What Does SIMD-228 Mean For Solana? | Analyst Round Table

Transcript

I think the reason like just CMD 228 was so controversial is that it is one of the first changes that I can think of that is not just purely technical but it's also very economic in nature nothing said on zerox Research is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial advice Pacho Ryan and our guests May hold positions in the company's funds or projects discussed hey guys welcome back to another episode of zerox research uh before we get into the show today um as we've been doing for the past few weeks I want to give a sh one last shout out

to das um it's coming to New York it's going to be next week both Carlos and Mark here on the call from the research team will be there um as well as some other folks from the team and some great speakers and members from around the industry so if you want to get your tickets um this is It's kind of your last chance um going into next week use code 0x10 at the link in the description grab some tickets and hopefully we'll see you guys at D next week um all right let's let's dive into it today like I said Carlos and Mark here with me today um couple of big relatively big announcements I think there's sort of an up uh maybe a positive and a negative to the announcement around the Bitcoin the Strategic Bitcoin Reserve that came out

um over this past week um kind of terming it the seized Bitcoin reserve it still fits the spr acronym there but I think the market was maybe a little OV excited about what this announcement could be um there may have been like an implicit expectation that the US government would be buying Bitcoin on some Cadence like the kind of Senator lamus has has alluded to um with her kind of ideal of getting to like you know a million units of Bitcoin but either way um executive order from Trump came out there is this establishment of the Strategic Bitcoin reserve and the United States digital ass stockpile um talked a little bit previously about this um stockpile reserve of other assets as well it seems largely that the

text of this and like the intention here is specifically to just not sell you know leading cryptocurrencies that are seized from illicit activities really um and that it seems like that may have been a disappointment for the General market that was maybe expecting more um what are your guys high level thoughts here is this like were we expecting this is is this countered or any thoughts that we had or is this more or less than we expected this soon I think it was largely expected I like the fact that they highlighted Bitcoin this time around and they didn't like just let leave it at digital asset stockpile I think it's good that Bitcoin will have like a preferential spot if

you will on the reserve and I think like at the end of the day it will be the main focus which is the way it should have been from like the start um I agree with you like um I think they will most likely just not sell the assets that they have ceased in the past from like uh silk growth and other uh hacks but yeah it could be like um I I wouldn't like rule out um some states uh buying Bitcoin like in the next year or so or some changes that allows like the government to like uh actually get some

buy orders in but like at this stage it seems highly unlikely yeah I agree I think it was largely expected at least for us inally I was just hoping that the market was also pricing in like a nothing Burger I mean most of these kind of crypto White House Summits are most of these White House Summits are sorry and not just crypto related so I mean I think it's big in the sense that you know if we look 6 months ago 5 months ago we wouldn't have imagined being you know crypto being an agenda in the white house I think from that lens it's really good um you know not selling um the the Bitcoin that's that's already in possession okay at least there's no sell

pressure there I think that's a good thing um I'm also happy that David Saks kind of walked back on Trump's post um with the Ada xrp he just said you know Trump just tweeted out the five largest by market cap don't read too much into it and I think I I'm glad to see a little bit more formalization around why that was like remarked on so overall I think the markets pulled back slightly I think there was some a little bit rumors of maybe taxes like a reduction on taxes for crypto long-term gains and you know that didn't materialize so there was a slight pullback but I think I think it was largely expected and it you know it went the way that you know I think we

largely thought it would how do we feel about the outlook for like Bitcoin from here and I know Mark you've done a recent monthly report on monthly note on on Bitcoin in General on the network like what are our thoughts going forward Carlos you mentioned you know there are some states that are pushing bills through you know house local state house and senates at at the moment um to formalize some kind of like state level um Bitcoin Investments but uh I guess going forward this is it it's a bit different now like I think prior to this event you know there was some like opium still left in a lot of you know maybe retails mind of you know hey the government's going to buy our bags

um with that out of the way you know what's sort of next or where should people be looking or what should we we be thinking about going forward I think something that's unappreciated is black crck adding Bitcoin to their model portfolio and I think they put a 2% allocation which means that not just from the pure Bitcoin ETFs just people just like hedge funds or maybe Pension funds and traditional advisors choosing their own allocation but other ETFs That Base that use um black Rock's model portfolio as a sort of index or Benchmark will start to have this as an asset allocation in their portfolio long term it was a recent change I think it was maybe last month um and you know it's going to take

you know for chief investment officers and portfolio managers is going to take them some while to you know do the sharp ratio analysis and whatever else their internal processes are to include this into their into their structures and start to advise it to clients but I think that is another structural Tailwind for Bitcoin moving forward um and you know if it was if we were in a different type of Market that would have been probably all over the Twitter timeline and and you know social media but now it doesn't get a peep out of anybody but again I think it's just another you know slow increment to what just mainstream adoption of of just of Bitcoin and you know potentially other assets as well yeah it's a great call I

