Aerodrome and tokenized stocks on Base

Transcript

When we think about the opportunity for onchain products, we're not benchmarking against things that are happening onchain, we're benchmarking against things like the New York Stock Exchange and the NASDAQ. We think the potential for onchain markets and so over time they will eat away at those other businesses. Last week, Coinbase launched tokenized stocks on their base chain with liquidity from Aerodrome. Everyone has been talking about tokenization for years, but now that it's here, how does it work? What does it mean? Who's going to win the market share? And what do you need to know about all this? Hello and welcome to the Milk Road Show, the podcast that knows that the real future of finance is swapping meme coins directly into Nvidia from an app on your phone while you're sitting in the

drive-thru at 2 a.m. I'm your host, John Gillan. I'm not speaking from personal experience. I'm your host, John Gillan. Today is Monday, August 31st, and today we are joined by Alex Cutler. Alex is the CEO and co-founder of Dromos Labs, the company behind Arrow, the largest decentralized exchange on base. Alex is going to share a ton of alpha with us today and maybe pick a fight with unis swap. We'll see what happens. But if that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it. And as a reminder, our podcast today is free. That would not be possible without our wonderful partners at Saber. Money, the stable coin payments platform built for Asia. So keep an ear out for more about them later in the show. Without further ado, welcome, I believe for the first time, to the Milkro Show, Alex.

How are you? >> I'm doing well. It's great to be here. >> I'm glad to have you. I rearranged some of our podcast schedule to get you on the show because you were kind of the man of the hour in the tokenization world. Uh let let's start with the the big news. Coinbase launched tokenized stocks on the base app. They started with four assets initially, Nvidia, Meta, Apple, and Alphabet. Talk to me exactly about the role that Aerome plays in this and what you actually built to make this possible. >> Yeah, thank you for the question. Um I mean these are incredibly exciting times. You know, we've been building this space for four years and the vision has always been right that we are going to build all this incredible uh infrastructure in order to enable the world's most vibrant, most real time,

most dynamic uh capital market onchain. And we know that to date, of course, that has largely represented assets that look like the types of digital assets we've seen to date, right? some incredible blue chips and Bitcoin and Ethereum um stable coins. A lot of fun on the long tail as you were mentioning uh at the setup here, but the vision's always been to bring the world's uh assets uh to bring the world economy uh onchain. And for us, this was a very big deal to partner with Coinbase to bring to market the first four tokenized stock products. uh these are something entirely new. Uh what we've seen to date with uh tokenized stocks onchain is that

these are largely uh derivatives or rappers or sort of tokenized debt securities, IUS, that type of thing. And what we've seen Coinbase bring to market here is the real thing, right? something that is backed one to one, conveys the the beneficial ownership rights that uh is held by a qualified custodian, doesn't sit on anyone's balance sheet. And so this is the real deal. And the real deal is super important because if we are going to bring the world's economy onchain, uh if we're going to have these robust uh internet markets uh and capital markets onchain, it has to be the actual underlying assets. And I think this is the beginning of something

that's going to move very very fast with the uh tokenization expansion that we're seeing right now. >> Could you talk to me just a little bit more about that? You you spoke about how this is the real thing on chain. Differentiate for me this version of a tokenized asset, a tokenized equity from some of the other products on the market like an X stocks like ano like you know anything else on the market because everybody uses the same word tokenization and I think some of the audience doesn't really understand the difference. What is the difference and why does that matter so much? >> Yeah, I mean I think if you've operated onchain for some time, you know the difference between um a token that represents something, right, in a very real way either via immutable onchain asurances, right, smart contracts, or uh

it's tied to something very very real and there's a degree of of legal relationship between those things. And the progression I think that of course we're seeing on chain is things moving away from maybe the more experimental IOU derivative type things into things that are very very real. And I think just to make this super simple for folks, right, if you go to the terms and conditions, right, of of many of these other stock products, they're going to be very very clear about what this is. You know, this is a debt security, this is a derivative, this is a rapper, and uh this is a way to speculate on the price of the underlying thing, but you do not actually own the stock and nobody can take and mint and redeem it um with all the the uh beneficial ownership rights associated with it. So, you know,

