VC Tokens vs. Memecoins: Which is Ruining Crypto? | Analyst Round Table

Transcript

a very simple button mechanism for online websites to onboard PayPal payments to their um checkout flows was like um a large part of their success in PayPal's adoption this is essentially that PayPal moment or could be that PayPal moment could be that PayPal moment for um crypto payments before we get into today's episode just a quick disclaimer the views Express on this podcast either myself or any guests are their personal views and do not represent the views of any Associated organization nothing in this episode should be construed or relied upon as Financial technical tax legal or other advice all right let's jump into the episode hey guys welcome

back to another episode of zerox research the research team is back to bring you another analyst round table today is Monday April 29th uh but this episode will go live Wednesday March first I'm joined by Brick Ryan and Carolina from the blockworks research team to talk about what's happening in the market so last week stripe brought back crypto payments and demoed it on Phantom Also earlier today they announced that they will be using Avalanche for crypto payments as well obviously stripe is mainly used by small businesses but I feel like this is a new um path in the US because strip's a US company that it's interesting to see like the diversion between regulation and what US businesses are doing in

terms of crypto do you guys have any takes I mean maybe let me start by saying bucko it's an honor to be on your show uh been a longtime listener so great to be here uh but yeah I think this is a great Avenue for like crypto to maybe get integrated more into the business environment so to say because I feel like a lot of these smaller companies would be somewhat willing to maybe experiment with uh like crypto payments but without the like underlying infrastructure of course there's no way way for companies to like try out any of these new things like I'm in the EU and to my knowledge if you're a small business or even a mediumsized business

there there's no way for you to even like begin trying out these new payment Styles um and yeah like stable coins have a great product Market fit so it makes sense to also add this type of stuff um for like businesses and yeah I feel like it's just natural development for the uh industry and hope this kind of grows adoption and then from there I don't know the normies the regular people whatever you want to call them are also more incentivized then to try out more stuff on chain if that makes sense yeah I think I'm also based out the EU so I agree with you on that is

that like crypto is not used over here at all but like in the Middle East and in Asia as well I think I feel like they've had these this infrastructure for quite some time and I'm I don't think they use it through like regular I'd say like um traditional venues but it's mostly just through like wallet to wallet or OTC a lot of the time as well so it's interesting to see like more regulated and like I don't want to say like more developed but um let's say more developed countries try and actually start adopting crypto for small businesses and I guess like regular transactions yeah and I mean the thing is like I guess the stuff you talked about earlier

is more because people are kind of forced to do that in a way because some entities don't have any kind of like underlying payments infrastructure in the first place uh who are in these more like developing countries meanwhile I feel like if the market takes off in for example the us then it has the like ability to kind of develop even further from there and then uh like you get even more power users on chain but I don't know if this is a stupid stake so I don't know what the stripe to power user on chain pipeline is like but it's I mean it's always just good to have people use the chain um it's good it's a

good development it certainly eliminates friction the most interesting like web 2 or even web one comp that I can think of is is PayPal and the PayPal button uh PayPal creating a um a very simple button mechanism for online websites to onboard PayPal payments to their um checkout flows was like um a large part of their success in PayPal's adoption and one of these major payment providers like basically all the payment Pro providers do that now right they just make it easy for you at their payment

flows to their to their checkouts um this is essentially that PayPal moment or could be that PayPal moment could be that payall moment for um crypto payments um as far as like value acral um you know obviously it's good for Circle uh being that they were the one showcased in the demo um and I think the biggest winner is actually the chain because probably most activity in the long run on these chains is just like simple payments if you look at what people do today um retail users by far their most common Financial trans

transactions are simple payments so if you're thinking about value acral to an L1 token or just getting that L1 token in the hands of more businesses and individuals um the introduction of crypto payments is is that that has the most impact there I think I honestly thought this would have been with like Bas um I'm a bit surprised that they onboarded what it was risky with Solana um to do a live demo with Sol is risky um but Avalanche kind of surprised me I honestly assumed that it would be base or it would have been polygon because I feel like they have that like BD um and that they would have been able

to get in on this one but um I mean I guess Avalanche has done a great job recently also with their kind of B BD department and apparently have onboarded quite a lot of especially Banks so kind of makes sense for the like project to go there as well but then what I'm thinking about is like I wonder how it works on the back end because I have no idea how this works because let's say salana for example is extremely congested and then you're trying to get your transactions through like what happens if you try it five to 10 times and it still doesn't work or there's some other problems they like how how would you solve for a situation like that and that's why I'm also kind of surprised that they went with a public blockchain because like if you really

wanted to do this and make it I don't know as functional or maybe as safe as possible you would have just maybe created a private blockchain just for this stuff and then uh like basically make sure that you have the capacity to meet the demand or whatever is happening in the market yeah feels like this should have been an avalanche subnet thing um because isn't this like the exact reason why they develop these things is to make like easily Deployable private blockchains especially with Evergreen um but agreed I would be so upset like if my transactions just weren't going through while I was trying to pay and it's very important like because stripe is sell is for businesses to sell and there's like those

statistics that's like um deter based on how people have to click and how little time you give them to make a decision on shopping um the higher like your Revenue goes because you basically want to limit the time that the Shopper has to think about their purchase I think it's like sub 15 seconds or something is ideal um but imagine like just trying to spam sometimes I'll be trying to buy something on salon and like the more you spam the more you're like ah I just shouldn't be buying this one I guess this is not it's not the interesting thing is it's it's actually milliseconds Google has a study where every 15 milliseconds is incremental like user disutility or something like that it makes them that much less or that's makes them that much

