DeFi Summer Incoming? | Round Up

Transcript

all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-hosts today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode thanks hey guys before we get into it I actually wanted to just issue a quick correction so during last week's episodes when we were talking about research and price predictions I think we got something wrong so we'll just put our hands up and say that we talked about vanak having an eth price prediction of 118k it was a much more

modest 11.8 K which makes sense to Folks at vanak put out a very thoughtful research they've been in the space for a long time great actors so I just want to say sorry about the confusion there we'll actually link the research in the show notes it's really good so highly recommend you go read that and check it out and sorry again to vanic for the confusion there so all right on with the show all right everyone welcome back to another round up a bell curve you got Michael's one and two hold down the fort Michael you're in uh you're in Denver right now man for for a wedding that is true yes I'm in Denver got a different backdrop uh excited for uh for what's coming up in a couple of days here in Austin and uh get to get to see you in person again me too I'm actually excited

for what's coming up right now because you know just having the two of us on podcast I usually don't you know reveal ratings in specific numbers but the the time you and I held down the fort a couple weeks ago that's the highest ever viewed Roundup so I take away from that what you will I mean the numbers they kind of speak for themselves I think you know the powers that be decided to drop the dead weight and uh stick with what's working and I'm I'm just happy that they made that decision it was really self-sacrifice is what it was it's for the good of the show I think so yeah boy went out for uh for advanced Indiana this morning but we'll all the boys will be together and we might even be able to string together a live episode in a permissionless which would be a ton of

fun that'd be great I hope we I hope we can make that happen that'd be great me too me too all right let's get into it because it's been a pretty big week for our stories and we're gonna run the gamut on a whole bunch of different types of things so uh maybe to kick things off I actually want to start with this idea of a a little bit of a Resurgence in D5 1.0 and just to get the caveat out there this is I'm not Financial advice podcast we're not necessarily talking token prices here but we're talking about sort of a shift in momentum and uh activity that feels very promising over in that side of the ecosystem and I so Kane uh Warwick who's the founder of synthetics protocol put something out this week which was a New Hope and he's got he's a very good

writer actually in addition to being a good benevolent dictator of the Dao and he he sort of addressed and laid out this multi-chain vision for synthetics which sort of relies on their shared liquidity layer which is infinix um it was an interesting post for a number of reasons uh one and I thought this was super interesting and pretty encouraging overall for how Kane and the entire ecosystem is thinking but they actually questioned a bit of a sacred cow I would say for the synthetics Community which is only allowing uh staking of snx and actually allowing eth collateral onto the platform which would enable a much easier expansion onto base which they're sort of viewing as a

little bit of a ring fence test right so overall I thought it was a very compelling vision for how to expand multi-chain I thought it was really healthy about sort of questioning uh things that they had held dear I mean what did you make of of the entire post the level side context here yeah stain was the founder um and the way that the the governance structure at least as far as I understand of synthetics works now is there's a uh there's a council of people who make decisions for the protocol there's a council be able to make decisions for the treasury there's a grants Council on ambassadors Council there's all these councils and the governance model is um very much decentralized um and so uh maybe an analogy here is

like when Kane puts out uh an article or a think piece on you know synthetics itself it's something I can to like Vitality putting out something on ethereum um so this is not necessarily like the direction or what will be happening this is all just kind of one person's ideas and one person is really knowledgeable about the protocol and and everything else that's going on so so that's just like context but I think you know since the synthetist community especially in in the Discord has been talking about a lot of these things and frankly debating a lot of these things over the last couple of weeks and months whether or not to allow multi-chain and that you know has always been sort of in multi-chain in the sense of where are we

going to put these assets where we're going to allow this functionality to exist are we going to do cross-chain margin Gene margining how would we get S and X over but the fact of the matter is they were also the first one to go multi-chain in that they were the first to have a fully functioning product on optimism as well as eth L1 so I don't actually think like moving to base is going to be or having native functionality on base is is too far afield of what they already have it's more just a continuation of wanting to um be the pl be in the in the venues where people are transacting where people are you know uh playing around with D5 so I don't think that that's it's funny Kane had a tweet after he

wrote that and he's like yeah everybody just loves to latch on to one thing that I write and one thing one little component of what I write and focus on that and and you know that becomes the the tagline narrative I think that was the sub tweet at me by the way yeah I was gonna I was gonna own myself here uh because I tweet I did exactly that I literally took a photo and I highlighted because he said at the end we might be building towards an app chain and I tag Kane in it no response but then the next thing he tweeted was said Tweet someone always latches on to a really small thing I was like oh that's definitely me but I was gonna say the the one thing that would be a pretty pretty distinct uh Direction change would be their own app chain

you know what why you would need that what would it be used for what would be the advantages of having that versus being a crossbase L1 optimism maybe even Arbitron et cetera um I I think all of that needs to be you know shaken out a little bit um but you know expanding into other venues having native uh maintaining and burning of snx on other l2s is really kind of what they're doing so far so I I actually you know read it and thought this is a continuation of a lot of the same um strategy that at least I've I've kind of assessed by uh being in the Discord and watching the conversation the one the one that I think is really interesting is what happens when you expand past you know other types of collateral and that that's another kind

of sacred cow um that I think frankly in the next couple of months with this you know new newly elected set of councils is going to get uh deliberated and figured out and um yeah I mean to go back to kind of the original Point D5 1.0 there's a lot of stuff that's working there's a lot of stuff you know that that definitely still needs to be figured out but I think you just think about the comparison between D5 1.0 and yeah that flash in the pan moment that we used to call D5 2.0 um I mean there really isn't that much of a comparison and I think a lot of this stems from um you know we got to know Kane and the synthetics team in in 2019

um frankly just as we were starting framework but they had just been through the 2017 through 2018 through 2019 bear Market they and the core contributors at that point in time had had made themselves anti-fragile in so many different ways and I think you know that continuation is what's making you know these D5 1.0 protocols you know who have at least the the liquidity the notoriety the brand sort of the momentum um lived through this bear market and continue to thrive um so I think that that's one of the other takeaways here is like they're continuing to test things while also you know doing doing very well um but also being one of the originals