Coinbase is working with a a qualified custodian here. uh they are very very clear that this is in a trust that conveys full beneficial ownership to the users and that means you can bring to bear things like stock splits and dividends and uh that you basically have a claim on the underlying and that is a big big deal uh because if it is not the actual underlying we cannot build robust uh onchain spot markets uh that can support like the growth of these assets onchain right because we've seen like on hyperlquid uh tons of trading around real world world assets and and stocks uh to date, right? But these are just markets that need to connect to need to

derive the price from something. So they derive it from you know of course traditional markets and oracles. What we see the future as is these assets and these markets around things like uh tokenized stocks increasingly existing onchain. Offmarket price discovery increasingly being created onchain that the derivatives even that we see will begin to derive their prices onchain because the onchain markets are 24/7. The onchain markets are 365. The onchain markets are globally accessible. fully fully transparent and that will give them the ability to tap into markets at real time. But you can only get that if the underlying asset is the actual real

thing. You need functional par to create sort of product and distribution par. And this is the first version I think we've seen that you can credibly say yes, this is the real thing. >> Hi everyone, this is John. Listen, our Milkroad Pro analysts nailed this AI bull market. They we had dozens of calls pay off in a big way for our community. If you want to see how our entire team of analysts are positioning for the crypto bull market that's going to come after this bare market finally ends, you can join us now at Milk Road Pro. It's just a dollar. Link is in the description. You'll get access to all of our analyst trades, their watch lists, and see how they're navigating this in their portfolios and get access to ask us questions in Discord anytime, day or night. It's just a dollar. Links in the

description. Milk Road Pro. Join now. I'll see you there. Okay. So, this is the first real bridging of the traditional finance world, moving that onchain. And you're saying that bringing the real thing on chain is also going to bring a lot of other markets and users and demand with it. That makes a lot of sense. I I want to get a little bit more clarity on something I've heard you say, which is that aerodrome allows users with with these stocks on chain now to be their own market makers and kind of act like their own version of Citadel Securities. I think this has something to do with a new feature called predictive allocation. But Alexander, I I spent most of yesterday trying to understand what this means and I'm kind of lost, but explain this to me in plain English from a user's perspective. How

do I get to become a market maker on chain in this this product offering that you've launched here? >> Yeah, I mean, I think we can kind of separate the the two pieces because um the idea that uh anybody can come on chain and participate in the very act of market making is a core feature of automated market makers generally speaking, right? Uh, of course, most people in the world have very restricted access to uh any type of of asset and where those markets do exist, they're not 24/7 and they're certainly not accessible to uh, you know, anyone to come participate. So, one of the most amazing things about the onchain economy and one of the core innovations of the AMM is that it makes the very act of

market making an open thing that anyone can participate in. And so why is this so interesting as additional asset classes come online? Well, I'll give the example of uh last week we saw uh Nvidia of course announce their earnings. And for folks uh you know who maybe not deep in the the world of of stocks and uh you know traditional exchanges well of course the market closes uh before an earnings uh call and uh they release it but then there are aftermarkets that you can participate in if you are a particular type of person or pre-markets post markets things like that and what

we saw onchain was that uh liquidity providers were positioning like an order book would on the buy or sell side of uh Nvidia on chain on Heradrome. uh basically participating in speculating on what they thought those earnings were going to be and that provided deep liquidity then for the traders to come in as they began to announce. These markets uh move very very closely and in a similar way to what you saw in after markets uh or even on uh platforms uh like hyperlquid. But this is what I mean in the sense of the act of market making is usually something that is reserved for a select few and this is a place in

which um anyone could come in participate in those markets and then gain the reward right um we like to contrast you know the potential of these onchain systems with against some of the most like legacy incumbents and of course for most people in the world you would have to go through something like interactive brokers right to have access to all these types of assets and you certainly couldn't participate in the active market making around them. You know, interactive brokers has hundreds of billions under management. I think they extract something like 77% margins you know on the activity on the capital that they create and onchain systems ensure that all the value that's

created to that if we can distill something like in uh like these giant brokerages these institutions into code and redistribute all the value back to the participants it makes something much more uh powerful in the network effects that can come so that's just like the benefit though of AMMs generally I I'm happy to get into kind of the predictive allocation portion of this because this is something entirely new. Uh but but yeah, I mean from day one, you know, I would, you know, people can come provide liquidity. In fact, they can even go to banker. Uh we have a great new partnership with banker natural language. Tell their bankerbot that they want to provide liquidity here, have it managed for them dynamically. And we

think like this is the future of these types of markets, not these very slow, old, expensive ones. >> Well, yeah, I think just to expand on that because I know the Aerodrome has partnered with Banker and this predictive allocation feature. The idea of it basically is allowing people to sort of bet on where future demand is going to be in these spot markets. And if they're right about that that volume and they provide liquidity early, they kind of get outside rewards. How does this actually work from a user's perspective? Again, cuz I I still get lost in the weeds on some of this. So run that by me.

