Research Review: Kaito, Lending Markets, Aerodrome and Fluid | Livestream

Transcript

Nothing said on Xerox Research is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only and any views expressed by anyone on the show are solely our opinions, not financial advice. Pocachio Ryan and our guests may hold positions in the company's funds or projects discussed. >> All right, welcome back everyone. Another episode here on this lovely Monday afternoon, uh, Eastern time at least. Uh welcome back to Xerox Research. Today we've got a full research squad on to talk through some uh recent ideas, some some recent uh investigating and and reporting that we've done. Um and I want to give a a welcome here to Kunal, the most recent

ad to the research team here at Blockworks. So uh glad to have you on Kunal. Great to have your first time here on the show. Um and then also joined by Dan Shapiro and Carlos. How are we doing today, guys? >> We're good. >> Good, though. >> I mean, markets are red, but like everything's great. How about you guys? >> I think the sentiment's back on, so we'll see how this week goes. I think it'll be a tricky week. I think the main one to watch is uh the PC data coming at the end of the week. So, that will give us a bit more like indication of where the Fed is leading towards.

Yeah, very very different like total sentiment shift over the weekend, I guess, right? People there was a lot of excitement kind of coming out of the bounce after the sort of Jackson Hole event and then um seems like the market kind of gave it back and now people are doom and gloom again. Um but still seeing pockets of of excitement here and there, different in different areas and uh I guess what we want to cover here today is maybe get out of the noise a little bit. um get into some of the topics that we're digging into, have ideas on. Um but before we do any of that, I do want to make a couple of quick shoutouts. For one, D London is coming up uh in October. So for those

interested out there, uh definitely get your tickets. Um the Digital Asset Summit, it's coming to London October 13th through the 15th. Uh crypto's premier institutional event. Top speakers from global funds, institutions, DeFi protocols, crypto companies, you name it. um we'll all be there under one roof. Um some notable examples maybe from uh our side of the thing on the ox research side of of things. Um Guy Young from Athena. Um Rebecca Reic from Gita Labs. You know, some favorites there. Um but use code 0x100. You can get 100 pounds off at checkout. That's like a hundred something USD. Uh I I need to review the exact conversion, but um anyway, 0x100 for 100 pounds off. Get your tickets.

come see some of us out here or out there in London. Um I don't know if anyone here will be there, but we do know Picacio, Mark Arjun, they will both be there for sure. Uh the rest of the cast to be there is kind of TBD at this moment. We uh I think they usually don't decide the full lineup until maybe a few weeks beforehand. So that can be a little confusing, but um either way, we will see some of you guys there. And uh one other note is uh Blockworks is hiring data analysts. uh we're looking for a research data analyst to turn onchain data and chaos into clarity um to find signal through the noise. So if you live in SQL you know have worked in Dune um have you know worked with onchain data

um put together dashboards love to build dashboards and um you know find find out insights from some of that onchain data we would love to hear from you guys. So link to apply is in the show notes. Um check it out. Um if you are, you know, cryptonative and love to dig into the weeds and um put together interesting connections. Um we would love to chat with you. So hiring is very much on the forefront, especially on the data side. Uh I know that's I know that's what Dan Smith and and David Rodriguez would certainly say. So um definitely check it out and apply if you're interested and you think you've got the chops. Um, and one last shout out to Katana, our sponsor for today's episode. Appreciate them. You'll hear more from the sponsors later, but for now, I think we can get into it. Um, we can start off strong

here. Kunal, first time on the show. Uh, I would love to get right into you. Uh, I know you you did some digging on Kaido. Uh, and I'd love to hear some more on this. This is I I don't know that we've talked much on on the pod at least about Kaido and some of the like um you know the the YAP drop the YAP campaigns things of this nature in in a few months maybe since the token launched. Um there hasn't been a lot of talk about it since then but um would love to kind of understand you know what you've dug into there and and you know where you see if if there's value in Kaido or um kind of what what's coming for Kaido.

Yeah, I know for sure like um pretty happy about Kaio. It's my first uh research article for for the team and quite excited for this one and as a whole Kaiito is basically an infoy protocol, right? And I'm sure actually a lot of viewers are probably yappers out themselves on Twitter. So they would be familiar with the core mechanisms of how Kaido works, how the Kaido Yapper campaigns basically reward people for talking positively or like just increasing information about a project on Twitter. But what really caught my attention for Kaito is firstly the AI sector as a whole has actually been underperforming in this recent rally. So a lot of the focus has been ETH and ETH DeFi tokens. So a lot of these AI tokens

are actually trading at very attractive valuation and at some point a rotation is going to happen right like people who made profits in other sectors will want to rotate and a sector that you know like the retail and consumers really love is the AI ones. So you know when that rotation happens I do think that people should you know already have some exposure to quality names that have good tokconomics are generating good revenues and I think you know that's where Kao really stands at the intersection of that they have strong product market fit and you know I think they're down 50% from their highs but you know traction has been improving so you kind of see like a divergence between traction and revenues with the price. So that in my opinion is what creates like an

attractive investment opportunity and I'll basically just you know run through the viewers like my investment thesises some of the revenue numbers and metrics and what I think will be the catalyst for the next leg of price growth for Kaido. So just to run through some of the revenue numbers. So Kaido's Yapper leaderboards and pro subscriptions together generate an estimated like ANR ARR of close to 20.8 8 million. And how the revenue how the business model works is basically they have currently around 92 Yappa leaderboards and to have a leaderboard each project needs to pay an upfront cost of around 150k USD and for the pro terminal product you have to pay

around 10K you know for one year and they have an estimated around 700 customers and so yeah this adds up to 28 20.8 28 million and these revenues are kind of sticky because you have to pay this up front and then you know the next cycle it tends to re it tends it will need to renew. So that's the the benefit of having these sticky revenues for Kaio and uh Danny I don't know if you're putting up the slides now but we can you know put up the slides or Yep. perfect. Yeah. So for the first one so year to date 106 million worth of tokens have actually been distributed to yappers. So these are projects airdropping like tokens to people who yap. So that's a pretty pretty huge amount right. So the

fact that projects are willing to air drop such a large quantity of tokens shows that they see a benefit in this. So you know it clearly shows that you know Kao has found product market fit and it's a pretty niche sector that Kao pioneered and is currently dominating like market share in. So that's an interesting angle to highlight the product market fit Kaio has managed to generate. And yeah, if you look at the the next slide, I will cover basically my like the core investment thesis around Kito, which is basically it has been the go-to TGE playbook for most of the protocols out there, right? So, you can just do the exercise yourself. just ask yourself what are some of the projects that have you know tge in the

past few weeks and then you can check if they have a leaderboard on Kito and the chances are they they actually do and on a weekly basis Kaido is actually onboarding at least one to two protocols to have a new leaderboard and you know like I mentioned earlier that's 150k in revenue upfront for each other product so it's constantly scaling its revenue and you know we talked to the founder and he said that you know they're seeing a strong dem demand for their leaderboard products. So they likely can sustain this pace of uh leaderboards onboarding moving forward. And the next question to ask right okay so from a protocol point of view what is the the benefit of having uh yapper leaderboard so I mean obviously on a high level the

main aim is to get people talking about you so that your mind share increases but it's not just mind share that's increasing. So in this in this table I basically uh like the Kaio team posted uh an example of Wavefinder and how they benefited from the Kao leaderboard and basically you can see that yes uh Twitter followers mind share increased but on top of that actual usage of the product increased as well and that kind of shows you like this is how Kaio has designed their algorithm where they're not just rewarding like any sort of slop and any tweets out there but they actually want like you know genuine in authentic content and the only way to have this content is to actually go in

and test the product, right? So, it's not only mind share but actually actual usage increasing as well. And that's a that's a very good like for early projects, you know, you kind of get uh initial user testing and feedback and you can kind of use that to, you know, revamp your product before launching. So you can kind of see the value is is very useful of projects and that's why they're willing to pay such a high upfront cost of 150k USD and it's the same for you know like so that's pre-t the the other side which Kaio has really been expanding to tackle is these postGE projects. So you know these are projects with mature ecosystems. They have a huge treasury.

