structured products products, some of them are exogenously sourced from their yield, some of them

are endogenously sourced. And I think this is where the reflexivity can begin. Um, now Athena in a way is indogenous. Um, now it's it's rebalancing by staying delta neutral on a continuous basis. And so it's removing the reflexivity through that uh piece. But I think this um trade-off will continue or this this this structural feature of these structured products is going to continue. And what's important is not necessarily gating permissionlessness with these uh products, but rating them. I mean, and that's what we're missing in this uh paradigm. And I think this is what Matt

was alluding to as well. Um we're just missing coordination middleware that allows permissionlessness in these modules while maintaining safety. And I think that's as a result of a lack of transparency when you have so much rehypothecation um and and so many layers where this reflexivity loop through leverage expansion can actually take hold >> and here by that Dan I I realize that we kind of threw you in the very very deep end of this so I figured out what's going on. Pleasure to be here gents.

It's uh it's good to uh very clearly see who's the work from home crowd and who's in the office. But we love it. >> Very very good. >> Um so I guess like the main takeaway here is that we need to have some more form of transparency and that you can see where the hell this money is flowing through and you can see um how much money there is involved in these strategies as well as setting caps to it. I like I don't really understand how you can set caps to it just given the fact that these are meant to be super permissionless and I'm not very against this idea of allowing anybody to create a vault and then you can deposit into it. But I completely agree that the badge thing is a very obvious one.

Another one is I don't think if you're modular lending protocol you should host every vault on your front end. I don't think it makes any sense. Like you should have five to 10 of them max and like from curators that you trust and then you just >> I mean back there for sure. >> Could could this be an opportunity for layer? Is this something as could do? What are not? Couldn't they be risk registries and uh they have different you know tolerances? Yeah, I mean I definitely I Okay, so I hear the point like one, you know, broadly speaking, I think consumer protection is a good thing. Uh the implementation details certainly matter there and I think that's hard to do. But um the weird thing about only listing certain vaults

is then you are de facto like u giving those a stamp of approval that like they aren't risky and that's like that is how the user will take it. Um and the other thing is like users there are users that know they are taking risk and are very comfortable with doing that and in fact want that product. Uh they want the max lever loopage knowing that days like this week can happen. Um but also knowing that what if you're able to avoid that you generate higher yields in in in the meantime. Um and so then you're just you know excommunicating that portion of the the market segment.

Now that said, it's like how do you sort of tow the line there and communicate the levels of risks in the vault is like the the zillion dollar question, right? And the weird thing is is like the people most qualified to have those opinions all have some like very meaningful conflict of interest in today's market because the people who have the best experience are building in the space. They either are a curator or uh one of these protocols that provides this this space layer infrastructure. Um so it's kind of like a weird thing. Now, there is I haven't looked deeply into this, but I just saw it uh earlier this morning, actually, but I think it's Credora who's starting to do some of this. Um, let me try to pull up a tweet and I can shoot it over, but it seems like they're trying to take a first shot

at Yeah, it is Credora by Redstone. Um, trying to give assessments and ratings to some of the I don't know if it's on the vault specific or on the curator specific side of things, though. I don't really understand the issue of having a strict list and an all list the way that Hyperlid does where it's like on strict you just show 10 and on all you show all of the different bolts. But yeah, I guess like if you don't include all of them then you're kind of cooked. Um yeah, just like what does that say about the strict list, right? Like I don't know. I'm sure you can find some dog that's listed in the strict list of perf products on Hyperlid, right? That like just gets absolutely

nuked, right? Like um >> yeah, I think to Dan's point >> this to Dan's point like the it depends on what the strict list is. Like is this just like a you know subjective oh we you know we like this asset and therefore this one is on the strict list or is there is there a clear list of criteria? >> It's curators. It's based on curators. Like I I imagine Gauntlet isn't doing super goofy stuff, right? Like they're just collecting their two and 20 or I don't know how the vault structures are, but >> Right. >> But what are the what are the strict criteria to be on the strict list? Or is it someone who's gone, oh well, I imagine that these guys aren't doing anything stupid and then therefore they're on, you know what I mean?

