Can Drift Rival Binance? | Analyst Round Table

Transcript

one of the first and most easiest things to understand is like liquidity begets liquidity and a trading venue that gets more liquidity should have locking because it's like non forkable State and like if the liquidity is there like more liquidity is going to come and the per deck space like the exact opposite has happened there's been increasing fragmentation over time the the capital in that space is very happy to chase the next airdrop I think and CH chase the like the newest thing nothing said on ZX research is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial advice Pacho Ryan and our guests May

hold positions in the companies funds or projects discussed what's up guys welcome back to another episode of zerx research today's a very very special day Michael eolo um co-founder of block works and host of bell curve the second best podcast on our network is joining yes thanks for joining us Michael no Baka you got to set the expectations much lower you gotta be like oh we brought up the B tier for this one yeah I couldn't get anyone else to join the show that's uh set the bar low man so I can hop over it um I'm also joined by regulars and not as special people Danny and Ryan who will attempt to keep up with myppo who like I mentioned is very good and we should make sure to put some pressure on

him so lower the bar very true I'm just excited to be here I'm GNA try to keep up with y'all fantastic so I wrote up some topics um today's episode is going to be kind of special I want to hear Mio's opinions on a lot of stuff um as well as I want to kind of soak the fire with Ryan and drift so I think we're gonna start off with drift and Ryan recently wrote uh report on it and obviously Kyle fman wrote a 50 page report on it Ryan do you want to run through why you think drift is a winner over another order book or another professional deex yeah so just um so for

some context um we wrote we saw the price of drift fall to like 30 or so cents um thought it made sense from a valuation perspective and began digging and uh potentially writing a report or recommendation for the drift token um we released our report on September 5th um the multicoin team released a report some days later though they had been early stage investors in drift as well um basically saying like both reports saying more or less directionally the same thing um that you know the opportunity for drift is is quite large

um relative to its pricing on the market today um I think there are like kind of three main reasons of why we like drift as like a strong risk reward not that like I'm not saying I think it will win or it will be the like the multicoin fra uh report frame says like they think it's likely that it will be like the binance of defi um I think that that's very TBD I didn't make that claim um but there's like three things so like one I think is just salana beta I think that the market is still underestimating what fire dancer can do to that Network um if if fire dancer achieves maybe one tenth of the scale that it's promising um

you're just going to have way more throughput there um and that's could drive significant fee generating opportunities for the dexes there that are you know basically technically capacity constrainted today so just simply making the pipes bigger will allow more fee generating opportunity for applications like drift um drift is is interesting in the like second reason is that it's it's interesting in the context of that increased scale because it's the only cross collateral per decks on salana today and building one of those systems is incredibly challenging so if you get fired dancer scale on salana uh I think the current behavior of current users is or so the behavior of current users is

going to change and it's going to bring on new more sophisticated users and those new more sophisticated users will want cross collateral as opposed to isolated margin um when they're managing risk in these systems um um I think the third reason why we like drift is that um is that there are it's drift has an inherent advantage against other pers Dex dexes because it sits at the L1 why is that um the multi-coin report um you know they they pointed out um

something that's super important but I think a little bit more obvious in that like they don't have to manage their own infrastructure the team can focus on building the product and I do think that's important um I think the more important point is that drift can has a more because it sits on the L1 has a um a more clear path to achieving D5 super app status so offering complimentary and adjacent products cross- selling their users on different products because they sit um where spot assets sit so if you think about the basis trade for example you can do it a basis trade in its entirety on drift today you can lever long perss uh you can Le uh short the

spot and you can manage all that within one cross collateral system and that's that that's pretty important um drift can also incorporate various spot asset products so borrow end um spot trading uh payments things like that that's much hard harder to do when you sit on your own Island so because competitors typically sit on their own Island they're inherently capped or it's much more challenging that path forward to cross sell products so um I think like the upside for drift given those Dynamics is there we don't even like we mentioned bet in the report which we think is super interesting but um you know since we're focused on like per deas right now like we we'll keep it at

that and I'll pause there I got a question for you Ryan do you have a or I guess for the for the whole group do you guys have a sense of a very strong opinion on when you're looking at something like a DEX what part of the infrastructure should basically be onchain and decentralized versus what's okay to be centralized feel like that's one of the levers that a bunch of different dexes are playing with and one maybe interesting example to look at would be dydx they're originally built on Stark net and then they migrated over to their own full stack app chain in Cosmos and you know a huge fan of dydx I love the of Antonio very bold he's been very product focused for a long time but there's also a sequencing challenge like they've had a lot of challenges you know since migrating to um since migrating to

Cosmos and I think maintaining a decentralized order book is trickier like that was a huge thing for Antony I remember him saying this was just not possible to do on an L2 in the current state he found that very important to the ultimate vision of what a de was but now I feel like they're figuring out that that's much more challenging and I think it's interesting to ask the question you know what part of the infrastructure actually needs to be decentralized on chain managed by a quorum versus what's okay to be centralized do you have a strong do you guys some strong opinions there I want everything on chain that you can but like Antonio said you just can't do efficient um matching on chain like you can't run efficient matching engine onchain which is why they I assume they had to move it off chain um I mean we

have a few teams now with I I can't bring up hyper liquid again like with a straight face because the past like month every episode I've been bringing up Viper liquid but like that's their whole thing you know they're trying to do everything on chain um on the other hand they are like it's like free validators it's collocated um kind of a black box in that end is like it's essentially what Mega E is doing where it's like hyper optimized but you are giving up on decentralization um they're claiming that they're going to decentralize eventually but like if you can just make you have to have a tradeoff you have to make something at some point a bit centralized because or else you just can't run everything on chain doesn't

make any sense so I have uh I have thoughts I guess about the I'm I'm less in the Weeds on drift specifically but I've thoughts about the just per Dees as a category in general and I think it's an interesting question to ask whether or not um you know drift might be beta to salana and I think there are some interesting parallels from the 2021 2022 cycle to look at but perss are kind of interesting because they're kind of a classic I think value trap in a sense like usually when sentiment gets bad and people start getting discouraged everyone ends up looking back at like perss or anything that's generating revenue and being like well at least this thing's making money you know and this was the uh I don't

know if you guys remember I I don't remember when the Heyday was of this but this was kind of like GMX and robbit and it was like well rit's producing all these fees and they're buying back their token and just look at what roll bit's done and now everyone's confused like why isn't that working anymore just The Narrative rolled off and BuyBacks just don't work in crypto it's not a value redistribution mechanism in crypto that works today because these markets just aren't effici and the other thing about perss as a category it's just very dispersed you know there are so many different per decks like how do you pick the best one I'm not really sure I I think that generally because we don't have very solid Frameworks for how to Value these things and I don't think that these tokens trade on cash flows or