more likely to churn on a website or in a payment flow um I think that like the important thing to remember here is like who's the first customer of this service like it's definitely not small businesses um it's definitely not Enterprises what it is is like crypto native businesses and people who are going to use usdc uh for ideological reasons so if you think about like whiff raising money to put you know dog whff hat on the sphere or like the Bonk store selling like Bonk branded coffee mugs like that's the

first place where you're going to see this process flow implemented and like if we like call to action um if we want to see crypto payment succeed like we like whenever we can we should make them right because strip's going to see that and they want to see that compounding adoption yeah but so you're saying it's it's an optin thing like not every kind of wender who uses stripe won't have this option for them immediately I I would imagine it's a I would imagine it's an opt-in thing I I would imagine that there's a lot of flexibility there but not an expert okay well that that kind of sucks then or I mean it would make a lot of sense

if it's just inbuild from the beginning because I'm not sure but I'd say it's never a like bad option to have more you know payment options out there as long as your money isn't like taken away so from a business business perspective it would be interesting to not just include him to everywhere but maybe some businesses don't want that in the first place and I think it's like rtic really cool um just normalizing crypto in in day-to-day life but in particular nonky non-custodial wallets and you really couldn't make a payment like an online payment in stripe uh without a bank account so I think that's um a really cool step and I mean what are we doing

if we're not connecting crypto things to the actual real world right so I think more Integrations will also Kickstart more positive Cycles like more clear use cases more companies will want to build in crypto more Talent will come more capital and just build more useful applications I think it's a really cool step yeah it's it is a really awesome step um it's great to see I do remember however in it must have been April 21 when like PayPal and Visa like made big announcements that they were onboarding

crypto payments and I was like this is the moment and like like it it wasn't right like these things take like a long time to play out uh is what we're realizing and you know I feel like every time I'm listening to an investor on a crypto pod that was around in like I don't know 2013 or 2016 like they've all said that yeah these things have taken longer to play out than we had previously thought so I'm always tempering my expectations all right um moving on there was kind of a click baity headline this week but I think it still touches on something that's quite important in the markets and that was that brevan Howard has made a tiny investment in

meme coins now I don't know if they have um they may have but I think this kind of speaks more to where we are right now where we see these huge um fdv very low float tokens launching basically every week um and I assume we're going to have a few more launching over the next few weeks but and it's kind of like people I'd say like the retail participant has almost sort of given up on making an honest living trading cryptographic coins and more so have moved on to mem coins and we've also seen like Venture Capital funds like hedge funds adopt mem coins as an

investment um writing these blog posts like multiple Pages saying oh actually memec coins are like egalitarian and they could change everything and on Twitter you see this constantly where the I I feel like this is like both very fair but also very obvious Stakes of like people saying oh mem coins are destroying the industry uh going back to kind of what kolina said about like how we actually want to get like actual use cases around crypto and then there's people saying oh actually like mem coins are the great um equalizer and and it's fantastic I kind of in between I like meme coins and I think they're fine for the industry I don't think I like

they've been around I one thing I don't like is that I don't agree with the meme coin super cycle fees I think meme coins are just always mem coins and they've always done well like do has outperformed BTC over the last few Cycles so they've always done well um but I also don't think that they're like the worst thing to have ever happened they're fine um but I think what's not fine is that there's a lot of people launching like 0.1 float tokens and then complaining about mcoins are ruining the industry they're not you are kind of Ruin not ruining the industry but at least not doing good for it what do you guys think yeah I mean I guess it makes sense

to kind of divide those two things like low float tokens and then meme coins and talk about them separately because like yeah especially with meme tokens if you take a position you never really or seldom can you have a real fundamental thesis on stuff like yeah you can uh look at how um popular the meme is on social media and like where it will end up at some point but still to a certain expent to a certain extent I'd say that's more like being in the casino and just trying to you know thanx your money and you should be pretty uh or have the expectation that you will

lose everything and that's why I think it's interesting that these like professional funds are apparently trying to take on more positions because I can't imagine going to my lpce I'm being like okay guys we're trying out this new strategy I hope you don't mind it it's going to be like we P 10% of the fund into meme coins and then really the two outcomes there are either you're going to be the greatest or you're going to be seen as the greatest Trader ever even though that's I'd say more luck based or then you're going to lose 10% of your fund so I definitely want to see how like these fund managers go up to there I don't know uh like boards or then LPS and trying to you know justify this

decision and saying like yeah this is skill based we know that this will like go up okay maybe I'll continue on that note uh going back to the like low float stuff um that's where I feel like retail has become much more you know cognizant of what's going on I think last cycle was more like oh this like kind of intrinsically valuable token that has governance rights is going up right now which is great and everybody uh or nobody really thought about like the underlying token structure and uh for long you've seen this opinion on the market or like a lot of people are saying that yeah like fdv

is a meme it doesn't really matter and then suddenly uh a lot of participants are like surprised that it the token is down only when the float has gone from like 5% to 65% or whatever uh so like that's just basic you know I don't know what to call it basic mathematics maybe but I guess we saw a similar phenomen in the equity Market as well like a couple of decades ago maybe uh and then the market just started realizing that okay like a low float thing just doesn't work uh in the long run so we shouldn't even buy into these things so at on one hand I also feel like this is something that the market

