Tokens vs. Equity, Lighter's Robinhood Perps Deal, & Trump - The Chopping Block

Transcript

Robert, what's your reaction to the Trump financial disclosures? >> That's a lot of money. >> That's a lot of money. >> That's a lot of money. >> Not a dividend. It's a tale of two fun. >> Now your losses are on someone else's balance sheet. >> Generally speaking, airdrops are kind of pointless. Anyways, >> unnamed trading firms [music] who are very involved. >> I like to eat the old >> DeFi protocols are the antidote to this problem. >> Hello everybody. Welcome to the chopping block. Every couple weeks, four of us get together and give the industry insiders perspective on the crypto topics of the day. So, quick intros. First, you got Tom, the DeFi maven and master of memes.

>> Hello, everyone. >> Next, we got Robert, the crypto connoisseur and Zar of Superstate. >> Good morning. >> Joining us again, we've got special guest Vlad, leverage legend and leader of Lighter. Welcome back, Vlad. >> Hey guys, good to be back. >> And I am Steve, the head hype man at Dragonfly. We are early stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see chopping block.xyz for more disclosures. So gentlemen, we have once again one of these classic debates that has resurfaced on crypto Twitter. And that debate is about this perennial conversation about tokens, equity, and what is worth what. So a lot of this conversation was galvanized by uh a fundraising announcement that we

recently led. Dragonfly recently led a fundraising round into Venice. So Venice, for those you don't know, it's a cryptoi project. They're they're pretty large. They have like 70 million run rate. We led around at $65 million into them at a billion dollar equity valuation. Now, Venice has a token called VVV. Uh Venice's token, they launched like roughly a year after the product existed. Um in an airdrop, they gave 50% of the supply for free to their community. Uh and they stated very clearly when they made the airdrop that this is not equity in Venice. This is like, you know, here's specifically what this thing does. It gives you the right to compute over time. And so when we did this uh investment into Venice, a bunch of people got really upset. And part of the reason why they got upset is that they were like, "Hey, this thing now has

tokens and it has equity." And the equity holders presumably they have, you know, they're senior in some sense to the token holders or something like this. And there's a perception that okay, well, if you have a token, then probably like that's supposed to be like equity. Uh it's supposed to be where the value of this business is acrewing. And so you know this is of course not the only example of this. There's been a lot of conversation before about the progenitor of this conversation unis swap labs. So famously uh this was like probably four years ago unis swap had a token sold the token to investors represented this is the governance token of unis swap and then later raised money for unis swap labs a for-profit corporation that was initially supposed to be the development corporation behind unis swap. They raised venture capital

separately and that caused them to eventually have their own wallet, have their own to uh monetization strategy on top of unis swap. And this is perceived by many people to be one of the original sins behind this, you know, having two masters, a protocol that has both token holders and equity holders and okay, maybe it's zero sum between the two. Now, I made the argument and we had this uh video clip that went viral that I don't think actually Venice is like this. Venice is very different because Venice is a company. Venice is not a protocol. This token was never meant to be a governance token or have control over Venice. But this has raised the question broadly, not just about Venice, but in general across the industry of how do we think about when tokens and equity coexist? First of all, of course, it's worth talking about why they

coexist. And Vlad, you know, we brought you on. Obviously, Lighter has been the center of attention for some of the stuff about Robin Hood that we'll talk about shortly, but one of the things that people bring up is that well, you know, Lighter also raised money into Lighter Labs, also has Lit token. talk to us as a founder how you think about the dichotomy between equity and tokens. >> I'll talk about how we approached it at lighter. You know, I think we have enough stuff going on that I, you know, I haven't really had the chance to think about like how other projects are go about it. So, I'll just talk about you know, our perspective, but you know, for us, we were always a USC Corp. You know, we're building in the US from day one.

And that's the only entity that exists, right, is the USC Corp. There is no separate foundation. There is no separate labs. The CC Corp is the entity and so the token was issued out of that. I I think there three things to say about this, right? one and this is something we've said a number of times since the TG but worth repeating like all value kind of generated by lighter is occurring to the token holders and the exact mechanic for that is programmatic buybacks we've been running those buybacks since the TGE like the algorithm for the buybacks has been published like we we publish you know on on the website you can see

exactly how much has been bought back we update the community there's still, you know, I don't know why some people are still confused about this, but like these buybacks have been going on for 6 months now and uh nothing's changed there. So that that's just kind of like based on it. One one thing second thing is that I think this is not something we really talked about publicly as much which is that so equity you know we did raise a number of months back before the TG and prior to that kind of equity rounds. I mean the understanding since we started working on lighter was always that the equity is kind of capital to build out the core tech but once that's done and once there's a token all value will acr to the token so like all the

equity holders even before the TG were aware that that's the plan and in fact the last round was like 5x overs subscribed and we we we told like all the existing folks on the cap table like what's going to happen going forward is that the equity will give you token allocation And that's going forward. That's the only way you're going to acrew value. So if you if that doesn't vibe with you, you can get out of this round. And only 1% of the cap table took us took us up on that and the rest stayed in. Right. So we so basically not not only have we been doing the programmatic buybacks, we've also been very consistent in how we've talked to the equity holders like there there's

not going to be another equity round like this is the >> so one of the points I so many of the um >> many of the people who are saying like look this is the this is a fundamental problem. Uh, one of the things that many of them say, if I can sort of play the devil's advocate, is that, okay, a CC corp, it's a for-profit corporation, right? That means that you have a fiduciary obligation to your shareholders. Now, I should also disclose Dragonfly, Robot, we're all actually shareholders in uh Lighter Labs. We also have the token or we have investing whatever token claims. And so, technically, you know, under Delaware law, assuming it's a Delaware CC Corp, you have a fiduciary obligation to maximize shareholder value. And so somebody might look at that and say, "Okay, well, yeah, okay. You're kind of saying that you're going to move money