so I it's exciting to see I just wanted to give a quick shout out to permissionless this is the biggest and best conference in all of defy it's the one that we do with bankless who's a great partner for us last year we had almost 7 000 people there in West Palm Beach we are moving this year to Austin Texas from September 11th through the 13th and if you're a listener of bell curve any of these last five seasons this conference is basically custom made for you we're going to be talking about liquid staking the theme of this season we've got a bunch of great panels on Mev if you listen to the app chain thesis we've got a bunch of Cosmos folks out there in full force we're talking about the converging architecture of Solana the roll-up space in eth and Cosmos so I

would love to see all of you there and to reward you for being such great listeners to Bell curb you get a special 30 off code it's bell curve 30. that'll get you 30 off tickets click the link in the show notes and then head over to the remissionless site and make sure that you get your ticket today again that is bell curve 30 click the link in the show notes one of the things that I think you know what we broadly call is sort of D5 1.0 which was some of the original protocols which had the the synthetics the compounds the aves the unit swaps this sort of group there was not not to say that new protocols won't come in and flourish but I think one of the things that separates Finance from other sectors is that what really rewards you over a long period of time is being a

little bit more actually on the conservative side of things right that's not to say don't innovate that's not to say don't take risks but security is an enormous value proposition when it comes to anything with Finance for kind of obvious reasons right it's your money you don't want you don't want the people that are sometimes custody in your assets or whatever to I mean a lot of D5 is non-custodial but you get my meaning and it's very easy to blow up in finance which we saw with a lot of C5 during this last cycle and I think the D5 1.0 uh teams to your point yeah a lot of the when they were just getting started they had just gone through this horrible washout bear market and the mentality of a lot of these teams was you see this with maker as well which we're going to

talk about during this podcast maintaining the peg at all costs right they were they were laser focused on that one thing that was the most important thing or maintaining the peg of dye so to speak so yeah I think that that is just baked into the DNA of a lot of these teams yeah I mean I'm even hard-pressed right now to think of someone who truly started in 2021 and and is gaining the same momentum and share as as the D5 1.0 um from from prior years and just to put some some metrics on on this I'm about to share my screen here and show a chart from defy llama of synthetics and I've got a couple of different metrics pulled up so there's tvl token price and fees and I could show you this chart for a

couple of the different D5 protocols but um there it's it's very interesting right there's a very similar pattern so obviously token price and tvl zoom up and Peak around 2021 2022 then it's sort of down only but then there's this very interesting Trend starting Midway through 2022 and 2023 of fees just skyrocketing going up and Kane has been extremely vocal about his idea that what is going to differentiate D5 protocols moving into the future is sustainable fees and I think there's a lot of different like words to describe that but it's basically Revenue minus mostly token emissions right because if your revenue is just a for you know just exists because you're giving away essentially free tokens in the project

that's not really sustainable Revenue so you know you could see this with uh again not Financial advice and I it's very unclear at this point how this is even correlated with something like token price but it is just interesting to see I think you know the the discipline of these D5 1.0 teams they're focusing on the thing that they think is going to create value which is which is fees over a period of time and I can pull up a very similar chart for maker as well you can do major you should you could do uniswap you could do you know so many different uh application protocols gorgeous protocols themselves where and I agree with the sentiment that in this next wave in this next cycle uh valued rule is is going to be you know the the make or break it for

all these different protocols and that um in comes in many different ways right you know obviously maker Dow is doing something very different from uniswap very different from Ave very different from uh synthetics but you know they all have the same sort of benchmarks in that you know they may be you know buying up real world assets versus you know swapping you know spot crypto but you have to be a crew in value in some way shape or form yep I agree with that and just I'm I've got the maker chart pulled up here now and their monthly fees is actually approaching the highs from 2022 or 2021 so Quite a feat during an absolutely brutal bear market last thing on the the D5 1.0 step before we move on to uh

before we move on to talk about maker and runes post about potentially adopting the svm in in Phase five of their end game well one thing I'd love to get your your thoughts on like if there are actual operators in the defy ecosystem out there listening how do you think about expanding multi-chain because I feel like during 2021 there was this enormous push that hey the future is multi-chain and we saw many of the like D5 dapps that got built on ethereum say the future is multi-chain I'm going to deploy over on you know all of these different chains and I think you saw pretty mixed results to that uh because it was an enormous engineering lift to do that it seemed to actually fragment liquidity in a lot of instances

and I think you know there was a phase maybe during 2022 and people said okay we are going to actually withdraw deployments across other chains Etc and now you're starting to see maybe a healthy mix which is okay the future is multi-chain but maybe we're gonna pick our battles here and be a little bit more strategic about where we expand that's what it seems like teams are doing to me but how how do you think about like if from the perspective of a D5 Builder how should they should be thinking about multi-chain the visceral reaction is it depends but but maybe the the like really simple framework to think about it is it comes down to two variables the first is user growth and the second is technical capabilities where user growth really refers to where are people aggregating right now and I I

would say you know most of you know D5 tvl is on ethyl one eath mainnet you've got some activity spread across optimism and arbitrum but the pbl the volume you know it is still not really comparable bass seems to be moving very rapidly in an L2 perspective as to where people and once again this is just like transaction volume total value kind of all the the Top Line metrics that you would be tracking and if you want to expand into those new areas those new geographies it's kind of like the same question you would have you know if if you were a traditional company selling you know just to the United States versus like oh let's expand to Europe because there's customers over there too

um so that that's kind of like the first uh variable the second is and we've talked to a number of companies who are working on you know more complex applications we've got um actually a portfolio company who is doing reinsurance and they're building a protocol where they have to keep some of the information completely private and it's verifiable you know by third-party Auditors if you know question because they're a regulated reinsurance company and so part of their protocol requires them to be on Avalanche just because the detection hold capabilities that Avalanche has and then there's also components of it that are on you know eth um and some of the l2s and so it's kind of like the diaspora of different blockchains based on use cases of what your application requires and we also

have a couple of other um we have at least one other protocol who same kind of thing they're doing an interesting new model um for uh spot exchange and that requires a pseudo off chain on chain element um and that order matching just isn't feasible on eth L1 or L2 so it has to be something that happens you know pseudo off chain via Avalanche but also connected to all of the other chains where the liquidity is via chain link ccip and so um it's one of those where I think we're going to start to see um we're going to start to see just more

infrastructure enable um the ease of uh having your application be built by multiple blockchains and it's not going to be just a ton of smart contracts on the same chain and when you want to expand it you have to do a built rebuild all those same contracts on another chain like that this is where cross-chain communication technology is going to be really really important but then there's just a like like I said at the start there's just a question of where people are and that's going to be more of user growth yeah I agree with you as well what about maybe to touch a little bit on and I don't want to speak for for Kane here and get get dunked on again but the the idea of being an app chain so obviously

