Analyst Table: Base TVL, Frax V3 RWAs, Neutron & Cosmos Hub, Eclipse SVM L2 Rise

Transcript

the cosmosov invested about like 500 000 approximately in Neutron um and today those tokens it's about 4.3 percent of the total Neutron Supply and it's about 28 of the current circulating Supply Neutron that amount that will be transferred or potentially transferred to the cosmos sub treasury equates to about 18 million dollars welcome back to another episode of zero X research before we hop into today's episode want to give a quick word from our sponsor hexins the most hardcore security team in web3 pioneering and ZK and novel cryptography hexins is trusted by tier one projects like polygon including the work on their new zkvm mantle risk zero Lida one-inch new bank and more you'll hear a little bit more about them later in the show

um also I want to give a shout out to uh blockworks research be sure to use Xerox research 10 on checkout when going to blockworks research.com to get 10 off on your annual subscription to blockworks research we just launched a really cool data product and we'd love to hear what you guys think about it today is September 25th and as a reminder we are changing out the format of this show and uh splitting into an analyst segment as well as an interview segment the interview with Nick Johnson from ens will come out Thursday and this episode should be airing on Wednesday uh September 28th um but as always we're joined by two blockworks research analysts effort capital and Xerox pibbles to jam on the latest Market happenings Pebbles why don't I kick it over to you for your hot seat or cool throne

yeah so I've got a cool thrown and it also doubles as a hot seat for Solana but base flipped Solana and tvl officially it's sitting at 370 mil so this is a pretty big step and um they've they've really overtaken like every new roll-up that launched this year like bass is just kind of one and you know that's partially because of bald and then gold and all these uh these stupid scammy tokens but now we're seeing um Aerodrome and friend Tech kind of leading the charge for bass together they're making up like I think 100 Mil of the tvl uh we also have like 30 different dexes so one for every user and notably

uniswap is like one of the worst utilized x's on base another thing the flag is that they flipped 4.8 million in profit from the sequencer in Q3 alone so uh things are going up into the right also coinbase's Chief legal officer came out and said that a token is not completely out of the question and it could make sense in the future so uh lots of fun things going on over there I didn't see that actually about the the token thing I'm guessing that's to play a role in decentralizing some piece of the stack but did he specify at all no it was literally like two sentences but um we we all rolled that out to

begin with so now that I put some Hope on the table tokenized coin stake it to the sequencer coin shareholders now get the double dip in the base Revenue that's that's the dream that'd honestly be really really cool if like they actually pulled that off and there's no reason that they can't be the one like okay assuming the regulatory conditions allow for that like coinbase is already doing like a tokenized version of eth right like they they give you CBE and custody to eat themselves and stake it and operate that it'd be really cool if they did that with inequity that would be very very fascinating and they are well positioned to be the first person to do it granted they're probably going to be one of the

very few currently the only and likely continuing to be the very few uh publicly traded centralized exchanges yeah I think though that that quote was taken a little bit out of context I think he went on a podcast and like like pibble said dropped like one sentence about it and then it became this big news story so I feel like we're definitely a little ways away from that actually becoming reality despite us probably rooting for it hard um and I also think it's kind of funny that Aerodrome is making up 90 to 100 million of tvl on base but it's only seeing like 500 to 750k of daily volume on the actual decks like all the volumes still over on on uniswap and I think pancake swap so I don't really know who's lp'ing there I guess everyone just

farming arrow and dumping it by looking at the token chart but yeah nonetheless that was a pretty brutal play yeah I also want a flag that there's uh one interesting app I can't remember what it's called right now but it's like a uh social network for or content creators who own pets I've seen uh Jesse Malik tweeting about it but uh it's uh it's off to a hot start on bass so I need to get looked that up later is this friend Tech but for pets like posting pictures of your pet because that seems like a real product Market fit I think parallels over there too right if I'm not mistaken

I'm actually not sure I do want to say that they they deployed something over there but off the Noggin I do not know I saw uh jiho's the uh actually one of the The prominent figures over there he was talking about how he once parallel to launch on Ronin so that's another interesting tidbit I picked up on today I want to give a quick shout out to hexins as we explore today's blockchain landscape let's take a moment to recognize them as a premier cyber security provider in web 3. hexins is trusted by tier one projects like polygon including a Security review on their new polygon Ezekiel evm mantle risk zero glido one inch new bank and more get a deep dive into your technology stack with the most comprehensive analysis in cyber security

Consulting hexins not only uses widely known methodologies and flows but discovers and introduces new ones on a day-to-day basis with over 55 billion dollars secured they cover everything from Smart contracts to blockchain to web 2 pen tests yeah there's been nearly seven billion dollars of total value hacked in crypto's nascent history so it's safe to say your team has a lot on the line don't skimp out take your security seriously and reach out to hexins don't forget to mention Xerox research for a free web 2 pen test with your partnership and reach out to hexins at hexins.io find them in the links in the show notes or reach out to them at permissionless they'll be at Booth 832 but without further Ado let's get back to today's episode one more cool thing I

have is frax with V3 which just completed audit by trailer bits on September 20th this is laying the groundwork for frax to really push their rwa strategy you can actually see their finres PVC which is a registered legal entity they actually have an address on chain and you can see them testing transfers with circle uh Sam K said that the first official attestation should be reported on October 1st and they've already put some of the uh the collateral backing tracks into some treasuries so super neat stuff on the way on top of

that we have staked fracks coming into so maybe October is a good month for fxs and it follows the trajectory of maker but uh we'll just have to see about that we're still waiting on tracks gov too so is uh stage frax basically the same thing as like s die where that you're opting in to earn some of that treasury yield as far as I'm concerned yes but technically there's a bunch of different stuff but uh the same goal actually or just like passing on yield and increasing demand for facts nice yeah I'm really excited to see this come to come to fruition right because makerdale has struggled internally with like how do we make sure we're getting