>> Yeah. So maybe just a bit of background on our system, right? So there are three primary uh stakeholders or user groups um in an exchange like ours in a metadatex. Uh that is of course traders and traders just want of course the best execution uh for any asset that they're they're looking to trade. liquidity providers. They're the ones who are bringing the liquidity that traders need and fundamentally they are just looking for the best reward for the risk that they are taking on and providing the capital. And in our system, we also have the token operators. So these are folks who take the Hero token um they stake it and then they participate each week by allocating arrow rewards or capital into markets that they think will be

productive and in exchange they earn 100% of the revenue that the uh protocol creates. So the big innovation um with predictive allocation is we move from self-organizing marketplaces and this would be the traditional unis swap model where you are just connecting together traders and liquidity providers from from that to coordinated marketplaces and that's what we have on aerrrome today where you have the token operators who are allocating capital across these markets earning back the rewards to markets that are now predictive that they are now moving ahead of uh where they think is demand. hand and so the example of this in the space of uh tokenized stocks I think is very very

interesting. If I am a uh S arrow staker, each week I am able to allocate arrow rewards uh to the markets that I think are going to be used that there will be demand. And so if I think you know that there is going to be a big moment around something like Nvidia earnings and that that market needs to be deeply capitalized, right? it needs to attract a large number of uh liquidity providers and deep liquidity. I can allocate arrow rewards to that pool. And now if I am right because I was early and I made the right bet there, I can earn an asymmetric reward

in exchange for that capital allocation to that market. And this has a number of amazing benefits. Right now, the incentive is for every capital allocator to be trying to think ahead on what markets will be used. And this is different than a prediction market because in a prediction market, you're merely just trying to bet on kind of a binary outcome of an event. This is allowing you to bet on there being an event that people will actually uh speculate on. And so you could allocate towards that market on something like Nvidia. could allocate towards markets um over the weekend when you know traditional markets will be closed and you think that there's going to be a bunch of news. You I think we've learned

in the past few months how much news can happen on weekends, how much markets can move and basically you get the opportunity to be reward rewarded proportional to how right you are. So this makes our system much more efficient. This moves our liquidity ahead of demand and it gives uh participants the ability to earn the same types of asymmetric rewards that they can on prediction markets but without needing to bet just on the binaries. >> Okay. So, what I want our audience to take away from this is that what Aerodrome is doing is kind of a first of its kind tokenized product. And as a result of the way they've set up their systems here, there are new ways of of of uh generating uh returns, alpha, rewards, and you should look into this

more and understand how this model actually works because there's a lot of cool things happening here. Um, Alex, I want to pivot a little bit to Arrow here because you guys have announced plans for a long time to merge Aerod Drrome and Vadrome into Arrow and have just one unified token, the Arrow token. Talk to me about where that token fits into all of this because every project, every DEX has a sort of like a different um value thesis, a different revenue model, a different like way they think about their token. Where does the Arrow token fit into all this and what do we need to know about that? >> It's a great question. I mean from day one uh we have built uh according to a a set of like uh very clear uh first principles and and one of those first principles is that um maximum value

distribution will be the only moat in onchain systems because you either take all the value these systems create and redistribute them through to users of the product or you are going to become disrupted by somebody who who doesn't or yeah uh who who does do this right and this isn't just how you know innovative new onchain products like uh aer drrome uh have disrupted major incumbents but I think this is how we as an industry go and disrupt um traditional platforms with thousands of employees extracting you know massive margins it's because we can offer them something we can offer their user something better than they can that they can never reproduce and so

