The Solana Rally: What Everyone Overlooked | Analyst Round Table

Transcript

is there stuff to do on salana will this change and uh yeah what are your thoughts there yeah yeah I got I got two answers for you so the second one which we'll get to later is what do you do on ethereum CU I'm just really interested to see how much fun you're having over there what's up everyone welcome back to another episode of zerox research if you're listening to this podcast there's a good chance that like Dan and I you believe the future of Finance is on the blockchain and we're excited that London is becoming a global hub for blockchain Innovation and institutional adoption of digital assets that's why we're pumped to host the 2024 digital assets Summit in London this March don't miss your chance to get ahead of the curve later in this episode we'll tell you how you can save 20% off on your ticket what's

up everyone welcome back to another episode of zerx research before we dive into today's episode a quick word from our sponsor hexin the most hardcore security team in web 3 pioneering in ZK and novel cryptography hexin is trusted by tier one projects like polygon mantle risk zero Lia 1-in new bank and more check them out on the ground at defc connect and be sure to mention zerx research when requesting a quote and you'll get a free webtube pentest with the purchase of your audit all right everyone welcome back to another episode of zerx research we got a great analyst episode lined up for you today with one small twist we're joined by Matt as usual but this time we're joined with Garrett Harper the host co-host of light speed a salon of focus uh podcast in the blockworks family it's an excellent

series uh we'll definitely put a link in the show notes but gett thanks a ton for joining us today we wanted to drag you into this just because with all everything going on the recent Market movements you know salana and its ecosystem has been very very exciting so we had to bring in the expert uh but I wanted to do a slight little twist today so instead of just talking about all the good things uh let's let's uh do a little battle testing ourselves here and do a little bit of an accus accusation audit um Sam mat I will kind of throw out a a random a somewhat random accusation about the quality of salana and some way shape or form and I want to hear your defense to this piece so I I'll go first here um which is a little bit unar uncharacteristic for me is

focusing a little bit on the nft ecosystem but metaplex controls about 99% of salana nfts and I want to get your take on is like why that's the case first of all uh to get a little bit of background on it um and you know what the negative implications are for that and if it really is going to continue to kind of plague or impact the salonet nft ecosystem going forward yeah it's a good question and I'm happy to be here you know actually my first two podcasts I ever did with you3 um on on Empire so I'm pumped to be back also I used to produce this show so it's kind of fun to be on it now um all right accusation audit for salana can I recruit mert real quick because I know he'd absolutely destroy you guys um okay so metaplex the

thing is with metaplex essentially it's a program on salana that 99% of nfts go through so on salana they separate State and programs it's really easy to use programs which is really cool but it often means that you have concentration kind of centralization around one program in some ways that wouldn't really be a big deal except that metaplex is the sole party that controls his program right now and it's like okay well why does this matter well back in I think it was May this year they were actually going to implement new fees on like protocol transfers and updates but there's some nfts for example that updated like daily or hourly based on the weather Etc and people are going to be like this isn't feasible anymore with my nfts so essentially you don't want to have centralized control around these nfts thing is interfaces will be coming

to salana soon um there runtime V2 is basically an update that's coming to salana in some ways like as a user no one's going to be able to tell the difference but as developer you will it's going to make things a lot cheaper but also it's going to enable things like interfaces if you think about interfaces it's kind of like on ethereum you have the RC 721 standard if you're an exchange like coinbase you can use that interface to interact with different nfts well on salana if you wanted to use a new nft standard right now it's not going to integrate with anything so if you wanted your nft to show up on Magic Eden that's not going to be the case instead you've got to use metaplex is standard not an interface and then it will show up but that leaves to centralization problem so i' say it

is a little bit of an issue today um but metaplex one it's in their interest to make this protocol work so they already have something where they want to make this mut immutable where it can actually change but two I think like interfaces coming in in the future will change that does the release of like um so nft the backpack X nfts in that whole world does that change us at all like do those rely on metaplex at all or does backpack kind of refresh and give a new interface that people can interact with it's a good question that I should know but I actually think they use metaplex um so they use the metaplex standards just like if you want to use madlads on ensor that's going through metaplex you should have Armani on sometime he's that absolute God engineer of Sana so you can

ask him about it perfect I love that and and uh so in sticking with the nft markets here for a second on ethereum they're largely denominated in eth the asset right and you know I think eth Maxis would tell you that's because eth is such a ultrasound money and it's it's such a great asset but is the same thing true for salana like does are all the assets uh nfts denominated in eath as far or sorry in uh Soul as far as prices go um yeah I yeah I think the majority of thats are through soul but uscc is definitely something that's Ed on the Chain quite a bit too you you'll hear David opman often put out like eth has his triple what is it the triple point asset you know Theory um which is like it's a commodity it's also used as a

store value um and then it's like a productive asset which is like staking and he says there's like a giant hole in Soul right now and I really I think the main point of this is there's a lot of inflation right now and there's not a lot of fees right one of the like the key things about salana is that there is low fees everything's about low latency high throughput and low fees right now and to make up for that you're going to have a lot of high volume I think it's a little bit unfair though to look at like what's going on at the chain today um and not what's going to be in the future right um it's it's more it operates more like a startup and a mindset of abundance than something of scarcity which is eth and I think both of those

are great but they're coming about it in different ways and that's why a lot of people say that slana will likely be the consumer chain or at least support a lot of these consumer applications I got a question speaking on the X nfts uh so you know I had like some of these mad Lads that I got right when they came out and now I have some soul that I was going to try to do stuff with I was like all right you know what like this is the first time I really want to go I really want to go experiment in the salana ecosystem so I was trying to find stuff to do and you know I was struggling so there's like this common trade where people are going to go stake their salana through jeto and then borrow against it a margin fi

and you know Farm points on both of them um I tried out dri like you know I checked out drift protocol which is like a purpose exchange over there but the liquidity is pretty horrible so it's not really like super easy to trade um so I was just struggling to find you know things to do in salana at the end of the day like the main the main uh value that I heard that people are kind of on right now is go buy Bon it's the only thing that's liquid enough to trade in high you know in in high amounts so I'm just curious like is there stuff to do on salana will this change and uh yeah what are your thoughts there yeah yeah I got I got two answers for you so the second one which we'll get to later is what do

you do on ethereum because I'm just really interested to see how much fun you're having over there um but on salana yeah there's quite a quite a bit to do but there's no there's no argument that ethereum definitely has more applications like one it's because I launched in 2015 salana launch in 2020 right like that's a big difference right there um I would say that Defi and salana is having somewhat of a Renaissance and a big thing is a lot of these new projects that are more mature now haven't had tokens and you don't have tokens you don't have incentives you don't have tvl that's big big complaint with salana their tvl has been sitting around 250 million which is Tiny it's jumped up to 550 million I think roughly right now but compared to ethereum that's like 25 billion um so that's a big difference there now like

you've probably seen this on Twitter over the last week or so the volume on salana actually surpassed the TDL um which which really just points to efficiency or you could point to like people are trying to game the system it could be either way right like people often like will just do trash transactions to go back and forth to get the volume up so I can see how there could be push back there as well um what I would do on saloner if I was just like talking to a normal person that's not an analyst like you I think drips actually really cool drip is something that's like trying to make nfts instead of about scarcity it's like accessibility and abundance and it's really connecting creators with people like me consumers right and it's like they're putting out free art every single week right now now

