Beyond the Hype: Crypto’s Next Chapter | Weekly Roundup

And this is something that I think about in version 1, which is, okay, like Solana right now, every chain is pure speculation, so to speak. Um, but like over time, what you want to see is as a percentage of the pie, speculation going down, like meme coin activity, important, growing as a whole, but percentage-wise decreasing. You want to have other types of activity. Maybe it's tokenized stocks, again, speculation, but a different type of user, different type of company. Because I mean, unit economics of the user in crypto suck. You onboard 100 million people or a million people to buy Trump, and then how many of those have stuck around?

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All right, everyone, welcome back to actually a special edition. We got a bell empire, Empire Curve. I don't know what the correct mishmash here is, but we got Michaels1 and 2, Vance and Santi from Empire joining today. Fellas, how we all doing?

You know, typically we're, we're adding speed and velocity to the shows by cutting people, but I guess we're We're adding speed and velocity by adding this week.

Too gracious, too gracious, Michael. Um, before we started recording, Michael was describing his Herculean triathlon, which, which, which my immediate response was, bear markets are when you get in shape and you start doing this type of things. And he said, no, we're not a bear market. Van said, no, we're on bear market. Sorry, sorry to blow the COVID guys, but I don't know.

It's a good question. We should probably get into it. But yeah, no, just try to, try to keep your, keep your time filled while not watch the charts these days.

Waiting for the chart to go up, refreshing CoinGecko. What do you guys think, though? This is a little bit of an odd spot. It doesn't feel— usually in crypto, you know if things are good or bad, right? It's clearly a bull market or clearly a bear market. Maybe there's some confusion around the inflection points, but This feels like a bit of an odd spot. I'm curious, what do you guys— how are you guys situating yourselves at the moment? How do you contextualize this within the history of crypto markets?

I think there's a handful of assets that are basically having their float cornered and these are going to squeeze in like 3 months, feels like maybe 2 or 3 months. And then there's the other 95% of crypto assets which just have no marginal buyers and are slowly bleeding out. Then there's all sorts of shenanigans in the middle with Jesse from Coinbase fighting everyone on the timeline and everyone else just beating each other, like Rushy getting the heave-ho from movement. There's movement in the pack and it feels like people are going to emerge and others are going to get left behind. But at the end of the day, I think the real trends of this industry right now are the lending market, stablecoins, Bitcoin as money. ETH is figuring itself out, albeit pretty messily. And yeah, I don't know. I don't think there's as much of a clear demarcation between bull and bear market. Like over $90K, it feels like it's probably back on. Under $90K, it feels like we're off. But Nvidia got sacked for like 10% yesterday and crypto kind of just hung in there. And that's the first time that's like basically ever happened.

Yeah, I would I generally agree with everything. I think the only things I would add are we're kind of in this range right now. It feels like where I would say if we're back above 90, it feels like it's game on. But I think if we're back below 80, it feels like it's game over. And we've just kind of been like in this range for the last couple of weeks, which makes total sense. It's one tweet from Trump or one tweet from someone who hears some information about, you know, the President of China says whatever, and it is one tweet away from breaking through in one way, way, shape, or form. Um, but I think ultimately this stuff gets figured out probably in the next like 30 to 60 days, and I don't think we have to wait the full 90. I think they're going to start having, um, you know, in terms of the tariffs and the trade deals that they're working on, they're going to start having 'we have agreed to a deal in principle' type notifications and announcements, and then it'll be, okay, here's the details. But once we move past this, and we will move past this, um, I, I think it's only going to be, uh, exciting for the rest of the year. Um, it's just the uncertainty right now makes people wait on the sidelines. What will also be really interesting coming up in the next couple of weeks is basically all of the Max 7 are reporting Q1 earnings in the next 2 weeks. Which means that, I mean, and Q1 I'm sure is going to be fine, um, generally. But what everybody will be looking for is guidance, um, for the next quarter, Q2, but also for the rest of the year. And whether it's, you know, CapEx numbers that people are tracking, um, forecast of revenue, if they're seeing, you know, tariffs or trade policies actually hit the revenue, uh, figures and forecasts. Um, so much of these businesses are basically the entirety of what people own, especially over the last 5 years. You had this huge allocation towards US equities over the last 5 years, but within that, an even deeper allocation into these 7 companies thinking that this is the trade of, you know, the decade. And they're, they're potentially, you know, the ones that are hit hardest if growth does not keep up with the already insane expectations. So those are things that I'm looking for in the next couple of weeks. But yeah, excited to move past this probably in the next couple of months.

Santim, I'm curious to get your perspective here. And, you know, I want to maybe make some of this crypto-specific. And you guys all have a lot of portfolio companies. And I'm curious how you're advising your poor co-founders at the moment, because, well, Santim, you are— you can speak from the founder perspective now with Inversion. But I'm curious how you're thinking about this, right? Because it's not like crypto isn't CapEx-heavy or a manufacturing-based industry, but If asset prices go down 50%, it definitely impacts your growth for the year. And so much of this is uncertain at the moment. So how are you guys thinking about just business planning for the next 12 to 18 months?

It's business as usual, really. I mean, again, if you move past the 6-12 month timeline, this happens in every cycle. Like, there are some pockets of crypto that are getting more attention, like hype and, you know, real-world assets. Lending markets are back on the menu. Fundamentals are back in order. This is like very— I'm not like, I don't think this cycle is different other than perhaps there's been like a few like outlier assets that have really like shined. But again, like, for me, it's business as usual. You always got to keep at least 24 months of runway, always got to control cost. Don't do dumb shit and invest in things or sponsor crazy stuff like focus on building a product and constantly be—

Conferences you can sponsor though.

Yeah, true. But you know what I mean? Like, there is some, always some reckless spending that goes on.

There is, for sure.

Yeah.

There's like always, in all my conversations with founders, they always say, look, there's one 10x engineer that we will just pay that guy more and we can let go of others. Maybe just focus on hiring more 10x people. Um, but listen, we've never, the backdrop for crypto, if you extend your view towards like multiple years, has never been better. All, all the major roadblocks have gone away. Like, we have a very pro-crypto administration. We likely will get stablecoin bill in the next, I don't know, 6 months. That's huge.

Less than that.

