Ethereum's Roadmap Dichotomy: Prioritizing the Protocol vs. the Asset | Roundup

Transcript

there is a reason why an extremely low percentage of institutional money holds gold you hear gold bugs Beman this all the time it's like the bane of their existence like no one owns the gold yet the opportunity is still so big it's like well they've had a long time they've had 5,000 years if they wanted it you know they've had 5,000 years to buy this stuff like clearly they don't actually want it that much and the reason why is this mental hurdle about yield in my opinion at least hey everyone wanted to give a quick shout out to the Wormhole Foundation if you're a bell curve listener you know that transferring across chains can be a massive pain I certainly do I complain about it on this program all the time that's why we are super pumped to have

partnered with the Wormhole Foundation the stewards of the Wormhole protocol the Wormhole protocol connects over 30 blockchains and six different run times including salana SOI ethereum layer 2s and more and the coolest part about this particular partnership is that they have made custom bell curve nfts which you can get in for free you can claim that by just going down into the show notes and clicking on the link all right guys on with the show all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host 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 all right everyone welcome back to another Roundup edition of bell curve today you got me and Miles O'Neal miles good to be back good to be back good to be back buddy good to be back yeah um this is gonna be a fun one it's been we're making the executive decision to not talk about the Bitcoin ETFs because I you know I don't know how much more Alpha there is to be analyzing these weekly flow numbers although shout out to Eric balunis and James safer who are basically the Oracles of this and uh yeah I haven't seen someone brand themselves this appropriately in quite a while so I did see I did see bitwise posted their addresses so you know the

crypto native ETF you can you can track I I will just constantly root for bitwise because one of the things that people don't see is they got they've got the nicest just best team in crypto if you've met their leadership team Hunter Matt Teddy it's really just an example of the good guys winning and this is just the latest example oh did you miles someone donated uh 69,0 69 SATs to through the address and so now the joke is that bitwise is the only over collateralized Bitcoin ETF that's funny I could totally see um you know the crypto Community just kind of cheering on the know the more crypto

native provider especially with such a likable team and let's just send them a bunch of AUM U just for fun but that's funny that's I could see people if I honestly I would even send them a tip too if I could figure out lightning but that's uh that that would be a whole that'd be a whole project to to get that figured out so also while we're shouting out shout out U udy and Eric W for fighting the good fight on I'm I'm very excited to see some of this change that's coming on bitcoin blockchain with ordinals and l2s and it actually feels like there's some real Innovation going on in there for the first time in a while it does we should do another episode on like just Bitcoin uh you know what's what's new over there because I I do feel like there's a lot going on between bit VM

and and a lot of ZK l2s and you never know um maybe maybe the time is now to finally get you know these this community off the sidelines it's kind of like that thing where oh I've been hurt before and I was a little bit slow to believe this but from what I hear you know they're um even at like SBC or and Colombia um you know blockchain event that happened a little while ago bitco had a very large representation for the first time in a little while so we' love to see that good to see good to see if we have time we should I think an interesting question to unpack as well because it's even relevant for eth rollups is you know what what are the extent to what extent is the performance

of Drive chains or whatever limited by the performance of the L1 and I I think that would actually be a really interesting question we probably have to get some experts on here who have a more granular understanding of what the limitations of drivetrains really are but I don't know I think that would be cool to cool to look into yeah I agree I agree I Gotta Give it but one one quick thing before we get into today's topic uh thank you Wormhole for sponsoring this you can mint an nft which is specific to bell curve now there's a joint competition right now going on between me and Jason over at Empire and he got slightly more mints than me so please help your boy win and uh go go mint this bad boy um we'd

appreciate it so all right miles um what I want to get into it's been sort of a slow news week we don't want to talk about the Bitcoin ETF I thought we could have a little bit of a of a higher level discussion and this was inspired by this next season I'm doing with Hart Lambert it's my co-host on the multi-chain endgame and basically what that is is try just trying to update my mental model on how multichain is going to play out with I haven't really thought about this very deeply for a little while there are kind of pockets that I end up focusing on shared secur chain abstraction Etc but I kind of wanted to try to knit it all into one thing and what I wanted to there is this great so Chris go is going to be the first guest of the Season which I'm super pumped for

and I I've read this paragraph in a in a blog that he put out on this incent intent Centric topology that he's been really excited about and um it sort of made me think I think it's very relevant um for for us and I thought we could Riff on this uh particularly into how it pertains to ethereum U and one of the challenges that they're looking at today or opportunities depending on how you frame it but you know at the end of this blog post talks about the uh heterogeneous security between multiple different chains and the end of supply side blockchain economics and you know he's again this is within a lar the context of a larger blog post about and we'll link it in the show notes as well about um intents versus transactions and

the idea being in a transaction Paradigm a lot of what generated value or the way that people thought about the economics of blockchains was very supply side oriented and this is something we've actually talked about on the show before I I think a lot of the investment cases I mean it's the 21 million hard cap of Bitcoin right and these are inherently supply side Arguments for setting a clearing price for Value but the idea is that intense because that puts the choice I mean you're you're not mandating one specific output so it's much more of a demand Centric argument based on what users want you're flipping that Paradigm um and one of the the second order consequences of that is that you're kind of unbundling the parts of a blockchain that had been bundled

previously and the way that Chris defines that is there's a protocol so this could be like the evm which supports smart contracts a specific security model so that' be Gasper with a validator set an ethereum a history so that includes the nominal asset which should be eth and then a community of people who ident self-identify as members and so one of the the interesting things I I think an interesting meta question to ask is let's just take two of those parts which is the protocol so let's just say ethereum itself as the protocol the evm and then the asset eth and what let's try to think through on this episode what are some of the second and thir

