Trevor King of Lighter on the future of perpetuals

Transcript

We think it's 10x more competitive over the next 5 years as the US markets open up. So, we think we'll be competing with a lot more people than just hyperlquid. >> The Clarity Act has failed. The SEC and CFTC are rushing to roll out regulatory clarity for the digital asset industry. And everyone is wondering who is going to win the PERPS wars once they open the floodgates. And most importantly, what do we need to know about all of this? Hello and welcome to Milk Road Crypto, the show that knows that when your project is up more than 500% since March, people are going to ask a lot of questions. I'm your host, John Gillan, and I'm here to ask questions. Today is Wednesday, September 23rd, and today we are joined by Trevor King, who is the head of investor relations and growth at Lighter, the zero fee ZK powered

perpetual futures exchange built on Ethereum. We're going to find out what that means and why it's so bullish. Uh, if that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it. As a reminder, today's podcast is free and that would not be possible without our wonderful partners at Nexo, the digital asset platform that lets you trade, earn, and borrow all in one place. So, keep an ear out for more information on them later in the episode. But for now, welcome to Milk Road Crypto. Trevor King, how are you? >> Good. That was a mouthful of an intro, man. Well done. >> I'm getting better at these. >> Thank you. Thank you. Thank you. Uh Trevor, uh we crossed paths here in New York City and got to have a quick conversation about Lighter. And something that jumped out to me from

what you said was that you were already pretty fullported into lighter before you started working there and you left Deli to come to Lighter because you said it was quote a generational company. Talk to me about your conviction in this relatively small project and and what got you so excited about lighter. >> Yeah, absolutely. I mean, maybe maybe some background is for the the prior two to three years, I'd focused solely on on PERPS for the most part. And so, I'd gotten to know the the team really well, and I believe PERPS was the fastest growing vertical in crypto outside of stable coins. And now, I would argue it's growing faster than stable coins.

And so, if I look at tech more broadly, I think it's the second fastest growing vertical in tech, outside of AI, and AI include robotics. So, like, okay, I really want to lean into perks. This is a place I feel like I have edge. Um, I have somewhat of a network in in crypto. I don't in AI. I have no edge there. help me lean into the edge I have. And so I spent a lot of time uh speaking with various teams in the per space and lighters kind of always stood out. Um I remember meeting them here in here in Miami, that's where I'm based now. I remember meeting them 18 months ago and was very impressed and so kept kept close tabs on them. And then over the over the months and quarters of spending more time with them, underwriting them for my personal portfolio, doing some

work for Adelfi on that side as well. um just getting really close to the team and I remember uh actually being somewhat critical going into their TGE and I thought you know valuations might have been a little bit lofty um actually I thought valuations were actually probably pretty fair but I thought the the metrics were probably a bit uh over inflated and I think anytime you see incentives I think it's safe to like discount some of that volume and how you want to discount that is up to you for me I generally speaking said somewhere between 60 and 80% I would discount the the volume there and and so I think you kind of saw that post PGE and then I remember spending more time with the team after that and kind of you know just spending more time with them their advisers well priced as well. Um and I

remember coming to the office when the token was down 60 70 70% in a matter of whatever 6 weeks it was and the team was like incredibly locked in. A lot of times when you come visit teams and the token's down 60 70 80% in a few weeks like morale is really low. Morale was definitely low here but you usually had people kind of almost looking for the exit. Um and there was none of that. There was no no one had resumes open on their computer. like everyone was very much so locked in like hey what we built is truly incredible and we just we realized what we needed to do to kind of like come to market in a better way. Um and so I saw them really lean in and that's that's when I personally really started putting a lot of my chips on the

table and then later on got the opportunity to join them and it was it's been an incredible time ever since but I do think it has the potential to be a generational company. A lot of startups fail um both in crypto, in tech, in wherever uh restaurant businesses, whatever they fail, but this is one I think has a great chance of succeeding and if we succeed, I think we'll be a household name. >> Okay. Well, let's talk a little bit more about some of the technicals here before we talk into that success story. Um, lighter is zero fees. It's ZK powered. It's zero knowledge um technology. It rolls up right to Ethereum. Talk to me about what this actually unlocks for users that they should care about because most people don't really care about the tech. They care about speed and low cost. Is there an advantage that

lighter gets from this technology solution they've applied here? >> Yeah. So we can think of like an exchange having like three parties. You have the exchange itself, you have the market makers and then you have you know call them normal discretionary traders. And some of these can be systematic as well. This is retail proumer hedge funds the exchange market makers things like this. You kind of have to like exchange has to satisfy all three parties. Generally speaking you you see an exchange charge both retail and market makers. We decided uh we we wanted to charge retail zero fees. We think that's a competitive edge when it comes to getting partners and growing our distribution especially here in the US.