Uh, you go to DAS, you have the sentiment among like non-crypto natives is probably stronger than within crypto natives. Like the BlackRocks, Robinhoods, Nubanks of the world. Like, those guys appreciate the potential. So again, For me, it's to survive and always keep, you know, healthy amount of runway. Um, and, and, you know, I think that the only thing that is probably like now this cycle is just understand your position in the stack. Like, how are you going to actually monetize your user or your product? And, you know, it's sort of simple stuff that I think, um, it's, it's kind of punted. It's like, yeah, we'll, we'll figure out monetization later. And I get it. Look, like Facebook in the early days, did not have a monetization plan. It just said, we're going to build a killer product that people love, and we'll then figure out how to monetize. And when it did its IPO, people forget, but everyone on Wall Street was discounting that stock like crazy. It went down, it had crazy swings because it was at a time where most people didn't appreciate social media. And at the end of the day, oh, if you have attention of the user, you can monetize the shit out of it. Um, and I think crypto is kind of going through that evolution now. Like, we still We have some breakout apps, but we still have 30, 60 million active users on-chain. Like, it's, it's, it's still not where we want it to be. But I do think that, like, stuff that I'm excited about, like tokenized stocks, front ends, uh, protocols that can capture that flow, is sort of interesting. And so, yeah, um, I'm very much, like, not bothered by crypto prices right now.

We, we've never been buyers of alts in a larger size than we are today.

Yep.

Um, I mean, maybe one mouth is, uh, I do think that could be volatile, but if you're waiting for like the VIX to spike to 50, it already happened.

And just, just as like, uh, investor psychology, um, you're never gonna be able to time the bottom, so don't spend your time waiting around for it because it has probably already passed in a lot of ways. And maybe you'll get another shot at something lower, but the best time to be buying something is frankly when it's like 20 to 40% off of its low and it has made a clear turn. Um, and that's the best time to be loading up, also keeping dry powder ready to go in case, you know, it's a, it's a fake top and you get another shot at something lower. But I mean, that, that I think is kind of where the market is broadly right now. You got a lot of people who are thinking it could be a fake top and, and maybe there's another drop depending on what happens, um, and maybe people will get that shot, or maybe we've already passed the drop and this is the slow build towards, you know, a new resolution. Um, the, the one thing that I was going to add just as commentary from this week, um, we obviously maintain relationships with a lot of venture fund allocators, our investors. And some interesting perspectives that we got in multiple cases, actually over the last few weeks, but it kind of capstone this week, was the things that they are really aligned with. And the thing that is really hitting with them in terms of why crypto is being able to showcase a side-by-side comparison of a technology company with number of people, product, revenue, cost, and then net income relative to a protocol where you've got probably similar levels of revenue, maybe even less revenue, effectively 1/20th the cost in terms of headcount and the people that are at the protocol or working on the protocol, and a massive difference in net attributable value either to the token holders or the equity holders. And being able to showcase that is something that is working really well for them. And it's just the most efficient way of putting dollars to work. Now, how does this translate? Kind of going back to what Santi was saying, we have to be efficient with the money that we're using as an industry. There is generally going to be less money than people expect. Every year over the last 5 years, we have less money than the previous year from, from just like a venture allocation perspective. Don't expect that that trend doesn't stop. It will be more and more concentrated in fewer funds, and the funds will continue to raise new funds, but you're not going to see very many super large growth rounds, um, frankly, for a while. Um, so, so you got to be prepared to do more with less, and you also got to be prepared to put your own startup company protocol, whatever you want to call it, on that comparison of Who is your centralized business comparable and how much more efficient are you because you have a blockchain? And if you can do that and you have a path to showcasing that, like, it'll work. And we just have been talking with LPs about that and that's what gets them most excited right now.

I— on the LP stuff, like, one of the things I think about a lot, to your point, Mike— Michael— around there is now more vehicles and ways to express along CryptoView. You have ETFs, you have, you know, Coinbase, Nubank, the latest Solana, MicroStrategy, like, you know, is that, does that compute? Do you think that will affect like LP allocation into funds? Because look, 10 years ago, like 2017 vintage funds, there was very much no, it was more so like the capture of, I want to go long crypto. I don't want to deal with custody and like the Grayscale premium was there for a reason.

Right.

Do you think that really changes the composition of venture? And if so, like early stage, very much not unchanged, but like the growth stages. And if you're like a company that raised $100 million and haven't shipped product or haven't shown metrics to raise another round, like what do you do? You can't go public. You need to totally recap that business.

I think, look, the reason why growth equity exists in the first place is because of this thing called, say, Barnes Oxley, which pushed all these companies to have just these insane levels to be able to go public, which require them to be at like I mean, Kotu said this in their last presentation. It's like a $10 billion revenue run rate is like the minimum to go public now. Um, or maybe it was a billion dollars of revenue and a $10 billion market cap is like the minimum to go public, which is like, you know, the number of companies that reach decacorn status is like one every few years. It's not every single year. And, and so that pushed this, this growth, this growth equity paradigm within traditional venture investing. Now, crypto venture has also done similar things. It's like, oh, well, a founder's fund can go raise $4 billion, then we should go off and go raise $2 billion. Makes absolutely no sense, especially when we're talking about the thing that is working best is being able to talk about the capital efficiency that we have as an industry. And, and to your point, though, I think what you're describing will ultimately affect the amount of dollars that venture funds raise, because in many cases over the last 5, 6, 7 years, you had many venture funds who were fund of ones. And what I mean by that is they've got a liquid strategy, they've got liquid venture, they're doing seed rounds, they're doing Series A's, but it's all within one fund. And it's just like the venture— or it's the crypto allocation that some endowment or some pension fund is looking at, and that's why they want to invest in that fund. Now, I think we're going to get product diversity, and you're already starting to see that obviously with an ETF. You can get Bitcoin exposure through a brokerage. Great. Endowments will go for that. There's no reason why a fund should be holding Bitcoin unless it's a trading strategy or a hedge fund in a liquid strategy. But I think you're starting to really get— the LP base is really starting to understand the difference between who is a core venture investor, who is a hedge fund investor, and what are the other financial products that I can use to get crypto exposure, whether ETF or structured products.

