Solana vs Hyperliquid, Why Ethereum Is Overvalued & Crypto In 2026 | Logan Jastremski

Transcript

The thing that we have really come to appreciate is that you can almost value the underlying blockchain like an exchange. Throughput does matter for scale, but throughput without execution, you don't have any revenue. And so, you really need to focus on the execution quality to actually have a good sustainable business model long-term. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed.

All right, everyone, welcome back to Empire. Santi and I are bringing Logan Frictionless Capital back on the show. Logan's a special person. Every time I talk to him, I learn something new. I struggle to keep up with most of what he's saying. Hopefully, you guys are smarter than me and can keep up better than I do, but Logan, welcome back, man. Thanks for having me back. Yeah. Appreciate you guys. Yeah, of course, man. Good to see you. I have a place I want to start, which is when I think of like the Logan thesis and kind of the Frictionless thesis, it is high throughput blockchains will win, right? You guys were early to Solana, pretty early, I think, to Aptos and or Sui.

And I'd love to maybe just revisit that thesis and tell me like what you got wrong there and what you also hopefully got some things right. Yeah, I And it's a good question, and I would broadly say yes. We were we were one of the few people beating on kind of the Solana drum in the wake of FTX's collapse. And in part, it was just because we felt like the industry was not going to scale, and if you en- enabled application engineers to build more expressive applications, uh they could at the end of the day, make more money, um and serve more customers. And I think that part was directionally correct if looking back on it. I think if I were to

separate it out, though, from the applications built on top of the blockchain to the underlying infrastructure itself, the main thing that I think we have gotten a greater appreciation for for the underlying blockchain, so like call it the L1, is that the way to actually make revenue is through execution. And I'm fully bought into kind of the uh Fleep and Santi worldview, which is everything is discounted cash flows. And I believe that is true, but I think the big thing is just how do you specific applications make money, and how do the underlying blockchains make money themselves?

And I think the thing that we have really come to appreciate is that you can almost value the underlying blockchain like an exchange, where it's effectively um how much volume you do, and then kind of your take rate, and that can be measured either in bips, as in a traditional exchange, or with priority fees. And so, I think we've just gotten a greater appreciation for throughput does matter for scale, but throughput without execution, you don't have any revenue. And so, you really need to focus on the execution quality to actually have a good sustainable business model long-term.

Can you double click on on what that last part means? Yeah, so throughput I think the thing that we did get right is kind of once you enable more throughput, it does allow applications to build more expressive apps. When we were looking at Ethereum back in the early days, uh developers were removing lines of code because they couldn't build the applications that they want because gas fees were too expensive. Um and when you enabled more throughput, it just allowed application engineers building on top of the underlying infrastructure to do what they wanted.

Um the crude and often uh I don't know, I guess directionally correct analogy is going from dial-up to broadband. Um you could build things like YouTube. But the big thing was for the underlying blockchain, how does that actually make money? And I I think in the past, it's like, all right, like put your finger in the air, Bitcoin went up X amount, like my chain will go out up like a kind of a derivative of that. And I think that is no longer or should no longer be true. Um I've been on this podcast, many podcasts, saying I think Ethereum's the most overvalued asset in the world, and I still believe that. In large part, I think it's just made people a lot of money and kind of has this monetary

premium, but I don't think that will sustain forever. I don't know if that's 5 years down the line or 10 years down the line. And so, I I think you do need to have a model that is going to point to, hey, these things should make money, um and you should be able to run a discounted cash flow on them. And so, with the blockchain itself, what really matters is execution. And so, as you kind of scale up trading volumes, the interesting things for the underlying blockchain is specifically priority fees if it's a permissionless blockchain.

Um and those priority fees ultimately in various different blockchains get redistributed back to the stakeholders, and those stakeholders almost earn a form of real yield. Um and I think we've just gained a greater appreciation for what are the actual core drivers of kind of generating these priority fees, and typically, it's just trading volumes and access to contentious pieces of state. Hm. Logan, I have two questions here. Well, maybe I'll start with the one around ETH being overvalued cuz I know that's the one that's, you know, people are going to get upset about. Is ETH overvalued >> clips for you guys. Is Yeah, there you go. Is ETH overvalued and all the other L1s are overvalued, or ETH is overvalued and other L1s are under you would say

are undervalued? Um pretty much everything I would say is overvalued. Um and this is going back to Everything all of the chains or just every token in crypto? Um specifically the underlying infrastructure with L1s. And what And why we I mean, we we built actually this interactive dashboard um internally that we're going to share soon. We wanted to share it with our LPs first. But it essentially breaks down almost kind of like a balance sheet statement of Solana specifically. And what ultimately it's showcasing is how these things can be um

both on the positive side and negative side. But the main driver of the model is actually how much trading volume are you generally doing, and then taking a certain amount of either bips or your from that trading volume generating priority fees, and those pri- priority fees are ultimately being redistributed back to stakers. And so, when you run these models, I think you'll find that a lot of things are overvalued um but if you kind of find some diamonds in the rough, I think this exchange model showcases that these things can scale and will scale if you continue to attract different trading volumes and have really the assets that want people

want to trade. I think Hyperliquid, what they've done relatively good recently was kind of branching out of kind of the crypto assets themselves and really expanding into commodities and part of it's like, hey, you need assets people want to trade, you need tight execution, but you also need the liquidity. And so, I think they've done a very good job at expanding beyond crypto assets. Yeah, maybe say one more line about just the valuations here because you compare these blockchains to exchanges, the revenue multiple for an exchange is what? Two, you know, two times revenue or three or four? I don't I don't actually know, but >> that low. I think it's like 10. I don't know Santi like >> six or Okay, somewhere between, yeah, three to 10 times revenue. I would

