DeFi’s Latest $290M Hack, Kalshi vs Polymarket & Will the Clarity Act Pass?

there's this amazing world where all capital markets can move on-chain, right, where every asset in the world can have a liquid market, transparent price, 24/7 order book, where a retail investor in Kansas, you know, has the same access to deals, data, and disclosures that, you know, a hedge fund in Greenwich has. And that won't happen if we don't fix some of this stuff. So I actually do believe it's the theme— the theme of this year is, do we get more pragmatic or do we not?

This episode is brought to you by Fidelity Crypto. You'll hear more about them later in today's episode. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice, or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed.

Welcome back to Empire.

Happy Friday.

Friday, happy Saturday, wherever you're listening. We have the whole crew. Gang is back. Santi, what's up?

Rob, what's up?

Good to be back.

Are you excited that Bitcoin's almost $80,000, right? Feels like a bull market again.

No, I will admit I didn't even know that. What's the price at?

Hey, it goes to $80,000 and now it's like $150,000 is back on the menu, boys.

We're ripping, we'd love to see it, man. I check, I check prices less than I have ever checked them in my life right now. That's probably a Symptom of a bear market. Rob, how's the—

you're building, you're building, you got the Blockworks, you know, rebrand, you know, you're, you're, you're building for the future.

So we're all long-term investors and checking prices every 15 minutes.

Rob, what do you think of our rebrand? Tell me, you're from— I know you're a great designer, so I—

so there is nothing at Dragonfly from a design perspective, from a branding perspective that they allow me any opinion on. Like, I am the last person that is allowed to have an opinion on design. Uh, Tom does literally all of it for us because he, like, he loves this stuff and he was a PM in a former life.

I've got a nice design touch.

Yeah, but it looks, it looks slick. I'm, I'm into it. So you guys did a good job.

That's where we're going. Dark mode.

I'm all for the dark mode, man.

Dark mode, baby. All right. Here's what I, we got a packed agenda here. I want to talk about, um, Rob, your favorite topic, which is Polymarket. We've got a little Kalshi Polymarket drama from this week. Both of them are launching perps. There's a little, you know, probably some oppo research that was done by Kalshi on Polymarket. Little, you know, Shane's not wearing shoes to meetings anymore. It seems like, you know, a little Adam Neumann going on. So we got Kalshi Polymarket. We got, we got KelpDAO, AAVE, LayerZero, Arbitrum freeze, all that kind of drama. We should definitely talk about that. We should maybe talk about just these North Korean hacks in general. We could, if you guys want to, we could get into USD AI and Chip and that launch that just happened. And then we should probably update folks on Clarity and what's happening there. If it was up to me, we'd spend the majority of the podcast talking about our rebrand, which is beautiful, and people should go to our website, but we won't. So let's talk about KelpDAO. Yeah.

Let's do it.

Good. Okay. I'm going to give a super, super layman's version of this. Basically, the biggest DeFi exploit of 2026 just happened. There was around $290 million of this thing called rSETH. It was back about a week ago, April 18th. And unlike some of the other hacks that have happened, this was not an isolated incident. So there are all these secondary, second-order impacts that happened. So an attacker— my understanding of this is an attacker via a Tornado Cash-funded wallet basically exploited— and I'm sorry in advance, I'm probably going to get one or two things wrong here, but from my understanding, they exploited KelpDAO's LayerZero-powered cross-chain rseth bridge and there was a compromised RPC node which fed false data to a single verifier, this one-of-one DVM setup. And they—

for—

there was a— this is where I start to lose a little bit of understanding, but there was a forged message which unlocked or minted unbacked rSETH on Ethereum mainnet. And the attacker then deposited like a couple hundred K of rSETH. Maybe it was like 100,000 rSETH as collateral on Aave. And this is where Aave gets into it. So now we've got KelpDAO, LayerZero, and AAVE. They deposited the collateral on AAVE, they borrowed $200 million of real ETH across chains, and then laundered that via the mixers, right? So they got the— TL;DR is they got the rseth, which was this KelpDAO staked ETH, they put it onto AAVE, and then they were able to borrow real Ethereum, and then they get that out and they sell the real Ethereum. Then where Arbitrum comes into this is I think there was a second attempt at like $95 million maybe, or they— I'm not actually sure which bucket of money this was, but the arbitrage was linked to the original bucket.