I think you can look at brokerages and exchanges in the 2010s 2015 really through 2020 and you saw zero fees really take off there. I think we we think something similar happens with per over time especially as the US market opens up and so we we charge retail zero fees and we're able to do this uh because we we give latency advantages to market makers. A lot of people want to say say this is like payment for order flow. Um it's not quite pee off. Um it looks and smells like it, but it's not quite because we're not a broker, so we're not technically offering up that flow. So it's not pee off. Um but so we're able to satisfy these three parties because market makers have somewhat of an advantage over over retail. Um retail gets the best execution possible because one, it's zero fees. Two, market makers are having

to quote tight because they don't get a last look. And so they're quoting incredibly tight to bid and get this benign flow of retail. and we still are profitable for market makers. So you have all three of these parties who are satisfied. Um and so we think this is very much so a competitive edge for us going into the US markets and more globally uh more so as well because we're really good dance partners because we charge zero fees. We can we can share economics really well and be a good dance partner for some of these larger institutions and I think Robin Hood is a great example of that. Telegram is a great example of that. Manar is a great example of that and those are like three of our largest partners to date. Just want to pause for a quick second to remind you all that the crypto bull

market is back. I have been deploying capital into altcoins that I think are going to do very well this bull market. Some of them are already up over 2x from where I entered. So if you want to see what's in my portfolio, what's on my watch list and have access to me in Discord to ask questions 24 hours a day. Join Milkroad Pro now. The link is in the description. It's just a dollar. I'll see you there. Well, let's talk a little bit about some of these partnerships. You've always referred to lighter model for partners as a white glove relationship where you actually deploy engineers to work with the partner on setting that up. Is partnerships the main strategy for growing lighter at this point? And and how do you think about finding new dance partners uh as you as you go about this process?

>> Yeah, I think this white glove approach and growing distribution with partners is definitely a big piece for us in growing and growing overall market share, growing our market share, market dominance and things like that is definitely something we're we're leaning into. And we focus on multiple geographies like everyone assumes us with like associates us with the US and yes we are incredibly focused on US and getting US partners but we also spend a lot of time in Latin America we spend a lot of time in Asia as well trying to get partners in different places. Uh we we announced a partnership with Bitub which which should go live later this year and we're very excited to work with them the largest exchange in Thailand.

And so we're really excited for these partnerships as well. And yes we do think this is a a huge way to to grow our distribution is working with these partners who already have huge distribution. I mean, take Robin Hood for instance. Believe they've got 26 million monthly active users. Um, that's that's a lot of users. That's many multiples of what we have in in crypto today. And so, really excited to continue to work with various partners and grow distribution. >> The partnership with Robin Hood has gotten a lot of attention, a lot of volume. I'm curious your your perspective on the success of this because it's not lighter itself. It's an instance of lighter that's built, you know, specifically for Robin Hood.

What's the success metric there? And, you know, who's getting the better end of the deal? Is Robin Hood getting a better deal from Lighter? Are you guys like Yeah. How how does that break down in your mind? What's your view on this so far? >> I think it's a very mutually beneficial relationship. Um, and so just for those that don't know, we have a 50/50 rev share with Robin Hood on this. So we they make 50% of the revenue. We make 50% of the revenue. If you're following this on chain, just for those on chain solut all the revenue will come to us. We still manage that instance and then we'll actually be dishing out and giving 50% back to to whatever Robin Hood wallet they want that to go to. Um, and we think that's an incredible relationship uh that we've got with them

and we're we're excited to continue to explore what that looks like in the future. And right now success I think is open interest volume, revenue, and things like that. Um, which are all growing at a rapid rate and we're very excited for this. I think I think the Robin Hood instance might be a top 10 by open interest now in DeFi Llama. Um, so we're really excited to see that success and we want to continue to see that grow. RWAS are 70% of that open interest and so we're seeing a lot of interest there and a lot of that is driven from some some composability aspects of being on Robin Hood chain. So you've seen people like long.xyz do tokenize of perpetual futures um and tokenizing those and doing interesting stuff and we've got many other partners who will come to market in short order who are

doing something similar and so we're really excited to see the growth uh on that side of the business which isn't something like that's the part of the business I definitely discounted. I have discounted for ever since I've known lighter like this composability aspect I very much so discounted but it's been pretty amazing to see this uh play out over the last call it two to three months. >> Okay. So it's been positive for all parties. It's just kind of like your your example with the the the exchanges and how lighter is trying to be beneficial for all stakeholders. Seems like that's what you're aiming for here as well. The reason why I wanted to start with this conversation on distribution is that I've heard you specifically name distribution as a key part of lighter strategy to go after the juggernaut of the space which is

