Zora and the Future of Crypto Media | Weekly Roundup

Transcript

The reason why you're able to attract all that flow is because you fundamentally change the economic nature of the relationship with the content creator. And so is there going to be a hundred billion dollar YouTube competitor onchain? Maybe not. Probably not because it's just not going to generate as much fees because in the classical sense of Bezos, your margin is my opportunity. That margin evaporates to the plat doesn't exist. It just gets distributed to the cons to the creator. This episode is brought to you by Aries Markets. To learn more about Aries markets, follow the link in the show notes below. Quick shout out to Permissionless 4 coming this summer to New York June 24th through June 26th.

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

You got me and Santi today mixing it up here. Santi, how you doing, man? I'm doing great. How are you? Happy Friday, everyone. We're recording on Friday. This might go out tomorrow. Uh, I think it'll go out later today, actually. So, shout out uh Mark. Uh you're a real one. And yeah, we're down some men today. We're still down and uh Michael and Vance. We had to do some last minute rescheduling, but it's good to see you, man. How's the week been? Very busy. Very good. Uh you know, what's not to like the markets are, you know, the VIX is now down. Um you know, markets have seem to have stabilized. So, we uh you know, beef is back on the menu. you know, put the extra block on the Chipotle

order. Who knows? I mean, for context, like we recorded last week and you know, Vance said something that really stuck with me. He says like they're buying it like they're buying a lot of alts and I think he mentioned like it has been the like they haven't bought as much alts as they have had like historically as last week which I thought was interesting. Yeah, I agree. Um Yeah. I'm surprised to hear that it's not in fact the end of the world and uh we might end up being okay here. And I do think that you know one of the things actually you just start to see pattern matching stuff and I actually remember I'm blanking on his name actually but he's the CEO of that logistics based company uh you know he kind of did a thread around and actually

there's a guy on our board who was a media huh Brian Peterson flexwork guy. Yeah. Yeah. Exactly. describing how logistics have grown to a halt similar to COVID and just got pattern matching here and I think it's a a good reminder that the market can look through not only the now but even the next couple quarters of data even if it's particularly horrendous if you start to see a sign of things turning around and you've gotten basically every bullish headline that you could possibly get from Trump on everything from he's not going to fire Powell to signaling that he's open to trade talks with China. So yeah, it's been a pretty quick turnaround. I mean here's the thing like I recorded a podcast yesterday with um Jeff Dorman from ARCA who is as like a contrarian like uh sober take and fundamental guy. We were talking

about Coinbase and Robin Hood and just that was the kind of the exercise that we used to just think about what how do you value these things like what is fundamental analysis? what is you know fund you know fundamentals in crypto actually mean um and I always remind myself it's like it's not so much what you know about a particular company it's like it's what is already priced in and thinking about what do you know incremental to that you know and it's it's always that exercise which is like you know uh buy what you like and understand it's like fine like you can buy a great asset at a terrible price or you can buy a terrible asset at a great price And so it's almost it is it's a million-dollar question honestly. That is where the skill actually entailed

which is like understanding what's already priced in into the market. And you know uh it's it's a very difficult thing to do because you could have sat there last week and said oh my god the world's coming to an end. Yeah the picture's bleak. Yeah tariffs. Yeah inflation. All this other stuff. But it's like yeah but does the price already reflect all of that expectation and and recalibration? And it's really hard exercise. is not there's not like one clear-cut thing to to do to understand what has already been priced in. Santi, can we talk a little bit about how you think about valuation of these assets? And I'm not sure what you uh what you covered with Jeff, but I was looking at and we were talking a little bit before we got on the show here. Uh Vance was going back

and forth with Zerox and GGMI at Defy Llama and they were poking at each other on the the TL. Um yeah, I can get this exchange up, but basically Huh? Let's get that exchange up because it would be reference to like then point to I know. Okay. So, well the here, let me Yeah, let me pull it up here. But the the maybe to set the stage a little bit. Obviously, there's been a transparency problem around crypto for a long time and and kind of a metrics. How do we value this u how do we value this problem in crypto for a long time? Um and part of this comes from the fact that obviously we grew up with Bitcoin and Ethereum etc. first. Um, and so those things are don't neatly fit into

the into the bucket of how do you value like an equity or a company or something like that, right? Um, here, let me actually I can't find this. Okay, on that point, I would say it's a it's an excellent point you make around Bitcoin because Bitcoin is vastly different than every other asset in the crypto space. By and large, Bitcoin is a commodity. How do you value a commodity? Whether it be gold, aluminum, um rare earth minerals, uh bitcoin, it's supply and demand. It truly is just that. It and no different than Bitcoin uh than gold uh which has been doing really well as of late. You you say, okay, it's just a flows game.

It's like what's global liquidity? What's what are the drivers of demand? What are the drivers of supply? We know supply. We understand it very well for Bitcoin different than other commodities where you're kind of an have a rough approximation of what the total supply of gold is, right? You have some sense that there's X units of gold in existence so to speak and geologists can confirm that. And what makes gold interesting is that 90 plus% of all gold that we think exists in the in the surface of the earth um has been mined. Yeah. And so it's a hard asset in the classical Austrian economics. So is there are scarce resources and then you say what are the drivers of demand for something like copper aluminum it's all

tied to construction and infrastructure and a lot of it is tied to macro and economy and you know what China is doing are they building are they not all this stuff for gold is classically just do people believe that this thing is you know has any store of value and then think about is is that demand going to continue to grow but Bitcoin is very different than other crypto assets totally different uh something like and then you could say okay base layers like Ethereum and Salana and um you know L2s and other L1s how do you value them and we had a really good episode with Kyle uh from Multicoin to when we went and talked about okay how do you value an asset like Solana which is similar to Ethereum

um Ethereum now has some noise with the L1 L2 dynamics but by and large you just have to believe okay L1's produce fees that are tied to demand for block space and then you think about okay well what are the drivers of demand for blockspace and then are they monetizing and pricing that block space appropriately. Yeah and Santi actually if I could uh there was a really great episode by the way people want to get a sense of kind of the zeitgeist of how your average person thinks about crypto or even your average person who's a little bit more wellinformed probably than the average person on finance. I listened to Joe Weisenthal was just on the chopping block and he was asking exactly what you're getting at there which is actually the question they asked was hey I kind of believe in stable coins. I'm