anything else rational at this standpoint you can just look at it as a game of fragmentation so any category that has a ton of different coins that you can bet on is just tough It's just tough but but I do also think I would be in the camp that one of the interesting things about salana that has uh intrigued me a little bit is there aren't that many coins on salana like for the kind of like the It ecosystem of this cycle everyone thinks it's going to be the next eth there haven't really been that many new entrepreneurs or apps building on it and there really aren't that many options that you can buy so I don't know I really like when it comes to not Financial advice but I like the salana beta story I think that's going to work for some period of time like

jeto is probably a decent bet disclosure small bag old or vegeto but you know I think uh but I but perss as a category I found kind of challenged um just because there are so many of them and it's hard to differentiate yeah I I agree with you there I think that look at as someone who got into this ecosystem like pretty late 2019 2020 uh one of the first things that you learn is like um or one of the first and most easiest things to understand is like liquidity begets liquidity and a trading venue that gets more liquidity should have lock in because it's like non forkable State and like if liquidity is there like more liquidity is going to come and the per deck space like the exact opposite has happened there's been

increasing fragmentation over time Capital has um the the capital in that space is very happy to chase the next airdrop I think and ch chase the like the newest thing um so like liquidity begets liquidity like I I do believe that that like that Network effect exists but I do believe that there are counteracting forces such as like the grant Dynamic like the incentivization program Dynamic like the airdrop Dynamic like those really overpower that Network effect they have historically um perhaps that changes if fire dancer can do what it says it can do uh because then you have a meaningfully differentiated Tech stack

uh versus what's on the market today um combined with that cross collateral um the ability to do cross collateral there I think is potentially powerful U but no I I I I totally agree perex is historically have not have been really challenging to do I think it could have been dydx and I actually think the overarching problem there was not um like switching the tech stack a few times and uh potentially switching it again but was the issue where the dydx equity was making money EX at the expense of the dydx token holders right um I think that that was a bump in the road that really changed the path for that project um I'm pretty cogn cognizant of that when I look at these

systems um I think it's probably one of the most underrated risks risks in crypto today um as far as like if you want to own a token um I didn't find a lot of that um in the purpose deck based t today where I was poking around so I think I think we've learned and hopefully you can see someone get some sustainable market share as a result yeah I wan to I want to agree with you mppo on your point around I think it's kind of the point that like price sort of drives narrative like you we get to these scenarios like with GMX back in you know 2023 um people go when the when the market is maybe struggling they look for these you know these businesses that are that are cash flow generating they look at you know price to fees they look at

revenues and they get really excited about that because obviously all the there there may be more speculative bets are in the dumpster during those times and then when we see that Trend reverse it's like the exact opposite it's like well this this valuation actually really isn't that good and everything else is going up you know multiples while I'm sitting here with this you know 20% gain on whatever um and they flipflop and then we see it again you know I think recently there's been eyes on you know people like teams like a tokens like a maker again because you know Bitcoin has been sideways down um and people are of getting into that same feeling of like price driving narrative and they're like well you know all these like more questionable longer term speculative future bets are struggling again alter getting hit hard and they're they're

going back and going wow look at all these businesses that generate revenue and then you know if if price starts to go up again it's like what you know what's the reaction going to be so I totally agree on that point this happens yeah like that GMX thing I remember but we also had 2022 2023 everybody tried to copy GMX and we had like maybe 30 Forks um across 15 chains it was kind of insane that that happened that's the fragmentation issue that happens in crypto because the marginal cost of spinning up something new here here are like four different categories that this has happened l2s so the first couple l2s like optimism and arbitrum you actually had a pretty long Runway of you know spinning up an L2 at that point in time

was super complicated but now you got these Ras platforms like conduit that makes it like you the four of us could spin up an L2 on this podcast in 10 minutes you know that makes it very challenging that's super e that's basically bringing up on a whole bunch uh a whole bunch of new Supply online meme coins same thing right it's as soon as pump. fun happened and they were launching thousands of New Meme coins a day eventually the market was going to collapse under the weight of that Supply same thing with per texes and then same thing with the prediction markets I saw I saw the guys from Alliance sweding the other day that there are 30 new prediction markets coming online like I mean yeah I don't know how you guys feel about prediction markets post

uh November 5ifth but yeah I mean that's going to be that's going to be challenging um to sustain any token values just when you have that many different options no I completely agree and it's like you said it's the issue that crypto has but it's also an issue that in general like a lot of other sectors have like with gaming this is something that I talked about on here as well but with like once launch one successful game like if you go on the App Store and you search for like Subway Surfers there will be like 55 derivatives of it and it's just the way that I think in general the world works this is like me coping about crypto constantly copying each other um I'm trying to be more positive on the

podcast but I agree with you like post I guess November 5th like election season I don't see any of those prediction markets surviving poly Market I think has to survive if you raise $70 million you have to survive at least one election cycle you can't just die out um that'll be fine I think eventually they'll all like sports betting I'm not sure if that's big with prediction markets we don't really have it over here but I assume you guys do prediction Market SPS betting I was just GNA say there's a blockworks research uh dashboard on Playmarket it's got the best uh best data in the business on PO Market but yeah if you

want to rip that up Buck the I mean I was looking at it the other day and I it actually looks like here's the thing that you can't really tell is it actually looks if you look at the um the percentage of different trades getting made it actually looks a little bit more distributed than you might think like something some some there's a higher percentage of people that are betting on sports on poing Market than you might otherwise imagine there there are more categories but the actual amount that's getting bet is still vast majority politics related and then the other thing that you can't really tell us how many people are coming to the site to bet on the election and then end up betting on something else so even

though the metrics today are showing that people are betting on sports or something else if that election were to go away that's like the marketing for poly Market goes away for the rest of that stuff and then they're just competing with FanDuel or whatever and they're just getting smoked I I think the sports bet angle is is a going to be a lot harder than the election angle to your point like the the competition in FanDuel and DraftKings and like pick your favorite like those guys are making millions and billions and they're spending and they have official Partnerships with like the NFL with the biggest you know Sports um associations of today so it's that's a much taller hurdle than like this election Market um area that you know there are some apps that are that are in that space But it's

it's far smaller and it's not really like captured by Giants today I mean if you don't have a phone app I don't think you can compete with um sports betting as well like even if you have that Progressive web app thing it's just not good enough people want to just download the app and bet through there while having beers with their friends they don't want to like be in the computer on the computer saying hey I think the Jets are going to win or something that's the only football team right know yeah that that's a great Point um and and to kind of circle this back drift um and what they're trying to do with um with um the betting Market um product that they have um like I think it really has to be differentiated like

you guys said you're not going to do it in sports you don't even have a mobile app um the election stuff is going to run run over run over it's very seasonal um drift's bet platform plus Sal's blinks distribution um like I think that there's a nonzero chance of verality there within the crypto community so you know what like what's what's like the most what's super common in crypto it's like arguing on Twitter like that is the pmf today and like what like in a highly financialized space like what better experience is there than being able to read a Twitter argument thread for thread and at the end of the thread

