VVV, CFTC and Morpho | Livestream

Transcript

What's up, guys? Just wanted to let you know about the Block Works Digital Asset Summit, which is back in New York March 24th through 26. We'll have top speakers from leading asset managers, financial institutions, DeFi protocols, crypto companies, and policy makers all under one roof. Think of Black Rockck, Coinbase, Robin Hood, and more. Follow the link in today's show notes to buy tickets, and make sure to use code 0x200 for $200 off at checkout. See you there. Nothing said on Zerox research is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only and any views expressed by anyone on the show are solely our opinions, not financial advice. Pokio Ryan and our guests may

hold positions in the company's funds or projects discussed. What's up guys? Welcome back to another episode of Xerx Research. Another live stream of Xerx Research. Danny, how you doing? >> Good. Good morning. Good morning. >> Are you having a good time? >> Um, I'm doing great. How are you doing? Trying to be positive today. Let's be positive. >> Yeah, I'm doing very well as well. Um, before we get the stream started, I wanted to give a quick shout out to to Lightseed IR, our new investor relations platform for Blockworks. not Blockworks Research for Blockworks. I think um we

are working with Salana to offer investor relations for Salana. I think we're going to do a bigger release today, but just wanted to give a massive shout out for it. Um I think today or this week at some point. Um, yeah, Danny, I think you might have a bit more information on this one than me, but if you want to. >> Yeah, I'll just I'll pop this up here, but the you caught the gist of it. Basically, we we kind of pre-announced this platform and I know David effort was at uh Hong in Hong Kong and announced kind of pre-announced it there as well um the platform, but uh I think Bach kind of captured it'll sort of be an investor relations platform for the

Salana ecosystem. So funds, protocols, the Salana Foundation themselves um can you know I think Blockworks itself is trying to push into this this angle of investor relations and getting more concrete into the details of protocol operations with quarterly reporting and understanding better metrics and you know token transparency and all these different things. So um I think this kind of partnered with Salana is a great opportunity for that whole e system to get on board that train. Um, this is it's certainly the direction that the industry is heading like more I mean it's not really compliance because there's not regulations around these types of things but it's sort of like setting the industry standard for

compliance I think is kind of how you'd want to view it and like what things are reported um and on what basis. Um similar to how businesses report earnings and and share details regularly with their investors. Um that's that's kind of where we're trying to push. Um so this platform will have a bunch of data like that on all the Salana related protocols but um we've also got some new analysts maybe in the Xerx chat you've are familiar with uh Toma or Zaki um and Joe as well uh will be writing and putting out content and our very own Carlos from the Blockwork research team as well will be uh leading and driving some of that content as well I think.

Um, so definitely some fun and exciting stuff I think you'll see coming out of this. >> Um, I think you kind of hit the nail on the head there specifically around like how I feel like we talk about this all the time. the industry needs more of XY Z. But there is a clear issue in how these protocols communicate with potential investors both on like the retail investor side as well as on the professional investor side. And this is something that we're working towards closely with Solana Foundation um to fix to improve. Um so if you are

uh not Solana but are interested in investor relations um either Effort Capital has already reached out to you to chat about it or you should reach out to Effort Capital to talk about it. I'm sure they're taking on more and more clients as we try to build this out and be a net positive for the industry. Okay. Um, unless we have any other comments, I'm going to get into the three topics that I've managed to scrape by together for this Monday episode. Are we ready?

>> Yeah, let's run it. If you if also if you uh don't know who Effort Capital is, I mean, reach out to anybody that you have as a contact from Blockwork. >> We'll put you in touch. Yeah, we'll take a >> um Okay, I'm gonna start off with this morpho thing and I need to actually find the thing. I just realized. >> Yeah, I have it here. >> Um Zaki is really upset with you, by the way. >> You're upset with me? >> Zaki is upset with you because you said his name on the screen.

>> Oh, is he? That's unfortunate. >> That's okay. He'll figure something out. He's gonna end up on the He's gonna be on the pods. >> Yeah, eventually. It'll be He doesn't realize that I'm gonna dox him immediately because my brain can't make the connection between real name and pseudo name. >> Um, okay. So, big Morpho news. We had big A news last week. Kind of positive and negative on the A news. The negative being the conflict. The positive only news for Morpho is that the Apollo Global is going to acquire up to 90 million Morpho tokens over four years.

Um, I have a few things to say about this and I want to make this with my face like this if you don't mind. Um, I am a little tired of announcements that don't talk about when something was signed, at what valuation it is happening, if there's a discount. Um, and I maybe this is something that we can work on on the IR site so that people can know more and more about this. But some I think this was a similar thing that I had with the unis swap news, black rockck buying unis swap or black rockck getting involved in unis swap and there was another thing as well recently uh layer zero and citadel

where we're just not seeing any of these figures. We're not seeing any of like where they bought it and I think this is like a remnant. It's like it's a remnant of the old cycle maybe a little bit. Um where like any partnership with a traditional financial company was like wow this is huge. We're like getting involved in the real world and it's like well now everything is kind of involved in the real world to an extent. So I would appreciate seeing some more information. I do like um on the other hand I feel like Morpho is kind of an under considered token to an extent like not many people are like oh I'm bidding morpho but more people are

like oh I'm betting a I think the primary reason for that is that morpho doesn't have any fees um I think everything is captured at the curator level or like whatever the front end level >> yeah they don't have a the their fee modules turned off they're they've said that they're, you know, explicitly like in growth mode today still. So, uh, there's no revenue today, but you could, you know, you can hypothetically model it out assuming some >> rate that they charge >> charge.