in the token, but legally under the law of Delaware, you're supposed to maximize shareholder value and your shareholders might not hold the token or they might have sold the or whatever. I don't know, blah blah blah. They obviously can construct many situations in which like this is not maximizing shareholder value." What's your response to that? What what would give somebody comfort that that you're not going to, you know, go do that? Yeah, I mean we've committed as a management team both to the buybacks but also to like not doing any other equity rounds going forward. I think all of our investors have committed to that as well because they were told that this is the plan and they had the opportunity to get out of the cap table if they disagree with that

plan. So, I mean, I'm not an expert on Delaware law. I mean, I I don't know if this has actually ever been challenged in in Delaware or if there's any actual precedent. >> Are you an expert on Delaware law? >> I'm not an expert at Delaware law either, but I guess I'll ask a simpler question, right? The company has ample financial resources, right? You're at the company you're going to build out lighter as a system for many years. I guess the question is what happens when the capital that you previously fundraised runs out? Do you raise money again sort of like pro bono for the benefit of token holders? Do you come up with a new funding mechanism like or

does the plan have to change out of necessity if the capital that you have eventually runs out? I guess how do you reconcile those things? >> Right. Well, I mean, right now, uh, the buybacks are 100% of revenue. We want to maximize that. I mean, I think, you know, in the current state, right, like we we want to have that buyback program be as strong as possible. And as as you pointed out, right, like we we have capital that we raised that can be used for operations for many years. And, you know, we're optimizing our costs. I think I don't know if you guys saw like we have this like all these prover machines we use and we're really optimizing our costs on

that but the I guess the the point being I mean at at some point the buyback program would need to shift to go from you know revenue to profit uh that's not going to come for number of years where that's going to be needed also I think by then we'll have things like clarity act we'll have other you know SEC and and kind of other folks in DC would will have thought through more on how this should look like. So I mean I think I think the end state is going to be something where it's more about profit and not just just revenue and then then then that'll be sustainable.

>> Yeah. I think another way to think about it is that you know for think about Zcash for example. Zcash is probably a good example because it's such an old protocol. You know it's been around for a decade plus in Zcash like there's a portion of the Zcash revenue or inflation or whatever that goes toward paying the underlying team to make sure that there's some sustainability. Right? there's a dev reward effectively. Um, if you think about makerdo, you think about a there's a portion of, you know, the DAO treasury that goes toward compensating the team, compensating the developers, compensating the the BG efforts. And this eventually has to get drawn down from somewhere. And so I I assume that in the limit that's probably what lighter looks like is that okay, lit token is the governance token for lighter. Lighter labs is a contractor effectively to the DAO. And it goes and

says, hey, this is roughly what I think my costs are. you know, if you're good with this, then pay me and then obviously you keep the surplus um within the lighter treasury. So, >> yeah, I mean, I think that's how things used to work. I mean, I think we we have maybe like more ambitious goals for it, which is like to actually be one of the first companies where the we're essentially like merging of traditional crypto tokens and tokenized stocks as a single type of asset like you know cuz we are listing tokenized stocks online or obviously not not for ourselves for companies like SpaceX but like I think the end state again assuming that we make good progress on clarity and

this is kind of going to be processed with SEC and others but like the end state I think that would be really cool is if if there's actually you know you can own shares of the CC corp directly as a token and and vice versa so there's actually kind of a direct onetoone mapping that isn't just a commitment by the management team but but actually in the smart contracts and in the regulations and in the law right like I think that's the end state we want that doesn't happen Yeah, >> in that world would the lighter tokens become the lighter company equity and vice versa and then you just have one instrument and it's fully aligned.

>> I mean I think that's that's the future where and again and this feature doesn't this is not unique to lighter. I mean, I think this would be a pretty cool way to structure things for any any company of the future. And this is kind of like what Defi Rails, you know, when Defi and Stratfi merge, I think it'll look something like this kind of for all companies. But, and you know, if we don't quite get there on this go round with the regulations, you know, it's not going to be like I think some people are concerned about this. Oh well, you know, if clarity doesn't pass, whatever, you know, things things are only going to be are going to be as good as they are now and and then some, right? No matter kind

of what happens going forward. So, but but I think I mean where I'm optimistic that this is the end state working towards where actually like DeFi and TRI rails merge and tokenized stocks and tokens for crypto projects become one and the same over the the next few years. So how do we apply that idea to VVV and how we started this conversation? >> Okay, so let me maybe also sharpen the distinction I think between something like VVV and something like lighter. So most crypto projects that launch tokens, the token is a financing mechanism, you know, so they they they say, "Hey, I'm going to create this token. I'm going to sell it to investors. I'm going to sell it to retail maybe. Um, and I'm going to use it in order to go build the

product." And that's a big part of the reason why I think there's an expectation from the market that like hey this thing is going to represent the value of the thing that you create if you are financing yourself by selling this token. It's important to like distinguish even though people think of like okay VV is the Venice token. Uh if you actually just look at the history of VVV existed for like a year before they launched the VVV token. Venice was self- financed by Eric Vorhees the founder of Venice. He put in millions of dollars of his own money. VVV was aird dropped. It was not sold to investors. It was not sold to retail. It was not sold to anybody. It was literally aird dropped in its entirety or the 50% of it was aird dropped to to early users of the platform. And if you go read the launch

announcement of VVV, it is extremely clear that VVV entitles you to a portion of the compute on the Venice platform. And they say very clearly Venice is owned entirely by its team. It's not owned by VVV. VV is not a governance token. There's no forums. There's no voting. There's no [ __ ] anything. We don't give a [ __ ] what VVL holders say in a forum. You don't own Venice. We own Venice. This is a asset that we are committing to honor and you know you can use VVV to mint DM which is a liability of the company. Right? So that's the idea. Now VV like Venice has made very clear that they intend to use their subscription revenue to buy back VVV and their goal is to buy back all of the VV

supply over time. And if they do that successfully, then basically they're just a company with no crypto cap table whatsoever. Like if they successfully do that, then they are entirely just an equity cap table left. But it was equity before they launched a token. The equity preceded the token. There's now 9% of the the the cap table held by investors. But most of their customers are not crypto users, right? They're a normal company that decided to create a token for a specific reason, a specific purpose, but it's really not like unis swap or lighter or really anything else in this conversation.