there's a salon of blink that has you bet on some like real world outcome of like what settles that argument um there are a ton of like internet subcultures that like operate on the same Dynamic of just like talking shop and like making predictions about the future of their industry or of like the you know the uh like the the culture that they're all a part of right um I think that you know you have an installed base in crypto of perhaps a few hundred thousand people uh who like to bet money and who are very ideologically driven on a lot of these issues uh perhaps we settle some of those debates in real time like on the drift platform in Via blinks on Twitter like that's not an unreasonable outcome for

me and it's it's differentiated right there's no competitors there yet you have competitors in sports betting you have competitors in election betting um so this is potentially like the the BET platform there is a pretty interesting response to like the seasonality of um and the intense competition that crypto is going to see in other betting markets it's not clear to me that that like drift will necessarily capture this but I I do like the point around having the potential to go after this angle like I we're seeing some new apps around like betting on live streams like just permissionless creating bets related to active live streams and then you know users taking one side or the other that trade I think the verality in that like can come from like you're saying with blanks and other other technology that

will tap directly into these social feeds of today like if there were bets on how Mr Beast like what his next video is going to look like and people could take one side or the other like he's got millions in reach and um to have people throw five or 10 bucks on that like I I think that's maybe the the larger reality audience size we're looking for versus like CT arguing over like if if ksani won an argument or not but I I think that that kind of tooling is is the way that you get there right like directly getting integrated into um the existing feeds existing socials of today rather than like trying to get these people off of Tik Tok because they they love being on Tik Tok they love being on YouTube Etc you guys checked in on

farcaster frames recently does anyone use farcaster on this podast I I still check every once in a while I go on foraster it's it's died out and I think um the nail in the coffin recently has been that vitalic has started tweeting again after getting stressed out that e is going down um so he's he's left farcaster and come back to the regular World um I think like I liked foraster um frames were really good but blinks are like it's one is like foraster native and the other is you can do it wherever you want and I agree with Danny is that people don't want to go on forecaster they want to like scroll through Tik Tok and Chuck a tener thanks

to Solana if that's a possibility I don't know if it is like realistically I don't know how long that would take to be an actual experience but feels like people want that yeah I think that just the Gap to get users to forecaster versus like everyone's already on CT they're already using you know they're watching stuff on YouTube they're listening wherever they're listening today and it's just I don't know that the forecaster experience is like strong enough um from a product standpoint to get people to move over in mass and I like the CT Community being what it is is like incredibly Niche it's hard to see that generating like the network effect to to get you know maybe other creators outside of that space to move

there have you been recently I haven't no no I haven't but no I haven't but I I think there's a uh I think there's a tension in between blinks and foraster frames and the goal of these social media platforms which is creating a cohesive editorial experience most people wouldn't use that framing but if you think about someone like the New York Times The Wall Street Journal which is sort of the Legacy model of this there is an enor amount of agonizing over the front page and what goes into the front page and what stories do you see and what is the format and literally the font the font of these these Publications changes every couple of years and even though

it's a little bit different it's the same process on everything from Google to Twitter to whatever social network and I think one of the tensions of frames something like foraster is when you allow more expressivity and creativity on uh you know whatever you're embedding into that platform it actually creates a lack of cohesion and actually what it's what it's kind of degenerated to a little bit I had a buddy ping me this the other day is that it's kind of just degenerated into people pushing and selling things you know which is originally why Facebook made that much more difficult to do um and so I think that's one of the challeng that's why blockworks was sort of interested in frames like as the you know looking at this through the the

business lens of blockworks like hey uh you can link out you know and so suddenly like the initial ideas that we had like hey this is why this might be useful is like hey we can sell tickets easier here and that's great for Block works the business but that's not great for you the consumer and the user of these social platforms and so it feels like this was the first iteration of this but that's a tension I see in between you know with this whole idea um I don't know how it gets solved I think it's a great point I think like we're seeing a great example in maybe hitting both sides of that without squeezing the users too much is like Tik Tok has been incredibly successful with Tik Tok shop um I don't know why that's the case but

it's it's like going back to the days of like you know QVC like sales TV where there are just some people who are willing to watch like a live stream of a Creator that's just literally pushing products to them um and I don't know if they just have the great like the perfect algorithm they like know the people that want that and and don't and maybe that's all it takes and they can differentiate that pretty easily but um I do like that like a like a frames like a blanks can can enable that um across potentially across platforms um and bring maybe that that Tik Tok shop kind of experience um sort of generally um across the board but I I you do make a great Point like it is finding the right kind of sauce to to not feel like every time you scroll through an app it's just

like add add add add add that's been my experience on all social media recently at at that is it and I I wonder like that shopping thing on Tik Tok I wonder if it's obviously it'll be more um successful in Asia and I wonder if we just I know Ryan you have some thoughts on the way that we use social media and the internet over here versus they use it in the East but I wonder if it's just like the phone experience that's why Tik tok's just been more successful like the QVC style of being able to just scroll and they're just way more comfortable with it over there like if I see an ad over here I get like viscerally upset I'm like I do not want to watch this

versus like if it's just become a regular part of life like we just expect something else over here versus over there how the internet has shaped culturally the you know what's one you know what's one um sort of interesting thing in podcasts is if you look at the way the podcast monetized there's two models you can do subscription podcast or you can do uh advertising driven podcasts and the I haven't checked this in a couple of years so I don't I don't know if this is stayed true but in the US versus China the way that podcasts get monetized are inverses of each other so there's a really low percentage of uh podcasts that charge subscription in the US and most of them are just monetized via ads but in China it's the exact opposite and most of them are

subscription podcasts and there's almost no advertising at all and so some of this stuff is just weird like idios sycratic almost like path dependent reasons for how markets evolve there's not some first principles logic to it it's just this is how it sort of played out it could go something I would not have expected is the us having less Subs based it's yeah it's interesting because if you look at like I I just know that like if you look at patreon and the and the podcast that like do well with their free version what I think what often happens is they have kind of the free front-facing podcast experience that you can watch on YouTube Spotify Etc and then it's like the extra bonus content

is behind the pay wall um and I I don't know if that just speaks more to like the American mind it's like oh now that I've watched this I like it enough to pay the money for like more stuff because I love it and maybe in Asia it's just I don't know what that funnel looks like where people are just convinced that they are like willing to pay for something straight up but that definitely feels a bit more like you kind of have to sell the product a little bit and then people are willing to actually like bite did you guys see um not to go totally off topic here but do you see those only fans numbers that ended up getting released this week that got we talked about it last week did what an incredible business they've built it's unbelievable and they return a lot of