these off-chain uh the off chain reporting actually completed and how do we get create like a process around that how do we manage this as a Dao and that's a huge challenge to overcome and so that where Maker Now uses multiple service providers with different types of financial instruments which means different types of reporting across many entities for accessing let's just shove that into one entity and let them manage all that for us and then all we have to do is have this one point of contact for all of our off-chain assets and that should greatly simplify the management of reporting for a dial and that's a really really cool way to do this when that's been a huge pain point for like the rwa leader in maker Dow so I'm really excited to kind of see this play out

because you know there really is no reason that they can't be in the same level of success as maker now as bringing these on rwas on chain and you know they don't have to go kind of make these deals with different lending protocols because they already have fraxland and they're already very intertwined with curves so they can quickly get liquidity for this new s-frax token if they desire to do so um curve also has a lending protocol so I'm sure they'll get a plug in there as well and like now you see why like their whole thesis was the Trinity and like let's build out every layer of the sack such that when we launch new products we're kind of like already primed to be in a very very good position and get users in like get the product in the hands of the users and also make it a

better product right like especially for stable coins and tokens liquidity is a very important piece of the puzzle and like this is something that worked really really hard to get really really good at and that's showing off so again really excited for this one to come live yeah I also want to highlight that they're actually integrating with stripe so once the actual entity is like in full force they're gonna have a constant API and dashboard that will show real time what the bank accounts are looking like so that's gonna be pretty neat probably like the most transparent thing we've seen to the minute in D5 that's actually super cool I didn't realize uh stripe was that and I guess on chain slash off chain reporting it's

almost like they're acting as an oracle of sorts that's super interesting I wonder if they'll have kyc requirements or something because that is something I noticed on Hondo uh they've kind of grown to 200 million tvl like with just t-bills tokenized really really quickly but you gotta like kyc in order to actually interact with it so curious if that's a root for axle take or not yeah we'll see how long the Meta Even lasts before Gary cracks down on everyone because we are just passing on Treasury yields to random people online yeah I mean I always go back and forth on this like on one hand it's like oh that's a no-brainer right like of course this is gonna happen uh but to your point like

does there need to be regulation around this I don't I I'd rather not peel that one back because the answer probably seems to be yes but like how do you go about enforcing that becomes this like impossible to answer question uh now Regulators are going to use the fact that that's impossible to answer a question as a reason why they you shouldn't be allowed to do it but the reality is like that's a really shitty reason to prevent you know people from getting access to better financial instruments so definitely a lot of work to do on that front correct me if I'm wrong but paxos is is in Partnership right with fracs in some form of fashion like I think that having a centralized entity like paxos decides them um I think you're definitely gonna be able to like frax can be like Leverage their legal

um teams as like a buffer from like U.S government overreach uh whereas like maker going back to your point then they're kind of they try to do more like distributed um RW rwa strategy where like they maker really has no one like legal team or one entity to rely on so it's like good in a way but at the same time if you're gonna leverage centralized assets then why not have a centralized strategy um so I'm honestly fully in favor of what prax is doing I'm pretty bullish on what they're doing and I think their partnership with with paxos is probably going to be um a potential King maker strategy like uh leading into the next cycle well allegedly Sam K was at lunch with roon the other day so maybe Maker's

gonna take their stuff and plug it in to finrest and we'll go from there that'd be a pretty interesting imagine like an m a night attraction maker that's actually pretty cool we don't need to decentralize stable coins like let's just call it what it is we need one um and I think they went on two different like they started off with two different approaches I think like make her try to do like more um safety uh strategy whereas like crack time or like a little more DJ a little more like they try to get protocols to leverage them whereas I think die when like along the lines like let's try to get retail participants to hold die um but they're kind of now converging on

the same vision at the end of the day which I think is the is the correct one uh but I would love to see like bear markets in my opinion are for M A's like figure out uh get rid of the inefficiencies in the system um I think there's a lot of synergies between those two protocols uh I would love to see that happen yeah it ever does though it would have to come up with a new name like Faye and Rari emerging the attempted merger there was uh Ferrari this fits so naturally but I don't know if we can if we can match these two together in a fancy way fractal fraxer fracker oh we're gonna have to cut this all right all right David who you got in the hot seat cool throughout this week

yeah uh I have the cosmos Hub um and it's community on the cool Throne this week so uh a couple months ago they launched uh replicated security they have a couple of consumer chains that are now leveraging the cosmo sub security um but uh I think back in I won't say Q4 of 2022 uh the cosmo sub actually the community approved a proposal to actually uh invest in protocols to Leverage The Cosmos help security so it's kind of like a business development initiative um and they invested in Neutron which is a cosmos and smart contract platform I believe the P2P team which is one of like the Genesis validators for uh for Cosmos and also one of the Genesis team

founding teams of Lido um the p2b team kind of incubated uh Neutron and the there was originally an airdrop for uh Adam stakers uh and for other part uh people in the cosmos ecosystem to claim Neutron tokens um a good majority I think because it's a bear Market not a lot of people are paying attention a good majority of those tokens that were actually uh went unclaimed and just late last week a proposal was put up by the neutron founding team to transfer all the unclaimed Neutron to the cosmos sub treasury so back in Q4 2022 the cosmosov invested about like 500 000 approximately in Neutron

um and today those tokens it's about 4.3 percent of the total Neutron Supply and it's about 28 of the current circulating Supply Neutron that amount that will be transferred or potentially transferred to the cosmos sub treasury equates to about 18 million dollars that's about like a 36x return on that investment which is kind of interesting because um you know it's kind of like a VC style bets like not only is the cosmos Hub gaining Revenue share from these protocols leveraging its security uh provision but now there's it's actually getting upside in the tote in the protocols that are in this atom economic zone or in this like larger ecosystem built around the Hub um now like one of the interesting things that I think you're seeing being