actually guess it's closer to two than to 10, but >> If you look at the CME, though, and like some of these, like call it non-crypto exchanges, those are valued generally between 20 and 30. Times revenue? Uh price-to-sales. I didn't Okay. So, Blockworks >> rep- Okay, I didn't know that. Okay. Well, then that then that kind of negates my Well, my question was going to be is, look, if something's trading at five times revenue, if an exchange is trading at five times revenue, and a blockchain's trading at 100 times revenue, you know, but I you know, but where we're at in the cycle or where we're at in prices, it does feel like these a lot of these things are down 80, 90%. Are you saying they have another 80, 90% to go or >> I hope not. I hope not. Um I So,

actually, in in our dashboard, I have these numbers. The CME is approximately 27x. Uh Robinhood is 36. It was higher, um but it's come down. So, I mean, it doesn't mean those are like cheap, either. Uh Santi's more of a PE expert than me. I would say generally, because these crypto networks and the L1s themselves don't really have a bunch of like cost overhead, I think we've talked about this a lot, and you guys have talked about this on the podcast a lot, as well, like Hyperliquid, even Uniswap back in the day was making X amount of money per employee versus some of these much larger venues, where

they were also making money, but just spending a lot more money. Effectively, the networks are almost at zero. You have the validators that are running this, and then they pay for like the hardware costs and the bandwidth costs, but they're also generally still profitable entities. Um I think the thing that I've been really trying to kind of like hype up is if you really break down to what blockchains are, they're just databases. Um they're databases that connect kind of these previously um kind of isolated, uh, ledgers. So, you had like JP Morgan ledger, you had Wells Fargo's ledger, you had New York Stock Exchange ledger, CME ledger. And all

they really are doing is doing like data packets back and forth to synchronize information. And this was the whole idea between behind going from low throughput to high throughput. Um, because you just needed to pass more data packets and between all these parties to synchronize information. And I think if you kind of press that even further, like what is this technology good for? It really is kind of uh a, kind of, uh, just global ledger, if if you think about it. And as they get more performant, they get better at things like trading.

And so, I think if I were thinking about, and I do think about like the largest TAM within the blockchain market, it really is this kind of global exchange. Um, at least from the underlying infrastructure side. That's different from the applications that are built on top of it. And what you would really want to do is connect all of these kind of, um, heterogeneous exchanges around the world and make kind of this global exchange. And so, that has really been the thing that we've been thinking about, um, because when you start to think about trading volumes and where blockchains are today versus kind of the global trading markets, it is massive. Um, so, I mean, today just take Solana for example, they're doing about 2 and 1/2

billions of daily trading volume. It's a It's a big number, but when you look at, call it the New York Stock Exchange, they're doing 100 to 200 billion a day. If you look at all equities markets around the world, that's like 800 billion to a trillion in daily trading volume. And then you look at FX and derivatives and kind of that broader market, these markets are doing 20 plus trillion a day. And I think these markets were are going to continue to grow. And really in my mind, the the kind of peak use case of these blockchain technologies is really getting everybody onto one of these single systems, uh, and kind of isolating the liquidity and different trading pairs.

So, Logan, I think I think the demand side is less contested these days. Like Nasdaq on the blockchain is we're closer to that reality. We're still at two to and a half billion of volume a day. If you go to an IC's volume, that's roughly, you know, uh, you know, 100 billion a day, give or take. Yep. So, I think we can all collectively, and even the market probably understands there's a pretty high possibility of that happening. Whether it happens on Solana or Hyperliquid, TBD. But let's just assume Solana, you know, is at 84 bucks today.

Um, you know, FDV's at, call it, 52 billion. It's P ratio is 80. I think where one can make a lot of mistakes when you look at P ratios like, okay, what's the growth? So, again, we go back to, okay, what's the volume growth that you're going to see? And where's it going to come from? Commodities, um, you know, other applications, uh, that are being built on top of Solana. I want to get to that discussion later on in the conversation. But just anchoring on this model inputs, cuz I'm looking at something you shared with me, cuz, you know, I have the benefit of being an LP and you guys.

And I see and when I you shared the model, I said, okay, I do believe say that Solana gets to nice volume, 100 billion. But where I want to have a discussion is where where's the take rate? Cuz the take rate today is two and a half bips. And I before I answer where I think that goes, like, what is your view on where take rate and where like do you how can you support two and a half bips when the nice and other markets are much lower than that? Yeah, so in this model, all we're really doing is taking the annualized trading volume, which is ultimately today amounts to about a trillion in annualized trading volume, and then taking the run rate, which is the REV

that's captured through priority fees, and then assigning a take rate. So, the take rate's a little I I wouldn't say it's like one to one. Um, what we are seeing on the prop AMMs within Solana is that, um, the take rate is really pretty pretty tight. Um, generally it's about one bip, um, maybe less one to two bips, um, generally. And that is pretty comparable to, call it, Binance VIP 9. I think Binance VIP 9 is doing about two bips. Um, it So, to answer your question, I I do think, I mean, if you look at the kind of like New York Stock Exchange and kind of these, uh, more institutional, um, trading

venues, they're going from like 0.5 bips to or to two bips or on FX, like, it's even less. I would say there's a lot of like second and third order systems and there as well that are also taking their cut of the fee, like the clearinghouse, etc. And so, I I wouldn't say it's exactly one to one when you're looking at the exchange volume. I do broadly though think that as volume increases, the take rate will come down. Um, and so, the main driver in why we really think blockchains can be valued like exchanges is because you really want to make sure

that you're doing as much trading volume as possible because that is kind of the key driver of the network making revenue. And so, if you're not focused on trading, I think you're really kind of screwed, um, because I think trading has shown and execution quality has shown that people will pay for better execution quality. And if you're not focused on that, it's just hard in my mind to actually be able to run a discounted cash flow model on that because you're not actually making the revenue. Logan, what do you think Solana got right and got wrong over the last couple of years?

