Talking Avalanche with Luigi

Transcript

look it's no secret that crypto uh there's been a hostile environment to crypto in the United States um I don't think that's a outlandishly uh controversial statement so um that you know to the extent that that has a rate of change that's positive for the industry I think it's going to have a very very profound impact I'm laughing at all the Strategic Reserve uh Bitcoin stuff because this is like what people talked about in 2011 you know like but government going to buy our Bitcoin one day well it took a while but like 13 years later this is actual conversation it's like pretty crazy so um it's always kind of funny how early we actually are a lot of times this

episode is sponsored by scale scale has differentiated itself from other layer ones by offering users a network of gas-free interoperable evml ones where the user experience comes first explore the gas free ecosystem at scale. spaceco and follow their Journey on X at scale Network to learn more about the gasf free architecture and growth of the scale ecosystem visit the scale research Hub at scale. space resesarch Kos Labs the leading onchain risk management firm recently launched its new flagship oracal product Edge Edge delivers integrated High Precision risk and price data for any application with the market follow and reach out to chaos Labs on X to learn more hey everyone today's episode is sponsored by glyph glyph is f coins foundational defi primitive

enabling filecoin holders to earn rewards on their fill tokens by lending them to a diverse pool of filecoin miners got Phill deposit it with file coins first in most popular defi protocol by visiting glyph doio today nothing said on zerox Research is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial advice pachio Ryan and our guest May hold positions in the company's funds or projects discussed what's up guys welcome back to another episode of ZX research I'm joined by Luigi who's the COO at aval ABS as well as Ryan Connor from the blockworks research team and effort capital from blockworks advisory

thanks for coming on Luigi awesome thank you for having me um I guess just to get us started Avalanche has gone through kind of a shift over the past few years I think um there's more of a focus on modularity and making the C chain a hub with surrounding l1s do you kind of want to talk about the thought process behind that and what you guys uh want to achieve sure um yeah I think I I think the question the framing of the question is interesting uh you know Avalanche is always I think from the initial white paper you know had the concepts of subnets he was always going to go after multi- multi-chain architecture I think from like a goto Market perspective uh it started with the c chain right if you

actually really think about it what it started with was the primary Network which was three uh chains with different virtual machines right you have the pchain U where validation occurs you have the xchain um you know where you can have exchange that's a utxo based chain the C chain which is evm based uh at the time when the C chain launched uh there were no l2s uh so uh if you wanted a fast cheap evm I think your options were really polygon and Avalanche for the most part um and I think you know Avalanche had a lot of succcess with the c chain because it had a great user experience fast finality felt good on an evm um that was something that didn't

exist at the time so you know I think from like a go to market perspective that was a really strong way to sort of do opposite uh in some ways of what Cosmos did right start with the Hub then go multichain um and you know in doing that you kind of already have a chain that everybody could leverage with exchange Integrations oracles um liquidity uh applications Builders Etc Etc so that's kind that was kind of the thought process um you know we launched I think the first what was you know previously called subnets is now called Avalanche l1s uh right after our first Avalanche Summit that was dfk uh defi kingdoms which is formerly on Harmony I

think that was 2022 if I remember correctly um and today there are about 40 40 subnets uh in production on mainnet um and uh I think almost 200 on test net uh you know we obviously have a new upgrade coming I'm sure we'll get into that as well which will make the cost of launching These Chains much cheaper and should play into the story of uh of uh of adoption for Avalanche El once perfect I'm happy um you brought up Cosmos because one thing I've been wondering is what what you would say is the competitive advantage that Avalanche has compared to other Hub style um blockchains it's a good question um you know there there's few important

differences between Avalanche and Cosmos uh they have two completely different consensus mechanisms for sure um uh Cosmos as well uh started non evm um more of a wasm based uh SDK uh Avalanche is VM agnostic uh so it start with the evm um we've seen folks uh experiment with the move virtual machine um internally we're building something called the hyp SDK which is uh uh completely abstract abstracted from the evm so I think there's differences there as well I think there's also just a cultural difference uh in a lot of ways like Avalanche brings you know I think a much more business-minded Focus to to

building um a network right it's uh focused on Enterprises as well as uh you know native startups and web 3 um it also in a lot of ways um you know has built several different pieces of infrastructure and tooling to have people launch chains easily like avoc Cloud for example um so I think it's just T taken a different approach to scaling the network in addition like from a technical perspective uh the communication layer is completely different uh Avalanche has like interchain communication um ICM which is different than IBC uh it in a lot of ways allows for I think faster uh cross chain communication and a lot less overhead

right uh and Cosmos I think every single um every single node needs to maintain every single state transition across every single zone uh that's not the same in avalanche that's all maintained by the P chain uh indirectly so there's some architectural differences there's cultural differences um and you know I think uh I think like you'll kind of see this across a lot of things U there'll be competitive market yeah I would love to jump in here as like a historically speaking cosm Maxi uh I think I said this a while ago actually uh when I did my own analysis of ACP 77 I think Avalanche is taking a lot of best practices and Lessons Learned From