want to to share this um chart you you pulled for the recent report on bitcoin but also highlighting that the the ibit ETF has seen the greatest amount of flows retained as well um and maybe that has something to do with you know just their General the the investors that are using this fund or how they're treating it or thinking about it going forward um but I think you make a good point just generally in terms of the the long-term view here um it it seems things are are relatively positive but it's just that the short-term Market action has you know left some some people in the crowds a little bit confused as to to what's going on right now yeah definitely and

then I mean with with black rock retention I mean I I I'm not 100% certain but anecdotally when I see these 13f filings reports come out every quarter which is any any in financial institution that has over $100 million of an asset needs to report it in these in these filings and anecdotally I just see them as you know Goldman Sachs and these other large Finance institutions so I think it's probably like you said the um the holder base the buyer base of these assets is why black rock has such a higher retention rate compared to others um I mean that being said last month wasn't the best for Bitcoin Flows In general we saw I think we saw like $3.6 billion doar of outflows and black rock was I think Black Rock contributed to

$775 million of those so it wasn't wasn't strong from them either gray scale gray scale continues to bleed like I I don't know when we're going to get this grayscale overhang out and done with I mean at this point I think them launching their fund might have been a net negative for for the industry if it wasn't for that little ETF transition um but I mean yeah we see it here February one of the worst month by far hands down no question about it and you know when we normally have on an average on a monthly basis structural inflows coming in from the btfs and then this month last month February we had negative price returns then the ETFs the ETF outflows did not help with that right

and so we saw one of bitcoin's largest draw Downs um for for the past maybe over a year and a half um and I don't know if it's I don't know if the ETF flows lead the price action or vice versa it's really hard to say there's some modeling to be done on that um but I'm you know this chart here that we have up it's not it's as February so maybe not up to date but I think the draw down was close to 28% um which seems for some reason to be like around the Max draw down Bitcoin is experiencing and I thought maybe it what the flow of ETFs and this new mainstream adoption was helping dampen the

volatility of Bitcoin but even in a month where we had record ETF outflows it still hasn't drawn down more than 28% knock onward hope hopefully hopefully that's it for now but yeah I um it's it's it's a fascinating quote unquote cycle thus far for Bitcoin yeah I largely agree like even if Bitcoin has seen draw Downs I think it has shown remarkable strength relative to other uh crypto assets like if you just focus on February performance um Sol like draw down like 18% against Bitcoin and like it's just like this type of volatility I think it's normal for a bull market I think we

forget that in 2021 Bitcoin uh probably had a Max drw down of 50% or something like that like in the midst of the bull market and I agree with Mark like the structural inflows from the ETFs have largely have largely changed that Dynamic where we don't see as sharp draw downs but I think like it's not something that that should like entirely surprises and in the past like uh month or so we have seen some macros uncertainty and I think like it's not just Bitcoin that has performed poorly I think in general risk assets have taken a hit and you cannot just expect it to

be uncorrelated from everything else in the financial system it's just like the way it is is just correlated with global liquidity and the not yeah I think that's a great call Carlos the Trump admin is has been making it very clear and not to macrol LARP too hard on this pod we try to avoid that usually but they've been making it pretty clear that they're okay with seeing some volatility and risk assets um for the time being time being to sort of achieve their goals um when it comes to rates yields and then the budget going forward so that's I think essentially what we've been seeing in both equities and you know I think Bitcoin and other crypto crypto assets have been hit by that maybe flight away from risk um for the time being so yeah there's I it's hard to get into a sense

of having some sort of bulletproof asset there's there's always going to be up and down um that comes with things so it's not too surprising on that side of things but um maybe another go ahead Mark no I was going to say yeah since not to be too mcky but since we've have this macro uncertainty we've definitely seen an increase in the correlations between you know Bitcoin and all the other assets and then it and then it does it does it put into context okay what what are we looking forward to are we just looking forward to when this you know fed starts to cut interest rates or are we you know are we looking to when taries down you know but and you actually you know I I maybe mentioned things longterm structural long-term Tailwinds and if I had to like just try

and think about it pull something out the only Catalyst let's call it that I can think of is um Michael sailor with his new um21 billion do raise with has Preferred 8% coupon stock and you know if if he does succeed with this and I don't see why he wouldn't you know raise $21 billion if somebody could do it it's probably Michael sailor and from an investor point of view you know an 8% coupon then you know at probably and the yield is higher because I think stock SDK that's what the um preferred stock ticker is it's it's trading at around like 86 so I think the yield is probably somewhere 9 10% as an investor if you can get that kind of dividend yield plus if Bitcoin does well you know it's going to be

correlated and you can get some of the msdr stock on the convertible right then this can do this can be a pretty welcome back stop for the for the Bitcoin and enhance enhance the whole crypto industry right now I mean for perspective $21 billion at today's prices is roughly 270,000 Bitcoin and um since the havening Bitcoin you know miners there's an emission of 164,000 Bitcoin per year so Michael saor will basically buy up the next year and a half Supply worth of of Bitcoin emissions in you know the the speed at which he goes I assume probably somewhere around three months you know so if if if if we can get that as some

