Hivemind: Crypto Feels Stuck, BTC DeFi & Ditching Staking

Transcript

we are firmly in this point where people don't believe they're not gullible like they and they don't believe that the kind of like hot potato game will go on and so yeah I think that's really healthy market dynamic it is it is like the way it's happened has been just like kind of depressing like why do you think ETH has been so bad for like three years this has been like a slow transition to this kind of market where people want to see real like fundamentals Nothing said on the hive mind is a recommendation to buy or sell securities or tokens. This podcast is strictly forformational purposes only and any views expressed by anyone on the show are solely our own opinions, not financial advice.

[Music] Hi everyone and welcome to another episode of the Hivemind podcast. The goal of the podcast is to provide an inside look into what we like to call the deli hive mind. Bringing together some of our brightest minds from each of the divisions to share insights, alpha and [ __ ] posts. Today with us we have the usual cast, Cedarus Parabus, head of our institutional research arm, Yan Lieberman, managing partner at Deli Ventures and our ventures associate Duncan, also known as Flood Capital. I'm Jose Medu and I lead Deli Labs, our protocol R&D.

So, um, we nothing ever happens, but it seems like World War III almost happened this weekend. Things were briefly looking looking pretty bad, but as of Wednesday, um, at 400 p.m. Western European time, things seem good. There's a ceasefire that's apparently being being respected. Um, where do I want to start? I want to talk about that. Other one's about Circle hitting 300 bucks like the market cap briefly going above the amount of outstanding USDC. Um, seems like Trafy is is bidding.

Yeah. Where where do we want to start on on markets here? Wait, so is that is is that the current status the ceasefire? Because Trump like had that clip the other day where he was like they broke the ceasefire and I'm [ __ ] pissed at both Iran and Israel. It looks like it's still on. Yeah but the market's caring less like um like crude is or like Yeah, like Texas. Yeah, crude is down a ton. Yeah, it seemed very perform like performance-based um or performatory, right? It was it was just like a telegraphed attack on a on a base where they told them ahead of time

so you can evacuate and then just an attempt to save face. And we've kind of seen that before which is kind of bullish, right? It it's it seems like the goal was to seem as if you're doing something rather than actually leading to World War II. But yeah, I mean, I'm not going to try and pretend I know what's going to happen next, but I think historically nothing continues to happen. Yeah. I think like what was because I think some people were saying that like Trump, you know, wants a war, but based on the clips I've seen of him, he seems Who says that?

There's like nothing I feel like there's nothing that indicates that he's that he wants a war. Yeah. I think it's just like a talking point that that people are like, "Oh, like Trump because like the military parade on his birthday and like posting all these videos on like Twitter and stuff or like true social trying to get people riled up." But based on what he's actually said clips I've watched, he seems to be like pretty frustrated with with the situation and is like looking for for peace. So I think that's like reenouraging because like obviously after the US like strike Iran, it was like pretty scary like oh [ __ ] like what's going to happen? But since then, you know, yeah, the telegraph attack, oil's like down like 13 bucks a barrel. I think that like this is first of all this is always

inevitably going to happen at some point if Iran didn't involuntarily like denuclearize and I think the rest of the world might like some of them will condemn it and everything but I think deep down they're like happy that the US kind of like did this and so like I think the reason why the market doesn't care too much is because I think there's like a medium-term catalyst that's kind of been taking taken out. And so I guess we'll see over the next few months like what the long-term implications of this are. But Iran is never going to like attack the US directly because it'll just kind of be over for them pretty quickly if they were to do a real

attack on the US, right? So I don't know. Their biggest threat was the strait and they like Yeah, but isn't it like China gets like all their oil there? They would just China would just buy elsewhere. It's like 5% US oil through there and 50% China I think was the quote. But but you know it's it's a global market is fungeible. They would just buy it elsewhere and price a pump. By the way, as of right now, it does seem like the ceasefire is being respected. There's been no exchanges for 24 hours apparently in Israel. like people are back, bars are open. Um yeah, and and Iran declared the war chapter closed apparently. I think Gainy Streams

went from like 1,200 live viewers to to like 50. So I think people that's a good indication of what point the word Biden could never because this is another indication of something only Trump would have been able to accomplish. I think that um I don't know my takeaway from this is like to be honest I was not kind of worried at all during this whole thing. I kind of figured the US attacking would kind of put an end to it. I feel like cryptos kind of desensitized me from a lot of these like world events.

um I guess like the volatility of world events, you know, obviously if things actually escalated to like full-on nuclear war or something, which I mean, you you can't really plan for that anyways, but I don't know. I think that's my takeaway is is crypto's really kind of like hardened me emotionally to not like overreact to stuff. Um, yeah. I mean, it's it's uh the market bounced back, at least Bitcoin. I I'm I'm in the camp that I think most people are are pretty not bullishly positioned relative to

where you'd expect us to be when we're kind of approaching all-time highs like this. and and you know partially because we've just gotten rejected off this level so many times and and it's been really profitable to to trade the range um and it seems like people kind of continue doing so but just the sheer amount of inflows between IBIT and um the treasury plays is insane like I I doing uh yesterday was 450 million or something like that each day has been nine figures of just inflows and and that's that's real buying, right? Just based on kind of how how the Creation