discussed in the cosmo sub forms is like what do you do with this Neutron there's also talks about potentially doing treasury swaps or stride like what do you do with these tokens that are sitting in your treasury ideally you want to put them to work you want them to be productive assets you can actually start seeing a vision where the Hub actually leverages like protocol and liquidity so it takes this Neutron it pairs it with some of the atoms out of Treasury it deploys it on the in a liquidity pool or like a DEX on Neutron or some other um chain in the wider atom economic zone or even The Wider interchange now it becomes like a productive uh asset to drive additional Revenue back to the hub I'm really bullish on this concept the idea of protocol and liquidity obviously was like thought of by by Olympus Dao

and then I think like say after time and payrollery merger was pretty bullish on the idea of protocol and liquidity prax obviously is like a market leader in this concept um I think there's a huge design space for protocol and liquidity you know and I think the when you combine on-chain governance like shared security I think it has a lot of um potential to actually have these you know bilateral chain agreements so what I mean by that is if you look at like the L2 space today there's a lot of other shared security models out there this eigenlayer there's polka dot there's the l2's leveraging uh each security uh what I like to say is that you see the l2s aligning with ethereum but ethereum isn't aligned with the l2s because ethereum is like a credibly neutral base layer but once you actually

start having subjectivity once you start having intention it's like the Hub is aligned with you and you're aligning with the Hub I actually think you can have like really interesting um like it's beyond your shared security it's like shared alignment for economic development shared political alignment shared social alignment uh and I think this is kind of like an emerging idea that you're seeing in the cosmos ecosystem that I think is like a really interesting Market differentiator or product differentiator uh from like the other shared security models out there so uh this is like the first iteration of this I'm really excited to see I'm assuming this is going to pass uh in the coming weeks once it goes on chain but the Hub just was able to diversify treasury get a cool 18 million dollars and potentially put that to work on

behalf of its takers yeah no I love that you flagged this and it's uh it's pretty cool to see you know in the atom 2.0 white paper being a I think they called it the allocator Dow that's like kind of the goal of like getting involved in these types of deals um and really it's beneficial to them because it's helped helping to power this broader Adam economic zone so really kind of cool to see early inklings of what that would look like and of course this one seems to be going quite well so uh kudos to that team I just don't understand what they're gonna do with it still even after you said that like to me I feel like what Cosmos needs the most is liquidity but if you pair that against Adam which is really the only asset realistically you could pair it against if it's Pol for

the Hub then I feel like Adam just gonna become this constant source of of exit liquidity considering it's one of the few assets in the cosmos ecosystem that actually has you know the the depth on order books to to put on that kind of size so I don't know I don't see how that problem gets solved then you would actually even take that a step further like ask the question why does neutron have a token if it's going to be a general purpose L1 blockchain there's only a couple ways that it can really derive value right so it's either gonna be like a cash flow generating asset like you want to stake this asset and earn not only just like inflationary yield right but but also real yielded through transaction fees or or anything else adjacent to the block space like uh

say maybe Med Boost payments through in ethereum um this could be an in demand as a gas token right like there's an economy that exists on top of the neutron chain itself and the users that are like very much so want to interact with this and so the token kind of has like commodity value because you need it to uh to operate the chain it could also be used as a medium of exchange within that so like common uh base pair for Dex is or the medium exchange for nfts right um or maybe it's like the last reason would be to be like as this respected store value right something the digital code thesis that Bitcoin is very much chasing after and like I honestly don't know which one of those buckets would make the most sense for Neutron to fall into so like that's kind of the question

I would post here is why does neutron have a token yeah this is actually a pretty like I wouldn't say hotly debated but it was um there was a lot of conversation around this last year towards the end of last year when the album initially like invested in Neutron and the prevailing discussion was like or the prevailing result was well we believe in sovereignty in the cosmos ecosystem uh in order for sovereignty you need to have like your own Sovereign governance structure in order to have your own Sovereign government structure you need a disciple resistance mechanism and that is the token so the way Neutron's tokenomics work is there's a set amount there's only a billion I believe in not in circulation but in total Supply and um on Neutron it's and not even just

Neutron other Cosmic chains as well you can actually pay in multiple gas tokens so I think you can pay an atom you can pay in usdc you can pay a neutron and the way the tokenaux or the uh for Neutron works is any gas fees or Mev payments paid in Neutron is burned uh a portion of that gets sent over to the cosmos Hub is part of like Revenue share agreement but anything that's paid in atom or usdc or any other gas token that Neutron accepts as a gas fee payment goes into the neutron treasury so the increase in economic activity actually leads to an automatic diversification of a treasury and it also creates deflation of the asset at the same time and kind of has like this I wouldn't say money-ness but store value or this like digital

scarcity meme that I think is prevailed in throughout crypto over the past couple years um it's a really interesting concept because again it creates like uh deflation there's a deflationary mechanism to it a diverse a diversification of Treasury which could directly correlate it to the on-chain economic activity um and obviously ultimately like there's governance uh rights associated with it too but um yeah I think it really came down to like sovereignty and governance rights and the whole belief in Cosmos ecosystem again is like sovereignty so just because you're an out of economic zoner just because you're a cosmo subsecure chain today doesn't mean you have to be one tomorrow eventually you might hit escape velocity spin off become your own Sovereign entity and then you the idea is like well what does the cosmos Hub do

like obviously we want these chains to be successful there's probably it's an inevitability that if you're a successful change you're going to become you're going to want to become a sovereign chain so the other idea is like security is a commoditized uh service provision like ethereum is a great example ethereum is a great settlement da layer today if Celestia comes online in this quarter which it's supposed to and it's actually 10x cheaper as a DA layer and settlement is not a large Revenue driver for layer ones um it's like a hundred dollars per day I think most l2s pay to settle on ethereum uh that's not gonna be a large Revenue driver and ultimately this is a race to zero infrastructure is a commodity usually commoditized uh sector why won't l2s just decide to leverage