kind of a as some kind of a catalyst some kind of fire to ignite or reverse the tides then then then maybe there is some hope for the industry but I I I hate relying so much on Michael saor be buying the dips yeah I think maybe the the a way of thinking about it is obviously when when Bitcoin is is performing well into the upside um you know it gives him more ammo to sort of keep keep raising and and keep buying and kind of repeat that cycle over and over to the downside I don't think he can be so quick about you know constantly getting fresh new capital in but to your point it may have some level of a dampening effect whereas on the upside it probably had a little bit of an ample Ying effect to bitcoin

so um but yeah I think the big question is just if it continues to the downside or we go sideways for a while like what's his real ability to kind of continue raising cash and and buying more BTC um he he's certainly going to be limited to some extent as compared to a few months ago when you know price was really up only um but but it's a great point I think a lot of people have been really leaning into how much of an impact do the s or buys really have on the market I think you know if we look back back to 2021 the question was like how much do stimulus checks have have had an impact on the market and now it's like Michael sailor is sort of like the stimulus check for Bitcoin almost this episode is brought to you by Ledger the global

leader in digital asset security celebrating 10 years of innovation Ledger Remains the most secure Hardware wallet for your crypto and logins trusted by 7 million users and securing 20% of the world's digital assets follow the link in today's show notes to grab your Ledger now but I guess other other relatively big news I suppose not for a while but um something that's becoming more and more clear is this idea of like the continued shift towards always on global markets that you know crypto markets have basically pioneered and um been pushing pushing on um for the past you know 10 15 years at this point but um we're seeing NASDAQ they've announced their plans to enable 24-hour trading um it sounds like sometime in 2026 this is

you know highly dependent on regulatory approval obviously um as well as some infrastructure upgrades maybe that utili blockchain technology maybe that is just upgrades the existing system so that clearing housers and the other intermediary pieces pieces that handle trading and and clearing and settlement of of different assets um can actually work around the clock but either way I think we're seeing this this trend um more and more especially with you know coming into this new admin um some of some of these Legacy institutions um Legacy markets are more open to the idea of you know Round the Clock 247 always on markets um I think you know we've seen examples from Robin Hood and even coinbase trying to push on that front

they've recently announced a a us perpetuals um sort of release as well so I guess I'm just curious your guys thoughts here in terms of like what what are the real impacts of this do we just expect more and more like still have the NASDAQ and QQQ BTC 10day rolling correlation up like are we just expecting continued convergence of these assets where you know today there is still some separation where you know the crypto markets and the equities markets while you know risk patterns and liquidity patterns are correlated to an extent um you might have some different like sets of investors are we just getting to an eventual point in the future where everything is merged and people are just trading all this stuff

you know all in one place or all from one you know brokerage or environment I think yeah I think it's an interesting question like if you look at crypto it trades 247 365 days a year and so by definition there's no other asset class that incorporates information as fast as crypto and I think we've seen it uh time and time again front run information faster than other markets react faster than other markets and if you look at like I don't know equities they trade like what 200 days a year they don't trade uh 247 they trade like in an eight hour period or something like that so I think like the move towards

247 uh 365 day trading it's um inevitable and what I think one of the effects that we'll see is just like uh every asset like every asset class incorporating information as fast as crypto does today which can add interesting Dynamics to like uh Capital markets at a at a global scale yeah definitely um I'm looking forward to it because I think for one I'm kind of tired of crypto being the only insurent to express your Viewpoint after hours or maybe on a weekend it gets so volatile um and if there are more Traders

online and I'm sorry for them when this happens your job is going to get a lot harder but when that happens it's going to be just generally more liquidity in the market on weekends and other viewpoints I think I think crypto will see more liquidity because Traders won't be shutting off on a on a Friday evening and it will there will be multiple things to you know maybe pay trade as well but largely so I think it's going to be good from a volatility perspective because in the sense of relative comparison like stocks if when this starts they're not going to be as they're going to be more fly traded than they are during the weekdays during eight hour during the eight hour window especially during Us hours and when they when we if it goes to 24/7 on weekends it's going to become a lot more volatile

well as you know liquidity dries up on those during those after hours but it's still being traded somewhere and then that starts to make sharp ratios less appealing in general starts to make things a little bit riskier um but then it makes crypto less risky in in in relative comparison because because it's been doing this and the volatility for crypto has been coming down I mean if you look at it at 2024 Bitcoin was less volatile than 35 stocks in the S&P 500 right so the larg 500 companies in US Bitcoin had less volatility than some of them and then if you look at like private Equity markets these things tend to have better risk adjusted ratios than public equities um but it's I think it's