naturally kind of figures out in the longer run and then if you try to do this in the future you're going to be called out or your token won't do that well because everybody knows they're like okay we don't even want to touch this thing yeah um people were saying that FTV doesn't matter but I feel like above 70k BTC everyone's like oh FTV doesn't matter and now we're kind of realizing that FTV does matter I um I kind of agree with you on the take that people will eventually realize that FTB does matter and like people will stop buying in but I think like the best way to I mean it should just it's just a

natural equilibrium still though because as a market like if you're a smart retail or Market participant you're just farming these tokens and you're getting it like out at the highest FTV you can um and it as a VC your incentive is to launch at as high an fdv as possible anyway so that you can exit as well I think why the face why not because I feel that yeah maybe if you're you're like a shortterm holder or your uh like view is shortterm then that is valid to say that like the VC should kind of get as high of a starting FTV as possible but if

you're really a long-term holder and like aligned with the project I feel like you don't want a situation where the token launches with a high fdv or I don't know how to put it with an intrinsically High FDB because then that means that in the long run like the market expectations are kind of skewed and then everything starts going down at some point and as a long-term holder you're going to be damaged of that or you know get damaged from that yeah it's um a high fdv to begin on a project could actually destroy the project right like we've all seen Silicon Valley where the founder realizes that if he launched at a lower valuation things would have been much

easier right like expectations would have been lower he would still have his company like to tokens go through that as well um and they risk alien alienating their communities if they start at that super high fdv and then proceed to dump I think you have to take it on a caseby casee basis I think some token structures depending on what they're trying to accomplish um will necessarily have these low float Dynamics and then the team has to manage it appropriately so one team that I think is doing a fantastic job with that is Hive mapper the way that the project works is that they give out honey tokens

for people who map roads and contribute data to their system so that they can sell to Enterprises um they um issue tokens based on uh an individual's contribution to that map and small very very small amounts of tokens have hit the market over time um they had to manage those um lowf flow Dynamics and they did so by completely cutting off any um um chatter about speculation in their discords in their telegrams they they made it very plainly obvious obvious to the community that we're not about financial speculation or about building this map if you want to uh contribute and and and

get rewarded honey do so but we're not here just to to focus on token price we're here to focus on building a Global and usable map um I think they really they handle that really well on their coms observing them from kind of day one and um other projects come to mind too like like worldcoin for example like you will necessarily have low float there because you're onboarding people one by one and you get x amount of like World coin tokens right like it's just a natural consequence of these systems and they have to manage expectations of their user bases yeah but I mean especially on the leather part I feel like it's a bit weird that the float is low and then I get that you

have to kind of um manage the supply because you're going to be giving out tokens to your users but the same time it's a bit of a weird dynamic where then some investors unlock 20% of the supply suddenly you know what I mean like those are a bit two separate things uh and I of course understand that investors have to get out at some point as well but it's just weird or it maybe makes weird incentives in that sense I think what would be cool maybe as a um like a long-term structure would be that everybody who's kind of contributing to the project I don't know if investors could do this but especially for the team would be like okay you're going to get comped like this many tokens if we reach these kpis

or if you're able to like grow the project in this way uh as long as like the incentives or the incentive structure would be made in a you know good way then I feel like it's easier for the market kind of to be on board with okay like everybody is still aligned with the project and not trying to you know just get out on the top or whatever totally yeah like the one thing that comes to mind when you say that is like valuation metrics provided by you know any kind of um like trading software service whether it be a coin gecko or whatever like there's no single agreed upon definition of circulating Supply so the um information that partic

ipants um have at their fingertips to make educated decisions is like you have to put in a lot of effort like I can very easily type in like AAPL and get all like um standardized statistics on Apple's valuation across a number of different dimensions I cannot do that in crypto um you know if you're going to invest in these things professionally you probably want to forecast out those unlocks and treat them like um unlocked tokens right you want to treat treat them as circulating Supply but we know that every project doesn't do that right they don't treat a lot of projects don't treat investor unlocks as circulating Supply until they exit those wallets which like from first principles I think

is incorrect so yeah standardization which like we're slowly getting there but like we're nowhere close standardization will go a long way yeah I feel like a lot of people have now started to do n plus one for um circulating Supply as well instead of what but I agree with you I mean even if you try and find some of these unlock schedules like now at least I think a good example and we'll talk more about these guys in a bit but I think a good example of this was Renzo and their pie chart like there's just these teams that kind of obfuscate how tokenomics look um and the worst is when they just release their like Supply schedule but it's just the like the chart and there's no dates there's no like it's just a percent and

you can't like you have to like do with your mouse pointer you reach out to the team and they don't they don't respond in time so it's definitely a mine field and the reason that I decided to combine the low fdv and the mem coin talk was because I think and I think a lot of other people think this as well is that because it's been such a mindfield there's this I'm not a big fan of the like pessimism but I think a lot of people assume that retail has just shifted towards meme coins where they have the same equal chance as um VCS but I don't even think that's true anymore because now we're seeing more and more K rounds and like um raises for meme coins and I feel like

they do this every time like the initial run up of Pepe towards the end of it you started seeing like VC not VC obviously but like fundraised um memes and now we're seeing more and more of it again so it's going to be interesting to see how much like juice is left in the tank for the I have I have interesting I have thoughts on kol rounds um I think at times they seem um maybe unfair um and they're often viewed with skepticism um I and I guess it's more of a question how much different is that from like Marketing in traditional markets right where you're outright