second and third order consequences of those things being unbundled and I feel like where where this is starting to even rear its head is you know the moneyness of eth conversation and I I think you're starting to see a couple of camps of people align with different parts of what had previously been bundled together and you see let's call it like protocol maximalists um and these are usually app developers on ethereum that want to see the actual protocol itself improve so the the two things that these people tend to ask for are shorter block times and um and uh cheaper gas right so raise the

gas limit and that would be uh the sort of a protocol Centric view of the world of eth and then there's another group of folks who I think are very attuned to the asset eth itself and its moneyness and what I'd love to unpack this episode is a how do you view the sort of dichotomy of these two points of view and how are we just viewing the overall moneyness of of eth especially in a world where we probably want eth to be used as money on other chains and so inherently it's going to be wrapped there so so what do you think about that is that a fair way to characterize kind of like a protocol Centric approach versus an asset Centric approach and what are your sort of high level

thoughts on the money argument of of eth yeah I think it's um so first of all it's like a super interesting argument in terms of thinking about intense this way and and their implications on say broader um you know blockchain Dynamics um I do think you know each like I think you to be kind of specific about what chain or what ecosystem we're talking about um and and with ethereum I think it's know we've talked about it right it's kind of in an awkward spot in its road map where it is starting to push activity out of the platform it's not trying to optimize for you know the I would say application uh activity on its protocol uh yet there is still a ton of

of applications it's still the center of of really all uh blockchain activity right even the trying to push things up to rollups at this point and so I think that that is you know you could argue that maybe with this road map the main you know demand side driver of of of ethereum is no longer trying to attract apps directly to L1 but trying to basically export its asset its moneyness to be you know the main I would say base asset of all these protocols built on top of it um either that are inheriting security via being a rollup or inheriting security um you know via

something like igen layer right that's completely uh you know a totally separate network but but connected through I guess this supply side of operators and and stake Capital um and then there's yeah I think a different question here of you know if that is your goal goal right to export eth the the asset and have that serve as the base layer of of trust and um and really the base money of all these ecosystems then how do you think about the stake rate right um I think the original V1 you know yield curve um was built and and kind of you know for for the merge right which is still still in

place um the I guess logic driving that was before there was even a ton of defi activity right on L1 the logic was you know didn't incorporate things like me it didn't incorporate you know I guess the incentives to stake and then mint a liquid derivative of your of that stake and so you know I think the original Target um with the with the current curve is somewhere between 10 and 30% Max um and we're already at 20 5% and we see that the you know the majority or at least a large portion of stake is you know accessing this via lsts and lsts as

we know have very very strong power laws and so you know obviously we've already to see begun to see one dominant LST and so I can see you know from the perspective of of ethereum just some general kind of concerns that you know a big refactoring needs to be done in order to kind of align uh I would say the road map of e the asset and what that looks like to I guess the road map of eth the protocol um and really what they're hoping to do by having L1 serve as more of a a settlement layer um and just you know maybe a place where you can export security right uh and that's not the way things are going right now it's looking

like you know the stake rate's going to go very very high uh to keep all those assets liquid it's you know likely going to be um you know of derivatives will be mented from it um we'll see exactly you know what portion of eth holders I guess would you know at this point have no interest in staking I think there is kind of an assumption that you know we're going to hit 50% and then it's going to go 75% 80% all the way to 100 I think there's still kind of a big question right now of you know huge pools Capital that just say eh 3 4% for all this smart contract risk like what's this ge you know GE client risk thing um just learning about that now and that's

not you know GNA help right so yeah a lot of a lot of thoughts there but um I I think we are at kind of like a pivotal um turning point in deciding you know how to realign the the supply side economics to the road map and the realities of of eth okay so much to unpack there so let's try let's divide this moneyness topic into kind of the stake rate and this stake derivatives right from main chain so that would be what is the appropriate and of stake rate from the perspective of ethereum the protocol and then what is uh you know how do how how should we think about the competing moneyness of something like Ste versus eth and then I

think a another interesting meta question to ask would be if the idea of if the objective overall from the perspective of ethereum is to export eth as a currency then what that implies is that most of eth is eventually going to be a wrapped version in one way shape or War even something that uses like the bridge up to arbitrum ends up being not canonical eth and you know we we were talking about this and we give you some Anal it's just a shame actually that the vendi diagram of people that have a deep understanding of global monetary Plumbing in trafi and crypto is so small because there are some extremely similar

principles and tensions like for instance the US is the issu of the reserved currency of the world you know we take our currency and US dollars are an export and there is a tension in between you know you want that currency to be strong and trusted so that people want it but if it's too strong then it actually hurts domestic voters because we can't export stuff so there's a constant tension um and it's anyway there's a lot of I I think you're starting to see that pop up in eth as well but let's talk about this from the perspective of let's just zoom in on the issue of the stake rate and you know have the existence of a derivative like steth I think one of the one of the difficult questions

is how do you trade off here are the trade-offs from the perspective at least that I see it one there's the idea of would you rather have money or yield bearing money and I think what you would learn if you again looked at trafi is that people would prefer to hold bonds over currency people with money people with a large amount of assets would prefer to own yield bearing money as opposed to non-yield bearing money with the with the extremely important caveat that the security assumptions are the same and actually within trafi the security assumptions of holding bonds or holding assets in a money market fund are actually stronger than holding USD in a bank so you got to assume that the security assumptions are relatively