really because they're only valued less than once a quarter right so it can go up if there was a true market it can be going up 10% every up and down 10% through the entire time and then it just chooses one point on the Dot Plot on March 31st so I think I think this will help with that comparison between the two different markets and um and also open up people to having just just open up people to having 24/7 trading Technologies like Robin Hood you can already trade stocks and crypto on the same platform and you know with ETFs you can you integrate that into whatever ATS provider you're using for the stock brokerage and then it it starts to become very dissimilar

especially if if we move past this just memes and and speculative phase that we're in as as every new industry is in and start to look at like fundamental growths and look at them as startups and businesses but that you can trade on public markets 24/7 then I start I then I start to see like more fundamental driven approaches and more investors coming into the crypto markets as well yeah I guess also the question is when we'll start to see the stocks like issued on chain directly because right now we have kind of like the this uh mix and match approach where we have like traditional rails like and then on top of that you add like

technological um I don't know like um yeah like just technology to allow for these 247 trading but like in the back and you still have like the old system so it's not really like completely transformational I think I I'm excited for the time where we issue stocks directly on chain and we have like these native asset issuance and I'm just not sure if they'll use like their own DLT or they'll use like a public blockchain or of that sort but that that's obviously like something more like in the long term that will than something we'll see right now yeah great points I think Mark your comments around volatility are probably

felt by market participants over the past few months especially with a lot of like Trump admin announcements on Friday nights Saturdays Sunday evenings um deep seek over the weekend I think a lot of that stuff we saw you know Bitcoin and and crypto assets move to the downside um or upside and then also move when markets opened on Monday morning as well um like alongside equities so yeah that I think that's a great Point it'll be interesting to see sort of how the volatility of both markets transform if we get to a place in the future where really all assets are traded Around the Clock um big big shift in in the game and yeah like you said uh I I don't envy

any of the traders that then have to monitor things literally 247 um is isn't that kind of what we do now yeah I guess if you're in crypto you already do that so um I guess maybe they just need to get used to it if everything is going to be tokenized Ledger is the global leader in digital asset security trusted by 7 million users in securing 20% of the world's digital assets in recent years Ledger has built a comprehensive ecosystem of products and services making digital ownership more secure and accessible for everyone Ledger's newest devices Ledger stacks and Ledger Flex introduce the world's first secure touch screens making it easier and safer to manage your transactions and assets alongside Ledger stacks and Ledger Flex they have also launched The Ledger security key app offering a safer alternative to

traditional passwords and enhancing your digital security follow the link into Today's Show notes to get started with Ledger today I guess moving on another thing that uh I think we're monitoring currently um and I'd love to get some insight from Carlos on is on there's been a lot of debate over SD 228 um and impacts to the chain impacts to basically yield rates staking rates kind of all related um so I would love Carlos if you could actually sort of start from like a generalized discussion of why SMD sd2 228 um and walk us through like what it means potential impacts and and then we can take a look at like what's going on because there's been some debates and there's actually um a vote up now to to go through with it or not

right so yeah basically Sal's inflation follows today affects the mission schedule um the current inflation rate is around 4.6% annualized uh here in this chart you can see that uh inflation has gone up a little bit in the past month the reason for that is because simd 96 was activated uh for those who don't know just a quick refresher cd96 removed the burn from the priority fee and so what that means is that right now when there is a sech in onchain activity there's no burn on the on the priority fee and hence uh you cannot offset that issuance

as you can as you can see like during the Trump uh mem coin launch around uh January 20 you saw a huge spike in the burn rate and that kind of offsets the volatility but that's not the case anymore because there's just no not burn anymore um so with this in mind like attention shifted toward uh CMD 228 and there's a sense of urgency by some people in the community that says that inflation is too high right now and Solana is basically overpaying for the security so I think we have right now I think we have in the slides like uh uh um like an image of the curve if we

could show it that would be awesome um so we have moved like like what simd 228 proposes is essentially a static curve like yeah exactly this one based on the staking participation rate and so the idea of this curve is to increase its aggressiveness once the staking participation rate drops below 50% so that the new uh inflation rate proposed by CD 228 surpasses the fixed emission schedule once the staking participation rate drops below 33% uh which is like this like where the

black line crosses with a purple line and the idea of this is just to increase uh the security in case there's a huge drop in the stake which is not expected but is a good like uh mechanism so with a current staking participation rate of uh around 63% Souls inflation rate will drop to about 0.96% under CD 228 uh which is obviously a big drop from the 4.6% that we were discussing previously and this has sparked some big debate in the salanta community uh there have been huge conversations going up in

recent weeks I'm I'm sure people have seen them but basically the idea uh is that CD 228 can reduce the profitability of salana validators significantly especially small validators and does it could reduce the validator count uh the reason for this is that today uh the biggest cost for being a validator on Solana is um voting cost which is a recuring cost and is around $60,000 per month and some some validators are really already run like in thin margins and if CMD 228 reduces like their um like a huge portion of the revenue then

