The US Treasury’s Stablecoin Report, TradFi’s Crypto Adoption, and Ethereum’s New Era | Roundup

Transcript

The biggest area of growth for stable coins is not in the US and it it is also the current largest area for existing stable coins, but it will be the largest place of growth for stable coins in the future as well. I would not be surprised if if we're at two trillion in stable coins. 1.5 of those are originating outside the US. This episode is brought to you by Arkham. Arkham allows crypto traders and investors to look inside the wallets of the best traders, largest funds, and most influential players in the crypto markets. Today, we'll hear more about Arkham later in today's episode. Quick shout out to Permissionless 4 coming this summer to New York June 24th through June 26th.

We'll have speakers from all across the industry, including Hayden Adams, Kyle Sani, Guy Young, and more. Get your tickets today by following the link in today's show notes, and make sure to use code Bell 10 to save 10% on your purchase. See you there. Hey everyone, quick disclaimer before we get into today's episode. Nothing said on Bell Curve is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only and the views expressed by anyone on the show are solely our opinions, not financial advice. Our guests and I may hold positions in the companies, funds, or projects discussed. All right, everyone. Welcome back to another roundup of Bell Curve.

You got Michael's one and two. Vance fellas, no one's at Dubai. I can see each other in the backgrounds. Habibi. Yippi. What do you guys What is Well, have you heard much about the conference in general? And then what is your feeling? What What are you talking about? We're saving it all up for permissionless. That's right. I think I had the right answer. Uh but yeah, I actually I caught up with Yo, who's over there at the moment, and it was funny. I talked with him the first day. He was like, "Dubai is really cool. It's really clean. There's a lot of people here." yada yada. Then the next day, he was like, "I have seen the underbelly of Dubai.

Uh, I don't need to get into some of the nightlight, but yeah, it was a sheep that had like a pet bear and, you know, other sort of tiger-l like animal. It's just like, you don't really love to see that kind of stuff. I uh Yeah, I I respect the distance traveled for everybody, but yeah, no, we too many important things to do here in San Francisco. We travel a lot. No need to spend a super long flight. is ESA back because of AI in general. Um like I it seems I mean also just as a user chat GBT I mean just how much it's improved. I feel like every week there's

a new model and it's incredible. I mean how good this thing are. Yeah. Well, I mean I I think um I personally have had uh six friends move back from uh mostly New York but other places all around the country who moved during COVID move back last six months maybe nine months now. Um actually three of them work at OpenAI. Um and or or now work at OpenAI. Um the city is busier. There's a lot more traffic. restaurants, reservations are harder to get. Um, it definitely feels like the vibrancy of San Francisco is back in some ways. It's not like I I

lived here 2013 through 2016. That was sort of the start of the the tech craze, let's say. Um, it got really crazy in 2017, 2018. Fortunately, I wasn't here then. Um, but I think that is definitely not where we're at. I I liking it to kind of like the 2013 2014 era again where everybody kind of knows the direction where things are heading. You know, open AI is going to be hundreds of billions of dollars of value that's generated and they their headquarters is right down the street. Um we walked out uh you know of our office and and yes, two days ago uh Johnny IV and Sam Alman are filming a commercial in our lobby.

Like there's there's definitely a lot of a lot of stuff going on. AI is big. Um, you can tell when it's YC demo day because this one coffee shop that we go to is packed with, you know, startup founders talking about how their pitch went. Um, I think the tech scene is is, you know, there was never really a chance that it was going to be anywhere else with real vibrancy, but um, it's it's definitely back in San Francisco. Wait, so if Sam Alman and Johnny Iv are recording something a commercial, does that mean that OpenAI is launching a hardware product?

So, uh, I guess we can talk about this. No, no, we cannot talk about this. Give us the alpha component. No, no, no. Look, they are they are, but they're defin like they were in a public space yesterday. Filming something together. Yes, we we may have uh moved offices. Maybe it's an SF tourism video, but probably we we may we may have had to move offices down the street to our our current office because of um a a campus being built uh with all the offices on our previous block. Um wow. Yeah. I mean that feels back I would say the the real estate market topped in like 2018.

Um, so there's like a definite bottom that that has been put in and if one of these not long ago, not co didn't have topped like probably way before co like just looking at like the price of different houses, but it feels like now the city is also a lot cleaner, which which is good. Daniel Lurri seems to be a pretty good mayor and I think that's good for everyone. Nice. Um, all right. Well, I'm curious to get your guys take. Maybe we can start this week actually with something which was a story that didn't get nearly as much attention as I thought it deserved in crypto. And I'm curious to get your guys perspective.

