What's Wrong with Crypto Data (And How To Fix It) | Roundup

Transcript

blockchain revenue does not exist Revenue to who is it the validators is it the non- stakers is it the staked token holders is it the other infrastructure providers in the space blockchains are networks they are not businesses and so you cannot say like Revenue because it's very unclear who you're referring to today's episode is sponsored by geod net they're a leading dpin protocol that's providing critical location and spatial intelligence Services needed for AI driven robots and drones discover how the net netw Works native token geod is powering the next wave of the robotics Revolution by hitting the link in the description of today's episode today's episode is brought to you by unich Chain an

upcoming layer 2 that's purpose built for the next generation of defi applications with up to 95% lower fees than ethereum and 250 millisecond block times coming soon after launch unich chain is designing the future of cross chain liquidity stay ahead of the launch by visiting unich chain. org and giving unich chain a follow on X hey everyone Jason here there's a reason why Ledger is trusted to secure more than 20% of the world's crypto assets today check out their newest devices The Ledger stacks and The Ledger Flex featuring the world's first secure touch screens take your security seriously hit the link in the show notes of today's episode to check out their latest devices trust me

you won't regret it all right everyone welcome back to Empire we've got a uh a new face um new and improved face over Santiago I think we could uh we've got Dan Smith is the uh head of data at blockworks uh you might know him from the used to be the co-host with mert at the lightspeed podcast uh and Perpetual ship ship poster on on Twitter so yeah Dan welcome to the show man thank you thank you pleasure to be here yeah don't don't forget the Grassroots origin story of zerox research with Sam Martin back in the day yes of course so you've been through two podcasts I know yeah they just they just shove me in all these Corners man come on me behind the uh locking me in the

data closet now yeah exactly exactly this is like a kind of closet Vibe with the brick behind you yeah who knows what's on the other side of this room yeah exactly exactly um we just got off the block works all hands what' you think it's exciting man 2025 is going to be a big year not only for the industry but super bullish block Works obviously I think we got a great wedge in the market yeah indeed um all right so brought on Dan because Dan has just been um relentlessly posting about why the data in the industry sucks and um I actually just had a couple questions for him about that uh but before we did there was a some interesting news announcements this week so the first one was um moonay acquired a company called Helio and chainalysis acquired a company

called Altera I think it is uh alaria Israeli company both of them were about 150 million so I think it one was 150 million one was 175 million and they were both related to payments uh so I just thought that was interesting uh two Acquisitions one week both around you know between 150 175 million both in the payment space um I don't know if you have any thoughts on this but yeah it's interesting to see some consolidation there I feel like we've long talked about the idea of m&a and crypto um especially at the protocol level I think mostly because the logistics of that seem like sound like a nightmare and it would just be fun to see more of it uh but this one's interesting I I liked you

that you pointed out that they're both in the payment space as well that feels like the layup for crypto uh the question is the execution on that side is tough I think you at least in the west and specifically the US you have like you really got to displace Giants in that space right I pay people with VMO pretty religiously I mean Apple pay is uh at least they're like Apple pay for the credit cards and whatnot in the Apple wallet I think did a very good job of being a uh like breaking up how I paid for things and changing that that pattern for me and that flow but as far as like sending a friend 20 bucks I don't know I love crypto but it's going to take a lot for me to send you know 20 usdc to somebody over just like a quick

venmo and my user flow is so programmed there and a lot of the team at blockworks is pretty Global especially in Europe as well and you it sounds like revolute is kind of that app for them in some regard as well so it's just like this trained user pattern that we have right now and the question is if you're building in the payment space like what are you going to do to you know force force a change there yeah I think what might end up happening is it won't be user driven it'll be actually business driven which is you ever go into like a grocery store kind of like a Side Market like not a big Corporation they'll be like oh you know uh everything's five 5% off if you use cashier or like two% off if you use cash I think you could start

to see that with stable coins actually um where it's like maybe everything's 1% off if you use stable coins I I don't know from a from a user perspective I've noticed I uh I've started to like you know you used to put money move money from a bank account into like a coinbase or gemini or something or what whatever the platforms everyone's on boarding on to these days are I guess it's probably coinbase and you would just put it into usdc and then you would put it into a coin H and then if you sell it you would move it swap it back into usdc usdc and then move it back into your bank account now I just kind of let it sit in usdc because you get so I mean is coinbase a bank account I don't know it's interesting and like you know even for

me personally get some crypto wins you want to take some risk off the table like what do you do with that Capital um the the coinbase in usdc is like a very compelling option for me but I don't know then I always try to think all right like 99.9% of my worth is in crypto like let's maybe put some dollars in a high yield savings account but it never happens are you 100% in crypto right now um I recently got semi- recently got married and so that that Diversified that was like my long a forc diversification yeah yes and she was like all in cash and super safe and conservative so honestly it was like the perfect barbell strategy that's great marriage best diversification strategy exactly I also wonder if these