like the cosmos and polka dots of the world um success is predominantly path dependent so yes Cosmos has an interoperability interoperability standard and a hub such does Avalanche the problem is that for the Hub at least uh and I think Polkka there's some parallels which I'll get into in a second um the interoperability standard of the cosmos ecosystem which is IBC found product Market fit before the cosmos Hub actually had services to offer the growth of its L1 like ecosystem so what ended up happening was like IBC found you know gain adoption but the cosmos H was just sitting there and not really uh I guess finding success off of the back

of the things that it funded um polka dot ready like polka dot chose the wrong go to market strategy for their app chain infrastructure um if everyone remembers when power chains launched it required chains that wanted to leverage the shared security network of of the relay chain to put up massive sums of money predominantly the users uh to pretty much uh bid to say like yes I believe power chain a deserves to to get this you know shared security features of the relay chain and which like a high opportunity cost of capital to like launch a a powerchain uh Avalanche is taking a different approach the C chain is a liquidity Hub already it is a smarter uh smart contract capable um smart Contracting platform um and now

it's able to already have this product Market fit in the ecosystem and like a center spot in the ecosystem while uh awm I think there's a different accur now Luigi my apologies on that but now you have an interoperability standard that is launching and growing in tandem with the growth of its L1 ecosystem and on top of that to take lessons Lear from the polka dot ecosystem instead of high upfront you know cost to Launch one ACP 77 which we'll get into later I'm sure uh really drops that to be more of like a pay as you go or like on demand pricing structure uh for launching your L1 so yeah overall I think that there's a lot of parallels but I think Avalanche is probably doing it right perfect I um I guess Luigi you mentioned that

there are 40 l1s on Main net and 200 l1s on test net what type of relationship do you guys have with the l1s and how much support do you offer them is it um kind of handholding or do you just give them the tools and say figure it out yeah no I don't think we're uh we're we're much less the figure it out uh Team we definitely handhold a lot of teams I will say like the handholding was a lot was a lot stronger in the beginning um we haven't had to do that as much right like as new as new tools come come online as you know there's good use cases to demonstrate as there's better documentation as resources like the Avalanche academy uh or the Avalanche CLI uh launching These Chains

is becoming easier and easier for folks um with that said like if you ever want to play in an Enterprise or institutional game there's no world where it's just go use it like that's not going to happen there's a reason Linux you know needed a red hat to be successful um you know in the early days of Wall Street there's a reason that that happened and it's going to be no different for blockchain I've spoken to million uh financial institutions Enterprises corporate I'm sorry consumer Enterprises Etc like most those people they don't want to be the the person at that at that uh at that company that makes a decision gets in trouble because they made a decision has nobody to call

wants somebody to call um and you know we we've set up ourselves to be able to provide that service uh in a lot of ways and I think that is a you know just a pragmatic go to market strategy frankly um and so yeah we we definitely we definitely hold hands but what we want to see happen with after ACP 77 is we want to see more of the uh you know do-it-yourselfers right the DIY Builders who launch their own chains um you know we are now I don't think anybody knows this but permissionless chains weren't possible on Avalanche until after this upgrade um so it's like a market that was just never available to Avalanche until after this so you know we want to

see a lot more of that we want to see a lot of validators we want to see people experimenting um you know I I think before before uh this upgrade Cosmos was your only choice um for permissionless chain um that was an evm perfect uh you brought up ACP 77 which something that I definitely want to talk about so um with ACP 77 which hasn't gone into effect yet as far as I understand then the proposal is to switch from a staking model to a pay as you go model what's the reasoning behind this and what do you foresee will happen yeah there's a few different things let me let me start

from the very beginning um you know I think the community took a bunch of feedback in internalized it and like this is the output uh the feedback was basically a few things one uh 2,000 avac per node uh was pretty prohibitive in terms of launching a chain especially on the permission side right because they tend to basically run a lot of their nodes themselves or have a consortion based model and that you know that's quite expensive in dollars and also a lot of them can't hold crypto in their balance sheets at all anyway um so from that perspective uh you know and I think this is something we knew for a while it was a matter of getting the right the right plan um that was prohibitive to people launching chains in addition uh having to also validate the primary

network was something that was also prohibitive right because some institutions didn't want to validate the C chain uh in order to launch their chains so also introduces more cost to run additional Hardware so these are things that I think were pragmatic steps to take um that uh if you look back at the time period where Avalanche was conceived much more in the power chain World um you know it kind of sat in the middle of Cosmos polkadot from like an architectural standpoint and you know what these thing what these steps an ACP 77 what's formally called like the etno or 9000 upgrade uh is basically a few different things one you no longer have to validate the primary network two if

you do want to launch nl1 you want to validate it you pay a small fee to the pchain um on a continuous model pay as you go uh you still have the option to do the original staking model so if you hold a lot of avac you could still stake it and run a node uh so that's important for people to know and the last piece that's really interesting is that this C chain base fee will be going down to oneu uh that'll make it basically the same cost as like a polygon or an arbitrum um except for the fact that you know Avalanche does have around 1500 notes U so decentralized cheap evm based chain um will be a really strong Hub in my opinion so those are I think the key components of the upgrade um I think it's really important plus the fact that

