Is USDe Crypto's Next Bank Run or a Tokenized Hedge Fund? | Roundup

Transcript

problem is most people over intellectualized markets they're highly psychological investing is not like a it is a mathematical Financial thing but it's ultimately if you don't understand psychology good luck like seriously good luck if you are an Empire listener hopefully you've played around on chain and if you have done that you know that transferring assets across different chains is a pain to put it nicely that is why we are incredibly excited to have the Wormhole Foundation as a partner of the Empire podcast stewards of the Wormhole protocol supporting over 30 different blockchains and six different run times stay tuned later in the show we have a cool thing that you can claim which is a wormhole nft just for Empire listener this episode is brought to you by PayPal here at Empire you know that

Santi and I are really into real world use cases and always on the lookout for the next killer blockchain app we're excited to share that PayPal has arrived in crypto to unveil a way to seamlessly connect Fiat to digital currencies later in the show you will find out how you can use PUSD to check out at millions of online stores what's up everyone happy Friday or Saturday or Sunday whenever you're listening to this we got uh we got Santi and we got special guest Mr Matt fback from blockworks research Santi Matt welcome to the show thank you thanks for having us it's great to be here it's great to be here is a glorious day to be here or as

the bad glor day as the bad kids like to say it is a bad morning so um what's going on how you doing Santi I'm doing great uh I'm excited because Matt as I hear as you describe he's the brains behind block Works research there has uh been a lot of controversy on Twitter recently uh particular project out there that reminds people of tra uh as always crypto Twitter always has very informed uninformed opinions um and is uh has very visceral reaction to certain ideas uh like blast so now blast to people people seems to be coming around to that project and behold so anyways I think um yeah crypto's are very interesting ecosystem

where it's very vocal there's a lot of noise uh uh and people uh tend to make up their minds very quickly on certain things they have to revisit and chew glass of it but uh thankfully we have Matt here who has more informed opinion in 99.999% of crypto Twitter and so hopefully in this episode we can get kind of like more into the weeds of like some of the mechanisms for the we're talking about Matt you can fill us in here but it's Athena right so people can obviously it's very topical um so we could start there there's a lot that we can discuss but um yeah really excited for the Pod yeah so I want to talk atha Labs with Matt I also want to talk there's a little bit of drama with um so A's risk manager the last couple years was Gauntlet and they announced that

they're stopping work with a you don't really see this that much um it's it's kind of like the analogy I would use would be like a consulting firm firing their client or a SAS provider selling firing their customer um I'd love to get Matt's take on this you wouldn't go as far as saying the auditor stopping uh auditing a particular firm I I didn't want to say that because that implies a certain underlying risk it's not it's an unfair comparison you almost well it makes you wonder if it was Gauntlet that terminated the relationship or a they terminated that relationship yeah so we'll we'll get Matt's take on that whole bunch of other stuff AI coins are riing Santi you had an interesting poll about uh what's going to outperform is it nfts is it whatever uh and at the time nfts were the lowest uh voted on

thing and I said feels very obvious I think nfts will will outperform the rest of the market and got a bunch of uh funny comments in my DMs from that so maybe we can talk about that but before we do that we are hosting um an Empire listening party um at Das we got Santi to yeah we got Santi to fly in for das um got him to change his flight and he's coming uh so so Wednesday 6:00 to 8:00 pm uh the amount of over like nightmare folks you better show up to this goddamn thing yeah yeah if you're come to D here are the requirements if you're come to das uh and you're an Empire listener and how can we verify you're an Empire

listener you might ask we can't we can't it's a trust thing so you have to be an Empire listener but we I don't know about you I'm GNA be in the I'm gonna be in the [ __ ] door show me your Spotify like 2023 top podcast if Empire not in one of those yeah exactly yeah R baby so uh yeah so we can ver Easter egg we should throw an Easter egg in some of these episodes you know be like what is the code the code yeah exactly the code is bald you have to say bald at the door and uh only Empire listeners will get it so yeah but we can verify that you have a Das ticket so go get your Das ticket uh we hit a big milestone today which is we just sold our thousandth D ticket we have a th000 tickets our ticket goal and

registering goal for D was 1,200 we were going to to rip past that goal it looks like um I would guess we'll end up around 1,500 or, 1600 which means the hotel or the the Hilton where we're hosting it is going to shut us down from continuing to sell tickets so we're gonna at some point soon have to shut down ticket sales um actually I have a I have a free ticket to give out so maybe I'll do something special about that because I don't have anyone else to give it to but hey maybe this is a good opportunity to uh if you're listening out there um maybe the most creative comment on farcaster will get a free ticket because I as a speaker right I get a free ticket maybe I'm not supposed to say this but I do uh but anyways maybe the most creative comment on

farcaster will uh get this ticket on me sure I don't even know how how you have a free ticket but yeah sure point you wanted to charge me that's fine uh sure what whatever you say zie all right so let's uh let's we may have to edit this shop let's get into Athena Labs um okay so Athena Labs um here's the tldr on Athena Labs it is a they you know what I'm not even G to try to do this Matt give us the tldr of why everyone is talking about Athena labs this week and what happened you don't need to go into too many of the details on how it works I'll kind of pull that stuff out of you but what happened with Athena Labs what was their fundraise and

like high level what is Athena Labs so Athena Labs has launched the newest stable coin to the market usdc um they've immediately hit their cap of 100 Mil in so 100 Mil usdc outstanding it's a really interesting project and it's offering something like 27% yield so there's a you know narrative going around like is this the new Tera Luna and things of that nature uh so it's kind of caused this huge stir on Twitter it is not the new Tera Luna it's employing a pretty interesting strategy in order to actually get that yield back to its holders um and it's a really cool team and they're building something pretty awesome okay so a stable coin though my understanding was they don't Market

themselves as a stable coin it's sort of a tokenized hedge fund that is playing like the a basis trade yes so the way I look at it it is a kind of a yield Vault wrapped in a stable coin narrative so we've seen like yield vaults in the past have all kinds of strategies including some actually deploy the same strategy that Athena is deploying so that's like a delta neutral strategy where you hold a long position you hold a short position so that you're not exposed to the price but maybe you're getting a a carry or an interest rate from something like staking eth or from being short pers which has a negative funding rate or has positive funding rate which returns yield to shorts so Athena kind of looks very similar to those to those yield vaults of of a past era but wrapped in the stable coin narrative

where actually if you deposit into the Vault you receive this usdc stable coin um collateralized by those positions so there's two products here right there's USD there's USD and then there's sde is my understanding so usde and maybe we can walk through both of those so us de is just the stable coin that's pegged to the US dollar basically it is a combin the way they do that is a combination of uh staked eth and perss to maintain the Peg and then there's another product which is s usde the E being Athena the S being staked so s USD that generates yield kind of like a traditional Bond and I think a lot of their marketing was like we enable the internet Bond my understanding is usde is backed by

basically yeah you've got staked eth deposits and short pers positions and then those two assets kind of work together to fully collateralize the value of USD and that kind of keeps the total value uh stable is that can you maybe give us a better explanation than I than I did stumbling over that Matt yeah sure so maybe it would help to explain kind of the life cycle of how you get to sde eventually so it starts with market makers only whitelisted market makers are actually allowed to Mint this usde token so what they do is they go and deposit a staked eth asset LSD so something like Lio Stak eth or binance Stak eth and they deposit into the protocol Athena then goes and uh you know holds this position on a