Acquisitions how much of them were in equity because the acquiring company's moonpay and chainalysis so moonay raised 555 million in I think the top like the the absolute Pico top which was like rough I think it was roughly Q4 2021 they raised at a $3.4 billion valuation then chainalysis raised raed in 2022 at an 8.5 billion valuation so they got a bunch of nicely priced Equity to start buying things with so I'd be curious to see how much of this was cash for Equity do do either of those have a token no okay no straight up Equity company well one of them has a to well one of the companies that got acquired has a token

which is Helio um okay right so what know what actually happen yeah it's a good is it Helios the token no no no no Helio look up like Helio I oh maybe I'm wrong Helio Ico I thought Helio didn't an Ico maybe not because I mean that's the interesting question right like we always talk about uh the push and pole between the labs equity and the you know public token uh I think uni swap always gets talked about here and the question is like what I mean legally token holders aren't requ uh have no claim on anything but morally there's definitely

a discussion to be had and it' be very curious going into the know Trump gets uh sworn in in what four days now and there's a whole lot of chatter about what exactly that's going to look like in terms of Regulation change and whatnot and you'd have to think that there's going to be some standard right these are permissionless networks there will always be nonsense on chain but I kind of how I I don't know if this is even a great way thinking about right now my base case is there will be you know two sides of this where some things do get standardized and reported and like you know the stamp of approval if you will um and those things will have to play by a certain subset of rules um and it'll likely be for the betterment of investors and token holders in the

space but again these are permissionless networks that will always be the pump funds of the world if you will yeah yeah um wow big breaking news out of trump actually right now um Trump America FDA authorizes the marketing of Zen pouches approves 20 New Zen nicotine pouches this is a oh no that's the wrong that's the wrong Trump news no the uh that is big breaking um the other I mean the speaking of trump the other thing that uh was happening this week before we get into too much data conversation is uh this Trump us token Reserve did you see this I did yes the uh Ripple Army Rejoice what is this I'm trying to pull up the what do we think of it I'm trying to pull up the news I think like broadly the idea was you know we've got got this

idea of a Bitcoin strategic Reserve how do we bet on American businesses that's stuck with crypto basically and like who launched their token who was founded in the US um and can we you know build up a reserve of those assets I think it starts to get pretty ridiculous pretty quickly in this category like okay I think you can make the logical reasoning why the Bitcoin strategic Reserve makes sense um I think you can also push back and say this is ridiculous what are we doing but like all right it's there right it's this way to transport well through time the whole point is that it achieves that and it's like ultimately gets spot up by nation states is sort of the point so okay like I at least get there but like I don't know if you start

buying up like soul and xrp and you know harar and other like you know relatively American built and founded companies it's like oh you're throwing you're throwing hadera in there all right I'm pretty sure it's US based and that's like right I don't know that's that's where we end up is it not don't I hope I wrong on that but definitely yeah the the idea of an American first strategic Reserve that would prioritize digital coins founded in the US like salana usdc and ripple why they would put usdc into Reserve that I do not know um that does okay H bar is up 20% today so I'm assuming that it is indeed americanmade wow um okay so I I don't think this will happen but one idea that I have that I

brought up on a I think it was last week's round round up that I really do think will happen is um so so I really do think a strategic Bitcoin Reserve will happen like I'm pretty a pretty strong conviction that that will happen and I think that Trump will say that he's buying americanmade Bitcoin I think he's gonna say for the Strategic Bitcoin Reserve we don't want this Bitcoin that's been tainted it's been mined in China you know we want we want americanmade grass-fed Iowa Iowa cornfed you know Bitcoins Texas Bitcoins all the adjectives that you see on like a carton of chicken eggs organic free range grass Fen yeah probably Iowa Corn we want some Iowa Corn you know Texas made Bitcoins

that's I that's my prediction for what's gonna happen is this just the um evolution of you remember when uh God this probably like three years ago two years ago where everyone was trying to buy like green Bitcoin or that was mind sustain yeah it's like the evolution of that idea which is kind of I actually think we mentioned Chan alysis earlier I think they were the ones playing like a key role in saying yep okay this was you know ethically mined Bitcoin all right let's uh let's let's talk about um coinbase Moro uh because that was what I thought was the last interesting piece of news this week um so coin so coinbase announced coinbase is offering Bitcoin back loans through Moro basically coin I'll just share what I remember from from the news

story but coindesk uh or excuse me coinbase like the history of kind of like use like Leverage on coinbase is you know I remember in 2017 buying Bitcoin on credit cards on coinbase and then 2021 I don't know if you ever did this but you could if you had Bitcoin on the platform you could take out loans against your Bitcoin but I think they were that like that basically just offchain loans right they would just like you know lend out against your your Bitcoin to to other counterparts um now what they announc is that using Moro which is like an a competitor for people who don't know Moro deployed on base uh and you can now lend against your borrow against your Bitcoin lend out your Bitcoin on Moro um via coinbase which is pretty damn cool like I think it's

pretty cool that the CI exchange the CI platform is now moving more and more and more on chain um I don't know I I I like this piece of news this was cool yeah I think it's really cool I agree I also think it's a huge win for Moro they were kind of a later entrance into the lending space I mean they they've been around for a while but uh I think they've even like shifted their product a bit but point being that a is largely the giant here and Moro won this deal um it's very interesting because they've kind of built a system designed specifically for this where they can have specific vaults for that give control over the Vault to the risk curator so I I don't know what the details are here but I imagine coinbase is very willing to do this because you

know they can bring in Risk people that manage this Vault so we've seen like Gauntlet we've seen steakhous and some of these other more risk manager focused providers do the same thing obviously at a different scale because they don't have a the US's largest centralized exchange uh at the helm but it' be very interesting so I think that's one angle here that I find intriguing and the other is it really shows you the interplay between coinbase's product Suite now right they have base it's you know the second most popular Chain by activity in you know pretty much every activity metric today and um they launched CB CB BTC on there not that long ago Bas is already doing like about a billion dollars of weekly Dex volume on CBBC it looks like sexex Arbitrage so

they've got market makers on boarded um even even just the presence of this asset on boards market makers I don't know if they're doing anything specifically uh so yeah it's just been fascinating to watch the how you create this new asset you plug it into your onchain economy on base and you immediately start catalyzing growth around this asset so to me that's like really the unlock here is that was always you know an idea a theory like hey you know imagine we have this chain and that chain has a vibrant economy on it and then we throw products at it and then just eat it up that is exactly what's happening here um so yeah I think it's a huge win for coinbase huge win for Moro as well yeah okay let me ask you this so there's like a 100 million coinbase users so you'll be able to take