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One thing that I'm curious about is how do you think the, like, a potential bubble in especially privates might impact the adoption of tokenization, especially from the allocator perspective. So, you know, one thing that I like, you hear quite a bit is allocators running into privates to hide from volatility, right? Because they don't have to mark to market every single day. But I could also imagine in case there was an exodus, right, there needed to be an— like, it's much more illiquid, right? That's like the shitty part. If you ever wanted to get out, there's really no easy way to do that. And so I was listening to a more traditional— I listen to a bunch of like capital allocators and more traditional private equity pods. And they're all— they're all— the thing that all the privates are talking about now is how do I— okay, these— if I had to sum up the consensus view of everything on the tariffs and the Trump side of things is that we've probably seen a bottom, right? Like markets tend to look through even pretty horrific quarters of data if there's a light at the end of the tunnel on the other side. But if we're headed towards a more stagflationary or whatever environment long term, it impacts the private guys now. And I'm curious how allocators might think of— I think some of them actually see value in not having to mark to market on a daily basis. But I also could imagine a scenario where they're not able to get out, and suddenly they're like, guys, this is ridiculous. I need these things to be liquid. There's no reason why they shouldn't be liquid. These should all just be tokens.

Fun story before Vance can share more perspectives on this, but, uh, we were talking with a large US endowment who said, um, their first crypto exposure was buying Bitcoin, and they worked with Coinbase to do this in like 2018 or 2017. And the, the person who was managing it literally told Coinbase, I will pay you extra to not send us accounting statements so that nobody knows how much this is worth. Don't tell us, please. Awesome. For 3 years, don't tell us. Uh, but that— yeah, it's kind of a question. Is it a feature or bug to have private marks that don't change with the vicissitudes of the market? In a lot of cases, it's a feature.

Your average, like, 2 or 3-year-old crypto venture fund is not going to have these questions asked to it. It's just like, it's going to be liquid at some point in the future. I think that's it for now. Older traditional venture funds are getting this question, and it's causing the questioning of the venture asset class more broadly, or at least, you know, the composition of it and how many firms should exist within traditional venture. The area of the market that's gotten a pass so far is just like AI-related stuff where we were just on a call with someone who's raising $250 million for a startup that won't have a product for 5 years intentionally. And I think the question with a lot of these things is like, how much interrelated party transactions are there? The revenue from SoftBank goes to OpenAI, which is spent on CoreWeave, which is spent on Cursor, which is like It's kind of like this round tripping of revenue and then how much implicit leverage is embedded in that system where if OpenAI doesn't work or if AGI is not in 2 years, does that blow up everyone downstream of them? And there's all sorts of other platform risk questions, but I think that is kind of— the allocators are getting a lot smarter, I think is kind of like how I would wrap it up, where there's now enough dispersion, enough different types of funds, enough time horizon where people can really start to ask the tough questions. It's good for the industry. It's good for crypto. And crypto should come out of this looking a lot better than the alternatives. It's more liquid, more liquidity events in general. Generally, the valuations are higher. I think that the capital is going to come. But what we've noticed from our peer set, at least in Crypto Ventures, that they're upping their ownership percentage requests. So some firms now want 10% of tokens. And, you know, giving 50% to the community, that's also in question now. A lot of the kind of classically held wisdom of crypto venture is being relitigated and re-questioned.

Same with airdrops.

That's awesome. As it should. As it should.

That's—

it's ridiculous that— yeah, that's great. Santi sent me a couple of charts. I actually want to maybe return to this question of bear versus bull market. Santi, these are some good charts here.

How do I—

I like the charts.

All right. Can you guys see— does it look full screen on my—

Yep.

Okay.

We're going to see all your DMs, but—

All right. All right. You're looking at the chart, sir. Oh, God.

All right.

So this is long-term holders of BTC are back to accumulation mode. For some reason, it's full screen on my screen.

But along with this chart, I did see a stat of the number of 1,000 to 10,000, um, BTC wallets is now at the highest.

Yeah, and buying, like, like, if you look at the distribution of who's actually buying, it's the guys that have really large— like, the duration of the bit— I think there's another chart that's not here, is like, you look at like the duration of wallets that have held Bitcoin after X, like over a year or multiple years, are buying right now. And that to me has always been the strongest signal. Like, it's not so much the guys that are short-term trading this thing, it's like, no, like The guys who really know and where the real wealth is and the flows are, they're, they're right now buying. Um, now question is, like, I haven't seen— I would love to see that chart of, like, like, within crypto, because I do think right now, uh, based on, like, that last episode with Quinn and some of the macro guys, it's like, it's very much, like, Bitcoin-centric and dominated, and Bitcoin needs to lead for the rest of the market to feel comfortable, like, allocating into other stuff. But of course, you just heard Vance say that they're buying alt, so Yeah.

Yeah. But we also just said that it's pretty hard to get LPs to agree to allow you to buy Bitcoin and charge fees. So yeah, yeah, not part of our core strategy.

But I think even if it was, I still, you know, like to us, the meat of the next move in the market is probably like the mid-tail coins, you know, anything between— I mean, there's things that are $100 to $200 million, which are kind of like cigarette butts sitting on the ground. Like, it's just like there's not much meat in them for like a huge fund. But anything from $500 to kind of like $1.5 is, is the strike zone. And then there's even bigger ones that are kind of like the mid-majors, you know, $10 to $20 billion.

But, and just as context, like, our view is that Bitcoin has to move first. But you can see this in the charts too. When Bitcoin moves, things that we're talking about in these strike zones, in these different strike zones, have higher betas to Bitcoin. So if Bitcoin's up 1%, they're up 2.5%.

Yeah, yeah, yeah. I think we have a positive skew. Like, hey, listen, uh, maybe it continues to be choppy for the rest of the year. Trade war, all these like idiosyncratic things are like, no, it's hard to like predict. We are in that kind of administration where one tweet away from like markets nuking or ripping. Uh, so if you're not using leverage, if you— and you have the possibility to allocate, you sort of say, okay, how much more, how much more downside do we have on something like Bitcoin? Uh, certainly could go to 50, and I wouldn't flinch. Um, but there is more. I think over a long-term view, you probably say there's higher probability that Bitcoin is at— maybe that's the question, uh, over in 2 years' time, do you think there's a greater probability of Bitcoin being at $150K or $50K?

Well, it's not— it's not evenly distributed, correct? Um, but even still, I would still say $150K, like, and the breakdown of probabilities is probably like 75-25.

I have a question for you guys on what do you think about this idea? Okay, so here's one thing that people ask all the time is, okay, I know that stablecoins are going to be big. What if there was a trillion of stablecoins in market cap in the next 3 years? How could I play that? Borrow/Lend actually doesn't seem like a terrible way to play that, right? Like a lot of these Borrow/Lend companies are leaning into stables like that kind of seems like category of liquid coin that you can buy that directly benefits from that trend?