And I know we've been talking about stable coins a lot recently, but I think this merits uh some airtime here. Uh so Quinn Thompson, shout out Quinn, uh found this report. It was a 20page report from the Treasury on stable coins. And there's a full link. We can link it in the show notes, but only got 250 uh likes. And I'm just going to read a couple of the highlights here from the market overview section, you know, which is read this last quote. Evolving market dynamics has the potential to accelerate stable coins trajectory to reach two trillion in market cap by 2028. So that is a 10x roughly from here. Um they make a distinction in between emerging tokenized money market funds um via what they've been calling payment stable

coins. So USDT, USDC being payment stable coins versus some of these nextgen uh stable coins that look more like money market funds. I thought this was a really interesting tidbit as well. What are the potential impacts on bank deposits? Uh and I'm I'll just read this. The potential impact on bank deposits may depend on whether stable coins are yield bearing or if they offer other operational payment features relative to the yield and functionality offered by other products. In light of potentially exacerbated competition, banks may be required to increase interest rates to maintain funding or find alternative funding sources, i.e.

expand their wholesale funding activity. So to translate what that means, banks might have to start paying depositors in the United States more because stable coins are ramping up the competition, which I find so cool. And come on, this is the big stage, right? These are $2 trillion potentially that the Treasury is calling for here and actually has a material impact on everyone that holds US dollars which is everyone in the United States. So pretty cool. I'm not sure what you guys made of this. Extremely bullish. Uh I mean look when when we're talking to RLPs or or frankly trying to break down the market for stable coins what we uh proostate is that you know stable coins in the next couple of years will hit one trillion.

Uh I don't think that I've ever seen a government agency uh especially the Treasury be more more bullish than us on something. Um so you know that that's pretty great in and of itself. Um it also called out the Genius Act as the proposed legislation. Um we have also heard murmurss that the Genius Act is probably going to be the the formfit uh regulatory construct that gets passed. Um, also potentially with a timeline of before Memorial Day, which would be the end of May. Um, I think that clears the path for basically all of this to start happening. Um, we've heard murmurss that banks are basically like waiting for the day after that legislation passed for them to start

opening up what they've already been building. Um, I I think this is going to happen a lot faster than people think, too. Um and yeah, one one question that I do have that remains to be seen is and and we've talked with you know advisers on this and and there isn't clarity yet um is what that yield bearing element looks like. So, you know, Bidd, which is the Black Rockck product, which is a tokenized money market fund. Um, that may be an interesting kind of alternative to tokenized bank deposits if, let's say, the Genius Act, at least in the way that is currently formatted, um, does not allow for payment stable coins to be yield bearing. But if you have tokenized money markets or tokenized structured products, maybe

those are the yield bearing ones. like we we need to have uh clarity and and what that act will hopefully provide is clarity around the market map of what is what and and you know the market structure uh for stable coins you know how how can banks you know delineate between what's a tokenized bank deposit what's a tokenized money market or or you know yield bearing asset um but I I I think once we have that um it's a really interesting you know secondary effect if you can tokenize all of your cash and your checking account and just transfer it into a tokenized money market as you're waiting to be able to, you know, pay bills with it.

So, you know what is is sort of making me laugh a little bit here is that I mean there was actually someone pointed out, it might have been Austin Campbell, um who's been, by the way, you should check out his um just commentary on stable coins in general. He's been pretty involved in the Genius Act and um I think it was him so I apologize if I'm getting attributing that when money market funds were originally proposed there was a lot of resistance to them actually especially from the banking community and the regulators because of this concern that passing back yield towards uh you know to holders of a money market fund would uh put pressure on the banks.

And so it's interesting to me to see this exact same concern crop up. Um, and you know, there there's good reason for this. I think that it would cause some issues by causing uh, you know, issuers of stable coins to compete on yield, but they have a whole there's a whole section here around the rapid growth in digital money market funds that catalyze an alternative stable coin narrative despite obvious differences. And they break out tokenized money market funds from stable coins. And they have all these things, target users, select use cases, payment tool, redemption model, issuers, and the yieldbearingness. And it just basically is just it's a money market fund. if it return earns returns based on the underlying assets and are yield bearing and under the proposed genius act stable coins cannot be yield bearing but there is yield that's being

generated it's just going to the issuer of the stable coin so it's an interesting thing maybe there's a little bit of path dependence in terms of how the banking system developed in the US and you know stable coins are throwing a little bit of a wrench in people's preconceived notions about the separation here so I'd love to see them like put this into force and then create a swap line for stable coins Like if you got paid, you know, 50 b 50 bips above sofur to hold and distribute stable coins, like you create this natural incentive to actually dollarize people. Like that would be a very interesting financial primitive to go alongside this. And um you know like we have swap lines to different countries for their currencies. I think this is kind of a

different variation of that. But, you know, there's not only a way to to put this into legislation, there's a way to put your foot on the gas and really distribute the supply of of US dollars. Uh, oh yeah, this was one other uh so exactly to that point uh bit. So, one other interesting tidbit from this executive summary was uh yeah. Okay. So, what are the potential consequences for the treasury market of stable coins? two main potential impacts of deposits moving to stable coins. An overall increase in demand for treasuries, which I think everyone has intuited, but the other is an overall shift to the front end of the curve. So for something like USDC, they're almost entirely collateralized

with T bills, which are very shortdated treasuries. And so that's kind of a powerful tool for treasury because if you have more demand for you know short-term data debt then you know you can uh you can afford to issue to not basically dump duration onto the market and raise uh longer longer dated yields right which is where people fund mortgages and things like that. So, it's actually like a really really useful tool in their tool belt, right? So, I mean it is, but like if you're going to go all the way to the front end of the curve and not be able to do thing like I think it reads that it says like they have to go to the front end of the curve and just buy like basically CDs or very very lowrisk instruments. Like if

they're asking to to kind of do that, I think the natural thing would be to give them incentives, you know, like call it like some sort of program like the the stable coin reserve program. start funneling incentives towards that. Um, I feel like the only way that you can actually do something like yield curve control mechanically is like if if you kind of create the incentive market yourself. Like it'll be so operationally difficult to do if it if you're just like kind of spraying and praying into like CLOS's or or or you know the tenure or something. So I think that's kind of like another interesting monetary policy lever you can pull.