They can afford all of this. And for these projects the the pain points are often different right you already have users on your product. But sometimes you know like the narrative around you is is not really there right. So basically for teams like you know Arbitra and Polka Dot they launched a a leaderboard on Kaiito because it's it's been a more effective uh form of like marketing versus like uh generic K spend and they can drive very specific narratives. So that's important for these projects cuz now you want to gain a narrative amongst liquid funds amongst builders. So you know Kaiito's product basically allows them gives them like a more cost effective and higher return uh avenue for them to do so. So there's benefits

for Kito's capturing capturing the the whole spectrum. It's preg. So that's a that's a pretty good aspect of the market that they have covered. Yeah. Next slide. And so that's a PMF side. Right. So the other thing I really like about Kaiito is they have very solid tokconomics and that's another thing that you don't see in many uh AI projects out there, right? So that was that really piqued my interest. So one side of the tokconomics is basically they have ongoing buybacks and to date they've bought around 6 million tokens which is around 2% of the silk supply. So this might not seem like a lot but you have to take note that you

know Kaio is still it's been I think eight nine months since their leaderboard project is out. So they're still in a you know very growth phase but despite that you know they've used onethird of the revenues to buybacks and the remaining two3 for growth. So I think they've kind of striked a healthy balance between growth and value acral to token holders and you know as we can tell this market is clearly rewarding projects with good tokconomics good value to token holders so I think Kito stands to benefit from this and what this buybacks does is also it makes the circulating supply of uh Kao deflationary so that's always a positive to have for any project out there and yep the next slide

So the the other utility for Kaiito is so Kaiito can basically be staked. So that kind of forms a supply sync for the token. So current API APY from KTO emissions is around 10.5%. But the the key driver for yields for stakers has actually been air drops from project tokens. So some of these projects with Yapper leaderboard air drop a small quantity of their rewards to stakers and this has actually accounted for around like 9.4 4 million year to date and in the same duration 1.3 million worth of emissions have gone to stakers. So you can see that the bulk of the rewards to stakers have actually come from this project distribution and

that's going to increase moving forward. So you know we talked to the team we found out a bit more about the G Kaito mechanism and I can't drop too much alpha on the the the pod but because we wrote about this for our subscribers but basically the the G kit mechanism will incentivize projects to airdrop more tokens to stakers so you know this should further drive yields and further incentivize people to stake the Kaido tokens and yep so the next one so that's where so that's to date what is happening the the important important factor would be what are the key catalysts uh ahead for the Kaiito token. So uh yeah Denny the next slide. Yes. So it's the capital launchpad product. So I'm sure like

those of you have been following Kaido, they basically are they have launched their own capital launchpad where they kind of link uh the the they based on what you tweet what kind of sentiment you're generating around a project you'll get certain benefits from participating in in the capital launchpad like just an over like a highle example let's say I've been very bullish about the intent space on Twitter if any intent project is raising on the capital launchpad. Maybe they'll give me a better allocation. So, it's kind of they're designing the capital launchpad to to get a more aligned cap table and reduce the odds of people dumping the tokens once the the token goes live for trading. And this is

actually going to be like quite a huge revenue driver for Kaido moving forward. They already have five projects on the launchpad I think within three weeks of launching this product and the first three projects have already raised close to $12.7 million and they basically have a 5% take rate on this. So 2.5% is collected in USD and the other 2.5% are in project tokens. So these project tokens will then be you know air dropped to Kaito stakers. So that's another increase in uh yields coming for the stakers and in my opinion the the market's not really pricing there. So in the table I highlighted here I basically

looked at you know different cases and what the potential yields for stakers could be and the current APY for it's so as on pendle current yields for kao are currently 40%. So that's close to my bad case scenario which kind of shows you that the market's not really pricing in the potential drops from capital launchpads to to stakers. So and that's where the opportunity really lies. And one interesting aspect here is so 2.5% of the project tokens go to stakers right but once these tokens trade if they trade at a valuation higher than the ICO round that that means there's more revenue going to to to Kito stakers

basically and that's not been accounted for for by the market and how I see this playing out like where I see the catalyst is so what's going to happen likely is once these uh so none of the capital launchpad projects have actually they've done a few raises but the tokens are not trading yet. So once these tokens start trading and the rewards start acrewing to to Kaito stakers then the market is going to realize hey you know these drops are actually very significant and that's when we'll start to see like a repricing in APY upwards to account for potential future drops and that's going to fuel the next leg up because that's when people are going to FOMO and be like okay I need to buy Kaido tokens I need to stake it I want

to get this yields from capital launchpad right people will start doing all sorts the moon map being like, okay, if two capital launchpads are launched per week, then this is the amount of yields I could be getting as a Kaito staker, and that's what's going to drive the the next leg up and demand for the for the Kito token in my opinion. And yeah, look at the next slide. It's basically to highlight my point. So, if you look at the current Pendle Pendle yields, it's kind of been flat at 40%. which just shows you that the market's not really anticipating the drops that are going to come for the capital launchpad which which is why in my opinion like you know the Kaio token has been kind of weak but once like I

mentioned earlier once this you know projects start dropping then you know you're going to get a sharp repricing and that's going to fuel the next leg up and you know in the research report I wrote I basically did a riskreward analysis and at a 1B valuation it's It's a pretty fair valuation and there's a pretty good risk-to-reward ratio to the upside and you know with a strong catalyst coming I think this token could perform fairly well. So in the AI sector you have very few tokens with a good PMF good tokconomics and good revenues. So, you know, once the sentiment shift and capital flows to the AI sector, I think you got to pick the quality bets that will likely succeed. And in my opinion, I think Kaiito stands a good chance to

get some of these uh some of the bits from retail basically. >> Yeah. Open to questions, guys. Yeah, I was going to say uh really interesting canol. I think the so there are no like typically what we see with a lot of tokens is when staking is involved is that there are like emissions of the own of that own tokens supply that come online and then stakers are paid via that. But are are none of the staking rewards for like eskaido or even potentially gaido paid out from like tokens that are coming becoming unlocked from the the Kaido supply? because I would find it's it's interesting if you know the rewards that stakers are earning is entirely from like partner projects that decide to do airdrops to them and then they're also getting you

know basically a cut of the revenues from the platform due to the buyback from Kaido. >> Yeah. So at this moment, so you're right, there are emissions from Kaio to stakers. But if you just do the math, so year to date, around like 1.3 to 1.5 million worth of rewards have come from additional Kaido emissions, but at the same time like 9.4 million worth of partner project tokens have been rewarded to stakers. So you're clearly getting most of your reward from these partner projects. And the rate of buybacks that Kai does actually helps to offset this emissions. So even, you know, if you take into account the emissions, they're still deflationary.

So they kind of have a good balance between both. >> So So their active buybacks have been larger than than the total token emissions. Okay. Very interesting. >> I I think this is a great report. I have a question like for Canal and the broader group which is uh for post DGE projects do you think there's kind of this adverse selection problem where like projects that are like inherently don't do not have product market fit or have a hard time finding product market fit are the ones that are like paying Kaido for leaderboards like I know you mentioned arbitr polka dot I don't know how much or how many other protocols are doing like these postGE

uh uh leaderboards, but do you think there's kind of this issue where there's this adverse selection of you know that if a project is paying for a leaderboard is basically because they're having a hard time finding like product market fit. >> Yeah, I think uh that comment definitely is valid. I think if you look at some of the projects in the leaderboard, you can tell that some of them have kind of lost their narrative. they've kind of lost where they exactly fit in the crypto market and in that sense then a project like Kao is useful because you can reward exactly what you want people to talk about right so I know arbitum has run like a few like let's say week one I want people to talk about D5 week 2 this

so you can kind of pay for very specific uh topics that you want to like generate around your token so definitely I agree with that and uh the other way I thought of it like let's say for a project like hyperlquid Right? I mean there's bull posters like crazy on Twitter. You don't need a product like Kito, right? So is there a case where they would want to have a leaderboard and I asked myself that and I do think I think there's still a good good use case there where now it's not incentivizing mind share but rather as a project like hyperlquid I would still want to know okay who are my top bull posters right who are the people who are posting organic content they're constantly posting this they are my top supporters cuz if I want to like

let's say for my next airdrop as if I'm the hyperlquid founder I would want to maybe allocate a certain percentage to these users. And right now, there's no effective way for them to to track this. But if you have a leaderboard, you know, it's not just incentivizing mind share, but it also lets you know who your true loyal community members are. So, I think that's another useful use case for projects that, you know, they have the product market fit, they have the narrative, but they just want to gain access to their loyal supporters. Or maybe it could even be like asking them for product feedback, right? you know these guys are talking so much about you, they could have some good comments and feedback on how to improve. So just gaining access to that audience itself could be pretty useful.