it's so it's connecting you with users but also it's a way to make money so they have like this Patron model where it's like called give thanks if you want to pay your patron of choice um dejan poet is one of their leading nft artists and he's actually from Arkansas like me and he does all of his nfts um with typewriter which is pretty sick um that's maybe not for the Deen like you if you're a Deen like drift is definitely good for the pers um then Jupiter which they do more than 50% of the volume on salana right now or they direct more than 50% of the volume they're an aggregator uh they they also just launch perss which has done more volume than um drifts over the last few days and drift is the leading pers product on salana um so I would say the

majority of people actually probably start with Jupiter and the cool thing is with Jupiter they'll soon have cctp so if you are on ethereum you're in the cosmos that has cctp as well you'll be able to Bridge Over really easily um there's like there's a sports betting application that's on salana I actually can't think of the name right now and even though it doesn't have much volume it's like all my friends that aren't in crypto right now are sports betting and they're all in group text that I'm in every day it's like those are the easiest people to get on chain so I I hope to get them in soon um jto Soul so jto soul is a liquid sing product for jeto which is like the leading MB client in Solano really the only MB client in Solana I think back in June is when they

announced their points program U for jeto soul and jeto soul jumped from 1.5 million Soul stake to it's like 5.8 million today and now 30% of that jeto soul is actually used in DVI throughout salana so I think you're right to say like few months ago there probably wasn't a whole lot to do there's also Zeta markets I mean there's plenty of def5 projects but there just wasn't a whole lot of user or you could usage and tvl um I think that's changing pretty quickly and you've seen that with like Jupiter actually launch their tokens and it's just that Network effect right like we have the prices going up which leads to like a wealth effect which means people are going to play with these products more and then also you're going to have aggregators like Jupiter that people it's the front end of SLA in some

ways so anyways um yeah my question to you is what's your what do you do on ethereum spend [ __ ] fees dude I went on a rant on this in our analyst chat uh the other day but I I was unwinding a position in in convex I had frax SE staked for a year just experimenting it wasn't a large position by any means but and because of that when I Unwound the position you know I paid like 50% of the yield I earned in gas fees in gay was at like 30 so it was it you know today it spiked up like 140 was not doing it during that period of time like I waited for a mild point in time where gas was not too unreasonable and I still ended up paying an enormous amount of fees like it's it is unbelievable and you

know Matt you mentioned Mar F and jto steak Soul uh jeto Soul I've been playing around with that as well and like dude it's like it it is night and day when you're you trans transact a bunch on ethereum and then you go over to salana you just like mess around even just a little bit like d the night and it's night and day like it one feels like a blockchain and one honestly doesn't it feels like a web page like it's not that's not about like the the the app UI by any means like just actually like setting a transaction and it taking like a second or under a second it's nice it's really really nice yeah I love that I think bat on your point it is fair to say though there hasn't been like enough depth and liquidity on salana because of that like

people like margin which is a lending product they have actually had caps in how much tbll they can have um because they've got to be able to liquidate loans and if there's not enough volume and depth on chain they can actually do that in the safe way I think one thing I did like ignore that I should have brought up it's just payments like salana to me in some ways is becoming the like shelling point for payments or at least I I hope that's the case um you saw Visa I think this is like two months ago say that they're going to start settling usdc Sala has a lot of payments protocols launching on top of it or like applications so sling is a really cool cool one that was more or less highlighted a lot at breakpoint so sling it looks a lot like VMO you can fill up

your wallet with usdc just using um Apple pay which is pretty cool because like on and off ramps to me are like the biggest part of crypto um they also have code which is supposed to be kind of like cash essentially you just send links around like I could right now pull up code you you could pull up code and I could send you $5 over this um so payments I just think the low latency and the high through Pana and also the composability make it like a shelling point for payments so like Matt you wouldn't really want to pay play with payments on chain like what are you gonna do but like the average person uses payments every day so hopefully that we get a real world use case not just DG like like you guys that are using crypto and that's going to be the

place for salana yeah I think that those are all fair points like today really the main uses that I see people using ethereum and it's l2s for are kind of perss and derivatives a little bit friend Tech and whatever you want to call that kind of uh you know social fi You could argue gaming and then of course more than anything like speculative gambling on shitcoins so like while salana doesn't really you know have as much ability to for those actions yet I guess you could totally argue and probably completely fairly that that's not going to be what scales this to a billion users so it doesn't really matter at the end of the day that salana doesn't have these kind of crappy use cases and also I think it's interesting to think about like all those different points you were talking about like margin Five Points and goto

points when those air drops do come out that's like a [ __ ] ton of liquidity that just automatically gets injected into the salon ecosystem you know goo could come out at a billion dollar fdv potentially whatever I don't want to speculate on that but at a very high fdv and that's just brand new tvl in the salana that didn't exist the day before yeah I agree I think these points are huge like I know I know I'm rambling this is my first time not to be a host of the podcast love to love to be the guest um but Tiner is one of the the leading like nft protocols on salana and you can see how powerful these points and obviously tokens will be back in February this year they had 2% of the market share and then blur happened on ethereum and they did that point system

which absolutely skyrocketed for a bit right and then right after that tinser came out and they had points as well it wasn't truly called points it was like loot boxes and they went from 2% market share to 20% and the 20% to 60% and they're still sitting at 52 so that just kind of shows you like the power of these points and incentives and what it can do yeah one thing that I'd love to see which I think you're going to start seeing too and especially with it sounds like that was a huge theme at breakpoint is like people are building things right and you still you've seen a lot of that experimentation occur on eth and Ethel 2s um like for example you know Athena launching a stable coin like that's that's super interesting I think you're going to see that spread and those ideas

um not only like just get mapped over to salana but get iterated on because you can do more on this type of chain that doesn't have fee barriers and that is low latency and that is high throughput so there's like a different type of app you can build um but it's it is going to be interesting once we start seeing that come online right like first you have to come up with the idea then you have to get funded then you have to actually build it then you have to deploy it so like there is this huge um like time Gap that you have to wait through it once the idea is first you know ideated um but like using Athena as an example you know they use stake deth and then run a deltra neutral hedging position on that they you take these as a collateral to

create this stable coin right and do you think that like Soul intentionally focus on focusing on not being money has any impact on the defi ecosystem as a whole it's a good question um I mean in some ways I wouldn't say I don't know if eth isn't money I mean if you talk to Anatoli he would definitely say the point of soul is not it's not for it to be money it's like silver resistance um Soul's of also using a few other things like over this last year people probably knew in 2022 that salana had some network issues right few outages um but they implemented something called quick um which is really just Network stability and also stake weighted qos which means quality of service and so now how it works if I have like imagine I'm a

validator I have 1% of the stake that gives me right to 1% of a block so I can have 1% of the transactions go into that block now that doesn't really matter unless the Block's full because otherwise I could just put in a transaction anyways um but in the future when there's more transactions on chain that's going to give even more of like a supply sync for salana uh for soul because if you're one of the validators that has a high amount of stake you actually have a right to that block which kind of gets to the point like can validator survive on inflation alone the point is they won't they don't have to um what one of this right here will be a revenue stream for them um the more Stak that they have because a lot of rpcs for example don't have their own Stak they

would then pay these validators that have a large amount of soul to be able to get their transactions in and also get their transactions in on time and like in a fast way um I do think it'll be interesting I mean soul is definitely more about abundance Less on scarcity I I think the eth meme is great I don't know I also just think that the more people that use salana more more apps that are built on top you have to have soul and even if you don't have to have soul because there is a count abstraction already on salana um it's going to be Soul used to to pay these fees and I don't know I think for something to be money for the most part you have to have a lot of people to hold it and you're not going to be on the