surprised that Ethereum hasn't benefited from all of these stable coins being issued on Ethereum. Um and there was kind of an interesting you know replay of the history and some of the more commercial decisions that Ethereum made maybe relative to uh you know Polka Dot and some of the other chains back there. It is interesting to ask, right? Just because there's activity doesn't necessarily mean that translates into fees or something that investors would use to value the token. Yeah. And that's really it, which is are you pricing block space correctly. And I I've held this belief for a long time, which is I don't think a single blockchain has priced block space correctly. It's hard. Ethereum codified it, then it went to EIP1559 and just thinking about different mechanisms

to price block correctly. And it's kind of a hard exercise to do. Um, but it is something that I think should be constantly top of mind if you're a protocol developer um, within a protocol like Salana or Ethereum, you know, or L2. But anyways, um, so what are the the the the fees? The way you can think about simplistically something like Ethereum, it's like the internet's super highway. You have all these transactions and demand for blockspace that is a lot of it is drive by memecoin trading and swaps and stable coin issuance and mints and uh NFT collections and all these different basically you're filling up block space uh and there's a lot of different it might be very concentrated

like hyperlquid it's just you know purely per activity and you know that's fine it's very robust or it could be a composition of many different things you know you could be a very generalized blockchain which is like Ethereum that has you know gaming and unis swap and all these different protocols that are on top of it and so that gives you some really you know assessment okay okay I I believe that u people think about okay where are the developers building if there are more apps in a chain that there's more activity for those type of products hopefully um and then there's two just to get to the point there are two main fee streams of blockchain like Ethereum or Salana that drives for the demand for soul or ETH the the kind of the substrate of the chain and that is like

fee streams which you know is the base fee call it and then there are like more uh people pay a premium to be included for block inclusion and that might be tips to validators that might be an incremental tip on EIP559 um like priority access to state priority access to state is a great example of that it's like uh you're paying name for the super for the fast lane in California or whatever free EV electric vehicle so uh but yeah you know and then um so there's you got to believe there's like heterogeneous activity and that drives me minable extractable value there are two kinds of me one which is not sustainable and

actually legal which is toxic ME sandwich and front running and all that stuff which has been an issue for every chain um and then There's non-toxic MB and um and that is again I would characterize all the tips and all the premium that you're paying that's like you paying a validator for block inclusion because you see a flash or whatever um that is um that's fine u and then that that drives most of the fees for the chains right I think you guys have a really good chart on Salana fees for instance or Ethereum Yeah, we we there's also I mean just back running is another really good

example of non-toxic me. One thing it would actually be good maybe we could at some point get um someone from a more traditional marketmaking shop on the show or like a sit or something like that because you know my understanding is that there's a very these things are very complicated to measure right like a lot of this stuff even in crypto today happens offchain like sex arbitrage is a huge bucket of where me happens it's very difficult to actually get granular information on that and there are kind of these games that market makers will play even in tradfi that it's complicated how they're extracting value from the system. And obviously there's if you kind of think about where the regulators are and where the market makers are, the market makers are, you know, you know, complicated or uh sophisticated players in the system that

extract provide liquidity and extract value. They're always kind of up here and then the market makers catch up and it's a constant game of whack-a-ole, but it's it's difficult to ever fully tamp that down. So I I think that, you know, people love to say that MEB is going to trend to zero and I I just I just don't think that it possibly could. Um I don't know what evidence that you'd look at to suggest. No, it's some some chains say we have ME protection and whatnot. Uh you have like uh you know Dflows of the world trying to it's it's a common problem that I think people are trying to address. I think it's a toxic MV that is like not definitely should go away and trend zero because it's you know a illegal and b like you know um should get solved. Um but there's there's

multiple kinds of MV. I don't want to make this an entire episode, but you know, we can link resources. You know, there's general front running, there's there's back running, there's sandwich attacks. Um, you know, ME is one of those terms that people hear and have a very visceral reaction to. Um, there's like I think of it as it can definitely degrade the user experience. Like if you if you if I basically the way it works is I I learn because it's public, right? and you're proposing a transaction in the block. You say, "Oh, Mike, you want to buy 100 units of asset X or swap it.

I might say, "Oh, wait a minute. I'm going to do that first and I'm going to tip the validator be included first." And then that drives a and then I can profit from that. And that that that R um you know is is goes away in large part. Yeah. But anyways. Okay. So Santi, this is a little bit of a follow-up point to what you were just describing, but one thing that people at Blockworks were talking about this week was here was a uh this is a post from Storm. So this is one of the data guys at Paradigm. And I'm just going to read from this post here, which is epic actual data on how much the gas limit can be raised. And I think this work was actually done by the folks on the Nethermind team. Uh, so I want to give credit here to Camel uh, Chola. Sorry

Kimmel if I uh, or Camille if I totally butchered your name there. But basically the idea is that you know over the course of the last year or two we've obviously had an enormous amount of debates about how much can we actually scale the L1 and initial results uh from this uh from this data that got collected here is that actually um all five node clients can support a substantially higher gas limit that already exists uh from 80x to 280x times uh sort of the current status quo u and so now that I'm reading here from storms post now that we have actual data instead of flying blind and performing vibes based optimization the client teams can precisely identify bottlenecks and raise their performance even higher.

So I know this is something that Giorgios as well has been uh talking about for quite a while. Um actually putting some data uh around the the decisions that are being made here from the Ethereum Foundation and the various client teams but fascinating uh when you collect onchain data and use that to actually inform your product roadmap and decisions and I find it super exciting. So not sure if you have any thoughts on that. No nothing really other than what you said. I think we should go back to the advance thing. This episode is brought to you by Aries Markets. Aries Markets deployed on Apptos in 2022 and is now the largest lending protocol with $280 million in TVL. To learn more about Aries Markets, follow the link in the show notes below. This episode is brought to you by Marinade. Marinade is

a high performance staking delegation platform that brings both liquidity and security to the Salana network by connecting soul holders with the best staking rates on Salana. Follow the link in today's show notes to learn more. Okay, so um this was uh Okay, so I'm gonna let me pull up on my screen here this exchange between Vance and Zerox and GMI. And this is um if I had to set the stage here for what we're looking at. U one this was uh I think Vance was originally complaining that hey there's still a hole in terms of um analytics uh providers here. Um, and the the core pain point seems to be, you know, we kind of have our own ways of describing fees and revenue in crypto, which