in our system um it's very very simple. We redistribute 100% of the revenues of the platform back to those who take the token, lock it and participate each week. And uh I think there's a very easy analog here that folks now probably understand very well which is hyperlquid. Hyperlid has become basically the dominant force in the sort of space of of perpetuals. Um and you know hyperlid is very much the darling of the last cycle. Um, and they got to this dominant position, right, by uh focusing on uh, of course, an amazing product, but also a token that represented, you know, almost all of the

value that that product uh, creates in that they take, I think, 97% of the total value created, they buy back the token and redistribute that value back to users of their token. And so our system, right, we're going to have a drone, velrone combine into a single exchange. Um that exchange is going to uh extend now into the deepest liquidity market in mainet Ethereum. It's going to expand to uh new chains like circles arc. And the intention is very much to unite the entire spot market AMM which is still the the uh level of the onchain economy that produces more value than any other layer of the onchain economy.

rapple that value in a single token just like Hyperlquid did and hopefully uh dominate onchain exchange in a moment when tokenization is going to accelerate it significantly. >> Okay, you just brought up like a half a dozen things I have a ton of questions about. So, let's take these one at a time. Let's start with hyperlquid. I've heard you in the past make this analog before. You've called a drrome arrow um the hyperlquid of onchain spot markets. Um and I'd like to hear you kind of expand on that. But the the question that comes up naturally here is, you know, Hyperlid is doing something like $180 billion a month in per volume, and they've grabbed 44% of all onchain derivatives trading. Coinbase's year-over-year spot volume is down, I think about 30 31%, something like that.

Um, and so it seems like what we're seeing is a shift away from spot markets towards perpetuals platforms and perpetuals contracts. How do you think about that? Because, you know, Aerodrome is definitely going for the spot markets, but it seems like the market is moving towards perpetuals. Does this worry you? Just walk me through your thoughts on this. >> No. Um I think these are uh symbiotic things. Um so in in what you described is in is more trading activity increasingly moving onchain definitely right and you see this in the way in which you know folks like Coinbase, folks like OKX, right? Many of these centralized exchanges are increasingly turning into distribution layers for the underlying uh uh economies on chain. Uh so Coinbase last year of course they

they uh launched a bitcoin lending product where their customers can go on coinbase.com borrow against their bitcoin that is just morpho on the back end. They also integrated directly into their front end dexes like us. So if you launch a token right now on aerroneum within 24 hours you are trading on coinbase.com not via their centralized order books uh but via a direct integration uh into uh our dex rails. So I would say absolutely we've all seen the charts right of the increasing dominance of markets uh trading onchain versus centralized order books and we've seen the trend in these centralized players increasingly becoming the

distribution layer uh for these onchain products. So I think that's very exciting for both ends of these markets in in derivatives and spot markets. But uh in terms of the relationship between you know something like uh hyperlquid on perfs and something like a drrome on the spot side I mean we know from traditional markets uh that both of these things need to exist. You need to have the New York Stock Exchange in NASDAQ in order to have the Chicago Merkantile Exchange, right? They have to derive from something. And what is very exciting right now is uh uh these derivative markets have had their big onchain moment, but they are captivate in their ability to to grow because they

still need to rely on when we're thinking about the trend of tokenization markets that exist um uh offchain that are not real time, that are not 24/7. And of course, you know, we don't need to dig into how Hyperlid does that on the back end, but it's a bit of a self-reerential, you know, thing. and it's capped. So, you can't have true onchain price discovery around the real world asset when traditional markets are closed in something like a perpetuals market. Nor can you build like the composable Lego blocks around this and lending markets and um new innovative products like what uh Bitwise has launched with the automated portfolio manager and things like that. You can't build the same sort of composability. So I think these two

things are actually very related and spot markets are about to have their hyperlquid moment and what we will see is you know these onchain spot markets will increasingly become the markets in which uh you know derivative markets benchmark against the oracles are built against where onchain price discovery happens and that can only happen via the combination of these two. Uh but the big difference I think like you know hyperl are very similar they never raised we never raise right uh they distribute 100% of the value of the token uh we've done the same they have done a very good job now I think of wrapping the collective value that these markets create into a single token that allows you know even the most traditional like

