Restaking and Shared Security: Lessons from Cosmos, Polkadot, and Beyond | Roundup

Transcript

if we don't learn from history we're like doomed to repeat it and I hope sincerely that we are learning every single time and getting better and smarter about this stuff like par chain auction slots so first of all it just like limited Innovation right you couldn't have a permissionless Le like tap into the economic security of polka dot they would have one every three weeks it was this massive event like I think aala had like 1.3 billion dollars of like dot locked up and then it was locked up for like two years right I mean like holy inefficiency of like Market structure right just like wow this is crazy like some of them like a year later went for $555,000 nuts hey everyone wanted to give a quick shout out to the Wormhole

Foundation if you're a bell curve listener you know that transferring across chains can be a massive pain I certainly do I complain about it on this program all the time that's why we are super pumped to have partnered with Wormhole Foundation the stewards of the Wormhole protocol the Wormhole protocol connects over 30 blockchains and six different run times including salana soie ethereum layer 2os and more and the coolest part about this particular partnership is that they have made custom bell curve nfts which you can get and mint for free you can claim that by just going down into the show notes and clicking on the link all right guys on with the show he everyone this episode is brought to you by swell a team leading the reaking future with their liquid reaking token r s now I've talked about liquid reaking on this program

before I think it is going to be a massive tectonic shift for ethereum and I am super super excited about it and I like the swell team a lot goes without saying do your own research this is not Financial advice you guys all know the drill again I like this team and if you stick around I'm going to describe how you can restake your eth in swell earn pearls I layer points and a whole bunch of future rewards so thank you very much for swell for making this episode possible hey everyone wanted to give a quick shout out to this episode sponsor flood protocol the optimal decks aggregator now if you are a listener of bell curve you know that meev is a massive problem which is why we are so pumped to partner up with flood on this season flood is the only G Fess and me

free aggregator that not only gets you the best execution but also gives you back all the extra Surplus that you create every single time you swap now this is relevant for both swappers and developers but you're going to be hearing all about them later in the program so for now thank you flood and back to the show all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host today are their personal views and they do not represent the views of any organization with which the co-hosts are associ with nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone welcome back

to another Roundup edition of bell curve you got uh miles uh today miles welcome and special guest new the show Jim pillo of figman cap guys welcome thanks for having me uh longtime listener first time caller excited excited to have you Jim I love excited to be here I love the pudgy in the back there Jim that in in shot Welcome to the New York figman Capital office uh I'm the GP at figman Capital uh been working with miles for a little while and uh got to know Mike uh at eth Denver and then we like we're all in New York City and so got to grab drinks um yeah you've got the pudgy penguin behind us which is an nft that our our CFO and Co owns funny

story behind that we've got some I stickers back here we've got some bad kids on the walls for you bad kid people so like yeah yeah it's a fun office we believe in office culture everyone's here everyone works out of the office every day it's good times we we we love a CFO that is comfortable with pudgy Penguins uh that is the sign of a flexible flexible CFO more so than anything he let us get away with a lot of things like we're he's responsible in all the right ways and flexible in all the the best ways that's amazing that's a good one too it's got a little Santa cap I don't know the Rarity of all the of all the Pudgies but it's been a tough month for Pudgies actually they were down like 50% something like that in the last month so

Hanging On by a thread but what are you gonna do I they're up actually I saw the last couple hours so that's good everyone's rotating into Geo bodden rotating their profits into Geo bodden dude so we so I'm talking and by the way Vance and Michael they're both flying back they were with us in London I've been in London for the last three days at at Das London which was a blast for the most part you would be shocked at the amount of times that Meme coins got referenced on like the main stage of this all institutional conference by and it's not just like the degens that like snuck their way in it was like Franklin Templeton was talking about these things like in a positive way you know this wasn't just like oh wrote speculation

Yad yadada where there were there were a lot of positive framings around these meme coins in a very institutional crowd so so that was interesting to me I I like we we don't talk too much about them publicly I like as some funds do some funds don't I'm curious like what was the positive framing like how were they like looking at them and thinking about how's trafy thinking about meme coins I think the positive framing basically is that it encourages adoption um and this is where I there's there's a lot of over intellectualization going on around meme coins I think RIT large um I think uh uh I think whenever you start to see the you know 20 thread you know think boy pieces from the VCS it's like

you should probably just sell whatever that whatever they're talking about and I think we're reaching that with the meme coins like tokenization of culture okay but one thing that I've thought about a little bit on this whole like this always comes up right speculation versus real world use cases I think Finance you know when you're building Financial product the alchemy that actually goes into that is speculation and that speculation can actually lead to real products that are extremely useful great example of that is the 30-year fixed rate mortgage that is not an animal that exists in the wild the only reason why it's possible for banks to offer you a 30-year fix rate mortgage is because there's a bunch of Deens out there that want to take levered bets on interest rates uh in this really deep liquid Market of interest rate swaps so

it's never felt totally true to me these people that are against speculation it's the work of the devil uh and it's never really felt great to me to be like yeah we're just building an online casino I kind of hate both of those framings I think when it comes to financial applications some amount of speculation is required to make real products and I don't know I sort of just Loosely lump meme coins somewhere into that conversation um is how I look at it I mean like meme coins are you know essentially icos without the Ico right so like you didn't have to build the put the deck together you didn't have to like scam a bunch of people like everyone kind of knows what they're getting into on day one um and like it's gambling it's like onchain gambling it's

onchain like I sometimes they become communities sometimes they don't um it's fun people should do it uh I'm gonna like quote you in like the over intellectualization of meme coins is like a hilarious thing to think about uh because when you're on chain and you're looking for them it's anything but intellectual at all but it's fun it's good it's like a it's it's and like there's a ton of coins that come on on and a lot of them are launching right now on salana and the trading pair is soul right and like it does create a bit of like a base like a bigger base for like soul to be a trading pair a major trading pair on its own chain um people

aren't rotating into like stable coins when they sell out of these like right they're they're rotating back into so um I assume that has very much helped the price of so um but it maybe also comes with like know we' talked about this a little bit before like violent the lights come with like violent ends and you start to see like these crazy ticks up and you're going to see like crazy ticks down because like the people stop you know when when memec coins go down you sell into soul and then like when some point people start taking profits into Soul or or something like maybe it impacts the price we haven't looked too much into it but like it's there's a ton of [ __ ] coins on ethereum yeah I to okay Jim and mes let me let me get your guys take on

something about this so talking about Pudgies I I do think that Meme coins are starting to fulfill uh at least one of the reasons why I was really bullish on nfts going into this year so if you look at some of these big airdrops that were you know this this is the first time I feel like that I've seen this Dimension is a really good example of this that gave large airdrop allocations to Pudgies holders pudgy holders or bad kids Etc and the idea is like look we know that we're getting sibl here so we might as well if we're looking out into the universe of crypto users and we're looking for communities that are to have some form of identification right and and are wealthy and are going to be good potential customers that I don't already have well these nft collections actually kind of look like that and I I don't

know if this is true so someone fact checked me on this but I saw that some crazy percentage of pudgy holders actually ended up just staking their Dimension airdrop so in my mind that was one of the big reasons why you wanted to hold an nft like you're probably going to get more of these free air drops as uh you know you get a bunch of tges coming up in the next couple months but I think mem coins are starting to eat into some of the market share of nfts and the other probably larger market for nfts is just all coins with pictures um I think that's a very real part of it and I actually heard some speculation at this at this conference this week that maybe uh projects would actually start airdropping to mcoin holders and I am a little bit conflicted about this I you know from from one