doesn't necessarily translate onetoone in terms of how Trad wants to think about this, right? So, the urge being, yeah, Tradfy puts things in revenue and earnings and price to earnings ratios and things like that. Um, and there's a little bit of a critique here, um, of, uh, the some of the the DeFi llama, um, imagery, uh, which is, so expenses maybe not 100% and I'm going to defend Xerox, NGMI here as well a little bit, like they're a really crack team and they do great work. Um, but, uh, there was a I think a meaningful discussion on revenue um, and how do you actually calculate revenue versus fees uh, but then there's also a terminology um, as well. So like using terminology like REV

versus just hey this is just revenue and V's right. So I'm curious what you think about this Santi and I and I think one thing that has messed a lot of people's uh frameworks up including mine is when you have when you look at traditional markets you have private startups and then you have public companies and you know depending on where you are in your stage there are certain metrics that people like to use right so if you're a public company people like to look at things like price to earnings ratio price to sales book value more traditional sort of metrics and everyone has their way that they like to slice and dice the data right and then in private companies, you also have your metrics that you like to look at. So VCs will run look at unit economics, they'll look at things like ARR, they'll look at

things like growth rate, all of that type of stuff. Um, and so, you know, now we have this weird we're kind of blending these two worlds because, uh, tokens go public much essentially start trading in a liquid way much earlier in a company's life cycle. And so the question is, well, is the metrics that we used when we were assessing private companies originally still the right metrics to use? Should we use different ones because they're trading in a public way now? You know, how do you think about the valuation methodologies now that we're kind of blurring these two worlds of public and private and companies are essentially going public sooner or or Yeah, exactly. Um, and there are protocols that might not necessarily have a token, but you you're seeing the amount of activity. All

right. Look, I mean, it's not a perfect science. There's a lot of discussion here between you know clearly like your research team and then DeFi llama and advance and I'll I'll just categorically say you still have this type of debate among public like in the public markets right people still have discussions around how to classify revenue uh how to think about like capitalize R&D uh you know lease adjustments um adjusted IBIDA and IBIDA and there's like all these different valuation method techologies and like every company for instance if you're looking at a software company and and all you want to focus on is churn well companies not all their version of churn is different and so and

so a lot of what you do as an analyst or like you know when back to JP Morgan or in in um a growth equity shop trying to understand these things is you you basically um assume and agree that you just are going to run the same data and calculate churn in in your way. Um, that might not be how the rest of the market looks at it, but you might say, okay, I'm going to take as much data and then restructure it so that my my definition of churn is the same for every company that I'm looking at my concept and therefore I can compare a company apples to apples, you know. But that's not to say that my calculation I mean I can't tell how many times I've been in in calls with management teams. I'm like,

"Guys, your churn, I think, is much higher than what you report because of X and Y, and Z." They're like, "Yes, but we actually don't treat churn from involuntary, which these are customers that went out of business." I'm like, "I don't care, man. Like, this is churn." Like, you are operating and you're serving software to restaurants, right? Well, restaurants have a high failure rate. That's that's just a that needs to be calculated in churn. Yes, it's involuntary. Okay, fine. I hear your point. But they're out there reporting in the public markets that you know churn is like much lower than what it is because they do these adjustments. So crypto I think the the if I were to just think about a protocol like a where I think people get very confused

is and I'm making a general statement is uh what is okay you have TVL and then a protocol like a has a lot of deposits and then there's interest that is being paid for those you have deposits right the protocol so what you look at okay you have the depositor base is say a thousand that's TVL it's all the deposits. That's a there's not a lot of noise in that metric, right? People can just categorically say, "Okay, well that's deposit deposits." TVL is TVL. Um and then and then you say, "All right, well then there's that." That that would be like GMV, gross merchandise value.

That would be like uh Amazon has a huge GMV, which is all the volume that gets paid at Amazon. That's not Amazon's revenue. That's gross merchandise value. Right? So that's GMV. And revenue is the fee that Amazon charges, right? Because if you're selling if if you're buying a widget on Amazon that's a thousand bucks, that's not Amazon's revenue. They charge a fee to the whoever is selling that in their marketplace or you know, and that's where I think you guys are normalizing this, which is a lot of people make that confusion, which is revenue is not GMV, right? You got it's like gross revenue, net revenue.

Marketing companies have this thing, marketplaces have this thing, protocols have this issue. Airbnb has this has this thing too, right? This is just a there and there is there are some in yeah bookings are grow or G the equivalent of GMBB which is that's not Airbnb's revenue ladies and gentlemen it is the total transactions that get passed through in bookings Airbnb and then Airbnb clips a fee on that and that's their revenue right and also it like at the end of the day right it all comes out in the wash in earnings because no matter do you want a really high revenue and a very low profit margin or do you just want like a lower and by the way just for people following going along. That would be what we're talking about here, just to put it in plain English, is imagine you book an

Airbnb for $1,000 and you have to pay Airbnb $150. Is the revenue for Airbnb $1,000 or $150? So, what I would look at, and I did this math a ton because I looked at Uber's private round and Airbnb in the public market. So, what do you what you want to understand is what is the relationship between GMV and revenue because that tells you how sustainable is the fee that Airbnb is charging. uh what's the take rate the commission rate and if it's a really valuable service that percentage say they charge 10% for every transaction happens in their fee that's their take rate that's their commission however you want to charge it the value goes really service you look at it over time and I say over time because this this is

something that is really useful uh for any investor which is you can't look at it of point in time certainly if you're looking at point in time of the comp group you're like if I want to compare a with compound with all these different like lending markets and I would compare unis swap with all the amm or dexes then you're looking at maybe a point in time which is okay what's the revenue what's the you know fees or whatever let's see um you know are they distributing that to token holders and whatnot right uh you can compare them point in time but more importantly you look at a specific company you look at the evolution of these things because you know I think say for instance a defile is wrong the way they classify revenue is different than the way you guys classify route. That's