I've been pretty vocal on this did a whole season on app chains been a very big fan of the app chain thesis in Cosmos and been excited to see it roll out onto ethereum um it's starting to feel like people it feel like I should just launch an app chain without really thinking about whether or not it makes sense for them and I do wonder if we're going to start to get because uh you know like stack architectures like op stack or or ZK sync is making it really easy to do and then there are Ras providers that are standing on top and making it super easy like one click easy to do that we're gonna get this this diaspora of app chains without without a lot of these

Builders really thinking about whether or not it makes sense for them and then I think from my perspective like if I was op the optimism framework and I was trying to think about my business model you're kind of what you're doing is some form of bundling right where you're hoping that hey I hope the people that build using this architecture and if your optimism opt-in to my law of chains I hope that I get valuable apps like bass and friend Tech right uh and I think what you might end up seeing pretty soon is a whole like a million different an app chains that launch and a lot of them that don't make sense and there might be some sort of reversion action so yeah maybe actually we could just be sort of an app and we don't actually need our own app chains for

reasons X Y and Z I mean do you also sense that maybe it's starting to become a little bit over overdone or people aren't being as thoughtful about it as they should be I think when you're going to have things like uh you know conduit XYZ I think that's you know one of the the uh roll up as a service um applications it's like one click Point shoot to start your own L2 um Rajiv and our team went through the process and he was like yeah it literally took me three minutes um and so when when that when you bring it down to that level I think there's an element that's really kind of exciting um because that that change in infrastructure Services kind of reminds me of what it was like when you went from you know having to build out your

own data center based uh server to just start your website versus just oh one click shoot five minutes to get a something running on AWS even that was hard because you had to you know often get you know an S3 instance these two instance you gotta you know go and actually build out your server it's just like you don't have to physically own your server but then there's all these like netplifies and these super simple like um uh there is a herotu back in the day where it was just like oh you could you know put whatever HTML page you want together and just run it instantaneously so I think there's an element of like bringing it down a an order uh or multiple orders of magnitude in terms of cost and time is is something that will

have really strong effects in terms of innovation and just creativity the thing that you touched on though is sort of like why and um I think what we're starting to get to and this is the same thing that happened with entrepreneurship and Innovation over the last 20 years is you had these different changes in terms of okay how much would it cost you to get going in 2000 it would probably cost you a couple million dollars to get any sort of product out the door let alone just you know building it and figuring out what the product is then into 2010 it would probably cost you a couple hundred thousand dollars and you know that would that would be like you know pretty sizable expense but for people who wanted to give it a shot it wouldn't be

insane to you know raise a million dollars and go off and try to build a product then in 2020 it cost you a couple hundred bucks or a couple bucks to get going um other than time and so I I I'm I am it's hard to point and and say okay like this is the direction that we're definitely going but this is kind of what it reminds me of um so so that that I think is just inherently valuable um but you know you you still you still have to take a step back and say okay well just because I put up my rainy dink netlify app uh doesn't mean that I could go off and sell a million dollars ARR I still have to be able to build a business build a product and eventually you've just like worked your way back up the stack where you're like okay now I

just gotta run my own servers because AWS is too expensive like it It ultimately kind of uh you scale with the infrastructure and and so I I kind of wonder if we'll see that as well where maybe somebody comes out and says hey I'm going to build this application it's gonna be really easy for me to just launch it on base see if I can build the user base see if I can find product Market fit um then maybe I want to actually you know run my own L2 once I hit scale and like that's maybe the question that Kane is provoking and his in his new new post I think you know one of the questions that I would have is still you know doesn't make sense to to build your own you know shared uh security layer kind of like the cosmos model

um I think that's kind of an infrastructure question that hasn't been completely answered yet but um yeah all of this to say I think there are some interesting congruencies between you know how how technology especially you know web servicing has changed over the last 20 years with what is going on now um with chains what I'm starting to see is a little bit of a spectrum here and the the two the two open questions for me in optimism world is and this is what the law of change is doing right which is interoperability interoperability is still a little bit of of a fuzzy question in in I think optimism ZK sync and their sort of hyper chain architecture seems like they have more of a more of an idea about it although a

lot of it is probably pretty untested at this point so interoperability is this thing which is pretty tough but I feel like is going to be solved the other thing is just a this is a is that Cosmos dealt with a long time ago how do you coordinate things like upgrades and standards across These Chains right just a really difficult thing to do other than to say everyone if you want to be here it seems like the approach that I don't want to speak for them that love change is taking is if you want to be a part of this law of chains and the benefits that you get from like a shared set of Standards is you have to make these upgrades so you're surrendering a little bit of like sovereignty with your your block space and and accepting more homogeneous block space and there's kind

of a spectrum here of Cosmos right which is you have all the value capture all the sovereignty you want on your own specific app chain but you have no distribution right you you're kind of just building this island out there in the middle of nowhere and you like hope that people might come and use your product but it's limited then there's uh something in the middle which is like the op stack law of chains which is okay you still have your own app chain but you've got to conform to this set of standards and you can't be as heterogeneous as you want and you need to upgrade when the law of chains tells you and like you get a little bit more you get like easy plugins with custodians like fireblocks for instance I keep using that example but so there's like a little bit of a middle ground

then actually I think Solana operate is going to be on this spectrum as well because what they have decided to do is have generalized block space but local hot spot fee markets so the problem that we're all trying to solve here is like how customizable is your block space and how do you deal with fees like how do you have sort of sovereignty over your own economics and fees and the Solana thing is to say we're going to make this all extremely performant block space you can't change things like block times but don't worry if like someone just like in ethereum right now if there's a really hot NF team in it affects gas fees across the entire chain don't worry we've got local market so that that won't happen to you and there's just going to be this like Broad spectrum and I listen to a lot of people