>> Yeah. So, I think it, you know, people if if you're, you know, doing a model on Morpho, then you you know, you'd assume some effective interest rates on what they could charge um or some bips that they could take within the product. But yet today it's like not turned on. Um which is not too different really from you know like the uni token for example for a long time. Um I agree with you though. I think some of the things that would be great to see are price paid um or if there's a discount uh maybe I think the the way that this is framed is quite vague in terms of a deal to acquire up to an amount of tokens over a long time period of four

years. um could mean anything. Could mean that they've they have structured like a contract in some way. Maybe they'll they'll use the software and then therefore like buy an amount of tokens like per month over four years and maybe that amount will change depending on services rendered or something. It it's really hard to say. Um it'd be great to see see some more details but that's all we get. Yeah, I I imagine because they're traditional financial company, they'll have to disclose to an extent somewhere at some point what they bought and what they didn't buy. But I just I don't know how it works and I'm hoping that things change. Um, in terms of the how much do like

one of the SAS things is like the death of SAS thing is that you can just build out a lot of these things yourself. >> Um, we I think we've >> all they gets forked a lot because they have a licensing thing. Morpho hasn't gotten forked that much. People can just build on top of it and use it, right? Like Felix operates as a and I talked to Charlie about this on the bot as well. Felix operates as a uh curator of Morpho and they have their own front end and like you can just use their front end. The back tech is the back end is completely Morpho. Um but the Felix guys just charge um for

curation. I'm wondering how much power Morpho will have once they come in and they say, "Hey, you know, it's been free all this time. Now it's 50 bips or like now it's 25 bips and like we talk a lot about software deaf SAS death I think a bit over over um overplayed but maybe not like for everything but so like there's industry level software that just isn't easily replaceable. I don't think this is a hot take um like I don't know SAP and stuff.

I don't know if that's if you guys have heard you still. I don't like nobody's going to replace that at least anytime soon. Anyway, the general gist is like we have this but versus on the crypto side now you're saying like not you but people are saying oh like they'll just turn on a fee switch but Morpho is purely a back end thing. They don't have any distribution on the front end. I think they don't have any distribution on the front. When you think about lending you think a like morph is distributing itself through Coinbase for example. um they implement this thing. Why wouldn't like audits are a thing obviously, but if this code is open source, which I'm not sure if it is, but anyway, like let's say if you're getting a already audited piece of tech audited

and it's just a fork, it I don't think it takes that much time. I mean there will be a cost associated but if the Felix team was like like our cost for the audits is 50 grand fees we would pay 150 grand per year. Um you know like what's the make sense? >> I think it makes sense. Um I think if I look at the quot statement in a vacuum today I would kind of say like there you know there's Morpho there's I guess Oiler is in a similar bucket like there's a few platforms with kind of like vaults and curation um as sort of like a product and a

service. So I guess the down the actual question would be more like you know if Morpho turned on a a fee structure to curators would they move to like an oiler or another platform. I think the the other question you have to ask is like how much liquidity is being shoved into Morpho today because it comes from Coinbase or wherever else. Now, you might be asking like, I don't know, is Coinbase going to, you know, take strip out Morpho and just drop in their own version of the same software? Um, they have all the customer deposits anyway.

Um, they totally could. I I think it's a risk, but they've also invest backed Morpho, so um I don't know. I I see the Coinbase Moro relationship is more symbiotic than anything. Um, I think the the fee thing is always a good question, but I feel like this is a conversation we have about everything of like, well, if they turn on fees, won't somebody else just make another one and and uh undercut them and then take away? And it's like, yeah, I think this does kind of happen, but I don't know. You you see this with a as well, and you mentioned it first of like, you know, a has been forked a million times, but basically all the deposits that a d attracts have stayed in a and it doesn't really matter if you copy it and make it slightly different and charge no fees. Like

people are just going to stick. I don't know, there's a there's a safety and security aspect on the crypto side of things and then also just like I don't know lindiness and then after a certain point it's just there's just so much capital there that it makes sense to interact in that place. I think for Moro Morpho it's you're probably hoping for a similar thing. I think obviously the Coinbase relationship is like that's pretty material. Um, so I would I would almost make the same argument in the sense that assuming, you know, they're on good terms with Coinbase, like and Coinbase isn't going to like rip them out and just drop in a, you know, AI vibe coded version of the same thing or just, you know, copy the open source code if if that's legally okay. I'm not sure what the license is,

if it is or isn't. Um, then maybe it's maybe it's kosher, maybe it's not. But I don't know, there's a lot of path dependency there. I think we've seen the same thing with um I think it was a similar one with KHI and Robin Hood where they basically partnered with Khi to do prediction markets and then like maybe a few months after they announced that they were building their own in-house kind of prediction market platform um with probably a goal to just do exactly what you mentioned of kind of strip them out and drop their own thing their own solution in um so I don't know I think there's a case by case kind of argument that need that will need to be made for I don't know This is a conversation we have about about every every type of application that goes from

not charging a fee to then charging a fee. It's like those are the downstream questions that come with it. How much of a moat do you actually have? Um if you do, then you're probably fine and you can charge fees and and increase fees and and if you don't um and all of your customers can leave quite easily, then then you're going to have a problem. >> Yeah, I think it's not >> clear in this case. Yeah, it's not I mean I think in crypto it's a very fair conversation to have a lot of the time though because vendor lock is I think not really a thing and also people are very mercenary and able to switch and leave at any time like especially users. Um so I it also depends on like who they charge if they're charging users that's

bad for the front ends and if they are charging the front ends that's bad for the front ends. So >> yeah, there's different ways they could go about it which >> would have different downstream impacts. I think I would imagine that >> I don't know they they've designed the product around the curator model and like attracting really like risk curators uh rather than sort of like users and they've attracted users by doing the partnerships. So it it seems like it would make more sense to either directly charge like a you know like a SAS sub fee to like a Coinbase for the integration and then maybe take a you know take some bips for from curators that you know generate revenue on the

platform but I don't know. >> Great way to end it by saying I don't know but that's that's really nothing. Um >> I don't know. >> Okay. I >> I guess like what does apart from this morpho thing which we said we were going to be positive about? Well, we kind of sh on it. It's fine. Um there well to be fair I started but there's two other pieces of potentially positive news. Um, one is that Dragonfly raised 650 million United States dollars for their fourth fund.

This is a ridiculous like um I don't know. It's I've seen now this isn't anything against the Dragonfly guys. I think they have some really smart guys obviously and venture is very difficult. Um they're and I don't know what deals they get. It's difficult for me to see like which ones they allocated more to which ones they allocated less to. If you go over their portfolio, it's not I would say outperforming other VCs maybe. Um but I think this is pretty positive in that it shows there is still some form of liquidity coming

into crypto. Like one of the big things is well VCs are very important to the crypto economy obviously despite what people might say that VCs are bad some are not great but you still need their capital to fund projects especially in initial. So like and $1650 million is not a little amount. So maybe our takeaway here is that it's not all doom and gloom. >> I'd be curious. I don't know how big their prior funds were um by capital raised, but I guess I'd say I'm surprised at the dollar amount. Like I would have I would expect

a lower number, I guess, just in the sense that I don't know. I think if you looked at if you look to like 2024 like that sort of vintage of protocol that went public that was like an especially high watermark for things that absolutely did not make sense by the time it reached the public market. Um, so I guess if you know if they sort of like raise a certain amount of money kind of prior to then and then you know public market prices of a lot of these things have come down since then um I would expect that it would be harder to really put the same or a larger amount of capital into new protocol investments.