sense it probably is a really great way it solves a lot of the problems that we were just talking about um in terms of you know cble resistance all that kind of stuff it's probably a good way to get wider distribution um and very retail participation for your for your airdrop on the other hand I'm imagining the type of person that is holding these meme coins and thinking do I really want that you know are these the the best people that I could have on my cap table so to speak you know maybe not uh I'm not 100% sure they're crypto users they're probably crypto native most of them I mean there's maybe a world there where like if you're where where it could make a ton of sense right like if it's people that you want using your product like

who else is like in the gutters like looking up yeah it's not at the very best it's geoo you know others but like it's it's already your grandpa's meme coin now so and it's better than civil Farmers right and it's different and like it will distract from you know inevitably like people who are upset about whatever allocation they got um and yeah I think these ways like to think about targeting on airdrops are kind of fun um we talked about even like looking at podcast audiences um you know how about it's a bit self-serving yes uh but I think that's pretty targeted as well um so

yeah it'll be interesting to see how that evolves we were talking to this one like uh reaking protocol um and they they had mentioned that uh they were thinking about like using reaking for not just for security but more for like you know you like lock up tokens and maybe you get like Whit listed for like some I can't believe I'm saying this like meme coin pre-sale or something like that right but like essentially like you know resing can be maybe used in different ways than like what people are thinking about like it actually is like decentralized trust in a different way where it's like trust like that you're you're gonna you're gonna lock up this token it's this opportunity cost that you let's assume it's ether solar or something like the opportunity cost is like you know you are gonna give this up in order to like access something for

a period of time um I don't know whether that needs to be restak or not but like essentially it's like it is an interesting way of thinking about like yeah maybe also transitions us into something other than meme coins but like uh this like every panel for the last three days like oh uh the institutionalization of Market structure two minutes in talking about meme coins but uh that that is probably a good segue here Jim because we initially what we wanted to do with this with this conversation is have a little bit of an update on the reaking ecosystem in general and I know um the two of you are just extremely extremely deep into the ecosystem and it feels pretty timely um you know I think we just we're having some of the large lrts that are launching pretty soon ether 5 being in

that bucket there's over 10 billion dollars worth of capital that has migrated to Igan lay looks like that's going to be up only um and there are some uh you know rumors of new Challengers uh in the reaking arena outside of Igan layer and overall the space just really feels like it is heating up and wanted to actually before we get into some of the nitty-gritty specifics around igen layer wanted to talk to the two of you because you've both been very involved in the uh progenitor uh of shared Security on Cosmos right which is um interchain security and uh I think you know miles you and I in our app chain season we talked about how ethereum might be a little bit guilty of ignoring some of the lessons of Cosmos namely interoperability uh right as it as it

adopted its app chain um sort of road map and I would love to get a sense from the two of you about some of the lessons that you learned uh from the Shar security side of Cosmos back in the early days and see what may or may not be applicable to Igan layer today yeah and maybe I'll just I'll just start off by kind of giving the two forms of of shared security that that are um either in production or in development in Cosmos um and then we can kind of compare them to igen layer and then we can talk about what's worked and what hasn't maybe within those those uh early early versions right and so the first form is what you mentioned is interchain uh security or replicated security and the first version of replicated security was Implement implemented on the cosmos

Hub and with V1 of replicated security if governance approves a new consumer chain the entire validator set of the cosmos Hub and all of the economic stake behind that is then you know restak and now operating uh so the operat the validator is now operating a new chain and all of the economic stake is restak to that chain um mes security is kind of on the other end of the spectrum where it is purely the uh reaking of Economic Security so let's say I am on uh osmosis I've delegated to a validator on osmosis say figment um and osmosis enters a mesh agreement with another Cosmos train

let's call it axar um I'm purely taking my the economic you know value of my stake and red delegating that to a validator of my choice on the the other uh chain and these with mesh security it can be bilateral so meaning like these two chains can secure each other or it can be Just One Direction so a provider chain providing e Economic Security to a uh to a consumer chain and maybe compare that to uh and and maybe I'll also say that more recently there is um a V2 of interchange security called partial set replicated security um and with this it is okay Cosmos Hub has a new consumer

chain it's not going to make all of the validator set opt in to running uh a validator for this new chain validators can opt in basically on their own if they think it's you know they can be economically profitable and and I think Jim I'll let you speak to like why that makes a lot of sense based off of V1 um but quickly just to compare to to igen layer it's kind of a mix right it is opt in from the validator level and opt in from the Staker uh level right um and maybe the the one difference is as a Staker you are delegating to an operator and then basically you let the operator decide which AVS is it's going to

support um and it's actually going to run the hardware software right of those avss and so it's a little bit of a it's a mix of both all right IC V1 would never work on ethereum because you would never get right all of these validators it's not an active set of just 150 right it's it's thousands and so um maybe I'll I'll pause there and then Jim you you've been very close to to iv1 you've written about okay what can we learn from it and um maybe you can speak to a few of the lessons there that that I think we are thinking about a lot as we're looking at ien layer in its early stages yeah miles you've been like really like instrumental I think in

like kind of like educating a lot of folks on like the igen layer side of like what avss are going to need to to do and so the AVS equivalent in Cosmos as you mentioned is consumer chains um they're consuming security and like presumably paying some sort of like reward um or some sort of like rent or something lease payments to uh the cosmos Hub and in the form of like Adam stakers so they'll receive some some revenue from that or some additional like payments for that um IC has been like I was really excited about IC when it was first announced it was part of like the atom 2.0 white paper it was like the part that I was like actually the most interested in um we've seen we've seen shared Security in

like multiple levels right like actually like polka dot and Par chain auctions is probably the first like real big example of like uh what shared security can look like you know where like essentially the more dot that you have you'll win an opportunity to be like part of the shared security of like the polka dot Network there's a single like kind of relay or a collator that helps to like transmit blocks to the polka dot relay chain and like an exchange for like these like massive amounts of dot that were locked up especially initially um these teams would like distribute kind of in the form of emissions it's like slightly different right it's like sort

of payment for this but you would like issue tokens to dot token holders do token holders on the on the flip side were not staking their dot right like you didn't like it wasn't a liquid staking token so you were actually there was an opportunity cost right you thought that like the yield that you were going to receive or like the inflation there whatever you want to call it emissions that you were going to receive from this par chain one to one like maybe not one to one sometimes 20 to one sometimes 100 to one was going to be more valuable than like just staking your Dot and the crazy thing about PA like pair chain auctions like great lesson learned right like if we don't learn from history we're like doomed to repeat it and I hope sincerely that we are learning every single time and

getting better and smarter about this stuff like par of chain auction slots like first of all the very first one was like at the time of dot to win a slot right because there's like a slot auction every three weeks so first of all it just like limited Innovation right you couldn't have a permissionless Le like tap into the economic security of polka dot they would have one every three weeks it was this massive event like I think aala had like 1.3 billion dollars of like Dot locked up and then it was locked up for like two years right I mean like wholly inefficiency of like Market structure right just like wow this is crazy like some of them like a year later went for