you can launch a permissionless chain now um what I think is really important is that for the network this model is much more sustainable um you know Avalanche as a community can benefit from l1s that launch on it this has obviously been an issue for Cosmos forever um super chain is trying to deal with this in different ways as well with their like revshare um uh sort of model um other other ecosystems have no idea how to grasp with it uh and it is a challenge I will say like that make no I don't want to mince words about it like it's you want to really find the balance of enabling uh while not you know prohibiting

adoption so I think there's a few different uh uh things to consider there um and what I would also just add is that in a world where we have uh thousands of l1s on Avalanche U that are interoperating with each other using the native communication that are using the C chain um I think this model uh is one that provides enough uh and a lot frankly um of actual um symbiotic rewards for the entire network perfect I um both me and efford capital wrote A

little about ACP 77 and so looking into it I did see that it makes it first of all very cheap to launch um l1s uh performance l1s um one thing is that Revenue generation would not be as good as it is under the staking model um and I guess the Counterpoint to that is that we're going to get thousands of l1s which is fair how do you get there um what does the go to market look like and what's your main focus to achieve that yeah great question um there's there's actually it's also interesting right like the staking model is staking right it's not sell it's not burning uh so you

you know you also can't equate it one for one um because in the pay you go model these fees are simply burnt um so I think in terms of the go to market we have a number of different programs and initiatives that we're rolling out um one is them one of them is the Retro 9000 program and that is uh up to $40 million in retroactive grants for uh teams yeah it's a quite large program for teams that build uh l1s on avalanche on the what we're calling the incentivized test net so when this Launches on Fuji uh I can give a little Alpha quite soon really soon um we will we have a actual platform a social platform where Builders will come uh

they they will be social about what they're building they'll talk about it the community can upvote them uh so it's a little bit different than the way optimism does their retroactive program here there will be uh Community engagement in that um and uh what's also exciting is that um you know we sort of have this opportunity to learn a lot about different things that people do like if you want to build let's say you want to build a new staking contract uh you want to write a new staking contract U that's infra open source that everybody can use that's something super eligible for a retroactive Grant or if you want to you know if you're in the market for building your own chain you should come and do this on the Retro 9000 platform or the incentivized test net during this time period get started

when you Deploy on Main net you'll receive retroactive Grant um so I think that there's a really good case for folks to sort of um uh if they're in the market for a change to kind of use this platform uh on top of that that's only one route to the go to market we on the BD side have a very strong pipeline uh internally of different teams that you know are and have been waiting for this upgrade to launch um I actually talked to a team yesterday that is looking to launch with 1,000 plus validators um on day one uh that was surprising to me but uh I think there's I I do think there's going to be a little bit of a shift in this industry from one that went from not needing validators to one that

actually does care about the sort of um sort of the number of participants especially in industries that really want to engage a community like gaming uh I think it's a really good use case for that so I think the go to market involves robust pipeline 9000 platform um all the efforts we're doing on the developer relations side as well and all the efforts on the BD side as well so uh yeah I think that that's sort of how we plan to attack getting a bunch of l1s on on market and one thing as well is like to keep in mind is at the same time the Cain base fee will be going down and so you know we're really kind of making we really feel good about the tech technology uh the state of the

technology the robustness of it and it's time to kind of you know kind of floor it is my view yeah Luigi just to like go back to the C chain um in this like post ACP 77 post ACP 125 world we talked about it like being the Hub uh for the Avalanche ecosystem do you see it as like an incubator for chain for for teams like launch an launch a smart contract um you know base application first uh hit certain amount of product Market fit and then spin off and go Montreal one because I've had conversations with other app chain um Tech St providers or or ecosystems whatever you want to call them and some of them just think that

their Hub is just like a liquidity Hub but they're like but we just we want people to launch their l1's first and we don't actually necessarily care if they launch their application on our Hub which I I personally think is like the wrong go to market strategy I think it's like no you want you still want not just liquidity on on this Hub you still do want them to like you want entrepreneurs to enter your ecosystem through this SE chain for example like is that the approach you guys are taking or do do you think like just grow the Alan ecosystem the SE chain we'll we'll figure out uh no um that is decidedly not the the way we talk to teams um there are certain conditions where you should have your own L1 uh depending on you know whether or not you have uh any

regulatory requirements that you want to sort of um block out if you're you know more on the Enterprise side if they count abstraction that you want to build is super important to you there's most of it could be done in the C chain but some of it is unique to your own L1 like gasless chains and stuff like that um but we always tell teams that if you're just getting started out um it's unlikely that starting out directly on an L1 with no product Market fit makes a ton of sense um now I will I will preface this with saying that it's getting much and much much cheaper to launching your own chain um right like I think a lot of providers out there like 3K a month and stuff like that um so I wouldn't say it's like a crazy cost but