>> What was the reason then? Can you summarize like in your opinion as the leader? >> Why they launched the token? >> Yeah. Why launch the token at all? >> Yeah. I mean, so the answer was that they wanted to give early users a right to continue using the product, right? Like VVV gives you the ability to mince DM, which allows you to keep using the product basically for free. It gives you a certain compute budget that you have available in perpetuity. And the idea in the very beginning was that we should give this to users. Obviously, it was a very small product back then. That was they were premiumf. And if we give this to users, then more people will use the product. The users will remain sticky.

They'll be part of an early community. And the strategy works right now. They're a large company. They have millions of users. They have, you know, 70 million revenue run rate. They're doing really well. They're growing really fast. But like there was no I think it's important to underscore that like they were using a token for a different reason and they were very clear the entire time what the token was for what it was. It was not like a winky winky hey this is a governance token maybe eventually we'll buy and burn it but you know maybe eventually it'll give you the right to everything but you know we'll see. And so I think the the conversation around it I feel like is collapsing some of the nuance of I think what's obviously been a very good faith team. They haven't sold any token.

They've only bought back more token over time. But I I've been very publicly I think on the show I've talked about the unis swap labs and unis swap protocol dichotomy as being really really bad. And the same thing happening. You know when we've had portfolio companies that have thought about doing the same thing because they saw that unis swap did it. They said okay why can't I do it? And I've told them, look, I think this is really bad because your shareholders and your token holders are supposed to be subservient to the same asset. And now there's a divergence in those two cap tables. And that's going to result in in pain, in conflicts of interest, right?

Because it's all supposed to be working toward the same thing. In Venice, that's very clearly not what happened. That's not the history. That's not what the token was framed as. That's not how the mechanics were. It's not how the fundraising happened. They put their own money in the in the in the project. >> Can I ask >> not the token holders money? >> Totally. Can I ask a couple clarifying questions just to better understand that dynamic? >> Yeah. Yeah. >> So if they air dropped 50% of the tokens to the community and their early user base. >> Yep. >> Does the company still hold 50% of the tokens?

>> Do they sold any? Have they >> 30 something 40%? No, they haven't sold any. They've only bought back tokens. So they own more of the tokens than they started with at the original distribution, >> right? Do is there a plan for those tokens to go to the investors that invested in the company or are they just going to destroy them if the goal is just to buy back the float of the tokens? Right. >> So So got exposure to VVV like the investors in this round got exposure to VVV via options. It's a somewhat complicated structure but basically we have to exercise the options in order to get them which means we have to pay the company for the right to get the tokens.

So by investing in the company you also got exposure to the exposure tokens on the company >> correct there's well there no no so we got exposure to directly received tokens as well as the 38 or something I'm going from memory like some very large portion of the tokens that are sitting on the balance sheet of the company so we got exposure to both. So the answer for us is that look we obviously think the VVV is valuable. That's why, you know, originally when we came to them, they just wanted us to invest in equity and we were like, well, no, no, we want we want both. We want exposure to VV directly as well as the pass through exposure and the and the underlying company economics. We want the whole thing. And so, yeah, look, I think it's very compelling this idea of tokenizing

compute specifically on the Venice platform. I think it's like very original and and an interesting kind of capital innovation. But I I I think it's unfortunate that people are clearly misinterpreting it by like looking from a thousand-y view and saying, "Oh, there's a Venice token, therefore it should be like a unis swap token without really having done the research of like what it is, what it was represented as, and what the history of the company is with respect to this token." >> I think that's where a lot of the >> But it's fair for the Venice token holders out there on crypto Twitter and in the community to see the value in the token because you see the value in the token too.

>> Yeah. Correct. Correct. >> But just not for having Yeah. >> I I think it's I mean there are other assets in the world that have utility and have some maybe upside if sort of the [snorts] the issuer does well. Like I think of like famously American Airlines issued like these like lifetime you know flight coupons or like country clubs will will have these kind of products too. And so it's like, yeah, you can you can use it, but obviously the the value of it's going to go up if you know the club does well or the airline, you know, does well. And so, but you don't buy it assuming that like, oh, this is giving me ownership in American Airlines. It's sort of, you know, this this other third thing. And so, you know, you can sort of ask questions about, okay, well, like where

does this, you know, liability [snorts] sit in in the prep stack? and like you know maybe you can wish that it's you know equity but like ultimately I think you know to SE's point if if people are transparent about what this thing is and what it's supposed to do I I I don't know that's kind of what the market is about and that's what the market's saying. I think the other thing too is like I I mean I I agree it's I think tough to do like equity plus token value capture and and generally there's some some cannibalism you know between the two but I I do feel like I've seen this less these these days just because we haven't seen any really breakout successes of any of these labs like yeah have been some teams that have sort of raised in them but like it's not like

you know these token teams are saying oh if only I could raise you know do an equity raise my labs code and then we'd be like a multi-billionaire like doesn't really sort of sort of you know panned out. I think generally when people have been at least recently kind of upset about this is because the labs entity got sold for parts or got you know acquired somewhere and like yeah that's unfortunate for for token holders but like it's also unfortunate for equity holders and for everyone. It was sort of uh you know you're not even really covering covering the prep there and so I mean I think ultimately everyone wants some sort of path forward to I think at least have a path towards uniting these two. You know maybe clarity and like we have you know Mr. superstate on the pod today, too. But, um, it's, uh, I don't

know, it it feels like no, no one's doing this out of some scheme. It's almost just like this was sort of a byproduct of of of what what the market was able to support at the time. >> Yeah. And it's also worth pointing out like Venice is genuinely weird, right? VV is genuinely weird. Not just because, okay, Venice is like a traditional company. It's not on chain. It's not a Dow, you know, whatever. So, that's one of the reasons why VV is weird because it it is an asset in the capital stack of a traditional company. But the other thing about it that's weird is that it's kind of like a overloaded asset financially in that you know it's not just like airline miles of like okay you know you can use this product uh you get the compute it's also that okay it gives