Um so I'm surprised by that. like it seems like it'll be difficult honestly to to do that unless um unless the valuations that they're raising at that that protocols are raising at are still just anchored to a high bar. But we've seen so much like public market draw down that that would just be very surprising to me unless unless expectations are still quite high on the VC side. I'm not sure. >> Yeah. I I will say one thing, they also like I completely forgot that they invested in Poly Market, Rain and Etheina. So I imagine they're doing pretty well. They also did lighter um which I think is also should be doing well. Um but yeah, I agree with you like

I think I would have expected maybe a smaller raise. Um but I think it also makes sense for capital to congregate around like um better venture capital funds as I feel like before everybody had a venture capital fund facility see these gap tables of like 40 people. >> Yeah. Anybody that made eight figures in 2021 opened a fund. >> Oh now I'm a VC then I guess like some of those are getting flushed out. Um I will see this I imagine on the liquid side as well where it's like oh some of them just die out they can't make money they have to return people call capital back um and like the good ones stay and maybe raise a bit more money and that's

why you get outsized fund just $650 million a lot like you can do free monad rounds you know and you can just take the whole round >> so yeah I guess that's why I was surprised I wonder what their mandate is >> um I wonder what they're going to like if it's just crypto or if you can also do AI stuff. Um because I think Polymark still fits into crypto because it uses crypto rails. >> Yeah. >> But I don't know if all of them do. >> Um yeah, I don't know. I guess like I was expecting some more pain before we started seeing funds are able to because we saw another one as well recently where a fund announced that they raised Oh, obviously like A6Z announced that they raised a massive

amount of money, but that one I don't consider. Um, I don't know. I guess I was just a bit shocked. >> With A6Z, I think it's just expected at this point in time. I I think they have kind of the same problem though. Like I don't know. We could probably go back and look at I mean that's sort of the nature of venture investing is you're just going to end up having a lot of euros. But I feel like just the amount of capital that they raise, they're really forced to like to spray into a lot of stuff that maybe they otherwise wouldn't if they didn't have so much capital. Um, but maybe that's just the nature of of like becoming the biggest venture fund. I don't know.

Yeah, I think I saw somebody today talk about no the other day on an ex article which are often very uninteresting, but they were talking about how VCs invest. Um, and I think a lot of those like funds that I said are probably like the VC funds, the smaller ones. Everybody who made eight figures who in 2021 and were like, I'm going to start a VC fund. They probably overinvested in like a bunch of copycat protocols and they just ended because it wasn't like the way that it was in 2021 where you could I don't know invested in a fork and then make a ton of money or like an

L1 and stuff versus now like I don't know what um Monad's most recent raise was. Was it two bill at two bill valuation? >> Well, they did the ICO on Coin List or on Coin >> for VCs. I think it was also two bill and it's fully diluted 2.2 bill. So, >> yeah, I think it was similar. Yeah. >> So, it's like I don't know. It took four years, four years on your investment and you're up 11%. 10%. >> Pain.

>> Yeah. It just it's just kind of the way it goes. I guess I guess the upside like when I look through A16Z is I know historically, you know, of course they're going to they're going to have access to all those best deals. So, you know, like when SU and Aptodos and all of those massive rounds were being done back in 2122, like they certainly were probably some of the larger investors in a bunch of those deals. And while the public token prices of a lot of those things are are down from their highs, like I think they're certainly up from like those seed raise rounds quite significantly.

Um so hard to say. I mean, if a lot of these things in public recently in the past one or two years, like it might actually take a little bit maybe more time before it changes kind of how the the future venture viewpoint is in terms of like amount of capital to allocate, if that makes sense. Because they, you know, they they invest and then they have to wait a long time for the thing to even go live and then they have to wait for that kind of vest period as well to really like see sort of what happens with the investment. Um obviously you know you kind of know like you know roughly kind of market to market valuation um how some of those things are doing over

time but it doesn't really like necessarily hit the book until a few years later. So there is there is kind of like a lag period there to >> um in terms of maybe an adjustment in how they approach things. >> Yeah, I agree. But >> but maybe the investment view is wider now. Like I I feel like previously crypto was very much like >> Frontier and you only invested in crypto. >> Yeah. It's like okay we're only gonna buy L1 tokens and now but now I think there's there's like a broader view of like >> you know you could look at you know Stripe is doing their tempo chain and like >> it's it's a bit more connected to fintech and finance and and trad

there there might be a broader range of investment opportunities. >> Yeah. I mean there was a whole like class of not class of but there was an entire type of VC fund that only did like crypto infrastructure which and even recent like Alliance I I wouldn't say like made their name but their focus was only crypto applications which is like a crazy thing to do like you're only focused on crypto applications. I mean, I guess like you want to build a niche, whatever, but or like you want to invest in what you know, but even then that's like a pretty crazy way to crazy way to approach venture. I don't know enough about venture to like know if that's the right way to do it or not. Um, I think in the

alliance scenario, it might be a bit different because they're incubating a lot of these products and I think they have like a venture builder approach. So, it makes sense to have like specific niche. You're hyperfocused on it. You know, like what works, what doesn't work. You have kind of a formula of getting these products out, but >> and they're very early. They're very early stage and it's small check sizes. Like, they're not shipping 10 million into a huge round, right? They're they're putting smaller checks into teams that are like, "Hey, we're going to build this consumer app and just see if it works."