they could become un profitable and drop off um helus drew some estimates around what that number could look like and the current estimate is around like 3% of the validator count could drop off which to be honest is not that big of a of a concern and then the other point against SD 228 which I think it's more present is the one made by ly Li of the Solana foundation and she mentions that it's a mistake to change Solana's inflation at a time of bck institutional interest just before ETFs potentially go live this

year and the reason for that and I think it's an underappreciated point is that Soul inflation sort of subsidizes institutional distribution today where if you look at custodians ETP issures in Europe they don't actually have exposure to the underlying asset which is soul but they do benefit from Soul inflation so other things equal they prefer having a higher nominal staking yield if and they don't really care where it comes from than having like a lower yield but it's just based on like real revenue and like just think about it like from an

example like uh think about a staking ETP in Europe and the ETP issuer takes a portion of the staking rate um other things equal like inflation being so high today benefits them because they get a higher percentage of that uh of the staking yield and they have higher revenues does they have like an incentive to sell soul to their clients since the same goes for custodians and other types of like institutional players and so if you remove that uh inflation there could be like this risk where some of this

institutional uh players lose interest like in promoting um soul to their clients and so so the idea of Lely is that um Soul could actually lose some institutional interest after cd2 28 I don't necessarily agree with the stake but it's obviously I think it's the strongest like um argument against implementing CD 228 yeah I just I pulled up the list of validators by stake and to your to the point you can see you know binance stake and coin base Ledger by figment and figment themselves and Galaxy as well they all have you know commission rates

of 5 to 8% and obviously very large amounts of stake today which like you would expect is you know from customers using their um using their services and depositing their their assets um and staking them via that you know custodian um so yeah I think just drives home the point of maybe the potential value there yeah yeah funny thing is Carlos we both came from separate European ETF ETF and ETP issuers so we kind of like live this industry for a little bit and yeah I know you don't necessarily agree and I don't think and I I agree either I mean they they still have Stak eth even though eth was like 3% at one point I

mean they're still going to offer these products because AUM is is just more revenue on their on their table for them I mean even if they have to charge a management fee I mean look at Bitcoin or ethereum ETFs in the US right now or even Bitcoin etps in Europe there's a management fee there and they're one of the more popular products I really think I really think the demand side is more important than what issuers do for marketing and whatnot I mean you know Bitcoin you know I I mean black Ro can help Market Bitcoin a lot but I you know I think like Solana can Market itself and I think investors retail or institutional want a coin with a good story and possibly a low inflation health helps that story as it's helped

Bitcoin in its past as ethereum have tried to use with their disinflationary fee model so I think the demand side is more important than than that um and I think I think you agree with that too and um but I I wanted to ask you know it's we're on the voting now I think it has like just over eight hours left um what do you think the outcome is going to be yeah like absolutely I I think we can share like the live voting but just before that one point that I want to like drive home is like you mentioned like the etps in Europe like I think one of the one of L's arguments here is like if you look at sole etps like the sole ETP at least where I W where I was it

was the biggest like it was the highest ETP by assets under management even even higher than Bitcoin and so she kind of uses this argument like one of the reasons Soul etps have gotten so big in Europe like even higher than Bitcoin is because of this like staking um yield that they get on top of the underlying exposure and and so other things equal like if you have like a staking ETP and a staking Soul ETP and the issuer makes more money on the so ETP then obviously they have like an underlying incentive to sell you the so ETP over the E ETP so I think that's one

of the points like ly was making which again I I agree with you like demand is more important but I think it's also like crucial to understand the other side of the of the argument and yeah like just looking at this boat status like uh boting ATS ends at EPO 755 that's about 60 hours from now so right now we're at Epoch uh 7 54 it has about eight hours left and then we have like two days left from EP 755 we have not yet reached uh the Quorum required for the boat to pass uh about 28% of active validators have

voted we need more than 33% of validators to vote for CD 228 to pass and if we meet uh Quorum like it's likely that CD 228 passes because you see that uh from the validators that have voted there is a majority of yes but we you need to wait uh basically around two days to see like what the outcome of the boat is uh below we see simd 123 uh it's being voted in the same uh time frame uh we see a more favorable uh opinion here again we have not reached Quorum uh it's only at 23% we need more than 33% for that to pass for

those who don't know uh just quickly cd123 is just like the block Revenue distribution proposal so right now if you're a validator you can set a commission rate for issuance rewards but you cannot share priority fees with your stakers so what cd123 would do is it allows validators to share priority fees with stakers natively and so obviously an important proposal as well for aligning validators with uh with stakers I don't want to call either of these things early but it has seemed like the broader Community sentiment around at least around um 228 has been

largely positive from what I've seen or at least in favor of the proposal um like you've mentioned Lily seemed to be the the largest and loudest voice on the opposite end um in the against Camp um but I I think we've seen broadly the community has been in favor of so it would not be surprising to see this pass um with a with a yes um I guess going forward the combination of these two things are there other like additional proposals in the future um around the staking rate or other changes to the network that we expect um to come into the future and kind of play into these Dynamics as well