There's a difference between a subjective and objective and I think that that's what Dan's getting at. >> You're right. >> Does that solve the problem? Because isn't gauntlet I mean didn't they announce USDC and USDT freezing because of what happened and and that would have happened regardless of if there was a strict list or and and not >> and curators can have you know they can cover the risk spectrum they can have the extremely risky vaults alongside the just USDC prime style vaults that are like you know as vanilla as it gets. uh so I don't even think I think it has to be vault specific >> in which case you have to do actual risk management and you have to do like proof of reserves proof of backing this was

>> go ahead >> wasn't the um wasn't the the plume market that elixir was borrowing from hidden from the UI like to to me that just and I think elixir was only depositor in there was like somewhere in like the 65 70 mil range. And so to me like maybe I'm I'm tinfoil hating this too hard. But I do wonder why that particular market was left off of the the UI. I would assume that the curator was responsible for that. But to me that just seemed like a hidden market where it was basically their their little USDC money pit that they were using when they were bridging over to to Plume to borrow on on that market.

Maybe, but we are we all agree that modular lending is the way to go going forward. I don't do a lot of lending at all. Um, we have specific guys who do lending on our team like coverage. Um, as far as I know, all of them are like fans of modular going forward and they always say a um is it self adopting modular lending platform. So, it will be. What do you guys think? >> As a as a as a big fund holder of Oiler, I agree. >> One thing that I do think is interesting on the risk side, um, and we're I think we're going to talk about prediction markets as well and how to scale them.

But I think one piece of how to scale prediction markets is turning it into a product that is consumed like an oracle. Um, and let's say if you had a prediction market for whether or not some vault will fall to this, you know, trap um, and and cause reflexivity in DeFi. That could be an input to that sort of risk engine. And and I think that's a way that you could have an introduction of reflexivity within the data of what's informing the prediction market and what's informing that risk engine.

Do you think prediction markets are a good way to hedge um exposure to like any form of financial exposure? Because I we were talking about this with Danny and after some deep occurred, I was like, do you guys remember Y2K? I I don't know if you know it. It it was kind of an obscure one, but kind of not as well because I think it like launched at the bottom. Um >> on arbitrum. >> Yeah. I think it like it had some significant flaws from what I remember and it like it didn't last obviously but um it it's the only like >> I guess that form of risk hedging that I can think ever launched and actually got some form of traction. So I'm wondering if like prediction markets will fill that in or if there's

like just that coming back but with a V2 or whatever V3 I don't know how many times they tried to relaunch. I think it could be prediction markets. I think it could also be HIV3. How >> how would that Are we doing the ABS HIV free talk? Is this what it is? >> Are you >> I mean, if there's a if there's a uh vault that's large enough and the risk is broad enough, um I think it could make sense as so long as you could actually structure it to be uh reflective of the risk and to actually be able to structure something that's delta neutral. I think the problem with uh a lot of the prediction markets is it's really hard to get true delta

neutral in a continuous manner and it just seems like if you were to structure a uh HIP3 market specifically for that purpose it could be easier >> and by that you mean it's just the per that you can short um or I guess you can long whatever like right >> stream finance will fail >> but or that the issue there is oracle Well, the underlying so if stream finance was to fail, it would be XUSD or whatever the underlying token is that we would expect to fail.

>> Yeah, stuff is fun, but it feels like we're getting into this dangerous level of financial engineering which kind of shows because like HIP hyperlquid Jordy talked about this a few days back and it's like hypers are kind of flawed. They're very fun like for pre-market because you can and it's like it's been their edge for a while. Like you can list day one and do really really well. Um earn lots of fees as a protocol. But I mean I think every single pre-market now has had that like massive um bourge khalifa where it like liquidates because liquidity is so bad.

Um, and you can just come in with like a million dollars, liquidate like 6,000 users, and then bring price back down to where it was. Um, so I can't imagine. Daniel, you wanted to unmuted. >> No, I I didn't have any comment there. Sorry, I didn't mean to unmute. That's on me. >> So, I I don't know if it would work, Arian. I apologize for saying it wouldn't work, but >> No, for sure. It's just there's got to be more ways of being able to uh communicate what it is you want to represent. And I think that becomes increasingly important when we have

increasing amounts of rehypocation. Um it's it's kind of necessary work in in terms of building a risk engine anyway. And so provided somebody does that I think they would be the one best positioned to launch such a market. Now is is liquidity going to be an issue? I think it depends on if if the structure is such that the protocol owns 60% of the token. If that's the case then yeah liquidity is always going to be an issue. >> That makes sense. >> All right. If we want to transition to something else, I'm gonna take a brief moment of the stream's time to do a quick shout out to