similar or or ideally even better but and then there's the the idea of kind of the issuance policy and what the the target stake rate should be and it might be interesting miles just as a as a thought experiment you know what would you think about obviously there are many different flavors of how you could Implement something that looks like a cap right let let's just say for instance you know the ethereum community or the relevant set of stakeholders said we'd like to favor eth the asset and we are going to implement some version of a cap at like 50% right just picking a number out of thin there I mean how would that can we kind of play play out some of the second and third order consequences like do you think do you think the result of that

would be fewer people staking would that push people actually into more risk taking via igen layer opting into additional sources of yield I mean how how do you see all that how do you see that playing out yeah um it's super interesting so I'd say like in maybe taking a step back why why would we even like talk about something like this and I do think it's you know driven by okay we're no it's no longer going to be the global computer on L1 it is going to be this base layer of trust a settlement layer that exports its security and its money right okay so we in that sense if that's our main you know basically Value method in our main product we want to

maintain a premium on right we want control first of all and we want a premium on liquid eth um because the reality is yield bearing eth um that can be used you know in a liquid fashion is not have you know onetoone trust and risk assumptions right like treasuries do to to like non yield bearing cash right um and so it's saying okay that's not really an option uh or we don't want that outcome because of the implications of you know something like Lio controlling the validator set right so let's actually uh put a a Target on what we want the stake rate you know to

be that's a little bit more um prescriptive than the original uh than the original I guess curve and so you know what it could look like is again yeah you you pick a Target that's maybe sub 50% or 50% % um and just you know have the yield curve you know not fixed but go uh to zero right um as you get to that number and potentially Let It Go negative um once it goes past that number and then it's a question of okay should that just be negative for like you know the new balances that just entered or should that be negative for everybody so that it's more of like a collective pain right um and then you know that has some interesting

implications around like okay how do you exactly do that do you just reduce balances right and then I think you take into account um next question is actually we can control issuance the two other you know variables that play into this yield the absolute yield number are meev and and now igen layer that's emerging right and so sure we can Target a stake rate of X through issuance um but if let's say me represents you know two to 3% and igen layer you know represents anywhere from maybe 1% yield uplift if you're really conservative to

you know three to four maybe 5% yield uplift for you know the more dgen like Risk on Capital um now we're still looking at a staking you know uh effective staking yield of of somewhere in between you know I guess three and like six or s% right and so should the protocol be aware of that as well I think that's also something to to think about um because it sure it can go like issuance can go kind of to zero and to negative right but you're you know you're not really uh you could potentially have well over that Target right um if the rewards offsetting the negative yield or high

enough um so these are like the different considerations that go into that maybe I'll I'll kind of like there so totally agree with all of that here here's where I see this going and I'm curious to I'm curious to understand if you also see the world this way because let's imagine there is let's imagine this sort of scheme that you just described where issuance tailes off at at some predetermined Target and what you're what you're doing from the from the perspective of the protocol is lowering the amount of yield that gets paid out and then there are these other separate Market forces where where yield is going to Trend lower over time anyway so for

instance me burned to me is kind of pointless as a discussion people like to talk about it but there are other Market incentives which are redirecting yield away from the proposer just did I mean Hart just came out with this thing oval which is attacking one pool of me which is Oracle related me this is happening on the level of dexes so sexto deex Arbitrage that ends up happening that's getting redirected back towards the app layer there incentives actually both from the perspective of ethereum consensus and the daps that are built on ethereum to redirect that meev away so these Market forces anyway so the stake rate is getting lower and

compressing and I would just love to know what this the objective of that is because if you look at how traditional monetary policy is conducted when you lower the yield you are encourag enaging people to take risk because the yield the desire for yield especially passive risk-free yield is essentially infinite it's infinite so when you lower the risk-free yield which I think people would consider it's not risk-free it's silly to suggest that but the safest yield you can get in crypto is most likely you know ethereum staking yield if that goes lower I don't think people will just say oh can't get the same

amount of yield that I was getting before people will have already been anchored to that Target and all you're going to do is push them out along the risk curve into riskier and riskier sources of yield and the easiest way to do that probably or looking like the dominant vehicle for that is going to be a combination of igen layer and liquid reaking and ironically I think if ethereum were to go down this road they're surrendering control of their monetary policy in a sense to a Marketplace like igen layer where igen lay can adjust parameters uh and and have an influence over on the the liquid reaking protocols

that are built on top of it to control the amount of yield that Global Investors are getting I I that's the that's the road that I that I see us going down here if we were to if we were to take this path yeah so you're so you're saying that it's uh I guess the downside is that you're basically um putting a lot of I guess control or giving a lot of control to something like the Dynamics of ien layer um once you hit that zero percent right and in assuming in assuming it's just going to stay there right um yeah I think that's fair I think that the amount of you know

security spend generated from igen Lair like it it's going to take quite a while um for that to be significant um and so and and I I guess I just don't see a you know a huge world where there's like 10% rewards you know coming from Ian lay for until there's thousands and thousands of abss if they if they get there um so I I do think that maybe it's like a bit overestimated right now based off of especially how many deposits are in Igan Lair um just the timeline until that becomes you know as as big of a factor as say something like you know me today just in in Gross dollars um well could I poke at that though right now but we're

we're not really in a great Market regime for that I mean can you imagine during another bull market I mean there's going to be I would imagine an enormous amount of demand for something like this tons of new chains I think so but there's I think that is actual spend right that is uh needs to come from somewhere and there is you know billions and like I think there will be probably five billion dollar of deposits by the time it launches anyways I I think over time yeah it it does become extremely significant but just to miles just to underscore that important Point again revisiting some episodes that you and I have done the value proposition from the perspective of an ABS is right now they dilute them they have to pay an enormous