you some benefits on top of Venice you know gives you access to Venice Pro but then also they're buying it back with with their subscription revenue right which means that okay there is it's it's kind of like it's a little bit like BNB I think B&B is probably the closest analogy to this where like you know what is BNB BNB is clearly not equity in Binance I don't anyone's confused of like why isn't BNB voting on the fee rates or the fee schedule on Binance. Okay, we all understand BNB is not equity in Binance, right? BNB is kind of this overloaded asset. It's got okay, Binance is burning stuff. There's also BNB chain. There's also okay, they give you discounts. You get access to, you know, uh whatever it's called, the the early access projects and the the airdrops and all this stuff. So, it's

like kind of this weird sum of parts valuation thing to figure out what this is. And clearly like Binance's success matters for BNB, but also clearly this is not equity in Binance, right? This is some other thing. Now I I agree with everybody here that like look clarity is going to give a lot more room for maneuverability in these kinds of of kind of I don't you know I don't I don't know what the word sort of protein assets that don't quite resemble any one thing. It's not a governance token. It's not equity. It's something else, right?

And it's not even pure commodity. it's really genuinely something else. And ultimately like the innovation in capital stacks is like a big part of the reason why we're here. It's why we invented tokens. It's why we're so excited about all the things they can do. If the answer was that well tokens are just a fancy way to like issue equity through the back door. I I don't know. I mean that's fine, but that's actually just not that interesting. You know, like we already have equity. We could have already done that. So that's that's a little bit why I chafed so much with this conversation. But clearly it's gotten a lot of people animated about hey what is a solution space to this look like? And I think I think this conversation is ultimately healthy because it means that everybody's now thinking I mean I know the Venice team

is thinking about it. I'm sure lighter is also having the same conversations internally of like okay people people care about this. They care about you know what are the guarantees that this token actually gives me and what goes wrong if they don't. Even like the CC Corp thing, right? Like having a labs entity and then having an overseas foundation. >> That was a hack. That is not like [laughter] that's obviously not what Delaware designed CPS for. Right. >> That that adds even more things in the middle between the users, the investors and the outcome. >> Right. Exactly. Exactly. So like everything in crypto is hacks on hacks on hacks. Go ahead. I mean I think to me like kind of like you know zooming out if we think about like merging DeFi and Trafi over the coming months and years

right like the point I would make is yeah there are a lot of messy structures uh I mean some structures are simpler some structures are more complicated in digital assets but I mean there are a lot of complicated structures in stratfi too right like look at openai and their corporate structure or even like you know my old firm Citadel you know there's Citadel the hedge on their citadel securities. If you bring all those things together and put them on chain, they're going to be a lot of novel structures there. Like I I think you're right. For something like lighter, it's actually relatively simple. For other projects, it may not be. That doesn't mean like I think in the two examples I gave like both created a lot of value for every stakeholder involved. So you know I I

think that there's like a lot of the discussion online I think assumes that like complexity of structure is due to some like malicious intent on somebody's part and I think that like a lot of times complexity of structure is just necessary for a particular type of business on defy rails or on stratfire rails. >> Yeah that's well said or sometimes it's it's an it's an answer to a bad regulatory environment. So, you know, I think for historically in crypto, we've had these just horrendous Byzantine structures and that's largely the reason why um that many of these things get saddled. But I think, you know, Tom, you made a good point that usually when these things go badly, nobody's happy.

So, like, you know, some of these M&A, okay, LabsCo got acquired, nobody's fist bump, you know, even if you're an investor in the lab code, you're like, well, that sucked, you know, because I I mostly invested in the token and like this labs is like this tiny little nothing compared to my token investment. So yeah, usually bad outcomes are bad outcomes for everybody involved. So but let's talk a little bit about, you know, speaking of the intersection of CFI and DeFi, let's talk about uh what happened with lighter over the last week. So there was an event in London uh by Robin Hood on July 1st called the world is flat. I didn't totally get why that was the theme. Uh but um you know Vlad I was I was there with you in uh in London in this like old church thing where they

did this I don't know a bunch of skits about nautical themed skits where they introduced uh a bunch of new launches by Robin Hood. So first Robin Hood launched uh the Robin Hood chain. Their L2 is now live. Uh of course they're built on the Arbitum uh Nitro stack. They have now 247 tradable stock tokens that are going to be issued directly on Robin Hood chain. These are kind of um uh StockX is is that the company StockX style and uh they also have USDG I'm sorry X stocks why am I saying stockx uh it's xox style tokens these are sort of debt tokens uh but that are supposed to kind of mimic the uh the value of the underlying stock and then you have USG lending via Morpho directly on the platform also Athena partnered with them and then lastly and

kind of one of the biggest things that was pretty explosive was lighter is going to be the native per integration in Robin Hood wallet So this is now opening up lighter uh trading as the per platform for Robin Hood chain for you know something like however tens of millions of customers that Robin Hood has available. Now interestingly you guys are offering incentives. So there's like 11 million worth of lit that is being offered to Robin Hood users via points. So if you trade on this uh you also get free gas uh and zero per fees for 90 days. So uh it's not available in the US, UK, Canada, Switzerland and a few other jurisdictions. Lit did very well on the news and there's a lot of excitement now seemingly around lighter's go to market around this uh Robin Hood integration.

But one of the things I was seeing a lot of questions about was about the fact that this is apparently a separate instance of lighter compared to the original Ethereum instance which presumably means that you're fragmenting the order book fragmenting liquidity. So Vlad talk about this deal and also talk about like mechanically how you're thinking about is if if this is a separate instance of lighter what does that do to the liquidity of the of the platform? Sure. Well, I think uh to to start it was a really fun event. You know, I think that uh definitely the other Vlad has a layer for theatrics that that I think uh you know I do not.