I listen to a great debate with Nick white and Kyle samani and and each side right now is battling with this like it's going to be this way or it's going to be this way and it's like it could be both it could be both there's there's just so much room here I there probably will be a more dominant model but come on I mean I it just really makes sense it really depends on what these applications are going to need what are the dominant applications going to be and what do they need and we're all just guessing because none of us know so what I will say is uh 100 agree with the infrastructure perspective um I think we are 100 in in the like this is what uh infrastructure build out looks like prior to application

Readiness yeah I think we know what the application categories are going to be they just aren't here yet yeah you might be right about that so how would you how would you stack rank D5 is going to be more along the security Vector um with uh cost not being as important um games is going to be literally the opposite well maybe maybe games will be in the middle and then sort of like consumer crypto maybe the friend tax of the world will be on the opposite end of D5 where it's ease of view use onboarding abstraction and blockchain elements until users want it but cost is going to be you know one of the variables that people really care about um you know for a chat application like

being able to Mint you know something I posted um and being able to have ownership over my like handle is stuff that I really care about but I don't care about that as much as like the eth or the you know assets that I have at D5 making sure that they're secure um so I I think you know it it will depend on the application category um but to your point the best part is we're going to have the infrastructure to support it all I agree with that it's going to be interesting to see how it all plays out man and I think those lines also are going to blur a little bit as we as we go forward and a good example of that maybe to to transition this into our next story is uh so roon posted that and I want to just caveat

that this is not a done deal this is similarly to Kane right this is a Dao and there's a lot of governance infrastructure in place so just because roon posted this doesn't mean it's going to happen but he posted about the title of this this post on the The makerdale Forum is explore a fork of the Solana code base for new chain so the fifth and Final Phase of end game is the complete re-implementation of the entire maker protocol built natively on a new Standalone blockchain codename new chain so in case you forgot about the five phases of the end game phase one is the beta launch and this is pretty interesting it was actually just interesting going back and reading this but the idea is that right now there are two different brands within maker there's the maker brand and then there's

the die brand so this would be an attempt to make one brand uh instead of having two separate brands uh then the second phase of the end game is the subdial launch so these are sort of like decentralized in specialized divisions within maker Dow that can run parallel and I think part of the idea here is to isolate some of the risk from kind of the core protocol itself uh to be efficient the the only thing I'd add um uh Lucas and um uh forgetting his last name I had actually a really good talk on this it was like a 30 minute talk um and that was kind of the one where it clicked for me the understanding of the relationship between the sub-dials and maker core it's really think of maker core as sort of the the central you know

entity that is helping to facilitate all of this and sub-dials are competitive in nature with other sub-dials but they're the the front line of defense of innovation and risk taking so if you want to go off and and try a new real world asset concept you want to go off and um you know do something like spark which is a fort of A3 those types of things would happen not in the core itself but they would happen at the edges which would be the subdials got it okay that makes a lot of sense and the each of these subjects will have tokens as well by the way for what it's worth um phase three governance AI tools launch so that's basically there's a lot of governance actual mechanisms and infrastructure that help power maker so this would be sort of an integration of

AI to make that more efficient and putting some of those AI mechanisms on chain the phase four is the governance governance participation incentive launch and phase five is the new chain launch in the Final End Game state so new chain will be a blockchain that houses all backend Logic for subdial tokenomics and makered out government security that means that on ethereum new stable and new gov token as well as die and maker will continue to function as normal and the only change will be that they'll be protected by a governance backend that operates through a secure state-of-the-art Bridge using a two-stage bridge design so everyone also said that this is basically this is the final State once this is launched it's immutable and it's going to be in place forever

and um and what they're they're what they're looking at essentially is uh a new code base uh for what this would be and and they're exploring a fork of the Solana code base they're also exploring a uh being a Cosmos app chain as well um and the reasons that he gave are there are a lot of properties of Solana's code base and the svm that make it very performant and optimized and uh and also he's really interested in eliminating some of the technical debt that has gotten built up over the course of the last year so yeah Michael what do you what do you make of this endgame in and of itself as you just highlighted or or ran through is a gargantuan undertaking

um yes it is a huge undertaking that involves uh you know changes to probably one of the best or some of the best known you know assets D5 1.0 um protocols in the space right now a total rewrite of the governance module you know and I think he kind of gets a bad rep for for even suggesting the AI integration really AI is just going to be a tool for taking all of this complex governance structure and breaking it down into what is effectively like human readable uh and reasonable information yeah um so ultimately my take especially on on stages three and five which I think

are pretty intrinsically related and that is you know integration with AI tooling plus the governance module being built on a new chain um I I think the biggest Point here is kind of what we were talking about earlier with applications that require functionality to exist on other change just based on technical requirements and I would imagine that you know obviously running the current governance model on ethl1 is limiting costly and probably like overbearing just based off of you know the tech debt that you referenced um so starting fresh makes a ton of sense I also think like roon you know in a similar way and I don't know him super

well but um I I think that he is just trying to test different ideas and you know poke at sacred cows to see if there's anything that makes more sense and and that I think is the right thing to be doing um you know it wasn't him saying this is what we're doing this is where we're going I'm building this right now it's it's more just like hey we just started thinking about phase five and there are some pretty interesting Concepts that exist outside of everything that we know um so maybe we should take a step back and I think he also kind of you know sort of walked it back but not not totally in that you just said hey look Cosmos to be great Salon or to be great like we should be exploring all of these things

um so ultimately I I think you know the East masses are obviously going to be questioning the uh uh the perspective but um ultimately it'll be good for major because you will have tested all the different concepts and found the one that works the best um but I I'm definitely excited to see how all this all this plays out I think um big risk and and big opportunity uh coincide um so it's going to be yeah just I think this will this will move D5 forward in a lot of ways yeah me as well and it for me it's it's interesting to hear him I I didn't really make the connection about why svm or why the Solana code base and