where is my >> fumbling. >> I'm fumbling. Aptos Bitcoin defi is heating up on Aptos with nearly 400 million in BTC assets on chain. Atos users can now earn yield on their Bitcoin via Echo BTC and OKX's XBTC without the typical bridge risks and high fees. Thanks again Apptos for sponsoring today's stream. I realized I didn't ask Matt and Arian if we can have sponsors on the stream because they're fun, but I guess it's we're going to find out if it's okay or not after the live stream. Danny, what did you want to segue into?

>> Um, yeah, I guess if we don't have deeper thoughts on the uh prediction market thing, I guess I'm kind of aligned with you. There's like an open question mark there on like the liquidity piece of it. So, it's sort of like a tossup. Would it work? Maybe. Would there be enough uh activity or liquidity? Maybe not. Um I don't know. Did you guys want to talk about uh you know, I'd be interested to talk maybe about some of these swapping models like either if you want to go down the the route of oiler swap and fluid or talk about like what Jupiter is doing with Ultrav3. like curious, you know, if you have more interest one way or the other and kind of like what's exciting about some of these like new swap um designs

that are coming to market. >> Onchain trading is is a little bit more in my wheelhouse personally. Um and I think the Jupiter side of things is actually quite interesting. So if you want to open it with V3, maybe we can run that direction. >> I have a question about Solana. It's a little controversial. Is that okay? >> We love Daniel. With regard to Titan, I've been told that they're the flow that they're getting is not real to the extent that they want. >> Okay. Well, you got to unpack that. What do you mean not real?

>> Well, the like they're kind of faking their flow a bit. >> You got keep going. Say what you want to say. >> They're cooking the books. The flow Jupiter and Titan are competing. And from what I've understood is that Titan is to an extent um showing that their pricing is better than competitors. Um and then the end user actually does not get that good price. It just gets the worst price in fact. Um >> okay. So those are kind of two slightly different things. But uh to the f the second piece and we'll come back to the first piece. So um let's see. They might have actually taken that exact thing off

which is fairly interesting. Let me So, okay. So, what they were doing was basically simulating quotes. Um, like it was like a considered just like an ad box on their website. Like they Oh, they still do it. All right. Let me share screen. Uh, this actually shows my wallet address. So, never mind. >> That's okay. >> That's fine. >> And I have to open it. >> Share with the class actually. So um what they what they were doing is basically when you you know the classic swap UI right below that they would basically say here's the price that you would get on Jupiter Titan or like our price and Dflow. Um but the way that they simulate those prices matters a lot in terms of like what the number that shows. Um so Dlow and Jupiter had both

made public comments around you know that just not being the the route that you would get if you used either of their UIs. I think in the case of Jupiter, they were using like a very old binary um that was like publicly available. It was like Jupiter v1. Jupiter's on like V6 now of their product. Uh and so I think that was sort of their main contention and I don't actually know the specifics of the DFlow side, but um you know, their team was pretty public about like the fact that that was not a that was a disingenuous uh representation of the price you would get for that same swap on their application at the same time. Um, I get why both I get why both I get why Titan did it. I get why Defo and Jupiter are upset about that marketing. The

reality is like who's going to get the best price today? And it's like very hard to uh simulate and replicate those exact things, right? Because even if you look at trades for the same pairs within the same blocks, the sequencing of like when the user pressed submit is going to impact the price that they received quite a bit. Um there's also other variables like slippage and how the transaction made its way from the uh RPC to the leader. Like there's a million things that play. So it's actually quite a hard challenge to uh to really dig into. What you can definitely be assured of is it is a fiercely competitive market and what the end result of that is users are probably getting the best execution they've ever gotten uh because of that. Right. On Salana is a little

bit of an outlier in the sense that a vast majority of trading volume from a user flow perspective actually moves through aggregators rather than dex frontends. Um or trading products as a whole. Uh whereas like on EVM networks just I think there's a lot of path dependency here but unis swap sat very core to trading for so long. It was the where onchain trading essentially originated. Uh and therefore the front end was actually kind of like that that main source of flow. Um and then moving on to the L2s like there are absolutely aggregator products one inch zero they have like matcha as a popular product um and there's many others it's interesting like it just when you look at the data and compare like percentage of volume from aggregators as a percentage of