centralized exchange like a binance or an okx I believe they have five exchanges that they're currently using to hold their collateral they actually have a custodian copper who is holding the collateral that's not currently being used but at the end of the day it does end up on these exchanges they use this staked eth as collateral to then open a short position so let's say you know you're a market maker you put one sth into Athena you get call let's say e $3,000 you get 3,000 usde at this point Athena takes that one stake eth one steth and puts it into binance they then open a short one e position against that one steth collateral so now whether eth goes up or down it doesn't matter you know the price there's no price exposure

anymore if it goes up you know the price of the the short loses value but the Ste gains value likewise if it goes down the short gains value but the Ste loses value so what's called delta neutral at this point and uh that's how what's collateralizing that one usde outstanding anyone who has usde can then go stake it with the Athena protocol to not only get yield so the you know the yield that's the result of both the staked e yield which is 2.6% or something like that as well as the yield from holding those short positions because right now the funding rate in crypto is really high so shorts get paid a lot to hold their positions open um but Additionally you get shards which is like Athena's version of points uh you know with speculators thinking that they'll likely either be an Athena

governance token air drop or maybe even a usdc air drop at some point how scalable is this model I mean and can it work in all kinds of market conditions meaning your point is a good one which is now you're getting paid a lot if you're going short it's no like reverse this model or implement this model nine months ago can it work yeah so that they have pretty good back back testing data on their website and it actually can work but if you know already makes up 5% of total eth open interest which as that number scales likely the funding rates will come down meaning those short positions will get paid less yield from their funding rate funding rates will come down and the T the token will have less yield additionally it's really only in a bull

market that we see these egregious annualized funding rates where something like 20 30 40 even 60 70% is paid annualized by longs to hold their positions open so the answer is it's a lot tougher to have this type of product in a bare market and then additionally even in bull market as it scales once it gets to you know in the billions it likely uh will no longer have that same type of return that it does today so okay so the the yield right now is 27 or so people are like okay that's they don't know where the yield is coming from you are the yield um so that goes down is there a point where the yield goes reaches a certain point where it no longer is interesting attractive to people and I guess then that mechanism

sort of people leave and then the there's sort of like a natural equilibrium where the yield kind of settles um and do you have a sense of where that could be is it six% is it eight is it St plus there's a there's a few things to keep in mind there which is one there's a risk that you know the staked assets deeg so steth isn't actually completely pegged to eth there's also risk in The Exchange in the custody in the custodian so in Copper and there's also risk in the exchanges so you know you have to price these risks in from my perspective and you know the way I look at it maybe like something like five six% so it's definitely not zero there is risk in this Pro in using this protocol but the yield is you know very promising um another aspect of the yield is from the

inefficiency in the funding rate market so funding rates aren't equal across all exchanges today that's likely because not all you know uh high value market makers are plugged in across all different exchanges so Athena will actually help these funding rates become more efficient across different exchanges um additionally the yield is actually far above 27% right now because only half of the usdc is actually staked so it's almost double that um it's worth noting that's like a that's annualized based on the last week's data and funding rates change every hour so you know it could it could be drastically different than that in reality um I would say if the funding rates came down or sorry if the interest on you know

ssde came down below 10% it now starts to become like is this really a positive EV is this a good expected value versus the risks that are involved um but whether or not the market really cares about that or just cares about getting these points it's uh that's definitely Up For Debate Matt can you explain um just funding rates again for people who don't know what they are and like just what what are funding rates in crypto yeah so per are Perpetual Futures are you know a novel instrument in crypto it's really only predominantly for crypto assets that the this type of derivative trades if there is a uh aggregate long bias amongst Traders looking for leverage so if more Traders out there want long leverage than short

leverage Longs have to pay shorts in order to hold their Longs open likewise if there's more interest if there's more volume looking to short an asset than long an asset shorts have to pay Longs and the funding rates paid an hourly Cadence so when you look at Athena and they say you know over the last week the average funding rate has been 27% annualized in our favor really what that means is taking every hour over the last seven days and then annualizing it over 360 5 days that's you know 27% uh Longs are paying shorts to hold those Longs open okay so funding rates are the fee that per Traders need to pay based on the kind of sentiment to the market if more Traders are bullish and are are long they are paying the short Traders a fee um and and obviously vice versa so

in this current environment eth um the other thing that happened this week eth hit 3K or touched up on it um so Traders very bullish eth which means the funding rate is positive which means that the long pers holders are paying the short short holders here and right now the um the rate what's the funding rate like 20% or 23% or something it's different across exchanges like on binance it's about 11% so long as you're paying short it's about 11% annualized but if you go look at exchange like dydx it's closer to 80% or Vertex or you know some of these taxes so when I see on Athena that I'm getting you know this 27% number that's basically you've got a 4% yield coming from staking yield which is like the consensus Rewards the execution

level fees and the me Mev block Builder bids and that's 4% then there's another 23% coming from the funding rate and is it right to say that Athena gets that gets that 23% because the Longs are paying Athena due to Athena short positions correct okay got it what happens if sentiment shifts beish like I think Santi was asking about nine months ago so if let's say so this I I have a feeling if Athena is going to rip um and you know next 18 months Athena does super well but then one day sentiment changes we go into a bare Market uh funding rates flip what what happens to to this at this point so we actually

have a report on block Works research where we do a lot of back testing of different perss over the bare market and the funding rates to do with those perss I believe it's called basis basis trading if you search up block Works research basis trading will pop up historically even in bare markets funding rates do Trend positive and so likely you know if if Athena didn't have a billion dollars um it would still be a profitable strategy but likely they they may think that the Caps that are they're able to deploy during a bull market meaning you know right now this the strategy is highly scalable so if it grows too big in a bare Market it could have a a large implication that you know maybe funding rates would be negative in the bare Market um and all of a sudden now Athena is actually losing money to

hold these positions open that's what I want to explore because so so funding rates to your point are not um homogene like standardized across exchanges or decentralized protocal like vertex and others um so they're quite different in the way they're calculated which is not so much of an issue I think now you're going to have a a pretty big buyer constant buyer of these things in the market which is going to be this project um what's the worst that can happen in your mind is it that the the central Iz exchange risk is real um the counterparty risk somehow like that part of the equation breaks down or is it um

like I'm less concerned about the model becoming like less attractive because in a world where people for instance if yield comes down to 7% to a point where people just feel that it doesn't compensate for the risks out there what you will see is like demand go down and then natural yields would go up Pres presumably right I mean there's sort of a there will be a clearing rate the market sort of will figure that out but the issue for instance with terara was you had what was marketed as a stable coin that um you know was you know the way I think of it is a lot of people came into the house they wanted to play in this yield and capture do a lot of this ARB and anchor whatever the

size of the door didn't grow so the so people started to want to exit and it happened all at once the way these things typically do in the bankr Run type of situation that's where you have the issue where people can't get out people can't redeem and then it deegs and then it has a downward spiral that is not the case here right like yeah correct I I think you know there is there is some negative encumbrance as far as you know winding down positions incurs fees so you know everyone leaving at once does me it's not positive for the protocol but it's not like this huge lack of liquidity or this huge event that absolutely destroys the protocol so you ask like where I see the largest risk

it's not in funding rate switching like yes that's risk but like you said I think that the market hopefully will be somewhat efficient there um the big risk is in counterparty Risk so they're holding a lot of funds on exchanges like you know it's Diversified across five exchanges but likely if the funding rate on one of those goes Super positive meaning it's really profitable to hold a short open there they'll put more funds there um as we've seen in crypto over and over again even the most trustworthy exchanges do have risk like there's no there's no other way to to look at it besides there is risk in holding money on on centralized exchanges likely in the future they'll also hold money on decentralized exchanges given that you know the funding rates there are even more uh promising and fruitful so