the AI sort of connection that was helpful as good Insight from you I I was I was originally sort of like well why does it have to be Solana just looking at maker Dow's business model I'm kind of like why does it need to be super performant but I do I do think there there are just these converging architectures and these different blockchains so ethereum and Cosmos and Solano they started from very different points and things that they were optimizing for and there's a bit of a sequencing where like there's really visible overlap right now between the cosmos and ethereum roadmaps right like this app chain stuff it started in Cosmos and ethereum said hey this actually makes a lot of sense and Roll-Ups are a good way to not compromise on things like Hardware requirements for validators in the main chains so that'll still be very slow and

secure but a lot of the computation and execution will go on up here in these Roll-Ups so and similarly I think what's going to happen with Solana is even at the roll-up layer there's still going to be these these costs in the form of d a right the proto-dink shorting is a good first step eventually we'll get data availability sampling but even then um I think what's going to end up happening is that applications are going to say hey we've no we really need something that's super low latency right and extremely performant and Solana's gonna be like hey guys like I spent the last three years actually thinking through exactly how to solve that problem and we've engineered our our virtual machine to deal with this by incorporating things like local fee markets and parallelization and I don't know I it's I think we're still a little

ways out that for from this and maybe we'll never fully solve the tribalism thing I keep waffling back and forth but I do think there will be smart pragmatic people from each ecosystem that will say all right this is a problem set I'm going to have to eventually deal with what have you guys done and there'll be cool interesting combinations I think you said it a little while ago but I think convergence is going to be the thing that happens maybe not in terms of the tribalism but definitely in terms of the concepts and philosophies that each of these ecosystems starts to represent yeah I agree so kudos to again just to you know maybe bookend this this doesn't mean that this is going to happen it just means that they're looking at it it also means I mean Cosmos he the the exact quote was that Solana is the most

promising code base but Cosmos is the other main Contender so you know none of this is said and done and Sam Hart actually wrote up a really great uh post we can link in the show notes about why Cosmos would make sense for this Sam's a great I you've ever bumped into him he's a great uh Cosmos guy so highly recommend you take a look and read it exactly yeah and just to also go again this is also just a uh a concept of you know potentially forking the code base um this is you know it's so there's so many different questions as to how the technology will actually work out um as opposed to oh we're going to move over into one of these ecosystems because those are two very different things oh yeah this was the last this thank you for bringing that up so obviously sort

of a win for Solana but it's not you know Maker's not talking about launching on Solana they're talking about forking the actual code base and they so I mean what do you make of that in terms of value accrual here and does this I I that's a very open question for me and what it made me think of is um so all l1s like Avalanche are evm compatible right obviously a lot of the value accrues to Avalanche but also it's sort of beneficial for ethereum because it lends credibility to network effects at the execution layer and some of that kind of flows back into eth a little bit but it's hard you know what I mean so these are just really unanswered questions I I

don't know what you made of the decision to Fork the code base and how much that directly benefits Solana versus more indirect benefits but that was an open question for me I just don't even know how to think about that honestly I don't think anybody really knows yet um and and if there is any valued role back to you know Solana itself I I don't know um oh yeah the proof will be in the pudding I it's one of the uh expanding the philosophical perspective of evm versus svm I think is the the advantage here or the value that you would ascribe to it um and that's just nebulous to that you know it's it's not tangible yep I agree with that um so next story this is actually uh a

win for a salon it's been kind of a big week for Solana um so Visa stablecoin settlement is expanding to Solana so basically now and by the way I think I gotta put my hand up here a second time in ecrow uh because a couple of weeks ago we had we had a debate about payments being big and I was like no I'm not really sold on it it was very very uh I think I'm getting ready to be proven wrong about that so Visa can now send usdc denominated payouts to World pay and Nouve through Visa Circle so basically it's it's kind of exactly what you were describing actually is that there are a lot of hops in traditional systems which are you know just over the years for some for good reasons some for rent seeking reasons there are just many

different intermediaries when it comes to aggregating collecting uh and executing Global Payments and ultimately blockchains do provide a better way one of the one of the requirements of of payment networks are very low cost right it has to be low cost for for a really small payment you can't be charging each gas fees so it looks like Visa has chosen to expand onto Solana here pretty big win for the ecosystem and what do you make of this news so I think it's maybe be helpful just to go back real fast and kind of describe who like the players are um so Visa everybody thinks the Visa is being a payments company Visa is not a payments company Visa is a data company and what they do is they create standards and networks and basically rule sets that if you are a participant

in one of these ecosystems in the Visa Network you have to pay a small fee it's actually very very small people talk about the you know three and a half to four and a half percent that these card networks charge the bulk of that actually goes to the issuing Bank um because they're the ones who are taking on the customer risk and the and the chargeback risk and and this is all on credit card payments um you know debit is a slightly different model um but let's just stay for credit cards for now um and Visa takes a very very small percentage of that and that's really just to know that all the different counterparties that you're going to be interfacing with are talking the same talk and basically like have the same data standards but also have this same

rule sets being applied to them that you would expect of all other counterparties um so so that's visas playing in this and World pay is you know one of the largest payments companies um and the yeah they're they're they're huge it's kind of like a Chase payment hacker um you know people may have heard of like Braintree which is owned by PayPal like these are all sort of like payments companies um stripe is in a certain way similar um and really kind of the the other core component here is well there's two there's an issuing bank and there's a merchant bank and issuing bank is effectively when you go to a bank um and you want to sign up for a credit

card they assess your credit worthiness they assess sort of your your history with the bank um and then they are the ones who are issuing you the line of credit that you can use to charge against the merchant bank which is the receiving side when you go to make a purchase is the the bank that is taking on the merchant risk of Udo to the store and swipe your credit card or or use Apple pay whatever making sure that you know the merchant itself is not uh making fraudulent charges and all the things you would expect when you have your credit card stolen and somebody goes off and uh charges a thousand dollars to it um the chargeback actually is something that's assessed by the issuing bank and