Definitely. Yeah. I I know we've talked about it, but I do think that these uh this model of stable coins look something like it's not originally what narrow banking was, but kind of like that. It's like I the way I sort of look at these stable coin issures now is they're kind of global bank deposits with very low overhead and much safer, more liquid uh base of assets. And it's kind of a cool model. Um and it's an interesting building block instead of the you know the IOU being tethered to a certain bank. It's just kind of global from day one and building blocks that anyone can use and people are and there's a whole nextgen and and I do think the treasury is right to make a distinction in between stable coins and assets like USDE like Athena or um you

know some of the or like uh Level or uh or CAP kind of as being new stable coins, right? use um USDC or USDT as a base to a collateral asset to generate yield or in the case of Athena it's more like a tokenized hedge fund strategy like those things do feel different to me than Tether or I don't know if you guys feel the same those feel like different things there there's a there's you know ALGO stable like history this guy Fang Pao was the first guy to ever create an algo stable in like Imperial China was backed by like like it's kind of like it's making this stuff interesting again. All these

different models. Um it'll be interesting to see what happens to the investment banks as well. The ones who are providing services to this stuff like you know Janice Henderson is putting their AAAL onchain. Uh Black Rockck obviously has Bidd. Like I expect a bunch of these people to start coming out with with things that will benefit from stable coins. Arkham was created to make blockchains human readable and simplify blockchain data so that it is meaningful and useful to the average crypto user. With their new exchange, users can see what the top traders are buying and selling with Arkham Intel and then trade on that information with Arkham Exchange. To get started, follow the link in the show notes below.

Today's episode is brought to you by Ledger, the global leader in digital asset security. Celebrating 10 years of innovation, Ledger is trusted by 7 million users, secures 20% of the world's digital assets, and remains the most secure hardware wallet for your crypto and login. Follow the link in this episode's show notes to grab your Ledger today. Something that I'm reminded of here, and it's an interesting sort of moment in time, I think, is, you know, we there have been a couple of um there have been a couple of headlines this last week, which would have been, you know, beyond your wildest dreams two years ago. and the market sentiment is still in the dump. This announcement from Treasury on stable coins. There is an $8 billion Bitcoin strategic reserve bill which I don't

know the inner workings of this but I guess the governor just has to sign it in Arizona. I also saw Charles Schwab the CEO came out and said we are within the next 12 months we want to roll out spot crypto trading. I mean these are huge development developments right? I mean just the Schwab announcement alone you know they'll probably do a staged roll out. It's not going to be all on day one and might end up taking longer than you know we want it to. But these are crazy developments, right, in terms of adoption here. It's crazy it takes a year to roll out. Yeah, I mean it's crazy that they're a year and a half behind Black Rockck, but it's good that they're doing it. I I mean, we were just saying this um in our office uh right

before this, but uh it has never been more bullish from a fundamentals perspective. um but it does not match where the rest of the market is. And um you know talking with other people in the industry and and you know partners of ours um they're seeing the exact same thing across the board which is like if you really dig into some of the things that have tangible value you know the fundamental flows of revenue and income to some of these protocols uh the institutional adoption and financial institution uh adoption of these assets.

um and some of the um I would say uh complexity or um you know product capabilities that these new companies are being able to support um just open up the field for what you can do with this stuff. Um it it is fundamentally bullish everywhere. You just have to look u but it hasn't translated into price yet. We we made a great slide comparing like these things to traditional pro I don't think we can show the slide. No compliance probably get mad but um yeah no it it is quite compelling. Um but you know the person that we just met with just said like people don't get this stuff at all. I and the the basis of the slide though

is, you know, you compare some of these protocols with some of the the comps of publicly traded companies, you know, in in the public markets. You compare the headcount and we're talking about like 10 to 30 people working at these protocols versus all of the the comps that we had were over a thousand, but typically like multiple thousands of employees. You know, they've been all around for like 12 to 15 years. They were started, you know, the earliest ones were started in like 2012, 2013. Uh, or sorry, the the most recent ones, the the earlier ones like a PayPal was started in 1998. Um, and sure they're they're highly valued diversified businesses in some cases at this point, but some of them are not. And and some of them are, you know, comparing a

protocol asset with a company, the growth is multiples higher. Um, the the profitability is orders of magnitude higher. And it's because these protocols can operate with such small opex compared to companies and have the same distribution, the same type of uh value cruel. Um it's just very fundamental. And so we we've started to incorporate this into our discussion um you know whenever we're talking to you know our in investor base or or peers in in um people in in the investor group. Um and that's what resonates best. It's just you compare a protocol to a company and