Ethel one holding eth for the most part if you're right and nor be User it's just too expensive um but I think eth will continue to be money in crypto for sure I think that's going to be hard to kind of like break that positioning I think they've won that in some ways but I also think soul will have aspects of money as well um that whole moneyness conversation is pretty interesting I don't I don't really know what is money and what is not but if I use it to buy things and crypto then I guess it's money do you think uh the fate of salana I guess I guess so token price let's say that and maybe like the flourishing of its ecosystem over the next six months is largely dependent on how these points programs actually shape out because like we just saw the Prisma uh points program

kind of play out and people got absolutely screwed and obviously this gets kind of complained about a lot because the whole points programs like you don't actually know what you're getting I know one guy on our team like farmed points for a while and could only like cash in for a t-shirt or something so hopefully that's not what this a lot of are going to do over there but I'm curious if you have any thoughts there yeah that's a another good question I mean I I think points are interesting in one way in that it allows the protocol and the developers of these economics to actually like put something out there into the world and see how everybody responds without actually committing to having a token um because not only do you have regulatory issues but you also just have like do we really you know

some people like dropped all their tokens in one go like they blew their load like do you really want to do that up front or like can you play around with points the other thing is like you said it really can mislead people as well um so I don't know I I think there's pros and cons of points I do think they like these token drops and how Jupiter does with theirs um like right now they so they've announced they're going to do token drop they're actually like talking with the community and so forth to see how they want to do it so they haven't announced how that drop's going to happen um it is good for these projects now I think that they already saw the high ftvs happen in Solo like before FDX and how badly that went and then also some of the air drops have

happened in ethereum so you can kind of learn like what is the good way to do that and that you could compare that to even like salana doesn't have some of the same Tech debt as ethereum because they saw ethereum for a few years um I think like the bigger thing for salana in the long-term at least will just be like fire dancer is a big one we don't have to go into that yet but like you know ethereum had EIP 1559 and that's what the whole Community kind of got around and same with like proof of stake and like the equivalent in some ways is fire dancer which essentially is just a new client that's supposed to be like 10 times more performant for Sal and right now it's kind of it's one of those things like it's like pre-t token is sometimes better than having a token you

know it's like pre-revenue is better than having Revenue um because if fire dancer just continue to get delayed for example that could be a big problem also like if you're introducing a new client that's written a new language it could be really hard to actually read for most people like it's esoteric coin B uh codebase and that maybe then starts the fragility of the network over because it's not hardened right like if you release fire dancer could have a bug in it right and if everybody switches over to it that's an issue so I think fire dancer right now is probably the biggest thing for salana on like a two-year timeline because as of now fired danc is supposed to go live on test that in the second half of 2024 if that gets delayed by like two years like ethereum with POS for like five years whatever it was um

that's not going to be good comparing uh fire answer to 1559 might be like a bit a bit of a reach I think 1559 made ethereum go from more less unusable for a general user to something that you know I don't I don't know if people here remember but you could wait 10 20 30 minutes for transaction to go through and and you had no idea what gas fee you should set so 1559 really did make e like was 0er to one moment for ethereum but I see what you're saying as far as fire dancer will make salana a lot better and I'm excited to see that my uh I agree my one like push back even though this is not what the salon Community will choose to do I don't think is like all the numbers that you see with fire dancer run on like today's

commodity Hardware like what salana validators are running so technically if it's 10 times more performant you could really just lower the resource requirements for a salon of validator um and that would make it more approachable and accessible and democratized according to everyone in ethereum um are they going to do that I don't think so instead it's going to be like people switch fired answer and you'll have 10 times faster speed throughput um and then it's like what can we support with this but if they really wanted to to say like okay we can actually just make our validator requirement lower then similar to you said it makes it more usable that EIP 1559 made ethereum more usable for the average user well this would make salana more usable for the average validator or node operator I got another question for you here what do you think

about people's claim that the supply overhang from the FTX estate and Alam estate is just too much to overcome because there's been 24 million Souls sent to Central ized exchanges do you think that's a legitimate headwind or are you not concerned it's a meme no it's I mean it's a short-term issue for sure um I mean Solana's whole thing like used to be like we're chewing glass right which like it was like people respected that term and that it meant that if you're developer on salana you're like working through all this hard like codebase and there's no real Frameworks Etc that were built out um but then they actually got like kicked in the teeth when FTX imploded and so they were 100% chewing glass um but I think the community's come out stronger than that and like now that you just have these FTX cells to me

in short-term for sure it's going to be some pressure on the price but um it's a really good thing like I I heard Chris berisi talking about back before FTX imploded that he didn't want to get in the salana ecosystem purely because he saw it as like a VC chain um but after FTX and this estate sale like that narrative it's already kind of gone away but that narrative will definitely go away because any if anything is taking that VC or Trader stake and is going to distribute to more people now who knows maybe it goes to one more VC um I don't think that's going to be the case so I actually think in some ways long term this is really positive for the network because if salana was always the DC chain like I wouldn't care about it and I don't think a lot of other people

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them on the ground at devc connect without further Ado let's get back to today's episode I don't want to name names here but I have a I have a real complaint about salana protocol documentation is so bad one thing that ethereum projects have like it took a while but they figured it out now uh what they got docs are good in eth land let me tell you that like when you could open a tab and there's a contract list of every relevant contract for this protocol that's beautiful and that definitely took a while to get to um and there's one thing I heard from people that were at breakpoint so let me know if you disagree with this but it sounds like a lot of the developer community of these new protocols I was mentioning earlier is people that have like really never interacted with eth or Bitcoin

before this is like a new set of a new wave of developers coming in and so that concerns me about dot quality because if you're used to digging around def5 applications on ethereum or the l2s and and so forth then you know the Pains of like having good docks and having bad docks and this makes a world of difference especially for people that are trying to learn about a protocol um so that is a legitimate complaint that I have is some major protocols in salana have a really really pitiful docks to be honest very very good and like legit complaint I think that's probably gotten a little bit better over the last year um Armani for example he's been huge on top of this like trying to establish Frameworks and like documentation but now you've even seen like mer from helias who's my co-host on Lightspeed

like he's really big behind this I know you've read like some of the blogs from the helias website they do a great job yeah yeah but we definitely need like more researchers in the space that are writing this out and also developers just for the documentation like John charb came on our show he's like when I came to crypto there was no way I wasn't going to ethereum because like I'm intellectually curious and where could I actually read stuff and learn that was ethereum like slana didn't have that um I'm I'm like really going like bullish slana on this episode I don't have like only good feelings towards salana to be fair but um I would say that in some ways though this is actually like another positive sign P the fact that you have so many developers in the ecosystem and also users without this

documentation is similar to like hey people are using crypto today even though it's like kind of shitty to use and it's really hard to have a wallet but that's actually really bullish anytime you see a product that's kind of [ __ ] but people are using it anyways it's usually a really good sign because those things will be fixed like Anatolia would say like this is an engineering problem I mean this is a documentation problem obviously that you're talking about it's a little bit different but in some ways I would say that's actually extremely bullish and like the big thing with with salon to me the docu documentation might be [ __ ] but if you're an ethereum developer it's like where are you going to build do you build on eel one today do you build on the rollups like this process is kind of