Celestia for da because they're not locked into ethereum they're locked them to eat the asset which kind of aligns itself like from a settlement perspective uh they want the each native asset but uh where I was going with this is like as a shared security provider The Hub is that's not where it's going to make most of its money you need a second order or a tertiary lock-in mechanism and that's where like providing liquidity for Consumer chains to actually uh jump start the economic engine is something really interesting where you're starting to see like these bilateral agreements take shape and I'm really excited about this concept but like to your point Sam maybe the Hub ends up being like exit liquidity uh but I think it's pretty interesting if you're seeing like uh strategic uh allocation to Capital

whereas like I think ethereum the l2s today it's all mercenary it's all private mercenary Capital going from one yield Farm to the other but if the Hub actually has a shared interest in seeing Neutron succeed it can deploy Capital that it that like the those chains know it's sticky uh but in the event that Neutron decided to spin out one day uh as long as the Hub maintains ownership of the neutron that it was allocated it could actually like eventually generate additional revenue from this new Sovereign chain uh just because it has a large ownership of its Supply yeah I know it's really interesting to think about that because this kind of parlays into uh my hot seat cool drone this week and just like the idea of like when do you need an app chain and when

does it make up the most sense and like how are you going to go construct that app chain and today that's very much so in the cosmos ecosystem but with the rise of the modular thesis you know I had to put the I had to put eclipse on on the cool Throne this week I'm super excited about what they're doing uh so they've announced that maybe Roll-Ups as a service isn't going to be their main focus um you know Neil has been pretty vocal on Twitter about like you know he's I think he's tweeted something the effect of ropes as a service is dead and then I think a lot of that has to do you know this is just my interpretation but uh it's like around the economics like how are you going to be how are you going to make money in that position as the

provider and who's the demand going to come from like who wants to build in a ropes as a service environment and so basically what they've announced is hey we're gonna actually you know we'll keep working on that on the back burner but uh our priority now is going to be building in East L2 and we're going to do it a bit differently than all the other l2s by using the svm for execution so boring from the Solani ecosystem and then leveraging Celestia for daa so like I like them dubbing this the uh the Optimus Prime of blockchains because it's like basically picking the most optimized piece of every layer in the stack that exists today right uh ethereum for settlement will bring the liquidity of ethereum because the smart contract bridge will live on ethereum so super easy for ethereum users to

interact with Celestia was built specifically for da that should be able to give you the best da solution and save you a majority of your costs like right now ethos is significantly more expensive that's used for da and of course the svm is all about speed so we're going to see a really really interesting environment here again because just this is like the most optimized blockchain you could really build today and someone's actually doing it so this is definitely bullish for ethereum it's another L2 that's going to be paying supplement fees back to the main chain of course da is largely where the bulk of costs come from but it's again participating in the ethereum ecosystem it's definitely bullish for the svm uh it's gonna bring more builders that are using rust that are like comfortable

with how Solana is built and and you know how that uh execution environment should be interacted with um and the question really becomes but is this bullish for Solana I would say yes over the long Horizon because it's pretty more builders that are comfortable in this ecosystem and that's super super important and if this roll-up like falls apart in any way shape or form which again yeah I called it the Optimus Prime but if anything goes wrong at all it can quickly become more of like a Frankenstein where it's just like how is this thing put together and this this doesn't make any sense for these reasons now you can really only learn from testing in prod if any of those things happen and the chain breaks then those Builders can probably fairly simply just Port that app over to Solana and there's another place to go execute

it and of course that's interacting much more directly with the salon ecosystem so net net I think it's like a really good experiment to be running again this is you know kind of the coolest blockchain we can build today so I'm personally very very excited for what they're doing you did forget one more beneficiary of this and that is Eclipse swap Eclipse lend Eclipse USD geology is going to be pastas with 10K in them and the tokens are going to go nuts you must have pulled up the D5 llama page of any of the recent l2s wink wink the ZK crew but they're working to fix that I think actually sparkling just announced it's going to ZK sync so shout out to them they're actually get a

real app over there I do like to see that they're gonna be using Solana and really putting that to work and then once you have fire dancer going live too like uh Peak Performance is on its way yeah they're not going to launch until Celestia is live so we do still have a bit of time that I think that's still supposed to be before year end so call three months yeah I think it'll also be interesting to see like uh you know everyone always has the argument like oh you don't want to pay rent to ethereum like that's going to be kind of like the opposite of what we're seeing with dydx going from ethereum to Cosmos like seeing the SPM on top of ethereum you know using it for settlement it'll be kind of cool to see just like how that pans out I guess

we're getting uh getting that argument for every angle at this point yeah I was like really intrigued to know more about the uh the differences between plugging like an svm into an evm but that shouldn't be a problem apparently which I'm I'm pretty satisfied to hear but again to your point Sam it's like we got to see this thing in in real time before I can actually believe that I heard on the bell curve uh shout out bell curve uh I read I was listening to I guess the latest episode earlier today and I know this but they're using neon like the evm uh svm like um I guess whatever whatever that is the evm svm compiler they're using that to

compile svm to evm uh for a clip so that was pretty interesting I don't know if you guys heard about that that's crazy I didn't think the neon team was capable of doing anything three years later because I don't think they know what a blockchain is so all right while we're shooting on folks I'll take my hot seat I got mixing uh they were hacked for 200 million dollars it's a Tokyo based company I'm pretty sure I'll be honest I haven't like actually used mixin before so uh take everything I say here with a grain of salt but their website says that they are transaction fee free privacy preserving and can support up to 1 million TPS and they apparently have a messaging app uh I guess uh I apparently

their policy was to move funds from hot wallet to hot wallet every single day and they stored uh validator Keys within a cloud provider I believe it's Google because they said they're currently reaching out to Google to like see exactly what um what happened and what what was the origin of the incident um not many people talk about mixing and it's kind of funny because it's number eight or at least it was on on D5 llama you know chains by tvl uh with like over 350 400 million somewhere around there um but yeah nonetheless that's like the I think like sixth or seventh largest bridge hack in crypto's history that's pretty large it's only smaller than like Ronin BMB Wormhole poly Network and maybe like a couple others but