you know uh it is maintaining your own chain is not deploying a smart contract this is a different effort um so we think it's incredibly important to have a public permissionless chain right to get you know to onboard people right it's top of the funnel uh deployer smart contracts here start to get adoption we already have a community for you to start to test out your applications and sort of get product Market fit when you do we can graduate you to subnet evm right launch a quick evm super easy let's say you sort of uh you know maybe you get to a gonzilla or Off the Grid stage and you know you're really cranking out a lot of transactions well now we're going to bring the hyp SDK off

the shelf for you something that we hope will deliver to you know to the tune of 100,000 transactions per second so we're really building this in a way where we can walk somebody through the entire life cycle of their growth um and be the infrastructure Provider from from day one till you know till they're one of the most successful applications in the world so that's really the vision of it um I will say like the C chain going forward will be a much larger Focus um we really needed to get out this upgrade we really needed to make avalancha ones as competitive as possible and I think you know we're now at the point where we can delivered not only simple uh upgrades

like a Bas fee reduction but actual true optimizations that we've been researching for years yeah just to one more thing picachio uh going back to like to launch your own L1 it's not just like the infrastructure maintenance right like I know there was like a large pretty um controversial tweet I think Andre cron posted not too long ago where you like listed the costs of like running your own L1 or L2 it's like not just the the backend infrastru structure it's oracles uh getting your own Oracle uh your own stable coin rpc's indexing your own data dashboards Keepers explorers uh custody like there's a whole go to market and like distribution side of like launch your own L1 so um

maybe you later on the conversation or we can take this offline like we love to learn how you guys are thinking about that from like how C chain can actually enable that as well for other l1s well one thing I'll just add there is I think part of that I think that's like somewhat true but mainly for like general purpose chains uh if it's not a general purpose chain I don't think you need all that infra most of it you don't need frankly especially the expensive Parts you don't need exchange Integrations you don't need oracles all that stuff can be pulled directly from the C chain stable coins you don't need you can pull it directly from the C chain so I don't think you I don't think you need all that stuff unless you're trying to be like block Works chain general purpose chain you know like soon

soon I know it's coming I'm sure it's coming everybody's got chain you're next right I'm kidding no rumors no rumors but uh yeah so that that's how I would answer that fantastic I'm glad we brought up the C chain because one of my big worries is that you guys are going to forget about the C chain and I loved Avalanche last cycle um and this cycle one thing that I want to ask is how you're thinking of improving activity there apart from ACP 125 um which reduces the base fee what are some I guess how are you to compete with um Solana which is the big one this year ethereum which has historically been very dominant what are your ecosystem if

it's going to look like that's a great question and and and it's becoming more and more challenging uh in the general purpose space to to to compete um you know you have chains that if that's all they have as one chain there's a lot they're willing to do uh to incentivize activity for it um at the same time like I think part of our story that's really going to be compelling is the fact that the C chain feeds the l1s but the l1's feed the C chain back that is part of the story um you know somebody launches a permission L1 not every single one of them is going to put a DEX on that chain um not every single one of them is going

to you know have an on-ramp directly to that chain they're going to use the C chain for that in order for that to happen though the C chain needs to be cheap if it's not cheap then it's a terrible uh right and I think that's the problem for ethereum it's slow and it's expensive that's a bad Hub right because you know you can't actually route things through it if I'm paying like a tenth of a penny on the L2 but then I have to pay you know 10 bucks on the L1 to get to the other L2 I know that's not how communication Works across l2s but if it was that would not be ideal um so I think for us it has to be cheap now in terms of competing we have um we have a few different programs lined up for the

seat chain in particular uh I can't really get into too much detail about them because they're not public um but there are a few different efforts that in my opinion will be quite um I think they're Innovative and I think we'll probably see every chain have what we're going to do uh soon after uh stuff that's been in the works for a few years frankly so I'm excited about some of the programs we plan to to use to get adoption for the C chain um you know I don't think you can do the you know go after a specific vertical only for for a chain type thing I don't think that works and you know for a lot of

Builders uh especially in defi it doesn't really make sense to deploy on one chain like it's like saying you're only going to have McDonald's in you know one town it's going to be quite tough to do right you have to compete uh where the competition is where the liquidity is where everything is um so it's incumbent upon us uh as a community to actually build liquidity fee generation economic activity on the Chain such that everybody needs to be there and for me that's one some of the programs we're going to launch but two uh making sure that the l1s become and feed the C chain as well uh if the l1s never SE feed the C chain at all that will make it much harder for the SE

chain to be successful and have its own unique story so you said you you didn't want to cater to specific verticals right but like one empirically what I mean by that is that c chain won't be like the gaming chain only like yeah that's what I guess I guess framing then around like go to market and and who to Target and you know what's hot what's not like I think objectively one thing that's worked very very well um whether or not the these teams like it is like dgen activity doing silly stuff on Shane as many of our analysts like to say um that's certainly been the story of this cycle the overwhelming and dominant theme of