Well, Borrowlend has been, as a category, one of the most beaten down categories within crypto over the last 4 years, namely because the 3 out of the 5 biggest blowups were Borrowlend, centralized providers of Borrowlend, and it just like destroyed, you know, Genesis, BlockFi, Celsius basically just like ate up that entire market. And people have been barely dipping their toes to get back in. One of our portfolio companies, Maple, now Syrup, is— I mean, Vance was on Spaces with them today, and I think Vance tweeted this, but like, they've just been chewing glass for the last 4 years, and they just hit over a billion in TVL this week. So you're starting to see this stuff happen on-chain and doing it in DeFi-native ways, which is really interesting. In particular, it was actually Sky that allocated over $100 million over the last few weeks to Maple to then lend out. So you're starting to see like all of these things pieced together in a way that is much more powerful than even what you had with Genesis, where rehypothecation, centralized, do you trust in them to, you know, manage everything in liquidity properly, but I think on-chain lending is going to be one of the, one of the massive winners in this cycle. Actually, I take that back. No more cycle talk. We're done with the cycle.

Yeah, I agree. So, well, Michael, to build on your point here, this is some really great data which was gathered by Galaxy and Alex Thorn's team there. Alex Thorn's team there. So, you know, this is— you're looking at— this was really difficult data to get. So they, I think, parsed through uh, public filings, bankruptcy docs, uh, etc., back in the day. Um, and they actually came up with the amount of CeFi, uh, or the amount of lending market, uh, exposure that you had going back all the way through 2018. You can see, you know, these— or if you're following along on my screen here, these sort of orange blocks are, uh, the centralized lenders, so Genesis and BlockFi. But you are starting to see a slow rebuilding of credit the market driven primarily by DeFi. Actually, he's got a chart here, uh, explaining, uh, reviewing this, which is today you actually have a larger market for DeFi lending than CeFi lending, which is pretty cool to see.

Great, great to follow up all of my points with perfect data.

I do think this is missing like the market maker borrow that happens on centralized exchanges, which I imagine is quite significant. But any way you put it, lending is still down 75% from the peak, and there's a lot of new category players that are eating most of that pie and most of the profits associated with it.

On the— I think your initial assessment was like, okay, we want to go long stablecoins because everyone categorically, I think, is like from Stripe to investors. I'm sure LPs are like, hey, this is a room temperature semiconductors, you know, like, and everyone is trying to— like, I've talked to every other day, there's like a new company that wants to launch their own stablecoin or wants to use stablecoins in some way, shape, or form, which, look, is really bullish for the category. Like, it just— it's the Trojan horse. How do you express that view? I mean, um, you know, I'd actually be curious because you guys, um, did you invest in the last one?

Have the stablecoin go to $1.50 or go down to $0.70.

Um, but, uh, I think there's like multiple ways you can express that. Like, there's now like stablecoin-specific chains. I mean, like Tron has been that for USDT for such a long time, but now there's like Tether-specific chains that have cropped up, um, that I think you guys are investors in. I'm too. Um, then you can play the Nubanks of the world and Robinhoods of the world that you could take the view that it's something like Nubank, you know, there could cut, you know, they can monetize that user more effectively, can acquire users more effectively. Their activity rate is a KPI that they disclose, which is basically like active mouths. Was gone up. Um, most of their users are buying USDC, not Bitcoin, Solana, Ethereum, or meme coins. It's, you know, having dollars in a bank account is a killer use case. Um, they're using USDC, but, you know, you can envision a world where they might use another stablecoin or launch their own. I don't actually know if they're gonna— if it makes sense for them to be an issuer. I think an issuer is kind of a tough business model, but if you own the user relationship, I think that's how I would express the view of long stablecoins, like think of who's gonna— who owns the customer relationship, and can you cut costs in a meaningful way or monetize that user? Basically running Tether's business model where interest income shoots up because, you know, you acquire more users and you have like all this depositor base growing.

I mean, being an issuer, well, there's effectively— so I, I think it's also helpful to maybe separate out what is a payment stablecoin versus what is a different type of stablecoin, and I don't know if you want to call it like— some people say Athena, like USDE, is more of a structured product. But I think that there are different flavors of stablecoins within like broadly stablecoins. So that's one thing. But being an issuer of a stablecoin, you know, maybe less so the case with Circle, as we talked about a few pods ago, but much more so the case with Tether in the fact that they make $13 billion in net income. Every year is a very, very successful business model, um, if you can get there. But it's also the hardest thing to displace. It's like we, we, uh, we describe it as, um, you know, uh, social media squared, where the network effects are, are twice as strong as what you have with social media. And I think broadly, you know, how we look at it is there's basically infrastructure, there's issuers, and then there's like you said, enable businesses. Infrastructure, Plasma is a great example, you know, stablecoin-specific chains, you know, affiliated with Tether and is going to be, you know, very low-cost, high-throughput chain. Issuers, now this is tougher. Tether Equity, Circle Equity, tougher. But things like Athena or Sky or other issuers that are doing differentiated things could be attractive places to look at the issuing category, where they're making real revenues and they have real incomes that are flowing back to a token. And then the businesses— I mean, we just announced an investment in an insurance company, and they are definitely focused on Bitcoin for now. They're regulated to be able to do so. But you can imagine a world where they are also regulated for stablecoins and being able to provide USD access for insurance products to people who don't have access to USD.

Um, this was your largest investment to date, isn't it?

Largest equity investment today.

Equity investment. That's great.

But the— yeah, at some point we'll, we'll get Zach on the pod. He's a second-time founder, really talented. Um, but yeah, I think broadly about businesses that are enabled by stablecoins is one of the best places to be, you know, investing in stablecoins. It's just, it's an indirect route, but it is, um, to your point, Santi, it's the owning the customer relationship. And we kind of describe it as like, there's a ton of business models, and it's like business plus AI equals better business. And in a lot of ways, we think of fintech as fintech plus stables equals better fintech.

Do you think— on this point, I'm actually curious, like, do you think that, like, the network— the points on network effects being really strong for stablecoin issuers like Tether, they've obviously benefited from being first and having all this distribution connectivity and composability, so to speak. Like, it's just everywhere, right? Exchange is a very fungible asset. If you are a Robinhood or a— I mean, I guess PayPal is doing PYUSD, but there's, I guess, reasons why that's not moving much yet.