I'm guessing most of them haveit have Bitcoin they can take their Bitcoin that um from okay actually from a data perspective maybe we can seg segue this into the data because I was thinking about you've got Bitcoin on coinbase then that goes on to bit Moro which which is on base which is on ethereum right so the value capture question is interesting and like how you track the data is interesting because you you've essentially got what was Bitcoin but then e ethereum the L1 is going to get tvl from this maybe depending on how you track it and then there's gas fees for like base or the L1 I don't know how do you I'm very curious how you think about

uh who wins in this equation and like how to tr at that data yeah good question so I think bitcoin's got a pretty big win with an Asis here so bitcoin's money they want it to be everywhere this is a great way to get it everywhere the asteris being centralized custody of the of the asset um in true Bitcoin or fashion you really want to own your own keys and all of this so that does kind of take one degree of security or adds one you know extra security assumption right I have to trust coinbase to now uh hold this CB BTC for me personally like that's fine I'm intrigued by this um and you know you mentioned an interesting point around the value acrel side of this so uh no CB BTC tvl on base does not

count for ethereum that is these are individual chains and if you wanted to make some like economic analysis of like the ecosystem of l2s on ethereum and compare that to something of say celesio or another uh settlement layer or another da provider and say hey like you know these guys all have ecosystem of chains built on them like how do you compare the economies across that okay that's a reasonable comparison but to say like all right ethereum decided it's going to like go this L2 route so we're going to add all of the metrics together and then go compare that to other individual chains like it doesn't make a ton of sense and the reason being is the value acrel piece of this is very very blurry when you start doing this so um you know a user spends $1 on uh ethereum

or $1 transaction fee on base it's much lower than that but that's an easy number so is a dollar uh ethereum gets about like one to two cents of that and so from the Direct Value cruel standpoint it is you know one to two cents on the dollar and from a more like monetary aspect uh of a value ACR position it's like okay well how are these things going to ACW value it's the you know the use of the asset on chain and the use of the asset as a form of money uh and the use of the asset as a store value so I did think it was pretty interesting that coinbase uh is doing CBBC first because if there was like a ton of demand for eth to be a store of value you would think that they would do eth first I'm sure eth will come but I

did think it was fascinating that Bitcoin was first before going too deep down the rabbit hole I do want to just so you've been pushing this thing called rev right maybe I would just love to hear your view on like what is broken with data in the industry today because there a lot of great data providers right we like you know everyone knows Dune and there's token terminal and there's Artemis and there's you know probably dozens of different data providers like what is broken with crypto data today and then like how did you start thinking about this thing of you know called reev as the solution to it good question so there are a ton of great data providers in the space that is something we're blessed with and the

reason being is blockchains are giant open apis there's a bunch of data sitting in there and it's easy is definitely a stretch but it's very possible to go in and pull all this data out and then run analysis on it and because of how easy it is it's super public right and so teams like Dune and Flipside have built very great public tools that are relatively easy to access um and basically everything's used uh doable with SQL and SQL is a very easy programming language relatively speaking so there is a ton of data out there the hard part and I think the challenge that we're seeing today is taking that data and turning it into some sort of like actionable Insight or getting like a critical understanding of what this St means uh so specifically everybody you know these are tokens token prices go up

everybody wants to talk about like fundamental valuation because you know what should these things be worth how can I make a price Target that is ultimately what everyone's kind of chasing after um and so I got obsessed with the data side because the idea of value capture has been totally backwards in in this industry for quite some time and I think we've actually seen some like shifting in that so R is basically a standardized metric to track blockchain value acral from user activity so strictly looking at you know the question being like what are users paying to use my product that's that is like the simplest way to think about this number and historically what we've seen is sort of like two different uh different approaches to value acral

for a blockchain the first one being you know the total value acral often called revenue is uh the transaction fees paid on the chain that is fairly directionally correct uh the the missing Gap there is you some of the largest chains today have outof protocol tipping mechanisms to say go directly to the validator say hey you're the leader right now you're the proposing this block here's a dollar put my transaction in the block um and that is identical to transaction fees there is no difference the validator is running a set of code that opens up that second transaction Lane to receive that out of protocol tip um it in many ways that is functionally identical to Priority fees where you're basically saying the same thing you're just using in protocol rails or the

transaction submission pipeline so R takes a differ approach because it is saying hey we're looking at all user paid value to to process transaction execution that is what we want to capture so it's taking transaction fees and just adding the second piece in um so really what's wrong with that approach is you're just missing a very important piece of the puzzle especially on some of these larger more active chains today the second approach that is wrong is is more wrong it's saying okay of all the transaction fees the only piece of Revenue is burned transaction fees this is harder to reason about uh as why it's a logical approach um this is an approach that other data providers are taking or this is more like protocols will self-report their own

like I put quotes around this word revenue or who when you say like this is an approach what do you what do you mean by that yeah so if you like open up defi Lama go to their revenues tab they do a fantastic job of being this open source repository for people to submit their um uh chain or application revenues too the way that they track revenue is burn transaction fees I'm not throwing shade at defil llama at all token terminal does this Artemis does this as well if you basically go to any data provider and say show me blockchain revenue for any chain like that's what it'll show you um and again the issues are you're when you say Revenue like you're generally referring to a Top Line and so my point is like blockchain revenue does not exist Revenue to who is it the

validators is it the non stakers is it the Stak token holders is it the other infrastructure providers in the space um the point being blockchains are networks they are not businesses and so you cannot say like Revenue because it's very unclear who you're referring to so when you say burn transaction fees are Revenue you're ignoring all of the other uh participants in the space all the other stakeholders in the network right validators stakers uh infrastructure providers and saying the only Revenue there is is what goes exclusively to token holders um and mostly on the unstake tokens right if I stake my token I get other rewards such as priority fees or me tips so that's the issue with burn transaction fees