the money they do 5.3 I think went to their creators which is incredible and they still ended up with 500 million of you know net profit which is insane what it evolved into is like do we really need crypto for to empower creators because these guys are returning 80% like that's that's more than enough um I don't want to be netive about crypto I love cryptocurrencies the tokens everything but like you know if they're already returning 80% then I don't know if we really need it what do you think I don't know I it feels I agree with you it feels like a little bit of a narrative violation because the porn industry is also one of these unbanked you know actually there

was a guy I think he was an OG ethereum guy but his name is Amin Solani or something like that and he built something called spank chain yeah which was explicitly for you know adult industry performers that couldn't get banking services and you know everyone kind of laughed at it it was it was it was the 2018 cycle C rocket sort of but it was very legit uh this guy's a really great developer and I think he's still very active in crypto community so sorry I mean if you're listening to this I don't mean to marginalize you I just haven't been following what's what's going on with you recently but yeah it feels like it should be a thing that works but for whatever reason only fans has been able to get around maybe it's less on the Creator side but the thing that only fans hasn't had access to is

capital markets in a sense like they it's been very challenging for them to get access to like VC money and things like that and frankly it doesn't look like they needed it almost at all but maybe I think the thing that crypto is really useful is um just creating markets and capital formation around areas where you know broader Capital markets are a little bit squeamish um and Ne can't necessarily see the future on or might have these weird bureaucratic Hang-Ups around and so maybe it's less on the Creator side it's more on the on the capital side in this particular use case but it's hard to say only fans hasn't been successful and they're putting up putting up the numbers that they are so I don't know hey guys permissionless the event for

crypto natives is heading west to Salt Lake City and we're bringing the biggest names in crypto together for an incredible C Miss event join me in the rest of block works on October 9th to hear for for more than 200 Industry Titans including Nick white from Celestia shiram from Igan and keoni from Mona the conversations at permission list will be covering the hottest themes in crypto including modularity reaking the Bitcoin and Solon ecosystems Ai and crypto rollups l2s institutional adoption and of course the November election that will be right around the court we couldn't be more excited about this event and it's happening in one of the most beautiful places in the US ticket prices will be increasing towards the end of jun so get your ticket today

make sure to use the code so I get some credit and bragging rights from the rest of the team uh use ZX10 for 10% off on your ticket one more thing we're also hosting the permissionless re hacka font in collaboration with Biddle box the theme this year is a multichain future to build a better cross chain experience so I don't have to have a heart attack every time I bridge to a new chain all Hacker found participants will receive a free ticket to attend permissions so if you're a developer come join us in Salt Lake City team up with fellow devs and build the chain future mppo this is a question that I've had for a while for you because you're very viscerally a bull online on Twitter like you're you're optimistic about the industry but I want to understand what

do you not believe in and you just mentioned like narrative violation with content creators what else in crypto you're like this this actually sucks guys we we should not be building this all right I'm framing this in a positive way intentionally but I think the way that we think about governance in doubt today could deal with some major improvements and and I I do View at a high level one of the things that crypto does is it enables cooperation um and coordination in a bunch of new senses but I think I think that crypto defaults a little bit too much to there's not enough Nuance in terms of organizational psychology and

structure and I think that crypto has a bad habit of defaulting to committees and making decisions by committees which isn't good and I think that a strong principle that people should that that I really believe in is what you're trying to do when you're organizing people is to attract talent and make the best decisions possible and you just committees are often times get in the way of that if they're not structured correctly and incentivized correctly and I'm very optimistic about the future of dows but I think we're still in the V1 version of that and it leads to a whole bunch of very suboptimal outcomes

and so it's not I'll caveat up by saying that I think I'm not a I'm not a hater of dows in the long term but I think we need to get way more nuanced in terms of how we think about how Dows govern themselves and it has to be more than just like one toone voting and a committee decision on everything that's what I would say do you do you have any good examples of what you think it should look like I don't want to ask like what do you think is a bad Dow um but what do you think is a good Dow or better so vitalic wrote this ralik wrote this blog post a little while ago about how he views Dows versus corporations you like um you know

corporate structures and I can't remember the specifics but there were differences in terms of convex versus concave decision-making and you know if you look at the US it and and how government works and makes decisions in the US it's very different than the decision-making setup for a us-based company right um and I I think that I guess the view that I would I would give you like a hierarchy of the closer that you are to the metal of like the L1 and like these kind of money like commodities like assets that L1 tokens are the more you want a very decentralized like I think the only probably true Dows in practice today are Bitcoin ethereum and salana

it's l1s that I think actually operate like Dows the rest and especially as you get further and further up the stack like maybe l1's are here and then there's l2s and then there's sort of middleware and then there's applications on top of that I don't really see why any application should be governing them eles in a structure that isn't like a company in the US I get why they're not doing it right now it's probably just for regulatory Arbitrage and people don't want to be labeled Securities but I mean come on these things are applications they're companies you're creating a product and you know I know we set out in crypto to say hey the money is broken but you know what's not broken the way that companies organize themselves in the United States it's

arguably too efficient it's too good so that should basically just stay the way that it is and then the further you move down that stack I think the more Dow likee and decentralized the government the governance process should ultimately be um so I'd be in the camp of not Reinventing the wheel on anyone that's making a product and there's not a really strong rationale to be decentralized and then I don't really know what the future of governance looks like for l1s right right now it's been it's kind of opaque the way that decisions get made there are these processes but they're not you know it's it's unclear how decisions get made think you probably have to put some amount of formal much more transparent structures even in at the L1 layer I

would see that changing as we go forward from here for what it's worth I like the way that l1s are run just because it's like there's very clearly a like the eperium foundation or like in Solon it's like all the engineer like that totally level of Engineers and they just run it and I think that makes sense um I know eventually we want to make it a bit more Equitable but for now like these are very early stage still in my opinion especially Solana maybe's a bit more mature but they have some issues I feel like they should just like run it how they should run it as opposed to like s swis style everybody gets to say hey guys maybe we gota actually go with mCP what do I know like I don't want to I you shouldn't ask me man

Resnik you know you guys discuss it amongst yourself not with me with the business thing this is another one of those scenarios where just because of Regulation where not doing like Max efficiency of what we should be doing like there's so much stuff in crypto that's just like if there was like a little bit of clarity if just somebody would write a sentence on some official document that said hey guys you can do this like crypto would improve two to 3x minimum not just market cap but like enjoyment wise I would just be so much happier dealing with some stuff as oppos to like you said things being run like with committees or want to one as opposed to like a business I do think

it's ironic to say that we need to see more transparency in like d governance systems when I think like the opinion from folks related to traditional governments is that we need to see more transparency and yet we're dealing with like decentralized ledgers where you can go and look at all the transactions and yet the governance systems are struggling to be as transparent um so I just thought that was a funny point but I agree on like in this differentiation between like these layers and like applications which are more like businesses I mean I think your point makes sense um and maybe just one other jab is that you know crypto participants are finding out that it's difficult to