Redemption stuff works. And so, um, you know, that's money flowing in and and then you also have these treasuries that are popping up left and right. And you're likely going to have a big one out of the London Stock Exchange soon, too. Um, and so these seem like they're kind of continuing, right? On one hand, you had Sailor that that kind of slowed down. He did the the the big raise through the CRDs and then um which is just like another stack on the uh in terms of preps but then after that raise of of like 1.2 billion he he deploys like 25 million bucks. So there's I think there's always this fear of how tapped this is sailor on that front and ultimately you kind of need BTC to to to

roll higher uh just with I think that the converts eventually these guys get worried about the leverage level and so you kind of need the underlying to to rip for that for that to to refuel and so um I think you know having all these other buyers pop up is huge. I I just don't know how how much more selling there there can be at like because this is money that flows one way, right? These treasuries are not trading this. They're just buying it one way. And so I'm curious to see how much supply there is realistically to be absorbed at these levels. Like I'm kind of just expecting to wake up one morning and be breaking through alltime highs. But and on your bullish positioning comment, do you think that's more a function of like people are actually like not invested or they're just kind of like invested in

like alts whereas like all the real action has been like BTC, Coinbase, Circle like you know that that sort of thing like micro strategy bit of both. I mean I think there's more cash positioning but this is kind of anecdotal right there's no real great way to gauge it. So, it's just chatting with people, but I think there's a decent amount of defensive positioning in general for their portfolio relative to what you'd expect at at this level. I think it's just because uh the war stuff and just how many times we've rejected all-time highs and and it just it's been profitable to trade the chop and and so and it makes sense, right? If you're wrong, you just buy back slightly higher and then if you're right, you do pretty well. Um,

and and it's it's pretty self-reinforcing. Yeah. Yeah. I mean, I think most people have just got wrecked on alts though, right? A few people who have been the BTC and hype despite what Twitter will have you have you think um clear and and circle got in before the first hall. Yeah, it's it's and it seems like all the the if the gener is happening in the in the stock market historically like crypto has has kind of moved after that actually um you know once like IPOs opened up last time um I believe it was

like 2020 that the the crypto real bull run started pretty soon after. Do we think it's the same this time? Like there will be material and obviously there's been hype and there's been pockets of of outperformance, but do you think there's going to be material all out performance um this this cycle? I don't really see how the equities can continue to just go so insane and have none of that spill over. Um I think it's just like access to capital thing, right? It's like there's so much money sitting in places that can easily access Bitcoin or these like crypto companies whereas like actually getting

that into alts is like significantly more friction, right? Like who who do we think is chasing the circle stuff? Yeah, it's probably a decent amount of retail, but like also like probably a lot of institutional money initially was was driving behind it where it's like you just don't really have that ability to come in. It's funny like Pomp used to say back in he used to have this line like every single stock commodity and asset will be tokenized but it looks like actually like every single token will be equitized. Well, did you see today that Salana is going to have uh SpaceX trading on chain? Really? So like private investments are coming on Salon.

It's kind of cool. But that again is more crowding out of who's doing that native. Um, let me see. I posted it a couple hours ago. It's by Republic is doing it. They're called Mirror tokens, which is kind of funny. Mirror. I'm not sure if they're backed or something. You know, the is so ahead of its time. The HR meme. It's like Docoin doing mirrored securities.

Let me call HR and then this guy's doing mirror securities. It's fine. Well, it's funny how like Yeah. Putting equities on chain even like six months ago, you go to jail right away. Now it's like the only thing that was in like 20 No was doing that probably 2021 or 2020. That was like Mirror was early. 2021. Mirror was was Yeah. No, it was it's 2020 that it went live. I think Yeah, I think the first Yeah. Yeah. more so when it was like prominent. Mhm. I was so ahead of her. Um it also doesn't seem like it's bad. Like it's it's unclear like there's a it's thread in this one of merch tweets. People are talking on it and if you read the terms like what exactly am I buying?

Nothing. You're buying a debt security from Republic. So it's like sick. If they go bankrupt then it see like it doesn't seem like you're actually buying the like I don't know how this completely works if they're going to like own maybe they own a certain amount and then they're only going to write these debt securities across what they have or if they're just going to like get a bit yolo with it. Like I don't really know.

Yeah. gotta look into that more. I think like back back to the alt performance thing, it's like okay, you've had basically a lot of people in the past few years who have gone like onchain or just like into alt have just gotten crushed. So like they don't have like money to recycle and then you have uh obviously ton of new supply. We've talked about that for a long time. The unlocks are actually like starting to hit now and like ramp um as these like projects launched like a year or two years ago. And then you have like you know just the the friction of not being able to get in this like big institutional money into these alts whereas like something like a coinbase or circle or like a coreweave like you know have obviously corewave is not

directly crypto anymore but a lot lot easier access to that capital same with like Mic Strategy these treasury plays I bit so it's just kind of a tough situation what will actually make alts run is like more money coming in And I don't really know if institutions are like near the point where they want to start bidding alts or like maybe in kind of Q3 Q4 you'll get fund inflows just cuz like crypto as a whole is picking up. So you could have some like bigger liquid funds coming in and bidding some of the higher quality names. But it's it's kind of hard to like recreate the scenarios like in 2024 when we had the big bold