you're taking a very very small subset of the total r or the total Topline number and saying no no no forget all the other stuff the only piece of Revenue is this um and you're basically saying the only participant in the system or the only participant in the network that I care about is the unstaged token which conceptually just doesn't make a ton of sense and I have some data if we want to throw it up on the screen we can kind of walk through uh maybe both ethereum and sana's R distribution so sanki diagrams are flawless for this they are the most simplest way to to think about um how this flows so if you look at this First left-and Column here and I you know I'm personally a podcast listener on like Spotify but strongly recommend YouTube

for this get the full screen here really immerse yourself in the sanki diagram um so this this first left column let the sank diagram just come over you really throw yourself into it yeah uh so this first left-hand column here we have four things we have goo tips we have priority fees we have base fees and we have vote fees so the last three pieces priority fees base fees and vote fees those are the transaction fees in the system and the goo tips are the outof protocol tips that go directly to validators again just to say hey here's a buck you know put me first and so here you can see there's uh blue lines and let's call them Orange Lines and

so there is a subset of the of the Rev again this total left column um all those things combined that flows to token holders which is a combination of the stakers and the non- stakers and then there's the other chunk that flows to these Network operators whether it's validators liquid staking token providers or jeto uh the lab steam because they're running this infrastructure that brought in $675 million of total rev for the network in 2024 and here to me it seems like all right if we wanted to look at this and say go through those two examples we talked about is the only thing that counts is transaction fees then You' you'd ignore this jeto tip section up top and say all we're going to count is pryo fees base fees and vote fees again you're like directionally there but the

piece that you're missing is okay this other 650 or excuse me $675 million of value that moved through the system that users paid for the product that paid for transaction execution and that goes to stakers and goes to these infrastructure providers you're just ignoring that uh so to me there's like no logical conclusion as to why you can exclude that I think you could I've seen arguments like hey you know another company manages and runs those rails true but the validators run the code to accept that and the validators roughly are the network uh 90% of stake on salana runs the goto client which enables this so okay sure like again this when it goes to it's not a business it's a network and the validators run the code that operates the network and

they're opting in to create this thing and and allow it to be in existence and oh by the way roughly half of the RV or the total amount of value that users paid into the system last year came from this so it's Inc incredibly important when you're talking about a Topline metric to include it and then if we only looked at burn transaction fees uh so if we look at in salana last year 50% of all transaction fees were burned so 50% of pryo fees 50% of Base fees 50% of vote fees so you can see that basically each of these buckets half goes into the bird and the other half goes to validators so if we were only to count you know the this Revenue again in air quotes I really don't think blockchain Revenue exists but if we're going to do this and say blockchain Revenue equals

the burn well instead of this roughly 12$ 1.2 billion dollar you're going to say there was only you know $370 billion dollars of burn or excuse me of of Revenue in this in this network uh over the year so again you're just taking a subset of this and saying this is what the revenue is when yet okay if we look at the burn that $370 million um you just take the stake rate over the period and allocate this between stakers and non- stakers and you'll notice that that a good portion goes to stakers because most of the assets on the network are staked and then you're basically saying all right all we really care about is non stakers and like this little chunk of stakers here when oh by the way they made $550 million from jeto tips so you see that it gets pretty hard

to say you know this is the top or only a subset of the RV should be the top Top Line because you're ignoring that the fact that users paid money to transact on the Chain uh okay if you're listening on Spotify and apple I'm sorry because we might have just lost you there but um why does this matter Dan why why does this matter for like the individual investor here and then why does this matter for for just the industry as a whole for the individual investor I think there there is a fundamental value to these things um you can you know like your your price to sales ratio probably looks a lot like your p p rev ratio if

you will and then there is an earnings piece here uh there is a price earnings right if we look at the bottom right hand corner of this we have stakers and non-sters who generated you know roughly 900 million uh in 2024 that was value that was distributed to them if that creates a fundamental value right if you forecast future Salon activity and you know break this out and percentage is going to come through tips versus transaction fees and how that's burned or not burned or distributed to stakers there is a fundamental value does that mean that's the only thing that will drive value to a token I don't know probably not but the fact that there is a fundamental value in my view is very important to consider and understand how to properly calculate so if you're taking a subset of the activity and not

the full picture of rev then you're going to get an incorrect number when you go do this valuation analysis so I think that's kind of why it's important from a investor standpoint from the industry RIT large we have no standardization of metrics right and so there are protocol or there are networks that burn 100% of transaction fees there are networks that burn no transaction fees there are networks where this value like all rev goes to the validators and stakers only get like issuance for example so you need a framework that can capture all of that nuance and RV beautifully does this so on the blocker's research site we walk through some of these examples so we've been looking at salonus we'll keep rolling with it and you can build like a

very classic income statement here where you have your rev as your Topline metric um I'll use the annual here so we can base it off that sanki diagram so here's your you know roughly 1.4 billion doll of rev in 2024 and you can see which pieces of those puzzles or that those Orange Lines we were talking about earlier go to uh infrastructure providers we call that operator payments it looks a lot like Opex if you really were trying to shove this into a traditional income statement and the net of that so rev less operator payments get chose this token holder net income that is the value that token holders received in the network over the period uh so again this there is a very logical progression of why this makes