build a government it's like obviously that's not going to be an easy thing to do um and make it efficient um we we've everyone every culture in country around the world has struggled with that forever so yeah I so you know what here would maybe be a hot take is that everyone in crypto especially the bitcoiners don't like the Federal Reserve right it's the evil empire you know Jerome Palace Darth cidus whatever the Federal Reserve is 10 times more transparent than almost anything that exists in crypto today like they uh so what does the Federal Reserve have they have a dual mandate they say these are the two things that we care about and by the way when we meet we have minutes so you know what we're talking about we

once a month we'll get in front of a bunch of reporters and questions uh we're going to show you the data that we're looking at in order to make these decisions and we're going to explain the framework with which we now do they actually do that in practice you know is there stuff behind closed doors yeah absolutely because these are human beings but that is far more transparent in terms of how the decision- making process ends up happening and the division of responsibilities than you know if unless I'm missing something in crypto like tell me but I mean that that's very clear and explicit decision making an or structure and I just don't really see a lot of examples of that in crypto yeah I think the unfortunate part is like the average maybe participant that's at that

level today like in in the Bitcoin discussions it's like they know what's going on so they like they don't need the minutes like we're not at a point where like average Sally on the street is asking about the minutes from the Bitcoin chat from this month because they just don't they don't care but it's not on the level of like the Federal Reserve today um so that's part of it but obvious like you know they should certainly be taking strides in that direction if if the point is to get there so I agree with you I'm going to bring us back to one thing that I want to know about which is um how does an L1 win and how does an L2 win because I feel like i' I've wanted to bring this up since the very beginning ever since Ryan said um it makes sense for drift to

exist on its own like not on its own chain and I think that it makes sense for an per X to exist on its own chain and then it ties into do we need app chains and then it ties into do we need more l1s or do we have all that we need um Ryan I think maybe we should start off with you last week you already gave a bit of a angry rant but maybe this week you'll be a bit calmer and nicer about that yeah there's a lot of endstate talk I have endstate talk fatigue um I remember in 2015 when the cloud was in its end State and like the future of AWS and Azure and gcp was margin compression um it's a very silly

take in hindsight um uh 2018 right the global smartphone cycle was over Apple stock was taking it on the chin because smartphone sales had peaked and it was the end state of smartphones um I remember 2019 and 20120 when like AGI was never going to happen like maybe we get AI uh but we certainly don't get AGI because these models are only good at one specific thing and not General things so um you know there's a lot of endstate talk and um I think historically if you look at technology markets I don't think you ever get there

maybe you get to this like fiveyear period of like plateauing margins or like some relative stagnation but like things change especially in crypto when Capital moves so quickly um due to these like incentive mechanisms that we talked about a little bit earlier airdrops incentive programs Foundation grants um so yeah I don't look so so then the question is like how does an L1 or an L2 win um I think that I really only have hindsight over the next like 12 to 24 months um 24 is even probably a stretch and I think as someone who's like looked at a lot of

these l2s from like a valuation perspective because a lot of them are starting to look attractive versus like historical valuations um it's going to be really hard for these upstart l1s and l2s to quote unquote win or to really carve out uh carve a name for themselves in market share um I think I said a few weeks back like you can't compete on liquidity ethereum has all the liquidity you can't compete on technology because like the biggest Tech Gap was like salana versus ethereum in like 23 to 2021 and all those Tech gaps have closed we now have sub sand transactions across the board really fast block times

all the wallets are generally the same um it's all about like BD and go to market right um some chains are really focused on interesting incentives if you think of blast but like that's going to be really hard because blast did have a really interesting incentive program and they got some traction and they lost it all so um look I look at the big ecosystems uh salana arbitrum ethereum base not in that order obviously um I think it's going to be really really hard to compete with them L1 or L2 um I think it really is a BD and go to market thing and um you know I have opinions on which foundations are doing the best um but

yeah I think that's really all you have at this point I think to add to like you know we're seeing like a lot of the tech converge um it you know at this point if you're launching an L2 you're probably copy pasting the 50 other chains that exist there's no differentiation um to Ryan's point about like go to market and and you know attracting users and and chasing after that opportunity it's like we need to see this translation of tech and capabilities into products that users want to use it's not like oh well ZK will en this thing in the future and that's so cool and I'm going to buy it at A2 billion valuation it's like ZK enables this we built this app this is how you use it it's really great for users like have the tech create the

product get people to use it like fantastic and that's how you differentiate if it's like we're the fifth ZK chain because ZK is ZK Tech is going to do this thing it's like do the thing nobody cares that you're going to do it when there's four others doing the same thing think about the ZTE the ZK Tech like kind of framing too is like this is all open- Source stuff if you have the magic ZK thing your competitor who already has Market sh can just take your ZK thing that's true for a long time but now that these now that these like top four is chains like significant user bases it matters much more today than it did when we had one1 of the users yeah I agreed and if you have the liquidity and like arbitr and

optimism they make money they'll just like they're um hiring ZK labs to actually do more work for them on top of like you said they can just take the ZK Tech like you already have the liquidity the users the activity the reason I asked about the L1 L2 is I want to know if the L1 trade is dead and this is something that I don't think is dead but it it's going to tie very beautifully to another question that I wanted to ask which is at what point do you care about fundamentals versus like speculative because I think the L1 trade will always be there because of speculative reasons but I think like fundamentally I agree with you in that these designs are all converging the like like you said it's liquidity versus the tech and the tech is like okay sui

and apos are fantastic dag based consensus gamechanging move language very good very secure doesn't matter that much like if no one's building on it um so at that point I feel like it's you know speculative versus fundamental so I also want to kind of hear your thoughts on that is the L1 trade dead if it's not dead is it not dead because we're just gambling I would be pretty hardcore in the camp that the L1 trade is not dead uh personally I think the I think there are a couple so first of all Ryan just to respond to your initial some of your initial points yeah I think you have the exact right take on endgame fatigue like everyone talks about it you know these podcasts don't sell

themselves so you know you gota you gota have something to big idea that everyone can grasp on to right at the end of the day that's the PF that's that's the chats pmf there are a couple you know topics that launched all podcast there's the modular versus monolithic there's the endgame debate there's the ll2 these are great things that people like to not uh I am less sure that I agree with you on the tech differentiation I don't know um and I'm just gonna I'm just going to hold off and say I'm not actually 100% sure that we've solved that stuff and even if you go back to march in April of this year salana was breaking underneath the amount of transactions that were getting introduced by pumped fun and that's not that many transactions in the

grand scheme I think there's plenty of room right like scaling up scaling a blockchain is really a challenge of you know managing your supply and demand like your block space Supply and your ultimate demand of transactions I think one of the mistakes that ethereum has actually made in their from a path dependent standpoint is I've actually weirdly brought too much block space Supply online like there's way too much cheap block space now on the ethereum network and they've reintroduced platform risk and l2s which is a whole point um I go on a monologue about that but uh the the demand wasn't there yet and so they have this L1 to this very tricky challenge of trying to scale the supply of block space to meet demand but demand is so so procyclical and so