this cycle is meme coin trading um last cycle maybe like the number two narrative was nfts I still think like defi activity overwhelmed but even that was like very dgen in nature um you mentioned Enterprise earlier uh you have a very um popular game that's taking off on Avalanche so like it seems that there's a different direction but I don't know like what do you guys think about that um D gen activity in the Avalanche network is it relevant is it not oh I mean it's incredibly relevant um it's it's it's why I'm in the space uh I find it incredibly fun um I think a lot of people forget in 21 Avalanche is

probably one of the most dgen chains out there um like we had we had Wonderland up um which you know if you think meme coins is D gen I think having a Lambo calculator is probably a little bit more um right this smarter coin like there was this crazy stuff back then and you know a lot of that stuff is uh um you know it's a moment in time right d gen activity can't happen everywhere all the time uh it has to be the right conditions for it to occur the right wealth effect needs to be happening Etc I think with salana what you're seeing in the memec coin stuff is a lot of it's the result of some of the airdrop activity pre previous to that there's a

wealth effect to that right there was new applications that launched airdrop tokens that created value for users those users reinvest that value and you kind of go on and on now what I will say about dgen activity what you have to be really careful about is uh you also tend to have a a large Exodus of capital um when you have these very unsustainable sort of activity right um pump. fun is collecting how many fees if they don't redistribute that that's money leaving the system all the time um and you know when you have these zero some games on the D gen world where some win others lose that's the only way it happens um you know that tends to have a a life

cycle that ends right at some point in time so you need to be really careful um you know in spearheading an ecosystem that benefits from those activities but isn't completely reliant on them right um I think it's really fun to see you know when I think about like um Revenue to a chain or fee generation for a chain if you go look at most chains all their fee generation happens in like a month a year and the rest of the year is like flat um that happens for a lot of chains and that's because these things are episodic um you want to be able to capture that when it's occurring I think salana is doing a good job of that they've you know clearly been

engineering their one chain for a long time and been focused on it they're really trying to figure out the local fee Market stuff um because I think that that is very important to their success um and so you need to make sure you put yourself in a position where you can capture the episodic volume when it occurs but that you're not reliant on it um if you are you will just do the classic crypto cry tree hey everyone we'd like to give a special shout out to the sponsors of today's episode scale scale is built different unlike other layer ones scale is offering users a network of gas-free interoperable evml ons where user experience comes first scale operates like the AWS

infrastructure model where developers pay for space in the network in skl tokens to validators essentially scale has chain fees and not gas fees this allows for free transactions on scale and has saved 46 million users over 9 billion in gas fees explore the gas free ecosystem at scale. Spacey and follow their Journey on X at scale Network visit the scale research Hub to learn more about the gas free architecture and growth of the ecosystem that's scale. space SL research chaos Labs the leading onchain risk management firm recently launched its new flagship Oracle product Edge Edge delivers integrated High Precision risk and price data for any application with the market after 2 months of security Jupiter Edge has already secured 30 billion in volume

and more than 60% of all Salon of per volume edges com comprised of three components High Precision price data with an integrated risk engine automated delivery of real-time parameter adjustments on chain and secure delivery of custom data points via zero knowledge proofs follow and reach out to chaos Labs on X to learn more thanks again to chaos labs for sponsoring today's episode quick shout out to the sponsors of today's episode glyph glyph is FAL coin's foundational defi primitive enabling filecoin holders to earn rewards on their fill tokens by lending them to a diverse pool of filecoin miners similar to lsts like Li Oro glyph solves a major cap inefficiency for filecoin glyph currently has over 19 million Phill deposited and over 150 million Phill in total volume and is backed by the filecoin fation multicoin

capital and more got Phil deposited with file coins first and most popular defi protocol by visiting glyph doio today thanks again to glyph for sponsoring today's episode just give like a quick little shill so like block BRS advisory recently did like a a deeper analysis into ACP 125 and just add some more context to it it's pretty much cutting already said it Luigi but like recap it it's cutting the base fee on the C chain from 25 Nano avox to one Nano avox it's like a 96% fee reduction um a lot of chains l1's l2s arbitrum polygon base is already going through this right now a lot of them have gone through like either the real or thought exercise on um increasing gas limit lowering base

fee like what should we do um I've never seen someone in the space actually do an economic analysis or uh pretty much a composition analysis saying like if we do this or pre Bas fee decrease or increase and post Bas fee increase or decrease like what actually happens to the chain what kind of high value transactions or low value applications how are they impacted so what we ended up doing was um pretty much modeling out compared comparing optimism um pre 4844 and post 4844 because that was effectively a a base fee decrease um because it obviously lowered the overall like user uh transaction fees on on optimism and we all right like here's how the economic activity composition changed um