paying someone to speak about your product um that they now have a financial interest in like we all watch commercials where celebrities are are literally Shilling Pro uh products to people um saying that it's better than the next thing when they probably don't use it themselves and they're just getting um you know um they're just getting a a check cut to them right like it's not that different I understand that like token Dynamics May muddy um the may may may cause it to seem more

illegitimate than otherwise but I don't see a way around it I think um is what I'm trying to say I don't see a way around paying people to influence public perception on public crypto projects I think it's just a bit demoralizing for the general population because you see these guys get these rounds and they're getting them at a discount sometimes to like series B like whatever number they've raised like they're getting it a discount at that and then they get different terms as well so they'll get like this is probably an exaggerated example but they'll get 60% unlock at tge and then you're like okay well I think it's more like a I

understand what you mean and another difference is that like in this scenario you could be losing thousands of dollars versus like obviously you can lose a lot of money if you buy something that a celebrity is talking about as well but it's I would say like lesser it's like 40 50 bucks maybe you buy a product that some celebrity has Shield versus like if you buy a token that your favorite influencer shield and they dump it on your head despite clicking that button that said I promise to sell carefully then you're you know you're hurt you're demoralized you're very upset and then you say how can I make it all back and that's the meme coin thing yeah I I guess the push back is that um I think it's the I think it's the user base or

like the the group of people that you're selling to empirically really value openness and transparency and kol's are really the antithesis of that um yeah I I think that's I think that's a good way to frame it but like I guess the market doesn't like these K rounds that much either because if you look at recent performance of almost whatever K project it's down only so maybe not the best structure to get your token to perform well out of the gate not Financial advice by the way yeah I don't know a lot about K rounds like it can't be a large portion of the allocation um right like do you think the sell

pressure for those projects is attributable to those key opinion leaders well I guess it kind of depends on the structure Case by case but as boo said like a lot of the times they get referable terms compared to other entities so then it becomes maybe a combination of low float and large KO unlock relative to others which might or might not lead to like cell pressure I'm just speculating here mhm one thing that is supposed to be fixing this or I guess is like a product that is going to try and fix this is Kobe's Echo um I wonder if you guys have any takes on this I kind of I completed

the kyc thing um it was quite intense but I it makes sense uh he wants to make sure that nothing can be go wrong and I respect that um I feel like I saw another product that was similar to this as well it's called like bidness club or bidding club uh I'm not sure if you guys saw that but I fund like I fundamentally like that idea of creating groups to share allocation I think it makes sense I'm not I'm not sure if it'll be like the great equalizer but I think it's like a very valid effort um but I don't know if you guys have any more like interesting takes yeah I agree that it's a really

valid effort um there is the question that you still have to kind of apply to be in a group right so the group leaders are the ones that choose the the project that they want to fund and then you kind of have to uh participate with them um in a round so it's not like it's going to be super 100% open to to everyone but I think it's a great step in in the right direction and and yeah it's it's a bit long the the the whole process and I think it also makes it a bit more serious and it is like you you are giving away all your protections or everything from like in my case the the European Union and you're saying I am

certif not certified professional investor and so I'm aware that I will lose all my money and I'm happy to invest in this um so I think regulation wise they took a lot of care to to build a really good product that that you can trust I think Kobe has also been like very positive in in the space since forever um so I'm yeah I don't know how many deals were were already closed I don't know if it's like public knowledge um but I think it's a great product I'm really happy to see it yeah I mean I think it's a fair question to ask like should retail investors even be able to access these

deals in the first place because they are quite risky and then you can make the argument like not everybody knows what like they should do maybe with their Capital but at the same time like I feel that at at certain point after like an investor whoever it is uh after they've given enough information and like the rules have been clearly laid out that okay like you are taking on a lot of risk uh there is a large chance that you won't get any of your money back like if they've got this information and still want to invest I don't see why it should be regulated like even if you want to make it super bare bone or a super bare bone

comparison I would say you could say that it's just similar to gambling or whatever and even that's kind of legal in most places at least outside of the US and some places in Asia but uh I think it's fair to let everybody get into or get uh the same chances at least yeah I think the closest competitor to this in crypto like in terms of um giving access to early stage deals is used to be fured like um liquidity boost boot scrapping cuz I think originally that was designed to be something that was similar to this for people to raise not from VCS but from the General market but it's become like not that anymore I

mean they do two rounds before they have a KR round and then they do a liquidity bootstrapping um thing as well I I mean if that's the best other competitor like this is I obviously like VC Investments are really risky longer term you can you might never get to exit it's very liquid but it's definitely like I think it's a depending on the project I think it's a fair shot than what like f has been recently I don't know if you guys have looked into any fi tokens or if any of our listeners have but I mean those have just been horrific horrific PA comparable to like just the entire they're having their own bare market now

um yeah yeah let's um move on to I'd say like the biggest drama over the last few days I onet Ryan I called on you last time to give an IET briefing I'm calling on you again uh do you have any takes yeah so I guess just a little background first for those who haven't followed uh over the weekend uh Martin scy um otherwise known as Pharma bro uh hurled accusations uh at the IET team um two two broad accusations one that the um um one less consequential one one more consequential the less

consequential is that the the project is flooded with Bots being promoted by Bots um in full of bots the other is that uh the GPU count uh on their Explorer and the gpus that they have available is incorrect uh or or or is misleading um so like just first like why this matters I think I I I personally believe that this space kind of like decentralized compute deepin space is one of the best shots on goal that we have in crypto to um convincing a lot of people in web 2 that like token incentives and crypto rails do solve a problem that a lot of people today have