fine. Okay. But look at the historical trend line for DeFi Llama and how they that's been trending for a particular protocol or look at your dashboard and as long as the methodology hasn't changed that still is useful because uh you might not agree in certain adjustments or how it's classified but but you always want to look at any abnormalities in the data just like wait a minute why did it go from 5 to 20 or 5 to 10 clearly some just like something happened something happened or there was a mclassific ification there was a maybe a protocol upgrade the fees got you know token holders there's a v switch or whatever you know what I mean so it it's good to like just take a long term like

look at it longitudinally and say okay what are the changes have there been real modifications and then and then that's where you start probing which is like all right what happened here quick shout out to today's sponsor Aries markets Aries markets deployed on apttos in 2022 and is now among the top 10 lending protocols s across all blockchains with $280 million of TVL. Aries Markets has expanded its product suite to become a fully integrated DeFi hub, combining lending, borrowing, and more. In 2024 alone, Aries introduced several new features to better meet the needs of its users, including native USDT support, an incentive program, and more. Click the link at the bottom of the show notes, head over to Aries Markets, and tell them that I sent you.

Hey everyone, quick shout out to today's sponsor, Marinade. Since launching in 2021, Marinade has expanded their suite of products to provide solutions for both DeFi users and Tradfi, including liquid and native staking, as well as direct enterprise integrations. Marinade's platform is optimized for institutions to securely expand their exposure to Salana. Whether through the provisioning of custodial or non-custodial yield, integrating staking rewards into Salana financial products, or leveraging Marinad's bestin market rewards rate for revenue and treasury management. Whether you're in DeFi, Tradfi, or somewhere in between, Marinade has something for you. To learn more about Marinade, follow the link in today's show notes. Uh, well, the other thing too, Sunday, I'm curious to get

your perspective is like I roughly think that, you know, the whole point of a company, right, is to generate profits and then return that to investors over the life cycle of the company. And so the way that most of the metrics uh from my understanding right of like early stage companies is how fast are you growing right like it makes sense to be more forward-looking right so generally and this is this is historically lined up to when companies are still private they're not public yet so that's why a lot of the metrics tend to be around how quickly are you growing right like ARR is kind of this metric that people want to look at in terms of how sticky is this revenue going to be that eventually you can return to me and then the unit economics analysis is okay you're growing but is there a line of sight

into profitable growth, right? Or are you just spending more? Are you putting $2 in to get $1 out and you're never going to be able to change that. So that's like what all of those metrics are kind of trying to measure and tell you. And then as the companies get older and more mature, it's like, okay, you're probably not going to be growing as much as you are not going to be growing as much as you were when you were a young company. So how how do I know that you can return this value to me? And so that's I I think that if you look at, you know, a lot of I think people tend to get over excited when like, oh my gosh, these companies are public and I can look at price to earnings ratios, etc. But I mean, you've invested in tons

of early stage companies. Like how often do you look at price to earnings of a 2-year-old company, right? It's completely irrelevant. Just because you can look at it doesn't mean that's relevant to the the stage of growth that a company is at. And I think that's still messing a lot of people up because even the oldest quote unquote of these companies are like four four or five years old, right? I mean, look, I mean there's a lot of there's a very one I I have a couple views here. One, the market doesn't think about it in fundamentals because categorically this entire asset class is is is a pure option value on some crazy assumption that we transform so many different industries, right? There there are pockets within the crypto universe of crypto assets that have very interesting

cash flow dynamics and buy and burn dynamics of distribution to token holders uh that are trading at quite reasonable valuations. maker hyperlquid. Um there are a number of protocols that looked at on a what is the total act you know uh transaction volume revenue and then what is made distributed to token holders via buy and burn or just um mostly buy and burn um then that uh that's interesting but there are few few companies like that particularly mostly in DeFi that have really interesting um valuation like if you look at it from

a like a cash flow perspective they're they're cranking out cash and then they're buying and burning they're burn buying burning the token like maker and hyperlquid and so that's quite interesting I think the market generally understands like hyperlid I mean I haven't looked at most recently but just rough rough math how much are they burning um this quarter for instance I think I think I've seen some assumptions there but it's it's it's fairly priced so to speak it's not like a 100x you know it's like in the 20s or maybe even 10 to 20 range which again if you look at okay what's Coinbase trading at give you some perspective the way I think about Coinbase right Coinbase is a $50 billion business enterprise value

business that's equity value plus debt they are trading at enterprise value to IBIDA IBIDA is kind of like a clean measure of like profitability so operating profitability 15 times 15 times you might argue is that reasonable or not Well, you look at Robin Hood. Robin Hood has a 35 times enterprise value EVA does. And so the question is that's like what EVA does that that's trailing 12 months even okay what's going to happen in the next 12 months in the next two three four five years because your point around growth is a really good one which is someone might say oh Warren Buffet of the world world's fundamental analysis might say wait a minute 35 times and 15 times it's really expensive P like the P of Coinbase is 20 times Robin Hood is 27

times but then you say okay you might have discussions if it's fairly priced or not and they say okay what if I told you that Coinbase was not going to grow next year but Robin Hood is going to double growth on a forward-looking basis that EV to Ebida for for Hood is you know 18 times 17 and a half times and then their P goes to 13 times which is near distress and if Coinbase stays the same then then then so so sort of like you have to bake in what is the future expectation and by the way Coinbase is generating seven billions of $7 billion of revenue, $3 billion of EVA. Robin Hood is generating roughly half of that.

So, so you're saying, okay, well, Coinbase, maybe Coinbase has saturated its market and you do then you would do market analysis. Okay, what is the addressable market for someone like Coinbase? How does that impact their profitability? When you have more stablecoin issues, when you have State Streets and and Black Rockcks and prime brokers of the world entering the market crypto, well, are they going to be able to defend their position? What's their take rate on commissions? Retail's really high. Is that going to sustain itself? Are they going to be able to offer institutions? Are then if the next a thousand institutions that come on to crypto? Are they all going to use Coinbase or are they going to use their custodian that they use for the brokerage account? If you tokenize stocks, who's going to have better edge there? Hood or Coinbase? You could argue