hyperlquid which is you know 20 times or so bigger by market cap and has I think just crossed all-time highs on open interests of around 18 billion. Um is this the essential strategic move you think to make lighter compete with hyperlquid? Uh and and why is distribution so key for growing a purpose platform right now? Yeah, absolutely. I mean, we want to grow distribution in the US. We want to grow it in the rest of the world. And yes, everyone wants to kind of pin us against Hyperlid. We think they're an incredible team, very competent, a great product. I've been using the product for many years. But we we we're ultimately competing with a lot more than that. We think as the US market opens up, the the per landscape gets 100x more competitive because the TAM's 100x. And so while I think a lot of people in crypto who've

been around for the last 24 months think per have been incredibly competitive over the last 24 months have you really saw the you saw really saw the emergence of hyperlquid and you've seen many others including lighter come after and similar timelines. Um and think that's really competitive. We think it's 10x more competitive over the next 5 years as the US markets open up. So we think we'll be competing with a lot more people than just hyperlquid. Um but regardless of who you're competing with, you need distribution, you need users, you need partners. Um, and so you can have the greatest tech in the world, which we we think we think we might in this space, but we need the distribution. And so we're very excited to continue to go after partners. We want to grow the overall per pie. Yes, I think there's like a lot of, you know,

low hanging fruits in crypto that and teams that we can start to work with. And we think that's fantastic and we want to work with those teams. But what's going to really grow the overall pie is more so working with traditional financial institutions here in the US because the US is still the capital markets of the world and we want to work with these teams. And so like we want to do both. We want to focus on the crypto natives and continue to work with them. We think they're incredible partners that move fast, but we also want to spend a lot of time working on the elephants in the room that are very much so the the financial institutions here in the US. And so like we want to grow the overall per pie. We think it grows 100x from here and we want to we want to

own a decent chunk of that. Okay. I want to talk more about the total addressable market as you see it. Um, but first I think this this conversation around institutional distribution is is a really fascinating one because you know I've heard you say that perpetuals are like an ideal product for retail, but the institutional distribution competition is heating up. Payword, which is Kraken's parent company and BitGo, um, recently disclosed deals with Hyperlid to make it easier for institutions to access Hyperlid. Um, and I'm curious your thoughts on the strategic moves that Lighter needs to make to compete in that in institutional distribution uh, war with Hyperlid and other competitors obviously, but like what's your strategy for institutions specifically?

>> I think this also comes back to your first question regarding the tech and how I kind of explained how we're able to offer zero fees. Zero fees makes us a really good dance partner because we can share economics really well. And so when you go to work, if you want to go pitch an institution, um, and if if you say, "Hey, I want to take, you know, let's just call it a four to five bit take rate and then you can kind of like charge anything over that, we're going to give you the shard rate." They're going to laugh at you and never talk to you again. And so you need to be able to share economics really well. And so we think we share economics really well. Um, and so as we think about going going to market, um, one, we're we're spending

a lot of time in DC. We're spending a lot of time with the CFTC trying to get US licensing to operate here in the US. And we also have this economic advantage, if you will, to where we can share economics really, really well without it hurting our bottom line. Um, and so there's twofold. It's like spending a lot of time in DC trying to get the right licenses to operate in the US legally and then also having taking this white glove approach and being able to share economics and being a great dance partner. >> Okay. Well, let's talk about what's been going on in DC cuz uh things have been popping off. Uh the SEC and the CFTC have been, you know, really clear about trying to roll out regulations to accommodate a lot of things in in crypto, but perpetuals are definitely one of them. Trump said hyperlquid by

name in the White House. Um and I'm curious if you think that they are kind of taking an even-handed approach to like the whole asset class or the industry overall, or do you think that, you know, they are tilted a little more in favor of a hyperlquid or of like some US native institutions? and uh just kind of how you see this this regulatory landscape evolving as you've been spending a lot of time in Washington. >> Yeah, I didn't have Trump saying hyperlquid on my bingo card. Uh that's for sure. Um but it it's it's incredible. I mean, I think it's a massive win for the overall industry. It it shows that it's it's important to more than just the CFTC and SEC, but it it goes all the way up all the way to the top of the food chain of people who are interested in this. And yes, there's

plenty of dollars behind that motives, those motives, of course. Um, but we're we we we've been very encouraged with how fast the CFTC is willing to work. They operate very much so like a startup. Um, and for those of you who don't know, generally speaking, if you were to submit an application with the CFTC, you have a 180day window. Um, where they say yes, no, or hey, we need more time. And generally speaking, in prior administrations, a lot of times you would see you'd go 179 days with nothing from them and then they say they need more time. Um, and so it was it was it was it was frustrating. Um, and with this administration, they are very proactive. Um, we don't think they want to take the full 180day window to come to a conclusion. And so, we've been very impressed. We enjoy working with them.