So, you know that they they organized some really cool stuff there and uh we actually there was a a real-time demo of perin Robin Hood wallet powered by lighter at that event kind of the as it turned out the trade that was demoed there. there. I think it was a SpaceX trade. That was actually the first trade ever done on on that instance. And like had the demo been like an hour before, it wouldn't have worked because like one of the market makers wasn't ready, you know. So it actually it was a it was a pretty high stakes demo, but uh it turned out really well and um I think everybody was impressed with kind of the speed and uh the the UX of that. But um yeah, we're really excited about the

partnership. to your point like it's not right now it's not available to every jurisdiction you know with the work we're doing with CFTC I think you know the Robin Hood US instance can route order flow to registered you know DCMS in the US and so we're excited about also kind of expanding to that but the the the current product is live right now I mean you can trade many different assets there you can use tokenized stocks as collateral and lighter core is on top of Ethereum.

Lighter Robin Hood is also on top of Ethereum kind of through the Robin Hood chain which gives definitely advantages to Robin Hood customers. I think we're working on something called lighter EVM as well. And so there's actually this interoperability between different chains on top of Ethereum. So, you know, when you talk about fragmentation of liquidity, these are different markets, right? Like it's it's relative to different stable coin there there's some there going to be different forms of collateral going to be different assets that these customers want to trade. But the the important thing is that moving capital around between the two instances with ZK is going to be pretty much

instantaneous. So market makers who come in it's not the same as like bridging from Ethereum to Salana or bridging from you know Ethereum to another L1. So that you know I think fragmentation is there's it's not just black and white either either you know um you know because market makers have the same capital base. Yeah, I mean if market makers can easily like like let's say you're market making BTC USDC on one instance and you're market making uh BTC USDG on the other instance and you can move capital back and forth almost instantaneously. Prove that that movement happened with ZK proofs like you can that that's that's a lot more

capital efficient for the market. It's almost the same as if they were running the same order book on one market. not you know it's a little bit less efficient than that but but pretty close. Compare that to the market maker having to market make like one instance on Ethereum, one instance on Salana. That's completely different, right? Compare it even further to market makers uh operating on DeFi and then having to hedge and trady. That that's really inefficient. So, so this is like as efficient as it can get, you know, other than being the same instance. Now, why would you even want separate instances?

I think there are actually reasons for that, right? because it's different customer base, different stable coin, but also different regulations. I mean, I think in this case, our regulatory strategy is very aligned with that of Robin Hood, but you can imagine like, let's say there's another integration down the road in somewhere in South America or whatever, right? that you know we've already done one with Telegram wallet too which has a different approach than Robin but like down the road there can be different instances of lighter that for whatever reason like like maybe there's an instance in some country that has like very specific rules around leverage and very specific rules around ADL and actually it makes sense for that to be a

separate instance there for those reasons alone but again if the balance sheet is essentially interoperable and very easily moving back and forth with ZK proofs that um is as close as you can get to having just like one big order book globally. >> Right. Tom, you want to jump in here about uh this Robin Hood launch? >> I mean I feel like we got the man himself chiming in. Uh I mean it's exciting. I think um you we've kind of been joking for like the past year that this is like global purpood example is sort of a good demo and I think um it's also I think cool also to see this like DeFi mullet thesis play out. I also think of like Coinbase really obviously really leaning into

Morpho and these vault products and obviously Robin Hood having their own vault products and like I think it's one of those things where you have these kind of industry leaders that are very well respected you know putting together the blueprint and and sort of you opening this this window and then you have like a million people kind of kind of you know drafting behind them and I think you kind of look at like the the ETF launches as being like an example where you know Bitcoin was this weird thing no one really wanted to do it and then it was like all right you know black rocks in and so okay now everyone's going to everyone's going to be offering you know ETF and we're like legitimized you know that the idea I think we're like you know basically on the cusp of a you know this being the

legitimization of the kind of DeFi mullet play and I think especially when people start to see you know the revenue numbers and and just sort of the the sense of of having this this model I wouldn't be surprised if we see you know every other financial services provider copy this the same way they've they're already kind of copying the the stable coin playbook. >> Yeah. Yeah, I mean I I remember when uh we first pitched lighter to you guys like I think it's been 2 and a half years. This is what we talked about at the time. It's like DeFi is going to be the rails for not not just the uh like fully decentralized front ends but also for CFI and even TRFI and like I think at the time I mean you guys got it right but it's I think at the time the

consensus was like no like no one cares about the tech it's all about you know distribution and marketing but like the reality is that DeFi is better tech and it's much better for even centralized or somewhat centralized front ends to sit on top of DeFi rails and we're seeing that I mean I think Our launch with Robin Hood has been fantastic. I I should also kind of give credit to some of our competitors. Right in the same week, Hyperlid had uh I think the largest exchange in Africa adopt them as back end and I think uh extended you know e Toro like these these are all kind of part of the same thesis that I think we had from the beginning when we started building lighter of like DeFi trad.

>> Yeah. Yeah, I feel like it's very similar to also what you see in stable coins is that like a lot of these traditional fintexs or even banks starting to adopt stable coins cuz they're like it's just better. It's actually just a better way to like accomplish our business goals as opposed to some oh you know we love decentralization or we love crypto values and we're kind of virtue signaling something. It's that no these are actually better products. Robert, did you want to jump in here? I'm sure there's also a lot to talk about with respect to the tokenized stocks are allowed. Well, I just want to jump in and say that I agree the DeFi mullet is being reborn. I'm excited to see a mainstream consumer product built on top of something like lighter as a back end.