there's really no comparison. You know what else I find a little bit funny is that when you listen to people that invest in public markets professionally, their complaint is that there's no scale left anymore. This is all just passive flows and there's no sense of value and that all the passives just buy the big bag seven and yada yada yada. Well, crypto should be the a welcome tonic relative to that environment, right? you can actually just get alpha by straight up talking to teams, right? Like that is if you just dug and found good teams, there is value lying on the floor in crypto, probably more so than there is in almost any other market that exists in the world today. So I I've started to feel like that when I listen to these

guys complain about passes. It's like, well, this you should love crypto then because this is an active manager's dream. It's hard. It's not easy at all. you guys are uh one of the best at it, but the opportunity is there, right? It's what people say they want. Uh yeah, if you're if you're in the forums, you're going to make it. I think like I'm I'm back in Discord, which is also funny. It's like the cycle has now come full circle. Um but Mag 7, I I would say those are like SAS is different. Like Mag 7, Michael and I were discussing this. It's like they are the best at what they do. They have the most scale.

They're growing the fastest. they're most levered to the f like if you're doing something other than the Mag 7, it better be very important for you to go public. Like the IPO window has been has been closed and so the Mag 7 are the only game in town. Crypto to your point, it's just like it's an open field and you know sometimes if you don't know what you're doing, you can overextrapulate and basically you know that's how something like an open C gets like a 13 14 billion valuation. But I I do think you have to be ready to lean into behavior that you think is sticky that is generating fees on chain that you can reasonably forecast. So here's one thing too which is you know thinking about this this is just a dashboard that electric put together on stable coins

but you know this is the circulating supply of stable coins which is basically up only here. Um and you know I'm thinking to myself okay what are the implications if this number is to first of all it doesn't go down quite so much right it did dip from 170 some billion to maybe 125 or something like that but relatively modest debt and what happens when there's $2 trillion worth of stables that exist on chain it's basically if you don't have it's basically going to be cheaper demand or cheaper uh borrow right um one thing that we haven't really rebuilt and Galaxy Digital did a good job of highlighting this and gathering some of the data is we never really rebuilt the credit complex when it comes to crypto and so yeah if you have $2 trillion

worth of stable coins on chain all else equal you're going to drive down the cost of borrow and you so you should increase leverage right and these dollars are pretty sticky they don't really move I'll actually show you a chart as well um if there's trillion of stable coins that means that there's probably two players with 500 billion and one player with a trillion like th those can be like Google sized outcomes if they monetize anywhere close to where they are today which is you know I would say on the low end is circle at like a 100 basis points at the high end is probably something like sky which is you know 400 basis points the the high end is tether well well yeah the the high high end is tether but

you know I mean who like it seems like it's like 30 or 40% for them each year. Um, but I would say going forward like if those are $500 billion stable coins, what what is the value of that business? You know, at two or 300 basis points, that's like 10 to 15 billion. That's a lot of earnings. It is. And that's actually, you know, people often say in crypto, especially in on CT, it's like, how do I play stable coins? I mean, there is an obvious answer there. First of all, there they're just there are stable coins that have their form of equity, right? Or token associated with them.

There are also borrow protocols that seem like pretty straightforward places in this as well, right? This is what I mean about value on the table, right? Like it's right there if you look too like right where do the stable coins go? they flow to borrow lend money market lending protocols um at basically any place where you have a relationship with Sky right now that's allocating capital into some of these protocols you have a relationship um you know like spark uh or a morpho I mean there are just so many examples of okay who there's the direct beneficiary which is either going to be uh which is going to be the issuer itself and then there's the second secondary beneficiary which is going to be the recipient the actual

assets. The the secondary one I think um that one hasn't played out yet. I mean it these are net interest margin businesses where basically you are tolerating unprofitable carry trades for a short period of time and then trying to find like longer duration or more incentives or a different credit mix. Um, and I think that's why being US stable coin will be a separate thing. Like everyone will have their own US branded stable coin. I think that's in the cards, but they don't want to give up the the XUS. But so just to further this point, one thing that isn't as clear in the Treasury market, but I

think should be, you know, call or treasury market uh presentation, but should be called out is the the biggest area of growth for stable coins is not in the US. and and it it is also the current largest area for existing stable coins, but it will be the largest place of growth for stable coins in the future as well. I would not be surprised if if we're at two trillion in stable coins. 1.5 of those are originating outside the US. It it's not going to be like we don't need stable coins in the US as much as people who are not accessing the US financial markets or financial services that we have need stable coins.