Um, if you look back to 2024 and 2025, I think the interesting thing is with exchanges, obviously you want liquidity and you want tight execution. But the other thing is you want assets that people want to trade. If you look at Binance and really how they got their kind of start back when they were up and coming and kind of, if I recall, like 2016, 2017 time frame, they were just listing all the ICO coins. And so, like, if you wanted to trade and like trade some of these emerging coins, you had to go to Binance because it was really one of the few places that you can actually buy and sell these coins. And when I look at Solana and if you think about these blockchains as exchanges, what

they had in 2024 and 2025 was meme coins. Um, and it's kind of a listing scheme. You want the assets that traders want to trade. And I mean, extend that to Hyperliquid, they have commodities. People don't currently want to trade, um, crypto assets. Uh, so, you have to have the assets that people want to trade. And even just looking forward, that listing process is massive. Um, if you have the assets that people want to trade, generally you'll have more trading volumes and you'll have more revenues. And so, I think because of the kind of like permissionless nature, so to speak, of assets being natively on Solana,

particularly memes and even with pump.fund or with Trump coin, people had essentially, spot exposure with leverage because of how volatility, um, or how how much fall the meme coins actually experienced, which people loved. Um, now you have leverage with things on commodities like Hyperliquid. And so, I think when I'm thinking about like the future and things that really all blockchains need to prove upon is just having the assets that people want to trade.

So, this naturally leads us into a discussion around Hyperliquid and the volume that they've seen is impressive. The REV in Solana, but to put it in perspective, at the peak of the meme coin mania, I think January 25, you saw like half a billion in REV. That has come down dramatically. Now it's 22 million. So, super concentrated, what is the How do you think about underwriting Solana versus Hyperliquid here?

And what is the internal allocation at Frictionless between Hyperliquid and Solana? Uh, I'll answer the first part. I don't know if I'll comment on the second part. The So, I think going back to how we view it is, what is the largest market in the world? I think that is global trading. What I criticized Hyperliquid for early on was not being decentralized. I think they have like 16 to 20 validators now.

Um, and generally they're all in like the same geographical region within Tokyo. I've become less of a decentralization maxi, if I'm being honest, and I'm more of a product maxi. I'm like, hey, show me the revenue, show me people love your product, and let's go. Um, so, I appreciate that they've took a more opinionated point of view and focused specifically on trading. Um, but when I look at like what the technology of blockchains was actually good for, which was really having all these different databases around the world and interconnecting those and making those real time. It's kind of like Zelle was was a unique

uh feature from really all the big banks and they just got together and did um kind of like a trust me that they'll do reconciliation afterwards and because they all trust each other uh they'll just make the payments in real time, but it still took them a while to actually settle the payments on back end. Um and with blockchain because that settlement is in real time and the data propagation um is high, you don't need the trust me, bro. You you can just make um trades or transfers on the blockchain.

And so when I think about where we are today from the blockchain standpoint and where Hyperliquid is, I think they built a very good, I would call it centralized exchange. And that is a great product. Um and they've made a lot of money. When I think about though if you have a global exchange, will all the parties really from a kind of country standpoint want to trade on Hyperliquid? Um because generally they may be slightly disadvantaged. Maybe they can't see into the Hyperliquid matching engine. Um will kind of all of finance move on to Hyperliquid?

I have a harder time thinking that's true. Um they have built a great spot product. They have or more so perp product. Um and it has make a lot of revenue and I think their unique innovation outside of um the vault product, which was great, was ultimately these 24/7 markets. But I mean, if you look and listen to um what they're trying to do on the New York Stock Exchange, they will also have 24/7 trading. And so I feel like the value prop may be slightly diminished over time. Um I love it. Is it fair to say so you have you have a spectrum of on one hand you have fully decentralized, completely open and that's

may maybe those people can win because they're fully open and decentralized. On the other side of the spectrum you've got the New York Stock Exchange and you know I don't know CME and people like that and they're closed but extremely efficient. You're saying Hyperliquid kind of sits in the middle. So like how do they win or It maybe more concretely, I if you want to tackle the global trading of all all the world, I think you need to make a product that allows kind of neutrality for all those trading parties. Generally um what we've seen uh if you start to study like high-frequency trading is like Flash Boys um and you get closer to the matching engine uh within

the New York Stock Exchange, they have the data center or matching engine in New Jersey and they give everybody the exact same cable length in New Jersey to make sure that you're trading on equal and fair information. And the races build private fiber lines um microwave towers so that you could get the information to that matching engine first. And the only kind of like maybe not hiccup, but it's kind of like standard quo with Hyperliquid because it's just located in Tokyo. And this may matter or this may not matter. Um I honestly don't know. Um what blockchains I think that are going after the global market will allow you

to do is kind of be uniquely um allow you to capture information flow. Uh so like order flow. What I've learned in trading is order flow is everything. Um so trading against non-toxic flow. Um Robinhood also kind of got this pretty early on where uh they were able to monetize the retail user base, sell it to market makers like Citadel and take a couple pips off off that trade. If you can make a trade in a certain region around the world and have that be executed in better than what it would be on a

centralized exchange, I think that's where it gets pretty interesting. I don't know how nerdy we want to get into like the engineering design of it. We we call it colocation, which is kind of the traditional matching exchanges of today where you play latency games versus kind of this global network. We're we're calling it localized congestion. And so I think long-winded answer to your both of your questions. I think the the largest market in the world is global trading and trading is only going to continue. And I think the exchange that optimizes for that global trading will be the winner over the long term. Now short term is different because if we're I think uh I can't remember which trader, Sante,

you may know, is like you can have a good business, but like bad price and it just doesn't make it a good investment. And I think that's the question that people really need to ask themselves now is uh you can have kind of a theoretical amazing business over the long term, but if the price is too high as an investment, it still may be too high. Yeah. I mean, I I go back to your model and when you open source it, I I hope people will will reference this episode. Because I I think where where I'm I'm just unsure Solana at 50 billion you're sort of predicating on like where is the volume come from is what I'm struggling to understand. I see a very

clean trajectory with Hyperliquid. And Hyperliquid sitting at um under like 60, 70% of the What is it? 60% of Solana's valuation or less? Uh what is it now? Hyperliquid 30 billion? I mean, if you look at FDV, it depends on which one you look at if it's uh circulating or FDV. Yeah, let's get that right cuz Solana for context, I mean, sitting at 80 bucks and it's uh you know, call it 52 billion fully diluted. Obviously has market cap of 48. So the Hyperliquid's 42 or call it 43 billion FDV.