definitely one of the biggest is this of this year and kind of sucks actually because I don't know if I'm getting like the right information feed but just from my experience I'd be curious um what you guys see on the timeline but it seems like Japan has been relatively crypto friendly and you know if this actually is an application that had significant user adoption in Japan that's definitely like a blow and I feel like everyone over here in the US is just now waking up and you know learning what the hell mixing is to be honest yeah it brings a total of uh total value exploited to 7.2 billion dollars shout out D5 llama for for tracking all of this for us but that is a scary large number uh and to your point Sam like I

really hate to hear if that assuming that's true like I can't personally verify that of course but I really hate to hear that that's that would you know signal it's like a normal people or more relatively normal people like less crypto native people that are getting impacted by this just by using like a messaging app um so that's uh not something you want to see it definitely doesn't help any sort of regulatory conditions that are already facing such strong headwinds well at the end of the day like we're gonna have to get this problem figured out a 7.2 billion dollars is a ridiculously large number and it's like every day where you see another nine figure exploit it feels like um you know a lot of this gets pinged back to North Korea and that's like such

a trigger word for any three-letter agency as well like that just it's just bringing like severely unneeded attention to the wrong corners and so kind of an impossible problem to solve if you truly want an open and permissionless blockchain but it's clearly clearly being continually worse I don't really know a good solution to fixing it it's called World app um uses World coin it's uh it's on the op stack and they whitelist which contracts can be deployed and that's why World coin is up 75 percent keywords open and permissionless I'm all for a federal chain

of kyc to get on a chain if they can guarantee my money's not going to get stolen I work in this industry full-time all of us working with industry full-time maybe I've never heard from Nixon like I saw it on the D violin with like leaderboards I never really just like paid attention to it but like I'm just looking at it right now right mixing 350 million dollars in tvl D5 chain 170 million dollars tvl Fusion 157 million dollars TBL uh whatever Clayton is 100 million like there are nearly a billion dollars in TBL protocols that I have never heard of and I work in this industry full time like and it's a bear market like this is nearly a billion dollar tvl of like

combined I don't want to call them ghost change I don't really know anything about them but it's pretty nuts that the amount of capital that's out there that's like in obscure parts of uh of crypto foreign hours every day and there's always something new that comes up and you're like oh I gotta check this out and then you do and there's continually this endless loop of evolution that's is uh notoriously hard to keep up with but that's kind of bullish the industry there's that much going on that even spending 10 hours a day every day still can't get you down that far down the list that probably wraps it up for our hot seat cool drone so let's move on to our next segment here going to be our governance update uh might be a bear market like David just mentioned but there's still a ton going on in

governance um most recently arbitrim had a snapshot vote to Signal the community's preferences for an incentive incentives program so Distributing the uh some of the ARB in the Dow treasury they signal support for 50 million and so now the kind of we're in the step of all right if you're a protocol give us an application requesting some amount of ARB explaining why and how you're going to use it and then the Dow will go through and approve those so of the applications that have came in which I've seen about 20 or so the the largest requests are radiant for up to 3.3 million Wormhole for two and a half million Ramses beefy and Magpie all coming in at 2 million and so some of

these protocols the airdrop is you know pretty meaningful relative to their circulating Supply and fully diluted valuations and so there could definitely be some interesting plays here if you're looking to scalp some tokens but to me the question really is all right we're in the middle of a bear Market does this really make sense to be allocating 50 million dollars or 50 million ARB tokens to defy incentives like right now feels like if you waited a couple months you might be getting a little better bang for your buck and of course the flip side there is yeah there's some couple billion tokens in the Dow treasury so it's like 50 million really doesn't make a dent and if that does kind of keep the lights on and keep attention focused on your L2 during this kind of very very

Dead period maybe the trade-off is there so I'm curious what you guys uh if you have a take on this I think I'd say I'm all for it honestly I mean op's got so much momentum you've got so many l2s launching like I do think that the Dow has like a responsibility to make sure that they're remaining competitive and if you know 50 million ARB can do that over the next three months especially in a way that's not super you know harmful to the token and just promoting farm and dumping then I think that's great um I know that making these incentive programs is incredibly difficult and that's why they're doing like a review process and having uh protocols submit applications but I do feel like there is some things that could have been done

differently that would promote less I guess just farm and dumping in its current structure and to be honest I haven't put like a ton of thought into it so I don't know exactly what it would look like but um yeah like I hear your sentiment Dan it's like damn like is this you know 45 million dollars actually gonna make meaningful change or or you know is it just uh exit liquidity for some people yeah yeah I mean I'm with you there I mean it's just gonna be after this this like real-time experiment we're running I think it's fine it's like when you're a kid and you were at the checkout line with your parents at the grocery store and you asked for a candy bar like 50 mil ARB is not a ton to them so they'll give us this little candy bar As a treat

and it'll it'll keep us happy for a few more months it's better to like try to keep Barb alive than let it like wither out completely and then try to resurrect it from nothing I think this is a complete waste of money uh I think would you say one of the poor girls names that's Magpie or something like I'm not giving 50 million dollars out just like yeah even if it is a small amount of money even if it's like candy bar amount of dollars compared to the treasury like can we do something productive with this we know it's gonna be active liquidity we know it's going to be sold off like arbitrum's down 48 since it launched uh in what March uh optimism is also about like 48 50 too so like relatively

speaking it's along the same lines the base announcement has not helped optimism surprise relative to arbitrum but like arbitrim needs to find a institutional partner an Enterprise partner that it can claim is like on par with uh with a coinbase which there's really not many especially in this bear market right now but like maybe earmark that for like specifically go to the Dallas I will take this 50 million dollars or however much money it is and let's specifically use it for a large Enterprise that wants to build on orbit orbit has gotten zero traction I think I saw the other day that like arbitrum was saying how so many chains are using the orbit like and there's nothing not like a shot at Armstrong