because that was like the new meme things popped up. ton of retail money into there. 2021 was was different. You kind of need a catalyst to to get a bunch of new money and and it doesn't seem apparent super obvious other than maybe these like fund infl it never really is apparent beforehand is is kind of the the thing. Um I don't know. I see both like you know and there's been so many times that people have said crypto is dead and and it makes perfect sense when they're saying it at the bottom where you know all the narratives seem tired and stuff and then it just sort of something new pops off out of nowhere and then once that happens people start making stories of why it will it will always keep going up right or whatever it is meme super cycle or or uh you know

defi taking over I mean dude when pump fun came out thing is I was like there's no [ __ ] way this product works at this state of crypto. Yeah, exactly. I mean, we passed on the Yeah. Anyway, um I think that um I think that uh like but the the other side of this uh is for me is just that it does seem like we need actual like a technological innovation or new narrative. Uh because for me I I still believe in the original kind of crypto thesis and like uh I think stable coins are I think we're going to need censorship resistant assets. I think eventually they're going to do capital

controls and that's probably closer than ever and then you really see the appetite for crypto drive up. I think you're going to see in the meantime like hyperdollization all that stuff's going to happen with stable coins on chain. So I'm bullish on all these fundamental like developments. But who do you think the big beneficiary is of the capital control stuff? Uh, Bitcoin. Bitco. Okay. Yeah. Yeah. I mean, bit like like self-custo. Yeah. I mean, I think ETH and and like DeFi will too because like eventually if you have capital controls become just a normal thing and without being too tinfall hat, I do think you know that that will be just a normal thing like

every country will have like capital controls as as fiat. It's sort of like a historical certainty almost. then I think crypto will will actually have a use case and and also like you'll need DeFi to do things with your with your assets that you're What about like Bitcoin DeFi? Is that something that I know there's like actually a lot of legitimate projects coming out? What we invest in Citria, right? Yeah. Yeah. I'm really bullish on Bitcoin DeFi too. It's just early. Um, it's slowly happening like there's there's a lot of like and stuff. It's going to be more for like stable coins and and like lending like it's hard to do per or

anything to DGEN just given like 10 minute like you know I think the majority of Bitcoin DeFi will be on like scalable L1s and stuff like is has actually gotten a decent amount of Bitcoin on it. Salana has like Bitcoin restaking now on it. A lot of these L2s have like Coinbase's Bitcoin and other I do think you're slowly seeing this. You have been over the last year and it'll probably just continue to like get bigger. I'm not sure if the actual Bitcoin roll-ups themselves will be these hubs of like Bitcoin DeFi maybe. I think if these turn out to be like real rollups, right, and not these like fake roll-ups we have today, but if they're like real rollups that are actually on

Bitcoin and they're good, then you will probably see some like purists Yeah. actually use it. But I think for the majority, you're just going to see these rap versions. Yeah. um kind of get issued on a lot of chains and you're starting to just see it in simple terms like for someone like a Citria or like Alen Labs um I know those two are like big names in in the space or even what Starkler wants to do with like Opcat um like what is the diff like what are the big differences when from those guys versus like just rap BTC well like Coinbase is Coinbase BTC is just Coinbase base is issuing it, right?

Mhm. And so your Bitcoin is uh is just Coinbase. Yeah. Custodied by Coinbase and then if you get proper like actual ZK proving that it's it's uh backed by, you know, it gets locked on the Bitcoin L1 with like a proof and then when you move it back to the Bitcoin L1, you get the proof and it kind of is like, you know, it's decentralized, right? So that's like truly like non-custodial Bitcoin on you know these Yeah. Yeah. I think the the big product is just going to be yield.

um like that there's trading people don't really want to do I mean some people do but I think over time there's an aversion to it because they just want to kind of hold it and most people end up losing trading and so like the the the more uh friendly product is just going to be something um that provides yield and so like that that'll probably be what brings in ushers in decent amount of of BCC DeFi Um, yeah, in hindsight, I kind of wish I just went full BTC yield farming at the beginning of the year because there's actually been a decent amount of opportunities with it and it's like a solid asset, right? And you can

put it on like, you know, yeah, you're taking smart contract risk, but it's like, you know, I could have some on base, I could have some on Salana, I could have some onuite, I whatever, wherever else have them. A good question. like BTC and stables and just do you wish that you just went like all in BTC at like let's say like 20 or 30K versus like No, I think I but I do wish at the end of last year but getting this year, you know? Yeah. But like do you wish you did that versus like actually like trying to like make investments and stuff? I don't know. It's boring, right?