Got it. So 43 10 million circulating, you could argue, you know, call it Jeff Dorman that, you know, you should be looking at not not the full, you know, um 42. I think CoinMarketCap reports 25 billion this outstanding token value metric which is um you know, adjust for some of these things around like tokens that have been permanently locked or burned or whatnot. And so I'm curious Yeah.

I think most of this argument is like where does the and you're sitting on the venture side and you're seeing projects and you're seeing developers. I can wrap my head around Hyperliquid. I don't see as a clean trajectory as Solana, but maybe this is the time that you should be investing in because it wasn't wasn't clear when Solana hit eight bucks. Yano was on the timeline talking about it. But is it meme coins? Is it NFTs? Is it Solana doing, you know, what Hyperliquid is doing with hype three? Yeah.

Walk me through your different scenarios. I mean it's if you look at like Solana specifically and really all of blockchain, if we're being honest, like you could almost view NFTs similarly whether that's ETH or Solana back in the day. It was all kind of a live test in my mind to continue to build out the infrastructure, get more performance, lower latency, um figure out the market structure. And it's really I would say that's step one. But the next steps is kind of this tokenization that everybody's talking about. It's like again, you you want to have the assets that people want to trade. And right now like for better or worse like those assets that people want to trade are generally not crypto

assets. Um it is commodities, it's AI stocks, it's robots stocks, it's all of the above. Um uh tokenized products. Uh real real world assets. Um and so I think you need to bring all of those on chain. Um and that listing process and what I think Hyperliquid has done fairly well is democratizing the access to listings. Um and then combining with the vault product, they have that instant liquidity for uh these new assets really on day one. And so if I look and go back to Jason's earlier question what Solana got right, I think it was kind of this permissionless asset listing that just happened to be memes and then the liquidity was there for

people to trade. You really need to expand that process of the permissionless asset listing not only to obviously crypto assets, but to commodities, to equities, to FX. Um I think like this pre-IPO stocks are also interesting. I've heard people make money there, but it's just all tradeable assets. So if you think about it and how I really view all blockchains is just the our asset ledgers. And really if we were to look back and just be intellectually honest with ourselves, it's that blockchain was really the next evolution of finance. Um it was not web three as most people called it. And I think we have the data to showcase that

the fastest zero to 100 million application revenue applications are really finance or trading related. Um and so for us, it's kind of just like doubling down on those things that work. Um which is focusing on the trading side, make sure that you have the asset listing process. Um and continue to kind of tighten the execution and the spreads. And that is happening uh with these proprietary AMMs, which are very interesting. ZK Sync is the bank stack of Ethereum. ZK Sync's Providium is the only Ethereum secured platform that is purpose-built for institutions [music] that demand privacy, compliance, and full control of their data. ZK sync

[music] enables financial institutions to thrive in the digital assets economy by launching and monetizing their own chains, tokenize real-world assets, build programmable markets, and settle [music] cross-border in real time. Visit zksync.io to learn more about the bank stack of Ethereum and book a demo. Santi, can I turn that into a question for you? If you had to If you had a long hyper soul right now, what would you long? Hype. Do you Are you long hype? I mean, I have way more exposure to Solana because of it's like locked and stuff like that.

But I think I think hype offers a more compelling risk-adjusted return. And this is not financial advice for anyone, but I just see a lot more of a clean trajectory of So, one of the things and I may Maybe we should anchor the conversation around again, where does the volume come from and how sticky is that user? How sticky is that? I would argue hype has created a very loyal customer base. And so my view is pretty much every other blockchain is going to want to do what Hyperliquid's doing. Like let's just assume like it's competitive to launch it. They'll be successful.

They'll throw massive incentive at teams to build and the question is like I think the stickiness of the user in Hyperliquid is marginally higher than for any other blockchain because because of the the the the lore, because it's sort of pristine, it has no venture backing. Anyone that you know, go like read the Colossus article on Jeff. Like he sort of created what I think is a pretty interesting community and sometimes you just got to be first and they're doing a pretty good job with hip three and you know in this case cuz you've heard me in the

podcast talk about like first mover advantage is a bit overrated, but I think it's like a very technically competent like probably the >> I don't I don't think they have first mover advantage actually. Like you have DYDX and On commodities, you're right. You're right. No, I'm just saying as like like perps platform like they're they're late to the perps game, but they were the like I So, people should read this Colossus article about Jeff. They are the first Uh one of the things that you want to see in like a founder, you like Logan, you're getting very technical and Santi, I know you focus more on the quantitative, but like like you know, the financials, but I try to like It's helpful to look at what founders can break out and create a lore about themselves and who can become this like not to like you know, maybe this is too

too big of a stretch of a word, but like a mythical figure for some cult >> Need grip for sure. Yeah, and some like you know, he's built this cult following around him and around the platform and it's the first perps platform that has probably done that. I I view it I mean obviously I like to nerd out on the details of the tech side, but I largely think all the tech details are mostly irrelevant. It they really only serve like to make the product better. And I I think if you're objective about Hyperliquid, they've made a great product. Um and it's hard to argue with that. They've made leverage easy, they've made asset listing easy, they have the vault product which makes the

liquidity easy. And so they've kind of just nailed all the basics. I think so even with Santi like it's hard to argue the value accrual is there and they are doing a very good job. I think in my mind people care I mean, they talk about the lore currently, but like people also trade on Robinhood. I think they'll generally trade on really any platform if you have the assets that people want to trade. Yeah. >> now you know, so commodity I was just looking at the data before this podcast. Commodities are now traded more on Hyperliquid than Ethereum. The most traded asset on Ethereum is is still Bitcoin. But then it goes commodities, then it goes Ethereum, then Hyperliquid, then I think it's the indices, then it's the L1s, and

then there's this like long tail, right? Uh and it's like uh some big long tail then then I think equities are like number seven. So, they are doing a nice job of building yeah, this everything exchange right? It's a cleanest narrative. It's you always want to look at also I'm now more like an if you want to take the lens of like Stan Druckenmiller the chart is very clean. Anytime there's a reset and a rebound, this is the thing that catches the the bid fastest. To me, that's something that I've just learned time and time again. You want to look at when there's a flush like a drawdown in the market across the board, what rebounds the fastest?