amount in their native token to procure security or validator set the whole value proposition of igen layer and re hypothecating eth security is that you pay less right so it's not I keep doing this mental I keep doing this math and I have to keep reminding myself that I'm wrong about this it's not the amount of emissions that these combined new Chains would would uh would issue on you know all equal they're expecting to get a massive discount right so they should only be paying whatever that whatever that is you much much less yeah it's funny it's it's funny because like I layer depositors are you know they're there for extra yield uh and the avss are there to give away less yield than the other you know otherwise would but

um just I do think that's that's going to come in for a while and you do have to you know I guess if maybe the one concern there is that if you push it really negative then you know that pushes incentives from the reaking side to basically you know take on a lot more risk than they otherwise should and then you know by I guess solving one problem by having a ton of liquid eth out there maybe you end up with a bigger problem of you know overloading ethereum's consensus or basically the original concerns around Ian layer which I think you know is has a lot of training whes for for all these reasons um so yeah I I guess I do think it's actually very realistic to see like uh a 0% Target at

some point um just because I think people will basically bid at 0% to you know process or work on the consensus protocol because there is going to be that much you know that many ways to profit off of just being a proposer um you know we haven't really talked about a lot of stuff coming down the line on on the me side yet um and I think you know as well as the ien layer side so I don't think you know the protocol necessarily needs to be like incredibly aware of of all these like outof protocol you know profit profitability drivers like like me necessarily um to still have this you know be kind of like

an effective you know Target stake rate um that goes slightly negative you know after it hey everyone wanted to give a quick shout out to the Wormhole Foundation if you are bell curve listener you know that transferring across chains can be a massive pain I certainly do I complain about it on this program all the time that's why we are super pumped to have partnered with the Wormhole Foundation the stewards of the Wormhole protocol the Wormhole protocol connects over 30 blockchains and six different run times including salana SOI ethereum layer 2os and more and the coolest part about this particular partnership is that they have made custom bell curve nfts which you can get and mint for free you can claim that by just going down into the show notes and clicking on the link all right guys I with the show one one more question on

this before we get to you know the other question of what does exported eth ultimately end up looking like what what do we think let's let's ignore what what other people think what do you and I I think ethereum the protocol should be optimizing for and is there a tension in between the parameters around eth block space or like the ethereum protocol that makes eth the export more money like versus making the protocol itself more usable is that is that actually a tension that exists and so yeah it's it's it's interesting um it is a tension I really do think it is um and and maybe one way to think about this is to like

compare this to I think uh Celestia right now and and tia which you could argue as like um basically saying it started at the point of where okay we want to build where ethereum wants to go right as this base layer and its main product is exporting Tia right um and you can see right now that it is like actually going a lot more smoothly um in terms of they don't have activ on L1 it's their whole focus is basically to export TI and get it used in all all these different rollups right um and they're and they're building that narrative and it's very you know coherent and everybody is kind of aligned on that in the same way that salana everybody is very aligned on

salana being the base layer of activity right and I do think you find ethereum is somewhere in between there right where they're looking at like um you know the money Camp is saying uh okay this is kind of where the road map is going we're pushing this activity out this is you know we need to export this this asset right and the protocols that are there are still saying like wait no we're we're still here can we like optimize the protocol a little bit more for applications um so I do think there's a tension there and then yeah we can talk about like okay uh if the goal of ethereum is to export this asset to be the base money you know and and all these other activity hubs like that in

itself is going to be you know a rapid version of ethereum um what are the the marginal risks of I guess that being a you know a a liquid staking derivative that is then bridged versus that being something that is you know you're only dealing with like the risk and Trust of of the bridge um and if it's an enrin Bridge usually it's not that bad yeah the enshrining it's it's interesting I mean this is where something like uh the liquid staking module M makes makes an enormous amount of sense as a way for the protocol to have greater insight and potential regulation

around what's going on with liquid staking tokens it you know ethereum here it's just so funny it's like first of all also to defend ethereum I mean ethereum is like pioneering all of this stuff you know they did uh and there are these weird second and third order consequences that end up coming down like the trans transition from proof of work to proof of stake we've talked about this ad nauseum on the show that Gap in between when people could stake and when they could ultimately take it out was what led liquid sing protocols like Lio to be so successful there was such a gap in ux that being able to trade in and out I mean liquid staking was the only thing that really ended up making sense within that context and I I think it's I don't know I I don't have a

great answer here I I still think ethereum is in probably the most enviable position to be in just by virtue of the fact that more people do view it as as a form of money that you'd like to hold than almost anything else outside of Bitcoin and they do have an extremely strong penetration of uh Ste and I think that's I guess where I want to drive towards here is I think that's inevitable I I think it's inevitable even if you just listen to again you can look towards tradis and analog and there's a lot of things that you should ignore about trafi but there are some things that you should not ignore and I think the thing that you should not ignore about trafi is this people want yield you know when Glo large Global

pools of capital do not hold their money in the underlying asset they hold their they hold their money in thing something that can generate yield and what I think you could say is like if your economic system favors the underlying as opposed to the yield generating thing that's more beneficial for everyone but I just think you're never going to get people over this mental hurdle of I'm just it's the greater fools thing I'm only holding this thing because I think someone else is g to buy it from me for less and I instead if I can model this yield you know be it a dividend or uh you know a coupon or whatever people are just so much more comfortable with that