difficult to manage that I don't I'm not actually sure it's a manageable problem and I think the the point honestly multi coin says this a lot and I really agree with this point that we're so early in adoption in terms of regular sticky daily active users that when this cycle really comes back this is anyone's game it's just anyone's game yes you know ethereum and salana have the advantage right now on the smart contract platform side but some amount of like really sticky really good strategy you know in acquiring users I agree with you on the point that like go to market and BD are going to be differentiators and I don't really see a lot of that at that L one layer I think there's opportunity for uh for L1 which is really differentiated on

that front to significantly win out and the the ultimate left curve and then uh sorry bu I didn't mean to cut you out there but the ultimate left curve here is just that as soon as just like every other category that ends up getting copied l1s are the ultimate category that gets copied and when Bitcoin and eth and salana start really ripping to the Moon again they are going to be these crazy rounds that come in they already did for kind of like the monads and the bar chains of the world and maybe those are the new l1s maybe I I'm not sure but one of these new l1s that's going to get funded that's going to do some cool new thing they're going to drop their token and they're going to be able to bootstrap enough demand and they won't they'll be able to stick around and not

fail when the water inevitably goes out again and I think they'll have just like a a shot at you know there's Pro my my my view has always been I think there's going to be five or six of these things that end up really sticking around five or six different ecosystems but sorry bucka what were you going to say I was going to say because you br brought up um you don't think that there's an L1 that has kind of won over I feel like you know what's one L1 that never like we just brought up ethereum and Solana um and we're like oh like these haven't won up Tron is arguably the only one that has actually like significant pmf to the point that it's exactly that user base that you're talking about like that sticky every obviously it also has it

Cycles but I feel like it's much less than the other ones like the C because everybody uses it all the time it's low value usage payments we like to call low value usage I don't know why um I guess it's not as many Fe as much fees like per but they make money on that chain and that chart is one of the most beautiful charts that like I don't know if just son is personally drawing it but like they've done a fantastic job over there so I feel like it's one that we never really bring up and we like to talk about if salon and l2s but you can't really talk about Tron it's not culturally acceptable um which is also an interesting thing but we

won't dive into that today but um Ryan what do you think about the L1 trade not being dead yeah I totally think that that's true to a degree like I do like it's kind of contradictory of me right like I'll often say like the space rounds to zero right which that kind of implies like anyone can come along and win and like yeah there is a non-zero chance that like if if Facebook anoints algor Rand as the nft chain and like Jake Paul like is just like ripping it selling nfts to his folks um his fans then like algorand kind of I mean it becomes a big Financial outcome for algorand um getting wallets into a lot of hands um

but I think I like put look if we all talk to Founders um I put myself in the shoe in the shoes of a founder um who's thinking about deploying in the crypto space you have like your crypto natives who like know they're going to go to where the liquidity is perhaps they're going to go to a lesser known chain because they're going to get some grant money um but by and large like if you want people to buy your liquid token and increase your personal wealth that you're going to go to a place where there's more liquidity um and again the grant Dynamic kind of kind of messes with that but I think that's like directionally the trend um and then I think of like okay you're a

web 2 founder um you've been in the game for a while you just heard about this deepin thing um now what chain do I want to deploy on you want like low you want low fees but then also you also want people to be able to buy your token too because again that's like your personal wealth um that's the success of your project if you talk to any of these deep in projects they'll say like hey the biggest pain in the ass is when our like customers come to us and they say like why is your token going down because in the web 2 world if you're if like you're in business with a startup and you see their Equity going down you're like what's wrong with your stock right like you have that like kind of like supply chain risk um when um when you deal with

a startup so like there's this there's this I think there's this inherent tendency for people who issue assets to want to issue them on the chains with the liquidity that's why ethereum has done so well historically um It's A Hard cycle to to Break um it's not happening in perp dexes because there's no asset issuance there it is happening like on the general L1 where there is a lot of money that can like support these token valuations I think I think of I think when I think of all the important considerations that a Founder has when entering in the crypto space very few are more consequential than that one for the success of the project I totally agree with you on that Ryan

but one thing that uh this might be a flaming hot take because it's been such a absolute dog like it's produced zero results but these BD deals that you know get a little bit of you know like the Starbucks nft thing or you know moving DMV well all it takes is for one of those to hit and here's a funny discrepancy like if you talk to a lot of people that have a very that are either working trafi today about their sort of crypto exposure you know I've had this happen many many times to me where it's like yeah I own actually a good amount of crypto and I own like some Bitcoin and then I own some algo and I think algo is going to the moon and or some xrp and why do they do that because

because these firms have spent an enormous amount of time and BD effort in the banking system and all it takes is for one of those to hit I can it hasn't worked so far but I could totally empathize with the I see the logic um and it makes sense to me that eventually one of those things could work the other thing is just on the supply and demand thing so so okay let's let's just put ourselves in the let's just put ourselves like six months in the future a more traditional bull market has resumed real demand is coming back to these chains and salana is just maxed out right it's like the like transactions are dropping left right and center and you know new founder comes and says hey I would love to be building on salana or ethereum but you know it looks like demand is maxed out here so

what are my other options right like that Dynamic I think is still going to be with us for multiple Cycles I would say um and it actually is in my view a real drawback to the integrated blockchain approach like that challenge of managing supply and demand is always going to be there and yeah I think it'll be I think it'll be challenging actually for salana it's going to be it might actually be kind of a painful bull market for salana in that in that instance because they have all their activity on one layer it's going to be challenging for them because I think they're going to be maxing out a lot of their block space right at the time when they want to be attracting new apps so I think it's actually going to be a struggle I mean it has its advantages

and its disadvantages as well like just being integrated having as much could and this is my drift versus dydx I don't want to C forid drift versus dydx thing is that when you're trading on a chain like even if like Solana can handle the order book capabilities but like you said when that time comes and sometimes things just aren't going through um fire dancer is supposed to be great we you don't know like we don't we just like you can assume it's going to be great but it might not be great which is why I always think like per stes these I think lending amm you want to keep on the base chain because those require liquidity and interaction with other apps and you

want to like be keep it as safe as possible but per Dees I think you want it offchain like um not on like the L1 I think you can have like an app chain an L2 specifically for the per STS because or else you're taking on too much risk and Ryan this is something that like I know you discuss in the report as well which is you can't like fund managers don't want to take the risk of having downtime on a per St because they want to close their positions or they want to open new positions and it's just something that you won't be able to do um so agree with you m is that if like Solana the demand for the block space goes crazy then like some of these apps just might not work and new apps might just just not be able to come because they're like