total dex trading volume this is like massively different numbers which is fascinating um so I guess like concretely answer your second question the Jupiter and Dflow felt like there was a misrepresentation of the actual quote you would get on their products uh And Titan was kind of using this as a a marketing uh angle. I am again just looking at their product now, it actually looks like they took that piece off. Um and I think all three of them are great products. Like I'm I've used all three. Um you know, Jupiter is kind of just like in my workflow. It's because I've been using it first and I don't know whenever I open Phantom like I find myself still typing in Jup. It's just like habit. Um that's kind of like you know the benefit of being a first mover advantage here. Again, I use all three.

I've explored with all three, but that's just like where I'm at today. Um, and on the the faking the flow piece is actually a super interesting question. So then I'll just go show some stats here and then uh wind down my my rant for you. So uh let me go ahead and share screen which always is a battle for me as a human. Um but the faking the flow thing is like it's an interesting question to answer because like how do you really define that? Um and like what does that actually mean? There's two interesting things. Sorry, I think you got to just throw it up on the stage, but then um >> I got to do it. There we go.

>> Cool. Awesome. So, this is our publicly available Salana Dex aggregator dashboard. It's on the Salana section um of our public page on the blockworks.co website. But a couple things to look here is like one, you know, historically looking at volumes. Uh it's been a Jupiter show obviously until somewhat recently, right? in the since about May of 25 this year, we started to see that get shaken up a little bit uh with both OKX, DFlow, and Titan all coming online and and being uh kind of showing their force and more recently Titan and DFL actually being a material percentage of competition. Uh a couple interesting trends here. So we you can identify cyclic arbitrage fairly easily or atomic arbitrage fairly easily um on a dex

aggregator and specifically when it comes to cyclic arbitrage what we mean there specifically is uh the uh it's it's atomic arbitrage where the input token is the same as the output token right so like the swap will literally read you know the user trades USDC for USDC and the if they put in 100 they get out 101 because you're basically routing through all these uh different AMMs that the aggregators are connected to and that is creating these atomic arbitrage opportunities. Um, if we can get into the why this has changed a lot recently in the presence of AMM prop AMMs, but you can see like there's an significant amount of arbitrage volume that flows over these uh dex aggregators which historically you know

I've been very focused around like that's where the user goes to get the best price which is kind of an interesting change in sort of the market structure and it's also add additional evidence that the prices that you're getting on uh aggregators today are are very good prices such that arbitrage opportunities are actually that's that's sort of a great way to capture them is over these aggregators. Um so even just like on a percentage basis the cyclic arbitrage is about 40 to 50% of all volume that moves over uh dex aggregators. So that is kind of a an interesting angle to answer your question like are they faking volume like no but like is there a hot ball of money that is looking for these arbitrage opportunities that is hitting these prop uh sorry these dex aggregators 100%. Um, now I don't I

don't view that as fake volume. I don't treat that as fake volume. Like I don't I don't agree with that framing, but it is objectively different than like retail flow. Um, that's a little bit harder to measure and you need a little bit more of an address heristic meth address address heristic methodology um that we're certainly exploring is something that gets us super excited. >> Arian, you said you wanted >> oiler swap. Yes, you asked you know why what we think is interesting. I think oil swap is interesting because I mean if we look at most systems a compound you know credit as it's existed before credit and liquidity exists in these separate silos um you know lenders provide capital traders moving it around but oil swap is fusing this it's kind of

making the same collateral base support both the borrowing capacity and the market depth and I think this does this does a few things Because modularity normally is about separation and each risk engine um covers its own uh kind of pool and those pools are separate across both functions. But in this this is aggregating the liquidity and it's recoupling those functions and in doing so it's internalizing feed feedback loops which I think has an effect on reflexivity because when swap depth and lending utilization are independent liquidity is proyical and when they're coupled it's

more reflective on each other. Utilization spikes the swap depth will tighten the rates will rise and the collateral demand will fall. until utilization drops and it becomes kind of self-correcting in this way. And I think what's interesting about Oiler Swap is it's or ULA swap sorry is it's effectively testing whether that reflexivity can be designed into the liquidity itself not just protected against it and I think that's interesting I mean there's obviously considerations you know you can't risk risk isolation is very difficult here now and and you have to assume that that uh reflexivity angle will protect against it. Um and and you

can always have I guess unified math model instead of several governance layers, but time will tell if that's enough. But I think it's a step in the right direction because it is um providing the benefits of modularity without the broadening the risk considerations. I thoughts on it or that um just to give a couple of my own thoughts just on on oiler swap and a few other these lending field swapping mechanisms that that have come to market over the past couple of months is that you know I I do agree with Arian and and do think that you know JIT borrowing creates you know conceptually more meaningful deeper liquidity per dollar of of TVL with um slippage versus um static LP reserves.