$55,000 nuts I think Miles and I both ate aala actually and I have no idea what even happened to that we might we might have some dot like that's now unlocked the it might still be there I forgot about it anyways go ahead um and so there would be these like just like the market was like super early like and very nent and like it really kind of stifled Innovation at a point in time where like polka dot possibly could have had like a bunch of pair chains on it could have been like the shared security network and like layer and like a lot of these like pair chains look like l2s so you know a couple years pass by and Cosmos Hub comes in and says like hey we want to do this like shared security protocol um we're gonna call it IC jquan

actually had like tweet like had actually like written a GitHub which is relatively legible um to an extent like in 21 so he' been thinking about this for a really long time and he talks about V1 he talks about V2 and he actually talks about mesh security too which he calls Sunny's version interestingly enough um and there's some like pretty good insights in there um the benefits of consumer chains are I think are you know we can talk about the benefits and we can talk about like some of the some of the costs and some of the challenges there I wrote this like crazy article about it and I was like this is like very relevant because I what I'm noticing is that like people are kind of staying in their own Lanes like maybe salana people sometimes stay in their Salon Lane maybe ethereum people

sometimes stay in their ethereum Lane maybe Cosmos people are staying in their Cosmos Lane and we're launching this like like I leer is launching on ethereum and like just reaching out to some folks and being like hey are you paying attention to what's happening on replicated security right now because like you have test in prod right now like you have like a real live version of shared security and you if you just pay attention a little bit you'll see the pain points you'll see what's like not working over there right now and what they're gonna have to try to fix and you can actually like not repeat those mistakes we don't have to learn those mistakes over again right over in ethereum um so it's been really interesting that's just such a critical point I love that you said that because you hear that very often there's this

pretty predominant take in crypto which is look there are too many things going on I can only focus in my own lane and I want to stay in this ecosystem and I just think if you do that if you if you look across all these ecosystems I mean there's so much design convergence miles you and I've talked that was basically the thesis of the CMO season but you seen it we're going to talk a little bit about salana l2s later as well you're seeing Bitcoin l2s like cestia is starting to look very similar to ethereum like all these different road maps are converging and I think it' be really silly to not look at the lessons that folks have learned on other chains in the past just could not plus one that attitude more totally agree with it I agree and maybe to double click on like

what are some qualities that uh or common common qualities between say like polka dot par chains and ICS V1 that we can identify as okay this was less than ideal like this this should be a improved upon um and I to to me the two are like uh when you have an overly rigid structure um and I think that is reflected by like the the I think what Jim alluded to with the par of chain auctions and kind of a set schedule um I think the second piece is you know this this whole idea of like all these validators are not created equal right there are definitely economies of scales within with within the validator

industry like broadly right and um you know I think there is a a world where if you were to say like combine let's say partial set security with mesh security you could get the best of both worlds where you could have the operators that are you know can profitably opt in opt in to run these chains and then operators that don't are able to you know um if you're delegating to one of them at the bottom of the set that doesn't mean you have to like miss out on this extra yield you should be able to use mesh security to delegate your stake to one The Operators that is opted in right um what other big ones are there Jim I I feel like uh there's some like super basic things like I I think when it came to replicated

security like onboarding process like like a lot of it is just like standards and processes like how do you do this and how do you do this in a thoughtful way and like what are the expectation and managing expectations right like we have 11 billion dollars of eth like restak on igen layer right now like we argue a little bit about what's Supply and what's demand but like the question question is like whether anyone is G whether there's enough abss that even need this or can actually incentivize this in like a proper way that like doesn't mean that igen layer is somehow like subsidizing like people to continue to restake their their eth um in Cosmos because of the replicated security model like you have 180 validators on Cosmos Hub and they're forced to support any consumer chain that launches

right so that's $4 billion dollar of Economic Security like staked atom right when you look at the two consumer chains that exist today you have Neutron and you have stride right no judgment on the projects or the teams or anything like that like talking with like a a collective friend of ours like xerx crane who say like it's very hard to incentivize a a little a big thing with a little thing right and so like the questions of managing expectations everyone sort of like vibing into the first couple consumer chains and saying like yeah let's just do this this is going to be a great experiment this is going to be great for every and nobody really looked at like the proposal standards like what do we expect like to be a good amount of like actual compensation and like for for

this Economic Security for this validator set like are validators being properly con compensated are some running at a loss um what is like the fee split what is the yield split like is all of the the staking rewards is it going to Cosmos Hub Adam stakers is some of like are you going to be able to do dual staking these RL ons will you be able to stake like your stride token or your Neutron token what's the fee split and we started to see some of these and like people were just like there was no guidance right and so like Neutron like essentially had to figure it out on their own and they had to like put the first proposal together like kind of on their own and they threw out some numbers they were like I think it's like somewhere around like we're GNA give 25%

of like transaction fees we're gonna give like 50% of me and we're not gonna have any inflation right and so okay that might work if you know but like what's what is the value of Neutron's token and how much transaction fees are we really like what kind of transactions are we actually looking at here in volume and you know like you start running the numbers and I ran the numbers and I was trying to like explain the numbers to some people and I was like oh like this is you know no offense this is like terrible uh for like Adam sakers like and these validators especially like the validators were running one network now they're running two validators you can tell me it's easy you can tell me it's hard to run a validator on Cosmos Hub or Cosmos I don't I don't care it's so cost money um

and like the revenue was like for one atom at $10 like you can expect somewhere around like fractions of fractions of a penny uh for one atom state right and so you're just like who is making money on this like who is actually like incentivized to actually do this and to support this and to like make sure that like Neutron doesn't go down or that Neutron is like supported like The Operators are not incentivized telling them that they're already getting paid for in atom tokens is like not like something that anyone wants to hear like hey I'll give you twice the work you're going to work 80 hours this week I'm going to keep paying you the same salary going forward is like not a great incentive model it doesn't really align the interests of like the stakers the consumer chain the the producer

chain and like also The Operators that are actually like trying to run businesses on this it's just like kind of unfortunately like probably not enough and and it was more like set it and kind of forget it that was the other issue um there was no and and of course the the price of these of the reward tokens could fluctuate a ton right we saw you know stride has has like 10x in the past six months right that that probably should also be able to you know be factored into these things right it like the amount that's that one of these projects pays out you know should not be like extraordinarily unprofitable for everybody you know in the bare markets and then maybe too profitable in in the bull markets and I think the other point you made there is that to me you know I

think the operators get the uh kind of a raw deal and I and I am starting to see this in igen layer as well that that I don't think enough uh if the AVS side or the reaker the depositor size are actually thinking about like the constraints of The Operators because the difference of taking on additional slashing risk is very different than running new hardware and having like humans right running like operating these these these networks um the you know the cost is is linear right for for uh for operators as they take on more and more but the cost is not you know it's hard to quantify like the cost you know to stakers right uh if it's just uh

additional slashing risk and and really the only way that that um operators are paid are via commission fee right so it's usually five or 10% and I think that that should be either a floating commission rate or it should be like separated out entirely right uh I think you can predict how much operators you know it's going to cost operators to run these networks and you can make sure that they're profitable and that can be like a totally separate payment stream and like consideration then how much do I need you know to pay depositors in terms of or stakers in terms of yield uplift right for them to to take this on hey everyone wanted to give a quick shout out to the title sponsor of this season

of bellur The Wormhole Foundation now if you are an onchain user which I bet you are if you're listening to belur you know that the cross chain experience in crypto still sucks let's just call a spade a spade we talk about it in this program all the time interop is still a big problem which is why we specifically wanted to team up with the Wormhole Foundation they are a decentralized interop platform that powers multi-chain applications and bridges so that could be anything from defi to nfts governance oracles and more so if you are a developer and you're building uh cross chain assets apps or data or anything like that I highly recommend that you click the link at the bottom of this episode and go check out to see what you can build on Wormhole and Wormhole first