Like there's a part of you that wants to do other stuff. Yeah, you might underperform. How am I going to become a better investor? You might underperform, but you're going to be like more mentally. Just get a hobby, man. Highly expensive hobby. What do you do? I underperform Bitcoin for 16 hours a day. I read a lot of research and think only work out for so much in a day. How are you going to become a better investor if you don't, you know, try? Yeah. Uh I think you go through periods though, man. Bitcoin, come on. Bitcoin's definitely gonna have a period where I think now you don't want to now I think other stuff's gonna outperform but yeah you think other stuff's going

to outperform Bitcoin. I think you have to measure your your performance over like years. Think about think about what you know Bitcoin going from 100K to 200K is a [ __ ] huge move. It's like if Bitcoin goes to 200K I just don't see how [ __ ] is going to get insane everywhere else. Like Well, that's what I mean. It's like if Bitcoin 2xes from here, like I have a really hard time seeing. I think the risk is what you've been seeing where BTC has been chopping around 100K and alter down 50% across the board. Yeah, but that's gap in this class. So, how much longer does this go on for? Depends on which week you're looking at though like right if you first like middle of May was incredible, beginning of June was really good and then just periods if you're in them,

you're getting smoked. Yeah. Yeah. Like I didn't look at charts for like one week. I'm like, "Oh my god, what happened?" Yeah. I mean, it it just seems like we've gone through some pretty horrendous headlines that you'd think would would break BTC lower and we haven't, right? So, it would have to be broader S&P bare market. Now, at this point, like GameStop just raised another 450 million through converts that headline just hit. There's just so much of this.

Bitcoin is honestly just like fulfilled fulfilled everything we could have ever asked for. It like trades so [ __ ] well during all this [ __ ] and like very little draw down like since the ETFs launched. Like it's honestly been really impressive and since Trump's been elected, I guess. Yeah. I think people sometimes also underplay the abil the like the fact that with BTC you can sell it whenever and like you saw this over the weekend where what was happening over the weekend you might think like longterm is actually bullish for BTC but it's the only thing you can sell on the weekend and so it kind of gets hammered a bit right um it's kind of like an underrated property

that you have this liquid liquid asset that you can just it went to like 98 or something right it's a feature brother it is a feature That's what I'm saying. It's like I So sometimes people see these dumps and they they try and put a narrative on like BTC cuz it like dumped over this war weakness and everything, but it's like well it's kind of the only liquid thing you can sell and that probably overpowers other medium to long-term impacts, right? So what do you think? Um, so I think NASDAQ and others are are trying to get stocks trading 247, right? It's just great for their business. A lot more volume. I think like the latest

estimates were were something end of next year. Why they started doing that now? It seems like kind of crazy that they have like they're deciding now to do that versus like they could have done that for so long. Uh, I mean, first you needed this thing to become purely digital, which it has over the past like 25 years. I'd say 20 years. Yeah. And so that this was really the only universe when that was implementable. I just don't see how years like maybe maybe spy will trade with a lot of equity on on weekends. I'm not sure like who's going to be market making it on weekends and everything for the Trafy guys to now suffer the pain of you being

exposed to draw downs at any minute of any day. Yeah, I think it's just not good for society. Close the [ __ ] market. Yeah. I just think I it does feel like crypto needs a new narrative to really catch hold in some like with some promise of fundamentals at least for for there to be another broad-based like al performance at least. I think Bitcoin is going to be fine. I think like define stuff's pro is is going to be fine. few other sectors are interesting things happening but it's hard for me to imagine because like if if speculative fever does and I think there will like

AI will be the biggest bubble of ever um but there it's just like you you can bid and especially like secondaries are getting more liquid there's Robin Hood and people and like even crypto people trying to make this stuff happen on crypto rails right I actually think that's kind of bearish for all the for all the shitcoins you can buy real businesses with I don't I don't know. I just feel like I I I just feel like AI is really what's capturing people's imagination. Um and not just imagination like it has, you know, I would say circle seems to have captured a lot of imagination recently. No, but I think that um what's interesting is that it's like yeah, Circle was like is like

a very good example because it's like stable coins were one of the there's only like a few really clear use cases of crypto, right? And like Circle is like the embodiment of of one of them and that's like gone berserk. But you know, in some of the other ones that are not as clear as like how the value is going to be captured, right? like the whole broad like tokenization just like that term like how is that value going to be captured or how is that going to happen uh is not really any clean many clean ways to play it. So, you know, we can be super bullish on that and like the regulations like moving, you know, in the right direction for that, but it's not super clear how to play it versus like some of this AI stuff, there's like a lot more like clean ways

to to buy into it and feels like it's like more applicable and more happening now versus like I think the outlook for crypto has like never looked better in terms of like more adoption, but just like how to actually play that beyond like Bitcoin and like you know whatever Circle or Coinbase and stuff is is less clear I think and some like select other projects. Yeah. I don't know. There's a lot of people there's anecdotally and like speaking to people there's a lot of very burnt out people that really think crypto is dead.

I think crypto is dead is almost like becoming uh somewhat like consensus among people who used to be full-time in the industry. Well, what do you mean dead? I mean, it's it's it's a good question, but I think just like that you you'll never get the the circles getting I think the ponzoos are dead. like like all the crazy [ __ ] that is like this hot potato game that people play, those things die pretty quickly. Um, and so when I think when people say crypto's dead, they mean that kind of Yeah, that's not those kind of games, which is not a bad thing. It's like I think that listen, I think it's going to become more boring over the years,

right? And everyone who's kind of has lost their money. You kind of need it to get more boring if it's gonna uh last longer. Yeah. I don't know that like sentiment changes so quick. December, everybody thought it was like the greatest bull market ever and like nothing would ever drop. There could definitely be four years. There's definitely going to be like another euphoric state of like craziness at some point. Like if Bitcoin like teleports to 150, like we're obviously going to get some pockets of insaness, even like 120. Yeah. But it just feels like Yeah. Like as Jose is saying, it's like the roller coaster thing is like, you know, getting