Um, we have great relationships with the CFTC. And, and I, yes, clarity didn't pass. And I I know a lot of people ask about this, but Clarity, um, you know, we supported Clarity, but Clarity not passing doesn't really affect our business whatsoever. the way we operate as a business doesn't change and we think the SEC and CFTC will step in and make uh make great rules and regulations around crypto assets. >> Well, I think a lot of uh other players in the space see the same opportunity. Koshi already offers regulated pershore in the US for better or worse. There's a lot of drama around that which we won't go into. Uh but Coinbase and Kraken are both applying to offer per as well onshore in the United States um directly here. Um so it seems like we're just going to see a lot of competition in the

perpetual space. What's lighter's strategy for survival here? Do you think you just want to, you know, continue to try to be the best dance partner? Are you expanding into other markets or just what's what's the view there? >> Be best dance partner is is is something I want to continue to hit home with both investors and retailers. Like we want to be an incredible dance partner. We have what we think is incredible technology. We have an incredible engineering team um who we can we can build things and customize things specifically for for your users, for your clients. what what is the best use for you and your business? We can do this and we can share economics. And so like it it's going to be the same thing. It's been three different questions. It's the same answer because this is like a big piece for us. It's it's this white glove

approach. It's being a good dance partner. It's having very talented and competitive software engineers. We don't just have like vibe coders like we have some of the best engineering talent in the world here at Lighter. And I have never been more impressed by an engineering team. And I think we are incredibly competitive there. Um, and and I think that's a huge competitive advantage for us. >> Okay. Well, let's let's let's just leave the the strategy on competition there for a moment, but I do want to come back to this question of the total addressable market as you see it because a lot of people debate this question as it relates to perpetuals, as it relates to crypto overall. How do you go about thinking about not just, you know, for perpetuals, but for lighter specifically? What is the total addressable market for all of your

products and and how are you like thinking about getting from where you are today and towards that target? Yeah, I mean I think you've seen this over the last six months, eight months really start to play out. Like you've seen commodities pick up late last year, early this year. Um, as there was speculative fervor and animal spirits and gold, silver, copper, uranium, you name it, there was animal spirits there and now you you saw that pivot kind of come down. You saw it go into equities and now equities, we actually just had our largest uh equity per volume day ever in the history of lighter two days ago. And so we we are very encouraged by the continued growth there. Um, and so now I believe it's uh just about 20% uh or 30% of our daily volume comes from RWAS, which is asset class

diversification from a revenue standpoint, from a business standpoint, which I I really enjoy coming from the investor side. You've less cyclical um correlation to to equities or to to crypto. And so been very encouraged with that. And when you think about the TAM overall, it's like, okay, how big is crypto and how many more multiples bigger are equities? and you add in commodities and then one no one's talking about right now is FX markets. We think FX markets could be quite quite quite big as well. You know FX is generally speaking not a super high margin business but we think there is a is a use case there because those are markets that have a lot of room for improvement and we think we can step in and help there a lot. And so when you think about that uh you know it it comes

out to be you know 50 to 100 times larger than what it is in crypto just from a market cap standpoint from a volume standpoint. And so we very much so look forward to to the expansion and the growth uh of equities, commodities, FX, you name it, from various asset classes. We'll let the first iteration of options live and then you know by end of the year we'll have kind of a full options suite product. Um and so then we'll have you know we'll have spot per binaries and and dated. Um and so we're very excited for that because we think that also we see huge huge follow growth there.

>> Okay. So there's a lot in that question, but you talked about your your view of the addressable market for per. And this was my next question, which is why I knew what you were talking about was options because you guys are going into options and prediction markets, which as you said, I gather you all refer to as binaries, like yes, no, which is, you know, we call it a prediction market, you call it binary, whatever language you use for it. You're expanding in that direction. Talk to me about how investors should interpret this. Are you guys just trying to grow the pie by bringing out these new products or is this sort of a tacid admission that hey maybe the per landscape is too competitive for us and we need to bring new products to market to keep growing?

You're laughing but like how how do you think about this? What's what's the strate? >> We don't we don't think it's too competitive for us. We just think this is a natural extension of our business and it's a very complimentary product and then over time we think asset managers come on chain. We see really sophisticated vault growth over the years. And if you're an asset manager in traditional finance, you have spot, you have futures, you have binaries, like traditional binaries. Everyone calls them prediction markets now, but they're originally binaries. And then you have dated. This gives you a lot of flexibility and um a lot of explicit explicitity. I can't say that word. I'm illiterate. Um you can be very explicit with the way in which you put on a bet.