Robin Hood because people already buying equities from Robin Hood. Yeah. You know what you're reminding me of too is all this math. You know, it's it's again there's not one simple measure. I do agree with your fundamental point which is cash flow is king. If a company the company can do all these adjustments and financial wizardry in a particular point in time and have their accountant sign off in the garbage. But if after one or two or three years they're not producing cash flow, then you can't lie. Go look at the cash flow. How much cash hard cash is being produced? And and that's just um very simple to understand. Yeah. You know what you're reminding me of as

well? Even with something like uh PE, there's cape, right? Cycll cyclically adjusted price to earnings. There's PEG, price to earnings to growth. There the investors love to slice slice this in a million different ways, right? Yeah. Uh I will say one thing which is I think for most of the industry including protocols ba especially basically your protocols you can't justify their current valuations. If you run any 10-year discounted cash flow uh you can't get to any re not even 10% of their valuation then okay what's the terminal growth after 10 years and most of the value of a company like in a classical like valuation framework you would say what percentage of the company of the valuation enterprise value of

company is in the first couple years if you do a discounted cash flow and most of the time we want to see 50 60 70% decent right there there's a lot of noise in what could happen as you as you forecast your forecast a year out is more likely to be precise than a forecast five to 10 years out I think even though overlaying the Bill Gates you overestimated what happens in one year underestimated what happens in 10 so maybe that's actually a wrong statement that I made but reasonably speaking if there's a lot of history to a company like Airbnb Uber or Coinbase you know they've been in they've been operating for many years and so if there's a material deviation in the forecast you know often times manage sent you their forecast and it's like that and you're like, "Okay guys, you've

been growing like this flat and then you're telling me you're going to double growth. What sort of wizardry do you have cooked up there that is going to lead to that?" And and so you discount that heavily, right? But most of the valuations of these protocols are very much I struggle with them. I don't think the market ever thinks about in a fundamental analysis. A lot of it is just social value. Ripple social a lot of social value made a lot of money for a lot of people. It is synonymous among non-crypto natives. Ripple is the easiest narrative to understand and Brad and team have done a phenomenal job of convincing the market that they are the bet if you want to express a long crypto transforming DeFi.

The DeFi bet for normies is Ripple. It's not a Yeah. Sante, can I get your take on uh I want to switch here and talk a little bit about Zora that launched this week. Um and Okay. Yeah. Coiner baby. All right. So, uh, Zora launched this week, I would say, to a decent bit of controversy. Um, so Zora is they started off as an NFT platform, um, on the OP stack, they actually had their own chain. And I guess the whole genesis of this was they originally had a slightly different take on NFTs which was instead of you know the pudgy penguins or the punks you know very limited uh number of supply very high value they basically had a more mass market approach to NFTs in general which

eventually they pivoted into something like memecoins um they uh we've talked about it on other pods I believe but basically the idea of Zor is that it's a social app so they relaunched as an app that's trading on or that's uh built on case and it's a social feed that looks actually something like Instagram um if you were to go on it today maybe a little bit of pump fun in there. Uh but basically the idea is that when you post on uh Zora every single post is a um is a coin. So you're doing a mint. When you mint a new post um there's a bu I believe a billion coins that are associated with that post. you as the creator get 1% and then you dump that into a single-sided LP uh pool on Doppler which is a UNIV v4 um hook uh

which is built by Austin Adams of Wetstone. He's one of the original designers of um UniB4 itself. And so uh and then basically those coins trade. So people buy and sell um your token and you as the creator you obviously do well if uh your if the overall value of the coin goes up. So your 1% appreciates you also get some of the trading fees there as well. Um and you as a user of Zora depending on what people are buying and selling you see it more or less right. So, it's kind of replacing the social algorithm, your the feed algorithm um of Facebook or Instagram with a more market-based algorithm. They also did their their airdrop this week. Um and I think a lot of people were one maybe a little bit disappointed with the amount of Zora tokens that they got, but also

they were disappointed with the there was one particular line that the Zora token is just for fun. Um, and so I think people were a little bit upset about kind of this idea that all right like what do I get as you know people I think are fed up a little bit with the current uh status of what you as a token holder uh the kind of rights that you actually get. So, I'm curious, Auntie. Um, you know, I think a lot of people had a little bit of an allergic reaction to this because they see it as kind of pump fun and they I think some people didn't necessarily appreciate the marketing of Jesse and bass in general. Um, and they view it as kind of pump fun, like a more thought boy version of pump fun. So, pump fun with extra strings attached. Um, I have a slightly

different view, but I'm curious to get your take on just this idea that Zor is taking a whack at in general and then also some of the more like just the mechanics of the token launch and how they described it. Yeah, I mean, look, I've met a lot of creators that have used Sora over the years. Uh I think many of them um got rewarded you know in the best way possible which is they were using a platform that they thought was interesting and then they got a reward because they were active users. I think that that's really interesting uh and fair if you're using a platform. You know, that's the nice thing about crypto which is you reward your investors, your team, contributors and also users and you give them some sort of ownership in

in the company by way of the token. Um the market never likes or I guess said differently, I've never heard of a launch that has gone flawless. People always complain. They they either get some people got too many too much tokens too and some people got too little and then dynamics are off and in the vesting not investing can team lock. So you're never going to get it perfect. Zora as a platform is interesting. I think uh I am not an active user. I don't think I qualify for an airdrop. Maybe in some old wallet but um yeah you know it's it's kind of interesting the the thing that makes me do wonder generally because I looked at Zora in the earlier rounds. I thought it was like an interesting experiment like

this was before NFT craziness. Yeah. Um is the IP stuff because I think I think that was like my biggest concern with Zora is like if if you coin something you might not have the IP attached to that. So it actually becomes like my my main question to the team was like what if I steal someone's IP and then I just like coin it. Yeah. And that's that's a challenge, right? That's not like a maybe AI can solve that. But anyways, uh it's still trading at just to get to the point of it, it's like it's still trading at like $211 million fully diluted valuation, 60 million market cap. Is that fair, reasonable? I have no idea. Not something that I I guess like