I do think that hundreds of millions of PYUSD.

Yeah, but I'm curious, like, if you have— I've always felt that the name of the game for stablecoins, like it is in everywhere, is like, A, do you own the customer relationship, and do you have distribution? There are a lot of legacy businesses that have a ton of distribution, like BlackRock, JPMorgans of the world. What would happen in a world where they issue their own stablecoins? Are you saying like you need to have like a Switzerland model that sits in the middle of everyone, or, or would they be able to displace Tether?

I, I think fundamentally that all of the issuers to date of stablecoins have completely missed on the product market fit of stablecoins, which is that PayPal USD, Circle, all of the major issuers within the United States are focused on the US as their core market. And Tether started outside the US and has focused on everywhere but the US. And that's why they have all the growth that they have. Everybody who lives inside the US, all, all 4 of us inclusive, have great access to US dollars and financial services around those dollars. Why would I need a stablecoin in so many cases? You know, maybe I'm funding an investment that's a crypto-native protocol and they're accepting USDC and I can do it over the weekend. Congrats, that's great. Like, I don't really need a stablecoin otherwise. And at the same time, if you live in Turkey, you're using Tron and you're sending people USDT, and that is the only form of payment that you use. Like, I think that a lot of these people have just like totally missed the mark on what stablecoins are actually good for, which is exporting dollars.

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Hey guys, I've got a question for all of you, maybe a little bit relevant for Plasma here, but how sticky do you think that stablecoins are to their chain that they're issued on? And I'm looking at a headline from Standard Chartered, which they're estimating $2 trillion of stables on chain. And they called out Solana stablecoins being, quote, stickier than expected. And we're looking at here a chart of the Solana stablecoin supply. This massive peak here was the Trump token launch. So you saw a flood of stables on chain. And here I can find the, the DEX activity after that. But you see, it's basically remained, and actually you're continuing to see sustained inflows of stablecoins, but it's not like it just dropped off versus the DEX activity post, um, post the token launch obviously fell off a cliff. So I'm kind of curious how you guys think about how sticky stablecoins are to their underlying chains in general.

I think Tron has this business model of like almost like Uber where it went city by city retailer by retailer and built out those mercantile connections that way. So I think that is fairly sticky. A lot of the USDT that is on Tron today is exchange reserves. So, I mean, exchanges are kind of the arbiter of where money goes and market maker capital as well, which again is just like looking for a fast and cheap chain. And that's honestly the same thing with Ethereum. A lot of the, you know, whatever, $50, $60, $70, $80 billion of stablecoins that are on Ethereum are basically just reserves. That being said, there is probably 20% to 40% of those, you know, TVL on ETH that is highly mobile and highly active and is embedded in lending markets. And like, I think Ethereum's strength right now is that it just has deeper capital markets than any other chain. It's kind of similar to the US's strength, where it's just like the capital markets are so deep that you can finance different types of things. So, like, Ethereum, I think, is fairly sticky as a result of that. Tron has the retail angle, but, you know, the, the retail payment vendors, like, they are not loyal to one chain or the other, um, so that has a pretty low switching cost. And then Solana, I feel like, is an entirely different ecosystem where it's more cyclical as it relates to meme coins. And the stickiness of the stables are related to the stickiness of the meme coins. I do know there have been a lot of outflows of stables from Solana post-Trump, Trump coin, that is. And I think that has a risk of continuing if the meme coin cycle does not, I guess, restart. I'm not sure if it's still fully kicking or alive, but it seems less alive than it has been in the past.

Hmm. The meme coin cycle is down quite a bit. I'll go find these statistics for you and Pull it up on the dashboard.

That chart's correct. Then I think, you know, and assuming meme coins are down whatever percent, like it does seem like the stablecoins have stuck around or new has flowed in.

They've stuck around.

The statistic here, just in terms of revenue being generated by chain here is meme coin activity and rev generated by that is down 80%, but Solana still has 70% of the overall volume.

by chain.

So even though Beamcoin activity is down, it's their, their market share relative to all chains is still quite high.

So are you looking, are you looking at your, uh, uh, REV chart?

Yeah, here, let me pull it up.

If you could, I was looking at that actually, cuz it is down dramatically, like Jito tips, priority fees. Like, I mean, basically you saw a spike in what I'm looking at, your, literally your network REV chart, which is so nice on Solana. I just— I can send it to you if you want.

Yeah, here, I got it. I'm actually just going to show the tweet of Ryan here. And also, I will say, you know, people were— I remember there was a— I tried to go back and find it in the Bell Curve. It was actually in the Bell Curve Telegram chat where we were debating whether or not the spike in REV, there was an analogy to Ethereum's fees that it was generating in 2021, 2022.

And To me, it looked a lot like that, right?

Like some sort of local maximum.

And the argument against it at the time was that the fee per transaction was much lower than Ethereum at the time. But I mean, I think—

well, the aggregate fee might be lower, but the composition of that fee is very unsustainable because it's very crazy. So that's a point like the Ryan— what is it? Ikigai— Travis Kling says, which is the Solana casino is a casino, but it serves you meth and drips meth in your drinks. Like, you're going to die. Which was like a very crude, like, which is like the point around toxic, and maybe I think is a correct one, which is you, like, if you pull up that chart that I sent you on DMs, like, yeah, I got you. That to me is something that I think about a lot, which is, yeah, like, still everything's down. Solana still has, in this cycle, Solana has just captured the attention. It's the most retail-friendly chain. It's not to say that it can't be displaced. I do think that there's a version of this world where, like, it's unsustainable to extract that amount of value per user. Um, and so you think about the organic sustainability of the fee stream, uh, of that REV. Um, and I think you— I do wonder, like, where that goes. Um, and, and yeah, there we go.

Yeah.

That's a meme coin chart.

Yeah, quite literally. One question. I mean, this is like calling into question a lot of strongly held dogma within the industry, but like, why are these L1s valued in the way that they are?

Like, in what case do you think everyone agrees that of how these L1s are valued?