And so you have a ton of flexibility there. And so options and binaries futures and spot gives you a ton of creativity in the way in which you express a bet. And so we think that's huge growth. It's not because we don't think we can compete in per in fact I think we are perfectly suited to compete at a very very high level for many many years and build a generational company in just per but we think options is very nice complimentary product um to have in this market. I got tongue tied there. I apologize. >> That's okay. We're both excited. It's a bull market. I understand. um what part of the market are you aiming to serve with some of these things? Right? Like do you think that there are a lot of people who want these products who just can't get access to them? Do you think

that they already have access to products that you can just offer a better version of? Cuz like like you said, binaries have existed, options have existed. What's your thought process on that? And how do you see the market landscape right now? >> The market landscape right now, I think you've got derive in the last few weeks who's really emerged as kind of like the market leader. You have Paradex and dime uh incubated by Paradigm. um, Incredible Options Platform and I think they're actually pretty good products. Like I've used them. I think they're good products. I started my career trading options. I started when I was when I was very young trading options in high school. Um, and they they're near and dear to my heart, near and dear to many people on this team's heart. Um, and and we think it's really just a complimentary product alongside PERS.

You know, I don't think we have a house view on on options growth overall. I mean, you can just look at zero DTE and look at the growth on Robin Hood. Um, it's pretty incredible. and how much of that is cannibalized by per you know we we I don't have a I don't have a personal view but I just think it's a very complimentary product to have alongside options and I think I think there's great products you know out there today I think drive is pretty good I think paradex is pretty good um but I think we'll have a highly competitive product um and I think we'll have incredible distribution and you ask who who who's a target audience there here it's it's definitely proumers it's definitely institutions and it's definitely like retail so it's the same buckets that would trade perks but it's a very different expression of a bet and

it's very complimentary and it can be a great hedge to an existing position or vice versa. Um, and so we we think these play very well hand in hand. >> Okay. So, it's they're products that your target user segments are going to want and and you think you can compete there. So, that all makes sense strategically. >> Yeah. And I think I think options too is like an easier cross-ell than prediction markets. I mean, look at Khi, look at Poly Market, look at the crossell they've had from prediction markets to per like not that those aren't going to be successful. I'm sure they will be. But if you look at it today, like it's been pretty slow. I think a lot of people thought it'd be incredibly fast.

And I think if you look at HIPP4 2, I think a lot of people thought, oh, boom, this is like going to be this, you know, within the month one, this going to be this massive revenue driver uh for the business, and it's just not. And I I think we kind of hold that view. It's like like having binary, we call we call them binaries because they are binary options. I think those are great to have and it's a nice tool, but it's it's not as complimentary as true dated vanilla options that are very very convex. You can have a lot of flexibility there. Um whereas like having having the dated options we think is going to be an incredible cross-ell verse prediction markets. prediction markets. The prediction market user behavior if you look at it on poly market or even yeah just yeah poly

market verse height verse lighter like it's it's a very different user behavior than trading trading you constantly are clicking most of the time most users don't hold positions very long on per learn some discipline maybe um but they're clicking buttons a lot versus prediction markets is kind of like I have I have this I think you know Trump gets elected a lot of it were politics originally and now it's sports betting regulatory arbitrage whatever you want to call it um And so people are going about it that way. And that's a very different user behavior than taking an express or placing a bet and expressing a view on the world via perpetual futures or options. So like it's a very different bet that the user is making.

And so options is a much easier cross-ell in our opinion than prediction markets. >> I really appreciate your your views on that and especially somebody who's such an experienced options trader. We had Nick Forester of Derive on the channel not long ago. So I've been learning a lot about all of this and here. >> There's a lot of great things being built. Um, and I'm I'm just learning a ton from all this. I'm curious your thoughts on this. We talked about retail users. We talked about institutions. I'm curious your thoughts and strategy for Agentic Finance and Agentic users because I've done a lot of interviews with people like Raul Powell and Jordi Visser, Tom Lee talking about this collision between digital assets and Agentic Finance. Um, and I'm curious what Lighter's strategy or vision is on

that because we haven't talked about that yet. We we've launched a fair amount of tools for people to connect agents and trade via lighter. We think there's growth there. I mean, personally, I it's it's one I'm excited about, but it's not a place I necessarily have competitive edge. I think if you had one of our engineers on, they give you a much better answer than I would. This is a place I don't feel like I have an edge or like a great great point of view. Um, I think it's it's been overhyped so far. Um, I think it's going to be pretty big for micro payments. Um, for for trading purps, I'm not sure. I think the best use case and this really is an agent agentic but it's more of systematic. One of our partners, Manara, who's actually our largest partner on the partner