And so it will be I think you know a lot easier you know for that growth model to to potentially you know outside the US. Over the years we have seen a multitude of hacks, rugs and bundled launches. The number one way that crypto traders can protect themselves and the wider community is through onchain analysis knowing who is moving funds and where those funds are going. Paired with their new exchange, users can see what the top traders are buying and selling with Arkham Intel and then trade on that information with Arkham Exchange. Arkham's exchange provides traders with the tooling and liquidity to take action in crypto markets based upon their onchain observations, bringing them the world's first exchange powered by crypto intelligence. To get started, follow the link in the show notes below. Ledger is

the global leader in digital asset security, trusted by 7 million users and securing 20% of the world's digital assets. In recent years, Ledger has built a comprehensive ecosystem of products and services, making digital ownership more secure and accessible for everyone. Ledger's newest devices, Ledger Stacks and Ledger Flex, introduced the world's first secure touchcreens, making it easier and safer to manage your assets. Alongside Ledger Stacks and Ledger Flex, they have also launched the Ledger Security Key app, offering a safer alternative to traditional password management. Follow the link in today's show notes to get started with Ledger today. Okay, on that point on just XUS uh in general is uh oh, one thing, okay, actually this is

what I wanted to ask you guys. Do you think uh as a hypothetical um so a lot of these stables right now are issued on Ethereum, Tron, a little bit of Salana. I think it's much lower in Salana's like 10 or 12 billion growing but but it's still probably 10 to 20 billion. Yeah, actually here I got it short on this. And actually the interesting thing about it as well which one thing that I think is worth pointing out is that crypto activity is weirdly stickier than you would think it would be. like it. I mean, all of these stables, you can see there was a big jump post uh this was the Trump stable coin launch here in in stables and it didn't really drop off after activity dropped off. Like if you

look at the DEX equivalent of this um it's way I mean there's a big spike and then it drops way lower. Um so so it is it is worth saying that yeah the stable coin stuffing. Yeah that's that's a candle a stable right there. Um and so there's probably a strategy right for and I I know a lot of these uh foundations and uh L1 and L2 teams are really concerned with getting um stablecoin and rwas on their platform. I I think it's interesting to think about is that actually good for soul the token or ETH the token, you know, especially if the value proposition is we want you to hold this

as store value or medium exchange or money within my ecosystem. Isn't aren't stable coins directly competitive with that as a use case? Simon, what do what do you guys think about that? Yeah, I think I think there's an argument that that is the case. um that a governance token attached to a stable coin is the dominant fee creation model alongside maybe like per attached to a stable coin or or sorry per attached to a governance token but Ethereum still does you know two to three billion a year of earnings and so like it is a long distance to get there like you basically have to 10x your revenue from like a like I it'd be like an 8x of revenue from like a sky perspective uh

for hyperl liquid it would probably you know four or fivex so I mean we'll see it's certainly possible also possible if the L2 and and you know L1 scaling road map actually get fixed that that is not the case so we'll see it's just like the question of which fees will grow quicker I I I kind of think like ETH is still one of the most dominant assets in terms of borrow lend um yeah it is the asset that powers most of this right a And um I think uh but it hasn't really had the the medium of exchange narrative basically since NFTTS died after 2021. Um I I

think Salana kind of had that with memecoins up until earlier this year. Um and because it was memecoin to soul as all of the all the pairs. Um, and so I I I less believe in the like these are going to be the assets that people use to pay for things on chain. I I do view them as collateral assets where you have a long basis long lawn perspective and you want to borrow against it for you know liquidity purposes or or whatever. Um but I I do eventually think that you know value acral um store of value or or kind of like a a a you know new type of value um mechanism um but less medium of exchange is how I would look at the base layer assets.

Yeah. Um, I think that I mean we probably have enough information at this point to do some sort of uh because these L1s are I think a lot of the tokens that you look at today you can pretty much look at it as some form of pseudo equity. I don't know if it's going to it's like these are companies, right? Like mostly um but L1's are obviously not that. They're clearly something very different. So yeah, I think that there's a lot of arguments um around how do you value these things? What metrics should you be looking at? there's this whole strategic Ethereum pivot that's going on in in real time.

Um, and I I've noticed that for whatever reason, you know, whenever someone suggests a part of this valuation methodology, people like, "Oh, well, if you only focus on this, then then why?" What? When in reality, there's a lot of different components to that, right? There's probably a liquidity component to something like an L1 token. I do think REV or fees or whatever is a component to it, right? There's kind of all these different things. And then even within liquidity, you can break it down in terms of, you know, there are different characteristics that you'd like to see or the fees that the L1 is generating. Is it based all on meme coins? Because you can decide to discount that, right? You could say, I think this is unethical or I think it's not durable or whatever it is. And you can have your own discount methodology.

But it is funny to me that the discourse in equities and fixed income is so sophisticated. And whenever someone suggests like one metric, it's like it's like, "Oh, well, you if you only care about this, then why?" It's like, "No, it's just a component to it, you know." Uh, but I mean, there's there's different sectors as well, like you own Bitcoin and ETH and and we do for different reasons than we do the midtail of altcoins that are doing earnings and buying back their own tokens. Um, I think there's like market beta, which is kind of the majors, and then there's like the asset alpha, which is the more idiosyncratic names. But um I feel like most people in crypto also follow that barbell. Yep. Yeah. But but I I do find that a lot of the coins that I see on