>> No, that that makes a lot of sense. I guess another like interesting like angle is like there's a lot of people that in recent weeks and months have been saying that crypto Twitter is losing relevance as as it regards to like driving uh crypto markets like in terms of prices. So how do you think like this affects Kaido if at all like long term? >> Yeah, that's a good question and I actually asked the founder the question. I I like, you know, I was very frank and I'm like, hey, you know, there is some FUD on Twitter that, you know, Kaido just incentivizes people to post like AI slop or just rehash other people's content or there's a lot of times people

just post things because they're incentivized to do so and they don't actually believe in the product and that actually affects the the sentiment or and that there's basically not good quality being put on Twitter, right? So the founder does agree that you know they're constantly you know reviewing the algorithm to design like how can we better reward authentic content and like real users and you know that system is constantly being refined. You have to take note that you know Kaio is still like 7 to nine months in in production for that the leaderboard at least. So it's still early stages. They're still refining the thing. And recently they also introduced this onchain uh element where basically if you know once you're

yapping you can also track certain onchain things. So maybe for example in the future you could have something like let's say if I'm uh yapping about uh X token do I actually hold X token on my wallet right? Am I actually putting my money where my mouth is? And this could potentially be tracked on Kaio. So, you know, just because someone posts like something on Twitter, you can kind of like feed out who's authentic, who actually believes in the project from who doesn't. But yeah, definitely agree that that's one issue, but the founder recognizes it and he's actively trying to address that.

>> Yeah, I think another thing is like this narrative of crypto Twitter not mattering anymore applies mostly to majors. So like obviously like crypto Twitter does not have many like a lot of effect for like BTC price movements or ETH or soul but like for these early stage projects which require like like bootstrapping like adoption like crypto Twitter is still valuable to get like this five to 100 initial users that are going to drive like just bootstrap adoption from like zero basically. So I think like there's still value in crypto Twitter for like early stage projects or like smaller scale um yeah DeFi projects

and stuff like that. >> I agree with that. I think we definitely still see the K like distribution channels on CT especially when it comes to smaller apps like this weekend was you know the football what was it footballfun or something along those lines that name. um you know basically there was a you know small group of maybe individuals excited about that or maybe they had a few kos uh kind of on board but uh that I think sort of spread like a wildfire. So you can see uh what the impact is at least for you know these smaller um niche applications or you know new consumer apps etc when if you can get a you know a few individuals with big followings to uh jump on a new app uh it can be meaningful. Um, good

questions though, Carlos. I was actually thinking about some of the same things. The one maybe the one point that I'll make in in Kaido's favor that I think is interesting is that, you know, in a let's say we were in a world where Kaido the app didn't exist, you would still have these teams, whether it's Arbitron, Polka Dot, pick your favorite crypto, like they're, you know, they may not go to Kaido, but the result is that they probably are still going to be doing some of these initiatives, right? they would go out if they wanted to do some marketing push on on CT, they'd go out and find, you know, 20 30 Kos and and pay them directly maybe or go through like an agency that works with Kos instead. Um it just I it does seem interesting here that Kaido's been able to kind of find kind of maybe displace

that maybe direct connection to individual Kaido uh you know Koss and like promoters uh on the platform and make it into more of like this broader somewhat I I guess you could call it decentralized in that anyone can like sign up um although they are like a sort of centralized provider of the data but either way it's interesting that they've been kind of been able to insert themselves into this market where it didn't really exist before It was just sort of a you know agreements with uh individual content creators and so on. >> Yeah. No, I think uh just a quick one.

Yeah, I think the point you mentioned, Danny, it's it's it's super relevant because I mean like I think last year there was a study like posted for how effective Polka Dot's marketing spend was and I think a lot of people were unhappy that you know so much money is being spent for these KS but you know where's the impact right you're not really seeing this and I think that's one of the pain point that Kao wants to address where a lot of these broad uh broad incentive campaigns or KL spends you don't have like clear like metrics that you can track right So that's when like you know a like some a kao can come in you have very actionable data that you can track impact wise and that's the benefit you get a higher ROI and the the cost is often lower right per year it's

150k USD and I'm pretty sure that's much lower than what polka dot used to pay its marketers. now. >> Yeah, I I actually do remember when they paid for the animated uh icon on Coin Gecko or Coin Market Cap and that was big news all over CT for the however many millions were spent on that. Um so fair point to Kaido on that one. Um awesome. If there's no other questions, we'll uh let me do a quick shout out to sponsors of today's stream. Uh quick shout out for Katana. This episode is sponsored by Katana and their 1 billion CAT campaign is live. Katana is a DeFi first chain. Build for deep liquidity and real yield by redirecting chain

revenue back to active D5 users. Bridge and deposit directly into vaults in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. And to our other sponsor today, IGEN layer. Is your treasury losing value to inflation? Learn how to make digital assets like ETH and soul productive and with uncorrelated protocol-driven staking rewards for CFOs, DATs, and corporate treasurers. The path to integrating liquid staking and restaking should be riskmanaged and aligned with long-term strategic goals. The productive treasury report from liquid collective and Igencloud outlines practical adoption in a forward-looking vision for the role of the modern treasury as a strategic enabler of new technology. Read the productive treasury report today by following the link in

today's show notes. And back to the show. Uh following Kunal and his coverage of Kaiito, we do have Carlos. Uh I think he's going to give us maybe a general update, broad market update on uh all things lending markets. Um so Carlos, I'm going to give it away to you. What is going on in the world of lending? >> Yeah, sure. So um lending and credit like credit sits at the core of like DeFi's capital stack and I think it's the most relevant sector in DeFi. Like it has surpassed $120 billion in deposits and is approaching like uh $50

billion or $60 billion in active uh loans and it has just like drive it has just drove like this DeFi renaissance at large. Like you can see here like it has been in a secular uptrend since basically October of 2023 and the big leader in this like vertical has been A. So if we look in the next slide uh we basically see that a as a whole has more than like almost two times uh the amount of deposits that the next seven money markets combined uh have like on on aggregate. So that's pretty significant

like if you see like early 2023 AB was still the leader but like not by much and over time they can have they have compounded like their lead over the rest of the of the pack basically. Um if you look at outstanding loans as well which I believe is more uh important than than deposits for money markets like they are approaching 27 billion dollars in outstanding loans which is also like more than two times higher than the next seven money markets combined and we can talk about the reasons for this but like it just speaks to a dominance as a whole. Um if you look here at the deposit market share like beyond the

abbot there are some highlights on protocols that have gained significant market share in the past few months like I want to highlight for instance morpho which has climbed into second place uh across all money markets and spark you see kind of like in 2023 they gained a lot of market share. Uh this was due to their connection to the D3M so the DI direct deposit module they were able to quickly bootstrap liquidity but you can see that after like farming spark tokens and like uh the initial search they kind of lost um market share and the reason for that is that sparkland by itself is

really not that interesting like it's just a fork of a P3 and so there's not much reason for like to use sparkland over aid. So that's one of the reasons I think Spartan did not take off whereas Morpho offered this kind of like modular architecture and pioneered it and so it was a lot more interesting and they were able to on board millions of dollars in liquidity via curated lending bolts. Uh the other money market that has gained a lot of market share is Camino and that's largely due to them dominating the Sena uh lending vertical. uh you see that no other money market like in this chart is active on Sena DeFi. So, Camino has

largely benefited from like owning its vertical within Solana DeFi. Um so, if we look at the next slide like this kind of like exemplifies my point about Morpho being able to on board millions of dollars be accurated lending BS and like isolated markets. um their partnership with Coinbase earlier this year, which I believe Danny you covered in a in a flash note, like has been the most successful um distribution tool for them. They have led like $1.7 billion in CBTC inflows yearto date, which is higher than any

other asset for the platform. And that has also driven USDC liquidity higher on the on the platform. And you and you can see here that when the CVTC deposits kind of took off, you also saw USDC liquidity rise on the money market. And that's been beneficial for them to climb onto second place uh across all money markets. And one interesting thing that I will note about Morpho is that they are beating B. They are beating a on base. So they are the leading money market on base which I would argue is the third most um interesting ecosystem after Ethereum L1 and Salana. Um one

other thing about Morpho which I think is interesting is that uh Felix which is one of the leading money markets on Hyper EVM is using Morpho in the back end. So, uh, Morpho is kind of benefiting from like capturing, yes, Coinbase upside in the base ecosystem, but it's also like you also capture upside in the emerging hyper EDM ecosystem, which if you ask me which are the three most um exciting ecosystem outside of Ethereum L1, I would say Sana base and hyper EBM uh just in my opinion. So, and Morpho is like gaining upside in two of those. So that's very interesting. Um if you go to the next slide,

um I want to highlight Oiler because it's been the highest growing uh the fastest growing money market year to date. It was starting from a very low base, but like Oiler V2 has been highly successful in attracting certain kinds of assets specifically like yielding stable coins and USD denominated assets. So the most successful market for Odor has been the usual stability loan market which has driven uh $730 million in deposits and almost $350 million in active loans. And you can see here that utilization is super high almost 100%.