investor classes to look at it and kind of understand what they are buying today aerome just competed for about you know a fifth of the overall DEX market, we win a dominant share, you know, a hyperlquid like share anywhere we compete. But this is our big moment because we're expanding across EVM. We're going to bring that same sort of winning formula and then hopefully we're able to show that the same model that's won in hyperlquid can win in spot as well. >> You know, one thing we've talked about a lot on this show is that crypto is quickly becoming a huge part of the global payments infrastructure. And nowhere is that more obvious than in Asia. But if you're actually running a remittance company or a payment business, you know that the hard part isn't moving the stable coins. It's dealing with local banking partners,

compliance, liquidity, and all of the operational headaches that come with sending money into places like India and Southeast Asia. That's why today's partner is Saber. They give payment companies stable coinpowered infrastructure to collect and make payouts across Asia without having to build all of that complexity themselves. They've already processed more than $3 billion in transactions across 40 different countries. So, this isn't just a concept. These guys are actually doing this for real. If you're building payment infrastructure or expanding into Asia, make sure you check out saber.money. This is really helpful, Alex. I'm getting excited about this. Okay, before we go to how Aerodrome is expanding, I want to ask one more question about a competitor or a competing product, which is the ETFs because spot, Bitcoin, and Ethereum ETFs have done a cumulative volume of over $2 trillion. Um, and it seems like these

are really popular products. They're accelerating in their adoption. Do you see the ETF products as a competitor in any way or do you also see that similar sort of symbiotic relationship that you see with perpetuals or or how do you think about that? >> Yeah, I mean depends on what time horizon we're thinking, right? Obviously ETFs are incredible right now in the sense that they give access um via traditional markets to these really incredible uh onchain products and and services. So the ETFs are amazing, right? and uh onboarding more folks, onboarding more capital into the into these markets. Um and I think that will be very important for some time, right?

Because we talk about, you know, Brian Armstrong talking about uh 10% of global GDP coming on chain in the next 5 years. Well, that's still going to take some time and that still means that there's a lot of GDP offchain. So, these markets will continue, of course, to exist both on the traditional and onchain side for some time. But I think when you look at the Bitwise product, right, this is basically something that uh allows folks to access these tokenized equities almost, you know, similar to an ETF, but you actually do hold the underlying assets and those assets can be rebalanced and there's no sort of fund wrapper around it. So if you imagine a world in which any margin that is being extracted by a traditional vehicle

whether that's a exchange whether that's a financial product that margin is the opportunity for onchain systems to come and deliver something that's faster cheaper more real time and I think we will see products being built on top of onetoone representations of uh real world assets that don't need to take the same types of um you know fees and rakes, you know, we don't have thousands of employees to feed um and to pay and to all this sort of stuff. Um but these products will increasingly have a foundation in onchain rails.

>> For anyone who missed it last week, I did an interview with Ryan Rasmusen of Bitwise about this product that Alex is referring to, these automated token portfolios that they think is going to compete with ETFs and that also uses tokenized stocks on base. Um stons on base, sorry. um which which Alex and Airdrome are providing support for. Okay, so that that's very helpful. Let let's pivot this conversation back to the expansion of Airdrome here. Um Airdome is expanding from base uh onto the Ethereum mainet onto circles arc. This means you're going to be going directly head-to-head with some of the largest dexes in the space, Curve, Uniswap, and you're playing on their home turf. What is your plan to win and sort of dethrone these sort of like enshrined institutions of the DEX space?

Um and and how do you plan to to you know go about uh challenging these bigger incumbents? >> I mean it's a great question. Um and it's a question I think we've been answering from day one in in many ways. You know for anybody who doesn't know our history uh we started as basically five guys in Discord um virtually all anonymous even to one another. And uh when we got started uh we got started believing in the power of this uh model right a model that redistributes value maximally that can quickly bootstrap all this liquidity and we thought the power of the model uh could disrupt some of the biggest incumbents in the space. But we didn't raise any money. We didn't

sell any tokens. So we've had to be scrappy at every step of the journey. And I will say at every step of the journey we were reminded at how improbable it was. So our first product right which we launched about four years ago as of this July was Veladrome on uh optimism mainet and we didn't start as the number one decks on optimism. In fact we weren't even early to optimism. Uniswap had been there for some time. Curve had been there for some time. But on the very power of the model itself, it slowly started to gain market share.