attribution side. Um they run systematic strategies. Um and they've got agents and things like this as well. and they've seen incredible success on lighter versus other platforms and that's strictly because zero fees and so when you're running these high turnover strategies and maybe an agent would run this having zero fees is actually like massively accreative to like your your P&L versus if you're having to pay fees and you have a ton of turnover it really hits your P&L and so like Monara is a great example of this I think pair protocol to an extent is also a great example of this that have had great success on lighter but they haven't necessarily on other platforms and so I know this isn't quite the agentic question you're asking, but if you think agents pay spend a lot of money um and they do it frequently, you know, having

a lower cost there is going to be massively accreative to to the performance of whatever whatever agent you're running. You know, one of the weird things about crypto is that the longer you're in it, the more accounts you seem to end up with. You buy in one place, trade somewhere else, earn yield somewhere else, and if you actually need capital, you end up having to sell something that you probably wanted to keep. That's why we at Milkroad are partnering with Nexo. These guys keep the whole thing under one account. You can buy, trade crypto, earn interest on what you already hold, and even borrow against your capital without having to sell it. All in one spot, all in one account, all on Nexo. So, if you need liquidity, but you don't want to give up your position, or you're already holding crypto and you want to be able to do

more with it, I think Nexo is worth your time. We love working with them. I think you will, too. Tell them Milk Road sent you. Gotcha. Okay. Well, I I'm interested to see how that all plays out. Um, let's talk about the token lit. Um, you guys have switched from a buy back and hold to a buyback and burn program. I think July was when you guys made this transition. Since then, you have burned over 6% of the total supply. Um, and I'm just curious your your thoughts on on this in terms of uh revenue that Lighter is making and driving that value to the token and just like what's the response been from the market to this change?

>> Yeah, I think it's important to to note that that's like 6% of circulating supply. Um, >> okay. Okay. for for what it's worth, um 6% of the circulating supply and yeah, we could we plan on continuing to do buybacks. Um we think it's a great way to show alignment with the community. I think buybacks like Hyperlid kind of championed those a few years ago. I think it's just a great way to show um and earn trust with the market. I think in crypto over the last 10 years, we've kind of gotten burned by teams and founders and so it's a great way to align incentives unfortunately. And so like I think we do buybacks to to earn trust. And I think over time and maybe this is where SEC and the CFTC step in is once we can kind of assign token

rights to to token holders, I think that probably changes because most companies that do buybacks today do it on a percentage of revenue and topline revenue, not not bottom line, not earnings, not free cash flow. And so I think over time it's probably a percentage of free cash flow. But yes, we continue to do 100% of buybacks with revenues and we want to be massively aligned with our community and as as the regulatory landscape changes, we'll be flexible in that. >> How do you see the strategy changing in that world where you can assign token rights uh to token holders and you don't have to use so much of the capital to just buy back the token? What does that unlock for lighter and and what would change in that that that landscape?

>> We could be a lot more disciplined on our spend and growth. I mean, I think if you if you look at a normal equity business, they spend most of their money on R&D and growth, capbacks build out. I mean, it's been the only talk of the town on Bloomberg for the last six years with AI and like this is very much so like how normal tech companies go and I think we're very much so a tech company. Like I don't like I yes, it's a crypto business, but like we're very much a tech company and we are diversifying our revenue streams in various asset classes. It's like we want to operate very much so as a tech company, as a startup, we want to be investing into growth. And so once we can assign rights and things like that to the token, I definitely think it makes more sense to

spend spend money on growth, but for the foreseeable future, and maybe that's yours, we will continue to buy back 100 or buy back with 100% of revenues um for the foreseeable future. Maybe that's yours, maybe that's not who knows. >> Okay, gotcha. All right. So, >> we just want to make sure Yeah, we just want to make sure that we have a great relationship with the community investors. It's it's a trust us. like we want to be good stewards of of the capital we have and we don't we don't want to burn that uh you know yes we'll do buyback and burns but we don't want to go light that on fire with various incentives and so when we think about going to do a deal with somebody we want to be very selective with who we work with how we spend uh both internally and

and externally with partners like we want to be good stewards of the capital we have we want to be good good investors good allocators from a business standpoint making sure we're spending money on the right places that are going to have a really high ROIC return on invested capital for the business. >> You know, you just said you want to be selective with your partners. Are there conversations you've had with people where you've had to say no for certain reasons or like what might cause you to have to say no to a partner that you know you you were interested in but you know couldn't get to a certain point on a deal. What would happen there? >> Yes. Uh we we have and this is this is more so specifically I mean our SDK is open source. Lighter TS is now open source which a lot of our front end