And the reason for that is that they are leveraging like oilers hook architecture and so people can loop uh usual's USD0 plus against the non-yield burning stable coin at a 5% fixed uh APY which is a very attractive basically uh looping product and that's what's been driving Oilers's growth. Uh Oilers also has other like interesting uh growth dynamics. For instance, they're the leading money market on Uni Chain. Uh they are beating Morpho on that ecosystem, which uni chain today is not super exciting or super big market, but they're definitely like big on that

ecosystem. And they also have like interesting like deployments and catalysts. For instance, um there's a new governance proposal that will implement a fee switch basically for a lot of the markets that Oiler is not monetizing currently around a 5 to 10% uh net interest margin. So that would drive basically uh Oiler's revenue up and would potentially have like a more attractive valuation. Um if you go to the next slide, uh I would also like to highlight like maple specifically like their syrup USDC product. Uh like Maple has been the

second fastest growing money market year to date and the the syrup token has also performed quite well along with uh the Oiler uh token. And I think that one of the reasons syrup USDC is so attractive is one their net APY to suppliers has outperform every other benchmark year to date with almost 9% APY and that's because they are able to benefit from from their institutional client base. Uh they lend basically OTC USDC to these institutions against high quality collateral like uh Bitcoin, Ethereum or Jettool. And then the other thing is that they have been a they have done a

very good job on DeFi integrations specifically on distributing syrup USDC across other money markets and being able to loop that against non-nealbering stable coins to incentivize more deposits and kind of creating this growth flywheel. So you can see like Maple launched a maple market on Camino for syrup USDC USDC looping and it has amassed almost $90 million in deposits and $35 million in borrows. So that's also like a very interesting like example of like DeFi composibility and like this money markets benefiting from each other's growth. Um if you go to the next slide um we also have like stable

coin deposits. What I would highlight here is that a has kind of widened the gap against other money markets in recent months. And the reason for that like specifically in the past few months is because a has been the primary beneficiary of uh Pendle's PTSUSD utilization on money markets. Uh we've seen Athe we've all seen like Athena's growing stable coin supply like surpassing $10 billion and Pendle is kind of like being a primary beneficiary of that on the PTSUSD market and that is being looped on a against non-yielding stable coins and that that's what has

been driven the stable coin liquidity the past few months. Uh the other thing is because a has this liquidity mode these large players can come in and borrow large amounts without a spike in the borrow rates. So that has also been favorable for a because you cannot really have like institutions or these whales come into other money markets and borrow huge amounts without a spike in borrowing rates. And that's what why a has kind of compounded their lead. Um I don't know if we if we have a lot more slides in this but I feel this is a good point like for for discussion if you guys have any any comments so far. Yeah,

Carlos, I was gonna say actually on this point maybe to to tap into it like Morpho we know earlier maybe earlier in the year or maybe the late into last year Morpho was I think outgrowing A um by deposits perhaps and I and I think maybe part of that was because for a while you know there were not these Pendle instruments on A's markets and so Morpho was getting a ton of um you know seeing growth due to the PT on USD um in its markets. But it to your point, it does seem like whenever that um change went live on a to enable um those markets uh that that switch just

completely flipped. Um but but maybe another point there around some of these like smaller markets relative to a is that all all the ones that you highlighted were you know morpho and on base with CBBTC being a big grower and oiler on like uni chain with um what was it the usual stable dollar um being a large grower. It seems like that's maybe sort of like a playbook here is that it's going to be really difficult to go toe-to-toe with a but if you can find like a niche marketplace and maybe even like a niche asset um to kind of build your foundation on that seems to be like a growth lever at least for these

earlier stage uh protocols. >> Yeah, I agree with that. Like if you look at Loro and Oiler, they were the first money markets to list PTS like even before Avid did it. And like back then PTS were kind of French instruments and like they like Morpho specifically saw a lot of utilization for PTSUSD before I have a listed the instrument. So I agree with you there like uh the edge for these money markets with modular architecture is that they have permissionless market layer where they can list any asset like permissionlessly with an isolated market and so they are very quick to capture

like these new assets that are very interesting and they can bootstrap liquidity in that way. Uh that being said, when it comes to competing toe-to-toe with AB, as you said, it's very hard because A has this liquidity mode and so for instance, for PTSUSD looping, despite like Morphos's theoretically better architecture to support that market because of an isolated market, a was able to offer lower borrowing rates than Morpho for that looping product specifically. And the reason for that is they also have what's called efficiency mode or E- mode where they are able to like for highly correlated assets or like softly packed assets they are able

to offer higher loan to value ratios and and like better like uh borrow rates if you will. Um so what we can see here uh it's kind of what you were mentioning if you see this is like active loans as a percentage of a you see that Camino uh Morpho and like Oiler V2 and Maple had kind of outperformed A in growth uh in 2024 and beginning of 2025.

But in the past few months, AB has kind of like outperformed all of them in outstanding loans. Like if you see like from July forward, like a has grown faster and the reason for that is just the BT market that I was uh mentioning. >> Um Carlos, I have a quick question. Um, what do you think could be the thing that actually enables one of these protocols to disrupt a um like do you think that there's any like architectural decisions? Like obviously we talked about how Morpho um is differentiated there, but um would you say it's it like liquidity um is just the dominant thing that and

really the only thing that matters for the most part? >> I think it's a good question. I think like if we look at tradefi markets as a comparison like think about the banking industry or think about the asset management industry I I don't think that lending is a winner takes all vertical like yes I have a super dominant today but I don't think it's going to be a winner takes all vertical and I think there's room for a handful of money markets to grow into the hundreds of billions of dollars in deposits and outstanding loans like in tandem with the growth in the stable coin supply. Um what I think will matter most going forward is probably uh

BD and like just like distribution like if you look at Morpho uh Oiler Camino they have a very similar architecture. So kind of like what they what will differentiate many of them is yes of course like the tech matters of course risk management matters but like what will also matter a lot is just being able to go to Coinbase and have this kinds of partnerships like the CBTC uh integration where just like that you gain $2 billion in deposits like in a year because you have like this massive distribution partner. Um if you look at like Avid today it's preferred by like ETH Wales and like well capitalized

players but if you look at the borrowers like as a histogram like you see that the borrower base of A is actually very concentrated and so like 350 addresses or something like that make up like 80% of ABS borrows. So like the liquidity seems like a big mode but when you look at it like by number of borrowers it's actually not that big of a universe. So, if you're able to like have this like distribution advantages or like get one or two partnerships that really get you a couple of billion dollars in liquidity, like I think that's a like that's the go-to playbook basically for

this uh money markets going forward. >> Yeah. So it it kind of seems like if you are you know feel strongly about growth of onchain lending as a vertical or you see you know institutional adoption of these protocols kind of continuing as a trend in the future then a seems like the the sort of clear broad lean but um like you're saying there can be these specific cases where you know you can lay out the Coinbase base X morpho um kind of partnership arrangement agement there where you know growth of Coinbase and their pushing users on chain could be you know long-term strongly

beneficial to Morpho and other other examples like that. >> Yeah, I guess there's other ways to like like navigate this market like if you just want broad exposure to the landing ecosystem like you can just like own a and like be done with it. I think that would do very well but you can also like based on your fundamental thesis of the market you can also choose your desired exposure. So for instance, if you are very bullish on Coinbase and the base ecosystem, uh maybe Boro is the most obvious choice because Morpho is actually beating base, beating AB on base. Um if you also want exposure to the emerging hyper EVM ecosystem, then Morpho is also giving

you like that optionality as well. So maybe Morpho is kind of better in that regard. Like if you think for instance that soul will outperform ETH going forward, uh a better way to express that viewpoint would maybe be own to own Camino because Camino is the sole beneficiary of like Solana DeFi uh maturing and further like institutions adopting like Solana as an ecosystem. So like to express like dispute on soul e outperformance then maybe camino is the better choice and like you can make like this case for a lot of other money markets like you can like look at syrup for institutional credit exposure for instance and and so on and so forth. So

I like I think the big takeaways here like a yes is dominating this vertical but like I don't think it's a winner takes all vertical like I think like many money mark like there's room like the pie is big enough basically for all of these money markets or like a handful of them to win like in specific niches and so I think you can just choose like your preferred money market based on your fundamental thesis of crypto Arch, >> I have I have one more one more quick question. Um, how do you think um interoperability plays into this? And do you have any thoughts on A V4?