>> Um, so I think that like the approach like really works for them there. >> Yeah. But versus like like I feel like hack VC maybe or Polychain like I feel they do like these massive VC rounds right because their ticket sizes they do these massive L1 or infrastructure rounds because I think their ticket size is too large like they they can't do an application because those historically don't raise as much money. So, and I don't know like I I know Polychain made a butt ton of money on on TIA for example, but they managed to sell I think quite a bit. But I imagine there's at least with the new class it's like

like Monad and Mega E are both cool and I think Mega E has been fine because I think they raised much less at lower amounts. If you just mark to market your monad stuff for years, for six years, maybe five years based on like private valuations first and then now I don't know what are you going to do? Like it's it's just a tough market like everything you have to >> Yeah. And that was years ago too, right? So like what's what's what's raising today? Um, I think obviously the market's very different. Like we don't have like there there aren't 10, you know, unreleased L1s now that are raising, you know, $200 million for their seed. Like that's just not happening. So certainly some of it is

I don't know there there's been a lot of prediction market excitement. I've seen there's definitely been some some raises in that realm like we're seeing more of these like cryptox AAI things and like agentic apps and different things along those lines. I think the the set of opportunities is definitely different. Um Tempo is probably maybe the good example. I guess there are in some cases some some blockchains but they there are more like >> but even Tempo's like paradigm is essentially building it out themselves. Like it's very much to me like a venture builder style of >> Yeah, it's similar to like Arc in that sense in that it's like you know you have Circle who's like we should build this for our purposes and I think >> you see I I kind of look at Temple the

same way and that it's like okay Stripe says hey maybe this makes sense that we have something to build out for our purpose. >> Yeah. And just like maybe to tie it back to Dragonfly, one thing that has I feel like says quite a bit is this isn't the end state of blockchains. And so he would like when people were like, "Oh, like we shouldn't invest too much in infrastructure anymore." At least he'd said this like a year ago. I don't know if this is still a spot process. Um but if I mean if returns on L1 are really low and no one invests in them, we might just be stuck with the current set of L1s that we have, which isn't necessarily a bad thing. Like you have Solana and ETH um plasma hyperlquid

mega e monad surely like I don't know some of these succeed and figure it out base arbitro you know >> B&B >> B&B I always get worried when I count those but yeah like >> you got to include Asia man >> you know or is this like is this I don't know $650 million going into a fresh set of infrastructure your projects. Who knows? I guess we're going to see. But like you said, I haven't seen any like I don't know. I feel like all of those um I don't know if you're you also have these channels, but I was I deleted them now, but before there was like this channel that would just send in every

single raise that closes like what valuation, who were the investors, etc. on Telegram. Um I feel like I haven't seen an L1 in there in a long time. Like you said, it's a lot of like protection markets. Yeah, the the L1 ones it's like the tempos and the arcs and yeah the other >> serious stuff but not like >> I don't know the death of infrastructure investment could be very interesting for crypto >> the other stuff has been um the other stuff has been like all these trading like I >> everyone everyone I don't know there's so many teams that are working on like we're going to build the everything trading app um it feels incredibly saturated as a space like some of them are Hey, we're making a

>> FOMO. >> FOMO is an example. There's like um I think Liquid is one. Um but there's a million of them. It's like, you know, it's kind of like the Axiom but the next generation of that where it's like just put all of the crypto trading applications into one broad uh like front-end interface for people, >> making a full kind of like trading platform. But I I feel like that's been an area where I've seen a lot of different teams and raise announcements as well. God, it's so funny. Um I don't know. I don't know. There's like Yeah, Axium made so much money before

they left. So crazy that they just launch token just made a lot of money and just left. I think >> Oh, would you? >> No. >> No. It's an interesting It's funny. It's a funny thing we say this frequently of like, wow, they made so much money and they didn't even like launch a token. But I wonder like if they launched a token and then the token went down 90%. Like would you be more or less upset that they that they launched a token? I I imagine that the answer is probably you'd be more upset if they launched a token. >> I think either scenario I'm going to be upset. >> Yeah.

>> To be fair, I didn't even trade that much on Axium, so I wouldn't have gotten a good air drop. But like for you for example like you were pretty early to actually see like >> yeah I used it a little bit. I think there was a point in time where >> you realize >> you know where where a token and an airdrop like would have been plus EV and I wrote you know and I I wrote about it I wrote about kind of the opportunity there. >> Uh certainly for like YC that was a great investment from them. >> Yeah. >> Um but there was a point where like that got eroded in terms of that you know >> Yeah. after me being early, then there's like, okay, hundreds of millions of trading volume on here. Like, I'm not it it no longer means anything to me. And

so, I just kind of gave up on the idea. I was pretty I felt pretty strongly about the idea that it was a very low probability that they would launch a token. I I don't think there's anything wrong with making a good product that makes money >> um and and doesn't crypto token. I I don't I honestly would almost prefer if we had 10 times the number of apps that were just good products that made money and and didn't have tokens. I would not prefer that. If something is making money, I want to be able to invest in it. Like same thing with >> I want to be able to invest in it, but I I don't want them to launch a worthless token that doesn't have any relationship to how much money they're making.

>> Yeah, I guess they're always kind of stuck as well in which Yeah, I get what you mean. >> Let's tokenize their equity and then just let me buy that. >> Yeah, >> that's what I would like to see. the SEC is going to come get you. Um, talking about three to four level agencies. Um, you're sent this in in the morning, but the CFTC issued a statement on prediction markets. I'm going to open this up and take a look. Um, if you want to give a bit of a background, I'm also happy for you to do that, but up to you.

>> Yeah. Uh, Michael Selig, he dropped he actually dropped a Twitter post, but I'll just share this one. He he shared a video of him talking about this, but uh I figured it easier to just share the quote, but he basically said something along the lines of the the CFTC will no longer let state governments kind of undermine the CFTC's jurisdiction over prediction markets. Basically saying there's been a lot of lawsuits in different states um against prediction markets um you know labeling them as gambling or casinos or like trying to adjust how they're sort of you know maybe they're not allowed in certain states or jurisdictions. Um it seems like the CFTC here is is trying to take a stance um and say that they have kind of full decision-m control within that

the US to kind of make rules and regulations around them. Uh in I'm not like a legal expert. I can't really say whether in practice that means anything. I I don't know. I think for a long time states there is this sort of like state versus federal government uh approach to to a variety of things like legalization of drugs for example is a classic one um where you know there's been headbutting over you know maybe marijuana is banned federally but states say hey we're going to legalize it and it's fine. Um, so this is I don't know it's just an interesting case where we're seeing kind of this same battle happen but uh in the reverse direction where the Fed or the CFTC is

saying hey these should be okay. Um and certain states are saying no we we don't want them. Um interesting to see how it unfolds. I think naturally as everyone knows or currently feels uh prediction markets are have been a pretty divisive topic uh for the past ever since they blew up really like at the end of 2024 with the election. Um so not surprising to see this here. I think the and the big big issue with the kind of the conversation is like some extent of the activity on the platforms is basically gambling but they are you know they're trying to market it as you know this like commodities

derivative derivatives product. Um and so you know in some of their advertising in their marketing in their languaging in their language it's like very it seems very much just like you know a sports book bet on you know bet on your favorite football team on football Sunday on KHI but then when it comes to speaking to regulators it's like no these are these are very advanced and uh you know truth seeking markets that should be regulated by the CFTC. So there's a I think there's kind of an inherent tension there from both like just the way that the product is marketed versus the way that the the prediction markets are sort of talked about um in terms of how they

should be treated like from a regulation standpoint which is interesting. I don't like you said about yourself. I'm also not a lawyer and I don't have a lot of legal training. To me, I also know that the US is like a very specific case in which states are some people's ideal notion is that the federal government has as little responsibility as possible and the states have as much responsibility as possible. Um, just from I guess a Europore point of view, uh, to me it seems like something that CFTC should probably regulate. Um, I don't know enough. And then,