the timeline I've never heard of before. Like someone tweeted out his portfolio. I was like, "What are these coins?" Like it there's different meta that's occurring adjacent to to what we're doing. Um, but I I I kind of I wonder how connected like the daily runner culture will be to like ETH gets institutionalized as an asset and like you bring all this private credit on chain and these stable coins, you know, go to two trillion like it'll be it'll be in parallel. Yeah. And I'm I'm pretty sympathetic to the idea that okay, you have some um there might actually be this weird messy middle period for ETH where more stable coins being issued on ETH rails competes with uh the medium of exchange type value proposition. But I

do think if if buyers in their head can translate stable coin activity into fees, then I think that's then I think that's a bullish case, right? Because just intuitively it feels like yeah if you have a bunch of stable coins which everyone is using that are issued on this you know within this ecosystem that feels like it should be valuable and I think if you could see that transfer volume of that activity translate into fees paid towards stakers the L1 then I think that would be good. I think people would I do think like a very bullish view on just like stable coins are minted on a chain today. Why is that bullish for the chain? Like Robbie Mitchnik, the head head of digital assets at Black Rockck had a quote where he was just like, "Look, that's the only place that people seem to be willing to

take this type of risk. There's a $5 million minimum on the Black Rockck B product." So, you know, like ETH has a natural strength of like very deep capital markets because the asset, you know, even though it's smaller than Bitcoin, is still used more in DeFi and like that creates liquidity network effects which draw things like stables or yield products. like it's it's all connected. Um and yeah, I do think there is like a lot of the bull case for ETH right now as well is just like how deep its capital markets are. Um that like I don't think we're we would ever, you know, move to a different chain for the most secure stuff that we have to do. Um so yeah, that that's kind of another

aspect. Totally agree. Well, here's another Okay, let me know what you guys better a finer point is like the incentives for you to mint on a different chain are like low singledigit millions, you know, like you know, someone might throw tokens at you or maybe there's like a fee discount or something, but that's oftentimes not enough to like push it there. And you know like people think about like the figure you know credit stuff that's happening on that chain or like you know the mirroring stuff where it's like yeah those are onchain but they're not like really issued here. Okay. I've got another I so I agree with that and I also think that one of the advantages that ETH has Monae supply pointed this out and said it more

eloquently that I did but there is I mean the negative way of framing this is there's a lot of capital on ETH that's not necessarily getting a super high return at the moment so you could look at a narrative like reststaking but that's a huge advantage for issuers that are looking for cheap funding and let me give you an example of what I'm talking about here so there's a new stable coin called CAP This is kind of one of these nextgen stable coin or money market fund like designs and you know what they're doing is they're trying to generate yield on I believe it's USDC and USDT. Um so the way that they frame this is there are you know this is their phrasing right but there are three ways of organizing a stable coin. One is authoritative where you have one team which is basically creating something

like a hedge fund like strategy like Athena. That's where yield is coming from and there are depositors that anyway that's the strategy to governance is you have a team that's competent. Then there's sort of the um forget what they call it here but there's the sky model right which is that there's a DAO that's organizing different units of capital generation and you can allocate across those different units. Um and then there's another uh more market based mechanism in their design. I'm not going to get into specifics here but uh where they have USDC and USDT. They bring in professional what they call operators to um to generate yield there and then there are end users who deposit and to ensure that the operators are uh incentive aligned to the end users is

they take rest capital and so the advant so there is this actually really interesting because there's what $10 billion of TVL and I not actually sure what the current number is but the big challenge is where what are you going to do with all of that capital because we're not going to secure Cosmos those chains, you know, from uh long range, you know, whatever attacks. So, instead, we need to figure out something else to do with this capital. So, it's essentially going to be first loss capital for these operators who are uh leveraging, you know, finding yield with USDC and USDT. That's an opportunity that actually only exists within Ethereum. Now, yes, Eth one is still the only place for like very big financial experiments. Yeah. Now that the ch the challenge for that is that that's a

completely radically different risk profile that most users probably thought they were getting into with restaking and you're kind of providing first loss capital for probably a very low percent. The the yields on restaking never got high enough for people to blow up on a carry trade with them. Yeah. Okay. Which is kind of funny too. That's what everyone was concerned about. remember when uh restaking was the black swan that was going to take down at some point. It was like lido centralization. It's that Yeah, that one was such a that was a crazy narrative. Crazy purity test. No more no more like please. I'm glad we're going in a different direction though.

This episode is sponsored by Catria. Catria is the first zero knowledge rollup to enhance the capabilities of Bitcoin block space, enabling Bitcoin applications and unlocking Bitcoin's full potential as a programmable financial platform. With Citria, developers can now tap into Bitcoin's liquidity to build scalable payment systems, privacy solutions, and more. Citria is currently in its test net phase and is approaching its mainet launch. To learn more about Citria, follow the link in today's show notes. One more. I know we don't want to talk about this too much, but uh there was some investigative work done from CoinDesk on uh Rushi Mansion and the folks at Movement. So, you know, just reading down some of this, there's been

a little bit there's been no comment. No comment. All right, we can uh we can skip this part. But yeah, I mean I do think that there's this is what we were talking about with Santi maybe two weeks ago is we could definitely afford to do better in terms of transparency in the industry like uh who's building the disclosure you know regime who's building um transparency around what these market maker contracts are building transparency around what the team has and what wallets they're in and confirmation that the smart contracts that tokens are being held in actually have a vesting component.