it's sort of like an insurance process where like the issuing Bank says Hey Merchant Bank did you guys actually charge this and the Merchant Bank goes yeah here's the receipt here's the signature etc etc um and it wasn't our fault we did we had no idea that this person wasn't actually the person who owns the card or you know there's a there's a there's a process but um the chargeback would come out of the issuing bank's side in most cases um and that um you know that's the reason why they take the bulk of of whatever percent is the interchange um really simple way of describing it the the interesting part here is when you're using a blockchain um you know in in the elements of uh so much of that payment stack that charge

that three and a half percent let's call it is really what happens when someone makes a charge and says I didn't actually do that and it's over a network that is reversible well what happens when you have an element of irreversibility one of two things person-to-person payments um and point of sale transactions it's going to get really interesting to see how chargebacks get processed I didn't actually send you a hundred bucks I didn't actually pay that um is it going to be the same process well how does the irreversibility of usdc actually work and are are there sort of like accounts that get charged and debited to um but I think you know one of the one of the nice Parts about this is I think

it's going to ultimately involving involving a blockchain with uscc is ultimately going to reduce so much of that interchange fee because you're going to have more Security in the chargeback process itself um so I I very early days for the payment side of usdc and integrating on blockchain into into that um but just think about it from like a data standards and security perspective I think ultimately this is going to be what banks want because of you know the protections that they'll get by incorporating a blockchain into this payment transaction process um so long-winded you know explanation of of the payment stack

um and uh yeah but I think ultimately this is going to be really really interesting and that three and a half percent is uh you know something that maybe up for grabs yeah okay so this is I really like the way that you describe that so on the one hand right if we just just took a look from a very high level at the amount of intermediaries that are involved some of them are necessary some of them probably less so especially when it comes to cross-border International payments and in general getting rid less pure intermediaries means fewer people need to make margin it'll generally be cheaper but but this Dynamic I think is is really the key one to understand because it's sort of about who Bears risk um and what what could be interesting tell me tell me if I interpreted this correctly but right now uh you you pay

relative like payments are relatively high but that's because of who Bears the risk which in this case is primarily the issuing bank so that also is a good experience for you as a consumer right because if you complain to your credit card company they're going to reverse payments on your behalf in a blockchain in a blockchain world then that could that Dynamic could actually be reversed because of the settlement properties of a blockchain Banks actually might like that they might charge less but they have to bear less risk and then the question is going to be for you as the consumer what is Escrow Services and chargeback end up looking like and that is the question um so I guess we'll have to see how that ultimately ends up playing out but I do got to give props to both Solana and also to Visa Visa man visas they I keep

using them as the example of the go-to you know used to see all these proof of concept things from Bank of America back in 2017 that made no sense and you knew it was just a PR thing they're experimenting with account abstraction on ethereum they're acting as a pay master in 4337 which is Cutting Edge stuff for ethereum they are launching they're leaning in and looking at payments on Solana I mean so cool man very props to the Visa team they're crushing it props to them I would also say think about their business model and what is potentially at risk if they get disintermediated by a blockchain where if they're the data standard and and you have you know Circle creating usdc you've got you know

ethereum creating the standards and the safeguards of transferring properties and smart contracts are basically setting the rule sets in the same way that Visa is setting them for for all counterparties involved in these transactions I mean in a way it's almost existential for them uh not to be participating in this way really good point all right we've got a couple more stories here that I want to make sure that we get to so one let's talk about um actually I want to ask you about the socket investment that you guys made uh because so I saw you co-led that investment and that coinbase um uh but they socket honestly is a company that I had heard of but I don't like know a lot about what they do I

know the tagline is sort of enhancing communication between blockchains their interop thing but what exactly does socket do and what is the you know as much as you can share I saw Vance tweeted something out but what's sort of the in in like I guess the investment thesis but more broadly how you see interop playing out and who benefits in an interop sort of world yeah I mean this goes back to um a lot of the same feces that we were just talking about which is you know when you have an application that requires multiple blockchains um or let's let's say uh you don't have the interop capabilities therefore you can't have an application that requires multiple blockchains or multiple you know execution environments to function the full-fledged application so these

interop protocols become the necessary component to enable that and I know chain link has ccip you've got you know layer zero you've got um you know all these different examples of you know in rock protocols and I mean there's so many more um but you know what we really got excited about was socket and you know they're a great team they're really smart they're moving super fast um it is also the ability to partner with coinbase and have um you know that be the preferred um layer for coinbase um and yeah it it um is something that you know we see as an important it's a necessary component in the infrastructure stack is it going

to be the only you know interop protocol absolutely not um is it you know going to be you know the the the thing that people choose for certain categories in certain situations absolutely um but uh yeah I mean we've been talking about it maybe just haven't identified it specifically but interop is the thing that enables so much of what we've been talking about with the infrastructure stack how does not necessarily you know reveal nothing that you can't with socket but in general for any of these interop protocols so maybe layer zero or whatever what's the monetization how do these companies monetize so I I know chain link in layer Zero have come out or at least proposed different models of um depending on what you're doing and how you're moving information or value um I I think those two protocols

themselves have a small fee that's associated with it um I think there's questions as to you know how do you pay the fee what is the fee how do you calculate it uh like but think of these as Network Services and um you know there there will be you know yeah fees associated with it cool that makes sense last two stories so there was a a little bit of a setback uh just in terms of Regulation and this actually comes on the the cftc side of things so for those many people listening to this podcast probably had a little bit of a mental framework that the SEC definitely under the administration of Gary Gensler but even previous Jay Clayton by the way how funny is it to remember that when we

had Jay Clayton it was like we got to get this guy out of here thank God we've got Gary Gensler coming in someone who knows blockchains man that wasn't exactly correct was it but the SEC has always been has come down a little bit more harshly on on crypto uh the cftc has broadly which is in charge of regulating Commodities and derivatives and and things of that nature has always had a little bit more of a a benign or open-minded attitude towards regulating crypto and frankly a lot of the lack of clarity in the US I've always thought of as jocking in between many different regulatory bodies but certainly the cftc and CBS SEC they're sort of staking out territory for who gets to regulate what in this new ecosystem can you just give this story what was it again that it was