of all this is a fun team they did something really cool with us you can actually go and click the link at the bottom of the screen which is going to send you to a landing page where you can claim your own unique Wormhole nft so we're doing this with me and we're doing this with Jason my co-founder so help a brother out it's a super cool nft I promise go click the link at the bottom of this episode and fill out your PO app get your free nft and if you're a Dev head over to Wormhole and check out to see what cool cross chain stuff you can build hey everyone this episode is brought to you by swell a liquid reaking protocol in the issue of the RW liquid reaking token now if you're a listener belur you know that I am just so

fascinated by reaking and liquid reaking I think it is going to be one of the most important Trends in ethereum and I am really excited for the benefit that it unlocks both users and also ethereum the protocol itself now disclaimer whenever there's yield in D in a product do your own research this is not Financial advice you guys know the drill but swell is a great team they have a non-custodial product and they are mission driven on giving you the best liquid staking experience if you take one benefit away from using liquid reaking make it be Capital efficiency now you can earn passive yield from ethereum you can earn yield from multiple actively validated services that stack on top of that and then you can still use our S as collateral in D5 and because I know y'all are a bunch of DG there's a points angle here as well

but in swell we call them them pearls so pearls equal points and if you stake your e with swell you can earn pearls and future igen layer rewards when there's a token generation event you can swap your pearls for swell tokens head over click the link at the bottom of this episode again just pause what you're doing right now go click the link at the bottom of this episode check out swell thank you later hey everyone want to give a quick shout out to this episode sponsor flood protocol the optimal decks agregator now flood is the perfect partner for this episode on the multi-chain future because flood is Sol in so many of the issues that we're going to be talking about this season and this is relevant for both Traders and devs so if you are a Trader you should definitely head over to flood

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appreciate you flood so well let me let me try to because I want to zoom out here and just explain for the audience as well like I I think what we're talking about here is okay everyone's very excited there have been multiple iterations of shared security by polka dot um interchange Security in Cosmos now the newest one is igen Lair and I think what you guys are both describing is that everyone thinks that that's an extremely good idea um in principle but the actual details matter and especially the economics have not been very well thought out and whether or not this is a good deal ultimately for ultimately for uh the sort of the supply side of this and it seem this is kind of what we're seeing right in igen lay that we've seen a ton of money East stakers pour in we can speculate as to why that is it

probably they're chasing doing what the Deens are doing and try to farm the igen air drop right or various other types of air drops uh so we can question how healthy that incentivization is from the marketplace itself which is a huge Factor here but it might just like maybe just to put a bow on the lessons from the ICS part of it like one thing that I would also add is well I would just ask you guys do you think um interchange security as it exists in Cosmos today is successful or not because one one of the challenges that I've also uh thought I think you guys have like Loosely alluded to this but there's also an adverse sele problem um when it comes to Consumer chains as well I think that's not like stride Neutron are both phenomenal projects but I'm not sure they really

did it for the economic side of things right they kind of did it there's like a loose alignment cultural reason that both Neutron and stride did this that was more a business strategy thing so I don't know I guess let's let's put a bow on the like lessons uh part where we kind of move more deeply into igen Lair and get I can I can give a super quick take I think they succeeded on the tech and you know V1 is like a find V1 uh V2 they've they've shipped very fast um I think where they've you know it's fallen short is to your point like the non-technical stuff like just just having the reaking pipes itself does not mean success um there's the qualities of like the atom token in terms of market cap liquidity volatility you know the

the high the closer you are to something like eth in terms of all of those things the better and and obviously Adam is is very far away from that and then there is kind of a brand alignment sort of aspect to it that I think um has also been kind of a headwind for for the Hub but Jim carouser Tech yeah I think all of those things are accurate I mean the the other thing I'd say along alignment especially with Cosmos Hub is that it's like this application specific blockchain and they have liquidity right they have atom tokens and one of the things that's been really interesting is like there is actually like business Partnerships that can be spurred from this right like there is a treasury and that treasury can be used to like deposit Adam into amms right that Adam can be used through governance proposals

to um to liquid stake on stride and then to like provide a liquidity pool between like stride uh sorry Adam and St ad St Adam and like so there are ways in which like you say hey this is like kind of like a like uh Rising tide lifts all boats sort of scenario that like can be very much more played into it requires like governance to be like thoughtful and like actually like positive into in certain ways and like one last thing I would say is that like one thing I did which like I really don't recommend anyone doing unless they like love being like uh like just [ __ ] on generally is um there was sorry for sorry for swearing um it's like I I I posted this article about like the challenges and

the benefits of com to IC and replicated security then what I decided to do was like here how how to fix it and rather than write an article about that I posted it on the cosmos Forum you have to love self- pain uh and the inflicted pain in order to do something like that so like it was an interesting experience I probably won't do it again but like I tried to come up with like solutions to these problems and thought like that there are like actual real tangible benefits that can exist but like you have to you have to do you have to kind of put in the planning work too it's not just about onboarding it's also about what the offboarding standards look like and like what are the processes by which like people get onboarded and offboard and we evaluate whether something is successful

or unsuccessful when do we cut ties right when do we dock our boat to it like so I think it's like really an interesting like there's a lot of learning lessons and I'm excited to like yeah talk a little bit more about what I's doing me too like can we get into the weeds of igen L so obviously there's been an enormous amount of uh demand from the depositor standpoint I don't even know what the latest numbers are I keep saying 10 billion I know it crossed 10 billion um in deposits at one point probably is higher than that now what I would be curious to understand is what is the AVS side of the marketplace look like um you know when we were at uh miles I know you you organized a phenomenal event um you know Club ABS at at eth Denver uh and just speaking to I

don't know how accurate these numbers are but just talking to some folks and there are a bunch of abss there but you know my sense of the size of that market wasn't hundreds of protocols it was you know probably sub30 and you know sub30 avss and quality was probably much lower than even that and I also think in terms of ultimately what's driving this my sense you know Jim you're maybe alluding at the beginning that uh not everything is about the economic security value proposition here but you know even when you're talking about something like there there two other elements which is one this sort of mushy uh question of alignment ecosystem alignment um and then I also think there's probably an

element here of maybe buying into a narrative uh we saw some of this where some of the stranded l1s that didn't necessarily have product Market fit um back when there was a new L2 launching every day I guess there still is a new L L2 logic every day but you know we're rebranding from you know uh mid- tier L1 into the mod the rollup road map for ethereum and it feels like some of the stuff that's going on in the AVS and reaking world is we're not just some middleware solution we're in ABS you know Jazz fingers uh that that kind of thing so give us give us a sense though you know being a little bit more boots on the ground of um what the demand side of this shared security Marketplace looks like yeah I I think that number is

probably pretty on I think there's probably 10 you know uh to to 15 large you could call them large projects like well-funded projects that will have you know High market caps um and then there's you know kind of a longtail and development um that that absolutely could you know be in the same boat in a few months um and on the ABS side I mean the rubber is starting to hit the road in terms of okay how much are we gonna pay like what do we actually want here do we want this like permissionless you know operator set no like that's a little scary out of the gate so we want to pick operators that we we know we like we can get on the phone with um and

then how much we want to pay it's it's kind of reminds me of where IC V1 was at uh beforehand I was like H let's just throw stuff at the wall um and that's okay like that is what I think we all expected um and I think what's what's interesting is that we're starting to see some of the first actual like announcements of lrts uh you know committing Capital to to avss now um and I think that that you know all those negotiations are are kind of happening offchain right now um and what's kind of funny to me is like you know we'll say like okay we are committing um a billion dollars you know across of of Economic