>> Um, interperability like I to be honest, I haven't considered it like how it affects like money markets. Uh, regarding AVID before, I do think this is a near-term catalyst. I think Kunal can speak to this a little bit better than me, but I think this is a near-term catalyst that will enable Abid to tap into RWAS uh with Horizon and institutional lending uh or institutional borrowers with AB4 specifically. Uh and yeah that can just solidify its its mode basically like with AB before a will also turn into a modular architecture similar to

Boro or Camino. So they potentially have the same advantages that these newer money markets have today. Yeah, I can I can quickly add that like Daniel was actually writing on it literally just this moment and I think you guys should see the report out by by this week. But yeah, so for we fall like you know the main upgrades coming are like they're going to have like a hub and spoke model where the hub is basically like a central liquidity on each chain and spokes are basically where users access these uh different lending products and each spoke can have like a tailored you know risk uh requirement c like already factored inside. So let's say if I have a risky

asset the loan to value ratio is going to be much lower and that is kind of already coded into that spoke itself. So you kind of want to isolate and manage your risk better. So that can be done through this hub and spoke model and with all the liquidity now in a central pool that means there's a better management of like supply and demand of these assets which means that you can offer like better rates to borrowers and better rates to lenders as well. So, I think Wii for will bring up a lot more efficiency and will make the whole borrowing process safer and also more efficient. And they're also going to have like this risk premium concept where basically if you're borrowing using a better collateral, you're going

to pay a lower interest rate as opposed to someone who's using a riskier collateral. and that you just want to prevent the case where you know people with a more risky collateral are subsidizing uh the the the rates that are you know people someone with safer collateral has to pay. So it kind of isolates that but I did some analysis on that and I think the impact for the risk premium will likely be marginal because if I looked into the existing collateral and a itself like I think uh close to 60s to 70% is already like tier one collateral like ETH USDC BDC. So this risk premium concept is probably just going to be like a good to have, but

it's not going to probably move the needle in terms of revenue. But yeah, more analysis will will come this week in the report, guys. So yeah, look out for that. Okay, awesome. We can uh close out lending and a there. Thank you, Carlos. Uh I think that was great coverage. Uh, and before we jump into our last segment here with the man who has not yet spoken, uh, I want to do one last shout out to our sponsors for today's stream.

Uh, thanks again to Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR. Katana is launching with notable ecosystem primitives, assets, and partners like Morpho, Chainlink, and more. Katana's 1 billion CAT campaign is live. Bridge and deposit directly into vaults in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link at today's show notes to get started. And to our other sponsor, I layer. Corporate and protocol treasuries face a major challenge today. Cash and traditional instruments are losing ground to inflation. A new industry report from liquid collective and IGNC cloud lays out the next evolution of the

digital asset treasury. Moving beyond just passively holding Bitcoin to actively making digital assets like ETH and soul productive through liquid staking and restaking for CFOs, DATs and corporate treasurers. The path to integrating liquid staking and restaking should be riskmanaged and aligned with long-term strategic goals. The productive treasury report outlines practical adoption and a forward-looking vision for the role of the modern treasury as a strategic enabler of new technology. read the productive treasury report today by following the link in today's show notes. Thanks again to our sponsors and let's kick it over to Dan Shapiro. Um we talked a little bit about Morpho and their connection to the base ecosystem. Um I know Shapiro you've covered Aerodrome in the past. Um it

sounds like maybe there's a little more to the story there again today. Um as well as some thoughts on Fluid. So, I'll leave it up to you uh to take it away from there. >> Awesome. Yeah. Um the how about we start off with um Aerod Drrome and I think um the the story here is is I think in the short term maybe um played out a little bit. Um but the main catalyst was the Coinbase DEX integration. Um, I think that that definitely stirred up a lot of hype because, you know, our view here has been that aerodyome um is the liquidity hub of base and obviously Coinbase allowing people to trade on any base

decks through through their application directly. um is you know that that's kind of the the whole you know that's been the aerodyome and really base thesis from the beginning is that it's going to have this kind of built-in distribution mechanism via Coinbase and um you know originally we thought all right maybe that's through uh the Coinbase wallet right um the the wallet effectively right you go there you deposit ETH and it effectively directs you directs you straight towards base um when It turns out, right? All right. Not only are they doing that, but they're literally going to let you trade on something like Aerogone directly through the application. Like that's um really like the you know the the truest uh

you know the in terms of right the distribution advantage that's like the in the truest sense. Um that's what it means. And so you know we think that this is like a pretty strong structural catalyst. Um, and it's going to channel, you know, Coinbase's millions of users directly towards Aerodrome. Um, if you go to the next slide, I think this kind of better demonstrates um what's happening. Like Aerodrome is actually doing like pretty pretty substantial um volumes. And that's even when you compare it to uh Coinbase spot volume. Um so, you know, it's been as high as as you know, 22 upwards of 25%.

Um, and that's pretty significant. And actually at times, um, with the ETHUSD pair and like this might only have been for like a day, but aerodyome was actually the the deeper market um, than Coinbase ETHUSD. So that just kind of gives you an idea idea of um, how much volume Aerome is pushing. And you know, I think I think Aerodrome's um strength has always been those major pairs. Um, and so, you know, maybe that's not too big of a surprise, but I think, um, you know, I think the story here is that if Aerodrome can be fast to, you know, list up and coming tokens, up and cominging

launches on base, um, and kind of start to capture more of that that longer tail market then it could eventually, you know, even rival Coinbase's volume, right? And I know with like regulatory changes, um, Coinbase has been a lot better and a lot faster of adding, um, kind of, you know, longer tail tokens to to their spot exchange. But I still think it it kind of rings true that, um, the newest launches, if you, you know, you want to see liquidity the fastest, projects are going to go straight to Aerodrome. So, um, the fact that you could trade on Aer Drrome through the app, I mean, I personally, I think that's that's awesome. And um you know the numbers have kind of been um you know supporting

that. So um actually if you go to uh if you go to the um next slide uh I mean kind of talk about how this has affected the valuation. Um I think when you know when I when I wrote about this um the market cap was about um half of what it is now. And so I think uh I think a lot of this once again I think a lot of it's been priced in but um you know we've kind of had like pretty bullish market conditions for for the last month or so now. So um you know I don't think it's necessarily you know run and click the buy button

right now. But I think that this is setting up for uh you know structural tailwinds. And I think in the future, I think aerodrome is is definitely going to be the the main protocol um that benefits from this. So, you know, I think actually we've already close to hit these uh FTD targets. So, um, you know, once again, like I think, um, we're going to see kind of how this unfolds and, um, if Aerrum can continue to like capture more of the longtail, but I mean I I'd say like I still remain constructive on on Arrow.