And Hyperliquid just time and time again does that. I'm not I'm not saying that Solana doesn't have Uh you could argue all of them are overvalued, too. Perfectly normal. Um and but I at least that diver My point around Hyperliquid is unlike any other L1 it has a increasingly diverse like the I think you can you can look at aggregate volume, but I think you also want to look at the composition of the volume is probably a more interesting and nuanced conversation. For Hyperliquid, very interesting that they're moving away from crypto correlation and entering commodities that you could argue, "Hey, look, it's it's obviously got a lot of interest because of what's happening

geopolitically. But you add the AI train, energy is just something that in my portfolio I want to be having exposure to. So, it's just sitting positioned really nicely to capture not only way more volume that has never existed on crypto on chain plus something that like breaks the correlation between just meme coins. Cuz if you look at Jordan, if you look at the vote composition of volume in not just Solana, but pretty much any other blockchain where you're making most of the REV is like retail flow and in stuff like meme coins, right? I mean, pump at one point was like a what is it? Yeah, over 50% of the REV of Solana if not more.

Pump is still doing quite well, but it's just come down a ton. So, what are you seeing from your standpoint? I I don't know what you would respond to that, but I'm I'm more curious like are you seeing anything interesting on the front lines, teams, prediction markets, uh anything else that might really enhance the volume in other blockchains? Um Maybe first on kind of just the broad comments. Like I agree with you. I think they have built a very good exchange product and people like to use it. I think I mean, just focusing on the product a little bit more, I think that is the core reason why people like it.

It's like I mean, back in the day I liked FTX before it blew up because I mean, they made fiat onboarding and offboarding super easy. And it's just like as you use a product and the more easy the product is to use, it's a lot easier to kind of recommend to a friend. And so I think they've done a good job. I would say for Solana specifically and what's been more interesting recently is this idea of the proprietary AMMs, which is essentially moving market making kind of uh logic um onto the blockchain itself and almost embedded in a smart contract. And the way that I describe this here is it's almost like um with standard

uh exchanges around the world, they give you that exact same cable length whether that's the New York Stock Exchange or the CME so that you don't have an unfair advantage. But they don't actually let you take kind of uh in a crude analogy a thumb drive and put your um market making logic on the thumb drive and stick it into the matching engine itself. But that's kind of what um these proprietary AMMs allow you to do is run the matching engine with the market making logic essentially side by side. And I think that has been resulting in very very tight spreads. And if you look at the data, Solana is actually been doing much better than Hyperliquid on the spot side. What they have not figured out is perps. And so I think the interesting kind of next question is can

you take these proprietary AMM kind of logic of um market making directly on the blockchain itself to perps? And then that's where it gets a lot more interesting combined with obviously you just need the assets that people want to trade. Commodities are obviously hot, crypto assets are less hot, but can you expand that to equities if you get things like Backpack or Superstate to allow KYC, then you have KYC of um equities on blockchains as well. And so I think it's those are one to watch. And increasingly what we're seeing now is with one of our portfolio companies Titan, they've actually moved the routing logic um

that used to be off chain actually on chain um directly within the smart contract logic. So, when you trade and that kind of latency to execution time is on the blockchain itself where historically um that was off. And so now they're actually have the best execution, which we kind of relate to more like uh national best better offer within TradFi um on blockchains. It's guaranteeing that you get the best execution across all these kind of aggregators across the space because they've moved this aggregator logic onto the blockchain itself. And so I would say um in kind of like the Chris Dixon words, like you you originally

start with like what you had in the past and then you just copy that to the new technology stack and then after a while you figure out what actually works with the new technology stack. And I think if blockchains are these distributed ledgers, we're now starting to get to the point where people are actually reinventing and building the crypto-native logic for trading, which is slightly different than order books. It this logic is living on chain and allowing some unique things to happen. And so that's been an interesting area to watch. Um while it's not one-to-one, um I think it's has the potential to actually be even better over the long term.

I think you're as equipped as anyone it out there to answer a question that I think is looming in a lot of folks is what did Solana miss or is that a disadvantage that allowed Hyperliquid like what maybe what did Hyperliquid do extremely well and and why was it hard or has been hard for someone like Solana to do what Hyperliquid did. I think you you sort of hinted at it earlier, but I think it's a it's a question that I've heard a lot of people ask like hey what what what made Hyperliquid Hyperliquid?

Um I mean I think their vault product was exceptional. Um if you looked at what happened with 1010, a lot of the market makers just pulled their liquidity um and stopped market making. And if you have a vault product, you can kind of internalize that flow as a backstop. And what they've done with um their listing process has also been fairly unique. I would say if I view it like purely from a technical standpoint, it kind of goes back to what I was talking about where you have co-location versus kind of this new paradigm that's less proven, but I think has potentially the better architecture for a world's exchange. Um Hyperliquid because all the kind of nodes if you will were co-located in a single jurisdiction around the world, it makes it a lot

easier. Just that latency um when you're not propagating packets around the world and it's clustered into kind of a 10 ms range. It's a lot easier to actually design um than having a global node set with a thousand nodes around the world that have to propagate information. And so it's mostly purely in my mind from a tech standpoint physics. Uh it's harder to propagate things around the world uh if you're just further away. And so I think combined with some of the unique things on the um call it vault front that they did on providing the liquidity, the asset listing, and obviously just making a very good perps product. Um

I think they've done exceptional. And Solana wasn't really competitive um like truly on the execution side until recently with these proprietary AMMs. That was really uh and Yano has a bunch of great data on this and I've been appreciating uh all the research and charts that you guys have been putting out. Um that proprietary AMMs are really eating into all trading across Solana. Um and that is specifically because they've moved kind of this market making logic on chain. Um which is for all intents and purposes from a kind of physics standpoint almost equivalent to what Hyperliquid's doing.