sense when you can run these multiples um so it's kind of like the next step of this analysis it's like okay well I I don't think anything today trades on a fundamental view to be completely honest I think every if you are they globally accepted uh onchain economy and like that all happens on a single chain or a collection of chains that will be worth a significant sum of money let's just like really hypothesize here and say like Global oil trade is settled on a blockchain that blockchain will likely like transcend the valuation of the token will likely transcend the fundamental value here right it's sort of like this money narrative but it's because a very important activity is happening on that chain and participants need that thing to do to execute these

trades um so I don't know it it gets more handwavy when you try to do the the more monetary analysis of like why these things have value versus this is a very concrete way of saying hey here's all the activity that happened on chain here's how much went to the token and here are the multiples based on you know the top line and the bottom line okay what do you think of folks who try to basically apply blanket pnls to l1s and l2s it depends what you mean by blanket I mean again if you get the Top Line right and you do rev like I think it's possible right if we're looking at this and it's the question is like okay if I'm a token holder what am I getting right and we can break this down to a token holder net income line it's

important to note that that line consists of both the unstaked the aggregate of the unstaked and the Stak tokens once you start getting breaking that down lower um it gets pretty hairy to be honest like okay if you're a Staker you're going to get different returns based on which provider you use or if you solo stake or even which Val validator you st to so get super hairy so the question that you kind of want to answer is like all right hypothetically let's say I wanted to buy every token on the network obviously not possible but let's just pretend it for a second you're not going to care if your unstake tokens make a different amount of money than your stake tokens if you own all the tokens you're just going to care about how much value is coming in the door how much you have to pay to operate

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G EOD and easily mined with their satellite Miner by setting up a base station you can get involved with this uh groundbreaking web 3 ecosystem learn more by heading over to geod net.com or just by hitting the link in the description of today's episode today's episode is brought to you by uni chain an upcoming layer 2 Solution that's changing defi forever it's built with a vision to be the home for cross-chain liquidity and defi Innovation as part part of the optimism super chain uni chain brings you up to 95% cheaper transactions than ethereum's base layer as well as near instant finality with 250 millisecond block times coming shortly after main net launch to make

things even better seamless cross-chain transactions if you're a developer this means you can build defi applications that truly push the envelope of what's possible onchain visit unich chain. org or follow unchain onx to stay updated on the launch upcoming features and getting started on building your dream applications earlier in today's episode I mentioned Ledger's latest products the stacks and flex and I wanted to take a few seconds to tell you more about them these wallets feature the world's first secure touch screens which don't just simplify your digital transactions but also keep them extremely safe these wallets are virtually impenetrable to online attacks because they store your

private key in a secure offline chip you can manage more than 5,500 tokens and install up to 100 apps choose the most trusted name in Hardware wallets and take control of your digital Security today at ledger.com or hit the link in the description of today's episode to check out their latest wallets if you were talking to a traditional allocator and they were starting to invest in crypto and they said look I want to invest in the fun things that have fundamentals right I want to invest in things that have fundamentals and I want I want a couple metrics to look at and you know obviously the metrics in the industry today are probably like what tvl you like active users uh number of developers um what metrics would you

advise them to look at first and foremost is RV I think it is a beautiful metric for capturing what chains have activity and in what size it's normalized to Dollars it's the dollar willingness to transact on the chain and we have seen chains with historically very low transaction fees produce very High Rev so the argument that like oh our transactions are so cheap that's why our rev is so low is not true it's provably false you can send usdc on salana for less than a penny and it has the industry-leading Rev uh last quarter so I think that's the the most interesting single metric if it was like under your head you get one metric that's the one if then the immediate question is like okay well what types of

activity are driving that uh that rev and we do also cover that on our dashboard and the answer today is like trading tokens across the industry at large the that is that is what drives RV so Salon in today that's very mem coin heavy AI heavy uh radium pump fund and Jupiter are all and the like token program are all sitting at you know the top six of what's driving Rev on salana uh but that's not a salana specific story right if we go look at Bass as well Bas is you know the second most active chain in terms of uh rev and whatnot so if you were to look here you know you can see the same story where the uh what's driving there is is

largely sex deck volume so arbitrageurs will there's deep liquidity for something like CBBC or ethereum and eth on base and uh that is driven a lot of the activity or a lot of the RV is same story driven by those Arbitrage Wars so there's this one interesting trading bot um we'll call him 0x 6f and you know he's doing 15% of daily transaction fees and does roughly 30 to 40% of Bitcoin Dex volume and ethereum Dex volume um so basically what happened was sexex Arbitrage for ethy asset has shifted off of ethereum Main net and onto arbitrum and Bas and that is really what drives RV capture within both of those l2s as

well so that's kind of like a quick one two on like okay how you take this Topline metric and then say okay well that's great it's making a lot of money but what type of activity is happen in that on that chain and do I think that's going to carry on into the future can you you know okay so can you start to apply RV to all basically where where does REV break down like can you apply re AC like okay what's my question here you can apply reev to all the l1s I think can you apply re to also all the l2s can you apply rev to apps as well like like where does REV as a as a metrics start to break down and how does it work as a metric if you use it to try

to compare you know A to B to C great question the beauty of RV is it does map across all blockchains not applications applications are businesses traditional pnls are going to look great there applications or businesses blockchains are these weird Network things that don't have this very clean cut and dry uh you know what is revenue discussion I think l2s look a little more busy just because there's like a today there's a single a sequencer that plays a very key role and the Dow controls that thing etc etc but largely there's still blockchains and RV does apply there are transaction fees paid there are out of protocol mechanisms it's all the same so if we look at R globally well I guess

one step back that's not to say there's not Nuance so something like Tron Tron does this very interesting mechanism I think it's the only chain that really does this basically if you stake the TRX token you'll get let's call them gas credits you get free transactions every day on the Chain so if you just like summed up all of the gas spent on the Chain multiplied by that that by the TRX the gas token multiply that by the price you wouldn't get the actual like transaction fees spent on the Chain it it would get this like massive number you have to actually reduce out uh the rebates that the chain gives so think about like again it's it's easy to think about traditional businesses in this sense but I I want to use this for like a logical comparison not a onetoone mapping but if you had a you know you