definitely from my perspective that's where the largest risks are involved using copper as a custodian does help but it doesn't completely alleviate that risk and uh yeah so that's where I would see the big biggest potential concern as a as a holder of usdc when they try to implement this strategy you mentioned there is a scenario where they lose a pretty significant amount of money if they don't do this efficiently um is that a function of as they scale it becomes harder and harder to implement the strategy and so um and other people are actually seeing what they're doing so they can you know and so would it um can you walk us through kind of the scenario where it starts becoming unprofitable

because there's a huge fluctuation in you know the funding rates or whatever or they need to unwind these positions fairly quickly so they kind of exit in a very unorderly manner like the protocol there would incur some bad debt are are like the users also going to kind of like participate in that downside or is that going to come from an insurance type of fund I'm curious how that would work so I literally heard today that they are increasing the Insurance Fund take rate so there is an insurance fund take rate it's extremely small right now but given that the yield might be as high as 40% this week for sdce uh annualize that is they're

deciding they've decided that I think 50% of the total yield will actually go bootstrap and Insurance Fund which I think it's an extremely smart and important decision because it is very much possible that that is a scenario that could occur you know funding rates flip against them and then you done unwind the positions it's not like all of a sudden there's a huge hole in their balance sheet but it does mean there's this uh you know there's a scenario where not every usdc is completely backed by$ onear so bootstrapping the Insurance Fund is awesome and given that if the rates are so high right now likely they can get it to a very healthy position where that risk is mostly mitigated um so yeah I think that it's a good decision and there is an insurance fund that will help take on some of the

risk where there's one thing that comes to mind is because funding rates change hourly even if a funding rate flips against them for one hour meaning they have been open short and the funding rate goes negative so they have to pay to hold that position open it might not make sense to close the position because closing the position incurs costs so you're putting a lot of trust in them as kind of uh a hedge fund manager type position that they know what they're doing and they've back tested and that uh they know when to close positions and want to leave them open so there is definitely that component to it as well like what are their skills as a Trader yeah this is um so so they have a decision to make here Matt right with like there there's someone at Athena who basically says look the max that they

that we can offer is the E staking yield let's call 4% plus the funding rate let's call it g to make 23% so we can offer a Max of 27 and then there's basically a Delta that they could that they could move into the Insurance Fund so they could basically say we're going to move 12% of that into the Insurance Fund start building up the Insurance Fund because they think that offering 15% to the market is still good enough to pull user assets yeah exactly okay and the main risks here are funding rates moving against them but like but like you said it's really like custodial and exchange risk it's it's you know basically a big sex blows up yeah and then would add in one other risk and

poor execution and what do you think of like as Li liquid reaking tokens start to kind of take off like Athena wants to juice yield a little more like they start to play with liquid reaking tokens as collateral they start that means they can like juice the yield maybe an LR like maybe a liquid reaking token gets slashed like what's the um what's the risk there is like is that is that a risk in your mind yeah I think adding rest reaking tokens into the mix definitely increases the risk of the protocol and likely given that it's extremely or seemingly extremely profitable to be deploying these delta neutral trades or these Market neutral trades today I don't see a reason that

they would want to go that route besides maybe catching the igen layer AVS narrative um so yeah I don't think it really the only reason they would go that way is if they just start to get greedy like that's a what I that's just a greedy yeah it would be a total detraction from the strategy like who is controlling the risk framework and parameters is as a token holder like do you have a say in in governance and in kind of that process or you're just trusting the team uh to be sophisticated and Savvy enough to implement the strategy yeah today you're basically putting money into a hedge fund it's kind of aedge fund yeah it's a tokenized hedge fund it's not a it's a yield Vault wrapped in a stable coin and points narrative it's like kind of year Finance

2.0 yep how big I the worst part about atha was just the marketing as a stable coin yeah it should never been marketed as a stable coin but everything else like this this all makes a lot of sense to me yeah I think it's a really really cool experiment um I'm glad that someone's doing it and there is definitely inefficiencies in the funding R Market can we talk about like others have tried to do this before and there's another project I believe who was it who' you mention sha actually had a good tweet about this I think it's LMA and uh someone else they have been attempts to do this in a tokenized man like uh like certain projects have done it and I'm not as familiar but um I was wondering Matt if you had more insight into that yeah one

actually comes to mind it's a it was a project on salana that uh you know ceased to exist I don't know what went wrong but it was called friction so they had a token Vault that them I was an investor too yeah it was really cool really cool but you know deep in a bare Market without the points narrative without the stable coin narrative it didn't work I forget the exact strategy but it was something like longing Soul staking it so getting some 8% or something like that per year from that position and then shorting it on I want to say mango Finance or one of the other per STX is over on salana and so very similar but it didn't have that idea of you didn't receive a stable coin in return um and there were no points at the time so it you know didn't really

see a whole lot of attra didn't see a whole lot of interest from the market at least not even in it's slightly comparable to Athena manner can we talk about the so so the added element here is that you receive out this stable instrument and then you has has some utility that you can then go use in other parts of the ecosystem and Def like the composability element of that right it's a big is a big added feature is what you're saying yeah so there isn't really a whole lot you can do with it yet but you would imagine that as USD it's a brand new product as it gets more uh Integrations and you're able to do it more with it there is that added element that actually does have some value right yeah because maybe you can use it for other things right you can go then and

deposit get get back this what is it uh stable coin is product and then go use that to long and basically rinse repeat right over over and over sounds like what uh very well could end up happening yeah that would add a bit more yeah get I guess on the user side would add more could well does it I mean how is that any different I'm trying to think of like if you're a user you you do this in a scenario where you can like take it out and then like rinse repeat over and over to use juice more yield in the same way people are doing that with compound

right and just farming it right you're depositing usdc borrowing D like doing that Loop over and over again right yeah see the same thing see the same thing with Ste very predominant trade I guess in this scenario the way it would look would be you deposit as a market maker you deposit steth into Athena you got usdc you'd borrow steth against it and you'd continue looping it to try to juice your yield it I don't actually I think today like a lot of the interest in Athena is likely these shards which is their version of points um so people you know attempting to get an air drop of some sort whether it be an Athena governance token or usdc or some combination of the two and you know we're just at that point in the market

where that's something that it seems everyone is interested in and wanting are you doing it I'm actually not in Athena right now but I probably should be I've just been extremely busy so haven't haven't had time but I would definitely would be yeah you would okay and this is not so so this now that I understand it better this is nothing to do with Luna like Luna blew up because this reflexive design Luna got minted sold a zero to protect the US Peg um and the anchor yield was subsidized at 20% was never really sustainable U it it's it's a totally different thing I saw a lot of comparisons on Twitter but they're completely different things now now that I understand it better yeah there's no

comparing them yeah um then there's this other interesting thing Matt that we were talking about um in the in the in the telegram chat with the Athena guys and with guy about um their go to market strategy and like the the uh Athena the way I understand it is Athena is going to be providing l2s uh with the ability to essentially offer for yield into l2s which the reason I bring this up is Santi and I have been talking about this a lot the last couple months I know Santi was an investor in Blast I and one of the my predictions of the year was like every L2 is going to eventually offer yield like native yield inside of inside of the L2 and it looks like um I think their head of growth posted something

that they're now offering yield to I think it's movement Labs I'll pull this up uh mode Network which is on built on op stack parallel five which I don't know but they're in Omni chain L2 and movement Labs who Santi and I are both investors in and um yeah they said uh here are the l2s that have announced integration of Athena Labs as native yield there's five more coming that should drive another half a billion in tvl at least l2s are the new yield consumers so what do you s what do you think of this about what specifically just about um basically all of these l2s are now going to use Athena as the to to to to offer the