And so some of these things >> a reason there's a reason Kyle leaves Multicoin to go build his own prop AMM, right? Yeah. Kyle's Kyle's still doing Kyle things. Um Um but yeah, I I think um the proprietary AMMs are very interesting and it's the thing that's kind of made um at least Solana in the short-to-medium term a lot more competitive is that the execution is not like 50 bips or a or 10 or 20 bips, they're one to two bips. Um and they're actually more competitive than a lot of centralized venues like Binance.

Logan, we focused most of this on just Solana and Hyperliquid. What else in crypto is getting your attention right now? Um Santi actually had a good post the other day about um DePIN. I think we were early DePIN supporters and still I think conceptually think it works. Um On a high level, what I think more so now is what people originally thought was kind of you have the Helium model where it's almost inflationary tokenomics. You give people kind of quasi equity or tokens in this uh model and people go out and do things in the real world for you. I think in large part that has failed and because Helium was the first, they kind of got to run

that experiment and it allowed them to bootstrap their network. If you look at everybody else though that tried to do it, it was really just like didn't work. Um and so I broadly think of DePIN now as almost kind of analogous to I order pizza from downstairs in my building on Uber Eats. But that doesn't make that pizza shop a technology company. Um similar to DePIN, if you're using the blockchain for coordination or payments um and even just rewarding people in tokens, that doesn't make them a crypto company.

They're still a company that has to go out and build a real business by themselves. They have to get revenue and kind of the financial engineering I just think does not work. And so I think in large part it's just being more so true that if you want to use the blockchain for coordination or payment rails, that will work. But don't do clever financial engineering where you're kind of early incentivizing people because I just don't think that's actually worked. So I'll tell you the biggest upgrade I've done in my investment framework is focusing more on supply than demand.

Because supply like supply's actually harder to understand. You come from Tesla. I think the value that Elon has built is really decomposing supply and he talks about it in a number of podcasts like SpaceX, Tesla. He just focused on the supply chain from building a company from the ground up and challenging every single part of the supply. Um Similar to blockchains, I go back to your model that you will open source. The supply is where I get stuck. Like when you think about DePIN, my my point on DePIN is I think we can all wrap our head arounds like it is freaking fascinating that Hivemapper with like 50 million in CapEx that is funded by community, not the company, they've been able to map like 36% of the world's roads.

Orders of magnitude less than Google and other players. You see this phenomenon again and again and again like we've been able to create these really re- uh dense and accurate networks and you see kind of Hivemapper and Helium do really well. The point that I'm trying to make is the supply side is sort of what are we I think I think probably what we're getting wrong as an industry is the take rate and the ability to monetize these networks. If we uh if we just like assume okay trading in the real world comes on chain. Like I know you and I talked about

stablecoin transfers like Tempo. Maybe maybe answer this question. Do you think that Tempo with stablecoin transfers is that an interesting business model? Like if you had the opportunity to invest in Tempo, would you do it? Uh no. I mean stable I mean I would ask them what their business model is because at least what we have seen in quote-unquote permissionless blockchains is that stablecoin transfers are a loss leader. Um it's from an engineering standpoint really a race to the bottom because as soon as you enable parallel processing, which really all the modern blockchains do today, you can almost infinitely parallelize, which stablecoin transfers are one of the easiest things to do. Um and so I would ask Tempo, are you going

to do a similar model to Circle where you have like Tempo USD and you're monetizing the float on uh the dollars in that system or you're doing uh a subscription model because the actual act of just doing a stablecoin transfer is not a money maker. Um unless they can like own the end customer relationships with the end terminals, maybe there's interchange. There's other things, but just the actual money movement is not very bullish. And so for that reason we haven't been very excited about um stablecoin chains because it's I think it they just don't make money.

Yeah. What's the if we go to the tail ends like where are we totally missing like the huge opportunity here and what is the absolute bear case? Like is it that these are common goods and so the infrastructure doesn't accrue the value, it's the apps. For all ones in general? Yeah, for all ones in general. Like Hyperliquid is like application specific, so it's it's a cleaner value capture in my mind, but generalized L1s Yeah, I I Kyle's and other folks have responded to my DePIN post like dude, you're overlooking Jevons paradox. Like there's just way more demand that's going to come online. You're an idiot. And and maybe that's true. Like I'm I'm I'm willing to be wrong. I just I'm not seeing it as clearly right now.

So so for the L1 themselves, I think you will value them like exchanges. Um and so I the reason why we've also generally been interested in Aptos is they put out this piece like a year and a half ago that they're only going to be focused on trading and kind of this world trading. Now, just starting and focusing on that doesn't mean that like everything's going to pan out. You still have to get the liquidity, you still have to bootstrap traders and all that, but we appreciate the opinionated direction. Um and I think what we really will continue to see even across L2s is more trading focused blockchain. I mean Base even said that. They were focused

on creators and then they're like, "Hey, this doesn't make any money. Blockchains are ledgers. Let's focus on trading." But even with mega ETH or any L2, Arbitrum, like what because they're single sequencer, they're selling co-location. And if you can co-locate next to the matching engine, you have the opportunity potentially to make more money because you're more informed than your counterpart. And this is the same thing with Hyperliquid and kind of why we bucket them in that same vein is because if you can co-locate next to the matching engine, there is alpha there because of just physics and trading.