um like who's building that because that's what we need and it's either going to come from a new regulatory standard that gets put through you know maybe with market structure or the other option is we could go like the financial services industry does and self-regulate I agree here one one point you want to be the sheriff no I'm all right you know who I think you know who I think actually okay so I think that the exchanges have to play part here and the evidence that I'll point to is when Coindesk broke this reporting that they brought receipts and all this stuff, the price of the token actually went up um which is everybody's very frustrated about, right? But when a I think 24 hours or some sometime today,

Coinbase announced that they were delisting Move and now the token's down 20%. So I think that tells you everything you need to know. Well, yeah. Uh the problem is that they if you rely on the exchanges, their incentive is volume. They're not going to want to limit, you know, assets and until they're being told that they need to. Like they're publicly traded companies. They're they're for-profit businesses. Like they won't abide by this unless they're told that they need to. I honestly think that this is self-regulatory from, you know, the protocols themselves and where you can kind of have this and and maybe I'm biased because, you know, this is our perspective, but like if we're going to get into the depths of let's figure out

what this asset is, if we're going to buy it or we're going to invest in something before it exists, like we want to know that there's going to be, you know, the safeguards and standards that has helped us evade so many of these what now look like, you know, nefarious actions on many different investment opportunities that we have passed on. Um, but we haven't because we, you know, do really deep diligence. If we were to take that perspective and apply that in a public manner and say here's how we're approaching this, here's what we're disclosing to the community. here's what we're, you know, talking with the team about what they should and should not be doing. How they evaluate marketmaker deals, how they evaluate exchange deals, how they evaluate what they should be doing from a staking locked tokens perspective,

like whatever whatever these decisions are. This is what we focus on with them. If we did that in a public manner, I think that that would engender confidence that would probably get them more capital. And then it becomes a positive reflexive loop where you do things in the in the positive sense that gets you more capital which you look better and then more people want to do this as well. Like the the punitive if you don't do this we won't list you kind of thing. I I just don't think I I frankly unfortunately have zero confidence that like you know Coinbase is going to do that especially Binance is never going to do that. They wait.

So, I thought that too, but can I uh look, this might not be the case, but they do have an in what what Binance and Coinbase don't want to do is list stuff that goes down only. They I think they do have an incentive not to do that. Um maybe you know like there was a period of time where from my understanding Binance became sensitive about being exit liquidity for me points. That was that was a real pain point for them, right? I was like, "Okay, it started trading on pump fund then it graduated into radium and as soon as you got the Binance listing, everyone dumped and they didn't like that." Totally. But but if Binance and Coinbase knew which assets were going to perform, uh, you know, they would have the best venture arms.

They had a farm and they have invested in basically everything. But the I guess my point is like you can you can identify all outright scams. You don't want those. You're right. You're right. It's hard to identify something that's like a mid-tier asset that looks and feels from the outside looking in like it's going to be great and it goes up 10x whereas, you know, one of its competitors like stays or or drops, you know, 10% or 50%. Um, I I think it's really hard to evaluate this stuff like it in terms of what will perform. Um so yeah I I think it's on the capital allocator side you know especially at the the public you know token element you know token treasury purchases um I got one more

yes yes okay maybe I got one more thing on um this was an interesting headline that I guess almost was technically this week which was Ripple was considering an acquisition of circle for something that looked like five billion. I'm curious what your guys take was on that. If I'm Jeremy Lair, I probably don't take the uh the Ripple equity and and tokens, which I think it probably mostly equity or or maybe it's tokens. I don't I don't actually know, but they're doing the AOL Time Warner where they take the the funny money and they buy real assets and they could end up with quite a treasure chest here at the end of the day and they could become like a very serious player overnight like that. That's why

Ripple is valued so highly in my mind. Yeah, it's kind of interesting. We we talked about Hidden Road, the acquisition that did end up going through. They process some crazy amount, $3 trillion in something like that of trades per year. And you know, as we were just talking about, it's strategically valuable for um environments like Ethereum or Salana or Ripple Chain, right? Uh to have a bunch of settlement um MPs happening on it. So, it actually makes a lot of sense to me to they have their own competing stable coin, I think. Um, okay. Yeah, that's right there.

But you could see, right, the all the cogs turning in Ripple's that makes sense. It's an acquisition. Buy a massive prime broker and then buy a massive stable coin. I mean what Ripple is worth is in the eye of the beholder, you know, or or or the eye of the beholder of the last round valuation, which I think was 10 billion, you know. Yeah. This this uh like there's a lot of companies that are just working through the private markets and doing this. They're buying very valuable assets and it's it's a weird venture PE hybrid strategy, but it's it's interesting.