Well, no, and this is kind of my question. It's like, uh, yeah, I, I— the other thing that we hear, you know, from LPs is like, how do you value these things? And like you know, how do you think about, you know, fundamentals and like what's going to be the network, uh, driving value, uh, value drivers going forward? And it's like, it's really simple, it's revenue and income. Like, that's what really matters. Um, totally. And that definitely resonates, but it's, it's a lot harder to justify that from like $175 billion base versus like a $1.5 billion base. And, uh, Yeah, it's just, it's been interesting to like compare and contrast things and call into question some of the valuation models, or if there are any models. But, you know, in thinking about it, you know, and people have tried to do this so many different ways. Is it issuance as a cost? Is it issuance as like a, you know, share multiplier? Like, there's an issuance question, there's a revenue question, there's a net income question. What happens if something like Ethereum becomes net inflationary for a period of time like it has over the last few months? Like, there are questions around that. And then there's the whole question of like the monetary premium. And if you use SOL as the trading asset for meme coins, but you also use ETH as a trading asset for DeFi, like, how do you put that into the valuation?

Um, I mean, like, if you look at the top 10, I think to me, even top 20, it's clear that, uh, similar to Tron, you just have had first mover advantage in these assets that have— it's an it's an attention game. Top 20, you can't— I would have predicted 2017, then 2020, then 2023, then now that the composition of the top 10 and 20 is going to change dramatically. It hasn't really. XRP, Cardano, um, a lot of these, a lot of these chains have just been really good at generating community. You know, they made a lot of money for some people. Uh, they have the— I mean, Brad is cut in its own cloth. Like, he is just a phenomenal promoter, you know, brand. I, you know, wasn't really expecting XRP to move. I mean, heck, there's a version where XRP becomes the number 2 asset, uh, because they just bought that acquisition, right? That is going to now— like, they're going to will into existence, which is what every protocol kind of candidly should be doing. Like, if you have a war chest of currency, go swap it and buy a real business and like grow into the valuation, which I'll give them credit. Look, I won't laugh at— like, they're just very smart in that way, and I mean, Chainlink and the way they went about growing and positioning themselves as leading oracle, like, you can laugh at Tron all you want, but they've been the single-handedly deploying and boots on the ground USDT. There's a reason why Tether's market cap of stablecoins has and probably will continue to stay at 75%. And so I think, like, I do think that it's like in 5, 10 years' time, we'll definitely look at cash flow and fees and more importantly, the composition of the fees. Yeah. As you have Yeah. And this is something that I think about inversion a lot, which is, okay, like Solana right now, every chain is pure speculation, so to speak. But like over time, what you want to see is as a percentage of the pie, speculation going down. Like meme coin activity, important, growing as a whole, but percentage-wise decreasing. You want to have other types of activity. Maybe it's tokenized stocks. Again, speculation, but a different type of user, different type of company. Because I mean, unit economics of the user in crypto suck. You onboard 100 million people or a million people to buy Trump, and then how many of those have stuck around?

Not many. The other thing too, that we just haven't had that long in crypto yet to debate some of the nuance of the composition of where these fees are coming from. Santi, and I don't know, you guys have probably listened to— if you listen to kind of like the way a hedge fund, a traditional hedge fund, or big money manager presents to its LPs, they're a very sophisticated way that they like to slice and dice the financials of different sectors and companies, et cetera. Right. In crypto, we're just way more immature in terms of thinking about this stuff. And I noticed this around the debates around REV, like rev on crypto Twitter, where people immediately jump to, if you're trying to maximize rev, that means you're value extractive and you shouldn't be extracting on day one. It's like, well, no. I think there is a miss— you're missing a durability component in REV. Like, I think it's very fair to look at that income stream and say, if this is coming from the meme coin casino and I don't think it's sustainable to have people pay 10% slippage to ape into Fart Coin, then yeah, you should assign a discount to that.

Right.

But it doesn't necessarily mean that you're max extracting from day one. It just means you have to optimize for something in the long term. Right. So we just haven't had that long to chew over all of this stuff, whereas finance has had centuries to—

I, I agree. I also think, uh, and this may be like a too, too simplistic view, doesn't solve everything, but look, there's no GAAP accounting in crypto. And if we had that, if we had definitions of like, no, that's revenue, this is cost, here's what token issuance looks like— if we had that and, and people could see it in real time, I bet these, these would trade off of fundamentals a lot better.

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There's another issue with this as well, which is kind of ironic for a space which is open source, which is we have a massive data and transparency problem in the space. Like teams, I'm sure you guys find this when you're doing your due diligence, but it's, it's crazy. I mean, people just— the circulating supply that teams state and what's actually on-chain often differ. It's really difficult to track. When you look at that nice pie chart of this is where the tokens go, well, teams mix and match where those tokens sit in different wallets. So you can't possibly verify any of that on-chain. There's all of this stuff that sounds so nice to say it's all on-chain and transparent, but so difficult, man. It's just—

you got to remove the paywall on your dashboards there. You actually want to fix this problem.

As a Blockworks investor, we said—

yeah, I think like, you know, like even like things like REV. Yeah, like normies don't know what that is. Like, we need to get to a price-to-earnings-based industry.

I mean, Vance can share this, but Vance found a bug in a dashboard recently.

Yeah, I found a bug in a dashboard and I was like Hey, like, this doesn't seem right. Is this right? And they were like, no, that's not right. I was like, so you're understating revenue by about $50 million a year? And they're like, yeah, I guess we are. And look, like, this is all public information. It's literally on a public ledger. So we just like bought more.

Well, it's— I can't tell how many times I've experienced this where I'm like, you're constantly monitoring certain dashboards. You're like, Okay, this definitely feels off. And then you ping the team and they're like, oh yeah, I guess you're right.

Like, we like, yeah, captured the week and he can't come back and we're going to get to it.

It's like, goddamn it, the duality of this space, right? Like, everything is on-chain, but somehow we can't like have standardized information and like the total versus circulating. It's like, guys, come, like, let's just, someone please build it. Edgar SEC now. Thank you. Please. 10Ks, 10Qs.

Can I, can I ask you guys, what would you like that to look like? Because companies wouldn't fill that out either unless they were— they had to buy, you know.

Okay, so, so Token Terminal has a good version of this where it's like lowest to highest fees, you know, net of inflation expenses. I think that's the key thing. Um, well, but what about—

do you think they categorize like apples to apples for every protocol?

And so this is the problem, there needs to be GAAP, generally accepted accounting principles, for what defines revenue, what defines these things. Like, the definitions of the accounting standards is just as important as just like putting them out. But the other thing that's really important is getting into a cadence. And I don't think you need companies to file these EDGAR equivalent documents. These are protocols, right? They should be on-chain.