And it started to gain market share against incumbents at that point. You know, that were billiondoll multi-billion dollar incumbents. Incumbents that were backed by, of course, some of the uh biggest names uh most entrenched interests in the space. But Veladrome rose and eventually became the number one decks on uh Optimism mainet and it extended that dominance across about 10 different optimism super chains on and then of course with the launch of Aerad Drrome we now competed once again we weren't first but we competed once again against some of the biggest incumbents and this time it was on the single most important the single fastest growing Ethereum ML2 in existence and Aerodrome as well rose to

a dominant position. So, our opinion is this model has proven itself. Anywhere competes head-to-head with any of the biggest, most entrenched incumbents, it wins. And it wins uh pretty handily, right? Like a 2:1 market share against uh some of the largest incumbents in the space. So even if we were just taking this model and extending its total addressable market to places like Ethereum, we think it would have, you know, more than a fighting chance, right, to uh play the same growth model as it has today. But we're combining it with the biggest most ambitious upgrade we've made to the model um in its history in metadex03

and the all new arrow. So we think fundamentally if you want to like boil down what our advantage is that first principle I described earlier maximum value distribution is the only mode and so we stay focused on things like ensuring that our system can maximally reward liquidity providers because if you reward liquidity providers maximally you'll get more trades. If you get more trades, you create more fees, you can redistribute to VE Arrow or staked arrow and the staked arrow folks can direct more value back to the liquidity providers. And we're very excited about this because this is like a different philosophy, right? Um some folks uh that we will be up against are taking more of

a platform economy kind of approach, right? This is a very traditional approach. It's like the Apple App Store kind of approach where they say, "Well, you can come use our rails. Certainly you can deploy a token here if you're an issuer. You're a liquidity provider. You can come like earn um here but in exchange for that we're going to take say an average of 25 cents of the dollar and we're going to redistribute that value to a different stakeholder class. We think you have to reward maximally and we think that seeing these two mark uh these two models compete head-to-head um in markets like mainet Ethereum will show that once again you have to reward maximally or you're going to lose share.

>> Five dudes in a discord trying to change the world is a good description of crypto overall Alexander. So I appreciate the history lesson on that. Um but this is the part of the podcast where I'm going to try try to start a fight. Um but the description you just laid out there contrasting aerodrome versus you know other approaches that is the approach that unis swap is taking. They've rolled out a plan to red redirect some of the fees from liquidity providers back to the token holders in a token buyback program. A lot of people have been very enthusiastic about this. You've been sort of critical about this. You touched on this a little bit but say a little bit more about why you think the approach Aerodrome is taking is is going to win here and sharpen that distinction for me a little bit. I mean,

liquidity is the lifeblood of any exchange, um, traditional or otherwise. Uh, if you are a trader, you're pretty exchange agnostic. You know, if you're on coinbase.com today, you probably don't really care if your trade is hitting their centralized order books. You don't care if it's routing it into an exchange or base on base or whether or not that exchange is a drone or one of our competitors. You just want the best execution. So our model and what we have optimized for from day one and will continue to do is ensure that we are rewarding liquidity providers maximally and we do that by wrapping more value than just trading fees but we also wrap

100% of trading fees. So uh in V3 right what liquidity providers will be able to earn is a token that represents things like all the trading fees of the platform launch payments bridge fees mev internalization um uh sort of bringing in even more value that's traditionally extracted from LP providers and we put all of that straight into the active tip of liquidity to attract more liquidity providers which attracts more traders which attracts more fees and more value. We think that that model is going to be the winning model because fundamentally, you know, John, if you are coming on chain and you've got, you know, tokenized Apple and some wrapped E and

you want to put it to work somewhere, are you going to want to put it to work somewhere whereby you get 75 cents on every dollar that that value creates, you get $1 of every dollar it creates or you get even more, you know, a buck 25 or a buck 50 and you know this is just core to us because it's a very user ccentric approach. Are we trying to recreate the sort of traditional platform economies that we saw in web two and the sort of model whereby platforms are able to sort of extract or redirect value of the systems? Or are we here to create onchain systems that maximally redistribute uh the value they create to the users that create it and