meme coins went up defi went up certain verticals saw increase in transactions and certain ones saw lower uh transactions and overall like gas consumption and active addressing what have you um so what we did was we took like optimism because had a very relatively similar um application uh composition makeup to to the C chain and what we did was we predicted like what actually happens if the decreases its base fee what we found is like going back to DJ activi is like we we think we're predicting meme coins are going to go up like 40 to 80% uh with this with this decrease the the caveat to that is also Finance like defi we think is going to see like a growth story we think meme

coins are going to see a growth story The the problem is that even with this uh net increase in transactions you're still lowering the base fee by 96% right so we still think like overall transaction fee revenue for the C chain um is going to decrease by like a wide margin like 85 90% um which is something that is really indicative of like needing to get more entrepreneurs to launch on uh the C chain and have like a handful of champion applications that really Drive net new users net new liquidity and use you know overall um I think attention to the C chain so I I you know just calling that out but I thought it was like a really interesting analysis because I I think other l1's and l2s that go through this thought

exercise in the future like use this as a reference point um yeah well one thing one thing to add there is like remember we're lowering the base fee right so base fee stays at the base fee so long as you know that Target gas is met once it's exceeded Bas fee goes up uh so any episodic uh very high Activity Days moments months Etc will still generate very large amounts of Revenue and this fee reduction really won't impact that at all what it does impact is at times where the demand for the chain is U basically uh being met by what the

target gas is that fee will be lower and so uh what's really nice about that in my opinion is that it enables and allows for a lot other use cases that are um that that wouldn't otherwise consider a public permissionless chain general purpose chain that would have to go their own chain um but at the end of the day like if there's really really high value activity on the Chain happening there will be a lot of fee generation so it's a matter of getting that yeah I mean you're 100% right right like pre- Bull Run salana base fee was about um I I think I looked earlier was about 50 or

60% or even larger than that actually of overall fee generation for salana post B run now it's like down to um I think sub 10% like 90% plus of the feed generation for salana is through priority fees and mostly uh goto MV you know GTO bids uh to get inclusion in the block so of avalanche's fee generation was inscriptions right right I mean just a moment in time where people were willing to pay a ton of money for Block Base disproportionately uh more than on an average day just that's why I feel like that model uh for fee generation it's what the Market's excited about today it's not a very sustainable model um right I

think applications will will actually over time reduce the amount of leakage that's happening um by that type of activity um because that that's that's a cost born to the user um directly and so I I just I don't think there's a world like I like I think when people thought about that exciting moment for E def back in the day eth1 defi we all knew it was probably not super sustainable um right every time there was activity fee went straight up to a part where nobody wanted to pay for it um I think this is also the same like it's not super sustainable uh you will have the fee leakage and so um you know we need to uh we need to sort of you need to find the

balance and I do think what the what the new model does is it actually does find them uh right we have value acral for all the l1s that are launching on Avalanche right uh and that's a more sustainable uh uh base and and floor and then there's sort of like the more volatile type uh fee generation which is more um you know uh that that's your high ceiling stuff so yeah just to uh jump in the the salana base fee is actually less than a half a percentage point of total overall total revenue at this point I was GNA say 1% when you were guessing half of % and um so so that's pretty interesting I I don't know much about um Mev on

Avalanche um what does that look like is there a growing ecosystem there today how do you guys think about that type of value capture I think it's I I think the Mev ecos you know it's quite similar to most evm based chains uh we don't there isn't a strong culture of um like the flash Bots type of stuff um on Avalanche uh so a lot of it is just directly uh sort of absorbed um from the from the the the fee payers um yeah I don't have a lot to add there there's not really a very it's not much dissimilar to most evm chains from that standpoint I think

the me pole has some different designs Etc but nothing crazy could I could ask a quick question on on interop in like narrative um sure interesting thing about interop um is that like if we go back to that Cosmos Hub example um the common like Trope of why you like you know things aren't going well on Adam is there there's not a unified narrative there's too many tokens and it's because they like chose this like interrupt first um like go to market or um design choice and we're even seeing that in like the app ecosystem now where you see

like helium for example like they're kind of walking back this like multi this multi- token dpin thing so I'm wondering like I don't know am I just like finding two examples where like intera actually comes back to buy you or um like will interrupt suffer from this like narrative challenge going forward uh I think as a as a first principle uh you never want to build infrastructure um that provides less choice to users um simply to gate uh parts of your infrastructure that weaknesses you want to be really careful about this it's not sustainable

um so people are going to want to move across chains that's always going to become a thing I don't see a world where that doesn't happen you want to enable them to do that you want to enable them to do that as fast as cheap as possible um I think this industry is really excited about the fact that there are some numbers to point to finally and they're probably getting a little bit too excited about that like on the revenue side um because at the end of the day like this is an adoption game and we're much more in the adoption phase than we are in uh you know Amazon 15 years after it started so I think it's important to keep that perspective continuously because if you do drop your um drop your guard down start focusing

on you a cruel only uh the new competitor will take you out very quick very quick and swiftly um this is very much a low friction game so uh it's easy for people to Port the chains it's easy for people to move if you let them do that they will um so I think in terms of the specific question around interrup ability uh I don't see I don't see it as a narrative problem I think a lot of people um equate uh the atom token price with the success of Cosmos uh or lack thereof and I think that that's a problem like I