Security across you know maybe this LRT or like two or three lrts um you know we we're we've got the guaranteed that we'll have this for say like at least six months right we don't want more than this number we don't want less than this number um and so we need you guys to like make sure that this is kind of a siphoned off Capital right so new deposits are not you know coming towards our pooled security um because the reason for that quickly is just you know if you have unlimited Capital come in the yield is diluted for every and then you know you probably have a lot of volatility in terms of people withdrawing and um and and what's kind of interesting is that you know there's

nothing actually on chain to to enforce these these slas these requirements um and so it's like okay um well what if there's some you know Black Swan event and there's a huge withdrawal right um that all these things just kind of go away right um and then I think from the uh the really interesting one is these duration requirements that I think make sense like if I was an ABS I would want to know okay this is locked in for this much time and I don't have to worry about it again like we we kind of we set our economics and and we can forget it but from the LRT or any sort of like you know uh depositor side that that ends up

with a very different sort of set of Dynamics than say like what you do when you're uh when you deposit into an LST right there's going to be now like a lot of complexity in terms of balance sheet management for lrts um let's say how do you support withdrawals right if like half of half of your you know deposits are technically locked up according to these agreements and and maybe those agreements eventually come on chain right so they're actually enforced and then what do you do right um so yeah that those are some of the observations in the early days maybe the last one is that you know I think there's 11 billion of deposits a lot of it is in lrts um and avss for the most part are looking

at okay the easiest way to like do this is to have I want a permissioned operator Set uh to start off with um and the easiest way to get to a set of like you know highquality operators and a ton of capital is to go to lrts um and so yeah right now it's I think avss are mainly working with lrts as the fastest way to get this Economic Security and The Operators they want um and in general the you know the pricing power The Leverage right now is with the AVS side because there's 11 billion of deposits and you know the yield uplift on that 11 billion do is based off of what abss are willing to pay um and there's a you know relatively low number

of of super high quality avss and so they have all to leverage at this point and um I think that makes sense it's going to change too because I mean Jimmy you remember like stride NE R had the leverage in those conversations um because this was really the new big thing for the Hub um and they needed to get it started right so I'll pause there but uh Curious to hear your reaction yeah like I I think one of the more interesting things to think about is like why are lrts like announcing these Partnerships right and why are abss going to these lrts and when you think about like maybe three categories of like rakers right now on ethereum you probably have three groups right you have retail you have like whales that are throwing $250 million in a single transaction uh who have

probably their own incentives and then you have lrts right and if you're an AVS developer right now and you're trying to get like Economic Security for for and restake eth like kind of like delegated let's say I know it's pooled security initially but like delegated to your your AVS so that you can launch on day one when Igan layer launches or like week one when igen layer launches like you cannot talk to retail like as a collective right like there's no concentration of like eth that you can get restak and committed to you in any sort of meaningful way like sure you can go talk to like a whale if you think that that's like a better idea or funds that have like a ton of eth if you think that's a better idea um but like presumably the one place that you

can go and whose business it is to like have an old restake e and to actually figure out places and abses to like delegate it to are lrts right so like in some ways it's like just the natural way that like if this thing is like the cold start problem of like how do I start and get Economic Security and E3 stake to my protocol like I guess I'm going to have to go to where like the biggest pool is that like has like a single decision maker or like a team of decision makers that can actually make a decision say yeah we'll support you on day one so we actually there's a ton of questions about like qu I don't know whether avss are asking lrts any of these questions there a lot of the ones that you mention miles I don't know whether lrts are

asking abss any of these questions because there's like a ton of stuff right like I think number one is like you touched on the the validator or The Operators um you know one interesting thing and insight that we get at figment capital is that like you know we are closely connected with figment the proof of stake infrastructure provider we're separate but we're we're connected with them and we talk to them quite forly and one of the areas I think has kind of gone like it's actually one of the interesting more interesting things about replicated security V1 which is that it forced all the all the validators to join on day one right you couldn't like op out and when you're not when you're forced in I have to do this I can't like I'm not making a decision the operator is not making a decision to

like uh to subject or to like expose like the the staked assets to these other slashing conditions that other operators didn't right once you start going down this road where like operators are making decisions on behalf of like their rakers you look a lot like a fiduciary right like you're are entering into you're adding risk to like eth that's been staked to you like these are not what they signed up for maybe initially maybe you start going a little bit more longtail because the yield looks better it's a little riskier of an ABS or protocol and so when you give validators especially institutional validators the option to opt in a lot of them are not going to take it uh and so what wound up happening which is really interesting is that like you have these abss that are looking for

like Hey we're GNA run testnet Al like what else ISS like what else do lrts offer right like abs like we're going to run test and and maybe one of the questions that we're go to operators like we would in another like pseudo Network and they would say like Hey we're going to run testnet would you like to like join and participate we're going to be an ABS on on igen layer and The Operators saying uh don't talk to me like we're just validators as a service we're just like valid like a validation as a service here you got to go talk to like our boss and our boss in this case because we're not going to make any of these decisions ourselves we don't want to be held liable for any of the decisions that we make we're not going to like essentially put our reputation

up like with some of these abss is like then all of a sudden what you're doing is like you're going to go go speak to the lrts like we're going to contract with the lrts the lrts are going to tell us where to go they're going to tell us when to go there and we will like so so like there's sort of this weird dynamic right now especially before anything has launched right once things launch it gets different I think that's how you stay a service provider right and not a fiduciary is is you are you know working for the the LRT governance of the LRT is is really making those decisions and that that is like a weird subtle difference that I think is is huge right um interesting sorry Mike go for it no I I want to move us into the LRT part of

this discussion and just for for folks who might be a little bit less uh in the weeds um than the two of yous like I think what we're talking about is a legal liability for in the cosmos case where you were just everyone was opt in you know basically if you want to be this participant in the network you have to do this as opposed to when a an operator starts to make a choice about which service it's going to participate and essentially constructs something that lookss an awful lot like an investment product there are different risk returns it almost starts to look like a basket of bonds or something like that any regulator would look at that and say you're making investment decisions on the basis of folks whose capital you could be managing right so and so moving that up to the to the LRT

uh is feels critical I I want to close the book on just actually just one more point on that if that if it's all right I I um I I think it would be interesting you know Jim with the cosmos Hub you you mentioned you submitted a proposal right to a governance Forum where everybody is kind of in one place and can see it and make improvements on it and then you know when new consumer chains come come forward they they submit a proposal to governance right and that's a single place where like all the operators and stakers can kind of see what's going on and I think Igan is going to need something like that right where it's a it's a governance form that's purely for like uh new AVS proposals and it's kind of like a you know a request for quote

like RFP is like Hey we're new we want to come in here we don't care if it's an LRT or if you're a regular operator you know we here's what we're looking for here's what the you know the economics that we offer um come opt in if you want to and or you know it's like more out in the open right and but it is like a Consolidated place where everybody has kind of a view into what's going on and I think that's probably one of the first like things that needs to happen here um because lrts in the absence of that are the only other versions of that where you can go to one place and you know engage with operators and stakers so sorry I'll those last thing the RFP process that you're outlining there is

giving me this flashback to my days as a consultant basically probably 50% of what we did I ran I was at this Boutique agency and we focused an enormous amount on procurement when I was there it was like 70% of the is we we would do this with actually mostly like large miles we talk about so many times you know what I'm goingon to say steel helping you know conglomerates purchase like hundreds of millions of dollars of Steel and running these incredibly sophisticated RFP processes to break down costs and get really into the nitty-gritty of the economics across every player of the value chain honestly I will say an enormous area that crypto has to improve on is the sophistication of RFP Pro processes it's like so bad so so so bad um but I I I want to get