yield I again I don't I mean it's Market will do its thing I'm I'm l so as you were saying this I was reading Tom Schmidt from dragonfly and I believe they're investors in Athena um along with um Arthur's Family office melstrom I think yeah um he has a really good tweet uh about just criticism and then response and I I would love to just link that to the episode um one of the things I want to go back to on this like we're talking about funding rates and the risk is quote quote usde is uh screwed when funding rate goes negative and he says which is I want to call this out because I think it's important funding has only been net negative 10.8% over the past three years and only for a very small periods of time um so effective to a few

basis points per day uh which is an interesting stat actually um and so he says this is mitigated by the Insurance Fund which also acrs buffer during periods of positive funding um and the way you can further mitigate this is potential risk launching via the governance token or staking the future um this problem is also self-correcting a shorts close out versus self- reinforcing so I think the interesting thing here is like funding rates like Athena is not the only player in these markets and so yeah exactly this this talking about and like there are a fair amount of people that are going to try to ARB this out and correct itself right so I think that's the most important element here of how this

mechanism works because they're they're not the only player there'll be a very big one in funding markets um but um yeah if things get out of whack with one particular exchange whether it's centralized or decentralized these things tend to even out because there was a huge AR say one exchange like the funding rate shoots up then that like naturally gets arbed out and like it sort of yeah like settles so this this is a great threat I mean I won't go into all of it but we should link it because it's important for people to just read it and and digest it yeah we can read a couple of these I mean Tom said it's you know people are upset the first basically the way Tom lays this out is like people are upset

about this and then his counter so first one's it's not a stable coin he goes yeah it's not marketed as one you can't guarantee 27% it's a Ponzi Tom says it's not guaranteed 27% is just the current market rate USD is eth tanks it's delta neutral language okay maybe Joseph can like B that out oh we're very liberal with language we're not W podcast actually think Spotify dings us if we swear too much so really yeah yeah anyways we we'll link it listen a lot of swear words in this uh thread Tom so uh yeah Tom keep it keep it actually speaking at uh pen if anyone's gonna be there I'm speaking at pen blockchain conference or upen something or another tomorrow with Tom on a panel so been of that conference it's actually pretty

pretty nice yeah so um Matt what are we missing here anything else on Athena we should talk about no I think that people who are buying into it just need to realize like what they're what they're you know what what's collateralizing their position what the risks are but it's a really cool experiment and I'm excited to see it grow nice like we've been skewing negative just being critical of it what's the um added benefit what's the the positive scenario here it works beautifully it scales a lot people are earning some nice juicy yield on it other than financial engineering and capturing some nice yield like what um what else I guess like a nice experiment

uh in terms of you know capturing yield for people yeah I think it's cool most people don't have the ability to go and automate a delta neutral trading strategy so giving you know open access to this type of investment or this type of strategy is really pretty cool yeah agreed all right shout out to them like I met them last year I spoke with the team a number of times and I didn't end up investing but um nonetheless I do appreciate the novelty of the mechanism and I I hope it works and I hope it doesn't fail do you regret I I did not invest no do you regret not investing no no cool Matt will there be a

token I everyone speculating yes like you know at the end of the day anom was in their round I a lot of people in the round I don't think would be investing if there wasn't a token but I've also heard rumors the air drop is going to be usdc um I have no idea nothing nothing uh that's actually believable but yeah who knows the the new metas was last CLE was Kobe in your round now was anom in your round um all right let's talk uh let's talk Gauntlet leaving a Matt uh for those who don't know Matt leads a lot of our governance work post by um John Morrow one of the co-founders of Gauntlet Gauntlet is leaving a it's

always been gauntlett's mission to make defi safer and more efficient for users etc etc I won't read all of this um but the tldr is that Gauntlet has served as the kind of risk manager for a for the last four years um and now Gauntlet has announced that they are no long they said quote no longer able to continue our work with a we will be terminating our payment stream as soon as possible and working with with other contributors to find a replacement for the risk Steward um and uh yeah there's some reasons that they laid out but then they said thanks and um yeah I'd love to hear Matt your take on like again the analogy I brought up at the beginning was like it's a bit odd for this to happen it's like someone

hiring you know it's like JP Morgan hires deoe and then or like BCG or something and then BCG fires JP Morgan right usually you have the client fires the service provider in this case you have the service provider firing the client it's it's kind of a bizarre thing Matt I'd love to hear like both what's the drama and the speculation around this and then like what is the maybe your more sober thoughts around this sure so uh Gauntlet was one of the first companies maybe the first company that ever really went and operated in Dallas that tried to become a Dallas service provider I think their compound proposal might have actually been the first first of its kind so as far as a company who has experience operating in Dallas

gauntlets kind of the best example that I can think of um they operated more than a few Dows and they've been doing it for a very long time when you're selling into a dow it's a you know it's a tough customer it's hundreds of people with diverse backgrounds with different intentions for what the future the protocol looks like and it's impossible to please everyone my speculation would be that a loud voice like maybe even a single loud voice in the Dow was able to make their life as far as operating within a so difficult that it just wasn't worth the headache to them um you know this is speculation but uh for reference like that one of the biggest delegates ACI a Chan initiative voted it was one of the

few votes against their proposal their last proposal to continue their work with a um there's a lot of so of course like a had this big event with CRV curves token where uh they basically took on way too much risk we're willing to take on way too much too many CRV deposits so it seems that a lot of people might even blame blame Gauntlet for that given that they're the risk manager but H looking at it from a from an unbiased perspective Gauntlet actually went and created proposals multiple times to decrease and to wind down the amount of CRV that a was willing to accept and it was turned down by the Dow so it's hard to fault them for that situation uh from a unbiased perspective but I guess there probably

was still some negative sentiment about it within some of these larger stakeholders in the Dow uh end of the day you know operating in Dows is uh it's it people in crypto like we say we love pain like we love to cause ourselves pain and like you know those of us that like to go and be active in Dows are kind of a prime example of that I think um are you familiar with chaos Labs yeah of course they also and look full disclosure I'm an investor there um but they also became involved um over a year ago I think um and are also managing create a dashboard and they also do risk

management in a more automated manner sort of like simulations Gauntlet I would describe more as like a consulting firm like very very math heavy of course like gigabrain guys but they they're more like um bespoke in the way they work right they go in they they make proposals is very you know human Centric whereas chaos tries to sell more out of the box kind of solutions where it's like constant simulation and uh ongoing monitoring but is there something to read here in terms of obious going to continue to use chaos The Gauntlet just sort of decide that it was you know it's just probably better for them to go out and pursue other things and spend more their resources in other projects for

given the chaos is like you know working with a closely it's an interesting perspective um I would guess that you know from some participants in the Dallas perspective Ive that is the case you know we think chaos has been doing better work so let's only work with chaos but I do know a few a lot of the a delegates believe that having two risk firms was better than having one so I think at the end of I do actually think that this was gauntlett's decision to leave rather than you know a firing them um as seen I think they passed the proposal in maybe December end of last year where they were actually uh you know furthering their engagement with a so yeah like to some extent did chaos come in and kind

of eat their like maybe that is the case but also I think that probably one loud voice in the Dow um potentially the one you have pulled up right now kind of just made their operations in a such a headache that it wasn't you know what's the what's the I mean I'm like we're avoiding the elephant in the room here but like why why is everyone on Twitter being like Mark Zeller Mark Zeller like what's the so I I saw a before before we go there sorry to I saw a great meme which is like gauntlets Bill to a Consulting 100K uh you know add a budget expenses 10K uh dealing with Mark Zeller 10 million this yeah so like Mark Zeller runs an initiative called a Chan