don't think that's really how that that if you really started from day one and looked at how that ecosystem was designed you should have never used adom as a proxy for the success of that ecosystem they there is no it's not it's not a good proxy for the success for it um doesn't ACR much value from people using the s or the interrup at all uh so um I I think what happened in Cosmos is a lot of people invented a lot of narratives for why Adam didn't do well versus why Cosmos didn't do well um you know like I all I always hear The Narrative of uh High inflationary tokens is why having validators is bad that's not true um those were chains that had

no product Market fit launching their own chain right so and the they basically inflated more tokens and more inflation than demand existed no different than a lot of the early gaming uh apps in crypto uh no different than a lot of defi apps in crypto when you use this to acquire users at a rate that's much higher than uh the sustainable amount of demand for the for the actual application or chain the chart will always end up looking the same so I think people need to get much smarter about uh tokenomics they need Dynamic Supply schedules that are tied to whatever the kpi that that individual application or chain is actually trying to achieve um

and I think that we sort of have a narrative violation in a lot of ways with what happened with Cosmos I think people attribute a lot of things that happened there to lack of success and I just I think the premise is wrong from the start perfect I've never seen David notd this much um David David has PTSD and I'm just explaining why um Luigi maybe let's let's talk a bit more about the other guys um I have three questions prepared uh one of them is how do you see the rollup model working out for ethereum do you think it's good for etherium bad for

eperium E 3.0 any hot takes about the mother chain is appreciated um so there's a few things there um you know we have uh a number of um so I think your question is really about the state of ethereum is that is that basically yeah so there's a few things there uh ethereum has this situation where they took the part of the ecosystem that people were excited about in the L1 and and the Defi and what itri distributed all the fees and um they sort of instead uh moved a lot of the value in fee

activity to the most commoditized part of the stack uh which is data availability in a lot of ways and settlement and so you know you're kind of seeing that transition play out in real time and it's also playing out in real time when another competitor is actually capturing that Val that that volume so um we need to be really careful about how we think about the um the timeline along these curves right uh because some of this stuff uh doesn't necessarily happen um in a straight line so I think eth is really suffering from a few different things one is uh all the M that I used to capture is being

captured by the rollups instead uh and it's also happening at a time where another chain is capturing a lot of me those two things combined has put it in a precarious situation um but with all that said it's still building you know a robust ecosystem and uh it does capture some value now what I think it needs to be careful of is not putting itself in the middle of a bunch of different situations right has Celestia on one side trying to capture the data arm it has you know salana and other chains trying to capture you know the the me part of the equation and then it has other chains like Avalanche competing with it on the multi-chain thing so you want to be care careful enough fighting every single battle um you know across

many fronts you alluded to this a bit but um how do you see Solana shaping out and maybe also how do you see the new move l1's shaping out um do you see them as I guess Solana is a very clear competitor to Avalanche uh to C chain um I guess the move L1 how do you see those ecosystems shaping up um here's what I'll say I think you know it's about order of operations I don't like they're deploying one chain and that chain is uh and that's their full Focus I think they'll come a time where they want to make that more multi-chain um and you know we we started with both frankly and uh you

know now we're going to be pushing sort of the scale of the vertical side of the equation now on the C chain and so I think it's really like where you started where you end up but I think these things all look pretty similar at the end um and I think that that's really what we need to be uh careful for um it's really just about where you started where you end up and um you know I think that they will at some point say like yeah we we need we need to also accommodate people who want their own chains and that's just not where they're starting from that's my view I know they don't say that publicly but that's what I think will happen Luigi just a quick question with like

just bringing up move and other VMS more generally is it have you guys thought about internally and maybe can't share this but any plans to make C chain multi VM like a VM know move VM compiler down to solidity or what have you just like grow The Tam of the developers that c chain can go after um I don't know if it's multi-m um I think you know right now we're focused on uh increasing the performance of the evm on the C chain that that's the primary focus um you know whether that involves putting the evm on the hyp SDK whether that involves just direct optimizations the evm all of the efforts

of monad you know and other people in the space of who that's that's all they're working on uh these are all things we've been working on for years so um that's kind of how we think about uh the C chain it's kind of been something we've been working on for a long time and it's a hard problem like you got chains raising $220 million to focus on one problem and you know it's because it's really hard so I think it's just important to realize that sometimes things take time once they hit everybody kind of figures out what the bottleneck bottleneck was and they'll all put it together the same same way as well so I don't I don't expect that to be a huge moat um like like most things in the space frankly perfect I think um I think I

have one more question which is I feel like you're making improvements to the evm um to the C chain I worry that one of the I guess the thing that Solana has had is they have some different distinct culture and um like a social layer on the Chain uh it's become very degenerate and you can say that's good you can say that's bad I do agree that a lot a lot of capital leaves the chain as a result of it but it also enters the chain do you see you guys focusing more and more on building that form of um it can be I know you said you don't want to focus on a