Carlos yes there are future proposals that I think are relevant to discuss I think the the reason like just CMD 228 was so controversial is that it is one of the first changes that I can think of that it's not just purely technical but it's also very economic in nature and most of the proposals that we have seen those far are very engineered uh Focus where it's just like let's solve this bug in the protocol Let's uh make this more efficient whereas here it's yes it's it's somewhat related to like it's technical of course but it's also very economical and it like um it has this side of what is the implication on

salty asset and and on the flows that it could generate which core devs I mean they are brilliant in salana but they are not so in touch like with the institutional uh side of things which I think was one of like Le's points and so in terms of like future proposal there's a proposal to um increase the block limit on salana so basically the block size to 60 um million cus I think and so right now there's like Solana's Logan is basically increased bandwidth reduced latency right so right now uh devs are trying to increase the block size

gradually to eventually double it uh potentially this year and that would increase bandwidth and so I asked uh one of the um core people at Ana if there were also like plans to reduce latency that is reduce lot times below like the 400 milliseconds and other things equal I think they prefer reducing latency over increasing like bandwidth so reducing slot times over doubling uh block size but the problem is that this has more complex implications around the validator ecosystem and one of the things things is that if you reduce the

slot time to let's say from 400 milliseconds to 200 milliseconds you would double the amount of votes necessary for validators essentially and so validators with votings being the like the biggest cost that would increase uh like cost by a lot for validators so you need to do other things before you're able to like push these boundaries of performance such as like abstracting away boating cost or reducing them or like yeah just a bunch of things that it has Downstream implication on a lot of things that you need to think about before doing that how do the like potential increases to

like the CU limit for blocks as well as you know if we were to actually get to a point in the future where they could alleviate some of the voting costs and reduce you know the the time for blocks as well like the expected additional requirements for validators for example like on this this CU change for example do we expect most validators to basically be able to just turn that on and be good to go or is there an expectation of a need to like raise the the general requirement of like capabilities of a validating node so right now the right now the CU limit increases are very very conservative to the like to the extent that it really

doesn't have any effect like on the Network performance at large but and the reason they're doing it that way is because just for the reasons you mentioned they want to make sure that there are no like um unexpected consequences in terms of like validators maybe some validators have hardcoded some uh some like assumptions they just want to make sure that uh there are no like unexpected changes and they they are doing it gradually so that they can eventually double and make sure that no that like will suffer or be subjected to like uh yeah any kind of like U negative impact uh in terms of reducing slot

times it's a lot harder to do and it's it's not just voting costs like imagine for instance you have to push the limits of consensus to the point like how fast can you propagate like information in the network and make sure like every validator is in line to like uh be able to uh have that information in like 200 milliseconds or 50 milliseconds and so yeah that's a lot uh that's a problem that's a lot more challenging but uh the rewards are also a lot higher yeah I guess the culture in salana has been very differentiated I would say from that of ethereum but it it would not be surprising to continue down this road um where increased

requirements increased you know throughput R latency ibrl um lead to generally increased like capabilities and requirements out of validators and where maybe at some point we get back to the discussion of like how decentralized how centralized um is to one way or the other um I think the eth camp has been boldly in the camp of like not wanting to raise any requirements for a long time keeping things very simple for the like at home solo Staker um I think that's really not been the case for for salana but who knows if you know if the goal is really to just kind of keep shipping and and increasing the capabilities of the network um that might become a conversation at some point in the future as well if you know significant numbers of validators have

to drop out basically to be honest I kind of prefer sana's approach right now like not letting let's call it the weakest lengths to hold back the entire chain um but even in that same way we we saw ethereum increase their gas limit by 20% this year um the 60 million compute units increase what is this what this be the first increase like let's call it block increase in like two years the no it would be the second uh we had an increase in I want to say January but yeah like two two months ago or or three months ago okay yeah I like I know I like this trend and um I think you can you can you know sana's been on the path of performance first and then we can you

know figure out the centralization a little bit later however you want to measure that um and I think it's above things like Aptos and SOI that uses you know bft consensus which has like you know you're limited to like 1 to 200 validators there so it's miles ahead of that but yeah yep great points um and great coverage thank you Carlos for the the Deep dive on 228 have you been getting silon chain this year farming on 10 plus wallets across different different ecosystems well cryptex calculator is here to help cryptex calculator has 3,000 plus Integrations to support all of your wallets Exchange accounts and onchain activity and a custom pricing Oracle to handle even the most chaotic port folios get started today and make tax season easy you can use our exclusive discount code BW 2025