initiative they're one of the biggest a delegates I think they have close to 50% of like the average vote on most proposals in that Dow so a ton of power um you know at the end of the day it is a decentralized protocol it's not like whatever Avan wants gets happens but when there's a single actor with so much power and a dow it definitely becomes important that you're able to work with them efficiently and effectively so if there's any animosity there it's probably going to be a non-starter for your uh future success and ability to have a you know happy working life while working with your partner that is this protocol what do if you were like you as an observer and seeing

all of this unfold like what are would you have done anything differently if you were in either Gauntlet or A's position second what are your kind of main takeaways for governance in general management of dows and submitting proposals I think from the gaunlet and a perspective like if I'm there there probably wouldn't be anything that I did differently um it's difficult if I was Gauntlet maybe I would have tried to pursue through it and like you know if I decide OB is this important part of defi infrastructure that is that is critical to the future success of our space maybe I'll try to push through it and continue

to like assert myself and let it blow over in the long term but other than that like I do think Gauntlet has been doing a pretty good job as far as being a risk manager there being a uh you know it seems that some of the actors that wanted Gauntlet Gan got what they wanted so it it's hard to speak on behalf of everyone others for instance I know are sad they're leaving um and then as far as governance in general it's tough like governance is broken but it starts with a to the Token holder so like the reason governance is broken isn't because of delegates it's because of the token holder you know they go and Del first of all only like small portions of the actual out circulating Supply go and and delegate their tokens for a I think

it's one of the highest at like eight% don't quote me on that but under 10% um and then once they delegate they just forget about it so it's not like they're holding their delegates accountable so if they disagree with the decision that's being made they go and talk to them like that doesn't actually happen in crypto at all so the problem kind of starts at the token holder level like between you know delegating and forgetting and then also between vot and voter apathy so people who just hold tokens and then don't vote at all then like you go a level further and there's problems at the delegate level of uh misaligned incentives as far as you know like aan gets paid I don't know a million dollars a year or something like that for this position I'm not actually negatively commenting on that at all but

you know there's incentives to ingrain yourself in these DS in a way where you continue to have your own incentive rather than just act in the best interest of the protocol so like how do you make that a more fair and efficient process like how do you have delegates get paid at the end of the day it's almost a full-time job so they should be getting paid um so yeah across the board and then you also have this third issue of sophisticated actors and entities don't really care about governance or want to participate in governance so you look at other aspects of crypto like ZK and you have some of these smartest people in the world who are dedicating all of their time to studying these issues and then you look at this predominant issue we have that no one cares about or wants to pay attention to

so I guess I would say those are like the three layers that I think about most when I'm thinking about the problems of Dow governance maybe maybe we should create points for governance and delegates and reward uh like Okay C certain teams have been like air dropping if you've voted if you've submitted a proposal in these TOS like I think it's a one of the more underappreciated uh like inputs or things that people are doing in crypto like there are some very like Monet Supply comes to mind like he was just instrumental in maker governance and he didn't have as much mkr he was con but he was super engaged Super Active like

on top of it and just didn't get enough recognition I think um someone like that should probably be more empowered unfortunately Dows are economic Dows right it's based on token weight and so for the most part and it it's hard right when you want to pass these proposals I constantly get ping that hey you know we need to pass so and so for these defi protocols do you have tokens or can you help us like no one's really voting and a lot of ECS are not even voting and maybe they're not delegating and so it's just uh difficult uh it's difficult to do governance not just in crypto and crypto's just kind of figuring that out Matt what is it like what does this um make you think

about like block works' efforts in governance um and if you overshare we can take take this out or something but like would love to would love to hear your candid thoughts about like the impact that this has on like your your strategy with with David and uh at for blockworks like governance side of things yeah I don't think I don't think there's any like fooling ourselves operating in governance and Dows is hard um it's a headache it can be extremely difficult customer to work with things can change you know drastically the things that are expected one thing is like you know you create a proposal there's um you know kpi is involved and all of a sudden you want to be working on something different but you passed a proposal there's a lot of difficulties

of operating in a dow but at the end of the day I think that for crypto to succeed we need governance to work um if you're invested in crypto if you're a protocol founder you need governance to work while your tokens vest like otherwise you're you know [ __ ] out of luck when it comes to your tokens vesting and all of a sudden this decentralized community has absolutely wrecked your token price and protocol so despite it being hard despite it being you know frankly uh sometimes even painful I think it's necessary that blockworks operate in Dows uh if we want our space to succeed I think it's necessary that other sophisticated actors service providers entities have the same Outlook because at the end of the day that is how we're going to make governance operate more efficiently and effectively and and create protocols that uh are able to truly be

decentralized and and operate um you know with some Merit over long periods yeah it's funny the lobbying that happens behind the scenes I got a call yesterday from someone who's applying for um the arbitrum we're applying for the arbitrum research thing they're applying for the arbitrum security thing um and yeah there's a there's a surprising amount of lobbying I think that happens behind the scenes that people don't see right now basically lobbying for votes um cool anything else on this m yeah I would just say you know on the lobbying front it looks like traditional politics you know someone hiring their cousin or their nephew or whatever for their position like lobbying behind closed doors all that it's it's not a

new problem it's you know it looks very similar to to the government of different uh municipalities and hopefully we can do a better job in the future do you think there's a lobbying firm that could get created in Crypt mat that would be successful 100% not even a question yeah I think I I've been thinking about that too I think if there's a Founder interested in governance and lobbying and knows how that game works or even if you don't know how that game works like I think that's a you're ambitious founder like you want to get into crypto I think that's a good company to go start um yeah you could even go a level further like there aren't a whole lot of companies who are Dow service providers who are trying to operate in this industry like no matter what you're starting if you are you know targeting

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whatever it is uh sui whatever you want to say the underlying token then there's nfts so if it's like if you think eth does your bullish eth you then like Pudgies will outperform or you're bullish salana madlads will outper perform or apps right if you're bullish salana maybe Jupiter outperforms or if you're bullish eth maybe unisa B performs and then there C results so uh the 33.6% of Voters said L1 token 29% said nfts and 22% said apps and actually at the time when I voted for this apps were higher than nfts and nfts were in last place what are your thought I'd love to I can't see your vote here um what do you think what like what's your vote and I don't know if there were any

comments on this post that made you change how you think about things but would love to get your take oh definitely the comments Chang my mind I'm take I hear a grain of sarcasm in that uh it uh I generally think that if you're bullish an ecosystem I've historically done a lever bet through a combination of I think it's like one or the other but uh um strictly outperforming historically I think it's been like highly reflect of like nfts have the highest beta second to that our apps and then it's also a difficult exercise because it's you have to get timing

right the farther out you go on the wrist Spectrum for nfts you have to get the timing right um uh and for apps as well like defi for instance if you look at like def5 summer vastly outperformed ethereum but if you compare def tokens relative to eth they've been on a downward spiral and haven't really recovered right and so you know it it um it depends on the timing and I guess your your conviction and your ability to time these things uh and uh and how you're implementing the strategy like nfts I've barred against my base stack so I had a bunch of eth would b a decent amount to buy you know