curves and you know because these deposits are you know earning an effective yield on the lending side with swap fees simultaneously LPS should in theory need fewer external incentives to stay and so this creates this sort of flywheel where there should be um more durable liquidity without these you know highly mercenistic uh emissions which we kind of seen come up with you know a few different of the V B V3 pools on on on on unis swap to date. Um I think the the consideration to kind of like look out for like with with vault utilization is that you know um when when when vaults are kind of like near that like max utilization

level or you know caps are tight. I think jet borrow headroom you know kind of comes off a bit um with highly volatile pairs too um with you know conservative LTVs. So like leverable debt, you know, is is quite a bit smaller. Um and and so, you know, we're seeing like a lot of activity historically along the lines of like stable pairs like USDT, USDC, which I think by and large is the largest pair that we've seen swapped out out of Oiler Swap if I'm not mistaken. Um and we've kind of seen like stablestable swaps become hyperefficient, too. Um, you know, Bunny was doing stuff with this with V4 before they were exploited. Um,

I think Aubo is doing some really cool stuff on their stable to stable swaps, but I guess my like primary point of of um, contention here is that like this is all very cool tech and it's all becoming more efficient. But, um, in terms of like token utility, I think that's a bit of a black hole that is yet to be um, discussed or resolved. What did you say the uh the uh pair was that drives the most volume? >> I think it's USDT USDC, but I could be mistaken. >> Okay, so it's definitely on the stable side. Interesting.

>> Yes. Yeah. >> There's >> one thing go ahead. What one thing like I've been so if USCCC USCT is the most popular pool to me I I feel like Solana has done a kind of a different approach to these majors and to these like very liquid assets which is the prop AMM um and it's worked very well for them so far. Um or the RFQ system is also very popular. They haven't been able to figure out CLLOs very well yet. So it hasn't happened. I assume on the EVM, at least on the like the relatively popular ones today, um CLBs won't be a thing for some time.

Oiler Swap is unfortunately I think a lot of these lending protocols kind of struggle from what you mentioned Matt, which is the token thing. Um, but like the second thing here is um I feel like there's like a feels a bit complicated and I'm almost like wondering if an RFQ system is a bit better for this as opposed to Oiler Swap. Do you know what I mean? Like I hate being that guy that always like because this is like happened to me a lot in Blockworks Research where someone's like, "Oh, like this new AM struct is coming. I'm like, you know what? like we could probably just have a market maker fill these quotes for like it's way less like way more capital efficient, not as complicated. Um, and since everybody's interacting through

aggregators. Um, on the other hand, I do like this idea of well actually I don't know if I love it like lending being used swaps also gets I don't know you guys the thing is that I'm disagreeing here but also you guys are like two standard deviations above me. So I'm kind of disagreeing hesitantly and thinking if I shouldn't be disagreeing. But do you get like the gist of what >> I have an add-on? Yeah, I have an add-on and maybe a simplifier to box question is because my head was in the same spot, but like do we think there's like a a path dependency and maybe just like the state of trading activity on like ETH versus Salana that's led to, you know, something like Fluid taking off on

Ethereum, whereas propM have come to like fill that niche for, you know, sort of like fill orders that are being placed on on the aggregators or is is there something else going on here? like would we expect at some point in the future that they all trend to the same endpoint or no? >> It's a lot of good questions there. I think I I wouldn't say oil swap is necessarily purely an AMM. I know it I know it looks like that in terms of design, but I think it's credit aware liquidity in that sense. It's it's not just that liquidity is posted and credit exposure is zero. It's um the same collateral is used for for borrowing as well. And so

you get more and and I think the main reason that they've structured it like this is it it would be so difficult to have an RFQ system that has composability as broadly as something like oil swap would or an AMM would and I think when you're thinking about modular lending and credit in general that composability is really important for distribution and kind of scaling. Um, now on the actual AMM design and whether or not that should tend towards an RFQ in the future, I think it's interesting. I do think that you they would lose some of the self-correcting mechanisms that exist with the curve on the credit utilization piece.