sold widgets and you gave discounts on your widgets you'd have a gross revenue and a net revenue RV captures that it's only looking at the bottom line of that like net revenue number so for tron's R it is the total amount of transaction fees paid in dollars not excluding gas rebates so there is Nuance here but again RV captures this metric because all it is trying to do is say how many dollars did users pay to execute transactions over a period um and I actually think when you look at this globally so we're looking at a chart here of network rev for most chains in the industry it's not perfect I think s is probably the big one missing here but largely this is very directionally correct you're looking at roughly 99% of RV over time this is like a really interesting where are we at in the cycle

chart because if we look at 2021 and we look at now you know ethereum November 2021 a monster Monster Month of like 1.8 billion dollars of of user paid fees to transact on a chain crazy if you remember back that's like Peak nft craze it was absolute nonsense happening on chain and it was a ton of fun uh but if you look at where we're at today we're still about two two and a half times off that number important caveat here is there is far more computation happening on chain today the cost of computation has come way way way way down um and that has kind of like enabled this this new Rising growth but I'm trying to like I'm toying with the idea of like okay although it's much cheaper to transact we have seen a significant increase in

total transaction activity and like what does the user care about do they care about like the fact that they you know have a dollar and they're going to spend that whole dollar on transaction execution or do they care about just the you know whether it's the simple swap um and they wanted to execute one swap regardless of the price so I don't know if we see this chart kind of like topping out back in 20121 highs to me it's like a whoa okay there's extreme froth because we're seeing the same RV on far more computation um and I guess while we're on that topic one more piece to layer on there I think is okay it's great that chains making money but are the applications making money um and we're actually at new all-time highs in that metric a lot of this is driven by

salana uh given the rise of all this mem coin trading and users willing to spend a lot of money into trade meme coins this is okay this is interesting so you think that the okay go back to that other one go to the r chart so you think this chart best summarizes why Salon is outperforming eth um I think it's a if again gun to your head you only get one metric yes I think it is um users are want they want to spend money to transact on the Chain if you think about why that is what is the what is the Bitcoin rev there back in the end of 2023 uh oh those are ordinals and like that's ordinals that was H you can

actually see even on like a grander time scale like you know the ordinals is more of like a flash in the pan but uh it's crazy to see the uh the rise of of ordinals go all right go to the sorry I cut you off before but go to the application Revenue now um yeah so I guess to also answer your question about like all right from a price for standpoint you know Salon has been white hot this last year and why is that well we just did a very depressing episode on xerx Research I don't recommend you listen to it it was we were coming into it being like all right bull case for ethereum and I don't know I I I'm probably guilty for just turning the corner on that episode but ethereum

made the decision that it was going to deprioritize L1 execution in pursuit of the L2 road map and what that did was move activity to l2s um an obvious consequence of that is the the apps went to where the activity was going and now that's where they're building and so RV is you know at in like cyclical decline on on ethereum and the question is like okay that's very obvious when you look at a chart but is that a good thing or is that a bad thing and and to me it's extremely hard to say that that's okay um you didn't like eth is not money I'm sorry it's not money it can be this like store value thing to like transport wealth Through Time similar to bitcoin I think the supply

Dynamic on ethereum is beautiful I think it's in a great state inflation is plus or minus 1% pretty much guaranteed it's in a great spot there the issue is like what's the demand to use eth's money and I don't see any examples of this I really do not um other than like a few of us on crypto Twitter that denominate a portfolio in eth like that's about it and so like more concretely the idea is that you'd push eth onto these l2s and the money thing would happen there okay well base I'll actually pull up a chart of this I think grow theie does a fantastic job of aggregating most ethereum L2 activity uh base doeses almost all of ethereum L2 activity so I'm just going to go ahead

and add every L2 that listed on grow the P onto this chart um and you'll see that from a REV basis and or just total transaction fees spent on this uh in in the entire L2 landscape you know yesterday base was 76% and it looks like it tops out at 79.99 per. of all of all Fe paid so like base and everyone kind of expected this to happen you're saying 80% of did I get that right 80% of the fees on of ethereum l2s 80% of the fees are base yes interesting and like Dex volume's in a very similar spot to a lesser extent arbitrum is doing quite

well index volume um but largely that's the same story and like whatever metric you want to use this chart will look roughly the same so base is that's I think that's why Kyle Sone always trolls with his like the future of ethereum as coinbase is because there's metrics like these are what we see in production today and so okay if we look at you know what's the moneyness of eth happening on Base today well they're actually rolling out a program to remove it as a gas token not remove it as a gas token sorry but to incentivize the use of usdc as the gas token that's better for the user right most people in the world certainly do not denominate an eth so why would you make them do that you're going to enable account extraction in your they it's a new tool base actually make or

coinbase makes money the more base or usdc is on base so of course they're incentivized to have more usage of usdc on base and so when you think about like the Mone standpoint it's like you know a lot of their activity metrics are through the roof as we can prove and then you get to the point of nobody it's not even a gas token really anymore well today it very much is but if they're trying to get away from that then how like I don't know I always feel like I'm grasping at straws when I'm like okay well this is why it'll be value valuable as a a money item but that's why I think RV is super important it's it's a measure of demand to use the thing interesting let's talk about another metric which is that I've just