[ __ ] right like okay well I can build on arbitr I can build on zync like I don't know where I'm going to do it are they even ready like all the bridges are have have like multisig and they're updatable are my users going to know where to go like that experience isn't very good and like slot is Focus to me is like trying to the documentation might be bad but like their sole focus is giving like a bigger and easier design space for App application developers to come on top and build and that's why you need low latency that's why you need high speed that's why like token 22 which is a new you know upgrade like token program that's coming out it's going to make things easier for developers I think their whole thing is like we don't know what application is going to be built in

crypto but let's make it as easy as possible and ethereum's going to get there but like their main focus right now is like we just need to learn how to scale so like if you're looking at those two ecosystems like which one is more likely to actually bring in the developer that's GNA have that great app idea it to me like that's salana I love it I love it all right we've been uh we've been putting you in the hot seat so let's flip it here uh I appreciate real quick real quick I got one more stay in the hot seat then stay in the hot seat he's just so bowled up on this and I'm just looking at defy llama 24-hour purpose volume is 17 million which is a joke uh stable coin volume before the last month and a half runup was the exact same that it is

today and if you switch tvl to Soul terms it's down only from 17 million to below 10 million today like to me that doesn't signal anyone else is using the chain now that wasn't using it two months ago before the price R up like what what do you think of that like to me it seems like no one's using it yeah uh oh those are those are uh strong numbers and I agree I mean the numbers on Sal are still pretty bad I know I mean I don't know who these users are but even uh Phantom tweeted out I think today that over the last two weeks they've had 100,000 new wallets sign up so I don't know where they're going maybe they're not they don't know what to do so I think this is a big thing in ethereum as well like your first time to

get a crypto wallet like what do you do with it like you don't really know so like one thing they're trying to do that Phantom did is they integrated with drip where now when you come in it almost has like a guide like get your first drip in FTE so I think like that's something they're trying to solve but yeah I mean the numbers are pretty abysmal but I think the thing is like the tech okay the tech is there let's be honest like six months ago no one was talking about salana except like maybe when I you know started doing this podcast and then people that are native to the ecosystem everyone's like is it dead like this December um that's changed pretty Qui you saw I mean I know I'm just kind of going out tangent from your question Sam but I think I kind of have to because

okay to skip to it like salon to me is net new and the reason that they have to be net new like they're net new and that they have to go after new applications and new developers and new users and like why is that and that's because there weren't really that many there like there's obviously like there's a joke that there's 75 developers in Sal that's not true there's actually a lot but like there's not much tvl there's not a ton of us usage there's not a lot of apps that really worked in the past where it's ethereum and you're an L2 they're mostly going after ethereum users because they're like we already have this giant basket of users we're just going to make that app that they're using faster we're going to put on L2 like we're actually just going to migrate our protocol to an L2 salana

can't do that because they don't have the tvl sitting there and they don't have the users so if anything they're having to go after like net new applications and net new users like if you want crypto to be what it is today and you're happy with that like let's just use the applications we have today that'll be great then like sure ethereum's doing it right um if you think that crypto can like do more than just having like our little group of people on our telegram then like that's something that salant is trying to do so uh to be fair yeah right now is not there with the numbers but I would say that they actually have like hardened D5 protocols that stuck around after FTX which is really cool to see like if I was them I would have probably left as developer um but you have some like

truly genius people working in the space that's what I like about Crypt in general is you have so many smart people in the space I would have left otherwise um you have that you have people like run coming out with mardow talking about the svm right I don't think he actually understands svm that much actually heard him talking about it he doesn't but he thinks that it has the lowest amount of friction and for somebody like maker they need a lot like low friction if they're going to do these payments and then you had Visa coming out on salana like you actually have these announcements but I think the thing you can argue about is that salana has good Tech like the S svm is good Tech isolated fee markets you're going to need that on l2s like parallel execution probably going to need that too and so

like just the the tech is there you obviously have the attention the attention is there we're talking about it right now and you see it on salana you now have the price I mean the price went down to eight from like 250 or whatever it was right now it's like from the last month it's from 20 to 63 it's like sitting at 57 today so the price is there you have the attention you have the price you have the tech now you just need the users and to me like all of crypto needs users but at least they have everything else so they're they're ready for that next step and hopefully we have another cycle in crypto yeah that's why I'm super excited about the next six months as again because you have that time lag of like creating these new protocols and I think we're it

feels like we're getting it there so um I I this last segment has really made us sound like the the other three of us really sound like eth Maxis which is really not true ironically but uh was a bit for show just for the sake of you know hashing out some of these really interesting topics about salana um because I think that like there's a lot of reason to talk about these I know especially when price starts going up Twitter just gets almost unbearable to be honest and with all the amount of noise going on so it's was fun to kind of just jam on a couple of these ideas with you but like I said we had you in the hot seat for the last 30 minutes so let's let's flip the uh flip the rols here and I'll give you the floor to put

someone in the hot seat or the cool Throne whichever one you prefer today okay um already talked about Jupiter some because they were going to be my cool Throne so I will do a hot seat to continue on this ethereum theme and I'm also a big fan of ethereum by the way like you said with Dan um but I have to I'm team salana right now so I think that ethereum L2 Frameworks are highly overrated and there's going to be a massive competition even though right now everyone's like Kumbaya so you have like a lot of podcasts where like ARB sham and optimism will go on at the same time like that's really great it's also great to have a meme that they're like working together and this is going to be amazing um but yeah I don't think that's gonna happen it's for a few reasons I

think the reason that you had these rollups and especially the Frameworks so you have like arbent one but then you have arbitrum orbit so when I'm talking about Frameworks I'm talking about like arbitrum or orbit I'm talking about um hyper chains and I'm talking about like optimism super chain I think those all came out of the result that just like a year ago we didn't have isolated feed markets and parallel execution wasn't really a thing or wasn't really heard of by people in the ethereum commun I mean people in the ethereum community knew about it but they didn't really acknowledge it and I think like right now you're seeing like Eclipse with the svm come over to ethereum um they're basically saying we used to think we're going to need a lot of like a framework we're going to have app chains use Eclipse but they're like people don't

really need this or most applications don't need this we're actually hoping to just have eclipse the one rollup that everyone's going to be on top of um I also think that like these L2 tokens through these Frameworks aren't going to do very well and the reason for that is the more competition that you have which is assuming that these Frameworks all you know live a great life together and you know don't have great competition is that it's going to commoditize them and if you're ethereum that's great like eth is going to be used throughout these ecosystem system so eth as an asset's going to do wonderful but it's the whole concept of like commoditize your compliment which is a really dumb like example but if you're a hot dog you're not competing with hamburgers you're competing with the bun for the hot dog you want that that bun to be as cheap as

possible so everyone if they only have $10 in their pocket they'll spend it all on the dog no one cares you know feel like I'm back in the econ class with learning about complimentary things and that's that to me is what's going to happen if there's true competition like you don't have purchasing powers in L2 now if you have what I think's going to happen and you have these power law outcomes and instead you have like I don't know three rollups that have 90% plus the value and then you have app chains like dydx Etc like that's still going to exist then you do have some purchasing power and ethereum does have to be able to offer data availability and so forth at like a reasonable cost or everyone will a sles show or they'll launch their own chain so anyways my hot seat is L2 Frameworks I don't know who

wants to defend them I'll argue your point of that you know parallel execution makes l2s dumb because at the end of the day sharding like ethereum's original scaling road map was pretty similar to parallel execution as far as you know you have different shards that are in parallel executing different transactions and the reason that you know ethereum developers decided to go a different route was because it it forfeited composability or synchronous composability between you know different chards and the problem there was a lot of crypto wants to touch the same state so you know having a transaction that touches a and Unis swap at the same time um is not possible when those are when a is on one Shard and Unis swaps on the other Shard I'm pretty sure if I'm not mistaken I'm not you know salana expert but I'm pretty sure the same is true

with synchronous with the with the parallel execution in salana meaning that you can't parallel in parallel execute two transactions that touch the same state on salana so like you know I don't I think that ethereum developers made a conscious decision to go a different route as far as scaling through rollups instead of scaling through a mechanism that you know could be could be conflated with parallel execution so I'm not sure that that's completely Fair argument um additionally I think that today the rollups we see are 100% competing right like I do think that we're in this very competitive market the ZK rollups have haven't really even come to come to fruition yet so I think that this kind of like bis Dev grant program Knife Fight is only going to heat up more and more and you brought up a good point maybe five or