>> yeah, really, I think that issue often comes down to whether you like or dislike the thing being discussed and then you'll take the appropriate side on whether the the state or the federal government should regulate it. Um, I think that's often what it comes down to for for many individuals and they're willing to flip-flop on that point. Uh, in this case though, it does seem like, you know, the Fed, the CFTC is backing prediction markets. So, um, I I I mean, I think in the immediate term that can only mean sort of like good thing things for them from a like a potential risk or lawsuit standpoint, but uh, >> for the prediction markets, right? Like >> for for the prediction markets. Yep. in

in their favor. >> Um longer term, I guess it opens up the question of like, you know, 2024 was a turning point in terms of the administration. If we if the US kind of flips the opposite direction in 28, does do we see some of these like decisions get rolled back in the opposite direction? That just seems to be a theme of US like American politics now is um you know one side gets in they basically undo everything the prior admin did and then start doing all of their own changes and then whenever they get swapped again um you see the same thing happen again in the reverse direction.

So, um, but I I guess if I'm thinking about it, like maybe there's a point at which, uh, they get cemented enough into kind of like the rules and regs of of of the day that, uh, I don't know. >> It's hard to change. >> Yeah. Is there a point at which it becomes hard to change back? I'm not not sure. Maybe, but maybe that's what you're hoping for if you're uh if you're the prediction market guy here. >> Yeah. This is one of the things with crypto regulation as well is this worry that Trump came in um America started becoming um favorable towards crypto

if he loses it's kind of like because if crypto is adopted by Trump like I said once again I'm European and I don't really understand I'm not European but I live in Europe. and I don't really understand the American political system very well. So, just ignore everything I say if you're an American. But to me, it the moment that you make something like a partisan issue, it seems like the other side is going to be like, "Oh, well, you know, this is your thing, so we're going to reject it." Um, which is obviously a very bad thing for crypto if it happens. And it would be the same for prediction markets. I um I don't I wouldn't say I have a necessarily positive view of prediction markets. Like I wouldn't say I'm one of

those people that is I mean you joked about this today on the Xerox research chat like what are we going to talk about? Oh, how we can make a lot of money like how we can make income using prediction markets. I'm definitely not one of those people like the Tulip King type of like oh this is revolutionary. Um, I think the vast majority of people bulling it are bulling it purely because they read somebody else's article and are saying, "Oh, wow. He said it's revolutionary and there are like XY Z applications, therefore it could be revolutionary." Um, I do think there's a lot of people making probably a lot of money on it purely because it's very inefficient.

And I think initially it was mostly like regular people. Regular here being like very smart people who were not particularly like part of a large firm. I think right now it's probably right for um the large market making firms and they're probably making a ton of money on it. Um either way I think it's probably just shouldn't be too it shouldn't be regulated too heavily probably. It is interesting that it's getting regulatory clarity a lot earlier than crypto is. I feel like crypto still doesn't have regulatory clarity properly versus like they're effectively really trying to make prediction markets

thick being not in a gray area. >> Yeah, I think it it speaks to the approaches. Um I guess like Khi Khi's approach differs from Poly Market I guess in practice in that they kind of entered in as like a CFTC regulated entity right by like basically offering a commodities or like derivatives platform um versus like I'm not sure what the the legal ease is for like a poly market approach. I guess the the poly market approach is that they were not uh you're not allowed to use them in the US. So they they were they were not regulated and they were not allowed in the US um I think until recently. So maybe they are getting sort

of like regulatory approval now. Um, so I think it speaks to that and like the majority of of crypto basically just tried to kind of sidestep um, US regggs for a long time either because they didn't exist or they were unclear. Like you know there were still of course there were problems um, in the prior administration in terms of like what's allowed, what's not allowed. It wasn't very clear like companies were just getting sued. Um, there was a lot of uncertainty there. So but I agree with your point like we're still sort of waiting for some of that clarity to come. though it's it's been coming in over this past year and coming >> not fully. We're not there but we will be. Yeah. I mean, it's also I think

>> and I think I mean it speaks to to the the points we just made about kind of like making something a party issue versus not like it would it would be equally concerning if um I don't know there's been some back and forth with some of the like the clarity act on the exact specifics there and whether or not it'll get passed in the current form or if it get changed and if it'll if they'll sort of like make it through the current Congress or not. Um and I think you have a real question mark there as well on terms of if it doesn't get passed you know within the next year and then you know you know the US government like flips you know Congress flips sides um from a majority standpoint in the midterms. Do you pass

a point of like you kind of missed your shot um point of no return in that you could have passed legislation even if it wasn't perfect or like completely up to what you wanted um versus not passing anything at all. um TBD on if that happens. But that's I think that's that's a similar conversation that people are weighing now. Um so >> yeah, >> I think if you're call sheet poly market here and you get this kind of like nod from the CFTC, I think I would say you're probably quite happy. >> Yeah, I think so. Um but I guess also prediction markets don't really have the issue of like two things. Number one, why I think they have like some issues.

Insider trading is one clear issue. Another issue is like very akin to gambling to an extent. Um but crypto has like money laundering. Um it's a big one. Sanctions evasion big one. Um and then potentially being securities which is a big one which I feel like is more complex versus the prediction markets ones are relatively less complex. still complex. Um especially the gambling one, but I mean the other one's relatively clear.

So yeah, I have um I have one last thing prepared. Um >> and I think I don't know how many people have context on Venice, which is Vorhees. Vorhees. I don't know if I'm doing the traditional Dutch pronunciation but Eric um Vorhees OG Bitcoin guy launched um private AI slash decentralized AI protocol Venice.