They're also startups too, right? Like, they're not— that's just too much onus for even a 2-year-old.

Yeah, but like, I mean, they're $10 billion startups with like teams of 150.

Like, shit, task 2 interns to do this shit.

Yeah, like, let's keep in mind, before, before say Barnes Noble, Amazon went public with $300 million market cap. Like, they, they can, they can handle, you know, IPO-level disclosures, uh, if they really wanted to. But I, I think what the reason why say Barnes is such an important element in, in the process of companies going public now is there's literally criminal liability if you get those things wrong. And so that's the reason why it is such a higher standard and such a higher bar. And so look, it's just you standardize this, you have, you know, a methodology for accounting for things, you put them out and maybe you're required to file a report every year or every quarter of just like, hey, here's what we've got. And that's it.

I would also argue that even outside of financials, there might even be a more basic set of disclosures and requirements that needs to be had here, which is what is the relationship between the Labs entity and the Foundation, right? What agreements do you have in place with market makers? Like these are just basic, these are just basic things to make it even investable, right? Before you even know the financials, like there's—

I don't know, we won't say who, but we have literally multiple portfolio companies who haven't launched yet who are literally going to be doing this when they launch.

Yeah.

And I think there's a—

sorry, doing what? Like disclosure?

They're going to be putting out disclosures, they're going to be putting out quarterly financials, they're going to be putting out basically like all of their best practices on how they evaluate their protocol and the success and the growth metrics. They're going to be putting out disclosures around the team accounts and which ones are the team wallets.

Maker hasn't done that to that extent, but I think as a protocol, they were pretty far along the curve of being pretty buttoned up in their disclosures. I mean, certainly, I mean, it's a low bar, but the Ethereum Foundation being like probably the worst in sense of most capitalized and yet like terrible reporting and accounting and just like no accountability as far as where $100 million is being spent each year.

And you're like, here's a little like, here's a little inside baseball as well. Guess what? The liquid buyers of assets will buy your token the more information you disclose. And so if you are a protocol founder and you're like, how do I get in front of people who will buy my token? Share more information. Disclose more. And absolutely, you will have a lot more people who are interested in buying your token.

I think this is, this is true for like the protocols that are just going to launch. There is the Cardano effect, which is you never want to share any information because—

well, yeah, and then that's so right, process where if you're not hearing, there's something going on. And if there's something going on, it's probably not worth it.

I agree. Um, Let me ask you guys this. One thing that I feel like exists in crypto, and for lack of a better term, it's kind of like the token industrial supply chain where there are a lot of people, there's a lot of incentives, right, to not surface some of this stuff. And we've talked about this before. Everyone was yelling at VC coins, quote unquote, for a little bit. And I just think that was so misdirected, right, where it's really honestly not a lot of shade got put towards market makers. And also the exchanges. Not every exchange, but some have some egregious, egregious policymaking or like policies for listing tokens. And I don't know how to say it's bad. It's, it's really bad. And they've got everyone locked up under NDAs. No one can talk about it. Everyone's incentivized to not talk about it because investors need to launch tokens. If you're going to launch a token, you got to, you got to maintain good relationships until things break through.

And once they break through, what are they going to do? Lock everybody up? It's kind of like the— what's the exchange? If everybody who's launching a successful protocol says, hey, here are all the deals that I got from all the exchanges, are those exchanges really not going to list something that's doing really well if they shared what those details were? No, of course not. Like, it should be transparent. It should be open. But it does take a first mover.

I would love if DEXs benefited from this. I think they already are. There's a sort of a structural trend of DEXs to benefit here in the long tail because the listing process is so much easier. And if the big centralized guys keep taking 10% slugs out of the token supply, then that's only going to accelerate. So maybe they should just keep doing it.

An informed listener might say, wait a minute, like insert Leo DiCaprio meme, like Messari tried to do this but hasn't been able to, and it's a coordination problem. Look, obviously exchanges do require this info, like Binance listing requirements and the colonoscopy that a team has to go through is very stringent. They don't share that with folks because to Michael's point, you know, the— look, guys, like there's a standard IPO. Like, look at IPOs. If you're a lead left or right underwriter, like you're— you take like there's fees that you disclose. I think like you normalize that and, you know, I think it should be fine. But, you know, the incentives haven't been there. I do think to Michael's point, like if we get all— if all the new projects like coordinate and say, listen, we're just going to share this type of information and we're going to make it transparent and public and, you know, just be that as it may, like I think we're going to be in a better position as an industry to be taken seriously by TradFi and just new flows coming in.

We all know this. We all know this. But there's this entity called FINRA for the financial industry, which is— it's not a regulator. It's literally something that was created by all of the financial institutions. To be a self-regulatory organization. And everybody has to apply, like, comply with FINRA guidelines and standards. And you have to, like, register with them when you're managing money or you're a financial institution. Like, I'm not saying that we need to do FINRA, but there are mechanisms that you can do that are self-regulatory.

The other reason why this is in everyone's best interest to do something that looks like SRO is if you— if the industry can prove that it's regulating somewhat, right, to an extent, and you pass something somewhat favorable off to a regulator, they're more willing to listen than if you haven't done anything and then they're just going to regulate you how they want to regulate you.

Right.

It's a way to at least have a seat at the table.

Right.

And one thing I'd be curious, I think this is something we've thought about as well. It's interesting you guys are getting to new protocols might have an advantage here. One thing I'd be really sympathetic to is the setup of some of the OG protocols. It was just done at a different time, right? Maybe for ideological purposes, maybe for regulatory purposes. Yeah, like, how do you reckon some of the older protocols that are, you know, blue chip and really well-intentioned but maybe have a sort of bizarre structures because they got set up in a different time?

As soon as, as soon as the top 10 comp— 20 composition starts changing because new flows going in, the protocols are actually buttoned up. Yeah, they're going to change.

Okay.

Don't expect them to do it now. They have no incentive to do it. They will as the industry grows up. Uh, just like also, like, let's standardize a repository where if people are going to issue disclosures. So, so let's go back to— I think it was Liberty Finance. What is it, Liberty Financial and Sui or Sei, uh, announced like something, right? But it was like, it was silly, the timeline was like, like, oh, this is crime season. I'm like, is it? Like, if there was proper disclosures and proper like announcements that are made, I don't think there's anything wrong with having a partnership between two companies. It's just You know, regularize, standardize how the communication happens, how the disclosure of conflicts of interest happen, and also, you know, have 10B-5-1 plans for the team. If they're selling, make sure they're not selling around that disclosure. Like, all this stuff is like very normalized in finance. Like, you have 10B-5-1 plans for executives, normalized like selling. Coinbase went through hot water and everyone tried to poke holes and like, oh, why are the executives selling? Dude, they agreed on these 10B-5-1s.