which is access to uh compute resources um and it would be a shame if you know that were to be taken off the rails by like a a scam project so super interested in what's going on here I think it's important to to take a close look at what Martin is saying and and talk about where he's right and where he's wrong first about like where he's right um undoubtedly the IET project um uh either by fault of their own or Consequences of just the General market and having a tge coming up um was inundated with Bots uh I believe that they hit the max people in a telegram group within the month and if you participate in telegram

or Discord you know that a lot of the content is is bot generated content if you um have followed the project you know it's just been like a constant it's been a constant problem and it's a really hyped project so like understandably that's going to happen um I don't envy their position having to deal with that problem uh the other part where Martin is right is in the GPU count like undoubtedly it was wrong and if you participated in the project over the last month or two you've seen that GPU number go parabolic and undoubtedly if you're familiar with crypto you were like civil attack um now where Martin was wrong in all fairness to the IET

team um they came out probably three days before saying that they were civil attacked and our GPU counts are wrong uh they came out plainly and stated that um the numbers the metadata the metadata on their website was corrupt um the amount of available gpus was misleading um could they have done more like sure like should there have been a banner on the website saying like please don't trust these numbers today we're working on it like sure like sometimes a Twitter post isn't enough um I think that like look the IET project um it is a very ambitious project they're trying to do things uh that are technically very challenging um I think in all fairness in in the spirit

of moving fast and breaking things to point out that a tech project is not working as described um might not be best for that project it might be a little bit unfair um and I think like as like a more of a meta comment um comms like like like we said earlier like the the you have a lot of stakeholders as a web3 company because of the token just by definition you have more Staker stakeholders than a than a web2 company and those stakeholders are very sensitive um towards um or sorry they they value very highly openness and

transparency and because of that comms are extraordinarily important um bot activity is offputting incorrect numbers on the Explorer are offputting and if you don't handle those things in the right way like you could lose your project right like it might not work out for you so um I think the meta lesson here is just that like comms are extraordinarily important you have to be on top of your data you have to fight bot activity and again it's not a position I am envious in I'm sure it's like super hard to to fight away uh the bots in this environment yeah and I'm sure that given how ambitious the project is they have a lot of stuff to do in addition to coms and like watching for S attacks and all of that stuff so

it must be super hard to like trying to control everything that's going around and then it's also sometimes like hard to tell whether for example crypto Twitter is just being trying to be like you know I don't know haters if you want to put it in Zoomer speak but like you don't always know if the criticism is warranted or not and then you just I feel that sometimes the best thing to do is just wait for a while and see how the situation develops yeah totally I mean just poking around today um you know last night scy was convinced that they had no gpus IET showed him like how to actually get the

right metadata to see the actual cluster um he said thank you like my bad and now he's claiming that they don't have the gpus again right so like it's a very fluid situation accusations are being hurled best bet is like you you you step back you like let the dust settle and then assess like it's really hard to know what's going on right now yeah and I guess kley is also trying to launch something within the space so maybe he's trying to advertise something like it's always good to remember that everybody usually has some incentive to do something yeah I but I do Wonder we to our listeners we talked about this this morning as well and one of the things

that we kind of agreed on was that everybody slightly knew that those numbers were overinflated one thing that I didn't know was that schy was launching his own decentralized AI thing and like brick said I feel like that's kind of a I mean he was also talking about too a few weeks back and he was making the same claims that I think everybody makes about ta as well so it's like these very like obvious deficiencies in these projects such as like ta oh I don't know if it's like being I don't know if it's gameable and with ion oh I don't know if like it's fake uh these like as price goes down people really like bringing up a lot of these issues that I feel like a

lot of people are already aware of all right this is a good place to move on to our next segment but before that a quick word from clusters thanks to our sponsor layer zero all right guys for this week's layer zero segment we have zerox Fubar founder of clusters a universal cross chain name service thank you so much for coming on FBA thanks for having me great to be here so just to kick us off what was the problem that spark the idea for clusters the main problem is that I got too many Wallets on too many chains and lost track of all of them I think this is a very common crypto power user problem if I I can't I came in the crypto with one metam Mas cot wallet one e in a dream one day and I I left back a

year later and I had 17 different wallets across seven different chains and and nfts I must have bought well drunk so cluster cluster aim to fix this I think we we live in a world of deting complexity there's a new chain that launches every single week it seems there's a new wallet that comes out um and even within that the apps the the decks the decks you use on blast might be different than the decks you use on ethereum so clusters kind of aims to bring this all back together there's a famous quote there are only two two business models in the world bundling and bundling and crypto is definitely in its unbundling or modularity phase but

clusters aims to I think build build the first Universal app that no matter what chain you're on it's a seamless experience that brows all your assets and familiar flows together yeah that's a very relatable problem so I'm pretty excited about what you're building over at clusters but how does layer zero fit into the protocol's design and how difficult are different Integrations to spin up like is that something that's on your guys's team on your end or is it uh more the people looking to integrate like is that on their end yeah the I mean the fundamental problem with with universal apps with cross chain apps is that the bridges are less reliable than boltimore you you've you've got it seems like a

new bridge colapses every single month what was it um even even economical semi-in shrined ones look at Phantom adopted multi-chain as their economical bridge and then multi multi-chain devs have not been heard of Since since the recent Chinese government raid and all and all their assets were stolen and and dumped um you you've had similar similar hack issues on a wide number of bridges so it's very very hard to take on the risk the the addition or marginal risk of of bridge trust assumptions generally and so I think that the the bridge space has not been with sure enough to build