deeper on the lrts but I want to put a bookmark for folks who if you have one sort of takeaway around you know what the demand side is of this Marketplace is now like ultimately maybe to editorialize a little bit my own opinion here it feels light right it feels light miles you know I like debated back and forth about this I think we're maybe heading into a bull market here I've always I'm I'm kind of more on the the side that demand will come ultimately it always tends to it surprises you to the upside like just having tried to business plan across these Cycles like I always underestimate the sheer amount of demand that will come into the market um but is it to say that most of the T the capital that's moving into igen layer today is chasing farming and it's not

like AVS yield here that's the I would frame I wouldn't actually frame I think the demand side for igen layer is is actually pretty healthy like look like there's IC had two consumer chains there's already you know 20 to 40 teams building on it it's more the supply side is so absurdly you know overweighted that like you know I think it's actually I think they're doing great um in terms of the amount of adoptions of AVS is I just don't think anybody expected 11 billion dollars of of you know economic stake locked up in in igen lay at this point and frankly like even though the demand side's coming along really well there's not going to there's not like that much spend to to really make it

worth you know from a pure yield standpoint right um aird drops aside like longer term we're going to need hundreds of avss to like support 11 billion um and yeah so maybe just stop depositing and we'll we we'll have like you know no more issues I I want to get a sense of like the LRT part of this so this is the liquid reaking miles I'm gonna uh put a feather both of our caps like we did we did an episode on this like three four months ago which was I think a little ahead of its time actually um since then there have been a whole bunch of lrts that have moved from sort of this background thing that people assumed was coming into the spotlight many prominent teams um and I want to get a of miles you actually

wrote something up uh like a sort of a five-page Trea here on how to look at lsts versus lrts and I think a lot of these discussion like you hear a lot of people say actually uh liquid reaking tokens are going to compete with the likes of Ste but I think you at least see the these is very different products and the competitive vector or the vectors that these two types of projects are going to compete on as being super super different so can you just give folks a sense of like how do you think about lsts from a high level then how does that compar to lrts as a product yeah yeah absolutely I'll try to give like the tldr and um so I think i' I'd first off say that they are going after the same Market of which is eth holders

that are looking you know for to basically get some yield on their e either by staking um or by staking and raking while also retaining you know some level of liquidity on on that e um but I think that they are very different in terms of their designs and their value problem um and I think at the end of the day they are different products that appeal that really solve different sort of uh really offer solutions to do two different things um so I'll say like lsts are really homogeneous by Design right they're all doing this like slightly different ways of doing the same job which is you know just securing

ethereum um they don't compete on yield right if they did then Lio would not be number one uh they compete in my opinion uh basically to come as close as possible to reaching parody with eth in terms of you know moneyness right so can I go sell this if I need liquidity right right away can I go use this in defi um you know I think we'll see more and more is can I use this as gas on l2s right and they they they have really just one asset on the balance sheet it's eth right and so the they also they also like issue more eth like like they issue the staking rewards every 24 hours so

that it tries to stay in parody as well exactly exactly so they they track to the price of eth the market pretty much knows how to price in whatever smart contract risk or say like withdrawal period you know uh Dynamics and that to me is okay we're trying to be internet money um especially on l2s right um and then you look at uh lrts and to me it's like the opposite end of the Spectrum in terms of just how like heterogeneous these things are going to look in terms of the so many different elements of their design um and operations and and really what is the like also the underlying right um and so starting off

with like okay do they just take eth like native eth as collateral and stake it and then restake it or are they accepting this like you know is the um the assets side of the balance sheet a bunch of LSS and eth right that that matters for pricing um they will all have you know slightly different or or very different uh AVS reaking selections um That Matters from a risk standpoint right uh they will have different ways of handling rewards uh some of them are going to actually just hold the rewards of these native staking you know reward token so like AVS you know shitcoin like one through 10 will be on the balance sheet along with the restake eth right

some of them are going to sell that uh those rewards before they you know get brought back into the protocol rebalanced and and compounded um and then some of them are just going to hold a whole lot of like just regular staked eth on the balance sheet to sort of like float around the eth price right so it's not fully deployed um and then the last thing I think is the most hairy one is actually like the duration uh and we touched on this earlier but the dur duration of these reaking agreements um that's going to be really hard to support uh right with when you're trying to like compete directly with steth and so you know I think the more that like if you were an LRT trying to compete

with steth you would want to try to appeal to everybody you would want to like accept as many types of collateral as possible you'd want like to come up with the Navy mix that more or less is like you know can can satisfy the whole market in terms of risk preference and um and I just think the more that you try to do these things like the worse you actually are at any of them right so by accepting a bunch of you know LSD collateral that's gonna you're not going to be able to reach the super conservative depositors that don't want like their collateral co-mingled with that and and socializing the slashing risk with things they would never touch on their own um there's going to be people that are happy to lock up their eth for two years right if that means higher returns um and and you know that

could be like sort of a fixed income or like some sort of like longer duration product right um but if you the more you try to do that you know with folks that want their Capital right away the more complicated it gets and then you could end up with like some really unhappy customers and so what I see like the LRT side moving towards is is just having a lot less Network effects at like the asset level um meaning like each particular LRT will never have the sort of network effects that Ste does just because it's not going to be really used as an asset like I don't think they're they're going to be very good at that um they're not going to trct to the price of e it'd be like kind of a nightmare for like an LRT to be used as gas like

imagine dealing with that um and so I think you could have winners at the entity level sort of like Fidelity and black rock are are winners that you know for mutual funds and have a family of different products that you know basically appeal the different user references um that's kind of where I see this going I think the challenge is that you know the more assets you launch like the more expensive it is to say like you know uh keep like enough liquidity on each one or something like that so that's that's generally where like I think a lot of the markets kind of like missing right now but um I'd love to be love to be wrong so please push back on anything so so just one thing I mentioned that like you pay out the rewards every 24 hours that's like for

the Lio model right there's rewards bearing and then there's rewards based like liquid taking some of them compound where like one one LST equals 1.x amount yeah rebasing or noning Bas um the we actually invested in one LRT so we invested in Renzo protocol um and I think with the way that we thought about it was like number one um these can be very big and and actually it's not win or take all right I think what we've seen in lios case more or less is that like it's been win or take all right the more more you look like money or the more you look like e like the more like Network effects you have and just like the liquidity becomes deeper and deeper and it's just sort of as like us a mile ahead of everyone else um with lrts

based on all of the sort of like factors that you just described very well miles like we're going to see these compete on for very different ideally for very different sort of use cases and very different types of customers and users and so I do think that like generally speaking the unlock will be whether lrts can be like used as collateral um outside of collateral there's like very I mean you look at Lio you even look at SCE like what do most people do with it I think like 85 to 90% of it is just sitting in people's wallets they just want the ability to like exit when they want to exit um and actually staking is just unnecessarily difficult on ethereum L1 um like you have to run your own validator or you have to have over 32

eth and like this just provides like a really simple solution for a lot of people who otherwise would be like not able to parti um and essentially getting diluted depending on whether it's inflationary or deflationary um for lrts like I mean we do view this as like more of a yield bearing instrument and you're going to be able to do a lot of different things with those assets like it's going to be all over the place and like we've think that it'll be like probably like four or five maybe like leading contenders and we're kind of seeing that right now I think just in the market and like how well so many of these protocols have like been able to like you know cap hundreds of millions or billions of dollars of like eth being restate