smaller. We're having these pockets, but they're only lasting a few months and then it's eventually the roller coaster has to like get on a new track because it's can't loop anymore. And then we restart it. It's going underground. Yeah. Yeah. Yeah. I mean, I I think it it it's the the loop expands on BTC all-time highs. Mhm. That's like a a reset for the Ethan Asia roller coaster. But let's be real, a lot of this stuff doesn't make money. I think like I've been talking about this. I know you like maybe you guys have like disagreed with it over the last year or two, but but the market has really been outside of like memecoins, which people like to point to to refute this, but it really has been moving to try and like value

stuff off of actual fundamentals and revenue and like all the all these there's so many L1s and like L2 tokens that are just, you know, subbillion now, which was kind of unheard of a while ago. there's like no bid for these things that um are just not generating money. The only things doing well are like hype and like before Salana because why? because he's gen generating rev right and like we are firmly in this point where people don't believe they're not gullible like they and they don't believe that the kind of like hot potato game will go on and so yeah I think that's really

healthy market dynamic it is it is like the way it's happened has been just like kind of depressing like why do you think ETH has been so bad for like three years this has been like a slow transition to this kind of market where people want to see real like fundamentals and I just like say is up uh I mean I don't want to pick on say it's always weird [ __ ] I know 60% over the last it's like one of the top performers over the last quarter and like if you look at the things other than hype like things that are that are that are performing I don't think you can really say like ETH was down for only for three years while we had like a meme cycle where dog went down I literally just said how how Is SPX doing 6,900 Jose? Your

your top altcoin honestly good. I think right 30. Holy [ __ ] Yeah, it's doing pretty good. But the people who buy memecoins are a different buyer group than ones who buy like infro tokens and stuff. We're buying belief over here. What do you think? Uh I guess in terms of next revenue generating app to drop is going to be Pump. Yeah, pump will be next. Revenue generating. Yeah, pump at 4B seems like a great deal. Yeah, probably it's going to trade at it's going to trade at a low multiple to its revenue. But even if it trades at like a radium or a Jupiter type

multiple, then that puts it I think like eight or something like that. um you know if it traded at like a hyperlquid type multiple it would be like 30 bill or something but I don't see that it would it's only doing 25% of revenue right other rather than 100% um yeah no I think that's that's even with that 25% interesting discount is is just one they're going to have a disgustingly large treasury to do silly things with um right they they have the 700 mil they've sold sold the soul and then another you know if they able to raise the 1 billion that's a lot of firepower to spend

then you imagine the airdrop will be stimulative as well which will supposed to happen after the initial launch but guys Banana finally launched the web app and you can get it for $16 this is a [ __ ] steal Axium just the bot I think. So get it before pump reigns the memecoin super cycle and we teleport back to 80. Yeah.

Do you want to go into the club stuff? Like can anyone Yeah. Do you want to talk about this proof of governance thing? Are you interested in that? I honestly think it's kind of I think it's kind of interesting because I could see a lot of like chains doing this. Yeah. I mean this was the John post from ages ago, right? Like explain it super simply in English. So in a normal like proof ofstake blockchain you get your token you have validators, right? And then people stake their tokens to these validators and then you issue inflation to them and then you can slash validators if they misbehave and this is supposed to be like economic security, right? like how the system gets a security. Basically, proof of governance has like three main intuitions. First of all is that if all the like returns are

just from staking, everybody will naturally stake. Especially if there was like a perfect risk-free liquid staking derivative of the token, right? And then when everybody stakes, there's no real return because everybody gets diluted by the exact same percent. Right? So that's the first one. The second one is that economic security from staking is a meme and that the the actual what gives a chain its security is not like the ability to slash a validator but the fact that they'll stop earning fees if they act maliciously for like the rest of time. So, if you're like some staking entity right and you start and you do some and you like double sign or do something or whatever,

you're going to get kicked off that network and you'll never be able to earn revenue again. And if that's like a very profitable business for you, you're not going to do that. And so, that's kind of like the second intuition. And then the third one is that proof of stake is not actually permissionless to begin with. it's it's actually uh permission because you need kind of like intrinsic permission from existing validators. Um so it kind of takes these three things that are kind of true already today and then says well if this is the case then you don't need sta uh like staking you need to basically pick a validator set and then you just pay validators a very small amount of issuance to like because it costs money

to be a validator and run the chain and then all like the rev is just burned and so there's no liquid staking tokens right it's just like one token in the system. It gets all the revenue without staking it or liquid staking it because everything is just burned and then you have like the validator set. And I don't know, it's like there's been a pretty good back and forth on the on the Celestia forum over this. I think that Celestia is like the right ecosystem to try this because they don't have like a DeFi ecosystem built up or anything.