punks and other collections and then with an intention to rotate at some point and like you know uh in retrospect like that strategy I wouldn't recommend it to people like it it has like nfts are not only liquid instruments right but you know um also when when the price of the like when eth ran from 25 to 4,000 some of these collections actually don't hold their floor relative to the base asset so that's also puts you at liquidation risk um but um yeah like the more obvious one I've privately kind of talked to you about this like I had this idea of like I really like the Solana's an ecosystem I think the nft ecosystem

there is going to have a a pretty meaningful like growth there's wealth effect because of air drops how do you get exposure that well Matt Lads uh is the number one collection that has run up quite substantially it's now 20K uh torians is one also which is uh you know double kind of Whammy not only is it you know a nice collection top three I think but also you there's speculation around the airdrop and it's a good like you know Marketplace so you also have exposure to the nft like trading um Al the question is like does it outperform Soul probably most likely I mean madl is outperform

soul right the the the the floor of madlads on a soul price you thinking of it in Soul basis has gone up quite substantially right uh there we go yeah so November they were worth $2,000 now they're worth $20,000 so they've gone up 10x 10x right since November yeah so yeah look I mean I think just to round it out it's also I've had a lot of conversations I actually would love to get your opinions on this both of years like will infrastructure continue to outperform or will applications like actually like outperform this time as we get more usage depends on the Chain depends also

on the project right but you know um yeah it's it's longwinded answer no how I'm doing it now it also depends as as a portfolio grows like I was having discussion with someone uh that I kind of really respect and consult with and we're also mind that like it depends like if your portfolio is as it grows like maybe the proportion of like base token that you want to hold is different right than if at various portfolio sizes it also kind of factors into how you want to approach this type of strategy well there's another element to this too which is this like idea of these these

tier one nft communities getting aird dropped tokens in this cycle which has never existed that's very true very true yeah great so um like Pudgies what's a what's a pudgy worth right now 30 60k 60k USD like do you think that you will yeah there you go I'm GNA share this tab instead here's the price of here's the price of Pudgies yeah so a pudgy is about 60 60k it's 19 and a half e it was like four e in December or something three e yeah yeah um do you so 60k is crazy crazy to buy for an nft obviously it's very expensive amount of money for a JPEG but do you think that you will had air dropped more than 60k worth of value for a pudgy in this entire cycle

probably right there were people I two calls with teams that are thinking about aird drops and they were thinking Pudgies came up for sure yeah yeah I mean there there are people at blockworks who made you 50 50 plusk from the pudgy the dim Pudgies aird drop alone right um and that that basically buys your pudy right there so Matt I'd love to get your take on all this yeah I mean I don't know if you're going to get six k out of your out of your penguin but you'll definitely get a nice solid portion out of it um would be my guess mad Lads are another good example like you mentioned the 10x but you got couple Grand in pith you got like five grand in dim um you got the you're about to get the Wormhole air drop which a lot of people are

speculating it's going to be one of the bigger air drops ever so definitely we're seeing this Narrative of like you hold these Blue Chip nfts and you get air drops especially if you're interacting with the protocol whether it be like you know getting some badge on Discord or something of that nature um so yeah like at the end of the day I don't think you can disagree like your point Santi that uh nfts are the highest beta and then apps and then the ecosystem token like I think it's very hard to disagree with that I think that's pretty much factual and then you know you add on that layer of if you have call it eight figs or more like you're probably not able to allocate as well to nfts and maybe not even to apps then as you go down that scale and have

lower amounts of money you can play around a little bit more in some of these uh more liquid lower lower volume Pairs and and nfts so yeah you I think it depends on the person so brain is like I don't think of nfts as Investments this is sort of My Philosophy oh wow that's an interesting take I like I I know they are here's but I a collector when I collect things I I've never sold an nft I've only sold one yeah actually well two board Apes that I got gifted because I never I never meant it I got gifted for apes and I sold them and the second one was also an nft that I got gifted and the team that gifted

that to me it was Nifty Island thing someone from the community wanted to buy this bla this island and I was like I'm it feels weird to sell something that I got as a gift but they they were okay they were like you should sell it to this guy I was like all right but I don't um you just become there's too much emotional cache to these things like when I collect things I'm like I don't want to yeah yeah well I think there's two different strategies here like let's say you I don't I don't think you end up you ended up doing that levered bed on Soul Santi where you're going to lever up and buy some salana nft but like that's an investment that right you're not sure in that case like torians yeah like punks too like I 11 I I wanted to collect these

things but I haven't sold them yeah I think there's two different way like there's three purchases you can make of an nft in my mind there's sweeping the floor that's a that's an investment there's buying a Grail but by the way imagine imag imagine anyone like just jumps into this pod jumps in minute whatever and listens to this thing like you're sweeping a floor like but I think but yeah yeah I me similar to um it's similar I uh blockworks just added uh we got a new board member um and uh he was the CEO of soues and uh is is now on the board of block works great guy named Tad

and um we I had lunch with him yesterday and he was telling me he's like do you know the four assets that outperformed the debasement of the dollar over the last 15 20 years wine and all this yeah yeah but um I don't know it was actually a very interesting conversation about like in an infinite World what becomes valuable in its finite things and um and I like erc2 no but like I think that it's no different than buying watches right like if you go buy if you go buy a let's say a pek for example or you go buy something like you either you should probably either get the new like the almost the cheapest pek so that you can get into the market you should buy a Grail pek that's really nice if you

think that like for let's say you're doing it for investing if you're just getting a pek for the investing purposes you should either get a Grail pek or you should sweep the floor of peks but if you're getting a pek for yourself like you should buy the pek that you the goddamn that you like love you're G buy a the most that you will never sell and I think it's the same for nfts so like let's say you're G to go buy a pudgy today you either sweep sweep the floor let's say you're buying the a pudgy for an investment you either sweep the floor or you buy a Grail nothing nothing in between but if you're buying a pudgy to have as your pudgy for the next 20 years buy get the Pudgy that you love the most hopefully it's a pudy that is also a

Grail and you can also afford and it doesn't Encompass a big part of your port folio yeah so so that you never have to sell see I think there's a lot of the best advice is I think Real Estate Investors are like really good in the sent like the best you'll hear them say you'll never lose money in real estate if you don't have to sell um and you can just be incredibly patient yeah and and you can afford to also buy one others are in a in a tight spot and I think it's generally true like the problem with these nfts is like just people should be and I'm saying this like it's just common sense but they're they can be highly liquid and you know you can look at while we are talking about Good collections in this

current market zoom out and look at the prior nine months of certain Collections and it unlooked too pretty for isuki it's actually like someone had a really good tweet about this this week that I saw it's like I think it was actually Mike it was pluggies and um um some of the salana collections have really performed exceptionally well everything else isuki um Bard Apes um and some of the other I here we go was uh they've uh haven't had a similar fate but not to be like uh you know Monday Morning Quarterback but doesn't it kind of feel like an obv like an obvious thing in the sense like when you were if you take six

months ago like the people that you really respecting crypto the people who are like deeply crypto native that you think are intelligent like no one's talking about isuki right nobody's nobody's talking about P Apes you know it was like disagree uh yeah look some people had isuki I think they're really they they actually kind of screwed it up with uh the second collection that they launch was like a total botch I think it was one of those things they could have controlled they just but board Apes for instance yeah you're right I mean I I think board Apes just different category it's just to respect I think it like what's what's ripping in in nfts right now the collections that deeply crypto native people respect it's the same reason why bad kids are ripping right um

and yeah bad kids are like the I would say bad kits for is to Cosmos what matlet is to salana crypto punks are to ethereum right you go a step step further with the Pudgies too like their brand outside of crypto has become really well respected like my girlfriend randomly gets their Instagram reals that have 10 million views on them they're selling Pudgies in Walmarts like they've achieved this different level of brand that I'm not sure really any other company in crypto has succeeded in like maybe coinbase raised all this money didn't do by the way there's also something to talk about here ugab interesting developments um in terms of kind of what