six minutes ago about how if you're a developer looking to build you know a product in the evm how do you even choose where to go and that's the answer is who's going to give you the most money which bis Dev program which you know which bis Dev team or grants program is going to throw you the most money to come build there but to some extent that might actually give these ethereum ecosystems a leg up and being able to attract developers compared to salana where you know at the end if you're want to code in Rust even you're gonna be able to do that on arbitrum soon with stylus um so I don't know I think that you know we see uh more competitive we see a more competitive e like landscape of trying to get app developers to come build there especially in a bull market when these

treasuries become worth even more money and I feel like these you know ethereum l2s are gonna have a leg up on salana yeah I'm I'm definitely really excited about the idea of like one one Single Shard baby I mean I I love Isola toy markets I think they're genius parallel ecution is how the world works and there's no reason blockchain shouldn't be on the same wavelength there and Matt your point um you don't lose atomicity with paralyzation but like if there were you just have to literally execute transactions that touch the same state they can still happen within the same block but they just and they can still be conditional right you can only execute if a certain a certain other need um but they're they just can't they just have to be uh lit

literally executed within the same threat so it's still you still get atomicity and atomic transactions it's just uh those particular transactions need to be on the same thread in a certain order um and so that's why I'm glad you mentioned Eclipse Garrett just because that like that that's going to be the proof case here like right today the users today are on ethereum mainnet for whatever reason and putting a parallel execution environment on top of that is really really exciting especially when you pair it with Celestia da like it should be cheap still assuming you know celesia lives up to the hype and provides cheap da and then you have the transaction throughput from the svm and you have the settlement in liquidity uh from ethereum mainnet so

uh we've talked about it a lot so I don't want to like keep harping on it on this podcast but eclipse is is going to be a really really exciting Venture because you'd have to imagine that if you're building an app on salana today like youve at least had the conversation of hey do we you know do we Deploy on Eclipse like does that make sense for us yeah I was just Echo maath points honestly like I think for as long as L2 can launch at10 billion ftvs and use those tokens to incentivize behavior on your chain you're going to retain the users you're going to retain the liquidity and it doesn't matter what what someone else does because unfortunately crypto is a game of incentives today and until we get that killer consumer app there you're hoping lands on salana I don't really think it

matters L2 is a win for the time being do you think that's going to happen on the main like optimism I don't know if it's optimism one then you have arbitrum one or do you think this is actually going to be the framework where you have like Bas obviously building out there is no other base in crypto like they had 100 million users that's why they had Bas but do you think other projects are going to do that because in some ways I feel like these Frameworks for developed because there weren't isolated fee markets and you know us to I'd hear people talk a lot about like well if you're a project you want to like be able to acrw your own M right to your token and I get that and on a monolithic layer or an integrated layer that is much harder but even with like sana's

isolated Fe markets in that separation of State um and the programs they are already working on way that you can actually because you have those like local fee markets to your specific State and app they're working on ways where you can actually acred that Revenue to your app itself so I think you lose that argument and also like there's no more like we need to have our own app chain because if there's an nft man it's going to clog our you know Ling protocol like that's not a thing so like why why else are there there these Frameworks when you mean Frameworks what exactly do you mean yeah maybe I have the the wrong word it'd be like optimism super chain I think the idea behind these like Frameworks alliances between like different two ecosystems with their own token is honestly trying to get a

flywheel Network effects going so that way devs come build on your stack users are there Capital comes there people are building out solutions to really hard problems like interop and l2s so I I think that's the main reason why they're going for these like l2s or you know Forks of your own codebase ecosystem of l3s I think they just want to get enough developers and users kind of stuck there to where like everyone has to try and solve the hard problems that haven't been solved yet I think it depends on the rollup ecosystem so like like Sam was alluding to with optimism or ZK Sync It's all open source anyone can go Fork the stack so like all you're really getting is soft Network effects where you know developers coming and building better tooling it's going to benefit your

ecosystem and benefit future developers and maybe bring more users in but for something like arbitrum it's completely different um I think actually I'm not sure about Stark net but for arbitrum you know in order to build an on the arbitrum stack and to build an orbit chain you actually have to use a sequence on arbitrum and drive Revenue there or well at the end of the day your transaction has to be included in the general message inbox on arbitrum so basically user sequencer so it's like actually potentially driving value to the ARB token when you expand this ecosystem so actually unfortunately like it seems that kind of optimism is eating arbitrum lunch as far as attracting developers because why like like you're alluding to why would you ever want to you know give up that that Revenue that ability to order transactions that you

see in salana and that you see in optimism if you're going to go build na chain over there but but I think it's an it's all evolving actually like there's an interesting you know Avalanche Improvement Community proposal right now um that I think we'll probably bring up later that's kind of relevant in this conversation as well I mean to me this kind of just goes back at the idea of like you know why do we D l2s is we're just building extended general purpose blockchains right like they're not app specific like it's and that's like a whole other argument but like why do we need these general purpose l2s it's because we can't do everything we want to do on eel one and so I don't know like Garr I tend to agree with you like sometimes when you start getting into the nitty-gritty of

the stuff but like I just get this like disgust honestly like like what like what are we doing when we have the opportunity to build out on these other chains that don't necessarily need this and like I'm not saying there's not problems there right there's still very hard problems that need to be solved but uh if you if you wanted to just build a like if you wanted a uh you know Global State machine then like why are we going to l2s and having to do this then like creating all these new sets of problems just to solve the same problems yeah it's that conflation of modular and app specific because when everyone was like modular becomes the buzzword it's like oh everybody's going to have a modular blockchain which then people were like an app chain but those aren't the same thing and that's what

you see with Eclipse it's modular but it's not an app chain it's just one L2 and I think that's where things have changed a little bit um and I think it's interesting too that a longer bare Market actually I think benefits ethereum because right now there's so many complications on to me at least on ethereum's road map and like shared inquit and these centralized contracts that we have or I should say with multisig that are on there just like l2s have training wheels on right now right like they're not completely ready to scale you don't really have like the law of chains on optimism figured out like all this interoperability not solved yet and like the end like yeah it'll probably be solved but similar to metallic endgame that I think he wrote in December 2022 maybe he talked about like the end of the day salana and

ethereum are going to be pretty similar in the sense that you're going to have like big beefy Builders and then like hopefully users at the end can just verify the chain right like they're going to have light resources to be able to verify the chain salana can't do that yet right they but they do have the scill today ethereum is getting close to having light clients I don't think that's really thing but obviously the node node requirements are pretty low um but it doesn't have scale yet so to me like if crypto actually took off in like the next year etherum like salana is there to be able to support that whereas I think ethereum would struggle quite a bit like I had a tweet on this the other day who knows if this would happen but I said if you had a bull market today like

the fees on l2s would Skyrocket to some extent they're going to be much lower than ethereum L1 but they will Skyrocket to some extent exent then because of that maybe if eclipse is actually ready to go you'll have some users go to Eclipse if you go to Eclipse you can use a salon a native wallet or you can use metamask because they have metam mass snaps and then if you download a Salona native wallet hopefully maybe you'll start to check out Salon itself because you see that's where the majority of the defi applications are and like the you know the liquidity so that's I don't know that's kind of what I'm thinking it's just like if today l2s aren't ready to actually scale salana is but like the longer that ethereum has to figure out the road map and like get out figure out this interoperability great Mt talks