And I I think for me, it's probably my um my project that I have the highest conviction on on base. um you know just in the short term I would be you know I'd kind of let uh I'd wait to kind of see what happens um with Bitcoin and ETH because obviously they've been on pretty big run um driven by a lot of the the DAP buying. So um definitely bullish but I'd say like being cautiously optimistic at these exact prices. Um, in terms of risks um I think that, uh, Coinbase, like obviously they're expanding to other chains as well. And so, Aerodrome, it's not like they're the only ones on on,

um, that you can trade on Coinbase's platform. Um I think uh Salana with prop amm um specifically with the sole USD pair I think that if Salana kind of expands into some other um popular like you're seeing them then them Salana Dex has gain a ton of market share. So um Aerod is going to be competing on liquidity depth execution quality and asset listings with them. Um so kind of as their mode of exclusivity um resides a little bit, it's going to be important to see um if they can still maintain the liquidity depth and retain market share against a lot of the established players. Um and obviously this is mainly Salana Dexes. Um and then you know I

throw like Hyperlid in there as well, but obviously they're never going to be tradable through Coinbase. Um the other thing is just like the regulatory cl um regulatory clarity around here. Um, I think that the CFI to D5 interface, right? Like I think given the current regulatory environment, that's not a problem, but kind of moving forward, um, going to have to see how like what the market structure bill looks like, um, before you can like maybe fully assess if this is potentially like, you know, a regulatory risk or something that that could be pulled. Um, I wouldn't, you know, expect that to happen, but it's just something to keep in in the back of your mind. Um, that that could be a potential risk. Um, but yeah, curious if

you guys have any any questions on this one. >> Yeah, maybe I mean maybe there's a question in it, but it maybe more of an observation, but I feel like you highlighted all the examples I was going to point out, but this does seem like another case of um sort of betting on the the growth of onchain versus off-chain and uh like Hyperlid lately. Hyperlid and Salana have probably been the strongest examples of that lately. But um I guess the you know the benefit that you have when looking at something like Arrow is you know Soul is a near hundred billion asset. Hype is a what 40 billion asset. So, um, you kind of have a much more specific and like focused angle of attack if you had a thesis here

around like the growth of more trading volume coming to Aerodyum via this like Coinbase Avenue um, versus on, you know, versus betting on, you know, maybe the growth of Hyperlid generally as like the growth of like onchain trading platforms versus centralized exchanges for example. It's like a sort of like a different way to maybe like take that thought process is kind of how I'm seeing it. Yeah, for sure. It's it's interesting to see how because, you know, you could say that like currently the the liquidity pools like the coin like for instance the Coinbase ETHUSD um spot order like that is completely um that is completely separate from Aerodrome's ETHUSD pair. I do think it's in a way right like this

is technically Coinbase almost like hurting themselves a little bit, right? if they're if you know if you can go trade ETHUSD pair directly through Aer Drrome. So I do think that Coinbase themselves like I think they're actually making a bet here that on chain is going to become bigger. Um right because if they didn't think that then like this would essentially just be themselves you know almost shooting themselves in the foot a little bit. So I think that um you know more so than this this just being bullish for Arrow um I I do think that right this kind of base integration through the Coinbase

front end is almost a signal that you know whatever the Coinbase team is looking at like I think they're clearly making a bet on on chain here and you know hopefully that on the back end right that's they're going to recoup any loss fees through you know their spot exchange through base fees in the future. Um, so I do think it's very interesting. I think, you know, the the synergy between the Aerodyum team and Coinbase Ventures that has always been um that's always kind of been like a bullish argument for me and I think this is, you know, this is that playing out directly. Um, and so yeah, I think, you know, once again, Aerodrome is probably

like likely the liquidity hub for, you know, you could say the onchain portion of of Coinbase. And so I, you know, as you can see with whether it's, you know, Hyperlquid being like the primary candidate like whoever's like whatever app or protocol is the main trading hub, like they can generate a lot of revenue. Um, and so, you know, once again, short term, not entirely certain on what happens. I think a lot of this initially has been priced in, but I I think that like this integration um it it can't be overlooked, right?

It's more than just Aerodrome getting some more volume. I think this is Coinbase making a bet on Chain. I think that this is a tight partnership um between Coinbase Ventures and and the Aerodrome team. And um you know, I think that there's some pretty cool things that they could do in the future. um you know like merging um the order books. I mean that's that's a big that's a big big um lift, right? But yeah, you could theoretically route volume um onto, you know, you could actively route uh volume and orders from um from the Coinbase V exchange into the Aerod Drrome ETHUSD pair if that would provide better um execution for for the

traders, right? like there's there's some cool stuff that you that you theoretically could do. So definitely one to uh keep an eye on in my opinion. >> Yeah, Daniel, I think one question on my end. I think you covered the narrative point of view very well and I definitely get that angle and that's probably contributing a lot to the bump that we're seeing. But wanted to get your thoughts on tokconomics as well, right? So with the VE model in place, yes, they earn X amount of revenue, but they are actually like emitting quite a lot of tokens and on a net basis, they're net they're like earning negative earnings if I'm not wrong. So do you think, you know, that should kind of be taken into account when doing like an analysis for

Aerodrome? And also do you see like kind of like a reflexity with market conditions where basically you know when ETH is going up it's going to lift all boats and as the price of arrow increases it means that you know rewards to LPS become more lucrative you get more people depositing that makes it you know easier to facilitate volume price goes up but the same you know reverse could happen as well right like once if ETH were to correct prices were to fall you'll kind of get that same uh loop downwards as well. So, do you think that a lot of the recent runup is just due to this reflexity in the price of ETH? And yeah, I wanted to get your thoughts on to tokconomics as well.

>> No, 100%. Um, that that's actually something that um back in back in my first time or my first report on aerodyome in 2024, I wrote about um that reflexive dynamic that you just explained and like that that's exactly what's happening. And so to me um right you can't think about just like the static backward-looking revenues because obviously as you stated like at some points those do go um negative. Um I think similar to right like the lending market like as Carlos just talked about like I think the the DEX market um is liquidity driven as well almost you know even even potentially more so um than

lending right like you do have some differentiation um between you know uh pool architectures but if something is a concentrated liquidity pool like a UNIV B3 style clam pool more or less that is at feature parody with every other product on the market. Um obviously prop amms um they're effectively using clams as well. They're just have protocol own liquidity that could be like intelligently market making you know better than like your you know average LP. Um but to me it's about can aerodrome um utilize those emissions to right on the upswings can they can they

on a on a net um on a net basis can they increase the total liquidity um you know that is deployed to aerodrome like amongst these cycles right because you know we saw um end of last year right a drrome ran up a ton and then I I think it went down as much as like 80 plus percent down to 30 cents, right? And now it's, you know, it's back over a dollar. Um that speaks to the to the re to the like reflexive nature of the V arrow model. Um but you also see um Aerodrome as a platform. If you look at daily volumes, those are increasing over time. And so I think that eventually right they're the you know they're not

just they're not going to be able to use incentives forever but you know as we just talked about right if they become if they are like the clear primary um onchain trading venue where Coinbase is literally routing volume to them directly they're going to have that um you know they're going to have that that volume that those fees right that stream of revenue where they can now, you know, compete against the unis swaps straight up or, you know, surpass them um in the absence of of of incentives. So, you know, I don't once again like you're absolutely right, like there's no free lunch anywhere. Um it's just, you know, it's hard to compete against um the the

early D5 protocols that launch so early like AB is in, you know, so far of a lead. Like I I do think it's very impressive how Aerodrome's been able to take meaningful market share um using their strategy, but you're right in that they're going to have to tr uh to you know change it eventually to make it kind of more sustainable. >> Awesome. Let's talk about Fluid Shapiro. >> Cool. So yeah, Fluid's the other protocol I want to talk about. Um I think um the the biggest the biggest thing I want to talk about is I'd say um catalyst coming up and then their buyback proposal. So

beginning with the catalysts um kind of the upcoming things that they have are the launch of fluid on Salana um the launch on Jupiter lend and DEX v2 um the the first thing and yeah what you're seeing right now is total assets deposit I mean fluid's been growing um like crazy recently um whether you're looking at volume the on the lending side total assets deposited um they've been growing pretty consistently. Um, which is very bullish you could say. I think looking at the catalyst though, um, I think that the I think that the market is yet to kind of fully

appreciate um, what could be coming. So if you go to the next slide, um, let's start with let's start with DEX market share. So if you look at the if you if you think about the Salana launch, what's about to happen is fluid's going to be exposed to about um twice a a market addressable market that's double um where they're exposed now. So um already they have around 20% market share on Ethereum um which is pretty substantial given that um you know unis swap has been dominant on there for so long and you know they've they've grown to 20% in a little over a