and and and that is I don't know I I sort of view this as inevitable and it's coming for all all blockchain all crypto assets actually and it probably is a bit of a cap on it's probably a little bit of a ceiling on bitcoin like like there is a reason why an extremely low percentage of institutional money holds gold you hear gold bugs bemoan this all the time it's like the bane of their existence like no one owns the gold yet the opportunity is still so big it's like well they've had a long time they've had 5,000 years if they wanted it you know they've had 5,000 years to buy this stuff like clearly they don't actually

want it that much and the reason why is this mental hurdle about yield in my opinion at least so productive assets yeah productive assets I agree I mean I would maybe if I had to push back on any of that like inevitability it's just that the risk profiles or not you know Apples to Apples between again like treasuries and cash versus you know staking eth versus not but I think those things I think those things do get worked out over time um and yeah I again maybe just to look at Celestia like they can Implement a liquid staking module which regulates you know lsts um and that's like another sort of second mover advantage that they have um just by not

having to go through this large migration and and not having and actually going with delegated proof of stake um and so yeah I do think that is a combination of can you regulate the growth of lsts on ethereum by targeting a a you know a more I would say opinionated like staking cap right or like a staking Target um or do you need to just kind of uh accept the inevitability of of lsts and people wanting to to stake and uh especially with all these new ways to get yield that have nothing to do with issuance right right and then say okay should we look at something like you know a bigger

overhaul of of the staking architecture Beyond just the issuance curve and and thinking about things like you know building native delegation into the protocol being making the protocol at least aware of you know some of the the different types of of staking right that is going on um and the risks that that could potentially impose yeah I think that's I think that's a really good point my own opinion is that it's inevitable but I I understand that that's an unpopular opinion and no I think I think that's that's that okay then it's like okay if it's inevitable what should we do about that to to maybe avoid some of these like negative consequences that we

see as as pretty likely right if we do if we just sit here and and and do nothing um like you know Lio can probably have a very large influence over the you know the that how all stake is delegated across the validator set right um not that they're not doing everything in their power to kind of you know basically get off of that sort of that narrative right um I actually think they've done a good job they've probably ethereum has probably wound up with a validator set that's slightly more depending on whatever your definition of decentralized is that Lio has it's been a forcing function of distribution yeah yep exactly but what you know which control Point basically are you going to

kind of Target if if you're in the shoes of you know somebody that is trying to figure out the future road map of ethereum you know it's a good it's a good it's a good question and I I'm not sure that I have a coherent uh coherent answer yet but I think I think it begins with you know the community this is a really important question I think for the community and the various sets of ethereum stakeholders that exist you know people people think that you know the ethereum foundations like the allseeing eye and they're in control that's obviously not the case it's a diverse they're they're diverse even within the organization and

pretty distributed um but certainly there are folks there that have um some influence there are you know different the the client teams that exist the apps you know ultimately we're going to need to come to um consensus on this and I I think what makes it okay let's ignore the idea of yield and being a productive asset I think if you were to just look at okay ethereum the protocol and eth the asset are related but you know increasingly diverging and the idea is to export eth as as an asset and a money to other chains then you you kind of have to accept the idea that canonical eth as it exists on

eth main chain is going to not be the majority and instead what you're going to have is you're going to have mostly wrapped versions with varying sets of tradeoffs and security assumptions so uh you know maybe like the worst version of that would be your canonical mint and Lock Bridge where you know you're just locked you know your eth is locked in a smart contract on on main chain and then you get some sort of obligation from the bridge and that has historically proven to be a Honeypot for risk but maybe it's much better if you have eth that gets bridged up you know into arbitrum or optimism that's that's a better version so I don't know I I don't this where I

actually have a lot of empathy for the ethereum alignment people because even though it makes me personally chafe a little bit sometimes I'm like yeah you don't really have a mechanism here to get people to do what's in their long-term best interest and I think these are all really well intended people who want to see users that don't understand all these trade-offs or are maybe a little bit shortsighted like every human can be from time to time not make bad decisions so yeah I can see why we've landed on alignment as as kind of a a way to do that because I don't I'm not sure if I've got a better solution yeah no and and the solutions are always like okay we can let's build things into the protocol that mitigate some of these risks but I think the challenge with

ethereum is there is such a like plurality of visions of what ethereum should care about and how to prioritize things even not just money you know and exporting to other you know activity layers versus L1 it's like okay should we care about should we try to compete On Da or not you know and and if we are if we do care about competing on da then then what should we be you know prioritizing versus are we really trying to compete more on the money side if so what should we be prioritizing maybe something that's more around like you know a supply side econom like staking overhaul right um versus activity on L1 and you raising the gas limits and things like that um so I do think that a lot of this is

that's why ethereum is beautiful it's the only blockchain the only ecosystem that actually you know supports all this this kind of diverse you know set of views and and and opinions on what to do um whereas again maybe I just contrast that to like Celestia and salana which are you know far more you know cohesive and kind of like the community's vision and priorities uh it obviously on opposite ends of the spectrum and what they're trying to do but yeah I do think that that's why you know things get uh pretty pretty spicy from time to time especially the fact that you know the EF like and the core developers are a separate class I would say of of you know developers than the application

developers and maybe even the role of developers uh and and I guess what they're care about and what they're thinking about on day-to-day yeah well let's talk about the here's a question that I have for you we were talking about this a little bit but I I'll be particularly interested to see what penetration of liquid staking in Celestia ultimately ends up looking like and where that shakes out because again Tale of Two Cities sort of thing or a sliding doors where ethereum historically lower stake rate although that's clearly creeping up very high penetration of liquid staking for a bunch of reasons no native delegation you had that ux um you know the mer you know pre-merge problem for stakers in