like you could never transition like an Ethereum or a Salana or someone else to this at this point because there's you know Geto soul st Lido staked Ether like way over right it's it's way too big but it does make it kind of clean right if you just have like very little basically zero inflation it would be 025% a year of issuance that would go to validators and then everybody else just uses the native token and you just naturally benefit from that burn and then you only need the rev to be over like 025% to offset the inflation every year Right. And so that seems fine. It's like I think it's like a there's obvious there's downsides with it with like oh you're going to do offchain selecting of the validators and all this stuff. Uh there's definitely some risks involved

with this. I but I feel like yeah for an ecosystem like Celestia which like token validators like it's like an offchain it's well you can do token voting permissionless you can do token voting onchain or you can just do like an offchain process and if you do token voting on you get to like what's that doesn't that just like gate the validators versus like well no that's that's the validation is already permission and proof of stake is like one of these assumptions that you've been going in with which like we've seen over the years that you kind of need to get accepted by the rest of the validators to join. So it's not really permissionless already. This is like a critique by proof of work people that

proof of stake is not permissionless. Um and so it's kind of just like agreeing with this and saying yes there already is this permission sense to proof of stake and it already is it already is like proof of authority as it is. So, it's kind of like taking a prag pragmatic look at how everything actually operates today, right? Like all these chains have the same validators a lot of the time too, right? And so if they do some double signing on Salana, well, there goes their business on Ethereum and there goes their business like everywhere, right? And so, I don't know. I think it's uh I think they should do it. I think Celestia should basically just try [ __ ]

everything at this point. One of their critiques was like, well, you had these people building LSTs on Salon on Celestia and then now it's going to be kind of like done in house. And Celestia has been doing more and more in-house recently. And I agree with that critique, but at the same time, I think that this idea, Celestia's original idea was like, we'll just build it and they'll come. And that's been proven to just not really be true. And so I think they do need to like first party take in house more and more. Um it seems like a good idea. I think it's I think it's worth a shot like considering like where that ecosystem is at. So it's not like there's not it's not like any insane take on that. That seems like

pretty reasonable and it's everyone it's also like pretty similar to what John Charb suggested back in the day for well it is it builds off of his proof of governance paper from like 2023. I think this is just the industry moving to more pragmatic like you know what is everyone's going to cut issuance and like it's validators like these validator companies and I love them but they've just been printing money doing like a total commoditized service but like literally printing like nine figure revenues at at scale it's like how much yeah how much selling pressure does Salani get a year inflation like 400 million that just it depletes risk appetite across the entire case.

Yeah, I'm not too sure. I mean, it I think this his argument that the validators validate because of future revenue rather than uh the threat of the threat of slashing is true when for Celestia right now, like where there's very little like realistically like value at stake and and shenanigans that can be done. I think it's less true as chains get bigger and there's more value at stake honestly. Um I think then the the POS attack surface gets bigger. Um I don't know. Remember when Snoopy stole like 200 mil and then got slashed one ETH? It's like is it even effective?

What? I don't remember. Low carb low carb crusader. How did he sell 200 turn? like this MEV attack where he kind of like faked this bundle and then unbundled it and then sandwiched the other validator or whatever and then they got staked like they got slashed like one E but they had stolen 200 mil or something. It's like the legal system is the real slashing at the end of the day. It's like the legal system is the real slashing at the end of the day. If if that's true then like blockchains don't really matter at all. Like how do you only get slash one E? Well, you can only get SL32 ETH max anyways, right? Oh, so it's like if you steal more than 32 ETH, then it's worth it from that. But if

they did that, then again, they would never be able to like validate again. Well, can't you just like go under another pseudonym? You could, but then you you could then you but the thing is a lot of these two are just all delegated stake as well. So even if you it's like you're not losing your own money, you're losing your delegator's money. It's like anyways, that's where it kind of breaks down. Yeah. I mean, these are all the critiques of sounds back in the day. Oh, no. I think it's like I think it's I like it when other ecosystems try different things, you know? I think it's I think it's totally fair that and fine for Ethereum to always want to have home stakers.

Personally, I don't agree with that tradeoff, but I think it's useful to have a system that's doing that. And let's say one day that actually really matters. that'll be like super bullish for Ethereum and we'll be thankful we have this blockchain that has all these home stakers on it, right? I don't think that's a trade-off that like anybody else should make. should make that and I think for something with Celestia that is down like 95% and is really trying to like unfuck their token um that trying some of these you know even Salana with Alpenlow is taking some risks here right where they're kind of challenging the normal twothirds Byzantine I shouldn't use that word too uh they're challenging the assumption of like

malicious actors um to like a more aggressive number basically to make the chain faster and get faster finality and everything because like in practice you would never kind of hit this threshold. So, I don't know. You're seeing more of this in the uh going against like the pure theoretical research and more into like what we've kind of seen. Pragmatic. I don't know. Jose, what what's on your arm? Like it's uh she had an injury. Yeah. It's an injury.