And so why we have built this model is because we're trying to be intellectually honest with ourselves of how do you actually run discounted cash flows on these things without saying everything is a special snowflake like Bitcoin. Logan, I I got dinner with your co-founder maybe a year and a half ago. And you guys were you know, long you know, tote some tokens that did well and stuff like that, but also very long Tesla. I'd love to hear if that thesis is still true.

Again, I don't know if this is actually in the fund or just personally, but I mean I'm super bullish Tesla. I'm biased just because I work there. I think even going back to kind of Santi and earlier, it's like crypto back in like 2017 and 2021 was kind of the only kid in town that like you could do interesting investments. Now there's AI, now there's robotics. I think Tesla is very interesting mostly from two parts. One is can you build a essentially autonomous car? And I think kind of peeling under the hood, they've done a lot of interesting things just building the neural network to make generalized autonomy. And I think people

underappreciate how hard it is to do generalized autonomy versus kind of the lighter model. I've had lots of debates with other investors about autonomous cars and essentially only driving with cameras and a neural network versus lasers which is Waymo uses. And I'm pretty confident and still extremely confident actually that you're going to be able to do it with neural networks only. I think the other thing though that people are broadly underappreciating about Tesla is just these robots.

I kind of view robots in the similar vein that AI was maybe like five or six years ago. I have lots of thoughts on robots, but people knew that AI was going to be a big thing, but until ChatGPT actually came out, people were like, "Oh shit." And I kind of feel like we're in a similar vein on that with robots. There is going to be billions of robots. And really what you need is the neural network for the brain. And then you need to actually build a competent robot and then build it at scale. And all those are relatively difficult things, but I think you're almost going to get a renaissance similar back into like the early Detroit days where they build these large

manufacturing lines for cars, but for robots. Because you're going to be pumping out hundreds of millions if not billions of robots a year. Some in the humanoid form factor, some in other form factors, but the robots has been a thing that we've been increasingly at least for me focus on because I think people are underappreciating how hard this will ramp when people start clicking. So those have been very interesting. What what percentage of Tesla's terminal value would you ascribe to robo taxis and robots?

I mean most of it if we're being honest. Like 90 plus is like robots. Yeah, I mean like the PE has always been out of whack. Like if you look at it like forever. I mean objectively, if you're just being honest with yourself, I mean there's a lot of Chinese electric car manufacturers that have been able to beat them on the pure electric car front. I I think if and they I I have a Tesla. I think they're well-built cars, but if you can buy a similar car that are cheaper, I don't see why people wouldn't do that. The bet specifically is can you get generalized autonomy in this form factor that Tesla has done, which I think is very very hard to do

and they have really built up over years from the data collection to the neural network training and that entire flywheel. And then the robotic side, which to me is now more it's less less of a reality today, but it's hard to bet against Elon. Where he's probably the best person in the world at moving atoms around and doing that at scale. And so I think him building the human robots will happen and it will happen at a very large scale. You're paying a premium for that today, but he will get it done.

I call Tesla the the Great Wall of China. The wall will go up and many of you will die to build the wall, but >> [laughter] >> it's going to happen. Are you are you a buyer of SpaceX at a trillion trillion and a half? I actually got asked this question the other day from a different LP. I I think crypto has kind of trained you to when things initially come out, just like watch. Like don't FOMO buy and then see if they trade down. And so I I'm definitely massively bullish XAI and um Tesla or SpaceX over the long term especially with the data center side and space. I think that is very interesting

if you think about the power capacities. Really even just the red tape to build data centers. Elon was the first person to do 100,000 GPUs that were interconnected where you could do any GPU can talk to any other GPU and I'm pretty sure they'll be the first to get to a million. But in his podcast, he talks about just all the hoops that they had to jump through just to actually be able to get the permits to actually build that. And so I think from the SpaceX standpoint, you're really underwriting today at least the ability to continue to scale Starlink, which is a great business and everybody loves the product. What they are going to do is allow you they've been buying a bunch of spectrum. And so they're going to do

direct to cell. And so then they're competitive with Verizon T-Mobile or really all global carriers. And that will be a massive market too, but over the long term, really what you're buying in my mind is kind of this increased access to intelligence and them putting more data centers in space. And so I don't know if it's going to be directly buy on the IPO day. TBD on what it comes out with. Over over time though, I do think people are generally underappreciating XAI and Grok. Obviously they're behind today and and Grok has killed it on the coding side.

But what we have seen with the scaling laws is that if you get access to more compute and generally have better data, you can continue to scale. And so I think I wouldn't count Grok and XAI out yet even though they are behind today. I can't let you go without talking about X and their financialization of the platform. And is that in some way, shape or form related to the crypto and what they what they do with it.

I mean if you listen to I'm a Elon stan, so I I listen to a lot of his interviews because I think uh I appreciate people if you can look at like who's more directionally correct over time because that's kind of a proxy in my mind for uh obviously predicting the future and it also generally helps with capital kind of allocation. And Elon obviously has done that fairly well. Um he's generally a little optimistic on his timelines, but it does happen.

And so with X specifically back to like the early PayPal days, um what he was wanted to build was a this global database where you had very low latency, low jitter, you had low fraud. And if I'll send you the clip, but he was talking about building the global real-time database. And that is what blockchains are. They are very high throughput, low latency, low jitter databases. And this is why even though I think Hyperliquid is a great product, this kind of global TAM is this global database. And so I think Elon's going to be on the mission

to kind of recreate that where X becomes the kind of money or WeChat for all blockchains or for all financial. I think it's interesting cuz uh um the main product guy, his name is escaping me, um used to be an advisor to Solana and to Solana projects. And so they do have an end there. Um But to me, it's just like more order flow. Um They're they capture the order flow similar to Robinhood and then they can sell that order flow to market makers and kind of have be another revenue stream. So if anything, what I try to think about is will trading continue to increase over time

whether it's going long, short, just buying spot, whatever. Um I think just as Robinhood kind of tapped into the retail market and people thought that was a small market at the time, people today still underestimate over the long term how much trading volume in general trading is going to happen globally as more and more people have access to capital markets on their cell phones. It's going to be a lot of trades. Yeah. We've been talking a lot about things that you're excited about. Is there anything in particular that you are just categorically not interested in investing or very bearish on?