like an enforcement action or something like that against three three different D5 protocols um so it was more than that it was a settlement um against 3D fire protocols um and you know the I can't remember exactly the settlements were in the you know hundreds of thousands of dollars um and really kind of I I think to what um the main rub was and I you know I obviously not a lawyer I have you know been piecing together the information via Twitter and actual lawyers on Twitter um as well as um you know people that we know that we talk to so maybe this is not completely 100 correct but close um the the main road was that the protocols and the interfaces uh sorry

the interfaces and the protocols that were created by these companies and it was three different companies that were in a part of the settlement um the they failed to do proper kyc AML uh procedures for accessing uh these protocols and um I think there's a couple of things that are interesting so cftc is in charge of the um the regulation of uh Futures products as it relates to commodities if you assume crypto products are at least in in park Commodities basically what a Futures product would involve is not the regulation of spot markets so if you want to trade one eighth from one

eighth or one eighth for usdc that's that's one thing um if you want to trade lever teeth uh or if you want to trade you know other types of levered products or Futures products related to eth that is something that would pretty clearly fall within the cftc uh regular regulatory envelope um and so I think that's you know kind of where where they went uh and so I think it was open derividex which are actually two you know leveraged trading uh um protocols and then Xerox as well I think actually what becomes interesting is 0x is not actually anything other than a spot exchange but just because

the protocol itself enabled trading of products that were levered that's where you know it fell within the the confines of of the cftc um so there's a lot of really interesting Nuance here one thing I think you know from a more meta point is um this feels like a ping pong battle with multiple players on each side where you've got the regulators and they're trying to lob different shots over you've got the courts that are going through the process and this very clearly kind of runs counter to the perspective of the unit swap dismissal that was a couple weeks ago where the judge in that very clearly said you know

the creators of these Protocols are not liable for the actions of um you know people using the protocols um this this could be misconstrued to be part of that or or not it depends on kind of the layer because once again these were settlements with the companies and I think most of the companies were actually operating uis to access the protocols so there isn't a different element here um or maybe like a different layer that people are talking about um so I think you know once again this pushes the need for regulatory Clarity right there this ping pong game can go on for a really long time I would imagine but it just creates more and

more confusion as to you know who who is in the right who is in the wrong how do we build how do we do this uh you know the the big loser here I would say is um us-based D5 where it is so abundantly clear that for the time being it's it's just completely it's very clear that it is totally unclear as to how to operate usd5 um in the US and and I think until we have that Clarity and that will probably have to come from an act of Congress um we we won't know how to continue forward um so I I think that's kind of like the the biggest takeaway that I have from all of us yeah it's definitely a little disheartening if you're on the crypto side of it and all you want is some

amount of clarity and it's like I'm getting different I'm getting mixed signals for within the same regulatory body how am I supposed to have a clear path and you and I have talked about how the developers and the entrepreneurs that are building these products need to have surety that they're not going to go to prison for making these products and I I agree with you I think the other thing that I'll say though is similarly to the the SEC right like the courts are the ultimate decider here Jake travinsky had a great great quote on this so uh again the legal system has been knock on wood pretty good so far makes you really thankful for checks and balances I actually had a history teacher who in like seventh grade who who's a big fan of John Marshall have you ever heard of that judge in the U.S yeah John Marshall

we should do a little a little history segment on old John Marshall and happy uh how he wielded the power of the justice system but yeah it's it's look there's a reason why we have checks and balances the judicial system is is pretty good over here property rights are strong and I don't know I I still have faith that this is going to play out the right way so if you're if you're building something defy out there and you're living in the U.S keep the faith keep the faith I totally agree um it's definitely not over I think um you know just just reading the tea leaves and seeing kind of the the wins that are playing out um in the court system incident time um but I think the we will be on the right side of regulatory history

ultimately it's just um you know fraught with confusion and and Shades of Gray for the for the time being yeah I completely agree with that I'm not sure how much really there is to dig into here but there is a Arc invest and 21 shares announced that they are pursuing an eth spot ETF so this was probably always inevitable after the Bitcoin spot ETF uh picked up some amount of traction I actually did see from it's just an account I follow I don't know but I saw that I saw yesterday uh ficky thought of Scimitar Capital posted just I know uh posted posted something about how there was a sort of an idiosyncratic bid for Bitcoin yesterday gbtc shares were trading up

five percent you know maybe this is someone front someone who knows something in his front-running news uh at the same time that eth was down not a typical move but anyway for whatever whatever it is you know all the the analysts at Bloomberg's Alex or Eric uh balcunas and James safart have picked up and are very bullish on a Bitcoin spot ETF being approved and now you've got uh Arc and 21 shares piling in and filing for an eth F and to be honest I haven't really dug into it and don't know the intricacies or the the probability of eth getting approved over Bitcoin it certainly looks like we're getting an eth Futures ETF but hey at least at least this is Step number one right so there was a Bloomberg art what you just referenced there's a Bloomberg article

that said according to sources um or maybe even according to multiple sources the SEC is open to a Futures based ETF um I I personally haven't seen that substantiated anywhere else I hope obviously that that is the case because that you know signals a number of different things obviously the the creation of that ETF I think um would be an important step but also um it probably would provide clarity as to the sec's perspective on the asset um so we'll be definitely watching that but I I hope yeah we'll see if that actually is you know real um but you know if we if we take it a step further and say okay

um Bitcoin spot is not a question of if now it's more of a question of when than Futures eat um would pretend to you know assume that each spot would be you know at some point later down the road the the one clarification though is I I think um the following that Arc put out is technically an S1 and I I don't know the nuances of all of this but I did see someone who kind of explained the nuances this is an S1 which doesn't have the similar timelines of what you would get with I think it's called like a 19b4 filing or something along those lines which is all of the existing eth uh or sorry

um uh ETF um applications that are in the in the process so there is no timeline for this and I think van ack actually filed an eth um S1 sometime in like March or April so more people around the table I think is a good thing um this doesn't mean that we're now in the timeline of like January or March to decide that spot ETF but um ultimately positive that I think people are starting to recognize that these Financial products are going to become live um you know most likely in the next 12 months um and uh that'll be it'll be exciting to see that play out yeah I'm in a complete agreement with you there I think obviously these things take time and never assume that it's going to

happen tomorrow the Bitcoin ETF definitely seems I look I have no special information I just read the same thing everyone else reads but it does look like uh and I think the final the final deadline as we talked about on on last show is it's just very interesting that it's all lining up around the same time as the having and uh potential rate Cuts so we'll have to see if that ends up playing out but you know let's just remind ourselves here maybe this is transitioning into the lot we're deep into a bear Market here I mean we are this is this is as deep as she goes really um and I you know I I don't know I it's talking to people who've been around for multiple Cycles you know everyone's kind of like okay this is how it goes and