about like he's he's a mathematics guy he way more technical than me but he says like ethereum and salana have the same endg game salana has ethereum has a lot more conditionals to get to that endgame meaning like each conditional is some factor that has to work out and if that probability is lower than 99% you keep multiplying them over and over and over it's like this has to work this has to work this has to work you eventually get to like zero right whereas salana is like it's got not a complicated future road map um it's not easy but it's not as complicated because you're that one Global state right so I think that's kind of the bull case for salana well I only push back to that on the L2 fee side is like how price sensitive is the average user to a transaction like when

do you start carrying like is it 50 cents is it a dollar is it $3 is it $50 like where where's that line and if you look at L2 transaction fees today you know they're they're all basically sub 50 cents um I'm quickly pulling something up here yeah so like uh you know CK syncs at about 16 cents optimism 8 arbitrum 19 and base about 5 cents that was uh looking at last month's data and uh you know like if those doubled do you lose any transaction activity like I tend to think no like I don't like me personally as a user if it's under a dollar like to me that's just I'm just rounding that thing down to zero but like that I am not like an mbot I'm not like there's definitely some uh

applications on Salon that rely on like seriously High transaction counts um and so that's like I could see how there's different apps that have those very specific use cases but on l2s today those don't really exist in the same capacity at least and so like I just don't think users are that price sensitive to be honest I I think anything under anything ballpark a dollar is like game on yeah I I mean I agree with that I'll um I I have to run here in a minute but I'll give you my last little rant on that piece because that's the best thing about ethereum right now today is that you do have price and sensitive users I mean I do think let's just act like dpen which is kind of an exciting narrative that's in salana if that is something that could help start the next bull market that

can't be happening on l2s that don't have isolated fee markets because those payments are so small they're micro payments that any spike in fees is just not going to work so like that is a use case that wouldn't work now like people betting on assets going up which is really like the main liquidity in crypto right now and where most of the usage comes from I think you're right like ethereum is mostly insensitive and there's this whole like comparison that's come out like salana is similar to Apple and then it's vertically integrated and that like it's less complicated for developers to build on top of and then you have Android that's something it's more modular and like developers can play around with and that's like the evm I agree like that's a cool analogy but where it falls apart is that apple is the one with price and

sensitive users which is really what ethereum has right like you want to have Apple's users to to like buy your products you want to Market to those users because they're LTV they spend so much more money than the average customer and that's what's happening with ethereum customers today salana doesn't have that the people on salana they say salana is for the Poes I hate that meeme but that's what they say right it's like to me actually like the more interesting thing in the future is maybe similar and this goes into the whole inflation debate like you're going to have a lot of Revenue there probably come through advertising like you're gonna have these applications that come on board and they just use Sal as a backend for payments Etc and maybe some of that like advertising fee somehow gets paid to these people running nodes

and validators because I yeah you may never have these validators that can be profitable alone from just inflation for example I don't know but that's definitely use case but like you could have obviously like Circle they have a business built on top you could also have people that are smaller that are consumer applications and they either have subscription fees or they have advertising and that's how they profit I'm kind of making this all up but that that's uh that's how I actually think something could play out because that's how it's worked in consumer today and consumer applications advertising Market is absolutely huge right and that that doesn't exist in crypto today but um anyways guys I've gotta I've gotta run so thank you for putting up with my rant this is this is a lot of fun next time I'll come on and be a little bit more

participatory and friendly no no we love it I appreciate you uh battling the uh the the crap we were throwing at you that was fun man that was fun well we'll have you back on for sure but thanks a ton Garrett and for the listeners we'll stick around because we are going through some governance updates next yes and uh follow light speed links in the show notes got get plug in yeah we we'll put that in the show notes for sure peace Garrett all right zerox search listeners we're calling on you to join us for the premier institutional crypto conference in Europe's crypto Capital London this March 2024 you're going to get to hear exclusive insights from industry Trailblazers on things like leveraging D5 protocols for institutional yield tokenizing real world assets with instant settlement navigating the evolving Global regulatory landscape

integrating digital assets into Banking and payments or crafting institutional investment mandates with digital assets as the key Focus we'll also be featuring some big keynote speakers including cluding Melvin Deng the CEO at qcp Capital Mark yuso the CEO and managing partner of Morgan Creek capital and stonnie kuchin the founder and CEO of a companies this is not an event you're going to want to miss seats are limited so be sure to register today by hitting the link in the description and using promo code 0x20 to save 20% on your tickets see you in London the land of tasty pastries and be sure to hit up Dan and I for a beer I guess let's just we can just go into the governance update that I like briefly mentioned two seconds ago about aval um which is ACP 13 Avalanche Community

proposal 13 um it's kind of a big deal it's in GitHub it's you know nothing's implemented yet it's kind of in a discussion type phase but the idea of ACP 13 is to make to remove the need to be a validator on Avalanche primary Network in order to validate subnet so today if you want to be a subnet validator which is avalanche's version of app chains you have to also already be a validator on Avalanche primary Network or C chain um today I think you you know November 13th that's about $35,000 it's 2,000 avac but at the peak of the bull market that was like 200 Grand so if you wanted to be a validator on a subnet you needed a $200,000 position in ax that drove really really in my opinion a really good fundamental

value proposition to avax you know basically you don't actually need fees you don't actually need you know a lot of the things we're talking about with salana and ethereum to be sustainable all you need is an appetite for subnets ACP 13 removes this need and removes this value proposition in favor of a little bit of an altered one so basically now anyone can go be a validator on a subnet there is no need to be a validator on Avalanche if ACP 13 gets implemented however depending on the the amount of usage that that subnet gets it'll have to pay an ongoing fee to Avalanche to Avalanche validators so you know it completely fundamentally changes avalanche's value proposition and no one is talking about it so that's I think that's pretty cool from my perspective there's also another one ACP 13 which is

Avalanche warp messaging which would give subnets and Avalanche primary Network the ability to uh communicate with each other just in a very similar way to IBC also like sleeper fact is that awm and IBC could one day actually be interoperable with each other and communication standards that work together so there's actually a lot of cool stuff going on an Avalanche land um you know technically I'm the expert in avalanche for blockb research and I cover it and I got to say over the last year there hasn't been a whole lot for me to like really to really bite into and get interested in and it seems that that's changing uh so maybe all L1 narrative is back but I was wondering what what do you guys think about ACP 13 yeah it's it's definitely really cool because the there's a couple different ways it's interesting right so one is

the from the actual just purely from the subnet perspective and like launching your version of an apch on a subnet the other one is Avalanche tokenomics as you mentioned so the tokenomics one is interesting right because there is a limited number like there's a limited total supply of a avac which is which is already pretty interesting for a proof of stake token like the madic token did the same thing um now that they're migrating to their own little uh now they're migrating to PO to kind of facilitate the staking needs of the future of the polygon World they actually re they removed the hard cap and are introducing long-term inflation because you need to kind of do that into perpetuity so it's kind of interesting that Avalanche is taking a different route there to begin with um but then if we look at fees all fee revenue on chain

goes to the validators like nothing uh there's there is a base fee but that's not like burned as it is in ethereum that that is also passed back through to the validators uh so if you're like looking for value acrel to the Token it doesn't really exist in the same sense it does uh for some of the other blockchains you may may know like ethereum and so it you already have to start thinking from a different lens when it comes to avac tokenomics and value acru and the difference that they're changing here makes I mean it makes sense right like let's say I wanted to launch my own app chain like H needing that massive barried entry is is a deterrent but at the same time it's not necessarily cheap to go spin up an app chain in a different landscape there's cool things like conduit now