I don't even know how Zoro makes money. Do you? Um probably some percentage of the trading fees, I would guess, of all these coins. Yeah. Yeah, probably. Um, but if we were to run through the exercise of how do you value some like Tora is you have to maybe comp it to like a sabes of the world which is like an auction house or like a art gallery which is uh I guess I guess like Pinterest maybe is probably the more close comparison in the public markets. Um but in this case Sora is is clipping fees I guess to your point around activity. Uh is that fe sustainable? Are there going to be competing marketplaces? Is this a place where the best artists or users come

to? I don't know. I I don't have many thoughts because I I don't like to speak of things that I don't use much. I I did end up passing on this when A16Z invested in it way back in the day. They didn't want to take my money and that's totally fine. The right choice. I uh yeah, I mean I I haven't really looked at any of the the rounds or anything like that, but I do I think it's a I mean I understand why people have a an allergic reaction to it. I mean people are kind of sick of the the meme coins in general. Um and I obviously understand why. I do though I have a um I think a lot of people have approached Zora through the lens of pump fun because that's the most salient example that they have that looks something like this. And so they're

slotting a lot of this and saying, "Wait a second. This thing looks exactly like Pump Fun, but now you've slammed it into something that looks a little bit like an Instagram feed." And you know, this is and I do understand, right? There's a big there there is an incentive here for Jesse and Brian Armstrong, etc. to have bring some of that memecoin activity that's been trading on Salana over to base. And I totally understand that, right? But on the I I look at this more from the perspective of having been an operator of a media company for a while and um I think that this solves some really interesting challenges in media and to me this is an extension of the big mega trends of media in general. Um so yeah I first of all I think that the big challenge that Zora if it were to

actually work that it solves is it's a neater uh redistri redistribution mechanism for value from a social platform to creators. So, the analogy I would give people is Twitter is starting to do this. Elon is trying to reward creators, but how much do you get rewarded? I don't know. You just get, you know, $75 per month, right, that Elon sends you. And you're like, great, but I have no access to the methodology. This is you could actually track, hey, I understand exactly how much I'm making because, right, I see the fees that the, you know, my posts are trading, etc., etc. Um, the other thing too is that I think this solves a um kind of a cold start problem and uh it's a better business model for a new generation of potential content creators. And I know people are

going to roll their eyes and be like content coins are the biggest scam in crypto. I get it. But I think that every single time media shifts mediums um you get a new generation of content creators. So like Brian Williams wasn't the biggest YouTube star, right? That's Mr. Beast. And Mr. Beast was, you know, young and he was a hustler and he saw this new medium of YouTube and he figured out how to exploit it and how to grow massively. And I think that there will be a a generation of onchain um social media and it's not going to be Dave, you shouldn't be buying Dave Porto's coin. You shouldn't be buying Kanye West's coin. You should be some young entrepreneur is gonna be like, "Wait a second. I can post everything on chain. I can track the cash flows from

that and that can actually acrue value back to my own coin and equity. And that makes a huge amount of sense to me. And the last thing I'll say is too, one of the the reason why the Substack revolution quote kind of fails is because eventually if you're a creator, what you really love doing is creating content. But then once you get to a certain point of Substack, you have to do all this like off-chain stuff and deal with advertisers and things like that. Um, and that's where people flame out and burn out because that's anathema to being a really good content creator. This is a much cleaner way in my mind of monetizing where I do a post, I get rewarded based on how viral or how many people see that post and then that acrru value directly back to my coin. That to

me makes a ton of sense. I I've heard I I totally agree there. I mean, let's think about platforms like we're in a world where most of the content is user generated, but the economic relationship is very lopsided towards platforms and not content creators. Yeah, the value of any platform like YouTube, Substack is derived from user activity and content. uh but Tik Tok or YouTube they don't distribute as much fees to these content creators you know and and that that will fundamentally change over the next 10 years and crypto is going to be a big part of that Zora um you know what is it uh OpenC you can think about NFT collections all of that like

mirror too but um so I definitely agree with you it's uh in theory you should continue to attract more artists and content creators to come over to a platform like Zora that basically generates far more the the distribution of fees is way more towards creators than it is to the platform. So I just like simplistically looked at okay what what's a fee structure to give people some perspective here. Zora charges 1% fee on all trades that happen directly on the platform and the fee is kind of split uh in a couple ways.5% is creator rewards 15 is trade referral rewards point the other 15 is to create referral rewards and Zora itself the protocol takes 0.2% 2% which

is kind of like 20 basis points is kind of in line with other protocols, right? Yeah. But the 1% fee on trades you could argue is fair. Um and then you believe, okay, there's a lot of trading activity because people want to collect these things and they're trading them, they're speculating, you know, fine. Um, and then you have I'm not sure how accurate this is, but DeFi Lama reports that Zora marketplace is currently generating about 1,200 in annualized fees, which it seems very low, but and token Terminal reports approximately 300 in fees over the last 30 days.

Um and then cumitive revenue Dune Analytics and D5 Lama indicate that Zora's cumitive revenue is about 5 million since inception. Um however, this is the point that that I think stands which is Zora has distributed over 27 million in earnings to creators from secondary sales. uh and that I think that that's the point that I'm trying to make here which is most of the value is being distributed back to the people that are generating value which is the creator.

So then how what is the right valuation for Zora? And this is I think an example that again I just said Zora as a platform is where a lot of people have uploaded content and there's fees that are attached to buying that particular piece of content and then trading on it and you have initial fees and then secondary market fees and then that's all great for creators that distributed 30 million. Zora hasn't isn't keeping much, right? um in the classical sense 1% trading fee they take 20% of that. So that's like the inverse of what YouTube YouTube I think takes 80% and they distribute 20%.

Now again in this case YouTube is making far more money on advertisers and that's not included in any of this analysis. It's just trading fees. Um, but the point I'm trying to make is I think one of the big mistakes we're doing in crypto is saying look at YouTube and these content platforms like Tik Tok and they are worth hundreds of billions. That doesn't mean that that if you create a competitor to that that value is going to flow to your protocol because on the contrary you're gonna just redist the reason why you're able to attract all that flow is because you fundamentally change the economic nature of the relationship with the content creator. And so is there going to be a hundred billion dollar YouTube

competitor onchain? Maybe not. Probably not because it's just not going to generate as much fees because in the classical sense of Bezos, your margin is my opportunity. that margin evaporates to the plat doesn't exist. It just gets distributed to the cons to the creator. Yeah. I you there's like there's air Uber for instance when I looked at the secondary uh the preipo round the TPG led the unit economics were not there like most cities were not profitable only San Francisco was profitable and in fact I don't think Uber would have gone nearly off the ground if it weren't because it create it was created under record low interest rate environment where you could pump liquidity into these companies until they maybe maybe broke profitability in some of these

markets but it takes a long time. Uh what I'm trying to say is um like the unity economics of a platform like Zora is like you can have a great service but terrible business. Uber great service but I don't know like I I wasn't comfortable investing that round. Traders, AI enthusiasts and deans listen up. The game is changing and Desk is leading the charge. To celebrate their launch, Desk is running a trading campaign with three major highlights. 38% of their token supply will be allocated to airdrops. They're offering the lowest trading fees on Earth. And finally, they will be running a desk referral program. The more people you invite, the bigger your rewards will be.