Um most famous for um do you remember that time they launched on Aerodrome and somebody like insider created it? >> Yeah. most famous for that. But they've recently gotten a second bump. Um I am going to pull up the chart just so that it's not a great chart given that everything in crypto is down, but it's not bad. Oh, you're going to see something relatively embarrassing. Yeah, there we go. So, it is up uh I don't know, 3x 4x from the bottom in December. Uh four four and a halfx from the bottom in December.

Um but more recently like it doubled over the past week. Um I think primarily due to well not I think but primarily due to Claudebot um like increased attention in um API credits, Claudebot, etc. They um they have a pricing model that gives you access to essentially every um they have a business model that gives you access to essentially every um leading model. Um and their like main pitch is that it's unbiased and private. Um I don't know if that is particularly useful for a lot of people, but I think you just end up

getting kind of a good deal. It's like 18 bucks a month and you get access to all the models within like some credit range. But it would be pretty good because like I don't know I have to often pick between Claude and Chad GPT. I always pick Claude but like sometimes I want to try out CEX etc. Um anyway recent bump. Um, I think the only thing in the market that is relatively interesting right now, um, just like to give people a a bit of a warning, it is up quite a bit and I did not buy. Um, just like and I'm I just don't want to be the guy who top shield VVV. So, I'm just telling you be careful. Like it is up quite a bit. But it is like I do think that one of the worries about

AI that is like apart from the civilizational collapse and like collapse of the social contract and the economic forms and whatnot. One worry that people should and probably could have especially on the more like guess libertarian side of things is that these things are probably going to be very controlled um and like what they tell you. um what they share with you, what work they can do for you, what work they cannot do for you. Um like the crypto thesis has very much gone from trustless well it's still semi trustless but um trustless like private um etc like cippher punky to settlement layer. I do think that AI is

one of the few cases where and I don't mean like decentralized compute. I just mean like paying for stuff with crypto probably lets you avoid some of the like biases and um privacy concerns just because I don't think they're going to develop this in the real world and I don't think if they do you want to pay for it with your own credit card with your name on it. Um, so just like something that I like a very base case pieces, but not something that I'm looking to buy or I'm thinking about. Just thought it was relatively interesting.

>> How do they um I'm just looking at it and you say they you basically get access to a lot of the kind of main models today. Um, and they're priced at $18 a month. I mean, are they just not like burning money to give that to users? because if you went out and subscribed to like all those models, you'd pay like hundreds of dollars a month. >> I think this is the same way that like Amazon is able to price cut people. Um because if you have like you pay 20 bucks to Claude and I pay 20 bucks to Chad QBT if we shared our login.

>> True. >> What am I now? You're they're doing this at a massive scale though and they're just running an AI proxy in between it. >> I guess in that sense they're just they're just running >> well they just have like a billion credits. >> They're buying credits in bulk and then just selling a a sub to users and most users probably >> query one time and pay 20 bucks for that month. Yeah. >> Yeah. or like I imagine they have like I don't know I don't know what the distribution thing looks like but I imagine like the majority of users probably hit like what 40% of usage and then 5% hit >> yeah like 500% of us >> and then there's like a significant

percent who's less than the 40% as well. So >> and then >> it just matches up. They might even have credits. And every time you get payment, you get to buy more, obviously. >> And then I'm going to ask the next stupid question, but how's the token integrated into that or is it not? >> So there's a bit of integr. So they have a two token model, right? Um, so there's VVV and then there's DM. We love those historically.

>> Um, and it's I you can stake to get access to it, but platform revenues buy and burn VVV is the like simplest way of me saying it. >> Okay. >> And then so it's like semi-related. I don't know how much of the revenues are used to buy and burn it, but it is somewhat related. And somewhere in one chat, somebody said that they're making 14 million ARR. I don't know if that's true but just I should probably do the math on that.

>> Oh, and then Okay. Okay. And then the DM token gives you access to a certain amount of credits usage of the AI models, which each DM you stake gives you $1 in daily renewing credit to access all leading AI models through Venice. So I guess I guess in that sense like >> that's a trick. >> It's not great. It's like those old type of like crypto protocols where it's like, oh, if you stake, you get like XY Z.

>> Yeah. >> Um, >> I can see how I can see how the the threads are being written about this one right now of like you get >> you get $3,000 of value if you stake X amount of DM tokens today, but DM is priced at X. Therefore, it's in your >> it's an arbitrage. >> Yeah, >> I was just about to say that. I saw a bunch of Fred saying that you get like value of I think the value is like $16 worth of AI. >> Okay. Well, one DM is $575. So, >> and it says one one DM is $1 every day.

So, I I think that arbitrage is closed. >> Yeah. >> My favorite was is when like there's an arbitrage opportunity in crypto, but then they like send it so high because everyone's like, "Oh, it's an RB them. And and then there's like now it's like very clearly overpriced by like 30 40% but they don't close it. Like it just like keeps trading at that thing. >> Anyway, I don't know. That's um >> seems nuts. that this is all that I could do on a on a postpresident's day crypto bear market where one of the

biggest pieces of news was that Dragonfly raised $650 million. Like >> all of crypto is just the smartest and the stupidest people in the world are both complaining that the world is going to collapse and that the social contract is [ __ ] and that um everybody who is like below x amount of capital allocated in stocks is going to be in the permanent underclass. >> That's my Twitter. There's nothing else happening. Wait, I'm learning I'm still learning about DM and VVV. Uh, you mint DM from VV staked VBV.

>> Come on, man. It's very simple. It's a free free model. But >> isn't this this is this is tomb. This is like Yeah. >> Let's not overthink it. And just to be clear, I'm not shilling this token. I'm just saying this is one of the only like >> Yeah. I'm just trying to understand it. I'm just trying to understand why like $1 of daily inference is priced at $600 right now. That's >> inference cost will go up. If this if Luke Leer was here, he would write >> I guess techn No, I guess technically if I'm thinking about this right, right, you get you get $1 of credit every day >> for ever into the future. So if I do the kind of the net present value of that

token and that that compute, >> you need to discount all future to now as well. >> Exactly. >> Terminal value right now is priced at $600 and you're assuming it goes on for what are you assuming? I guess like typically it's like 20 to 30 years, right? >> Yeah. >> Glass build a [ __ ] model. Let's build this model right now. You got to build a model about how the compute become does the the compute becomes more valuable or maybe less valuable over time. I'm actually not sure. Does the compute get fully commoditized and then the cost of compute goes so low that the dollar every day is meaningless or worth a lot.