create an insurmountable amount of network effects that grow these onchain markets and and systems. So we're very confident in our model. you know, we're confident because we had none of the advantages of our competitors and we've won, you know, dominant positions, two to one positions and markets like uh base and optimism mainet and we're very excited to expand that dominance into other onchain markets and we're very excited to do it in a moment where tokenization is at its peak and you know if you are skeptical of of Alex in presenting this right let me just give you some data points a drone does more volume most weeks on the top traded digital asset today while operating on

one network in Bitcoin. More volume than all the other exchanges uh all the other chains combined. That is the power of maximally rewarding our users. We've got another very important one. Uh we do more volume most weeks on foreign exchange onchain which we think will be a quickly accelerating vertical of the onchain economy. That's the value of maximally rewarding uh liquidity providers. And in just the first week, right, of tokenized stocks launching on Aerome, Bass was not first in issuing these. Aerome was not first in hosting the liquidity for these, but on these four initial assets in one week, we carved out about 25% of the total

market. And that is something I think that will only accelerate. So maximum value distribution, I think, is the only moat. There's no amount of incumbency, there's no amount of VC backing, there's no amount of sort of uh Lindy that can compete with that and that's what we're very excited to continue to prove around the entire EVM marketplace. >> Well, I love the confidence. I admire the success. I'm really excited to see how this plays out in the markets here. I want to ask you a few questions around the relationship with Coinbase because there's been some controversy. Uh, Coinbase choosing Uniswap V4 over Aerodrome for its verified pools feature got a lot of attention. People were calling this a betrayal, saying Coinbase stabbed you all in the back. You've pushed back on that, but could you just

explain a little bit of what actually happened here and you know what is the nature of the relationship between Arrow and Coinbase today? Um, and uh, yeah, just talk us through a little bit of what's going on there. >> Yeah, I mean that's very funny. Uh, haven't haven't heard that one in in a in a while. But yeah, I mean we've been very close partners with Coinbase uh since day one. Um you know the day that Aeradrome deployed to Bass, the TVL of the chain doubled. Ever since that moment, you know, we have been the primary trading liquidity hub on base. the uh alignment is so significant, right, that Coinbase went out, Coinbase Ventures went out and made the largest liquid investment uh I believe that they had ever made and it may still be the largest that they've ever made in buying

and purchasing Arrow off the market, not via a private sale or anything like that. T-wapping on chain, locking those tokens uh for four years and now voting and participating in the system each week. So, they've got a direct stake in the network. you know, that's no different than any other lockers. They get to allocate capital to new markets each week and earn back the value that those markets create. So, what's been the power of this, right? Things like the Bitcoin dominance. Uh, we worked very closely with Coinbase to help bring CBTC to market. And Coinbase used their own voting position, of course, to direct incentives to those markets and earn back the value that those markets created. This is how we've grown our dominance on FX onchain. Coinbase and us

both aligned using the power of the token the tool to direct capital to new emerging markets, deepen liquidity there and grow dominance. Uh with respect to uh verified pools, you know, that was something that they approached us on at the time and uh we were just skeptical whether or not the market was ready for verified pools, right? this is something whereby you know somebody has to KYC um in that pool um in order to uh participate whether you are trading or providing liquidity. So we passed on it and then there was some hubbhub but even Coinbase was very quickly quick to correct. This is not a betrayal. This is an experiment we're running. We're using uh some unis swap v4 rails and all of

that. But I think our thesis there was very much proven out because that product I think is is virtually you know dead at the moment. But the future will come for verified pools. Um, we've done a lot of work in this uh in our V3 and so when the demand will come there, we'll be very ready to work with partners like Coinbase uh on products like that. >> Brian Armstrong said last year he thinks 10% of global GDP comes on chain in 5 years. You mentioned that in this interview as well. You guys have partnered on tokenized stocks with them. What's the plan to scale this? Are you planning to roll out a whole lot of new stocks? Are you moving towards indices?