Um that's a good question. I mean within crypto or just broadly? Let's start with a crypto and then unless you know and then broadly. Um I would say I don't know. I mean I think as of today it's very hard to focus on non-financial use cases within crypto because that has shown where the product market fit is. I think maybe there's this opportunity where deep in networks can bootstrap their networks over time and then start making sufficient revenue. We just haven't seen that in the data and I would still say that is a possibility but I don't think you can do

what Helium did. So we have just been hyper laser focused on kind of the market microstructure. Obviously have studied the different architectures for some time on which are the best for trading and which we think are not as well positioned over the long term for trading. Um And so yeah I think it's just being honest with ourselves about what actually works and what doesn't. So if you're building anything on the trading or finance related side definitely reach out to Frictionless. I would say though from um the things that we're excited about but like wouldn't necessarily invest in I think

it's hard to invest in I would say the wrappers or like anything outside of the core model at least today or or compute. Compute has obviously done fairly well with Coreweave and um Nvidia but it's kind of a there's this funny meme on X where it was like Nvidia or um Anthropic put out a new feature and it was like the Gladiator meme like do you live or do you die? And I think that's true. Um And like as these models get better they continue to kind of propagate outwards and um eat into more things. And so I think you kind of have to go long the models but it's very it's a capital intensive business um and

they are making great revenues but I'd be wary about kind of investing in like the wrappers or applications outside of those. Um Yeah that's where I think the robots are interesting cuz like they're under appreciated in terms of where where they will be in the next call it like 10 years. Um In the next 12 months you're going to come on the pod again. What outperforms Bitcoin or Nvidia? Um probably Nvidia. >> [laughter] >> Why not just pivot to investing in AI?

>> Santi what do you think? Nvidia or Bitcoin? Nvidia. Over over 12 months? Yeah. Is there a time frame Is there a time frame for you where that changes? Um No. Like well there there will be a time frame where like Bitcoin probably outperforms Nvidia over like a 6-month period or so. Nvidia's been pretty flat.

So I actually think I actually think it might outperform in the next 6 months or so. Uh over a longer term period I think Nvidia continues to outperform. The only the only thing I think the scenario where I think Bitcoin outperforms is like everything goes to [ __ ] and Bitcoin relatively under like a relatively outperforms Nvidia and you have this AI apocalypse where like capex rise up there's a lot of hype and Nvidia falls more than Bitcoin.

But Bitcoin still goes down but to a lesser degree. Yeah I mean the problem that I've always had with Bitcoin is like uh it's kind of at least kind of implicit that like money printing will continue and that's true but it's also just like not super fun. I personally have always liked the businesses a little bit better which is why we focused on how do you actually scale blockchains? I don't want to be super super doomerish on blockchains. I do think if we do consume finance I mean today the market cap of all assets is 2.5 trillion.

I do think that's going to go to a hundreds of trillions and the trading of that is going to be massive and if you can own different parts of the trading stack whether that's the execution or order flow that is massive but I think there's also kind of a just being honest with ourselves now there's other interesting things happening in the world with artificial intelligence and also the robotic side and I think like you are seeing more and more managers kind of expanding their mandates to do that because at the end of the day really what you're paid to do in my eyes is make your LPs money and if the opportunity are maybe not as um unlimited as they once were before you really have to go where I think

there is alpha and you can be early. I think there is a lot of interesting things on trading and I think we're at Frictionless very early to understanding some of these nuances of the different trading stacks including order flow and kind of the different value capture across each of these but there are other cool things and I think just got to be honest with ourselves about the investable universe is large. It's getting pretty silly out there. I mean you just saw Allbirds pivot from being a shoe company to an AI company and the stock is up 10X today or 8X.

The Feels frothy. They used to do that with crypto. You launch an NFT and you'd be up 10X. Right. Um what do you before we drop what are you reading to or or what is your like consumption diet to stay on top of everything going on in the world and crypto to inform your investment framework and just in just to level up and build an edge in Um I I think our core um I would say alpha was always trying to at least try to aspire to be first

principle thinkers. It allowed us to understand that blockchains were bound by um bandwidth. It allowed us to kind of understand parallel execution before others. And so when I try to expand into these other markets or adjacent markets it's really just going very deep and like the core building blocks and kind of understanding uh kind of the trunk of the tree so to speak before getting out into the leaves. And so even just like um I don't know. I mean on the compute side just like different compute architectures on from training for neural networks to inference.

Uh I've been nerding out on uh kind of the understanding of doing kind of most chip design is electrical pulses versus doing like photons which is light. There's a bunch of like nerdy stuff that I've kind of just been going deeper on to build that base knowledge so that when you move up the stack to different applications or models or even on the robotic side that you're not kind of uh swimming naked so to speak. And so I don't know. It's a mixture of um just smart people and podcasts. I think the thing that all people really should do is try to identify who's the foremost expert in any given field and like why

are they winning? Like study Kobe Bryant. Study I mean I guess Tiger Woods maybe is not the best example but like people that like are dominating in their field. In athletics this is very common. Study what the greats are doing. And I mean you talk about Druckenmiller and all these other people like why are they winning so much better than other people? And you can do that for any given field on the robotic side on the artificial side. And I think it takes some time to identify those people but then you can really study them and like how they thought and their kind of unique insights. And I think that's a great like foundation model to then jump off of and build your own unique insights cuz otherwise it's just like you're grabbing at leaves and generally

you have a poor understanding of kind of the world. Logan always good chat man. Appreciate it. Appreciate you guys having me on. Yeah good to see you. Santi Cheers.