we can't do anything there's a million tokens launching on pump up on a day there's literally nothing we can do here's something I want to get your guys uh perspective on so this I think that ethereum so a word that people used to throw around a lot more back in the day was platform risk and you know when founders were getting it started you know do I basically build on ethereum or take a risk on some newer less proven Network and it was actually a gigantic moat at one point in time for ethereum because there were a bunch of new flashy l1s you know some of which were stuck around like salana some of which did not like I know Phantom is still kind of kicking but you know less uh less of the

place that you would want to take a bet on and so vcs's having been around and seen some Cycles were basically just said I think pretty good advice which is don't don't risk it just why would you do that just build on ethereum if you're going to have your product yeah just why take that risk if feels unnecessary now but now with the proliferation of l2s you aren't supposed to build on the L1 anymore right that's not it's too expensive it's been the explicit part of the road map which is new apps are supposed to launch on l2s and these are now relatively new unproven platforms and one it just kind of psychologically introduces a choice which is actually not great from a Founder perspective so instead of just launching on eth now I got to I got to

make a choice here right do I bet on optimism do I bet on arbitrum do I bet on whatever and it reintroduces that choice which adds friction and then also these are new unproven platforms most of these rollups I don't think there's any stage two Roll-Ups today right am I right about that I should know that off the top of my head but you know there's there's actual platform risk that's got reintroduced to ethereum and then you trade that off with the dynamic of launching on salana today which is yeah you just launch on main chain which actually feels so I think they've surrendered that moat a little bit but on the other hand I think they also um but I think in a sense ethereum is going to be better suited to scoop up some of this demand because salana is probably going to spend this bull cycle maxing

out their uh their their block space which is going to lead to all these ux challenges um assuming that fire dancer doesn't magically solve everything which I'm very bullish on fire dancer but I think you have to be somewhat skeptical about it yeah how do you do you guys agree with that framing or what do you think about that that the framing is 100% correct um it's framing that um frankly like I I've heard that as early as 2021 q1 about the E the the rollup Centric road map for eth um it's very obvious from first principles that that's the problem right there's obviously like liquidity fragmentation

asset issuers don't know what to issue issue their assets but like there's platform risk all the l2s have gone down um um you know within the last six months or so I'd say or or perhaps eight months um so I think that that's definitely true um no argument there to to the capacity constrained Point um my my thinking around that is like I thought about this historically and it's why I favor like quote unquote more centralized approaches in crypto um I'm not I'm not a decentralization maxi um by any means um think about what happens when an L1 reaches a capacity constrained point like theoretically like their their their fee revenue and

priority fee revenue is maxed out so like everyone gets together and they say like what do we do next the this happened to ethereum and they literally said do everything everywhere else and we'll try to be money forget execution you guys can do it over there we'll try to be money that's going to be our new go to market which is a very low probability like go to market in my view like selling the product of money is extremely challenging um if it's not USD denominated money um I think that because of because because eth holds that strong ideological bias towards decentralization that path made sense um I favor l1s and platforms that are not as um ideologically constrained

by that need for maximum decentralization so like what will happen to salana if they've reached Oru or apose if they've reached the maximum point of scaling well I my guess is those teams are just going to say increase the hardware requirements I think that that's fine like that's totally cool like tell the community like this is going to be a six to 12 month thing 3 to 12 month thing whatever but just like have be your machines like we can do this um we can do increased transaction throughput with beier networking and beier CPUs or gpus um so like when I'm thinking about like where to place bets um I'm pretty short the um

I'm pretty short like this like ideological stubbornness of um maintaining some like low Hardware requirement at all cost because you can't move in those scenarios when you reach that Max um throughput scenario that we're talking about so like I I think that if Salon is there for any significant period of time I think they just handle it better from like a product perspective like allowing users to for their transactions to hit the chain in instead of saying like hey go do this activity somewhere else we don't care I think that that's an important consideration when investing in these things I I think they realize that now like etherium has after resnick's fourth podcast of him saying hey guys maybe we

don't need to optimize for raspberry pies we can just like run on a m M2 MacBook Air or something I think they finally realize um if if the requirement is 32 e then maybe this guy can afford like a small uh MacBook mini um in terms of the l2s my horrible take which I got yelled at in like the analyst chat is that I don't think l2s are good at execution and like we got into the semantics and we were like oh like technically they're good because they have higher TPS and because they have lower fees I don't think it's worth it um I think like you're wasting so much Capital that exists on the L1 and some of these L2 like I think you want really beefy l2s like let's not lie about it

centralize the sequencer Mega E Style I want a gorillion TPS like whatever I can put on the Chain I want to put on the Chain let's Max it up or I want like the L1 where it's like I don't care if it's 15 TPS because what arbit from is 50 PPS huge difference it doesn't matter I'd rather have that liquidity that like culture that e L1 has versus E2 like the l2s have like you're actually launching products you're getting silly on the chain there's money flowing around I like that a lot more than this like in between where it's like we have a bunch of mid l1s on stage one not actually doing very well um Daniel Smith yelled at me for this he said you're stupid but it's still my opinion I why did he say that why did why did mean Daniel Smith

say that what I I wanna I don't want to tell on him on the podcast but did you say you like getting silly on chain yeah well it's just what are you doing on AR arum L2 that you're like like I can't remember base is different I think they're doing something interesting there but on arbitrum optimism there's nothing to do anymore like on E L1 I'm still actually like if I'm on the L uh I'm on E main that I'm still minting nfds I'm still trying out interesting stuff and the apps that they launch like the basic example is Vista some random Decks that launched on the E one a few weeks back um only went like 40 50 mil Market cap but I haven't

seen something like that where like everybody on my timeline is talking about it happen on optimism ever I've never seen it happen on optimism they like fully went for um op stack we're just going to do a bunch of random little l2s on arbitrum when GMX was popular was happening everyone was building on GMX but since then that hasn't happened there's nothing interesting going on yeah it's the bare Market whatever like there's less users but on Solana it's happening like people are getting s you can legally say people are getting silly on chain on Solana you can't say that for arbit from L2 and on L1 people still get silly and I know that's like not a right way to say but at the end of the day Ryan you said

there's 100,000 users I don't think that's true I think there's like 10,000 users on chain like of l1s and L on and Solana um and I think like these are very active users and Rich users and I think you want to milk them as much as you can can and how you can do that is by letting them get like do stupid stuff armed careing because that's when you earn most of your fees I support getting silly on chain um I think in the context of like salana the thing that I like the most and put a lot of stock in as far as like the team and the development teams that work on like the networking issues ETC is like they're very much in like founder mode they're not in they're not in eth manager mode where they're sitting around like oh let's just push

everything to l2s like we just won't fix anything we'll just we'll just throw it all over there and then you've got these other like I think even bass is a good example Like Jesse poock he has incredible targets for what he wants to see on bass like Giga gas or like multiple gigas a second um to be pumped through on base um and I think salana it's it's been the same way it's like you have or like basically taking down the network it's just too many transactions it's killing everything else like pump fun and Meo activity like basically PE keeping people out like they can't do anything because there's so many people trading meme coins on chain like it's just it's causing issues and then and the teams are like well we need to do a networking fix need to drop a patch like right now we need to get

working on it we need to develop this and and push it out right away regardless of the work on fire dancer it's like oh there's an issue let's fix it and then people go and get silly again and then they break something else and like oh we need to fix this thing like I think like that desire and focus on you know there's an issue let's let's get a patch out and fix it like right away and like just improve efficiency um capability like throughput that I think is something that I put a lot more stock in than like this sit around and decide like 10 years from now what like what does this thing need to look like it's like just fix the problems you have right now and make it better yeah I agree I agree with that as a philosophy as well here's one thing