to enjoy 30% off all paid CTC plans until April 15th of this year follow the link in the show notes below to get started I think maybe maybe one last topic because there's been a lot of discussion and I I think we've kind of alluded it to a little bit um in recent calls and even today around this like continued Trend towards you know maybe trafi adoption of potentially crypto rails this idea that like rwas is a bit of a Hot Topic today um real world asset protocols I just wanted to share one chart from our friends at defi llama um with some data from their narratives tracker but we can see here that purple line is the AI category and the orange

line is the rwa category um so it's it's interesting to see how quickly this Market shifts between from one narrative to the next um was very much the Hot Topic um in late 24 going into 2025 and you know maybe partially spurred on by the new Administration and you know easing regulations etc etc um this this concept of like rwa protocols rwa tokens are um maybe hot in everyone's mind now I guess the the sort of lingering question here from me is is it getting a little bit disconnected from reality do people really have like reality and expectations set correctly around real world asset protocols um I I

think it calls back to some conversations around you know if if some of these large institutions are going to come in do we really expect these like open source and um kind of like freely available technologies that have been built out to ACR to you know the Dow protocol tokens sitting around those or is it going to be you know the black rocks that come in adopt the the tech you know build it on build it with their own staff with their own servers what have you you know spit out their own chain um and we see the value basically just acre to them in the form of you know captured revenues or or something of the like I I guess I'm curious your guys thoughts like are there are there names or or protocols in the rdba space that were're genuinely excited about um

and we're not so concerned about like a sort of a capture of this space from the entering participants I think it's going to be tough for for Dow's like incumbent I mean um upcoming protocols that come really capture the rwa profits I think it's going to be existing existing try markets because that's I mean that's where trillions of the assets already are right and you know if you look at it now it's you know real world assets are growing the most popular one is stable coins but we don't really consider we don't really bucket that into it but real world assets have been growing but albeit slowly I know um rwa axyz has keeps track of all the um the assets on different chains but I

think I I don't I don't see how you can trade these things with without in a not being in a kyc manner so because these things already have existing regulations around them they aren't just some kind of mean coin that's spun up I think there's going to be two paths for it there going to be like Black Rock has their own version of Ono you know and they they start to build up stuff or like Providence for example um and on here we see rw. XYZ they have this um chart to show you the different private assets by category and if we look at that private credit that in the blue line by far the most massive and all of that is coming from one chain that's Providence blockchain and they it's

mostly private credit from Helo H loocks which is like home credit loans basically um think of it like many mortgages and you know so they got they already tapped into the crypto markets the blockchain markets with existing traditional Financial inform um instruments and they're also issuing some of this stuff directly on chain um using like yeah um certain certain tokenization standards that have been around for a while it's just that our you know like Providence has adopted them first and integrated it into the chain and I think what's interesting about them too is that they aren't a fully permissionless train in the sense that it is permission permissionless to run a valid

but in order to bring in new up codes you need a certain a quorum of the of the existing validators to agree on bringing in those up codes or you can call them contracts the existing contracts are all Financial based you can build your derivatives and dexes and other things as well but the reason why they did that was to prevent you know Meme coins or um certain kind of nfts with royalties from flood in up the chain and they want to be and in my opinion this is probably the closest thing to an app chain that there is because it you know in any other app chain you can just build whatever you want but this one has some kind of limitations on that so I think

that seems to be the most successful way to do it if we only measure things by tvl of rwa I think another way which is also likely is permissioned chains or in my opinion maybe permissioned l2s and I say L2 is because these large institutions it's probably easier to to just use the evm because there's so much documentation there it's probably easier to get a developer AI can probably help you with it as well given the resources and you can have full control over your environment through that centralized sequencer so it just seem and there's you know Ras providers as well so it just seems like the lowest hanging fruit for them versus if they were to spin up their own chain you know JP Morgan has their own chain

but that's a specialized chain if they spin up their own chain then what becomes the point because then every large institution is has their own Silo chains and then you basically what benefits are you getting you might as well have kept it on your traditional database in the first place so unless you know unless traditional financial institutions have some standard that they you know come together and agree on which is not that's something that they do all the time and especially in the financial sector but maybe not something with such an emerging technology not so early so more likely they will go to interrupt solutions that already exist in the open source space and if layer tws can figure out that interrupt I I see that as just the lowest hanging

fruit for them to have quote unquote The Best of Both Worlds how do you think about the limitation of like ethereum l2s today from like a throughput perspective because I I think it kind of calls back to your point about you know if there's not if there's not really much of an advantage or a benefit like why not just keep it on your private server um and with most L2 like Bas is really the only example that's trying to really push and scale throughput but the majority of them still sit at sort of like the eth standard of doing like 10 to 20 TPS which I'm imagining like if we're thinking about some of these very large financial institutions like the amount of money and the amount of customers that they have and the amount of maybe

transition of asset or like movement of assets that they might be dealing with um there might be an expectation of being able to handle higher throughput um I don't know if that puts press pressure on this evm idea or just you know they're all going to be adopters of like w for example and and really just scale the heck out of a sequencer like Bas is doing yeah that's that's a really good question I mean I think initially pilot programs I think you know move these rwas don't really move as much as we think they do like things that really move are like treasury markets very liquid very short-term instruments and those aren't going to be put on chain there's no point they already work fine I think it's slower moving things like private credit to private Equity these and you don't need as high of a