Like say more. What do you what what is I mean like AI is worth 350 billion. They bought like the number two uh code generator Windsurf. Um there's there's like a lot of people that are pretty highly valued that are like you know coreweave bought uh weights and and biases or some like AI you know co-pilot shop. Um but yeah it's it's be a highly valued company right now. There were calls on Twitter that OpenAI should buy Snap yesterday. I saw that. Right. Wait, Michael, what do you think about that? Give us give us your your take. Well, if if uh any of the publicly uh held shares actually had voting

rights, maybe that would be a real um consideration. But given that it's Evans call, literally just Evans call, like it's never going to happen. Go. What is Snap valued at right now? Not much. Like six billion. No, no, no. More than that. More than that. 20 something. 13. Wow. I hadn't checked it in two weeks. When did When did Michael leave on the chart? 77. No, you left it like I left literally as the lockup, the IPO lockup was ending.

Goodbye. This is a pretty good example of uh corporate governance failing and why it's actually important. Like this was going to be like Mark Zuckerberg fever round two. They were going to really go head-to-head, but I think wasn't dialed in enough. Yeah. F New York Stock Exchange stock where the stockholders have zero governance rights. Yeah. And I mean I I mean Michael, you probably have a better sense of having more. I've always heard Evans Spiegel is a great product guy in general and really talented there, but it's kind of hard to operate in the space that he's operating at and and do nothing. The stock price is down, I

think, on a 5year term horizon. It it is uh difficult down 53%. On a fiveyear time horizon, um it's difficult if not impossible to be a subscale advertising business. Yeah. And basically everybody that I used to work with has left. So I have no I don't even have friends there anymore. Yeah. All right. Well, uh shoot I was trying I was going somewhere with that but can't remember. So we have a Oh. Oh.

Uh let's talk about UNO. Um so uh this is I'm not sure how much you guys can talk about it but UNO is a um is this is Liam Hager. Um so he is one of the founders I believe of X- framework fame uh and also jump uh jump as well right uh so he he was working on the team at fire dancer um and then uh decided to launch um his own L1 I'm blanking on the name of his business partner I'll find it um will and uh the idea is that this is obviously I think actually there was a small lawsuit there for a second which has been dropped um but yeah it's basically You know, some of the smartest minds behind Fire Dance for launching

their own new L1 uh presumably based on some amount of lessons learned or presumably based on some insight that wasn't, you know, couldn't be adopted in Fire Dancer for a reason XYZ. Yeah. You know, you know you're working on something and worth something when Jump files a lawsuit um to enforce your non-compete. Yeah. and they then settled, which which is now completely settled and totally done with. But um yeah, we're very excited. Liam worked at framework um specifically on the trading operations that we used to have and then that that actually spun out as well um a few years ago. Um and um then he joined Fire Dancer to to or

jump to Jo to lead the Fire Dancer engineering operations. um and yeah just has a better idea of um you know what he thinks um they can build versus what he's seeing in the market um and I I believe he's already said that the through so it'll be the through blockchain onto is the the name of the company but through uh thrru will be what it's called and the through VM will be a risk v uh um based VM which is uh what actually Vitalik came out um I think this week or last week um and and said maybe we should consider this for a new upgrade for the EVM.

Yeah, Liam is super talented. He's been working out of our office and we're we're super excited to see him go live. Yeah. What do you guys think of that proposal? The risk five VM proposal from Vitalik there. It's kind of an interesting I mean the idea just being you know uh if everything get is getting translated into the EVM it would be more efficient right sometimes by you know almost two full orders of magnitude to just have risk five be the be the dominant VM on Ethereum. I'm curious what you guys think about that. That was an interesting I I I love that they're actually calling out some of the sacred cows. um I I don't have enough information to know whether or not

that's going to be a better model um for for where it is currently or or what's potential by the time they would implement this. And that's kind of the key point, which is like this is great. We're talking at minimum 2028. Totally. Okay, here's something that I've had a lot of trouble reasoning about. I'm not 100% sure how I feel. Is you you would be giving up the EVM dominance, right? which is there are strong network effects that are associated with the EDM and I I don't but I don't really have a clear mention model for how that translates into something like Eve price right like like Avalanche is an EDM chain so is that good bad neutral how how does that Cosmos and IBC are and I know it's not

the same comp but like how much does the Cosmos and IBC capabilities technical integrations actually translate to the Cosmos coin none at I I don't think of it that way. I do think that there is um maybe a philosophical or sort of like a community oriented element of having alignment around the EVM that does benefit in secondary ways um or or potentially even tertiary ways um for for Ethereum itself which is just like instant integration uh you know same address convention um like that all of those things I think add value um ultimately but it it doesn't translate directly

Um, that's how I would put it. Yeah, I feel Yeah, I guess kind of intuitively like Yeah, I mean you you would like to be there's probably you're probably derisking from the perspective of devs, right? Like if I'm taking the time how to learn the EDM that if it's widely adopted on a bunch of other chains, there's not going to be some platform risk of learning like this has been the challenge from my perspective starkware like or something like that. But yeah, I don't know. Um anyway, it's interesting to think about and uh yeah, that's basically all I've got this week.

Anything else that we do want to talk? Do you want to make this macro podcast five minutes on the state of the markets and take up some? I think we'll leave without the macro today. I think that's Yeah, I think that's good. Um yeah, no matter what we say, we'll be wrong one way or another. Yeah, I know. Yeah, it'll be completely different by tomorrow. So, all right, guys. This was a fun one. Appreciate you both. See you next week. Later. [Music]