Like what's the expansion of this tokenized stock product look like or what's what's next on the road map there? >> Yeah. Yeah, I mean look, this is a big reason why we're focused in the areas that we're focused on, right? You know, how is it that this little exchange on one chain became the top venue for trading Bitcoin? How is it that this one chain or this one exchange on one chain became the top venue for trading FX? How is it that we've, you know, in a single week in the assets launch so far grabbed 25% of the share? We are focused not on the markets that have like driven the onchain economy to date. We're trying to skate to where the puck is going and the puck is clearly going towards tokenization everything on chain very very quickly and we're not going to get

distracted. You know, we're going to move faster on this um and ensure that we've got a dominant and mo around the asset classes and the verticals that will grow fastest. So, what's coming next? A lot more stocks. This was the the set of the first four and I think we've already exceeded uh early expectations there. So I would expect the roster of stocks to grow significantly. But I would also expect things like additional types of assets, real world assets increasingly deploying on our rails, pairing against those tokenized stocks, which again I think represent the best versions of these things on chain, migrating from other exchanges or issuing first on us. Uh more markets and things like the Bitwise

products building on top of them. And so this these become sort of compounding network effects. uh that will grow these assets, grow the amount of activity around them. Um you know, I think because these represent one to one the underlying, you could see more neo banks tapping into these. You could see funds wanting to hold these actually on their books. Uh we'd see more traditional folks wanting to come in and help uh to make these markets. And so as Jesse the founder of base likes to say um and I think it's very very real in the context of of these this is just day one. These were four assets. Um it's been explosive to date and uh our goal is to bring as many as we possibly can on chain as

quickly as possible. >> The Aero token as of today is trading in the mid40 range just under half a billion dollar market cap. Do you have a price prediction in mind or a market cap size as a target in the back of your mind in terms of the the growth of this project that you see, you know, for the rest of 2026 or just like, you know, an addressable market that you have in mind? Give me give me some thoughts of your own opinion on how big this can scale. >> Yeah. Well, I certainly don't have any price predictions and and certainly nothing I say should be construed as uh financial advice in any any way, but >> you're too smart for me, Alex.

I mean I I always appreciate the attempt but I mean look we we've stayed very very focused on ensuring that we are going to dominate spot exchanges just like hyperlquid has has dominated in derivatives because we look at last year and spot exchanges produced about 5 billion in fees onchain compared to derivatives uh producing I think about three billion you know chains producing about 2.5 billion I think lending a bit less than that. So we think in terms of a total addressable market, second only to stable coins, dominating and capitalizing and wrapping all the value of spot markets is the single biggest opportunity on chain today. And that is before you even think about the pie

growing with these trillion dollar markets coming on chain in tokenized stocks in index funds in uh global FX and payments infrastructure and things like that. So I think we increasingly when we think about the opportunity for onchain products, we're not benchmarking against things that are happening onchain. We're benchmarking against things like interactive brokers. We're benchmarking against things like the New York Stock Exchange and the NASDAQ. We think the potential for onchain markets because they are just better products.

Faster, cheaper, real time, 24/7. They are just a better product. And so over time they will eat away at those other businesses. They will redistribute that value entirely on chain. And uh so we believe you know the total market cap of this industry is going to grow substantially as we eat away at trapi. All right. I have a very specific ask for you guys. Somebody listening to this knows the person running marketing at a crypto or AI company that should be advertising with milk road. We reach more than half a million investors across everything we do and Q4 is filling up. So don't be the brand that waited too long. And the cool part about sponsoring the show is this episode is still going to be getting plays months

from now. So send this to them. Look like a genius and tell them to go to milkroad.com/sponsor. >> Alexander, I have kept you way longer than I agreed to. So I'm going to get arrested by your your team if I don't let you go here. But I do just want to say I I rearranged the schedule this week to try to get you in because I think what you're doing is really important and I wanted our audience to get a chance to hear directly from you about what's going on, what you're doing. Um so I'm really excited about it. Thank you so much for being on the Milkro Show and sharing all this with our audience. Uh where can we send people to find more of you and your work online? >> Yeah. Um you can find me on Twitter at wagmeal Alexander. Um you can find a

drumfi. Um and yeah, we tend to be pretty chatty on there. So please do uh follow along. It's going to be a very exciting uh few months here. So I hope uh you know your audience uh tunes in and participates. >> Well, I will definitely be following along with the announcements. Alex, I hope we can catch up again soon to to see what's going on in the space. But in the meantime, thank you so much for being here. >> Thank you very much. Cheers. >> And thank you all for joining us. I hope you all learned something today. So until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of the Milkro Show. Thanks for being here everyone. Bye. Thanks for listening to Milk Road. If you enjoyed the show, make sure you like and subscribe. And if

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