reliable cross chain apps um for for quite some time the the why now is that for the first time I think layer Z V2 is both immutable enough but composable enough with the highest security bounty in the world to that we can really rely on it and build hyperstructures on top so yeah the there's kind of the the the meme was that everybody's building infrastructure and nobody's building apps but it's not really true the the infrastructure still quite brittle so with with respect to to what that means for us um it lets I mean being able to rely on kind of tested tested security structures from ler zero lets us be more

more aggressive and fast moving in terms of expansion while still focusing on as decentralized protocols as possible nice that's great to hear why you guys chose Larry zero as a solution and how B2 V enabled Custer as an idea to be built one last question I wanted to ask is how has adoption been and has there been anything that has sort of like C any surprise even how people are using clusters an option has been off the charts we launched two months ago we've seen over 80,000 unique names registered already um surpassing even an SS steady state so the biggest excitement has been how many people truly are using clusters

for its purpose you you scroll through the feed and people are configuring people have their wallets from what seems like 12 different chains all in one cluster Sal lot Bitcoin ethereum the l2s um other other edml ones and so that's that that's really fun to see awesome well that is unfortunately all the time we have left for today but we will be sure to link to uh cluster's uh Social account in the show notes but thanks so much for coming onar perfect thanks so much for trly all right we're back um one other piece of big news last week was the Easy E um dpeg um I think and this might be kind of a dumb dumb take um that this was due

to people being upset about the airdrop um as well as the pie chart tweet I uh I don't I mean I saw some numbers that made it seem like it deps 70% like one e was uh one Easy E was worth Point free E I'm not sure if that how sustained that was um but I think it like kind of brings it back to this very obvious issue that lrts have and it's just duration um you don't know when you're going to be able to exit and a lot of them I think e fori is the only one that has withdrawals I don't think any of the other ones have withdrawals but I'm not sure if you guys have any other thoughts on this one this was just like I feel like it just happened for a

day and then it caused like liquidation and Moro and gearbox and then the day after they were like oh we're going to increase the airdrop allocation which shows that bullying teams works it improves tokenomics drastically yeah I mean maybe worth going over the mechanisms a bit first like my understanding here is that basically people got mad about the airdrop structure which then made a lot of people dump the token and because you couldn't you couldn't withdraw it or you could maybe but anyway people I guess Market sold which then of course causes the peg to go down and then that

probably gets even worse when people start getting liquidated on this uh like Loop strategies uh and that probably costed that but yeah in yeah I don't know how to like react to this news really because this just shows that as you said if you bully a theme then they'll change the structure so that kind of makes an incentive where maybe if the team I'm not saying this team isn't like super uh you know honest but maybe a team that isn't that honest knows that okay we can try this like shady structure at first and then if the market pushes back we just like change the structure to something more uh you know sensible so some teams will always

know that okay we can like try and like get this and if if it doesn't work then we'll just revert back to something sensible but I think it will like I don't think it has ever fully well it kind of recovered but at least it was trading at always a bit like one point something e and now it's all always like 9899 um so I don't like I don't think it would be a good strategy in the sense that I think it will be kind of at least for the next few months tainted with with this image and I think it could um also tell us a bit about like these projects are all a bit Half Baked in the

sense that you can deposit but you can't withdraw probably if withdrawals were Ena then this would have been much much smoother and um maybe it's a good take to like remind projects that they should kind of you know just launch the full project before having like so much money inside them I think the big takeaway for me is that this is just like a glimpse of what you will see in a world of reaking and rehypothecation like this was very

benign right like it was a funny pie chart and it caused like 20 million in liquidations and smaller amount in bad debts throughout Defi and like the thing about rehypothecation is that it like necessarily adds fragility and systemic risk to a system that's fine we all know that but when you couple that with crypto's appetite for looping Loop strategies that contain leverage and um Auto liquidations when they unwind things can and smart contract risk things can get very dicey um I don't spend enough time um in like

the E ecosystem to know how seriously um the potential impacts of rehypothecation are taken by like core teams and EF people um but I do see the tvl numbers for igen layer and there's clearly and and the surrounding protocols and there's clearly an appetite tight for rehypothecation to get like incremental additional yield and it's doesn't appear to be a lot which is which is worrisome um if things go like Cycle's not over right like things can get way um more out of hand um if if people don't manage their positions

well yeah but maybe worth noting that this problem is probably made worse right now by the fact that you can your points as well so I feel that that's kind of exagerated the risk right now uh but there will of course be a risk uh as you like mentioned one thing I find kind of funny is that if you talk to anybody about like oh like what do you think are like the risks of ion lay reaking they'll bring it up they'll say like oh there's like obvious risk with like these liquid reaking tokens but like Ryan said I feel like not everybody's kind of digesting that the fact that they're looping everything um which is fine because you want to earn extra points obviously it

go like you want to farm the protocol you want to do your like Loop your YT points as well but it just like I don't want to be a Doomer but I feel like eventually it might not end particularly well and imagine being the guy that got liquidated on like Easy E last week I would be so upset I would be like devastated I think that's one thing people don't think about they're like oh it's igon layer like the risk there's risk but it's not like risky and then boom it's like drops 70% and you're just staring at your wallet single tier shedding yeah all all leverage strategies end poorly like in every single Market in the history of