team by any means they're doing really good work but like let's be honest most of the Mind share has been like taken from by optimism um for right wrong or indifferent but it's like let's use this money for something productive let's not just throw it at these like faceless D5 protocols like the faceless users of them um that's not how you're actually going to win this long term like you need to actually find sustainable Partners to have the arbitrum stack um actually floor so I'm I'd rather just save it for a rainy day use it strategically but maybe specifically earmark it and tell the community like this is for a large Enterprise uh user that's not just going to take our tokens and dump it like they're not we're not going to do what GameStop did to IMX

right they've got the tokens and they immediately dumped it on the market We're not gonna do a polygon where like oh we announced Reddit but nobody actually ends up using it uh like all those announcements that actually have not held polygon at all in my opinion like find something that's actually going to benefit the arbitrum token holders in the long run because it definitely damn sure is not just like giving out incentives to the random D5 protocols bang bang shots fired from effort Capital hit them in the DMS if he just offended you uh but I do appreciate the long response there because I could quickly look up the Dow treasury has about 3.6 billion uh ARP tokens uh so 50 million is like what right around one percent of that kind of hear both points I don't really have a strong opinion on this one but uh

moving on in the in more governance updates Vesta finance a lending protocol is has got an rfv trade going for it so it's the Dow voted for a full unwind and dissolution of the protocol which would stop the uh investing of Team tokens and accelerate investor allocations leading to a full Redemption of the treasury so the treasury value per the fdv would be about 53-ish cents and the token was trading at 14 cents at the beginning of the month has already run up to 44 cents um and so our rfv traded trade Fanatics are winning yet again uh so I guess that's the right thing to do you know if the protocols get you know deemed to be dead then return the value to the Token

holders that's kind of like definitely the appropriate thing to do of course there's still a long list of steps that needed to be completed for this to actually happen but we're seeing more and more of this you know the the nouns Dow recently voted to kind of have the rage quit option you're seeing the Redemption here and it's becoming a little bit of a trend yeah the the most complex part of this is one it's front ran super heavily like all the people who got in it what 12 cents earlier this month to where it's not even worth one of us going in there and trying to complete the trade for this like 10 15 because you have no idea how long it's going to take the actual rest of the proposal to be seen through I think we don't know

how long it's going to take before there's actually something you can redeem for and like they've they've obviously got to remove like all the liquidity all the protocol and liquidity in the pool so like what is that even going to be valued at by the time this all plays out yeah and then on top of that I'm gonna doubt that this is all going to be automated I'm sure we're relying on you know two or three individuals to do right by the Dow and just return it and yeah you can you can't get me to do that for 10 or 15 percent zero zero chance yep I'm with you guys there as well and uh one last governance update uh we have the maker debt ceiling actually two more governance updates the maker debt

ceiling um maker just voted to increase the debt ceiling on its two largest rwa vaults or sorry that's still a live vote but jumping from 1.2 billion to 3 billion and dramatically increasing its Revenue run rate I think the rough increase was about 80 million uh so it's a material change in in the Dallas Revenue I think they're doing roughly 100 now and so this will be annualized of course and so you know it's pretty exciting to see these developments playing through uh makerdale is just on this non-stop war path right now it's like wow many projects are struggling and like Vesta Finance is shutting down make your doubt keep shoving along and is really focused on their their rwa strategy and how to bring that yield on chain so super exciting to see here as well

I'm so bullish maker they like yeah historically um you can argue the mkr token has really done nothing the the maker burn really did not actually like end up generating real value or real demand for the asset but I think it's rwa strategy uh they're going heavy into it obviously they're gonna be able to generate over 100 million dollars in profit like not even Revenue like actual profit it's an ultimately like unlimited scalable business assuming the government the FED doesn't come and uh take their assets away or seize them but um the rwa play like allows them to increase their fundamental floor for like how what maker should be valued at as a cash generating protocol and then

on top of that now you're actually with the end game you're going to see all these sub Dallas pop up they're trying to align with maker spark protocols one of them um but you're now like owning maker owning die is actually going to be required in order to farm the subdial protocol so not only does like make or get you upside in the rwa narrative you're actually getting upside and like volatile tokens that are potentially going to become like major D5 players in the next cycle um I think it's it's one of the best plays I think of the next cycle like I don't I wouldn't know how it's not like yeah it's not like not the most polynomic type protocol out there but I think in terms of uh has long-term staying power in terms of like the brand

um broon's been here for multiple Cycles he's you know the earliest D5 protocol in in existence um it's putting a lot I think the enemy is putting a lot of attention on on maker itself and I definitely think it's like one of the best plays uh for the foreseeable future not Financial advice and I don't own any mkr today yeah I just love the anti-cyclicality if you will you know as soon as the market goes risk on people are going to be borrowing against crypto assets paying interest rates and then as soon as everyone goes risk off which is usually the other direction of rates then you know you're sitting cozy in t-bills so I I agree I love it now the last governance update we uh

moving back to Cosmos ecosystem the block which research team is actually put together two really interesting Forum posts and of course that effort was championed by none other than effort Capital no pun intended but I'm gonna start doing that more often uh so effort why don't you tell us a little bit more about the monetary and monetary and fiscal policy changes to Adam that have been proposed uh over the past week and a half or so um we put together a proposal to the custom sub Community as part of this grant work that we got from out of accelerator uh to like reimagine the tokenomics of the cosmos Hub and specifically the Adam Massa uh so there's like this prevailing narrative or I guess you could say over the last cycle like there's you you think of

ether's money Bitcoin is money um you can argue maybe to some degree that like Solana is money for its given ecosystem uh because not only did people want to hold it but you actually had to like use it you have to use it as a medium exchange uh you'd actually use it for utility purposes to actually pay for computational resources on the network um a lot of the people like outside looking and never thought that like Adam was money um because you it was not forced upon you you as a cosmos ecosystem user if I wanted to go on osmosis and do a swap I didn't need to pay an atom you can accept atom as gas but like I didn't need to and I think the by not forcing that on you uh in addition to other reasons like on the outside looking in