that are kind of like really simplifying this and you know these other role as a service providers but if you're going to go like spin up a cosmos chain you know you have to have your own in token have your own token take a portion of your uh Supply and kind of like uh bootstrap a validator set we're just talking with Greg asseri from aosh uh because aosh SP up a cosmos chain to uh operate their their Network and he was like yeah the the ongoing inflation cost is is a drag and it's something we think very heavily about and I don't want to put words in his mouth but he was basically saying my interpretation of that was you know if we were going to go do this again like we would actually really consider not building an app a cosmos chain because like we don't necessarily want our own

token to have to bootstrap this validator set and so if you look at subnets you know today each subnet uh with validators has about between two and 10 validators today so they're definitely smaller Val validator sets by Design um it's kind of like they seem to be playing into this uh institutional angle and like hey like you know we really need these greenlet Services where you know you know who's in interacting with their chain I'm a little more on that kyc side of things um that's kind of like the direction it appears they've been going in and it kind of makes a lot of sense to continue building in this direction right like that group cohort of people probably doesn't want to have to take a 2,000 token position in aaac uh so there's another way for them to do that and pay a little bit more on the variable cost

side right so sounds to me like the new model they're they're using um kind of removes the fixed cost and introduces the variable cost so like hey if you're using a ton of our resources we're going to charge you more kind of thing so maybe it's a good way to kind of bootstrap some experiment um and it's something that they you know that this probably makes a lot of sense for them to focus on right now yeah I think the variable cost is really interesting thing to think about because if you look at like you know building on top of ethereum if you want to go build a roll up on top of ethereum you don't need to be you don't need an ethereum validator so you know that's just not a thing but what you do what you do need is to pay a ongoing fee back

to ethereum dependent on the usage that you're you know that you're that you're R Up's getting because if you have a lot of usage you're going to pay a higher data availability cost back to layer one um and settlement cost as well so like it's basically taking that ethereum and ethereum scaling model and putting it onto Avalanche and it's something I haven't thought a lot about but you know when we're were talking about arbitrum a second ago and how optimism is kind of eating their lunch a little bit with being able to attract developers I think it's something that might even you know if we see success with with Avalanche making this transition that you might even be able to apply to something like arbitrum as well in some in some shape or form one thing I don't know enough about here is like the throughput

capabilities of a subnet because if you like saying all right I'm going to go build my own little kyc chain say you're I don't know say you're black rock and you're like I want to just build a general purpose L1 but you have to verify to get on my chain um like where would you consider building that because you could think about like a an ethereum based L2 that just settles down to L2 has the bridge contract on the L1 and settles down to the L1 uh but uses like a it's like imagine of aium so it has its own centralized da layer because why would I bother paying to ethereum if I'm going to be a kyc chain anyway anyways you're already going to have to trust me and know me and it's like why I wonder what the trade-offs between like a validium on top of ethereum versus

building a subnet are like that's that's definitely uh something I'm I'm not too sure about but because when you look at these subnets you know they do have smaller validator sets like I don't know why that is like out of the box like I don't think it's a terrible thing by any means it's just it's just a different set of trade-offs yeah it's an interesting question I actually wouldn't imagine that if I'm black rock or a cohort of different you know institutional players looking to create an like I'm making this up I'm I I don't converse with these entities regularly but I would imagine that they're actually not looking towards rollups at all like that's probably the last thing that Avalanche is probably the most risky type of of you know chain that they're willing to create um they have the Evergreen framework or the Evergreen

subnet which gives Avalanche subnet creators the ability to actually like you know in a very modular and easy to set up way set up these like kyc chains um Evergreen is like a framework with different modules that already kind of support what uh institutional players might need in a chain but you know I think you know roll up we're getting more decentralized we're getting more we're getting less if we're on private to public Spectrum right so like you fully private blockchains that don't interoperate in any way with ethereum or Cosmos or anything like that you have a four validators that are all run by centralized entities and like that's kind of you know the most centralized and the most decentralized being you know public blockchain that anyone can permissionless validated permissionless to use I don't imagine that those players are really ever going to go kind

of further than an avalanche upet or avalanch Evergreen subnet but I think if Cosmos offered like an easy way to implement a cosmos chain um like Avalanche does that would fulfill kyc requirements and whatnot that now Cosmos might be a significant competitor in this market as well so you guys mentioned arbitrum there we actually got three governance updates from the arbitrum side of the world that tie in nicely together um back funding successful steps that didn't make the like I guess they did get voted yes but and they reached Quorum but they weren't in the top 50 projects so they're looking for an additional 21.4 million ARB to give to 26 more projects I believe it was 56 that didn't get an aloe so this would cover about half of them that one is voting uh live right now and should end on Tuesday the 14th

we are recording this on Monday the 13th so by the time this goes live the result will be solidified but uh what do you guys think here should we be funding this or not man I have such mixed feelings on this one um my initial thought is that probably not and I have a bunch of reasons for this a you know the original governance proposal stated that 50 million ARB was going to be the amount that we were going to allocate to incentives by January 31st for this short-term incentive program first of all like if we give 25 million more whatever a little less that kind of like goes back on our word when do we stop like okay fine are we gonna you know what about those that didn't have a chance to get in the like into the round one um you know are we GNA keep giving

out more R before January 31st or should we kind of stick to our guns and you know it's not that long it's November 13th we're talking about like two and a half months so it we could do I think it might make more sense to wait and to do another incentive round after January 31st additionally if we waited until then we'd be able to do an analysis or multiple analysis on the how well these incentive programs worked and then we'd be able to potentially utilize our better than kind of just giving it out these programs now for instance maybe we learned that gas rebates have a higher retention of users than uh L giving it to you know lending LPS or something and like that'll be very very important and valuable data to have and then finally the the entities that would get funded in this round aren't reflective

of how voters would have voted had 75 million are been allocated it kind of became this strategic game towards the end of you know you voted to get the protocols you wanted into the into that into that like you know the amount so that uh where they'd get allocated to if there was you know 50 million getting given out for instance blockworks research we only supported 50 million arban requests so we voted pure we only voted yes on those that requested 50 and had there been 75 to allocate we would have voted very differently and this is true I'm positive of all delegates so you know clearly there's a ton of problems with doing it this way but one thing to note is you know if we ran a short-term incentive program roundout two right now likely it would be pretty random results as well I don't think

that these protocols have like worse incentive programs than the ones that did get funded or the ones that would get funded in a subsequent round so it's like it's kind of just random anyways who got funds and who didn't I'm not random but maybe not based fully on uh like qualitative analysis of which ones were the best programs so it's not like these ones are maybe worse than the ones that did get funded so it's really all about like okay do we think that we should up at the 75 million because there was so much appetite because like so many protocols wanted incentives which I actually think is valid you know I think some delegates probably wanted 75 million to start and that that doesn't change now so you know it's a tough one that's really interesting Matt you've been very boots on the ground um

with this with this whole process here and and I think maybe the reason that it was a bit challenging has a lot to do with just like the format that that was in right you know I was listening to an arbitrum uh uh space today that on the Twitter space that was exactly about this topic and just hearing other people express the same issues that you had when you're going through all these stps was you had to give like 15 20 minutes to each stip and there was 100 plus stps and so it's like maybe the system was a little bit broken and so it's like there's like a multiple compounding issues here and so now when you're trying to think about like how do you back fund these things I don't know like I I don't I definitely don't have a good answer here on on yes