I think that's exciting. My only concern is the fragmentation of liquidity. We brought this up before, but you know, it kind of stinks to have to start from scratch in a sense and, you know, build liquidity, you know, in a whole new platform when you already have, you know, such a great base of liquidity in one market already. >> Yeah. I mean I I take Vlad's point that especially because this is being launched in non- US markets very plausible that actually this is kind of a interesting hack for them to allow a lot of the traders in non- US markets to be like hey you want to get exposure to US stocks via per here you go this is like the easiest way for you to do it um or just you know other financial assets for which you know as long as you have an oracle you can and

and you have some you know market makers willing to provide liquidity like boom you've got you've got a market going so I can I can see the claim that actually the fragmentation is like you know these people are mostly not trying to buy just like the same old stuff um that actually there there's very different appetite for assets although I guess we'll see once uh the roll out is um further along >> yeah but later core is doing such a great job at building liquidity in these assets that should be attractive to xus >> right that makes sense okay so let's switch gears a little bit one of the interesting stories here has been In the many trials and travailes of governance tokens, uh there was a somewhat somewhat hilarious uh although I'm sure sad for

the victims involved uh exploit of a token called Bonk. So for those of you who do not remember Bonk, Bonk was a memecoin on Salana, one of the OG memecoins and uh they have a governance process I guess. uh don't know why uh I don't know what there is to govern with bonk but so basically there's this governance forum where you know mostly nothing was happening and nobody was ever looking at it and so somebody came around and they proposed something on the governance forum and the proposal on the governance forum was called soellian bondow I I don't know what that is that referring to Thomas so I don't know what that means and who submitted a governance forum and I think the the governance BIP uh sorry BIP 76 which is uh calling willing to rebuild

from the ashes, monetize their holdings as well as reward all yes voters uh who are eligible for tokens by transferring uh bonk tokens out of the treasury. It kind of sort of seemed like nonsense. I didn't understand what the uh governance token said, but it was very short. It was like roughly a paragraph. So they they put it to a vote as they followed the governance process and uh seven people voted out of the 18,000 eligible votes and there was roughly 1% voted no and uh 99% voted yes. Now of that 99% almost all of it was the attacker who bought $4 million worth of bonk in order to vote in this governance forum. And so basically after voting closed they voted

themselves $20 million worth of bon tokens. So people freaked out. They were like, "What, you know, what happened?" Uh, threatens of law enforcement and whatnot. And, uh, and kind of here we are now. Robert, you're the OG governance guy. I think it's pretty clear there were some very basic governance norms that could have solved this, like proposal alerting, time locks, higher quorum voter turnout stuff, you know, you know, like limitations on how much money can go to the Treasury. Tom, go ahead. Oh, this reminds me so much of who is that that weird guy on the compound forums that similarly had some like nonsense proposal to like uh Yes. Yeah. Yeah.

>> Hunty. Oh, yeah. Yeah. Yeah. Robert, you want to do you want to summarize the Humpty saga? >> It's the same thing as Bonk in a nutshell. Just I think that one was more sophisticated. At the end of the day, there's a style of governance attack which is buy enough governance tokens to be able to influence governance, right? In a community like Bon that nobody even knows there is a governance process, it takes fewer tokens. In a system that has fewer checks, balances, safeguards, like Bon where there basically are no safeguards, it takes fewer tokens. But this applies to pretty much any token-based voting system where someone can buy enough tokens and then try to get what they want out of it. Same thing

happens in any semi-democracy, right? This happens. You know, people complain about the influence of money in politics all the time, right? But the governance attack, so to speak, is you accumulate enough of the vote, you try to sway it. Bonk, it was successful, right? This is not the first time that there's been a successful governance attack in DeFi. Years and years and years ago on the show, we talked about Beantock or whatever it was, you know, or someone >> Beantock, they bought the governance tokens and then they took over the Beantock Dow. And you might say, why did some weird algorithmic stable coin have a governance process anyway? It just enables someone to steal all the assets.

The same question applies here. Why would Bonk have governance? There's nothing to govern. The whole thing is nonsensical. But this is not the first time it's been successful, right? There have been governance attacks that have failed, right? Like the Humpy one. There have been government governance attacks that succeeded. Bonk, they succeeded. It had all the ingredients for it to succeed. no safeguards, nobody paying attention, and a large war chest or treasury of assets to steal, right? It had everything there for this to occur. I don't know how many other things match that pattern. If you run a project in the space and you have token based voting, you should take a serious look at how it works, why it's there, and

what safeguards exist. It's crazy that Bon had so few safeguards. We pioneered some better implementations of governance that were basically open source standards for teams years and years and years and years ago. And I get that the Salana ecosystem doesn't have all of the governance tooling that the Ethereum ecosystem has. But >> I don't think that's why Bon didn't have government safeguards. But yes, I take your point. >> But it is what it is. You know, it's just an embarrassing moment in the history of onchain voting. >> Yeah. I mean, this is the failure mode classically of democracy of 51% voting themselves all the money.

>> Uh, >> but it's not even 51%. It's 51% of those who show up. And in a community where seven people voted, >> which is which to be clear is also a failure mode of democracy, right? Like if if there's not high voter turnout in democracy, the same exact same thing happens. Um, >> that's what happens in like small primaries where there's very low turnout and you get crazy candidates. >> Right. Right. Exactly. And so I think, you know, funny enough, coming back to the tokens versus equity thing, right? Like this is one of those things that actually Delaware Court of Chancery has developed norms against this kind of thing which is that if you are on the board and you're like hey I'm going to vote that the board gets paid $50 million a year and like we you know basically raid the corporate treasury.

Delaware Board of Chancellor would be like well okay maybe you have the votes for that but sorry we're not going to let you do that because it disenfranchises minority shareholders. Um >> well that might that one might technically be legal. >> No no no no. Like basically the um you have a fiduciary obligation to I mean the shareholders have to sue. If they don't sue then like okay they're not going to do anything. >> Right. But if the shareholders approve the package, right? You said specifically that the shareholders approve it. >> No, no, no. I'm saying the the board if the board approves a whatever a resolution to start paying themselves a shitload of money and like raid the corporate treasury or you know the the the the preferred shareholders vote themselves all the money and screw over the common shareholders. like these are all challengeable in court and the

Delaware Court of Chancery will say nope you can't do that. You have to protect minority shareholders as well even if they don't have a voice at the table. Democracy doesn't work that way. Democracy does not work like Delaware Court of Chancery. There's nothing stopping you from saying you know what we're going to vote you know all the billionaires give all their money to everybody who's you know a college graduate. >> There's checks cuz see there's two houses of Congress. There's a president and there's courts. >> No no but right but that's democracy. That is itself the democracy. If the if the democracy if that apparatus agrees to it, there's nothing that stops you except in principle the Supreme Court which says, "Oh, the Constitution."