the beginning and then there's the moneyness of eth the and a robust defi ecosystems for all these things and then for something like salana or Cosmos you have very high stake rate very low penetration of liquid staking so for Tia it'll be really interesting to see where that ultimately ends up shaking out I think Tia Celestia has the benefit of having learned the lessons you know shall we say of of these three major ecosystems they'll have more information than anyone else did at the time that they were that they were sort of making these decisions for themselves I'll just be really interested to see where it ultim ends up

me too and I'd actually push that even further to say I'm very interested to see where lsts on eth actually uh how they evolve in a rollup Centric world right because I think part of the challenge with lsts in a rollup Centric ecosystem is is bridging and and fungibility right um even if it's the same LST if it's you know coming from one route it to you know a rollup let's say let coming from like osmosis to a rollup and you know another one is coming from I'd say another rollup to this rollup those two are not GNA be fungible um and with something like miles explain why that is for people oh

it's just it's just basically whether it's a bridging route or an IBC route um you know it basically what the D what is minted on the other side is specific to the collateral that's locked on you know the the source chain of where it's coming from so the derivative minted of say like steth coming from you know arbitrum to optimism that's been locked on say like the arbitrum side um versus uh steth coming from Stark net optimism which you know you need to basically like have these uh canonical bridging routes to make sure that okay I went from like eth to Stark net with my Ste

right and I want to go to arbitrum or optimism in this example I need if you're arbitrum you want every every like all the steth coming in to go first back down to ethereum and then come up the same rep right and so it does actually add I think I think another part of like you know LST adoption um why it's so high in Market penetration is on um on ethereum is also because there's you know you don't deal with any of these fungibility issues um and so yeah I I agree with you um I think it's um very interesting to see how this plays out because I would argue Tia is one of the only assets that that really has like a lot of the qualities

of eth and terms of you know moneyness and kind of that shared base layer asset that everybody has to use and hold for some reason versus having you know it's a cosmos chain that has already has like a 59% or 50% you know staking ratio that's all Native staked um and well you yeah we'll basically see it I think a lot of it also depends on you know the rollups themselves and how much they want to lean into this as a way to uh attract uh liquidity on their platform yeah it'll be interesting to see I the other the other tension here that is unclear at least in my mind in terms of how this all plays out and maybe you've got a much better I mean I know we agree on some parts of this and

some parts less but in a world where you have a couple dominant let's just say the Tia or eth S uh you know sort of viewpoint ends up playing out here and there are a couple of monies that get used on all of these blockchains what are we gonna do with all these other tokens what are we going to do with that I even in even in the scenario of eth rollups where you've got why can't they just why can't they just make Revenue you know like I can't they just earn Revenue in those Bas layer tokens from usage of their platforms and once they you know have made enough Revenue that like there's no higher Roi you know growth

investment other than paying capital back to users we can you know do that kind of sounds like Ane Equity but um I I do think that like that's fine you know not every token needs to be like needs to be money obviously right of course but you talking about the other l1s mainly like no no no I was talking about the layer twos and even a shared sequencer let's assume that the shared sequencers are going to launch tokens well as well and you know there there's a couple of different you know a lot of this is path dependent of how regulation frankly ends up playing out so let's just let's just let's just say there's a world where these things are allowed to be valued based on their cash flows then they start to look

pretty Equity like um and one of the the if you were the if you operated one of these protocols today you'd say hey I get that this is the first principal way that they should operate but the only way that crypto protocols tend to get users is through launching a token and that's like boot uh you know solving the cold star problem I know you're going to push back on me but a lot of no no no no IE I'd be like look I I get it I get it but I also have to do this if I want to compete because my competitors are going to do it so then if we can assume in that world that uh they're not going to be allowed to distribute cash flows back or even imply that because they shouldn't even be doing that just from a

business standpoint at this point in their life cycle anyway then they need some other way for for you to ACR value to the Token here's one way that you could do that let's Imagine This sort of chain abstracted multi-chain world where you've got a couple of different layers right this is where let's just say there's kind of an area where maybe this is a wallet or this is what NE is trying to do with their blockchain operating system some kind of front end where a transaction is originated and let's assume that the destination the state that you're trying to impact is on another chain um and uh shout out to Sam Hart by the way for actually I just got off of a long call with him earlier today um but

you know basically the idea would be there's a couple of things that need to happen there's kind of a simulation that needs to get run about what is the optimal route and when I say that was exactly what you were describing which is not all routes are created equal there's cost there's speed there are security assumptions based on the route that you take then there's this sort of Transport layer and then there's ultimately the chain where you want to impact things in a kind of shitty version of how this could play out you know you could imagine each hop being token gated and in order to take that version you know in order to take that route you would have you'd have to essentially swap into that token and then swap back out I again there's a lot of reasons for that to that we could all

say that's not efficient but I could see that playing out as as an end State well why wouldn't have Bridges done that already then right I I don't know I I just I if if it can be that fluid and there's liquidity venues and it's all abstracted away then then then sure uh maybe I agree um but I do think the whole the the less denominations there are the more efficient these systems run in general it's less friction you can honestly view those like tokens as like Crypton native intermediaries that just add you know annoy Annoying rent seeking checkpoints and I think they can be rent