To get started, click the link in the show notes below and make sure to follow at trade onesk. The other thing too that Sanji, I'm curious to get your take on is one one of the like on the Jeff Bezos, your margin is my opportunity. Um, you also the thing that is difficult to understand um in the fullness of time is if you make it a better service for creators, how much do you expand the total market? Um, and that's look that's hard to make that argument with someone like YouTube, right? Because how many billions of people exist in the world, right? I'm not really sure. Uh but well, actually, I'm sure it's like eight billion people. But uh but that's YouTube, it's a centralization of the platform. Like we have now the two most popular artists in our generation were discovered on YouTube. Taylor Swift and

Justin Bieber. It's created the Logan Paul's of the world and you know the all the influencers of the world. you know, it's YouTube has created a lot of value for creators for sure. Um, but it is capturing their business model is very different than Zora's, I think. Yeah. So, we'll we'll have to see here. I think um you know from from my perspective I think it it one of the things that I think is one of the more interesting experiments that's being run in crypto and a challenge that I see on if if you just look at industries that are ripe to be disrupted media I think everyone would agree right like mainstream media is ripe for disruption I think disruption is already happening um and then the next question is is

social media right for disruption which I'm not 100% sure it is but one of the things that you get from I mean I'm curious what you think about this because I don't know I mean one of these things that you've seen time and time again in crypto is this desire to speculate um right so it was back in like 2011 and 2013 it was like Feathercoin and colored coins and stuff like that um and then it was uh you know ICOs in 2017 and then it was originally DeFi summer and uh you know food farms like Yam Finance etc um and then it was NFTs right and memecoins and we've seen this movie over over and over and over again. And it seems like each of these predicts something actually valuable over time. It's just you kind of get the

hypest version and the stupidest funhouse version of it in the beginning and then it takes a number of years for the market to understand what actually happened and to put more you know guard rails and more uh professional capital formation around it. And I think if you look at something like NFTs and memecoins, you don't have to like it. You can say that yeah retail's getting fleeced. You can say there's a lot of toxic ME. You can say that gambling is not good. And I would agree with basically all of that. But I would also say I think you'd be foolish to completely write it off as if it's not a persistent phenomenon because it obviously is. Oh, trust me. Like newspapers have to reinvent the way they made money, right? You know, it was mostly what is it? Uh periodical like what is it the

the fee like the what do you call these? It wasn't periodicals like at the end of the paper they would have all these different classified ads. Classified. Yeah. And so like you had to change, you had to adapt. Is Zora a good business? It's a good service. I'm not sure it's a good business. Now I go back to when I I think I mentioned in the prior episode when Facebook went public, most of um the market didn't really understand how how you could make money off of a social media network.

in Western investors didn't know that because it was all like u they didn't turn on the fee. They weren't bringing on advertisers. I think there's a if you go read like the um the social network uh and and a number of accounts that document the evolution of of Facebook is at the board level Zuckerberg and folks like Peter Theo and others like really resisted and pushed off the turning ad revenue on because they didn't want to degrade the service. They said let's just let's just grow number users like we're on this hyperdrive growth. We're becoming the main social media network.

let's not distract, let's not compromise the the platform uh experience by turning on advertisers. And then of course now I mean I can't even remember last time I went on Facebook because my feed looks like Times Square and and yeah, you're so right. You know, like their saving grace was was WhatsApp and Instagram and and your point's a really good one which is the the evolution of these platforms is at some point they capture all it's organic. It's a great service. Like content creation is pristine. It's like you become really popular because you're posting really genuine stuff and then you get somewhat co-opted, corrupted and varying forms because you you just sort of need to make more money

and then you the advertising game changes changes it. Um but again like when Facebook went public it it wasn't really making that much money on ad ad revenue. But I think if you were there, if you were like DST of the world, Ernie Miller, Ernie Miller was backed up the truck on Facebook, I think series B, because he had invested in Yandex and some other social media networks in Europe that had far more along. And he said he understood something that the market was not appreciating, which is if you own the user attention, you can you have a great product to then monetize the out of that user. And he was like, Facebook's going to do this. They're not doing it now. they're gonna eventually do it. And

he put in a billion dollar valuation. I think he he was like, "Fine, I'm willing to invest like two three billion. This thing's going to be uh huge." Uh but he had the insight of invested in in in Yandex and some of these Eastern European social media networks. What I'm trying to say is like I think that might be what ends up happening in web 3 which is uh it you get to a point where Zora as a platform maybe or OpenC or whatever become these places where it they create really good content and the best content creators are there because they're making more money and that drives a flywheel of great content and and if you're at a point I I don't think by the way you're ever going to make

that much money given the feed dynamics. Yeah, it's be on volume. It needs to be on something else. And what is that something else? I think to your point, it is it going to be the same story of just turning on ad revenue? Maybe it is. Maybe in some creative way that I we just haven't figured out. You know what I you know what I Okay, so I've been trying to come up with a word for what I see as related concepts. And I would actually put Azora in the same bucket as prediction markets. um like poly market and here's the connection that I see is media is moving the big question of media is what mechanism do you use to show information to people and historically that

mechanism has been a very small group of editors in a room using their intuition and saying I think this would be interesting to people and what that's moving towards what crypto has done is they have made that uh a more market-based pricing for information in the same way that like if you're a trader what service are you providing you're providing price discovery to financial assets I think crypto has lowered the friction of issuing assets to such a point where you can take that price discovery method that has been applied only to financial assets in the past to actual information and that I think is the interesting thing here so to me that feels like something that over time is just going

to end up happening um and it's going to happen at prediction market level and it's going to happen at the social like the content that you consume every single day level. Yeah. Um so I don't really know how that's going to manifest. I don't know what these businesses are going to look like. I will say there are some I'm I'm sharing our uh uh our Zora dashboard that we've got and some of these metrics are promising that amount of plat posts that are going on the platform is moving up, existing accounts are growing. This is a good daily active users over weekly active users which is basically a user retention metric um is going up. So there's stuff that's moving in the right direction for Zora here for sure.