Just to clear— yeah, just to describe what those are if people don't know.

Uh, yeah, 10B-5-1-6. So you're an executive of a company, right? And you say, I want to— Jeff Bezos has done— every, every major executive of a public company has to go through this, which says, I want to take chips off the table, I want to sell my stock, or in this case, token. You say, I'm going to sell programmatically in this cadence. And there's— you could either do it every, every Monday or, uh, a certain amount of stock, but it's a very— and over like 6-month period, 12-month period, you know, usually it's like 12 months or whatever. And so that kind of insulates you because no matter what happens, say there's an M&A acquisition, like an M&A transaction or a lot of news coming out, you're sort of like tied your hands to selling programmatically. And so that's the way that this should be done. And I think it's something that I would encourage every founder of a protocol that— look, nothing wrong taking chips off the table. Enter into— and it just can be an email to yourself says, I'm going to— or you deliver tokens to like a smart contract or a market maker and says, hey, sell these tokens programmatically. And that, I think, is the best way to address, like, you know, insider seller selling and whatnot. In the case of SUI or this announcement, it would have— imagine there's two paths forward. If the team sold any tokens, and you didn't have a 10b-5 plan or like some sort of schedule, you're in hot water because then everyone's going to say you sold these tokens when the market pumped. You could have said, listen, I agreed to selling this. You know, it's normal. Here's the, you know, program, whatever. And these are the type of things that are very common in finance that should be standardized in crypto. Like, like, honestly, if you're a protocol and you've raised a decent amount of money and you're going to have a TG and you're going to have a token, have an investor relations person on your team, not only to talk to LiquidTokens, but also just, you know, to make sure that your comms are in place, your investors are in place, like connectivity with investors. It's just such a standard thing that every fund has, every major company, public company has. And, you know, um, for better or for worse, crypto is that environment where companies go public earlier But that doesn't mean or give you any reason or excuse not to be buttoned up on comms.

I completely agree with that. Yeah, it matters so much, right? When public companies, when you have the CFO or the CEO get up there, there's a lot of training that goes in there. The narrative is how you sell it to market. Jeff Bezos is one of the all-time GOATs, right? I mean, he got everyone very comfortable with Amazon generating no profits for a long time because he was reinvesting. And that was a huge bugaboo that Wall Street had with him forever. He's just a really good comms. I think Reed Hastings, right, of Netflix, was also quite good at this.

Jeff, go listen, go read. I mean, obviously go read Jeff Bezos' investor letters. They are, other than the Berkshire letters, it's like my favorite.

Absolutely. All right, fellas, I think we can call it here. This was a really fun one. Santi, thank you.

We got extraterrestrials.

Oh, sorry, Michael, end us with aliens, dude, please. Yeah, end us with the aliens. Yeah.

This is my, uh, this is my totally out of left field, uh, uh, interest, but it was pretty interesting. Uh, yes, we found a planet 124 light years away, uh, that we've discovered in 2015, have been basically sending signals out to assess what is on this planet or in this planet. Uh, there have been previous signals that have come back that signify the presence of water, um, uh, presence of nitrogen and carbon dioxide. And what is most interesting is there are two different molecules or compounds that were identified in this. I believe it was officially identified last week that can only come from organic material, biological organic material. And if both of these compounds are truly identified, that suggests that there is biological organic material 124 light-years away from us on a planet that is 8 times the size of Earth with a livable distance, as they said, from the star in that solar system.

Granted, K2-18b.

Yeah, exactly.

Someone's going to launch a meme coin with that.

There we go. Literally, and I'm gonna punt that to the moon.

Oh my God.

But yeah, they, they're gonna release the data next week and other scientists are gonna, uh, confirm or deny it. But it is a 3 in 1,000 chance that the findings that they have so far are a fluke, which is apparently a 3 sigma, um, um, validation. And they need for it to be a scientific community validation, they need 5 sigma. So we're gonna get it tested.

Some of these quotes are pretty cool. I'm sharing an article here from the BBC.

It's the DMS and the DMDS are the two molecules that I was referencing.

Yeah, some of these quotes here are really interesting from this BBC article. If this association with life is real, then this planet will be teeming with life. There is the amount of gas that we estimate in the atmosphere here is thousands of times higher than what we have on Earth. And this, this last line here from this Professor Madhusudan, if we confirm that there's life on K12-18b, it should basically confirm that life is very common in the galaxy.

So, so it's 124 light years away. What is it, 800 trillion miles from here?

Yep. Still a good ways.

Are we going to see my distant cousins anytime soon or what's going on?

Coincidentally, coincidentally, last week I started rereading before I found out about this, uh, Project Hail Mary.

Because I read that, that's so good.

Uh, there's a new movie coming out that's, uh, coming out I think in the fall. Um, and it's Andy Weir who wrote The Martian. Um, a really, really good book. It's more like they're trying to solve a problem, less they're trying to go explore, but it does talk about being, uh, a human at the far reaches of light years away from Earth. Uh, that's pretty interesting.

If anybody wants to get—

but you think they have tariffs in KB18, uh, 2B or something?

If they don't, they're going to soon, baby.

We're going to tariff— we'll issue tariffs to K218.

Tariff these MFs.

It's not rare earth minerals anymore, it's now rare extraterrestrial gases that we're tariffing.

Incoming tweet from Tremoth: I have secured 25%.

Exactly. Gases than we have here.

Do you guys track like asteroid, uh, mining and all that?

I don't know. Should I be?

Okay, we should— I mean, if I have graciously invited to some other pod in this, um, you should look into it. It's like the amount of gold and rare earth minerals and on some of these asteroids that could be potentially be mined is like astronomical. The problem is like how do you bring it back to Earth?

But yeah.

Santi, how much, how much Bitcoin are they finding on those asteroids? None.

None.

That is, that is very true, sir.

Very true. All right, guys, I think we can wrap it here. Santi, appreciate you joining, man. Michael, thank you for the aliens.

Yeah.

All right, everyone.