financial markets I think when if I think about these systems I think a lot about traditional financial markets and I can't help but see like the guard else around rehypothecation are the reasons why the unwind in trafi are so less disastrous than here like we have the FDIC the FDIC has an emergency fund like we have the FED even the treasury stepped in in March of 2023 to help um there are um caps on the amount of lending that you that a bank can do and reserve requirements and there are withdrawal limits on individual accounts like the whole system has had like 200

years of like figuring out how to handle like rehypothecation Risk and it feels like we're just letting it rip like I understand there's like committees that are thinking about this and like um the E the I leer team is talking about guard rails um it is the guard rails in crypto and risk management practices around um rehypothecation strategies are orders of magnitude off from what is in trafi um and that's that's systemic risk yeah I mean you're also allowing potentially the people who have the highest risk appetite in the world who like put 100x Longs on

random um meme coins totally there there's no reason why I can't rehypothecation there like I don't know it's um there's a lot of asymmetry let's put it that way I give that three months before somebody starts re hypothecating m coins because they've already started doing points and stuff now but uh we'll see but yeah I guess it's just a sign of uh maybe developing Market because yeah as you said even tread fi markets had problems with this stuff historically and then when something like terrible happens or that's usually I guess what's needed like at first

everyone says that okay this is fine like ter Luna stuff yeah this is fine we have a great backup fund if anything happens okay that didn't go that well so now I guess we already have some regulation around like especially stable coins uh so yeah if anything happens I feel that at least after a catastrophic thing usually the market gets better than so if nothing else positive to take away there is that like if something was to happen uh the market will probably be safer afterwards we just need to develop our lore a bit more as your take we need to go through a little bit more

struggle hey I'm not I'm not I'm not saying that you said that okay um talking about points farming uh I don't know how good of a segue it's going to be but another points program that is supposed to end uh this week or next week is hyper liquid um our very own Carolina has done a potentially the best like the longest and the most comprehensive Deep dive on hyper liquid um very recently exclusively for our subscribers um Carolina do you want to kind of give your thoughts on that a little bit um yeah so the the hyper liquids points program is finishing very soon it

should end in about one or two weeks and I think it's an exciting time for the project it has been consistently for about three months now ranking in the top two top three dexes for dexes in terms of daily volume and now it's sort of a Moment of Truth where we find out just how much volume and all the other impressive metrics have been inflated by the points program um there's no question that users have been farming the air drop it's more of a question of how much and how many will stay and I may be an optimism but I I do think that even people who deposited in the platform just to get some points um probably enjoyed the trading experience and might actually make hyper liquid

there go to perex it is pretty smooth and fast uh there are today 130 assets listed prelaunch token markets vaults for copy trading and Market making strategies trading is gasless and you can deposit USC from our bom very easily it has generated $140 billion involv volum and attracted 110k new user since the beginning of this year and daily volume has been consistently exceeding $1 billion and I think the deposit UI flow is so seamless that most people don't really realize it's actually a bridge which is is a great thing because they managed to build their own L1 and optimize it for high performance low latency while keeping the ux abstracted

to this fact so I think this is the only way we can start actually Bridging the Gap between prexes and centralized exchanges by focusing on ux and performance and to get some more details um hyper liquid right now is not only a perex anymore um very recently the team has enveloped native spot trading and it had been in the works for a while in the test net and around two weeks ago there was an air drop of per tokens to points holders and that was the first token launched on the hyper liquid L1 so the launch of this native spot Trading uh came with two new native token standards the hip1 and hip2 and the first is a fungible token um standard that

incorporates onchain spot order books between Pairs of tokens and the second one is designed for bootstrapping liquidity via an onchain Market making strategy and it is integrated directly um into the block transition logic of the chain itself in division here is for the spot and the per de is to be kind of the primary source of liquidity upon which all the other apps that eventually are added to the L1 then can Thrive so basically instead of building a chain and incentivizing teams to build on it and just incentivize users to bridge to it they did it the other way around focusing on making the chain very performant and a challenging product just building a very performant

challenging product and and the user base to later on ADD other absolute so we'll have to wait and see uh to see if actually projects will come and on the this new L1 and how easy it will be to introduce new tokens and to bridge new assets but it seems like a more long-term uh plan now in any case it is however I think relevant to know this when trying to make sense of the value of the Native token that will launch now very soon probably the tokenomics haven't come out yet but we know the token will have a role in securing the network which is proof of stake so the documentation mentions that staking and slashing will be similar to to Cosmos chains the tokens influence may also

extend to the asset listing process and it will definitely be used to pay for gas in the future on the L1 so it's interesting that although the project is very known for for the per deex the toen can actually have very clear utility at the infrastructure level and that will stop here I was just going to say that you know how you were like oh the bridging is very seamless it is very seamless because I didn't even know it was an L1 when I first bridged I was like just thought I deposited it to a vault but apparently I bridged over which is kind of insane um I'm kind of excited to see if people are going to stay on after the points program I know a lot of people are saying hyper liquid is a great perex um I'm sure it is I don't really trade that much on perps I

feel like I'd get liquidated immediately but a lot of people are saying it's very very good I feel like a lot of people said that about vertex as well and they also said that about like a million other to I'm but I'm sure this one could be very very good I'm excited to see because they do have really good Avo and Hyper liquid have done very very good job doing pre-launch tokens and I think that was a really good way to capture the meta especially since we had a lot of these points programs and then like teased their drops for months and months so they did well there and I know their product is people are happy with it so I'm excited to see how it's all going to turn out is there any um public information on the like trade latency numbers for something like hyper liquid or an AO