Anyway, whatever. I'm I'm obviously approximating. Vlad, what stops somebody showing up on the lighter forums and voting themselves all the money? >> Uh, well, you know, we don't do a lot of this like decentralization theater around governance. I mean I think that's been something you know I guess we talked about kind of in in the past uh kind of ways that were needed structures that were there because of uh like lack of clarity and some of this led to this like weird structures but but I mean I think like zooming out like there a lot of weird things that happened in DeFi right like uh we had something this week related to lighter where somebody used

uh somebody was trying to I lit with ETH and I think they used uh like one of the uh the aggregators to do that instead like they could have just moved the ETH to lighter and bought lit there but instead they they used one one of the aggregates I think like they spent like 2 million worth of ETH just to buy like 14k worth of lit and the rest went to me. So like so the weird stuff like this happens in in DeFi but it's like you know it's it's it's like rails for the future of finance and there as as that gets built there's like there like weird corner cases that'll emerge that's like it's like saying the internet is like if you compare internet to pre- internet

there a lot of weird things that happen the internet but that it's still much better system net so we we still believe like DeFi is the future even though there's these like weird corner cases that happen. I don't know the details about I mean I think you just described it there but so I mean that that particular situation wouldn't happen on lighter because there there is no doubt right there is no structure like that it's all just one entity as I mentioned but but again even even in in kind of the lighter ecosystem weird things happen with if somebody uh like like this uh this >> sounds like that was a third party yeah it sounds like that was like a aggregator that was kind of broken if they allowed someone to make a trade with like 99% slippage that sounds like the aggregator's fault.

>> Yes, for sure. But I I mean I think like broadly speaking it's all you can say well like someone coming from Trafi could say well that that's weird like that that should never happen like that that would not similar to your point about like Delaware. Somebody can say well in Trafi there would be protections against that. Uh but but I think you know there there going to be these corner cases as DeFi grows and uh I think in in in a lot of cases there there can be protections built in. >> Yeah. It's it's worth underscoring that like look this is a this is a memecoin obviously to the extent they had governance it was kind of Mickey Mouse governance. So they're they were laring a little bit at having a governance forum I guess and like unfortunately

they actually had governance and assets for which to govern. Most governance like this is not a problem of first impression let's say like we we already know how to solve this problem. So maybe a little bit unlike some of the other issues that we're talking about like this is a solved problem. It's just kind of funny that this I mean I obviously sad for bonk holders. Um but uh it is it is kind of like come on guys, if you're going to govern tens of millions of dollars of an asset, you should do like even just the basics. So um if nothing else, it's a worthwhile warning to people who are who are doing this kind of thing. Uh last story that I wanted to cover uh that's gotten a lot of play is the um of course uh every president they are uh legally mandated to make these

filings annually of their earnings while they are in office. Uh I believe that uh you know Obama when he made these filings it was roughly eight pages. Biden's was 11 pages. Trump's disclosure was 927 pages. Now, when people trolled through this gigantic disclosure of all of the financial assets and uh business dealings of of Trump, what they found was that he has made roughly $1.4 billion in post tax income from crypto. Uh in fact, he's made more from crypto than any other US-listed crypto company. He made more than Coinbase did personally.

636 million came from licensing Trump token. 594 million came from World Financial. uh and about 200 million came from equity sales and I think I'm thinking this is like that stuff I I assume his pre-tax income was roughly 2.3 billion from all the crypto ventures combined this is roughly matched by you know people did some accounting of all the losses of the people who invested into Trump token and world financial that was roughly about 2.3 billion as well seeming to imply that this was somehow a perfect kind of uh frictionless transfer between retail investors into Trump assets and the Trump family directly. He put up minimal capital into World of Financial and Trump token. It was less than a million

dollars in total. And uh nevertheless, he obviously received enormous proceeds from uh the sales and the trading volume associated with these assets. So Trump made a lot of money from crypto. If you didn't know that, now you know. I think this is already pretty obvious, but I think just seeing it kind of boggles the mind with respect to the scale of of income that he made. Robert, what's your reaction to the Trump financial disclosures? That's a lot of money. >> That's a lot of money. >> That's [laughter] a lot of money. You know, >> clip that. Amazing reaction. >> That's a lot of money. You know, I think people are genuinely surprised by it. I think everyone assumed the numbers were lower. He's had a lot of ventures that everyone has known about, right?

Everyone has known about the Trump family's involvement in World Liberty. Everyone has known about um what was that publicly traded company he had that uh >> Trump Media? Trump Media that then became a Bitcoin digital asset treasury company as well, BB Bitcoin miner or something like everyone knows about that. His involvement in crypto has not been a secret, right? I just don't think people understood or appreciated the scale of how successful it's been. And so that was what surprised people. I assume the future earnings from crypto are significantly smaller, frankly. like you know when he entered the market it was much more of a bull market. The endeavors he had were

much more successful. I think a lot of that's frontloaded. If he had to do additional disclosures year-over-year I would not expect him to be earning anywhere close to $1.2 billion a year in the year since and the years going forward. I think it's probably a much smaller number. And so it is truly a large hall. I doubt that future years are going to look anything like it. Yeah. Um Vlad, what's your reaction to Trump uh Trump's takehome? >> Yeah, I mean I think it is a lot of money as Robert said. I I don't know all the you know I didn't have a chance to read the what is it 600 pages of the disclosures. Um >> sorry