seen you going off on on Twitter which is active I think it's active addresses uh yes it is I guess one more point to just to visualize this last topic and we'll jump into active addresses another sanki we love sankes so this in Q4 of and can we build sankes inside of our research platform en is grinding on it very soon these will all everything I'm doing is just like giving them tools to be like hey here's a here's why I want to build sankis and so it's coming stay tuned but Q4 2024 base saw about you know $30 million of transaction volume or $30 million of network RV coinbase kept 78% of that 14% went to the op Collective and 8% went to

ethereum like so this is eight cents on the dollar I should I should say not not two one or two but it's shocking to me that the op Collective has a better deal with Bas from a dollar perspective than ethereum does it's shocking to me and when you like you know the ethereum Maxi Community will say yeah yeah yeah the fees don't matter it's all about scaling the asset and again I think that's fine if we can make that work sure but I do not see any evidence of that being the case and so to answer your this a very long-winded answer to your question about like why has Salon performed it's because you don't see any of that everyone's just like throw as much activity on this damn chain as we can

and like let's see let's break it and then fix it and then break it again um and it's just a totally different ethos and I also don't think you nobody's like viewing it as this money in this aspect either I think it's important again we saw an infl uh proposal to change the inflation structure we can get into later come across this morning but I don't know largely it's just like they're there to to maximize rev and like you can get to a trillion dollar valuation with rev alone like it's a lie do not let anyone convince you that's not possible active addresses tell me about them okay let's jump in I actually think I have a twin pinned tweet thread here uh but why this is a silly metric so this is single-handedly the most noisy metric in

crypto and it also carries like real weight um when you say active addresses are users you are directly or indirectly maliciously or no ill intent doesn't matter you are implying like something that has a very important meaning in web to uh like companies are valued on RP maybe maybe less these days a revenue per user but it's not like Twitter has a bot problem as well so maybe I don't I haven't caught up in the the the tech side of you know do we still care deeply about the user number but um when you call them users you are implying very direct things about what that word carries and what that means and my uh my my grievance here is that it is extremely cheap to operate a cyol farm of many

addresses and there's significant incentive to do so for airdrop farming or just for doing U like there's a huge reason about this for mem coins as well and like Distributing to many token holders so you climb up all these silly leaderboards so people see your token it's like a marketing thing um this happens peras like very very it's pervasive onchain it's everywhere and even if you look at like trading Bots that are doing sex Tex Arbitrage or like running very complex strategies and you know being generally good like only back Runing or whatever whatever I'm not talking about like malicious activity here um they run multiple addresses on their Bots because it improves the efficiency of the bot that they run so if it's not like if there's one Trader running through one contract using a 100

addresses that's not 100 people it's not 100 users it's one user um so I just think that when you point to something and portray it as something it's not so when you point to active addresses and you call them users you are making a huge leap uh that is sending us down the wrong path and if we do not self-pace this you know the and the industry you know now that we're kind of going into this golden erir of the industry if we don't self-pace this someone else is going to come in and be like holy guys like you're calling 80 million users when there's you know a few hundred thousand it it just doesn't make sense and so we're trying to build out a better metric to this we're like really workshopping it internally I doubt we'll like launch it publicly until it's pretty hardened but it's a it's a hard

problem to solve you can't just like do this overnight like and so the question is like what are you even trying to do do you want to know the number of people do people even matter like especially in this world of AI and AI agents like you're going to see way more non-human transactions like what are you actually trying to measure uh gets pretty hard and like I think again I think web 2 companies have this problem too think like I don't know on my Twitter I have like my account my non account I basically never use and then like a couple blockworks accounts on there so am I suddenly five users like what I don't know the the word user has like really gotten diluted meaning uh and active addresses I mean crypto has it way worse because to you you you know one click you can create a wallet

whereas and then you know two clicks one more click and you can send some money to the wallet like to create a second Twitter account it is kind of annoying you have to you know yeah I mean there there's there's probably 12 clicks there which is you know I I also have multiple accounts and uh it's you know it's just like I wouldn't have like 10 accounts though but I do have like probably 30 wallets or something I don't know lost track I'm I think I've lost some wallets at this point like right and so like are you 30 users no and like we're not even denting this problem so how do you do so what okay what are you trying to accomplish though is it I guess people want to know how many people use crypto that's why it's how many how many how many daily

active users of crypto are there how many monthly active users are crypto are there that's I mean that feels like I've heard like 50 different answers to that it's because there's a very small subset of um industry participants that know the answer and it's centralized exchanges and wallet providers that is it and if they you you have to pry that data out of their cold dead hands to get that from them yeah but you could add up like metamask shares their user data like once every couple months they announce how many users they have and Phantom you know I think announced they have like five million users or something like Maus I think it was yeah so that's that's interesting and then you have to get into the whole like are they counting things in the same regard and and whatnot but yeah I mean yeah

it's it's it's tough and I'll maybe we can throw this link in the show notes but you should walk through the thread on your own um it's G to be it would be brutal to do that live but there's a few examples in here of these cybo Farms that like literally just Farm a fake transaction um with a a new account that creates this new user perception it's just a silly metric and again there's so much Nuance in all this even Dex volumes Dex volumes are pretty interesting to see what's driving onchain activity you can see what types of assets people are trading etc etc uh but there's like a ton of noise in those too I think they're directionally useful but like challenging to use so again that's why I always fall back on RV how much are users willing to pay to be a part of

this ecosystem yeah yeah um Dan anything else on crypto data you're thinking about I think my broad Mission I suppose is like how do we March in the direction of just broader standardization it's so complicated to like you know if you just want to compare to ecosystems it's so challenging it is so so challenging um but people you know demand it that's that I think that's like a very reasonable thing to like want to strive for and to push towards so that's what we're doing at blockworks research is we really want to make this easier for the user um because all the there's so much nuance and we just want to reduce that down into a few simple numbers that you could that you can use