No, elbow elbow injury. What happened? It's an old injury. is from Worlds at the end of last year. I got popped my elbow in the first match and then had to do a bunch of matches on it. So, it's a bit [ __ ] I've been rehabbing my thumb. I've been doing all these uh I've been getting this. I've been rolling it into like a straight line and then I've got these elastic bands and I've just been like doing reps with my thumb just cuz it started weak men. True keyboard warrior. I I no Ira camera and started doing this. I I I sprained my thumb and then I continued to lift in golf and everything and then I started getting

all this bad elbow pain because when I was lifting I wasn't using my thumb. So then I was putting a ton of pressure on like my joints and everything and then I was like, "Okay, I'm kind of [ __ ] up my body. I need to actually figure out how to rehab this thing and like stop lifting for a little bit." So yeah, man. Once you get like 30 up, you got to uh you got to take injuries uh more seriously than you used to, unfortunately. Nice. Uh what else? We can talk about the the clubs. We can talk about the club. I don't know if I'd call them wars on because none of them are real. I don't think that anybody is in the war against Hyperlid yet. Um but they want to enter the war. They're

looking to enter the war. Um, I think there's some Yeah, there's It seems to be It's funny because clubs were the narrative with Serum and Salana a few years ago, right? And then they didn't really work on Salana for like multitudes of reasons. Um, but now you're seeing them make a comeback. And so you've got obviously Hyperlid has been extremely successful, right? most successful blockchain since Salana um and one of the most successful in the last like decade realistically, right? Um so know you're you're just seeing it more and more with you got like Monad has Kuru, Mega ETH has this GTE, you've got uh Bullet which is like Salana's

first network extension, Habachi is like this private thing. So you're seeing more and more of these come up. I think it's going to be pretty hard for them to realistically get like a meaningful amount of market share. I guess a good question is like how much of Hyperliquid's volume now is like just organic people looking to trade versus people with like thinking there is like farming and air drops and stuff. Yeah. Some next air drop and then like how much is it Yeah. Just like these market makers taking advantage of like the organic volume, right? Like Yeah, I don't know. It's a good question. I also think Hyperlquid has a lot of fish on it, right? Which makes it

a great place for professional market makers. So, like I think you could probably get if you were sufficiently hyped. you're sufficiently like hyped up as an airdrop, you could maybe get like, you know, 20% of hyperl volume, 30% of like people coming over and like farming, but then they might be doing like very farming like behaviors. Like I've seen a lot of these ones have like very low open interest, but a ton of volume because people are just like wash trading. So, uh I honestly think open interest is a pretty good metric. You have to look at both open interest and volume. But it's also like Hyperlid's super unique in that they didn't raise any money and so they were able to give

like this insane airdrop where I think a lot of these other ones won't be in the same position to do that. Um yeah, I think the main thing Hyperlid has is that is like you can't fork the holder base that got made rich holding this thing. Um and there I mean it's a really good product to be clear, but like you also can't fork the holder base and origin story. It has like a Bitcoin in the sense of just like, you know, a bunch of people who who who are like behind it and stuff. And I I also think like I don't know. I think with I think HIPP 3 is actually like really cool. And I think if it works out, there's a sense in which you don't

really need another perex because like historically the way that a new per venue or even just a new exchange venue um wins against against an incumbent is just by offering like a longer tale of assets, right? Whether it was like Paloniex back in the day and then Binance and then like unis swap, right? and then FTX get your per on shitcoins and using shitcoins as collateral. Um, and then obviously Jupiter like meme coins and I feel like with with HIP 3 if I mean obviously you need the the 1 million hype delegation but if it works um you can just spin up your pairs on hyperlquid and get like 50% of the of

the trading fee revenue right and I think realistically that's going to be more money for most use cases than you would bootstrapping your own venue and having to get users there and and stuff like that right. So I think Hip 3 makes it even harder for me for someone to come in with a meaningfully like differentiated like product. Yeah, I will say we should still remember that hyperquist custody model is quite degenerate and like you know has billions of has like billions of dollars in a hot multisig. So I think if you were to want other I didn't know it's a hot multisig.

Yeah. Yeah, it has no rate limits or anything. All right, that's what you mean. So, I think like just, you know, I think people should constantly kind of be aware of that. I'm not saying anything's going to happen, but it's it's like, you know, it's not there are some pretty big risks risks there. And uh um I don't know. So, I think it would get kind of worrisome if this thing got like 10, 20, $30 billion in that. Um, so we'll see. We'll see. I think a lot of these other ones too are trying to play the whole tech and like custody, especially the rollup ones, like you know, but I think even those ones, um, they're still actually just like

multisig right now, the ones that are live. So it's like you see this a lot with rollups where it's like theoretically they're, you know, way safer, going to have ZK proofs and all this stuff, but then you look how they're deployed today and it's like, oh, there's an EOA that does kind of everything. So yeah, I agree though. It'll be hard to compete with Hyperlid on on product at the point that they're at. Yeah. product liquidity like I the only thing you can really compete on even if you have like similar product or as good product which is like going to be impossible because you won't have the liquidity is like these incentives initially unless like someone invents something

new that hasn't been done but I feel like in terms of per stream use case hyperlquid is pretty good yeah I mean I think the liquidity actually on the majors is not that defensible because you realistically don't need all that. Like there's like an escape velocity threshold where okay, trading a certain size that probably applies to a majority of people, right? Yeah. Like that guy, no. But but for 99% of the other people, obviously that's not 99% of the volume, which is the important caveat, right? Is the whole power law component and that's why like the whale game really makes Hyperlid valuable.