year. Um so that's very impressive. Um if you go to the next slide when they launch on Salana um Ethereum and Salana actually have about equal spot deck volume um around 20% market share um and you know that's with BNB kind of growing growing like crazy in the last couple months but um launching on Salana right like immediately it effectively doubles their addressable market. So um they've been very successful on Ethereum. Um you know you could you could argue if they maintain that that success moving to Salana they could theoretically double uh their volume. If you go to the next slide um where Sal where Fluid has dominated

so far is with stable coin swaps. Um the reason why they've dominated with stable coin swaps is because uh stable coins are correlated pairs. And so, you know, this is kind of similar like Carlos talked about a's emode, right? If if you're levering up um on an asset and withdrawing a correlated asset, your risk of liquidation decreases significantly. And so Fluid's entire value proposition is that um LPS can effectively reuse their their liquidity position whether that's on the lending or deck side and deposit it into the other product. So if you have a large um lending position, you can take that you

can deposit that into the DEX and start earning extra fees um on your debt. If you have a um if you're LPing some pool on the deck side, you can actually take that LP position and use it as collateral, withdraw against it, right? Take that money, re put it back into the decks, right? You can effectively loop this. Um and Fluid with their LTVs, you can create 39 units of liquidity for every one unit that you deposit, right? So, you can generate you you're effectively can create these leveraged LP positions. And so, right, with stable coin swaps, the pairs are correlated.

Um, your liquidation risk is super low. Um, you know, you can just make you can make a lot of money. Um, you can make more money depositing into fluid than right, you know, curve or unis swap, right? And that's why it's seeing so much growth. Um the problem though is that uh until recently or until Dex V2 launch um fluid has not been using uni v3 style um concentrated liquidity pools. Um they're not using like v2 like you know passive static um static range pools but um the the protocol does have the ability through governance to like modify the ranges of some specific pools

but it's not right. it's it's it's really not that effective. Um that's why in the market downturn we had a lot there was like a lot of ETHUSDLPS um that suffered some pretty bad impermanent loss. But what DEXV2 will do which is the other catalyst um is that they're introducing um concentrated liquidity pools. And so really what that'll do is it'll allow LPS to to manage their positions better and protect themselves from impermanent loss. um which means that you know in theory uh fluid could start working a lot better um or be it could start becoming a lot more desirable um for LPS for for pairs you know volatile pairs not just

correlated pairs. So if you go to the next slide, um what this is showing is and you know I this should have been a a smooth chart so I apologize for that but what this is saying is that volatile pair swaps are effectively a market that is seven times larger than stable coin swaps. And so if you know really the argument here is okay fluid is expanding um to Salana which doubles its addressable market and fluid is also upgrading to DEX v2 which will make it more efficient and really you know viable for volatile pairs. Um so it's doubling its market that uh the

volatile pairs represents a 7x increased market size. I'm not saying Fluid's volume is going to 14x um because there's there's market structure differences between Ethereum and Salana um mainly uh on Salana the the dominance of prop amms um as it pertains to like the key asset pairs and this is something that that Carlos has written about and that um he kind of helped me work this part of the thesis on. So, uh, maybe after if he has some questions, we can talk about that more.

But, um, even right like conservatively, um, I think it's safe to say that even if you just look at Fluid on Ethereum, um, if it can dominate just the ETHUSD market and steal some of that market share away from from Uniswap, right? Like it could it could increase its volume and, you know, and revenues um or fees um, you know, 25 50% and that's that's being pretty conservative. That's not even including potential volume increase um from Salana or exposure to to Salana markets. So um I think that um I think that these catalysts are are pretty big in that sense. Um do I expect fluid to to dominate um volatile pairs

like it does for correlated pairs? I do not. Um, I think that it's it's a lot easier levering, right? Getting those benefits that that Fluid offers you with smart collateral and smart debt with correlated pairs because you don't have the liquidation risk. I think that the second that you you start to really lever up um with volatile pairs, I think that the level of sophistication that that requires and active management of your positions increases um significantly. And I don't know if right that is necessarily um you know an extra couple basis points here or there. I don't know if that is worth kind of all that that hassle. Um but I do think for um potentially some of the some of the

larger pairs where there is liquidity there um you know at safe loan to value ratios if if you could do something just as simple right as instead of depositing your ETH into a if you could deposit it into Fluid and then you also just get this extra yield because that's deposited into the DEX and it's LPing you know the ETH the ETHUSD pair on Fluid um and you're earning more on fluid than you could on a with, you know, fairly low, you know, to almost no risk. Like, I think that that could be very desirable.

Now, are they going to, you know, take 50% of of all, you know, volatile swap market share like they did for stables? Like, no. I I I would bet against that. But, right, once again, the volatile market is so much larger than correlated pairs. like even if they just get a fraction of that they could you know increase their growth um or they they could grow significantly right upwards of like 50 uh to 100%. Um the other exciting thing um is the buyback proposal announcement. So if you go to the next slide um they the the team proposed a few different buyback um models um for the token. The first model is a

um sorry one sec. The first model is a dynamic buyback model. So if the market cap ever goes below um 500 million, they'll start um buying back the token um with 100% of all revenue. Um and then as it as it gets higher than 500 million, it'll start buying back the token um with a linearly decreasing amount of revenue. Um the second model is a T is a T-WP um buyback where they will buy back uh it's not a T-W buyback.

It's a it's a 30-day T-W buyback model where if the price is below the 30-day time weighted average price. So essentially just like 30-day moving average, they will buy back uh the token with 100% revenue. if it's over that moving average or T-W, they will not buy back tokens. And so this is to kind of adjust the buyback based on market conditions. Um 30-day moving average is actually pretty quick. Um but you we do see kind of like a difference um in distribution of price being below or above that depending on the market. like since October, late

October 2023, um since Bitcoin bottomed and has been going up, um price actually spends around 60% of the time above the 30-day moving average. So maybe in bull markets, right, it's only below at 40% of the time. In bare markets, maybe it could be um below it as much as 60% of the time. So really that you know more more or less over the long time frame it's essentially buying it back 50 you know 50% um of the time revenue goes to buybacks and when you actually run these numbers um both methods are produce um not identical but very very close results um in terms of the amount of buybacks. And so what you're seeing now

is a sensitivity table where just kind of look through um you know based on recent volumes like it really looks like the buybacks are going to be somewhere between 10 mil and 30 mil um annualized and you can see at various FTVs what percentage of the tokens um uh the protocol would be buying back annualized. Um hyperlid buys back around 4%. So I think it's looking like fluid would be somewhere between two and 3%. Um so I I do think that that's actually pretty significant. Um and another reason to to be bullish um fluid at least another reason why why I'm uh

constructive on it. So these nothing's live yet. the community is kind of debating and and voting on what they want, but they would go live um August 1st uh potentially. So, yeah, I think I think there's a lot of a lot of things to be excited um for Fluid, right? Salana launch, DexV2, and then buybacks. Um it seems like everything's kind of coming coming together for them and um definitely, you know, reason reason to be uh to be bullish. So, that's kind of the overview.

Yeah, I mean this was a great overview. I think like a couple of things, right? Like as you were mentioning like it it's going to be interesting to see if fluid can take market share away from prop AMMs just because like the deck structure on Solana is completely different to that of Ethereums. Um the other thing is that they do have like a strong distribution partner with Jupiter for the lending side uh for the beta product and I think that this can be really good product especially for JLP looping uh because obviously like that's Jupiter's like a flagship uh kind of token. So like if they can uh bootstrap a meaningful amount of liquidity for the

JLP looping product that would be uh beneficial for fluid. And then the other thing like that's more interesting is that this buyback proposal that you were just discussing. I I really like that the founder is moving away from this programmatic buybacks as a default and kind of opening debate on what's the optimal way to conduct buybacks for a protocol like we've seen on the past for things like radium for instance where they just bought raid tokens back at when the market is euphoric and it's not really necessary and you're just buying back your tokens like very expensively.