I've been thinking about what do you guys think about the stack like bundle of chains model that a bunch of l2s went down one thing that I've been noticing now speaking to a couple l2s it's like why did we do that if the whole point of this right is that ethereum is super decentralized you can borrow some aspects of that right the settlement assurances that Ethan Network give you and yeah I'm kind of in the camp of Crank that up to 11 centralize a sequence or make it you know and and then if you if you have that as a perspective you don't need all these different chains why do you need all these apps don't want their own chain they just want some specific properties that separate chains give you and so I one thing I've been noticing Talking to I view this as like a bundled business

model the op stack super chain is a bundle um Avalanche they're not subnets anymore they're L1 it's a little bit of a bundle it's uh you know ZK sync eror Chains It's a bundle and they've they've got this business model where they're trying to use interop it's all about monetizing interop but that would be so much simpler if you just put everyone on one chain right arbitrum one or ZK era right that kind of makes more sense to me and the business model of a bundle it it looks a little bit like a SAS type thing it's like hey all right pay us your sort of monthly fee and we'll manage the the backend infrastructure for you on these chains and maybe you'll pay us for interop or maybe not but then on the you know if you have one kind of chain that everyone's on the business

model is like there's just transaction fees and uh congestion fees and priority order and all this stuff which is that just looks like a better business model to me and I showed you guys before this I did a podcast this week with uh Eugene the Ellipsis Labs Eugene and Frankie from Paradigm um and that's their perspective and they've actually done a whole bunch of spe they're they're in svm they're using the svm for their execution environment they've modified little bits and pieces of it they've enshrined an Oracle and they've made it like this is the chain for Def and inad of solving the Noisy Neighbor Problem by moving everyone onto their own chain they've just solved a lot of the issues that defi apps have uh you know by battling battling it out for Block space

and they put everyone on the same layer and I kind of think that's like seeing that is like yeah that that does feel like the way actually what do so what do you guys think about these like these stack kind of business models in general the stacks and bundles I absolutely hate I think it's like a combination of oh somebody else built it so I need to offer something similar um this prevailing notion that app chains is exactly what people want for some reason everybody thinks like oh we need to like accommodate for app chains when it it hasn't worked um except for like a few specific scenarios and I think this is probably like not completely true but this is my opinion I think they need a

way to make their native token popular um if you're an L2 you give it up for e and you still want AR to be used somehow like I think with Avalanche this is not very very relevant because obviously they don't care about e but they used um they made subnet stake aack Avalanche like that's very clearly a an attempt at making it not maybe not money like but giving it more utility and I think that's what a lot of these l2s are trying to do is that because you're giving like you're giving e all of the moneyness um or Capital like properties and you're giving it up on ARB um or op and you want to give it like some form

of utility and I think the easiest way to do that is like through either making them stake ARB or op or just making them use it on their own chain like keep putting liquidity on that chain through that I don't think it makes sense as a business model I agree with you I think it makes more sense to just why are we made doing more modular stuff like at another level the whole point of the L2 was that we stopped um the moment that you do L3 I think it's like you need to look in the mirror and say am I really doing this like do I really need to do this the modular versus monolithic stuff is just an argument about timelines and path dependence in my opinion I do actually I would be a in the long run a proponent of modular design and I think

that the driving force behind that is we haven't talked about ass or app specific sequencing or whatever but it's the it's the uh which can't which should not be the acronym but it seems like that's the acronym that we're landing on here that it's just the ability to own the fees that you generate like I I think of apps as orderflow Originators and if you're originating your order flow you are going to want control over the econ like the environment the product environment but you also want control over the economics that you're bringing to the table and I think a lot of business models were built on this assumption that hey I'm just going to have all these order flow Originators bring their order flow to me and then I'm going to internalize it and keep a bunch of the value and I don't think

that's going to prove out over the long run is that's what I sort of feel about but the goal has been that you have to pay that money that you're giving up with your order flow to the base chain to benefit off of liquidity or not having to build but you don't think that because we're getting all of these I guess like Ras products or because it's becoming easier you don't really need to pay for that security or that whatever that building that complexity anymore we should just keep it yeah is the ass argument a2s is a good one I saw a2s but ass does um ass is not great yeah I agree on the timeline perspective like it just it feels like we're just not

quite there yet and the same I think the same goes with a lot of the modular focus and like I feel like maybe over indexing today is just people wanting to build things for something that they think is going to be like a dominating demand driver in the future even when it isn't really a viable business model today like I guess that's great from an idealistic standpoint but if you're going to just lose money money on it I don't know that it makes sense um I do feel like like there's just some ways to go like we don't even have like app users still pay to interact with every app that they use like we there's I don't know if there are very many examples of applications where like you log in and like the fees that a user would pay to like post the transaction

are subsidized by that application like that business for them and they can like make posts or do whatever the app does right like trade a meme coin like that's clearly there's clearly some form of the business model in the future where you know you go the way of like the traditional digital businesses where they're they're they're obus skating all that stuff under the hood they're they're paying for those server costs and you don't have to worry about like these blockchain fees and the value that they're generating from you the user is just so much higher they're able to monetize you so effectively that it doesn't matter um but we get into all these arguments about like who's getting the fees how they're getting the fees what they're doing with them when like we're just struggling to even like get the users to pay those in the first

place for what it's worth I think if we have to off youate stuff I think um if apps aren't paying rent to the base layer uh they're going to have to pay rent to somebody else like if you're an app chain and I think this is probably why Unis swap launched their own wallet and I think this is probably why we'll see a lot of other apps launch some form of front end for themselves that's on a phone because or else you have to pay fees to Ravi um to make it easier or like to any other wallet provider I don't think because or else I don't I don't see how you're going to get differentiated I don't see how you're going to get hosted this is something I need to think about a bit more I I haven't looked at app specific sequencing enough just because I think I

got put off by the acronym for what it's worth I thought it wasn't very serious but it does sound relatively serious that I need to actually read up on it and think about it a bit um unless we have any other D topics that we're dying to discuss no this was great guys um Meo thank you so much for coming on um really appreciate you having really appreciate you hopping on thanks for having me guys that was a great chat this was a great chat yeah I um now this is this is my never miss podcast so I'm uh appreciate you guys making room for me heck yeah comment of the year right there [Music]

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