>> How do you think like what is the what is like the best case scenario for uh Uler Swap look like? Like what like when you think about a year from now and it just like has smashing success over the next 12 months like what is it doing uh that is like like what market problems it solving today? Is it on the yield like is it giving users an ability to just generate yield in an interesting way or is it more so like trying to solve a specific gap in the lending or trading side of things?

>> Can I make my guess and then you can give the correct answer? I think it's specifically there's a lot of this capital that isn't being used efficiently and it just needs to be put out there and act like I I do understand this point of like making this liquidity available to an extent because then RFQS can like market makers can use that liquidity somehow for their own functions as well. Right now please give the actual answer. >> No, I think that's right. I and and Matt probably has a better answer than me here to be honest. I I think it's credit aware liquidity where um a system where you know it's really allocating to it's somewhat underwriting and it's not underwriting explicitly. It's kind of uh

as a function of the credit piece. Um but it's it's most efficiently using liquidity with credit in mind. And so swaps of credit operations in that case and and as a result of that you would have composable credit markets emerging. Um and then we would assume programmatic access access to credit. >> It's that liquidity it >> it's that it's it's using oiler swap to bootstrap liquidity um originally which saves on incentives which I previously alluded to. I think a year from now, one of the success factors that I would be looking at would be our our Dow treasuries and protocols

seating their pools from day one on Oiler Swap without having to stream in the native token to LPS, which we have seen in the past creates a bit of selling pressure for dexed pools out of the gate. Um and it obviously saves uh treasury managed funds on the native token side a as well. Um some some other things too obviously you know you want deeper effective liquidity across the board. You want liquidity reused and reduced fragmentation because LP funds are uh in lending vaults and can be reused around pool. Hopefully that solves this liquidity fragmentation

problem or at least reduces it to an extent as it's a a fairly large issue right now. Um, and then on the on the trader experience and routing integration side, there's hopefully they're going to be this reflexive loop where since they support V4 hooks, it's integrated into existing routing frameworks, traders will inherently benefit from a more competitive execution side without needing to know on the back end that the capital they're swapping in and out of is being lit and used in JIP borrowing simultaneously. Uh, and it's deployed I mean since it's built on UD V4 I assume it's pretty uh deployed on like you know the top chains and whatnot because when you the Dow

treasury piece is interesting and whenever I think of like all right which Dow's got the money to uh make that RF uh apply for that RFP for it's like arbitum always comes to mind because they do have a lot of resources uh Dow manage resources um I'm curious if like how the broader DAO treasury integration side of things is is going in terms of using that capital. >> Yeah, exactly. Yeah, I mean it's it's kind of in line with our best case scenario, right? Um or it's not that Oiler Swap would compete with someone like Uniswap, but it would change the term of liquidity provision to credit

extension. and and and in a way you're looking at how balance sheets work in traditional finance. Um and I I think the movement towards that is the opportunity for oil swap. Um and and that should absolutely apply to Dowo treasuries which are probably the largest case of idle liquidity in DeFi. >> Okay. So, oiler swap prediction markets Jupiter. We're excited about Arian Matt. Before we >> That's it.

>> Wrap things up. Do we have anything else that you guys are like super looking forward to over the next year? >> Just deploying out of our recently announced fund for >> we are very excited for that fund. We've backed a few exciting opportunities that I'm not sure if we can comment on just yet, but I'm sure you'll see Twitter announcements in the coming months. We're we're really excited for that particular fund. We continue to source and find really exciting deals within the space and backing founders who we believe are furthering the adoption curve within crypto and um continue to try to find amazing founders to back and we're really excited going forward.