So like this dynamic buyback based on FTV, it's really beneficial because you can buy back your tokens when you think your product or your token is undervalued uh fundamentally which is kind of like how buybacks work in the traditional world where if you see a company conduct stock buybacks is because they think that their stock is potentially undervalued relative to what investors as a whole think, right? So, I think that the dynamic buyback proposal is really cool and I would hope that's the one that's chosen at the end uh over the over the top like 30-day swap. I don't think that's really interesting like

just a programmatic top. Um but let's see what happens. Yeah, I I totally agree. And and even in the proposal, right, I think um the team was favoring some hybrid approach between the two. Um or a fourth option, right, which is no buybacks at all. Um and maybe they're just growing so rapidly that they don't even need to do that, right? And you know, their token is fully diluted. Um there's, you know, no no investor overhangs or or cliff or anything. So, um I think that that's all that's all very bullish. Um and something to mention as well is um I I think that to the prop amm point and

this is something that that I've talked with the team with the the team with a little bit. Um I think prop amms are they're awesome, right? Because the you know the the team themselves are are effectively the market maker, right? And because they have a ton of liquidity um they can they can create substantial substantial depth um on you know the major pairs that they're trading and and you know not get run over right um obviously I think toxic flow is probably the the the most devastating thing for LPS and you know these teams they're well capitalized they have they have strong talent um you know if they can if they

can update their prices, right, faster than other arbitrageers or um or competing LPs, right? Um I think that's how they're able to to quote so effectively, right? They have this infrastructure advantage, potentially a talent advantage, resultant algorithmic advantages. And um it just makes sense, right? Like I think what we've learned is if you're just, you know, retail person, you know, if you're retail guy Joe and uh, you know, you want to deposit your your thousand dollars into an AMM to make passive like passive returns, like you're you're going to you're going to suffer um impermanent loss, right? It's just you're you're effectively marketing. And so I think something cool that Fluid could do as

well is um create like vault um products. And this is something that they they talked about as well in the buyback proposal. Um where you know these vaults might have specific strategies um of using smart collateral and smart debt um where it makes it a lot more desirable if you're just a retail user to want to deposit liquid uh deposit capital in there for yield um because you know that it's going to follow um you know like a good strategy. So, I think that to me is the their only chance to compete with the propm on Salana. Um, but I uh, you know, I I think that what I do like is the team has they've been

around for, you know, for a long time. They used to be instad. I think that they've evolved. They're very adaptive. Um, you know, they're obviously like OG DeFi guys, very very DeFi native. And so I think that they understand all these all these problems. And um you know we talk about differentiation there isn't you know there isn't really another protocol that has this this type of you know dex lending lending hybrid and because of that they can um you know they they can offer some pretty pretty advantageous um or they can provide you know capital efficiency that that other protocols just can't um provide. So yeah, we'll see what happens. But um I

do think that uh there there's there's a pathway there on Salana. Um it might take time, but um I think uh there's reasons to be optimistic. >> Awesome. If uh no other comments then yeah, maybe I'll just summarize it. It definitely seems like potential upside from expansion to Salana. Obviously the buyback potential um V2 I think you mentioned. So I think all exciting. The big question mark that I was going to raise as well that Carlos um so gracefully did was the hyper competition that we see on the Salana decks side of

things. But uh if they can edge their way in there then definitely some some interesting uh potential upside to I don't know that there are many cases where we see you know strong success in the EVM side as well as the Salana side. So um if they could be the first to like really carve out in both ecosystems that would be really interesting um because that's not really been achievable up to this point. uh we tend to see you know Salana native um teams do well in Salana and then you know EVM native teams do well on the EVM side um so would love to see that um but I think we are through our topics for today gentlemen uh thanks

for coming out and giving all of your great insights um and sharing some of the research that uh typically is reserved for subscribers but wanted to share at least a little bit of alpha today um talk about what we're digging into get a little bit out of the typical noise that maybe everyone is following on CT and headlines and and dig into a little bit of the the deeper research that goes on uh maybe behind the scenes or just what we're we're actively tracking. Um maybe just to to end on a light-hearted note uh anything outside of the topics covered today, is there anything we're excited about um going into the next next couple weeks, next couple months? I I'm seeing there's lots of discussion

rumors around Salana Dats. Maybe that's the next trend. Um, anything else top of mind that uh we're looking forward to here? >> Um, I think Salena that coast will also coincide with the ETF approval. Uh, so that's going to be interesting like what gets more inflows, what gets more uh buying pressure for soul. Uh, one of the advantages of being late movers compared to like ETH ETFs is that sole ETFs will launch with staking. Uh so it's going to be interesting if like staking has like a meaningful differentiator in terms of the demand that captures on the institutional uh side.

>> Yeah, I think for me it's next week the world libertify token launch. Yeah, I just think it's interesting. I think in the pre-market it's being valued around 20 22b which kind of gives you an insight on how the market's looking at the token. Like I mean it's not really fundamentally valued, right? Because they don't have a working product yet and like a with like you know 60B in TVL trades at 4B but something in a similar category no product yet is trading at 22B. So it kind of gives you how the market's valuing it and I think how they're doing it. It's like hey Trump with the memecoin is around like 10b in valuation. So if this is a Trump D5 product we got to put a premium to it.

So I just excited for the launch. I want to see how it trades and whether we get another crazy people pile on money and it that could be interesting. >> Honestly, I I don't have any I was kind of uh hyp I was excited about the uh the heaven launch. Um rode that a little bit. Um not excited anymore. Move moved past that. Um actually I actually actually am starting to get a little uh a little bearish right now. um just in the short term um I just feel like momentum um is dying and so honestly probably looking to to derisk. Um but I I was I mean you

brought up the Salana debts to me I think that's probably the the most interesting thing here. Um and you know maybe if there is um I don't know the weird things happen around these kind of turning points in the market right like right when everyone thinks it's over with ETH it you know ETH hit an all-time high um people were doing live streams about ETH all-time high price and all this right like I wouldn't be surprised if the Salana rotation is has begun and maybe that's why um you know ETH could be uh significantly underperforming Bitcoin is um people selling and preparing for what could potentially be, you know, a next leg. So, we'll see what we'll see what Bitcoin does. Um,

I'm I'm not convinced that it's going to bounce here. I think it could go a little deeper, but um I don't know. I I could see I could see a Salana rotation occurring, especially if we see those DAT flows. So, I think that's probably the number one thing to be looking at right now. >> Yeah, I'm gonna agree. I think I mean the debts have been the sort of the biggest strongest trend um of the past few months and maybe even of the past like year if you count Sailor um with the largest DAT in that um they've definitely been a big force within the markets. So, and seeing what's happened with ETH recently with a lot of the ETH DECO um to see a big push for Salana or even other assets outside of you know

BTC and ETH um it would be interesting to see a continuation of that trend. Um the reverse of that to see you know all that sort of leave the market or their bids leave the market would be you know probably not as exciting for all of us risk on. Um so to see that continue uh I think that would be a positive outcome. Certainly, if it's if it's Salana's turn and we see big inflows like that are rumor rumored um for big tat DAT raises um to then get shoved into the soul token um that should be pretty exciting for Slaughter. I guess the big question mark here which I don't know that anyone has the answer to is that I think the at least on the ETH side um and a lot of the ETH that codes it was not

not so predicted right I think people had kind of like you said Shapiro like ETH was kind of written off earlier in this year and um when those treasuries co came onto the market it was like starting to see a little bit of a revival and I don't know that there was like this pure expectation of like wow they're really just going to like shove billions into the token and send it up. Um, but we inevitably saw that happen. In this case, I don't know, maybe we see the market sort of frontr run that a little bit with Salana. Um, and there could be a bit more of like a sell the news situation rather than uh rather than a run it up um type of outcome. But it's hard to say. You know, they they could surprise us to the upside if the rumors that we're hearing around

potential DA raises end up being even much larger, then um you know, we could go higher. If if they fail to to really to bring that money forward and put it in, then uh maybe it surprises to the downside. We'll just have to see. So, um, all right. I think we can close it off for today. Um, thank you guys for coming on again. Uh, this was a pretty long one. Uh, and I'll just do another quick reminder shout out for DS. Use code 0x100. You get 100 pounds off. Um, that's 100 something USD. I don't know what the the number is. Maybe 130 bucks or so uh off your tickets. So, find the link in the description in the show notes. Uh, and we some of us at least that get to make it out there. Uh we'll hopefully see you in London this

October. Um but until then and until next time, we will see you guys. So thanks for coming on today, guys. [Music]