or no um as it pertains this at the end of the day it's 20 million tokens and the grand scheme of things that's a relatively small number uh but one thing that is worth noting is since the start of the year or since the token generation event uh between the Dow Treasury and the foundation activity there's been about an 11% increase in circulating Supply um and that's in over the course of about eight or eight or so months since a token generation event that's like one thing that the community should probably keep in mind is like you know when you're emitting tokens from a dow treasury that is new Supply hitting the market um and that's not necessarily a bad thing that's you know getting the treasury in the hands of the to uh Community is largely a good thing especially these are like pretty Builder

focused incentives and I tend to think that's probably a better way to go about this than just like you know per se maybe like a airdrop round two or something like that um so I just that's what I would say is like just you know keep in the back of your head like you are emitting new tokens and so you really have to weigh out the the value of of doing this and I T to think like getting in the hands of the builders is yeah like I said is probably a good strategy there's a bit of a crazy conversation going on there is a grant funded by one of arbitrum Grants programs plurality labs to do a budget basically create a budget for how much ARB can we spend without having big price impact on the token and I forget the exact number but the you know

initial report from this what seemed to me like a very rudimentary analysis was that you know basically you could Adit another hundred something million R by the end of the year and not have it impact the pricing and this was purely based on order book depth which I don't think takes into account other things that you know could have impact on um like you know flows and and siment among the market of you know just the idea of this of having more tokens emitted but uh yeah it is interesting that that they did you know there is this grant outstanding to create budget and that the budget's basically saying that you know we can emit tons more tokens and it won't be a problem that basically be like doubling or so the amount of total Supply that's hit the market since token generation and I don't necessarily think

that on a sense and that's like 20 20% inflation a year and again this isn't like a token trying to make money so inflation is probably not even the best word there it's just like Supply growth um but you know when you are emitting new tokens you do need net new net new buyers uh that's just something to consider and I haven't seen this analysis so I don't really know what their their framework was or process was there but again yeah that'd be going from about 11 or so% inflation to something closer to 20 um I don't I I don't know I don't know I wouldn't necessarily feel com comble just throwing another 100 million tokens out the window yeah I would agree with everything you guys just said and just Echo the same points um onto the other one which kind of is tied into it one

inch is uh voting to sell the original ARB aird drop that they got for usdc and then Bridge it back to ethereum uh the vote closes on the 18th and the yes is winning big time right now and quorum's practically reached not a ton to say on this one other than the fact that I do believe most of these tokens ultimately get sold don't get benefits to the actual L2 like I mean come on they're bridging back to ethereum like it just seems pretty ridiculous to me I don't know if you guys have any thoughts on it I mean this is exactly kind of what my point was earlier when I said you have to just like think about the the impact that you're you're creating when you're issuing new tokens and generally giving them in the hands of the Builder is seems to be a better way than just like

maybe an airdrop um but not if they just turn around and sell them so I don't know I think they said this could be a manual sell so I don't know if they'll do some OTC transactions try to minimize their price impact and again they are a DEX aggregator so maybe they have their own uh they use their own routing technology but uh that's yeah like you just got to measure the value of what you're getting in return until like not to go back to the stips one but yeah I think it makes sense to like I don't necessarily think there's a rush here I I would have to like really hear out the argument for why there would be need to be a rush to kind of like Mass do this in Mass really quickly um but I don't necessarily think this a rusher so i'

I'd rather like take do some analysis around the quality of of the impact of of this tip so like for example GMX fees were off the charts for uh you know the initial first couple days when the incentives went live like let's look at those token holders like are they what are they doing with the ARB incentives that they're getting after they trade with these things are they just turning around and Market dumping them because if so like what is that ultimately doing for AR which I'm like it's Progressive decentralization for sure but with new issuance and if it just turns around and hits the open market and hits the order books it's like what was the net benefit there like I don't know I think you like need to focus on community building and driving long-term staying power really more so than just like some of these

short-term plays yeah I think the key words here are opportunistic capital like money that's just going to come farm and then leave versus getting sticky liquidity and sticky brain power um I think we actually say it in our arbitrum delegate platform but there are times when incentive programs and and liquidity farming can be worthwhile Endeavors but generally speaking most of the time at least from my perspective um you know they negative EV Endeavors you're spending more value than you're actually getting so I have strong agree like you know not huge fan of incentives in general unless they're really really well thought out that said arbitrum is kind of you know in my opinion Best Tex stack many L2 today highest tvl it's you know well positioned but they're having a tough time attracting developers and I

think a lot of very astute people kind of see that uh you know arbitrum like struggling in some regards and because of this it makes sense for the Dow to be taking big swings and swing for the fences and really do things that you know are high risk high potential reward um incentive programs aren't necessarily what I would look towards for that but I do think it's important to the Dow do like really you know try to do things that set it apart from other rollups today before uh it's too late yeah I totally agree with you there Matt the only other thing I'd add is like I think there is also real value in building Goodwill with some of the builders right so using and going back to the GMX example um you know they played a very pivotal role in the early days of

arbitrum and so now that they're getting a they got a large dip and they're seeing like very increased fees uh because of the increased activity around the ARB incentives they've gotten that they're utilizing and it's like if you create an uh like a comfortable and exciting place for Builders to go then like you are going to attract those new wave of Builders and like that is definitely going to be a competition between the l2s of you know who gets the best Builders to create the best apps to then attract in the the uh the next wave of users so it does make sense why these incentive programs exist it's just doing so like increasing the efficiency of them I think is ultimately the goal here yeah I think it's going to be like a long road until we actually know the optimal way to design a token use it to

incentivize you users and stuff but that's kind of what makes this space so fun right now is we're all just kind of figuring it out as we go all right my internet's pretty shitty and we're running up on an hour and 10 minutes so I'm going to speed race through these last three governance updates all related to inflation in some ways that's kind of the theme of today but uh Adam is looking to cut the max staking yield from 20% down to 10% and then we also have shout out Westy for pointing this one out he saw a conversation in the Discord which is also available on gov Hub on blockworks research.com little self plug but uh basically uh proposal to remove snx inflation entirely with the current inflation rate at 5% annualized this mixed with Bas V3 synthetics deployment could be a pretty

large Catalyst and then on top of that you've got 30 million op up for grabs with retro pgf round three and obviously synthetics is likely to get an allocation and then we also have reduced inflation in some way not really reduced but more relocated for dydx their beta just went live so you can actually trade uh on dydx chain which is super exciting Matt I know you're going to love that um and then uh they're also migrating incentives from dydx uh V3 on starx over to dydx Chain by winding down those incentives from EPO 30 to 32 and then of course reallocating them to dyx chain in hopes of migrating user activity over there DX is the one that stands out to me I am keeping a very close eye I think

the first trade occurred this morning so fees should be you know technically speaking going back to going back to validators and dydx token stakers today there is a chance that there is zoomi APR on staking dydx for the first couple days first couple weeks first couple of months even um so it's something that I'm keeping a close eye it sucks because I told myself I was going to buy a large spot bag of It kind of to hold forever I actually like there's very few coins that I I count on one hand how many coins that I'd actually want like you know long-term exposure to and the idx is actually one of them and I'm kind of you know hitting my myself as it goes through $3 and I was telling myself that under $2 but you know you can't win them all um I would keep a close eye on the

trading volume there's a ton of incentives going to Traders there's a ton of new pairs that could get volume and uh not a lot of dydx staked thus far only thing I have to add there is Sam you just mentioned three protocols that are thinking deeply about inflation so maybe it is a cost after all but I'll leave you with that thanks again for this excellent uh thanks again for this excellent episode guys be sure to give G to follow on Twitter uh we'll put his Twitter in the show notes follow light spe it's an incredible podcast again has a little bit of a salon Le so it's really excited to kind of get it a little bit deeper into the things going on in that ecosystem as well uh thanks again guys and we will see you next week hey everyone thanks so much for tuning

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