it was never considered as money but if you actually look at how Adam has performed across other chains in the cosmos ecosystem like there's a clear like it clearly has outperformed um I call this like the numerator like it is the asset that everything else in the cloud was ecosystem is compared to for one reason or the other I think a lot of money like the the concept of money very much like a social contract there is a reason to uh there's certain like things that can uh tangible things like medium of exchange actually using for gas and I think reinforces social construct of moneyness like eat is mostly money because people want to hold it and people think it's money not because like you can use it on the network at least that's my personal opinion the reason why I'm bringing this up is because you're starting to see

like with this new Adam economic zone The Narrative starting to play out a lot of other tokens uh chains like Neutron and stride are actually going to start allowing Adam to be used as gas on the network I think like 75 plus of all transactions on Neutron are actually being paid in atom and not Neutron like the native token for the chain which is really interesting but people have historically wanted to hold at them uh and in my opinion that that makes it money now to in order to reinforce this money thesis one of the problems with Adam's um monetary policy or Supply schedule is that it has a dynamic inflation model if you don't know that so like most proof of stake networks um like Solana for example did a set Supply schedule it I think goes down like 15 year-over-year it's inflation until it reaches like a base level of

one and a half percent uh and there's certain there's something nice about that you have certainty around what you're getting you know in a year from now how much so long there's gonna be you know in five years from now how much sold there's gonna be but uh the cosmos Hub the Adam in particular uh has a dynamic inflation model that's based on the amount of atom that's staked to the network as a function of its total Supply if more than 66 percent of the supply of atom is staked to the cosmos Hub inflation goes down until it hits a minimum of seven percent if less than 66 percent of the supply is staked then uh it goes it can hyperinflate essentially to about 20 percent um it changes block by block long story short this uncertainty in my opinion

like hurts the monetary premium of atom on top of the other like reasons why people don't consider money outside the cosmos ecosystem because again it's not used as gas and etc etc but the reason why this monetary policy was created initially uh was because it actually foresaw the the belief of like D5 if you're holding ethereum let's say and ethereum is paying you five percent yields would you rather stake to the network for five percent yield or would you rather go borrow it uh or lend it out on Ave for six percent yield or seven percent yield the idea was that the proof of stake Network can actually like compete with defy yields to ultimately make the proof mistake Network secure liquid staking blew the cans open on and

like opened up a can of worms for proof of Sega networks now you don't have to actually choose one or the other you can actually stake to the network get the staking issuance yield and what other other yield that's that proof staying Network generating and you can actually leverage that yield and all to also like deposit collateral and defy obviously stake to eat huge Boon like lighto is absolutely killing it over this past cycle but long story short what we proposed the monetary policy changed to Adam is like in this new liquid-saking world you don't need Dynamic inflation the proof of stake network no longer needs to compete for defy uh you no longer needs to compete uh with the default yields um now that you can double dip you'd like to create like a more certainty around the supply so we we long search

short we propose to decrease the uh the inflation of Adam on a very similar type of schedule that Solana proposes uh what this ends up creating is like about 100 million less atoms minted by the end of the decade um there's some really good conversation going on in the community right now rather like is that good uh why is it good also what are the bad things um a lot of validators make money off of the inflation so it we propose a pretty aggressive tapering of inflation over the next few years and they're concerned that like hey if the atom economic zone doesn't generate sustainable Revenue this could be actually bad for our business which is a very valid concern but there's a lot of conversation going on in the forums around that and then the second thing which I think I'm really excited about is this idea of a

dynamic uh liquid thinking tax so if you look at Lido right now there's a whole bunch of conversation and debates going on in the ethereum ecosystem about how lydo has like an overwhelming Monopoly of liquid safety uh and that if it passes critical consensus threshold of 33 percent then uh Lido can effectively control ethereum the network uh Lido governments can shut down ethereum if it really wanted to uh and now like Lido it's kind of like this governance rapper uh over ethereum which was inherently not supposed to have launching governance um there's something called the liquid safety module that the cosmos Hub implemented with its most recent upgrade that allows the Hub actually to be cognizant of how much atom is takes to the network I'm sorry of how much atom

is liquid staked um something that I think the ethereum foundation is actually researching and potentially like going to bring over to the ethereum network which will be really uh exciting but what we propose is if the Hub is cognizant and if if liquid taking poses this like potential existential risk for all proof-of-stake networks and if the hubs actually be able to be cognizant of how much is liquid staked of its own asset then why not create like a market for it if there's concerns around too much liquid staking uh even though it's an inevitability Let The Hub actually benefit from the growth of liquid staking uh in theory since the Hub doesn't have Smart contract capability the growth of liquid taking should lead to the increase in economic activity of the atom economic zone built around the

Hub um ethereum increased economic activity leads to more burn well what if we were able to actually tax the growth of liquid taking so that the market finds like its own equilibrium for how much should be liquid saked and how much should it be and like the more liquid taking there is the higher the taxes and then what we could do is actually burn this tax and uh not necessarily create a deflationary atom but uh lower the inflation further so it has like more sound money-ness that I think this crypto that crypto space likes to uh look at in terms of like what assets should we invest in you could also use this tax revenue to like Leverage protocol liquidity which we talked about earlier today uh and generate like more more revenue for Hub stakers uh but long story short again there's like a lot of exciting stuff

going on in the cosmos ecosystem particularly with the Hub uh Blockbusters research is like a major part of this conversation about like how to change the tokens for the Hub and Adam so it's like a more sought off their asset so that it um can actually generate more economic activity in the wider out of economic zone um I'm going to be giving a talk about this at Cosmo burst which I'm really excited about on day one uh Monday next week um and yeah I'll that's kind of what we're building and one of the things that I think is one question I want to pose to you guys is like you're seeing conversations about Lido offered dual governance to stake teeth holders so stake teeth holders can actually like to more closely align light out with ethereum protocol State these holders can have governance rights over Lido the