doesn't hurt that there's also like incentives to do that through like not only are you getting igen points maybe those will be worth something someday but also like these other points or these other tokens um I mean ether fi just you know launched its token and like I believe it's more the fully diluted value is like more value than value than Lio right now so that's the world we're in well welome to the dgen like side of things and like but but yeah whether that's like whether that makes sense or not like I I'll let other people like disguise miles was shaking his head for those who enough long uh to put to put a bow on this uh because I want to move on to salana l2s as well which is

interesting uh you you can sort of think about Ste we we miles and I did a whole season on liquid staking and the the whole one one of the big Central questions there was what does the market structure look like it's a win or take if not Mo all then win or take most market and that is the money market right money commodity Bond whatever you want to blump this new stuff that we're making here in crypto like that's what it's competing on security liquidity etc those are the vectors the lrts look much more like a mutual fund and it's a total return type competition so that actually has a very fragmented Market structure and so um I know there are at least some very smart folks out there who disagree

with this point of view um friend of the friend of I'll call Loosely friend of the Pod John zler shout out John if you're listening to this uh there are different uh views outside of this but I I tend to agree with that as well I think a big part of it is the the homogeneity of the basically what the stakers are doing um in in like a staking pool like Lio as opposed to just so different and heterogeneous in the LRT world and you know Jim to your point about would you accept these things as collateral like just think about if there were you know 15 different RTS different combination of uh operators and avss how do you even underwrite that how do you underwrite that from a collateral standpoint it's so much easier when it comes to Ste right I I just it's hard to see it for me as well

so I'm basically agreeing with you I want to move on and actually spend the last like 15 minutes talking about something which I think is pretty interesting and has sort of gone under the radar but uh salana l2s um so we there have been some Rumblings about this uh for for a little while that whether or not l2s would ever come to salana you know it's kind of as as many things have got dragged into this whole modular versus monolithic debate um but I I do and like we were we were talking in our chat before there actually been a couple of protocols on SOL that have quietly launched uh or announced their intention to transition to Salon L2 which I was pretty shocked didn't get more attention and shout out to zerox research because I wouldn't have known about it unless I listen or talking

about it on a podcast but Zeta markets is doing this and there's another protocol called grass um Zeta makes an enormous amount of sense to me uh just based on uh their their derivatives uh trading platform over on salana um but what do you guys think about this idea of salana L2 is curious to get your guys takes okay I I'll go uh I think it's interesting um you know I don't spend a ton of time in salana land uh douge from our team spends much more time in salana land than I do um I think what it I think like if I was going to put my like so so this is probably a midt so just like I'll accept that uh the the the trolling that will ensue um but like you know if I had to say one thing I would

say like it seems like they're coming maybe at the best time or maybe the worst possible time like we're we're finding like you know liquidity fragmentation is coming to an integrated blockchain near you right now um and it's happening because it's hard like generally speaking there's a couple tweets about like hey like it's hard to land transactions on chain right now um you know for ethereum it was it's really expensive and slow but really it was like just really expensive and like I can't get my transactions through it's not expensive on salana right but it is taking longer than people expected and like people are having trouble getting Bridge transactions through people are having trouble like minting nfts people are having getting crazy slip like having crazy slippage um and having to

like enable that and like the salon user base it's like accepting this um partially because they maybe they just don't know any better um but you know I think what it goes to show is that like bottlenecks will exist and as soon as bottlenecks exist like they will exist on some chain at certain points in time and developers are not going to like just sit and wait six to nine to 12 months until like everything gets fixed and like fire dancer comes or like someone comes to save the day it's just like not like these people are trying to build applications and products that people want to use and what It ultimately does is like they're going to find workarounds quickly and more quickly than anyone anticipates the market moves quick right this industry moves quick and so th those moments of like what do people decide to do

typically have Downstream effects that like honestly can influence how the ecosystem and how the the network like operates and is built going forward um it sounds like like I said that's why it kind of sounds like maybe the worst time for like this to be all happening on Solana is just because like people will start to build l2s now one of the more interesting things and we were talking about this before was like you know when we look at ethereum what was ethereum's solution to like it's too expensive right it's too slow it was like let's just build ethereum on top of ethereum um and without making it any better or like like optimizing on any sort of way in any sort of way like ethereum equivalency was considered like the Holy Grail I don't think people are are

thinking about like building generalized smart contract platforms like SPM chains on top of salana right now but we're seeing are like kind of like application specific rollups where like it's a DEX or it's like I think what grass is I had to like look it up but like it looks like it's some sort of like data AI layer or or something like that um and so what they're saying is like it's not that it's a dedicated block space like let's just ignore dedicated block space that's like one reason why maybe people would use this but not in this case it's actually because of like maybe throughput or like depend like like just reliability um and and like being able to like have transactions execute maybe even in the way or the order that you want to and and making some opinionated decisions about which transactions go

first and which transactions go second are less important um so ethereum equivalency I think like so what we did was we built ethereum on top of ethereum and now we're talking about like l3s and it seems very yeah right stupid uh but like I think really what we want to do more than anything is like if there's application specific rollups that like kind of use or work on top of salana like that probably I could see a world where that exists and like where that makes sense like where I get concerned is on like the bridging side of things and like users and users getting rugged because of like just the things that we're talking about with like um slippage and like users like less familiar with like some of these like like these risks that that that are enabled like when you do

slippage and you get like wrecked like these users are also gonna have to bridge up to l2s and if they do that and they're like you don't know exactly what they're doing and the bridge is maybe a multisig like you know what happens in that scenario and like who gets hurt just to respond to Jim something that you said about uh it be like what was what is ultimately the reason for this I I I would uh I think it looks a little unfortunate because there's a bunch of failed transactions that are happening on salana right now but I don't think that's what's driving this actually um like one you know this takes so long right to the I'm sure that this has been in the works for a while but also actually miles you were at this but we hosted a salon research sort of meet up

and hang at our offices earlier this year and they were actually talking about something called um pra uh it's here I'm G to share my screen here this was this is a very old proposal uh but it's called program program rebatable account right fees and these got proposed because that you know we've talked on this program before how probably salana their fee markets are sort of broken and need an upgrade um but one of the flaws that in the the fee markets of salana currently is that it's free to just WR lock any account and you can actually do it like in an unlimited basis so this was a proposal to essentially charge a fee to uh WR lock an account but you have the the host of that account or the owner of that

account would have the ability to rebate that fee right so you can punish people that are just spamming contracts and you can actually reward users that are um you know actually trying to interact with the account in a legitimate way and the reason for this this is like if you think about what this really is this is about sovereignty and economic control of the account on a general purpose L1 and you know to maybe draw a comparison to the idea of liquid staking in general is like liquid staking there are a bunch of different reasons why liquid staking makes sense and it differs based on each ecosystem and I think for l2s like the one of the differences between salon and ethereum is that there are a couple reasons why you'd want to do an L2 um it's cheaper you're moving a lot of the

actual execution load off Main chain but also there's this kind of sovereignty uh reason and like a huge amount of the way that like honestly app chains the way that they deal with Meb and can extract uh rent and shift around their economics like that's really nice in ethereum land where fees are so expensive on main chain it's been so focused on the cost aspect right driving cost down but there's really other bucket and reason why you might want to launch an L2 and not just be a smart contract on main chain right and that has to do with everything that the application like the cosmos people just saw you know they were just five years too early I think in in just the control over your ux and your ability to mitigate some of these like me economics type things and I think that is ultimately what's going to