I generally generally I'm excited about. So there's a lot of like infrastructure pieces that we could talk about. I could talk about like the networking stack um kind of becoming cryptonative and and the work that people like double zero and optimum are doing there. But broadly there's one thing that I'm really excited about and I'm really going to be looking for in fund for which is piggybacking as distribution. you know, using existing um frameworks, whether that's in Tradfi or whether that's on the personal uh consumer application side of things and and the data that is associated with that. I really like the idea of piggybacking off of existing standards as a method of onboarding to crypto and I think that's something that I'm expecting to explode in popularity

this year. What about store of value assets that pivoted to roulette with a take where the take is burned? >> Interesting or not? >> We'll take the whole round. >> Yeah, I saw the annualized number. I'm in. >> All right, there we go. That's when you know annualizing one day revenues. That's like 2020 like that. Okay, so we've got annualizing one day revenues. We've got Dinocoins putting in multiple 40% days sequentially. Um I don't know this is like a very strange twoe period in the market where like yeah like I don't know Bitcoin fell from 115 back to 98 97 and

yet you still have these like very onchain pockets of um you know relative nonsense going down where it's like exciting things happening. Uh I don't know. It's it's like it's a really fun time. Like if you if you're rocking the Ze or stack, you there is no bare market. You're crushing all-time highs in every category there. And if you're just like the Bitcoin, ETH, Solana stack, you're in you're like you hate life. So it's like a very strange dichconomy of uh what's happening in markets right now. I don't know if we I was late to the party. I don't know if we missed this bit, but um curious on the takes here. You can tell what assets Dan is long by how enthusiastic he was in stating that.

>> Has Dan given you guys his twoe notice yet? >> He has not, but we're expecting it over the next week. >> I'm a lifer. There's no there's no twoe notice coming. >> You know, you know the top is in when he instead of the one day annualize, he's doing the one block annualize and it's like the top block of the entire casino. I >> know. I was looking at a U here. Give me a second. The child has distracted us from Zack talk. Um, >> I can The thing is I I can't talk about Zcash because I have a very I should definitely not say it in front of the child. So, we'll wait.

All right, Danny, you want to rule us out? Rule us out. You want to wrap us up? >> I would love to do one more thing. I'd love to give a shout out to our sponsor for today's stream. >> With nearly 400 million BTC assets on chain supported by a secure, fast, and affordable MBM environment, Aptos has become the BTC VI growth chain. Apptos users can now earn yield on their Bitcoin via Echo's ABTC and OKX's XBTC without the typical bridge risks and high fees. With support from Echo, OKX, and STAX's SBTC, Aptos is the place to go for best-in-class yield on your Bitcoin. Appreciate the support as always, Apptos. Thanks so much for the sponsor.

They're on point with that ad. Get spot assets on your chain. That's like P1, P 0. Make it happen. >> What are you doing? >> Are you on the sponsor live? >> No. I said they're >> He said they're right. >> Oh, okay. I was like, they're not doing the right thing. I was like, don't do that. >> No, no, no, no. Totally the opposite. >> Totally the opposite. Like that that is totally the right move. Um, you got like Hyperliquid's doing this. Mer has been on a rampage about bringing Ze onto Salana and then it actually worked. >> Is that where all the near intents are coming from by the way? Is it literally just people buying Zcash?

>> Uh I I love onchain data more than 99.9% of people. I hate bridging data. So don't ask me. Get to me on the pod. >> Don't you have a bunch of juniors that can take care of this? look through. >> You got a whole team, Dan. >> Anybody into that death pit of a of a of an arena? >> We we have um we have one guy who we gave who we just give the word. Well, not me. I'm not involved in the data. They won't let me touch any form of data or chart, but we have a guy I know they give like all of the like very difficult blockchains to um Rod. Shout out Rod.

So, Dan, maybe this is a >> this is a John this a job for Rod. No, >> Rod's the aptto goat, too. Shout out to the sponsor. >> Very good. All right, Danny. I think we can. >> All right, we can uh we can call it there. I'll I'll shout out the uh Yeah, for whatever reason, Mert and the Salana crew have been uh nailing these home runs that are not the soul token, but they've been nailing Zack or and now near uh interestingly. So, something of a track record they've been building there. Uh Ari and Matt, thanks so much for coming on today. Appreciate having you guys on. We'll have to have you guys on again in the future to get in more detail. I know we maybe didn't get to dive in as much as we know you love to.

Um, but to everyone out there watching, appreciate y'all tuning in and uh hopefully you're not orined or zeigned, I guess. >> Thank you for having us. >> Appreciate the time, guys. Always a pleasure. >> Always a pleasure. >> Thanks, guys. We'll see you all next week.