seeking but not necessarily as annoying with you know making you kind of like deal with these these token complexity issues um so maybe I'll say this like I know we do we go back and forth on this a lot but there are cases where like it really does make sense to lean into your token as money because that's going to create the best biggest version of both your service and like the ecosystem that depends on you and I'll go back to Celestia right you're I think it was Dan on your team did a great report being like uh showing God the The Forbidden RW Revenue right of like of Celestia and saying okay it's like 76 bucks a day if we like 100,000x this then you know maybe it's this but the whole point

again is to like just keep scaling the band you know the the amount of like data right so it's never actually going to be the the revenue driver so that said you know exporting Tia and leaning into this like you know Tia's modular money meme um and what that actually means is getting Tia adopted on all these rollups I actually do think like is is a you know Rising Tides you know lifts all Bo boats for the ecosystem number one I think it makes as like to my point on there like routing and things like shared sequencers far more efficient because we're looking at one denomination of like a very liquid asset and then it you get like the you know

once you kind of hit exit velocity on on the size and of market cap and and uh you know asset meability then you could start exporting your security and and restake assets and like what zachi was saying I think we both pretty much exp and or already seeing like you know the top um at least you know at least at this point eth Bitcoin salana and tia all have projects that are either actively working on reaking or you know thinking about it right um so then that sense like that makes that totally makes sense to have you know give that should be like the point of your token but yeah I just think if you're like a you know a transport layer I mean look at IBC it's not great that we really just rely on

like relayer subsidies instead of actually enforcing some sort of you know fee there that might be sustainable um but you know that so there there's absolutely no Ren seeking and then with other Bridges I think you're just you know for the most part taking taking a fee on whatever the the asset you're trying to send from one place to the other is um so yeah sorry I was rambling there for a while but miles that makes almost too much sense in the way that that and there it probably will end up playing out something something very similar to that but I just would that pre again I just there's this like very complicated thought and look this could be solved but you know

will it even be solv because if you were to just say as soon as you say as soon as you say that these tokens get valued based on their cash flows then kind of has to become a security at that standpoint and even taking my crypto hat off for a second it's like what rationale would I if this is just if this is just an equity why can we distribute unless we as a society want to say which which I would be down to have this conversation the frictions around issuing Equity are far too high I think that is the case and as an issuer of startup Equity I I think there are pros and cons to I think there are pros and cons to having your equity which is startup

Equity wildly volatile be liquid in a lot of cases it doesn't make sense there are a lot of negatives that comes come across to it but I think I think the the pros outweigh the cons in general and I would be a proponent of generally maybe that's maybe that would be a good end state for tokens or a good end impact for tokens is that they just make everyone see that the way that we issue and think about Equity needs to get an upgrade I'd prefer I'd prefer that over bending over backwards and forgetting and trying to create you know new best practices or like new principles just to avoid this maybe transitory like you know issue of not being able to admit that it has properties of a security um

and again that doesn't apply to all all tokens um and so yeah I do think that's like okay either this is a better way to issue Equity or some version of it or you know maybe you hold off on it um you know as we're seeing with IG ler now like big part of you know the reason the these avss will have tokens is is because it is a cheaper way to pay for security right they do have to go probably fund raise for these tokens to have any value um and but typically when you fund raise you also able to Mint a lot of the token right um it's not one to one equity dollars into to tokens out um and so yeah I do think that this is it's helpful for bootstrapping costs um

you know and and eventually it kind of depending on the project it could have potentially have non you know security like properties but it's I wouldn't like make that the focus of your of your of your mission right versus like just the product itself I agree I guess the only push back that I would have you and it's not even real push back it's just how long is that going to take for us to come to that I mean that take coming to that realization could take a decade and if you're an entrepreneur and you want to do something now this is where the element of path dependence I think comes into comes into play and another another you know another aspect of this as well

is we've taken whether we know it or not an enormous amount of we've really copied a lot of bitcoin's architecture when I say architecture I mean the amount of decentralization that's required the the sort of um I don't know the ethos of the community and the construction of the protocol based on the intended use case and broadly applied that to all of crypto and I do think that in bitcoin's case the token is the export I mean that is it's like the property of the block space aligns very neatly with the the token Bitcoin Bitcoin is the product it is it is money and we and it's B I mean the token the tokenomics of the protocol are based on

the price of Bitcoin going up and that is what the protocol is trying to do so yeah know I think we've taken a lot of that and applied it to completely different structures which look far more Equity likee the question is just how long is it going to take for everyone to come to this Collective realization and for that to get you know translated into legislation that makes sense I don't know how long that's going to take yeah was funny because I was going to actually say like actually you know I don't feel like most uh you know application tokens right now are really like make like they're they're trying to make Revenue protocol revenue is good people like that right so they like it even better when it's paid out as you

know dividends right the real yield meme um but I would say yeah if you were to say like pick one characteristic where we've just not thought from first principles whatsoever and we've slapped something you know a concept from Bitcoin you know over to to the way we launch these tokens um it is probably that fixed Supply you know it's just like that's like the least you know nobody's gonna be like you know at the SEC looking at a token be like well it does have fixed Supply so yeah um that's not very Equity like yeah sure no it makes revenue and pays dividends out but it has fixed Supply and and they haven't minted anymore uh you know

um good on them doesn't really move the needle in that conversation but yet we're stuck to it and for whatever reason it's like just it's lower on the priority list of uh I would love to see that I you know what I think with a high quality enough Team all it would take is for one blue chip protocol to break that mold and I think the industry would change overnight because you know this idea we we are so and by the way this is I I do think you know you talked about salana and Celestia I think they I don't know how fair this is to draw and I now under I understand that I a lot of this I really think you