components which builders have been reaching out are very appreciative of. Um but so like that's fine. Whoever wants to build can build. But then when it comes to instances like what we built for Robin Hood, we had the Robin Hood lighter instance. There are other teams even prior to that that instance going live who are who are asking if we could build an instance for them. Sometimes it doesn't make sense to to build an instance because they can't solve the bootstrapping problem. Like you have to find the liquidity, you have to have the distribution to have the the taker flow. You have to have the market maker relationships and you've got to have a pretty big balance sheet because you have to fund that. Uh, and so sometimes it doesn't make sense from that standpoint. But if you can solve the bootstrapping problem and you've got

great distribution like Robin Hood, it makes a ton of sense. There there are others that uh don't have the same type of distribution that it doesn't make sense to kind of have your own instance. And so it makes a lot more sense to just plug into our SDK and use partner attribution. >> Okay. So there's a lot of variance in terms of what is the right solution for what partnership there. Um, in these conversations you're having, you head of growth and investor relations. in these conversations that you're having, are is this like more like people are coming to you like desperate to get some sort of solution for PERPS or are you still having to sort of pitch per and crypto to them and like what's the nature of those conversations? Is it more like you knocking on doors or fielding incoming?

>> It's it's both, but it's definitely more of me knocking on doors. Like we we get some inbound, which is great and we love that, but I I don't know too many people that are knocking on traditional financial institution doors. And same with some of the larger crypto players. I don't know how many people are knocking on doors there. And so we spent a lot of time knocking on doors. Uh I think we have an so like Manu leads our our BD team. I think he's done a stellar job of growing the BD team and knocking on doors. He really champions that. I've stepped in there and started knocking on a lot more doors as well. And you know, I think that's like a core focus for me.

Like yes, while I might lead investor relations. Um I continue to have conversations with investors. If you're an investor watching this, please reach out. I'm happy to chat. But I'm spending a lot more of my time on the BD side, like knocking on doors, getting deals done. Like we want to grow our distribution. Um, and we don't want to just grow our distribution to 2x, we want to grow to 100x and who are the right partners to work with. Um, and so spending a lot of time with these partners and a lot of them are slower moving versus in crypto generally speaking, you have a conversation and you usually have a proposal and a term seat shined within a week. These are months, quarters. Um, and so it's it's very much so of like this courting phase um, where we spend a lot of time with

these partners in person, virtually. Um, so doing a lot of door knocking. >> Yeah. Well, I think if if you're knocking on doors that are taking longer to get back to, it's usually because those conversations are more worth having. So stick with it. Um, I want to ask another question around the token. There's a staking rewards program that's been initiated, which I believe was funded with 250 million token reserve um, targeting around a 6% yield on on LIT. Um, but this seems like this program is is set up to run for maybe a limited amount of time, but maybe not forever. Is this also something you think you might sunset at some point or just like what's your your thoughts on the evolution of the staking program?

>> Yeah, we're flexible with that. I I think I don't think it's a needle mover if we were to increase that 4% or decrease that 4%. Um, but we remain flexible in that that allocation of capital. >> Okay. Well, we'll just let that sit there then. Um, do you think that zero fees is going to be something that lighter continues to offer in perpetuity? Cuz like I I've I've wondered about this a lot. Like does this something you're committed to maintaining? Is this something that might change in the future as dynamics in the market change and like you know the business needs to bring in that revenue. What's your thoughts on that and and the outlook?

>> Yeah, absolutely. We we want it to be zero fees for retail. We we do believe that. But it doesn't mean we won't monetize in different ways. So we recently announced we've changed the way in which we monetize some flow. So originally you had a standard account which was free and then you had a premium account which a lot of market makers and call it you know sophisticated API traders were using cuz you had higher rate limits and you you had to pay fees there. Retail was free. Now we've actually introduced a new tier called plus and so we had a lot of users on the free accounts who are running into rate limit issues because they were using the API for TWOPS and so you would hit your rate limit pretty pretty quickly there and so we've introduced this plus tier where we charge 0.5 bips

make or taker and you have much higher rate limits and so we're start we have seen some movement from free accounts to plus accounts even to pre premium accounts for higher rate limits and so like there's other ways in which to monetize um we've also introduced a lot of OEMs tech features order and execution ution management uh system type of type of trading features. Icebergs, RFQ, advanced Q- ops that are both make or taker atomic orders and for some of those we do charge one bit uh for for retail uh for free users. Now they can use the other features. They're completely free but we believe these are very much so premium features that deserve a premium fee and so we do monetize on that a little bit as well but the core feature the core functionality of the exchange yes will be free.