I'm not really sure. >> But the thing is that the dollar also becomes more meaningless over time. You need to you need to put that into the into the calculation somehow. All right, Cladbot, create a model for VBV and DM. >> Do you have Cladbot set up? >> Make no mistakes. Uh, I do not. >> What's your I feel like we never have talked about this. What's your go-to setup? >> What's my go-to setup? >> Are you mainly >> chat GPT? >> I've been using um Gemini for a while now. I think maybe this is going to sound stupid, but for my needs, I feel like the models got smart enough like >> it doesn't matter

>> six months ago to where like I switched a few times and I noticed like a little differences and then you know I switched again like I don't know I've used them all. I've used Cloud. I've used I've used JetT. I've used Gemini. I've used some of the other ones. Um, and I've jumped between them at certain times when I felt like I wasn't getting like the best kind of responses or my prompting like wasn't really helping the answers. But I've kind of landed on Gemini because I feel like it it's just giving me the information and the context that I need.

>> Yeah. um with like the minimal like I don't need to write like a 16 paragraph thing to tell it to tell it how the prompt and like how their response should be structured every time. Um and I haven't I haven't changed since then. And unless it gets materially worse like if I notice degradation then I probably won't switch unless something some insane functionality um gets dropped on my head. But I don't I don't know personally I don't feel the need to like run a cloud bot to tell me about the weather every day. I don't know if I don't know what people are using it for. Like if you're using it to code something, I can see that 100%. But I'm not a coder and I I don't like have a need to build an app right now. And I think if I did, I would probably just

like again do that like by prompt. >> Yeah. Um I guess most of the time you use it for like crypto research, podcast research, um organizing tools, etc., etc. right? >> They become very good at research. Like I'm >> I think Gemini is the best at that because >> I'm very surprised like by how good it is. I'm often surprised that it like it gets information that I wouldn't expect it to have. Um, and I kind of like wonder where it got it, but I there's just so many I don't know. Obviously, they have the search engine, so they they're good at indexing links and sources. Um, >> yeah, >> so it does a very good job at researching.

>> Yeah, I think Gemini is very very good at that. I will say one thing, it has improved drastically since I remember maybe a year ago, year and a half ago. If you would ask it a crypto question, it would either source you something from two years ago or it would just like make something up completely. Versus now I feel like >> to the point where I'm shocked where it's like is this true? Like before I was like, is this true? And my gut feeling was it's not. Now it's like, is this true? And it's like it is. I just didn't [ __ ] know about it.

>> Yep. There was a there was a change that happened like a year ago where I feel like all of the models kind of switched from okay we only know things up to a year and a half ago and to then okay we have actually have access to everything on the internet now uh and we can know anything as recent as like yesterday um and I think that's when there was like a big step there in terms of being able to research things like fully through prompting whereas before it was kind of like you could get background information but you could not get like very current up-to-date information about things because they would they would tell you that like oh it's January 2023 this is everything I know and it's just like no you you're just you're missing like two years of of things that

have happened since then. Um, but I agree with you like now I'm more surprised in the opposite direction where uh it'll it'll drop tidbits on me that I'm like I actually did I didn't even know that and then I have to go and check and see that that's a real like a real fact that happened. Um versus the opposite like exactly same experience as you where before I had to double check that like okay you're wrong and now I have to double check like okay you're you're right actually. >> Yeah. I'm trying to do this test now where it's like before when I would ask it about crypto, it would always give me Cardono and stuff.

I'm doing this test now with like Claude and Gemini. See, I just said like what are the five most important crypto tokens right now? It's a stupid question, but Claude said BTC, E, Soul, XRP, and PMB. I think that's just the top five by >> probably. Yeah, I I've been surprised like for even for researching like smaller teams like hint if you come on Lightseed I'm probably prompting Gemini to get some extra info from about you. Um but I'll also you know manually pull up your Twitter and other things and and look in your background. But either way, it's become very good like surprisingly good for I don't know who who's been on the pod

recently. um >> harmonic >> per team's harmonic like it it knows all the information about these things and like it still does you know the models are still pretty cringey in terms of like oh it's not X but it's Y they're like changing the they're changing the whole paradigm of financial infrastructure like it'll you know you can't really like use what it gives you in pure text but um at least the information about like oh yeah you know these builders were working on you know he was working on margin FI and and he started working on this other project within Salana. It's like it'll know all of that information all the way up to current date. Um, and I find that very surprising because I think I think even if you know a a lot within cryp like

teams who are maybe like very Twitter centric like there's maybe not a lot of details outside of like Twitter or Telegram chats. Um, it's surprising to see a model just like pull information like that together from just kind of disperate sources across the internet because I think it would be hard to maybe just kind of if you had no info to just like search Google and find that information. >> No, for sure. Um, I will say I think jobs are still relatively safe though because of what you said like I think if you have no info and you can't really tell a like you can get all of this information but you need to ask a specific question like the margin I think specifically but

like I I know this is a really bad example because I gave it a [ __ ] prompt but if you ask why like the most relevant tokens claude includes Sooie um but like also it includes Solon XRP E bitcoin versus Gemini is actually kind of interesting. Said hyperlquid number one, monad number two, toao number three, dog with hat number four, and ono finance number five, which I think everything apart from whiff I think is like kind of a cool.

>> They must be doing it based on like Google search trends or something or like traffic like search traffic. >> Yeah, >> that's kind of interesting. >> Yeah. It might be because of my internet as well, by the way. Which in which case it's like >> it knows what you're It knows what you're searching also. So maybe it's factoring that. >> But then it's also kind of weird. No, >> it is >> because it's like >> send me send me the prompt and I'll and I'll give it the prompt and see what the difference is. Let's do this live. >> I said quick answer.