can trace back to the original Civil War of crypto which is the Block siiz Wars of the small blockers versus the big blockers this idea of scarcity or abundance and I do the way that at least I see it is you've got ethereum and Bitcoin on the scarcity side of things which is a good which is a totally fine and a good place to be on but I think that maybe it's unpopular to say but the big blockers had a lot of points they had a lot of good points these weren't evil people there was a totally rational argument on the other side of this that ended up losing in the Bitcoin protocol but most protocols that have played out since then are more in line with the big block than the small block Vision like mostly they are and and this idea of abundance versus scarcity I think is

going to come more into the four and I I would love to see more demand side Arguments for this industry as opposed to everything being about limiting the supply limiting Supply make some that's useful and people will want it you know right and maybe just to kind of it's funny now we're seeing um I think what a lot of the big blockers back in the day actually would have wanted but just in a different form going back to you know what we're talking about with now we have rollups right on on top of Bitcoin um and we have Babylon that is able to you know export the the the I guess the security of Bitcoin and those two things you know may not have happened um if Bitcoin was was not still so pristine and dumb like at the base

layer um or at least like the security exporting um I think you know that's that's a perfect case where it's saying okay here are the choices we made for the you know the objective we wanted which was digital gold like pristine pristine you know asset and uh what can we do with that without breaking that original value prop um and I think Babylon is getting towards it with the ZK rollups yeah I'll be I'm very interested to hear like what apart from community and all of this like untapped liquidity in you know in on bitcoin right is there is that like the Crux of the value prop and the and the differentiator of why you know folks are building on bitcoin uh versus something

that's like you know maybe optimized to to host rollups like or or even ethereum for that example that is such a good question I don't know I I have historically not been a huge champion of this this was a narrative a couple years ago defi on bitcoin and people have been talking about things like drive chain since 2016 maybe even before that probably before that uh but I I'm I'm with you miles I don't really know I'm I'd be in the camp where it's like why are you building this on ethereum doesn't that make I mean more here's my the Steelman argument is that um the best tech doesn't always win it's Al it's it's largely like we're seeing

right now with even like something like blast like a liquidity game right and so even if it's not necessarily suited and you're bending over backwards basically to make this like you know a rollup work on bitcoin the wills like like you can't like just look uh you can't you can't discredit like the the value of or at least the promise of you know a trillion dollars worth of of capital sitting there that hypothetically if you were to unlock you know one% of it's a a massive roll up right okay miles so I had that exact by the way going into this year my highest conviction most out of the money sort of bet is Bitcoin nfts for exactly

the reason that you just described because people want to do stuff with their assets and once they lost blockfi and Bitcoin it's the largest pool of Crypton native capital there's no such thing you don't get yield unless you want to kind of do uh the stacks thing so this was my thesis like people will probably buy nfts with that so um but I but let me let me ask you this miles do you think in in one of the big differences between the community of ethereum and Bitcoin and now every other blockchain and Bitcoin is there's a general acceptance of tokens tokens being built on that Leverage The ethereum Celestia salana platform Bitcoin has historic resisted that quite a bit and I think it's hindered more so

even than the performance issues of 10-minute blockchain times Etc it is the community that will push back and say you're coining munib munib of stacks might have more patience than any human in this entire industry uh I I honestly think he does yeah I think that's generally my um my skepticism is I would say like to my previous Point actually less around the viability of the tech to host these products and more around like uh maybe call it like product Community not having product Community fit um like the user preference yeah the the user preferences and like um demand drivers for for why folks are on Bitcoin in the first place

I think uh are very very different right um that said the promise of just one% of converting 1% of those folks you know um well we'll see man we'll see I I think there's it's it's there's changes of foot over there um and yeah I think we should we should probably do an episode at some point I love Bitcoin I like Bitcoin is what you know that was the original you know that was the light bulb moment for most people including me in this space it is still I think the architecture is beautiful I love it I've always liked it I have chafed a little bit in recent years with what I think are very non-scientific not particularly well-run

uh reasoned arguments that are coming out of that community that feel more religious than anything else but and you know one of the personal frustrations for me in that is you know blockwork has been around for six years we've been talking about Bitcoin for six years and some of the people that are the loudest over there now I knew six years ago and they wouldn't say a word publicly about Bitcoin and it's like oh well now you are and like I'm not Bitcoin enough for you because I also like ethereum and Celestia and salana it's a actually a personal frustration for me but um yeah so anyway um we can we can end it there I think this was hopefully guys you know miles and I just at this was it was a slow news week we thought we'd just get on and rip about

something that was hopefully relevant for folks and we're never trying to you know we're always just trying to explore these ideas and I I think this these next 10 years of crypto is going to be even more interesting than the preceding 10 years and it's going to play out in non-obvious ways so hopefully these episodes just make you guys think a little bit is all so I think that's the point yep unscripted unfiltered some of it was probably pretty dumb that I'll regret saying but uh always a blast man yeah always a blast and uh and a shout out to everyone out there who's pushing the frontier there are no answers in the space a lot of the stuff is totally new so shout out to shout out to everyone that's pushing that fun tier so all

right miles this is a lot of fun cheers buddy cheers man see y hey everyone Mike here if you're a bell curve listener you know that transferring assets across chains can be a massive pain I certainly do I complain about it on this program all the time that is why we are incredibly excited to have teamed up with the Wormhole Foundation the stewards of the Wormhole protocol and the coolest part about this particular partnership is that they have made custom bell curve nfts which you can get and mint for free click the link at the bottom of this episode take you get your free [Music] nft