>> Okay. So, you're going to try to maintain that, but the monetization strategy could evolve somewhat here. Um, Trevor, I'm curious about something. >> One other piece on that. I think we have a lot there's a fair amount of pricing power, I think, to be had with our model as well. And I think we can get very creative with with flexing some of that pricing power. I think you you see some of that on Robin Hood right now, actually. So, for those of you who don't know who haven't looked at the docs, the the market maker fees, the premium account fees on um the Robin Hood instance are three times as much as what they are on the main instance. And so it's kind of you can kind of see where some pricing power could come into play there.

>> Do you want to elaborate on that a little bit more for for people who maybe aren't reading between the lines of what you're saying here? What what are you getting at here? >> Yeah. So so we we we make our money as mentioned earlier from market makers and sophisticated traders who are using advanced features and and need higher rate limits and there's a fee on those on the main instance and what that fee is is three times as much on the Robin Hood instance. And it's kind of like okay well how much can you charge these users before they leave and so you kind that's what's pricing power is and so like we're kind of experimenting with that in a way and I think we did that about four or five months ago we actually increased it on the main instance and so I think it's safe to

assume you'll see some more of that over the next year um I think we want to be slow in this we don't have to monetize right now uh aggressively and we don't want to do that we just want to focus on distribution but there are a fair amount of monetization levers we can pull internally >> okay well let's game this out a little it because it seems to me like a lot of the institutions and players in the industry that you might be partnering with or seeking to partner with to increase the distribution at some point maybe not in the short term but at some point in the long run eventually become sort of an adversary or a competitor in some way at least at some point right um how do you think about that because like when you're trying to to do this right

now it may be advantageous in the future it may be adversarial like how do you navigate those relationships when you're talking to these institutions >> I think most of the time it's very like it's a it's a great partnership, a long-term partnership. We don't plan on, you know, having 12-month partnerships, 24-month partnerships. We want these to be long-term, 5, 10 year partnerships. And most of the people we're having conversations with, you know, we don't view as competitors. They don't view us as competitors. Very much so as partners. >> Okay. Well, I I think we'll have to monitor how that situation evolves. Uh Trevor, I'm going to ask a question here, and you take this however you want. When should I next expect to hear you making some headline news?

>> Sometime soon. Uh, I don't I don't have a good answer for you. Um, we're we're excited for the partners we're having conversations with. Um, and I think it's it's safe to assume, you know, you'll hear more from us. >> Okay. Well, you keep knocking on those doors. Matt Hogan from Bitwise is a frequent guest of the show and he says that it takes like an average of eight meetings um with an institutional player before anything happens. So, that that can take months for those eight meetings to happen, too. So, uh we'll we'll keep paying attention. Uh Trevor, thank you so much for being >> I would also add shout out to like the Bitwise guys. They're fantastic. Matt, Ryan, the whole team over there. They just la we have an ETP in Europe now. Y >> uh with them and so they're an incredible team.

>> Yeah. No, I I saw that it's like I think this morning that came out. So there's just a lot happening all the time and the headlines keep coming. I'm sure they will continue to. Trevor, thank you so much for being on Milco Crypto. I learned a lot. I think our audience has learned a lot. Full disclosure, I have a bag of light as well. A lit light lighter, whatever. Um because you know after talking to you and a lot of other people for a long time um you know one of our analysts here at Milk Road called this like when lighter was below a dollar he said you guys were going to be huge. So we've been a big fan of the work for a long time. Where can we send people to find more of you and your work online? >> Uh you can just follow me trevor flipper

onx. >> All right sir. Well we'll make sure everybody does that. Uh I think that is the end of my questions so we'll probably cut me saying this out but Trevor King head of investor relations and growth at lighter. Thank you so much for being on Milco Crypto. It was a pleasure. Thanks for having me. >> And thank you all for joining us. I hope you all learned something today. There's a lot of bullish alpha in this one, so I hope you take some time to digest all of it. Until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of Milk Road Crypto. Thanks for being here everyone. Bye. Thanks for listening to Milk Road. If you enjoyed the show, make sure you like and subscribe. And if you're struggling to find winners in the market, that's exactly what Milkro Pro

is built for. Our analysts have called some of the biggest winners early and Pro lets you see what they're buying next, every trade they make, and the research behind every position. Check out Milk Road Pro at the link below. Everything you hear on Milkroad is forformational purposes only. These are our personal opinions, not financial advice, and we may own some of the investments we talk about. Always do your own research and make the decisions that are right for you. See you next time.