I've sort of been here before but there are definitely a lot of people on their first cycle that are uh struggling right now and you can see it actually on Twitter I mean Jesus people are tearing each other apart on Twitter over really benign silly things right and whenever I see someone tear someone apart online I'm like you must be going through something my man I I hope it's all good you know don't worry it'll be okay blink twice if you need help yeah seriously um I don't know how are your mental how do you like yeah what what are you sort of feeling at the at the current time I I so I I think we've talked about this um or you've mentioned it before we've definitely talked about this before but

um Toby's tweet way back when of the way to survive Cycles is to get really excited or dig into something during this period of time frankly um you know what that was for at least uh Vance and myself in in 2018 29 well 2017 2018 in particular um is we were building hash leads which was you know an nft platform for professional athletes prior to us starting framework um it was really easy to put your head down and work on a startup I I think um you know just personally it's harder to have uh you know your eyes honestly your head on a swivel and trying to assess the market constantly during the bear Market this cycle

um but I think you know the the nice part is it's it's good to have a recognition of where we are in the cycle and have that feeling to know that it will ultimately turn and like there will be things that change and weeds like this making me feel like oh well it could actually be next week where things start to look up because you know to your point I bearish timeline is is an understatement um but or maybe just quiet timeline which you know most people relate to being bearish I think it's also sort of just people decided to take some time off this summer and go touch some grass go out do something and um I think September and October

um we'll we'll start to see some of the you know initiatives that were talked about or you know lined up for launch for the fall those will start to happen I'm actually really excited I think by the end of the year January we're going to actually have some fun to play games full you know Global availability um so like that's that's going to be a fun thing to at least you know test out and play um I think we're going to see some of the stuff move on you know like we talked about D5 1.0 um hitting hitting new strides and some of the launches that they'll have around those protocols um and yeah I'm always excited to be surprised on something like a friend Tech because personally I didn't see that one coming

um but I I think uh there will there will be new shots on roll on that respect as well and um so yeah I mean all that's to say like things are definitely not you know fun right now but I think this is also the time when you you build the calluses and the in the muscle memory to know how to operate during this time um but yeah I mean these are these are the I I'm very very excited about the future ultimately um it's just you know being able to stay engaged and excited and um yeah know that know that we're on on the right path 100 I've actually never been more interested purely I know it's like a meme in the tech than I am right

now it's actually much easier to discern during this period of time than when everything's working because when everything's working there's going to be a new narrative every week and you actually get this sort of exhaust uh and I I don't know about you but I've found that the the issues in bull versus bear markets mirror each other a little bit or are sort of inverses of each other rather and right now what you're what you're dealing with if you're slogging through a bear Market is a lot of stuff isn't working right if you're the operator of a company your revenues are probably down you know we just checked in with a company you know he used to be sort of a darling of last cycle and he's like I haven't heard in a while revenue's down 80 like half the people got fired I mean this is

the same story everywhere right so if you're going through that just know you're not alone uh but the the the upside of that is that you by by sheer necessity you have had to take a very hard look at your business you've had to take a very hard look at what makes sense you've had to isolate and pick which problems you want to solve and if you do that if you go through that really tough like shiatsu massage process successfully you will emerge stronger for it on on the other side when when the market does come back and turn around at least when crypto is as cyclical as it is today the opposite problem will happen everything will work everything will be all good it'll move really fast hiring will be your biggest problem none of the salaries will make sense and you sort of get this like

weird delirium it's like your punch drunk or something like that you're you know you're not you know the world isn't exactly as you're seeing it and perceiving it but you're getting all these weird signals and they're just sort of inverse problems of one another and you know we talked about last last week that crypto's the cyclical industry it's going to continue to be a cyclical industry the people that make it in cyclical Industries actually are really disciplined it's people that have like a good sense of not building into something that makes no sense keeping a level head leaving some growth on the table being conservative with your finances that doesn't seem like it plays out on even a even like a two-year time frame but I think it does over a 10 or 20 year time frame sorry oh and and you know we talk about uh how how fast

our crypto years to relative years and and maybe the uh the 10 12-year business cycle is actually the three four year uh crypto cycle and I I go back to it every once in a while and just think about who are the great you know people who have stayed their ground and it's really easy I think mostly to point to investors as to you know how they have performed over long duration you know you've got the the stand recommend of the world you've got the Warren buffetts of the world and you know even like the Jeff dunlops of the world who've been you know uh working all in different markets and in different ways but have outstanding successful records throughout all of those business Cycles throughout their

entire careers and to your point exactly I think you know these are inverse problems you're going to have to know you know when things are so bearish that it's going to be time to either you know you're going to know to talk you're going to know how to react you're going to know how to motivate at the lows and then it's going to be the opposite at the highs um it just is uh it's harder to recognize the highs I think than it is the lows because you think that the highs are going to keep on getting higher um and the people who survive this cycle are going to understand a lot better how to recognize the highs and how to operate more efficiently more efficiently at the highest so know that that's awaiting all those who make it

yeah I completely agree all right partner well maybe this is a good place to end it and uh I will see you very soon in person live permissions man it's gonna be a blast and fingers crossed we get our like a full Roundup together in in person that would be so much fun that'd be a blast man I can't wait can't wait Ivan I'll see you soon [Music]