Although they did just launch. So this is we'll see how that behaves. We'll see how that behaves over the coming months. Look, by and large, I mean, I kind of agree with you when I when I invest in you guys said you have an opportunity to kind of transform media. I don't know what how that looks like, but you're there and I believe like your point around Poly Market and you're you're going to see the tokenization of everything. And and why is that interesting? Because in a world where money moves more seamless in these rails that are connected like the truly a settlement layer of the internet, you create markets on everything. And why is why is that interesting? Because markets are arbiters of truth. Yeah. And they surface the truth in a very interesting ways and and I think that's really powerful. Um it's really powerful

because then you are able to discover artists or creators because they're like, "Oh, wait a minute." Like they're actually generating a lot of content. in that the alternative is content creators and a platform like YouTube or Tik Tok or Instagram that are trying to game the algorithm and they're obsessed around that and and some people I I would argue that the edge is more so understanding like what the algorithm and how it's going to the titles and the imagery and all this stuff. Does that make it good content? No. But the virality it might be high and you know and that's what you get served on the feed.

But I would place a far more like you can't do that with markets unless you're in the business of burning money and markets markets just which some people do but markets are really um far more they're not perfect but they're arbiters of truth and and I think if you really want to discover pristine genuine content the market is willing to put a dollar behind not a click a dollar behind that's very powerful and I think that's really the upside here which is you might be able to discover so many different artists and the same with that you know OpenC allowed for many different artists like People Pleaser and whatnot to you be discovered. I I think we're going to see a panacea of user generated content and the discoverability of that user generated content be perhaps more

pristine because it is tokenized and then financialized in the best way possible which is if you're not my view if you're not transacting value it doesn't matter. If you can't and again if you can't monetize that attention you've done something fundamentally wrong. Your business is not right. your platform's not right. Facebook was able to turn on and monetize that user in a very interesting way because a product was great until it wasn't. But, you know, they had Instagram and WhatsApp and maybe they'll have some other stuff in the AI space, but it it all comes down to an attention game and and ultimately like I I would be if you're Zora, I guess you're sitting there and saying, "Okay, we've distributed a lot of really good value to the creator. How can we

monetize that? Imagine Zora does end up becoming this place where you have amazing user generated content. Oftentimes when when I was an investor in in you we would do these expert calls and you would call customers and I'll tell you we ended up investing only in companies where we heard customers say one thing and they said this we would we would be willing to pay two three more times for this product. And it was a common thing like pricing a product is really really hard. Uh and and I don't think founders are not necessarily well equipped to price their product because they come at it from a

more emotional standpoint. It is I mean there's there's people that truly consultants that just all they focus pricing analysis. And the nice thing about crypto too is because it's so financialized and in real time you can tweak these things. Yeah. Yeah. And then see how the market responds. And look, the hallmark of a good product is you can increase prices and maintain retention. In fact, there's a private equity fund out there that just buys businesses, jacks up price. And their math is basically if we double the price and we only lose 10% of the customers, we would have made this business, we would have created so much value. And it's under this idea that most businesses are not price valuable products. If you believe it's a valuable

product, then you believe that you can raise prices not lose as much customers. Yeah. It's it's a really difficult uh analysis to do also. Um yeah, the the pricing stuff is I I would argue with the in the private equity fund, they didn't necessarily create value. They successfully extracted value, but uh but uh well they they created more value for helpers and for shareholders and for the employees that built a great product. Yeah, it's completely true. Santi, I think we've got a Oh, by the way, just one thing on the Zora stuff because people make it about I have no idea if Zora is the final form. One one thing that I would say as well is we're just in the era of crypto where we're starting to get more product um expertise and discipline and engineering expertise discipline the it still took

social media or like web 2 the first version 10 years right to find the final form factor and then in year 15 or whatever we get Tik Tok and bite dance and it's been disruptive like these things take a long long time to iterate on I have no I have no perspective uh whether or not Zora is the final form factor here I think history would tell It's probably not. It's just, you know, I'm trying to zoom out and say, is this an interesting experiment to run? Um, because a lot of people have had a super allergic reaction to it in general. I don't think so at all. I think a lot of the creators out there might very much disagree with anyone that is purely just speculating on the token. Yeah. Pays to use these pro projects. You use them because you get value out of them and

have no expectation of an airdrop. And if you still use the product without an airdrop like Uniswap, Uniswap didn't have that token. It was a great product. Yeah, there's I want to plug this book that I just uh read yesterday. Phenomenal because it talks about product. Um, and it is called it's written by the guy who built the keyboard for the iPhone and like the haptic feedback and like and then he built the keyboard for the iPad and just really was very much uh front and center in building product like proh product in the golden days of Apple when Steve Jobs was still there. It's called Creative Selection: Inside Apple's

Design Process During the Golden Age of Steve Jobs. And it's written by Ken Kosienda. Phenomenal book, man. It's just a front row seat in like how he, you know, all these crazy stories of how he went to Steve and was like, "Hey, should we have this keyboard or this keyboard?" And it was like pretty awesome. uh if you're it's tied into are you building a good product and cutting kind of groundbreaking uh uh stuff and I think it's I I really enjoyed it. Yeah. Um there's also really interesting I mean uh different companies with different people have approached product differently. There's kind of Apple has great taste, right? like they have this sort of um a little bit there's an art

and a science when it comes to product and then Facebook or better I think has been an example of a company which no offense to Zach maybe had a little bit less taste but it felt very data driven and analytical in their approach to improving product too you see that culturally at different companies but Zanti I think that's all the time we've got today man this was uh this was a ton of fun I think Anna will be back next week so uh yeah but I don't know man we keep doing this we're going for I know I was gonna say I feel it was a little sparkier uh yeah this is uh we about to switch it up um do a little swinging. Yeah, really really fun, man. Thanks for hosting and uh yeah, hopefully people enjoyed it and um have a good weekend.

All right, partner. You too. Chat soon. Bye.