make l2s on salana take off and make sense it's not going to be about uh cost savings um probably for that reason general purpose l2s on salana make a lot less sense but app specific l2s on salana I think makes a ton of sense and then Jim to your point about learning from other ecosystems like this was kind of the Fatal flaw on the rollup Centric roadmap for eth is that they just didn't account for interop whatsoever so thank you I was I was actually gonna bring that up I was like I just sincerely hope they work on like an in protocol so if Builder listening to this please for the love of God like think about interrupt it's like we're so early here right with all these things launching like talk to I think Union or polymer are talking

about IBC on salana potentially as well so like go talk to these guys like let's let's do that PSA yeah I I have a couple quick reactions um I totally agree with you I think the reasons across the whole space that you see activity or teams moving to l2s or moving to their own chains is either because the base layer has gotten so shitty for their users that they have to like that's where we see just general purpose you know l2s kind of make sense uh or you're like dydx you have the leverage right to do this and and you take a whole user base with you because you've built a huge brand um then the third reason is just kind of to differentiate versus peers because you can get some feature that actually you

know I I think for Zeta is is even lower latency with uh in a in a in a rollup setting right um and you know I think it would be a not a bad situation at all for on it to have you know instead of having general purpose l2s keep all the general purpose stuff on l1's and when projects have enough leverage uh and can take their users to an L2 um that's how you you kind of let them graduate to that and and it's not going to be every project because some projects benefit more than others from composability um right and so I totally expect like super apps you know at some point for the reasons that you know we see like app chains elsewhere and and really like stretch what you can do with an app

chain in terms of you know custom block building and even like native smart accounts just all these levels of extra control that you have um and value capture that comes with it there it's it will happen and that's a good for salana that they graduate to a salana L2 I think what I'm super interested in is because we haven't really seen it yet like how like the trade-offs that we see on ethereum like how bad are they in a salana setting where you have you know Ultra fast like uh transaction speed low cost and finality like pretty quickly right um does that in itself like make these interop challenges a little less scary because you can just hop in and out of them or even like could you maybe

just have these these be like Bas base rollups or like I don't know it it it could work like that um I think that maybe takes away from the value capture St yeah I go I go back and forth on Bas rollups all the time myself but like that that's to me what I'm interested in is like how bad is you don't have to wait seven days right for like an coming down from an optimistic roll up um so all those things what do they look like right yes Progressive decentralization of like decentralized applications like ultimately leads to applications that have like large user bases creating their own like uh value acrel mechanism uh that like doesn't share as much of it

with the base layer like it's Cosmos was too too early um I think like ethereum had an opportunity to maybe do l2s and like a lot of teams just jumped on them because it was just too expensive to operate and I think like even to for ethereum you know like like we were talking about before like it looks like everybody just tried to copy the evm and like I think one of the best the best areas of like research right now is in like super optimization and like evolving the evm which I mentioned before like David Silverman from polygon like had a tweet and I'm going to just like print it on a shirt and like wear it around all the conferences which is like evolve the evm right like the road map of of ethereum being a rollup Centric one uh essentially what it says

to us is like the Innovation should continue at the L2 layer um like don't rely on us for Innovations like super deep Innovations on like execution any longer you guys take the Baton and run with it and we just like really haven't seen anyone do that too much quite honestly they've gone for like equivalency versus like uh Evolution let's say um and like that is why like I'm actually really excited about like the uh the mega eth team I think they're like they're doing something like really hard they're like really focusing on like providing you know an execution layer that will ultimately be able to compete with like high throughput like high frequency l2s or l1s sorry all ones

and like ethereum is going to need mega eth essentially is like my my my hot take um and if it was like so easy like I'm just shocked that there's been billions and billions of dollars like invested in l2s and this is where we this is the state of things like 120 transactions per second on a good day and and like what are we doing guys like you have billions of dollars like that's the best you can do like mag if is gonna come in and just like kind of I think blow the water out of a lot of these and have people look kind of silly that like that was like what they optimized for was like 10x improvements versus 10,000x improvements well the other thing that I I completely agree with you on that Jim uh the the other side of that Spectrum

though is I think people are going to start to question again like what ises like minimum viable sort of functionality look like for the L1 right for so long the design principle of eth has been to push complexity aside and I actually I was just looking for the tweet I couldn't find it but maybe we can get it in time to put on the the video for later vitalic actually a couple months ago posted like I used to be very much a fa in favor I'm just pushing complexity up to the role player but now I'm rethinking some of that and actually ethereum has to have more functionality like miles you and I've talked about this forever but this whole like ethereum is settlement layer like if all ethereum does a settlement I'm sorry that's bearish like that is that is bearish uh and you're I think you're

starting to see folks understand this on that's why there's this huge push right um from some folks for eth to be da and eth to be a sequencer it's like uh Hey guys like the the L1 is still this really important coordination layer and has to do more than just be this like really slow settlement layer um and and I agree with you miles about that point like frankly I sort of interested in the idea of Bas rollups on Salon because yeah you don't have 12C block times you have 400 millisecond block times they want to move it to 200 millisecond block times and then suddenly a lot of the you know 90% of the pain of Bas sequencing goes away um in that world so I think I think we're going to start to reexamine what the ideal role of the L1 is assuming that every L1 is going to have

l2s and what functionality should be part of the L1 and what should be part of uh the layer 2os and there are other chains out there that are building like frankly I want to give like Avalanche the way that they've uh handled um uh interop across their uh subnets is great um and I think people don't talk at all about like the role that the L1 should play in interoperability between its chains so to to build a to build a rollup to to to design a road map that is rollup C and not think about interoperability and how all of these things are going to interact with one another feels like a miss a an own goal right like it's we should have been

thinking a little bit more about like what does that look like and and how does that how does that function operationally and like in a in a good and seamless way and we're we're armchair quarterbacking and there there's so many priorities right like I mean like you know I want to get credit where credit is due we just got the merge we got Denon this is building the plan in midair so I like I'm not saying we could do better here it's just uh you know other chains like learn I definitely cannot do better I definitely cannot do that no but I I I would hope that like projects you know um in general infra infr projects whether it's igen layer or like ethereum core development is like kind of listening to the market seeing what like users are actually doing um

and then being a little bit more opinionated not necessarily in saying things like you have to do this but here's a standard right like we're here's we're going to enforce a canonical like a few canonical standards that are just going to make everybody's lives a lot easier um you're not going to have to you know choose between the Conex Wormhole layer zero you know like all these interupt standards or like something like that you have to be very careful like uh you know which you pick and choose right because you know if you're overly opinionated about the wrong thing then you're going to like you know you're going to lose your user base um but yeah that's what I'd like to see a little bit more of just in general is like I I know it's all about credible neutrality and um you know that's that's

extremely important but like there is a kind of a needle to thread I think uh not that I could have done any better either but AG agreed we're just we're just humble middle of the Bell cers guys unfortunately we gotta wrap it here but uh this is a lot of fun Jim we gotta have you back on the show again some enjoyed myself thanks for having me guys have a safe flight home Mike all right appreciate hey everyone Mike here if you're a bell curve listener you know that transferring assets across chains can be a massive pain I certainly do I complain about it on this program all the time that is why we are incredibly excited to have teamed up with the Wormhole Foundation the stewards of the Wormhole protocol and the coolest part about this particular partnership is that they have made custom bell curve

nfts which you can get and mint for free click the link at the bottom of this episode take you get your free [Music] nft pap