to compare compare blockchains together um and again at the at the application layer I think it's much much much much much more straightforward yeah what do you think of tvl as a metric I think it's useful um right if you like in the context of you know how much Capital resides on this chain I think there's like a good security discussion to be had there so coinbase is doing something interesting they announced this I'm not like accusing them of anything this is this is just a thing they're doing uh they're parking user deposits of usdc on base and so like the l2b uh total value secured number is is like screaming up into the right on usdc growth and they're like like shows up in bridging metrics as well um but like again this

is how all metrics are nuanced is is a centralized exchange parking user deposits on chain like a useful thing to be factoring into like how active this economy is like yeah no probably not but again this happens everywhere like binance has a few billion dollars of usdt on arbitrum it's like 60% of all usdc on the Chain like they have to put it somewhere and they like diversify the risk I don't know how their risk management systems work but like that's clearly what they're doing and that's a okay uh it's just the question is like if you just take tvl at face value is it useful like directionally but not really but if you parse out a few things it's like yeah it's absolutely it's the amount of idle Capital waiting to be pushed into the economy or already in the economy if you're talking about like

d tblo yeah um all right I have to jump in a few minutes but I do want to get your quick take on uh this multicoin proposal that I just saw go live yeah it's super cool so basically the point is they want to reduce inflation on salana so salana today their inflation rate was just basically fired from the hip I think anat toy has been super you know open and transparent he like I don't know our original set of core validators came from the cosmos so we like sort of did what they did and called it a day uh salana grew into a top ecosystem and now multicoin was like look this is not a sustainable or realistic curve like let's put some work into it I think the tldr is it's going to have like a Target stake rate they proposed 50% when the total amount

staked pushes above 50% the inflation will reduce to incentivize like the fact that hey you know we're Above This threshold we don't really need anymore so we're going to lower the rate and then of course if it drops back below uh the rate will increase so you're kind of like trying to have this target rate uh we actually see a lot of that in the cosmos right now anyway so um there's it's kind of interesting there as well I think this is good right now like I don't know take a step back and say why do we need inflation well it's I think in the very very basic form it's to incentivize staking and to offset the the operational costs of validators so validators take a commission on that inflation and then pass the rest back to stakers that inflation commission you know is largely supposed to be to

subsidize the fact that they pay uh a few tens of thousands of dollars on salana to to operate their machine if you look at the distribution today between stakers and validators stakers earn 97% of inflation okay so validators take 3% so like okay it feels a little bit unnecessary like why are we doing this like this doesn't really make a ton of sense and it's pretty circular right if you're like getting diluted by you know roughly seven or eight percent today then and you're also getting paid in that dilution it's like you're you know the price goes down but you have more tokens like that's basically the change so it's just sort of like circular and I don't know it is it's just not clean um and inflation does impact the price inflation pushes the

price lower like value equals or Price equals value divided by Supply when you increase Supply you're increasing the denominator you get a lower price um that assumes there is some like fundamental value there but but that's how the math works so I do think inflation matters I think this is the right step forward lower inflation today's situation is uh just unnecessary unnecessarily High good proposal you're you're a supporter yes I am a supporter yeah is it too much too too quick um no I uh you know they they said this in a chat somewhere that this is kind of like step one like let's just put in this variable rate and then step two will be they actually have a very long form post

about the idea of like building out a risk curve basically for staking where long-term willingness to stake should be rewarded more than shortterm um that seems pretty reasonable and if they shoved all of that in I would have 100% agreed with you that's like okay we went from I don't know bro we just had a this curve looked good so we threw it in to like you know we're bringing the RIS curve on chain that's like two extremes so they actually did like a halfway which I think is a actually interesting interesting yeah because okay yeah yeah I gotta go read that yeah and I don't know you see like maturation on the economic side from ethereum uh happening over the last let's say four years you know salana is kind of at this maturation Point as well where it's very

interesting to see like historically a year ago if someone said yeah hey we should lower the inflation they would have gotten screamed at by the engineers get out of here we're not worried about that now it's like okay yeah now this is kind of dumb like happy to fix it um I got to jump Dan this is awesome I I did want to call something out which is we are hiring a bunch on Dan's team Dan's hiring a bunch of folks uh Dan started a blockworks because uh he cold dm'd me on Twitter and said I'm a big fan of your feed and block Works um I currently work in business valuation at God he's reading the whole thing live at ey uh and I'm a part of valuation group in Atlanta Georgia is like the most professional group like I'm about to

begin working towards my CFA uh so he said don't don't do any of that come work at block work so um yeah we've got a bunch of open roles and Dan's hiring a bunch so yeah if you want to uh avoid the embarrassing cold DMS and just just shoot one of us a a normal DM or apply on the website cut all that out good Lord um no it's funny actually I uh I've spent $1,200 on the CFA prep books sent that message literally the next day ended up with this job in roughly a month and threw them away so nice never looking back got to invest in yourself you know amen amen so uh Dan Awesome thank you for joining uh thanks everyone for listening either you I'm assuming you

either loved this episode or you didn't like it if you don't like crypto data either way we will see you Tuesday I think we have an episode with um uh I'm pretty sure on Monday it is the op is a big episode on the the super chain with Ryan Wyatt and Ben Jones from optimism uh asking them a whole bunch of stuff that's either on Monday or it's the Monday after so I'm 5050 I got that one right but quick plug checkout optimism. blockworks research.com we've got the top chains in the super chain listed there uh we talked a lot about bass there's a awesome bass Dex activity tab on that dashboard it's public definitely go check it out there you go thanks everyone hey everyone just wanted to give a quick thanks to today's title

sponsor geod net by setting up a base station you can get involved with this groundbreaking web 3 ecosystem learn more by heading over to geod net.com or just by hitting the link in the description of today's episode [Music]