they've done recently but like puggies did what Yuga tried to do with a fraction of the budget which is incredibly impressive right yeah look at this they 1.3 million followers on Instagram th this one's crazy they have fifth almost 15 billion gify views or GIF what however you pronounce it um which cool Matt if you had uh I'm going to make up a number here if you had 100K and you wanted and you were super bullish um I'm trying not to pick on anyone let's say you're a super bullish ethereum you're like gigal long ethereum whatever are you buying eth spot are you Levering up in buying eth or are you um or are you buying like some eth collection we'll use Pudgies here

because it's been ripping I'm probably long rollups so like nothing on ethereum or ethereum I'm probably long like op ARB um probably mostly op and just sitting on it for like depending on the time frame but for a six Monon time frame call it 12 Monon time frame like I think that that's how I would get my Beta exposure to ethereum through l2s um specifically maybe op but I think Pudgies are a good bet you know if you're talking about 100K and you're spending 60 of it on an nft that's it's a very large portion to be in in one item um especially but like I don't think you can go wrong there but yeah like at the end of the day if I'm bullish in ecosystem like I'm going for beta like I'm probably not longing the ecosystem token I'm sure I'll have a

good amount of it but um on a shorter time frame like something that I'm not holding for the rest of my life something that I'm planning on you know selling in six months 12 months whatever like I'm definitely you know looking for for more beta whether it be through nfts or through rollups apps doesn't matter um but yeah for ethereum specifically definitely rollups the long L2 is a one I've heard from multiple people and in terms of the ratio of like if you if you believe in ethereum well like um something like ARB arbitrum um like the ratio of how an L2 should trade relative to an L1 probably grows is an opinion that I've heard from uh some folks and I generally agree with that and I'm biased of course

because that's how I actually express my um exposure to a theum like I certainly have eth but um you know by virtue of investments in L2 is another like middleware infrastructure of um is how I generally think it's like not too far out on the wrist Spectrum like you certainly have to be opinionated on a particular L2 you could have a basket of them but as a whole I think um like if ethereum does well l2s do better I think as a basket uh they just have to because um you know and and or like with igen in the mix like feel like you know Ian uh is like the Saving Grace for ethereum in many ways like especially the cycle with

like liquid reaking and abs and all that stuff like it doesn't if I doesn't work then I'm more bearish on eth so if you're and so by virtue of that I think you want to have exposure to the thing that's pulling eth this cycle which I think is I mean you could talk about ETF but it's I is plays a big and l2's play rups play a huge part in that so I'm just thinking of the Catalyst it would drive the L to and the same way that like defi was a big Drive of ethereum and interest in ethereum as like the first killer use case back then um but it feels like defi you kind of had to was a little bit less

sustainable in terms of the whole you know yield farming um kind of wave whereas the l2s are like far more sustainable I think because they'll see the more usage they'll you know and and I think that's probably a better like I would feel more comfortable this cycle holding some like an L2 token for longer and maybe not even rotate back to eth I mean I think you always I mean I think of it's a growing the E stack at some point like you want to think in eth terms but uh I would feel more comfortable holding longer term an N2 token or something like I versus a a random like defi project what's the over under on Ian fdv at launch 30 I said 30 yeah three handle

baby yeah I said 30 in chat today how how long it stays there probably longer than starkware did you invest in I Santi I passed in the one billion round I passed one let's go that was last year yeah yeah within just when we had them on the Pod yeah yeah exactly crazy can't catch them all can't catch them all Matt do you um or actually both of you guys when you are long something like let's say okay so Matt you think that this L2 trade is going to work out will you just go kind of spread across like your two or three favorite l2s or will you uh will will you pick one like or let's say it's um

NextGen blockchains like or whatever you want to call this bucket of like a sui and move like are you just like I don't know I've got a grand put 500 in soie 500 in apus or you picking one or yeah yeah I'm picking one I mean I spent 247 in crypto I'm supposed to have opinions on what's better Tech what's more in the narrative so like diversification amongst the basket isn't really something I'm interested in um I think that I have the ability to like pick and I'm wrong a lot but like I have the ability to with a thesis go in and say I think that this one's the one that's going to outperform um and then you know sometimes I'm wrong but at the end of the day as long as I went in with the thesis and if the thesis is proved

Incorrect and I and I close out that position when that happens it's still a win in my book blockworks research.com there's your plug go get a sub folks prices go up March 18th um yeah Yuga Labs interesting stuff this week so they uh they both acquired Moon Birds is that the name proof Moon Birds um Santi you're muted so Mo moonbird and then they let their um they let their CEO Danel go and one of their co-founders step back in any any thoughts on this Santi any thoughts yeah it's Ros thing uh I don't know what yuga's endgame is at this point Mike and get the get the balance sheet of moon and uh launch a token for

it I think there's a lesson in there of like raising too much money in theory sounds nice in practice I think makes you do dumb [ __ ] I think they have one more shot you know other side if it actually is a really cool game World ecosystem then you know youa actually still has a chance at at coming back in the narrative but I think that's kind of their final shot look I hope it works there's just too many people that would probably be affected if it doesn't and you never want to ca you remember like uh the the company I'm thinking of in web to is magic leap you

remember them yeah course yeah the the virtual kind of still around but they they all hype they rais a ton of money they consistently rais a bunch of money but they haven't delivered and then um you know just a lot of money that got burned yeah um but like Pudgies I saw just bringing back to Pudgies Pudgies I mean I don't know how far they are but the video that they shared it was like uh in December right of like the world that they wanted the game I mean they're doing this with like they only rais like a million bucks that's what I'm saying yeah like I'm struggling to understand how you guys like you can't I guess I've heard it from many Founders there constant like there's there's a popular uh phrase

among like Builders which is you C throwing 10 more engineers at a problem is not necessarily going to solve the problem and sometimes like yes you need more resources to hire more people but I've seen time and time again many teams like it bloated um you know hire BD marketing do all these things I'm like like whereas I've seen I heard it from uh SE from zapper he's like our best engineer has 10x the amount of output than like some of the other engineer so go find that 10x engineer and I don't know maybe Pudgies has just been lucky but those guys just seem to ship um but hey I don't have a full insight into what's going on in Yuga

maybe they'll you know blow our minds uh you know with what they're doing and they just haven't released it so I want to be cautious and you know caveat everything that I'm saying just I don't have like Insight but it sounds like there's more going on with Pudgies for a fraction of a Yuga and the resources that they have so maybe there's something in that yeah yeah I mean blockworks bootstrap for the first five years right yeah it it makes you more More Money More Problems right and it like when startups raise too much money I think they basically lose their core focus and like never really understand what they're who their user is and what their product how their product is differentiated in the market well throw money this a good transition because we

want to talk about airdrops and I want to ask you a question or both of you guys do you think the most teams in crypto understand who their customer is you told me that was a bad question when I asked keone that yesterday um okay now wait wait a minute sir you're sharing private it's not Kosher man all right all right not kosher not Kos that in that context it was like just ragging on myself I asked a question yesterday to ke and S goes bad question you said who who's your customer devs or users for an L1 I think it was like a m kind of question I'm more thinking of like DS a a d an L1 your customer is a Dev an app your customer is a user that's my