throughput for it so maybe there's a scenario where you know 10 20 25 50 TPS is fine for the current use case and as and as they start to as these things become on chain and now it opens them to becoming more traded more frequently and then then you might need to me might need more throughput so it can grow as adoption grows maybe the backend infrastructure grows with it as well but the early days is might not be as necessary um or you can do you know Providence 20 you know like how much of a validators relatively smaller nod set um and you know just beef up the requirements you have IBC if you really want to have some kind of interrupt um

but then it but again it really depends on it really depends on what standard they go around and I I don't think I don't think they are going to when they're doing this analysis I don't think they're going to jump to that level of it I think it's going to start off at pilot projects as as you always have to do and I think the easiest pilot project is evm and then once unless you really start to see the benefit and hire a proper team to build it out and maybe they say oh we should do this one maybe we should look look for a faster chain or something else depending on what your criteria I think I think probably l2s or or well I think probably l2s would just be the way or something evm related will probably be the way yeah I agree with that l2s just

allow for a faster time to Market you don't have to worry about like building consensus bootstrapping about valat set in case like you wanted it to be like your own chain it just makes sense to build an L2 there's also like Avalanche subnets that were specifically focused on like uh institutional players I think that's uh something like we could keep an eye on uh there's also this interesting thing about like Mark mentioned like standardization like there are some erc20 standard RC standards like are specific for like uh you know for permissioned uh kind of things like allow for uh blacklisting and and that kind of stuff uh you also have like

token extensions on Solana which like the main focus was to allow institutions to enter the chain like with private transfers uh control over who gets uh to control like the like the token and whatnot so I think like we're seeing a push from many ecosystems uh to on board rwa on their chain and with that like it's obvious why because it can unlock like a huge amount of like tvl and uh distribution but like yeah I just uh I think it's very early stage I I honestly think the main issue today is not technological but rather

Regulatory and many of this like institutional players just don't know what's their right way to do it and if you on board like an rwa onchain there's also this issue of how do you have legal like like a legal claim on the onchain instrument where when you trade it like offchain because uh like these items like are usually like issued on off chain first so you need to make sure there's like a legal way for like when you transfer ownership of that asset onchain there's also a way to do it like on an offchain basis if that makes sense and so like one of the things that I'm

excited about is just like issue things directly on chain because it makees things a lot easier than just like having this like a hybrid system where you have like a traditional rails and on top of that you tokenize things I think that adds a lot of friction and you lose a lot of the benefits of blockchain technology that way great points I it is interesting to see the continued Drive in a lot of the newer chains at least towards like I mean this increased bandwidth reduced latency seems to be the motto for most of like The Cutting Edge teams at this point you know the monads the mega eths you know there's Fogo there's untu there's a bunch of different chains even suen Aptos I think

is really the same same ideology there um and I think interesting to hear a contrast here when we we think about um you know institutions wanting to bring RW on chain and maybe that not really being um their consideration today um but you know it this could be a little bit of a difference in terms of timelines and expectations of like where things are going obviously salana has a need to like service their retail Traders today whereas you know this the distant future of like onchain institutional usage is is not quite here yet so um different needs for for different times I guess is maybe the the one big takeaway there at the moment um but we're I think we're still early to a

lot of this stuff and I think the point around regulations is is key you know I think we're still looking like at least in the US we're waiting for you know uh stable coin Bill we're waiting for clarification around a market structure Bill probably various other things that might impact you know whether Banks might even be allowed to custody different cryptocurrencies um a lot of different things that aren't in place yet that are sort of keeping any kind of interested parties sort of held back from doing anything right at this moment um but since I have both you guys here and you're both going to be in Das next week maybe to close off the episode this week I'd just be curious to hear from you guys like either the guest or speaker you're most excited to hear from adass next week or a talk or any um event that

you'll be taking part in um while you're there next week I'm excited to hear uh Ryan Ryan Connor spanel on like valuation I think that would be interesting yeah I mean I I'm looking forward to what I'm involved in um I'm I'm moderating on um Bitcoin centralized lending and then one on marinad taking and definitely thank you should come and checking out I'll also be mcing on the first day for the investor track so it's going to be a fun time all around awesome Shameless shill for Mark uh definitely if you haven't already if you're interested if you want to head to das it is next week like I've said this is sort of like the last chance um to grab your tickets 0x10 is the code if you want to get 10% off tickets the link

in the description go see Mark he'll be M like he said he'll be mcing he'll be doing a few things um cash flows Connor we'll be talking about valuations of things um as would be expected from a man that goes by cash flows Connors so uh we will see you all next week either at Das or on the next pod um thanks for coming on guys and uh we'll see you all next time [Music]