big difference is like in the college ecosystem it's a proof of stake Network that has on-chain governance should liquid stakers have the same governance rights that native stakers should because that creates some potentially interesting like security concerns uh if you don't need to like actually Bond your assets to the network and can just buy it off Market yeah yeah that's a really good summary of kind of the ideas that uh you know we worked on and and how we think it'll benefit not only Adam the asset but Adam the network more importantly and I really just kind of improving that money-like narrative I think the the most interesting thing is the LST tax I wouldn't be surprised if this is another moment where uh the cosmos front

ran ethereum to something so it'd be very interesting to see if that plays out over the long term um but more specifically to your question uh it's super interesting because you know Lido and staked eth like they're gonna give the stake to eat voters veto rights over Lido's protocol which is the big difference here is like yes safety uh steak to eat users are basically the customers of Lido and yeah your customers maybe should have a voice in the future direction of the protocol that was kind of the whole point of a governance token in the first place so that that seems like a pretty natural fit there but when you ask this question earlier uh in our group chat I was like I was confused I was like it seemed like

a no-brainer to me but then you're like well yeah but there is a huge risk in somebody being like let's just say you know person a pushes forward a malicious proposal and then uses wallet B it's still person a controlling a different wallet to just go smash bids liquid staked atom vote on the proposal and then immediately dump it and like yeah you're gonna take a haircut there but that isn't bonding your assets for a 21 day period to be able to vote on this thing and then withdraw them and then sell them like that's a very very different purpose and correct me if I'm wrong here but the 21 day unbonding period is like specifically uh put in place to like mitigate the governance attacks is that is that piece correct the the original reason for I think it's like a second order effect the first

reason it was to uh prevent like long-range attacks uh that proof stake networks like inherently have but I think like Babylon chain is supposed to like help fix that if you use Bitcoin work networks uh but I think there's also like a a governance aspect to it too like you're staking for 21 days um typically governance in Cosmos takes like 14 21 days to vote on things so like it does kind of closely align with like this 21 day on bonding period okay okay so more of a second order effect but that still makes a ton of sense and um now that you mentioned that I've I've yelled at you about this before but we have got to cut down the 14-day voting period that's ridiculous I agree there's conversation about

extending it they think the hubs are moving too quick and I was like guys The Hub hasn't done in two years and like we've seen salon and Avalanche pop up like The Hub needs to move quicker and they're like no like we don't want to fast move fast and break things I was like no that's exactly what we want to do we're on The Cutting Edge of like everything right here in crypto like we can't move slow yeah I know a couple of us talked about too like maybe the idea of having you know the LST holders have to hold that token for x amount of time like maybe a week but then you run into Province like okay like what if I'm like lp'ing like I'm there's just so much that happens in D5 and you know the whole point of having an LST is to have that

liquidity and be able to make it work so I'm sure that integration would be pretty tough and then I know Westie said well what about you know maybe locking up uh post vote for like three or four days um the token Holdings like which that might work but again kind of the same thing so I don't really know the the right answer here but I do think you absolutely need some kind of fallback you know Fail-Safe mechanism in the case that there is a governance attack because that's clearly a real risk here I think you just like um make their governance power or their voting power of the liquid stakeholders make it a fraction of what an actual asset holder would have like just run some actual math on it but like maybe

they get like 10 of the voting power that having one actual token would be my problem with that is you're giving all the the voting power to the validators like don't you actually want the users the funds Etc to have that voting power can have a little yeah it's double it's a double-edged sword I actually think that what if like all Stakes what if all liquid staked atom for example had like could not have more than 33 vote power like for the hubs like no matter how much you you voted like you no matter how much liquid takes Adam there was out there it could never cross like a threshold specifically of governance uh Authority

um that that would be pretty interesting but I also think Sam like you're right like you also want to give people like part of the reason why we have these proof of stakeouts that's at least for like launching governance and is there's a governance factor to it like you actually have say in the protocol but do you lose some of that say now that you are also trying to make money with your your governance token um I don't know previously liquid thinking overall it's opened up a huge can of worms for for proof of stake networks and um it's really interesting to see what the space is going to look like in a couple years because there's a lot of thought leaders I think like hafsu and what have you that I think would say anything that limits the growth of liquid taking is naive and it's

inevitable so just embrace it with open arms and just get ready for the ride and we figure out over time all it's going to boil down to social consensus anyways so just while you're trying to create mechanisms around it just embrace it and just uh Let It Grow uh which I think is a really fair take too so um I don't know it's gonna be interesting to say one more idea there I know we all want to get off of this it's we're coming up on an hour here but what about having a quorum that needs bonded atom in order for the vote to pass so that way validators essentially have veto rights over proposals by not voting do you mean like there has to be a certain number of like

normal bonded atoms is that yeah okay that's interesting so there's or like what if you had the liquid staking tokens kind of like vote as a unit right because depending on the proposal like they might all have their like them as a group has different interests per se then like uh the Val like the hard bonded atom uh as a group would have so it could be interesting like I don't know maybe like group them as one vote somehow I don't know how that would work but theoretically but it would be interesting to see that either of those models well that's for another day yeah it feels like we need to we could probably do a whole podcast on like that type of topic or Cosmos Converse governance as a as a as a whole maybe we get Sam Sam Hart back on and

it's been a while I think he was on one of our very very first episodes of zero X research so he's definitely due back for a second appearance probably a great a great place to wrap it up though everyone thanks a ton for for listening this week and as a reminder we switched up the the framework here so we're gonna have two episodes per week the first one will be the analyst episode the second one will be the interview this week is with the ens founder Nick Johnson so be on the lookout for that one to drop the day after this episode and thanks a lot guys cheers