everyone who's kind of below that threshold. If you're not going to experience any slippage or uh or like equal or lower fees, then you're kind of incentivized to to trade on some of these other ones just for that future airdrop. All else equal the trading experience is the same and you're getting something. So, I think, you know, you kind of have this long tale of things that'll probably slow down Hyperlid's progress, but um I think eventually once the airdrop's done, then unless there's something else that's differentiating, you'll probably end up moving back. Although, I could see a decent amount of people being just kind of lazy and and just keeping their money in a certain place once it's

already there. Yeah. The other thing with like Hyperlid that is interesting is that they had like they given out this massive airdrop. So you h and you know basically the only place to custody hype is on Hyperlid itself. So if they have like $13 billion of like capital in their native token that can only be custodied there and like they gave it all to people who are like big perpet traders like they can kind of so like slowly sell that off and keep on trading and like that perpetuates the flywheel and all that hype has to like stay there versus like you know if you're to do a new exchange with your new airdrop token and then you launch whatever the lighter token or bullet token whatever it might

and it has to like stay on that platform, then like there's a bit of there's like stickiness there to to to that capital, especially if maybe like Hyperlid enables like a low level of margin on hype. Um, then it's kind of like you can't really leave because you have the lock in with like maybe fee discounts or just capital being there. It's harder to leave. Do do you think like uh Hyperlid is like a much better product than DYDX was? maybe pre-coosmos dydx like the the kind of starkware one functionally as like I would say a casual user might have different take but I didn't think it was that much different um as like a casual user

yeah me neither which is why I kind of don't really rate my ability to predict what what's going to succeed here like it was yeah it was definitely better in terms of uh liquidity on alts 100% % like way way way way way better. But if I was trading like BTC or Salana or something on DIYX versus Hyperlquid, it's wasn't huge differences. Yeah, that kind of goes back to that earlier point, right? It's just at a certain threshold, a certain amount of liquidity, which isn't that much. You don't notice a difference. Yeah. The other like a good point to this whole like hype lock in like of a lot of capital being there is um and I don't know if this has been

like confirmed but there's a lot of stuff going around on Twitter that I think Amber Group had just has like a massive B&B position that's like uh they can't sell but it's like usable as collateral. So like they use it to like make markets on Binance as like an example of of this kind of lock in where it's like okay we can't sell this but like we can make markets with it and make money that way. So like we're just kind of like forced to use it on this one venue and I think like there could be a similar thing happening with hype like similar dynamics there which like creates more of a lock in effect.

Yeah, I think it's going to be tough to unseed hype at this point, especially with like all revenue flowing back to to token holders and you just have this, you know, you can just buy hype. Um, I think you can turn that on on other like ones too though, for sure. But extracting a bunch and you know what I mean? Like if it was like with DYDX at the peak it was like oh this taking the money and dumping the tokens. Where you trade versus what you hold.

But I think they're not they're they're very in my mind they're very tied together in the sense that like hyperlquid really like the market share took off once hype was out there and there was this army of people that got rich off it were incentivized to shill it uh were incentivized trading activity there of it and use it to trade like yeah like that's a big it's a big wealth creation event for their users to give them more capital to trade with more capital to trade Yeah, exactly. Yeah, I guess the other element is like when when hype hits whatever degree of of central uh centralized share, right? So, it

gains two ways, market share and and and and growth of the space. And so maybe it hits a certain level of saturation where it's it's like hard to gain additional market share, but and then you're mostly, you know, its growth is based on the growth of the space, then you could say it's kind of fairly priced, right? And and then you have this this scenario where people can look to other ecosystems because they want to run that playbook back. Yeah. And then there's the also the other point which is like with these builder codes like people building more front ends on hype could be like a really interesting distribution outlet for them. Um that's like a whole other piece. I definitely think like how they're building the scaffolding with this like HIP 3 and then like the builder codes

and stuff allows people to kind of make the decision in their mind like okay should we just like monetize like pretty lucratively off these additional fees we can charge like on top of hype and like not have to worry with like the whole [ __ ] headache of building a per exchange but like still get a big chunk of the economics. even ostium or something, right? Like you could build just Osteium on top of and um you could build osteium on top of Hyperlid or like Athena originally wanted to build Ethereal so they could have an exchange which uses USD as or wanted to have someone build Ethereal to get an exchange that uses USD as collateral and as a trading pair. You could just do it on top of on top of hype now, right? It just it feels like um yeah really smart I think and

something that makes it harder to compete on the long tail for sure. What do you think the most impactful thing outside of stable coin just like money markets that we've had just borrowing against the per the per itself the ability to equity per the ability to tokenize culture Jose the tokenizing belief I think probably minting tokens yeah and being able to like associate like different utilities and cash flows to them generally. It's probably the most coolest one of the biggest ones.

But yeah, per is funny because it's it wasn't even invested by invented by DeFi. But yeah, it's funny cuz like I don't even trade pers and it's like yeah about being able to trade Bitcoin like from anywhere in the world, you know, during the weekend when everything else is closed is obviously like that's a really cool tool. I mean, obviously self-custody of your assets is like for me it's kind of like the the the whole like democratization of private banking in a sense of like that's why I said money markets. I do think that that's just something that like most people don't have the ability to just like borrow against stuff easily, right? Um now that can obviously be used pretty poorly as we've seen over the years, but

yeah. Cool. All right, guys. I think we can call it here. Yeah. Thanks. Thanks very much for joining us for another episode and see you again in two weeks. Yeah. Thanks everyone. [Music]