specific vertical which I think makes sense like do you see your you guys focusing on some form of culture and social layer for the chain or do you see that just happening naturally as uh you improve the evm step by step okay so last question would be I feel like Solana did particularly well because it attracted some form of DJ culture SLS social layer and you said that probably not great because a lot of capital ends up leaving the system potentially um but it enters the system as well through this I guess because everybody thinks I need if I'm going to do the generate activity I'm going to do it on salana and we've seen a bit of it on Bas as well um how are you guys I guess how are you thinking about that is

that something that you want to focus on with Avalanche or yeah um yeah and I want to be careful to I don't want to say that it's uh it's not a good thing to have it I'm saying that they're consequences um and you really are like an ecosystem has to thread a needle effectively they have to get all this sort of what I would call unsustainable type of activity um and then have the sustainable thing kind of come in right after and that's really what nobody's been able to do in this space so far all right that's why everything has kind of been very boom Bush um and I think that's really a function of just the space still being

early right like maybe like is mem coin trading something that could exist forever it can totally um I do think there's a chance for that I think it's probably more probable that it transitions into trading of actual assets that people normally trade stocks bonds stuff like that um you know hopefully with the better regulatory environment that is a decade away anymore um so I think it's really uh you really want to find the balance of letting that unsustainable activity that brings new capital in and sort of let it kind of um find use cases that are more sustainable like we did we did after 2021 see a lot of activity stay and that

activity stayed in defi um you know people still we're borrowing against their liquidity right like Avalanche has btcb which is you know one of the largest Bitcoin Bridges uh out there direct bridge to Avalanche and you know those are things that captured value in terms of us like I said there are a number of different initiatives that we're taking uh to allow you know sort of set the right conditions uh such that this activity can occur that's all you can really do like you can't actually make it happen um I think that to the extent that you get too involved to make it happen it will be

unsustainable and so for especially for D gen activity it's about having the right conditions number one what's that include number one you just got to make sure you have the right actual infrastructure that's the bare minimum you have the right arm ramps etc etc number two do you have interesting developers uh building on your chain they're going to launch cool tokens people want to trade cool tokens um so that's like another condition that you need number three do you have good applications that people enjoy using trading that like Jupiter's a great example I think that Dr that Drew a lot of people to salana and so did uh you know efforts like the Phantom wallet Etc but the biggest condition that they had is they had a lot of capital inflow via the air drops and that's those are the conditions you need to create for for

that kind of activity to develop yeah I can't agree more on the airdrop comment you can I think you could probably chart it out and see that after jeto air drop activity prod quadrupled um right and then also the Bonk stuff too right like you know once that gets listed on an exchange you know it go straight up and so many people have it and now there there's a huge wealth effect so sorry sorry to cut you off no no that was it perfect um Ryan David do you guys have any more questions yes I don't know if he can answer it really but like uh or at least publicly stay H it but there's potentially you know huge like Tailwinds for the industry from like a regulatory perspective Avalanche has historically kind of positioned

itself for institutions you've already some institutional adoption even prior to like regulatory tailin um are you guys like our phones ringing off the hook uh like any anything you could publicly share uh either from like Avalanche perspective or more industrywide perspective on um I guess institutional adoption of of the industry look it's no secret that crypto uh there's been a hostile environment to crypto in the United States um I don't think that's a outlandishly uh controversial statement so um that you know to the extent that that has a rate of change that's positive for the industry I think it's going to have a very very profound impact um on industry I'll tell one

story uh right after FTX um there was actually a situation where um we were in touch with a very large institution uh we worked on a project for a long time they can the whole project a few days after FTX for no reason other than FTX um you know tons of effort tons of you know uh brain bashing against the wall and just completely shut off I think you'll see the opposite of that now um you know there's going to be a catchup that has to happen and the teams at these various institutions and Enterprises that shut down their crypto departments are looking around the room right now asking well what do we do now and that's

only going to get louder and louder and the teams that we've been working with for years are well POS positioned to capitalize in my opinion so I think it's a I think it's it's going to be incredibly new we have not had an environment like this um so let's hope that they keep to promises and that we actually get to a point where um you know this industry crypto um isn't you know isn't isn't operating in a world that's 15 years behind like I I I'm laughing at all the Strategic Reserve uh Bitcoin stuff because this is like what people talked about in 2011 you know like the government's going to buy our Bitcoin one day well it took a while but like 13 years later this is actual

conversation it's like pretty crazy so um it's always kind of funny how early we actually are a lot of times perfect um okay Luigi thanks for coming on man this was this was really good no thank you for having me this was a fun conversation love love the podcast always catch it and uh appreciate appreciate the uh availability perfect thanks Luigi nice job thanks again to scale for sponsoring today's episode if you weren't already planning to make sure to go check out scales ecosystem explore the gas-free ecosystem at scale. and follow their Journey on X at scale Network and visit the scale

research Hub to learn more about the gas-free architecture and growth of the ecosystem that's scale. space resarch