versus um centralized exchange um I only know that they um they are capable of managing 20K um orders per second and compared to binance that's like very little but it's a lot compared to like salana yeah um so it seems to be that that that is the hurdle right and why you see these per deex is kind of moving to constructing their own chains is just to optimize the hell out of it to get them at parody with those centralized exchanges um I think they'll be able to do it but it seems like it's a long road there or it's a long road

ahead yeah what I'm most interested in seeing is it feels that a lot of burp Dees like the quality is getting better and better and then the like kind of competitive advantages on the ux side are getting smaller and smaller so yeah as boo said like I feel AO and then hyper liquid have probably done pretty well also like in addition to them running the incentive programs is them having the pre-launch markets which then gets kind of customers into the door and maybe integrated to the community and then they like continue trading over there meanwhile a lot of other burp dexes are just running like points programs or some other type of incentive programs so

I don't know it will be interesting to see like where kind of a market equilibrium lies where suddenly you don't need to incentivize usage anymore in a similar way but I guess more like your market share kind of stabilizes uh which I feel that for example The Lending Market is kind of or has historically kind of went in that direction maybe until spark launched but uh you know now it seems that it's super volatile like suddenly a new perex can come out and suddenly take up like 15 or 20% of the market uh which is kind of an interesting phenomenon yeah I feel like they're always trying something new with perex

as well I don't think they've iterated that much on lending and borrowing markets I'm sure there's some stuff out there that's like novel but feel like you don't want that much novelty in your lending and borrowing you want like your assets to be as safe as possible versus with perss you might take a few risks um I actually with Hyper liquid one Ryan this goes back to like what you said about the latency I know this isn't what you meant um when you comparing it to the Sexes but I feel like hyper liquid's main competition isn't a sex it's um dydx or whatever the most popular one is now besides for hyper liquid like the established player is the competition and not and like not

like Market sharewise or whatever but I feel like that's the same the user who's on on dydx that's who they want to attract because funds can't trade on like I mean they can trade on dydx I guess to an extent maybe the larger assets but they can't really trade on hyper liquid at all there's just no they take up like 30% of the oi know yeah I I feel yeah I'm thinking about two things so what you said now um at the end um yeah like professional Traders it's really difficult although I have talked to um some people that were either building like vaults on top of hyper liquid or um professional traders that were actually like running some

Market making strategies and uh what they said is that um the the apis and the sdks are really really easy to integrate with and I feel like that's something that doesn't really that we don't really know like as an end user but it's cool to know because it makes like everything um much more seamless to to integrate is just makes more uh more apps reliant on on hyper liquid so that could be a cool thing for them and um yeah regarding the ydx I think that's why also hyper liquid is uh kind of leaning into this kind of attention um focus they always have they're always listing the newest assets and with the

pre-launched tokens and they also have those Bol not sure if the idx has something similar but um they basically we have copy trading vaults or U Market making strategy vaults so you can def you can just see the performance and put your money there and kind of not do anything while it's trading for you and all of those little things I think make the the ux maybe a bit more interesting or exciting at least yeah I feel like the vaults are a great marketing tool I see the vaults more than anything else on Twitter it's just people are like oh look X lost 30% on their vault this week ha and it's just like you're always reminded of hyper

liquid yeah I mean that's going to be interesting because I just feel like there's really no large scale passive strategies you can deploy that's going to make money for you like consistently kind of in perpetuity or I'm just being reminded of AOS like OG options vaults which kind of performed in a quite stable way uh for a while but then suddenly when the market like turns against you your performance drops by like let's say 7% putting you like uh equal or close to 0% if you started from let's say the beginning of the year uh so that's just I guess a tough problem to solve and I don't know if that's

going to be you know possible to solve because at least until now like if we don't count for maybe The Medallion fund which is like a tradify fund that's doing pretty well like everything else is either moving with the market or kind of worse than a passive strategy is moving in the market yeah the Vault strategy is just like vaults the hyper liquid vaults are interesting though because you basically get to put your money where your mouth is like if you're talking constantly on Twitter and saying oh I'm one of the best like Traders and then you can just launch a hyper liquid VA capture whatever fee they take I think it's 10% and then you can just let people

uh invest in you um but that ribbon is like it was the ribbon vaults they just I don't even think they were doing like negative s% I think they were losing money overall and then they were advertising that this strategy has like a 47% return and then the historical API was like minus 28% or something like that so the vault is it's trying to sell vaults to a niche ecosystem of like people who overtrade and actively trade all the time for Passive U strategies I feel like it's always a difficult way to Market yourself no but I mean maybe I express myself badly there but of course it depends on like uh from where you start looking at the performance of the

world but especially for ribbon Walts just because I don't want to dunor them uh or I want to make clear that like the performance was pretty stable and like positive but then you'd have that this like short two week periods where suddenly the market turns against you so like if you traded through these vaults you just had to be careful or you still had to know what you was doing you know okay I'm not going to invest in this week because like I think the performance or the market structure is such that the performance this week will be bad I'm just saying that it's hard to create a passive strategy that's really like outperforms uh constantly maybe Michael sailor has a really good take on this

have heard him his passive strategy on outperforming consistently this is not Financial advice but I would recommend the one chair strategy is a fantastic one apparently allegedly NFA um feels like unless we have any other takes on guaranteed passive income strategies we can end it off over there thank you all very much for listening thank you Ryan kolina and brick for joining um have a nice day thanks for having us a [Music]