like think okay take crypto out of it who for think of it think of like AWS like who's the customer of AWS Squarespace who's the customer in Squarespace a user yeah yeah know I I understand let's go back to the question that I asked do you think the projects really understand their customer and does it the does an airdrop introduce noise because a lot of this is just incentivized there's two there's like it depends what you're trying to optimize for though um the air drop an airdrop is a marketing expense right for a company um but it's a marketing expense to serve what purpose right so I think a lot of

people think about a marketing expense as a way to just pull users in just like as a way to pull people into your product but so far historically in crypto the best way to pull someone into your product is and to get someone into your ecosystem is number go up technology right it has nothing to do with your usually in like web2 land you're marketing your technology and then that pulls people into your product in cryptand it's number go up technology then pulls people in so like the customer of an airdrop could be the Traders which causes number go up which then causes developers to build does that make sense I feel like it's not just a marketing expense it's also got this

component of an attempt at regulatory Arbitrage as far as like truly decentralizing ownership of your protocol um when I think of customer in crypto it's a little weird because I think the only way that a crypto protocol really gets a brand mode and stay power is through like proprietary orderflow um so transactions that are being routed to this protocol through you know a user interface or something of that nature and I don't think aird drops really help you get you know proprietary order flow or exclusive order flow so at the end of the day I don't think that you know those two things are super connected and no I definitely don't think most most

protocols know who's using their using their application um but I think it'd be very difficult to get a good sense like we have a sense of what kind of users on crypto Twitter but we don't have a sense of who's doing all of the stable coin transfers on Tron and we don't have a sense of uh or at least I don't of a lot of different aspects of who crypto users really are yeah sort of a necessary thing I think um air drops are going to continue to happen I I think teams it's sort of a table Stakes but um perhaps what would be wise is to not not give out air all the entire airdrop allocation at once and reserve a lot of it down the road to be opportunistic strategic because you

get to understand the customer better like simple things like Jupiter right or blur like you have Camp the certain rounds as you go right you want to sustain trading activity and interest like you have a constant drip of airdrops um to keep up the kpis that optimizing for veras other teams just kind of give out all the you know airdrop at once and it's uh I think it's a it's not probably wise to do that I feel like it hasn't worked so well like I'm thinking of vertex as a good example of a protocol who had you know different Epoch and rounds of giving out their token and the second it turns off all of a sudden you know

volume or at least a large portion of volume leaves and they successfully you know incentivized a group a significant group of traders to then have some brand loyalty and use their UI use their ux use their protocol but I'm not even sure that that that has proven to be a worthwhile Endeavor as far as the amount of money that these Protocols are giving out versus the number of users that they're onboarding well that's the other thing so if your vertex to just what's the answer not even introduce an air drop I think the air drop was a good good idea like it it did bring some users it was just an expensive way of bringing some users what do you think STI I don't know I mean it's a difficult

you can't make generalizations right I mean you could look at Uni and it was forced it's hand because Sushi tried to vampire attack it but uni became uni at a different time right I mean there was just a lot of these things now everyone expects a token in points and so it's like all right well I think I think it is difficult like you were talking about Tina like are people expecting a token most likely there have been projects that have gotten away by just saying hint hint went wi there's a token coming at some point but you know two years in they haven't released a token I don't know man I think it's a lot of these discussions are difficult because we have like 100,000 users on chain

less I if you believe that like we're gonna get through millions of users like I don't know just build a good product and have points and maybe build loyalty I I don't know like like something like vertex like if you're a per protocol if if you allow people to like do swaps have like meaningful utility then I don't think you need an airdrop I don't think you should rush it um if you feel that you're being out competed by someone that has an airdrop You Know It's Tricky ultimately sushi didn't deliver on the product as much as uni has and so now you can look at the both tokens and that's very clear reflection the Market's telling you his

it's like the market is like a voting machine in the near term waiting machine in the long term I tend to think like the really good teams that are excellent product Builders should have conviction in the product that they're building that it is just vastly Superior and they can copy that on the margin it is open source whatever um but I wouldn't rush into an airdrop or a token even in this market and I appreciate everyone's thinking now because you know prices are up and it's a good time to launch I wonder if what what's the Ben gram quote Sante that you just said short run the Market's a voting machine Market voting machine on the near term it's weighing machine in the long term

so you want to be a really heavy Pro does this weird thing the the thought there I think is like shortterm it's basically just based on like what people like long-term it's BAS based on like the value that occures to Something in the cash flow that that it spits off but in crypto crypto almost like delay extends the time Horizon for the voting machine component because of culture and Cults I would say like the Bitcoin is the ultimate meeme coin it's a it's yeah like memes and like adding culture into the market and adding like Cults into Brands basically extends the time Horizon for something to be a for the market to be a voting machine as opposed to a a weighing machine I don't know it's just an interesting idea um yeah

Markus St being very uh rational not just in crypto long time ago like really long time ago there was there was this good chart I saw about like we are moving to a dopamine economy it made me think I'll try to find it I'll find it no one's thinking about like what JP's doing everyone's looking at Nvidia earnings see if the Market's can be sustained you know uh it's so nice interesting times oh this is it here let me show you we can wrap on this everything has moved there slow traditional culture to fast modern culture to dopam mean culture used to be play a sport then it moved to watch a sport then it moved to gamble on a sport newspap went from newspapers to

multimedia to clickbait went from film and TV to video to Tik Tok went from albums to tracks to Tik Tok went from views on a gallery wall to viewing on a phone to scrolling on a phone handwritten letters to voice email memo to short texts courtship and marriage to sexual freedom to swipe on an app and the the category that's missing from this is markets and I think markets have moved from uh actually if you look at like markets a long time ago is dividends right like you didn't really buy a stock for number go up you bought it for the dividend you look at the dividends you bought it go up too come on man no I mean if you look at like um who would have [ __ ] bought at stock if you didn't want it to go up like you bought you became if you wanted to be a

share holder in Carnegie or like in the Gilded Age like 1870s like Carnegie Rockefeller and stuff like there wasn't really a necessarily a stock market um but you look at the railroad Mania dude the Tulip Mania like animal spirits have been around for a while man it's just course every industry starts markets are markets the problem is most people over intellectualize markets they're highly psychological investing is not like a it is a mathematical Financial thing but it's ultimately if you don't understand psychology good luck like seriously good luck and and present value is all you need to know about like you know how things should trade and building Greater margin of safety but you're still speculating like it's still can other

people understand you know and you know sometimes you know also the I'll end with this the other Keys what is it um great quote which is the market could stay uh irrational longer that you can stay solvent and so that's why you never want to short in crypto yeah you know I think the AR I think the argument now is that it's not that there wasn't always people who wanted to get rich quick it's that now that's the the norm like you know whether that dopamine culture has led to a society where everyone is in the same boat of I will never be able to afford a house I will never be able to do unless I get rich quick so I feel like the dopamine culture as it relates to investing has is kind of like a valid uh

progression it's uh it's also the age at which people participate in the markets has gone down right old markets used to be stale pale male like old white dudes basically um who male yeah stale pale male old white dudes on Wall Street um and then it became the you know old like maybe you know moms and dads who in the 90s when you had like e brokerages like TDM trade and stuff like that came online and now anyone with a smartphone can become can become an investor and as you go down an age you also and you get more digital you get more dopamine obsessed and you know you talk to an 18-year-old they're not interested in 8% a year right so well with that folks I got to drop I'm late for a call out all right boys great chat thanks appreciate

joining yeah thanks for having me appreciate yall hey everyone Thanks for tuning in to today's episode don't forget to claim your free Wormhole nft exclusive to Empire listeners hit the link in the description of today's episode and fill out the form to claim your unique Wormhole nft today [Music] okay