Give me the top five most important crypto coins right now by relevancy. Just write like quick answer. Give me the top five most relevant crypto tokens. Go. I'm going to bring down the entire Google establishment if they're using my data. Let's see what happens. We're trying this live. Gemini loading. No, it gave me the Well, I mean, it gave me BTC, ETH, soul, link, and hype. >> Okay. See, like that's a pretty good answer. I would say >> not too crazy. But you also said, what was your longer thing? You said based on >> relevancy,

>> most relevant top five crypto tokens >> by relevancy and importance. >> By relevancy and importance. Maybe the wording there is is important. I'm curious. No, it gave me it gave me the same thing. No, it gave me BTC ETH soul XRP link. >> Yeah. So, like >> I don't know. They're not bad. >> I think that's a better answer than what I got, but my the answer I got was like a bit weird, I would say.

>> Yeah. >> If Ono is a weird one as well, like why is Onondo in there? I know they're doing like a lot of cool stuff with like the global markets and stuff, but >> maybe Yeah, I don't know. It It makes me wonder if it was like anchored to recent announcements from those team or like recent like search trends. That would be my guess because you know had their they did announce something relative like it would it would have been interesting if it gave you like um layer zero uni morpho like some of the stuff we talked about because it they were like recent articles or something along those lines.

Hype doesn't surprise me in that sense just because there's a certainly there's a lot of web traffic around it. I agree going back to it though. I wanted to get back to this to your point around like jobs. They're going to take our jobs away. I do think I mean I don't know what this says about kind of the average person but I do think there is um there's this point to be made that I saw Xerx Loris tweeted this earlier about um the most important thing that LLM coding tools do is remove the technical barrier between people with domain expertise and the tools that they actually want. And I think from my experience this makes a lot of sense. like you probably have to step a little bit outside of like the I don't know we're all in finance and crypto and it's it's not

I don't know a lot of the knowledge is like very readily available for some of these things but um when you come get to like manufacturing plants or like on the ground like engineering equipment and it's like there's a 60-year-old motor that has a maybe the the manual for the thing like doesn't exist anymore. Um or like a factory just operates in a certain way with like 50 different types of piece pieces of equipment and you have a guy who's worked there for 30 years and just kind of knows how those things interact like that guy has a ton of value but um maybe that business like has low margins and like they don't hire 10 software devs to like spit out good you know useful apps or pay SAS you know subscriptions. uh a guy like that with a

lot of kind of like expertise in his particular field I think gets a lot a ton more value immediately out of being able to like make a quick app to track data for himself. Um and so like that type of person people people who have expertise in a field I think basically like they get they get supercharged. I don't think this is a hot take, but um if that's you, then I feel like, you know, if you're using the tools and you're making use of them to like kind of increase the the value of your outputs in work, then um you're basically proving that value to a business. So, I think there's plenty plenty of professions where it it may be

like a net positive for some workers. And obviously there will be some there'll be some types of jobs that are just like they're pretty much like wrote repetition of tasks which were probably doomed to get replaced by software at some point anyway. >> Yeah, I think that's a fair take. I also am like I think the broader cuts might not be like entire software departments get cut off but it's more like 60% of it gets cut off and then one person just controls two agents. Like to me that seems reasonable but I'm not sure if the replacement for that is like we just get a billion software companies instead of like a 100 million that we have right now or whatever 333 million that we have

right now. um or or the entire world is doom and gloom and we all die. I agree with your thing that like very niche knowledge workers I think are very important but the worry that I have over there is that I think some people are like okay like let's say you're 65 years old Danny and you have knowledge about this one specific factory that does uh manufacturing of microphones microphone tech and you guys have like proprietary knowledge nobody else knows about it it's just written on paper and you're working with AI to implement it and robotics implement across the factory, you have to have a junior that you're teaching or juniors that you're

teaching. Like you can't just replace everything. So that's the one thing I'm a bit worried about continuity. I'm imagine most people are thinking about it and are like, "Oh, we need like continuity at some point." But also, I wouldn't be surprised if like a bunch of idiots just put themselves out of business because they like we had this with >> Yeah. They just like shove all their information into like public >> Yeah. >> places and then they get like displaced. >> Yeah. And then they get displaced or the only person that knows how to do something just like >> just dies.

>> Dies. >> That's been a concern in manufacturing for for like the past >> 10 probably longer honestly than the past 10 years. When I worked in manufacturing, that was like a very large concern of the corporation that I worked at was we have a lot of had a lot of people who were like you said 60 plus. They're like the only person that knows about a type of equipment. Um, and there was a lot of questions about how do you resolve that going forward >> if they just like retire? >> Yeah. >> Or like those stonemasons, they can't find stonemasons in some countries to rebuild some architecture because there's none exist. like they have to fly them out from Italy or something.

>> Yeah, it's funny. There's um it reminds me of The Foundation by Isaac Azimov. It's great science fiction book, but basically talks about how like >> the empire falls I mean the empire falls apart because people like literally forget why and for what reason they like build some of their infrastructure. And it's like, yeah, the nuclear reactors just start failing because we're like not we just didn't have maintenance engineers to, you know, check on the thermals and, you know, people stopped putting the, you know, stopped putting together buildings the right way. So, they just started crumbling. It's like, >> yeah, it's at some you do need to have I mean, whether they're people or whether they're robots, I mean, there has to be something that that does maintenance.

So, >> yeah. >> And passes on information >> and ideally somebody who is aligned with the future of humanity. Maybe also not only robots. >> Yeah, there is also an argument to be made that like if certain things are quite literally crumbling and nobody cares about them. Um I mean do do we still need them? Um or do we need do we need them to go away to s and then like cause a problem to serve as a reminder to people about why we need them? I don't know. I think that >> that may happen in some cases as well. >> Yeah. Isn't this what Okay, so this >> that's a bit doomer though. That is a bit too much. Um, foundation is great though. Highly recommend to any listeners. Um, okay. I think we're good

for today. Um, Danny, thank you so much for coming on to the listeners. Actually, the Solana ad, the Solana Lightseed platform announcement is live. So, if you're listening here, you can go and check that out as well. It looks pretty cool. Um, a lot of hard work went into this from the advisory side. um from the Blockworks research side and from Blockworks in general. A lot of people were involved in this. So, I just I I recommend checking it out. If you think it's cool, um if you don't think it's cool, a lot of ears that are waiting to listen. So, if you have any feedback about it, um you know what, you could probably even just come into the Xerox chat and say, "Look, like this needs to

be changed XY Z." Somebody will listen to it. We're like very, as an organization, I think we're very like feedback oriented. Um, and we want to be told when we're wrong as well as when we're right. So, if you like what we do as well, that's also obviously appreciated. >> Okay. Fantastic. >> Beautiful. Great conversation. See you chat.