>> 900 pages. 900 >> 900 [clears throat] pages. Okay. Yeah. I mean I think >> warie level treatis right uh you know I lit holders get mad if I spend 30 seconds writing a tweet. I don't think they'd want me uh [laughter] spending time reading all that stuff. But um you know, but I'll just say, you know, I think the president has always been involved in many different types of businesses. So, I think it's no different when it comes to uh to to crypto. But but the fact that the administration has embraced blockchain is is definitely not good for the industry and uh and and so but but yeah, all these different businesses. Yeah, I'm sure it'll be interesting for uh folks who have the time to read the

disclosures to understand how they work, but but I think netn net it's like great for for uh for the administration to uh take such a positive view of this industry and and actually un actually be part of it. >> Tom, what's your what's your take? >> I mean, I think this is kind of how everyone expected the memecoin thing to play out. Like, it kind of sucks and it's also like, you know, what did you kind of expect? I um I I am curious. I feel like uh people have sort of maybe jumped the gun on, you know, assuming the the worst and like obviously the the numbers, you know, it's like, oh, it perfectly maps like people, you know, it's like you sent the president 2.4 bill when I think if you read it, it's like this he has this royalty agreement

with celebration coins which like started the memecoin and the income is also listed for assets that you receive in kind. And so he's like Ethereum staking that you he list the dollar value of of uh you know the ether that he received from staking. And so it wouldn't surprise me more if like a lot of this were just the like ownership of Trump tokens and like the creation of it. That's income and therefore you you know owe taxes on on that. And I don't really know the specifics of of the royalty setup because again it's not like you know he sold $600 million. >> Do you think he might be underwater post tax or what are you saying? No, no. I'm I'm saying like it's not as if, hey, literally people sent him $600 million in cash to purchase the the, you know, this this memecoin and then he took him

$600 million. It's more likely some blend of, hey, maybe some of these sales or LP rewards or however this royalty thing was structured in addition to this like inkind realization of Trump, I'm guessing he covered his his taxes on that. But like if you look through it, I mean he's also apparently like he has he's getting some yield on USDC on chain because it says it's kept in his cold wallet and he lists income on it. So I don't know if the president's yield farming somewhere but uh some tips. So >> yeah, shout out to Baron. Yeah, Baron's Baron's yield guy. But anyway, I mean the whole thing is I think I think the unfortunate story is like this thing again is crypto is becoming very politicized and like I think this is just a makes it such an easy target for

coming elections and so you know independent of these weird specific wonky details you the headline does not look great and um I I know I'm I'm hoping like you know we'd get more kind of bipartisan movement as we saw with Genius. Yeah, I think it's pretty obvious that like this is this is right now what's holding up clarity is this um you know ethics provisions which basically says okay you know president andor the executive branch of people in government can't do stuff like this they can't issue coins they can't get involved directly into the crypto industry for profit and um and this is why this now is going to be animating Democrats for the next obviously going into the midterms and potentially even for the next 2 three years I think it won't be obvious until 2028 whether or

not Trump's involvement in crypto ultimately was a liability or a boon to the industry. Like we sort of are getting the front half and the front half is the good half, right? You know there's there's united Congress, the ability to get legislation passed. There's uh you know basically total control over the United States government at this point. Pretty soon Trump is going to be a lame duck president and there's going to be much less focus on passing legislation so much as probably him defending himself when inevitably you're going to have a Democratic either split Congress or fully democratic Congress coming out.

>> What's the poly market on that? >> Right now I believe it's 84% to win the House and uh Senate is like what 5050 I think but Republican bet. >> Yeah, it's it's highly correlated. If they do win the House, it's more likely that they also win the Senate. If they win the Senate, they'll they'll definitely win the House, right? Because obviously that means there's a gigantic blue wave. So, um the Yeah, I think there's a um there's an unfortunate reality here, which is that we're going to kind of see, but there's I I suspect there's a lot of political pain coming because of this. Like, this is just there's a lot of stuff in crypto that's hard to understand. This is easy to understand. president made $2 billion from crypto and everybody who invested

in it lost money. Uh that that feels bad and like almost like the perfect obviously like to your point Tom like he that money was not made by like traders losing money or something like that that obviously can't be the way in which Trump monetizes royalties or something. But that perfect equivalence between the two makes for just a really bad narrative for for this whole ethics conversation which is increasingly going to be animating uh the conversation around crypto. So So we'll see. But yeah, I think it's a it's a bad portent of what's coming over the next couple years because we're going to hear a lot more about this coming soon.

>> The one thing I'll add there is I think this could potentially be a positive for getting clarity pass because I think it gives the Democrats in the Senate an opportunity to get a win, right? I think if they can negotiate an ethics compromise, if they can get something on paper, it really puts the ball in the Republican side to get this across the finish line. And so, I know it's a high stakes game that Trump has created here, but I think it creates a path for everybody to find something to be happy with.

>> I'm skeptical that this makes that easier. I feel like this makes that harder because it's now becoming so politicized and it's becoming such a powerful political point that before it might have felt a little esoteric of like, oh, Trump made a lot of money. U now it's like, okay, this is this is really a democratic talking point now. Like this this plays and I think the other element of it is that I mean I I I take your point, Rob. I think you're right that probably Trump is not going to make anywhere near this kind of money over the next couple of disclosures. you know, like there's just not there's no more juice to squeeze. There's no more retail, you know, unless you're Ansom, there's no more retail trading activity to squeeze. And so maybe that would give Trump more reason to say, "Okay, yeah,

I'll give on ethics cuz like I already made my money. Like I'm good, you know, like I don't think I'm I don't think there's another billion in here for me to make." Um but uh but you know, knowing Trump, like I he obviously is very self-confident. So maybe he's like, "Oh, no, no, yeah, I got another one in me." You know, maybe we uh launch Baroncoin next. >> I hope not. >> [laughter] >> All right. Well, if if if we do, obviously chopping block, we will need our Baron Trump allocation. So, if you're listening, Baron, hit us up. No, Robert doesn't want any. >> I don't even make those jokes.

>> I'll take I'll take Robert's allocation. I'll take >> I see the whole thing. >> Okay. All right. Thanks. Uh Vlad, where what should people check out? Where can they find you? Any anything you want to direct them towards? >> Lighter. You know, we have continuing to add assets to trade. Uh now there's uh you can also go to the the Robin Hood instance. Um you know definitely follow us on X uh lighter_XYZ. Uh lots of exciting stuff coming out. We're working on options next. So yeah, you know, we're we're pumped and uh yeah, maybe maybe you know we'll uh add some exciting new new per week as well.

>> Great. All right. Thanks for joining us, Vlad, and we will see you all next week. Thanks guys. [music]