It was the original.

Okay. So there was a second attempt of $95 million, same hacker, it seems like, but that got stopped then. Okay. So we've covered Aave, KelpDAO, Aave, KelpDAO, LayerZero. Then there's Arbitrum. So the Arbitrum Security Council met. They did this emergency freeze. Of around $70 million, about 30,000 ETH on-chain. And the funds moved to— they moved the funds to this intermediary wallet. And I think I'm not actually sure what's happened after that. But yeah, very mixed reactions, right? You had like Tay on one side going against Gabriel Shapiro. And, you know, people are saying, is it really decentralized if you can do this? And, you know, a lot of other people saying you're an idiot. Of course, this has to get frozen. You know, it's very bad for DeFi. So anyways, that's my version of what happened here. I'd love to get your guys's— yeah, just your guys's thoughts. It's interesting timing coming after we've been talking about on this podcast so much that you are not getting paid enough for DeFi yields. And then, you know, this happens. So sadly, very timely. But yeah, Rob, Santi, would love to get your guys's takes on the situation.

Number one, I just want to say, you said you were going to do a bad job. You did a good job. Like, that was— that was good.

So I, I, uh, that was, it's been in my face every tweet for like 6 days.

So it's, uh, you know, tough to miss it.

Listen, I, it feels like, I mean, we're a little late talking about this obviously, cause it's been, um, it's been a week. And so it feels like a lot has been said already. And so I don't want to belabor the point. Uh, I think one of the interesting things that is true here is this is probably the first DeFi hack of size. That has like multiple affected parties who are all trying to figure out how to move forward. And not just multiple affected parties, but multiple affected parties who are like big brand name, like large protocols and businesses. And so the resolution here has become, I think, a lot more complicated than it would have come— it would have been. And like most other things, like when Wormhole got hacked, like it was pretty clear, like, you know, how to, how to solve that. Or when Drift got hacked, it was pretty clear, like how to solve that. Right? And what you've seen here is, you know, the same thing we talked about 2 weeks ago or 3 weeks ago, which is, again, this is a— this is not a smart contract hack. This is a, a hack of a— probably a person inside LayerZero was, uh, ended up being hacked or phished or in some way compromised that then allowed them to compromise these LayerZero run RPC nodes, uh, inside the, inside their security setup. Right. And the, you know, and following that, a lot of decisions of which in retrospect look very, uh, poorly thought out resulted in what happened. Right. So the 1:1 DVN setup, right. And there's, you know, the finger pointing on both the LayerZero and the Kelp side around like, you know, who. Decided that and like why it was set up that way. The, you know, uh, on Aave, the collateral setup so that, you know, you could be 93% uh LTV on rSEETH and even, you know, allowing rSEETH to be collateral, what that means. And so there's a lot of like conversation around, you know, I guess ultimately who bears the brunt of like the full loss. But we do know what happened, which is that probably somebody at inside LayerZero's security setup got hacked, and then, you know, there's all of this resulting decisions made outside of that resulted in what happened here. So now I, I think at the end of the day, what's interesting is like they all very clearly lawyered up right away. They all are, you know, sort of pointing fingers at each other. I know there's a lot of work happening behind the scenes too to find a resolution, and But it is, um, it is complicated because the incentives here are like very misaligned. The AAVE token has been getting absolutely crushed. The LayerZero token has been getting absolutely crushed. And, and you can probably make the argument that AAVE is sort of an innocent bystander here, right? Where they, uh, they clearly, you know, you can, you can argue around whether or not they should have allowed rETH as collateral and what the right LTV should have been, how they should have managed that risk. But at the end of the day, like, they had nothing to do with the hack. They were just a mechanism of how to, uh, this, this attacker tried to exit. And now they might be the ones who have the hairiest situation because of the fact that they have got all of these pools have continued to be frozen and people haven't been able to, um, been able to, uh, kind of withdraw their, their, their loans or their deposits. And they're the ones with all the bad debt now, right? and the bad debt is going to ultimately be borne by, you know, some people in and around, like either lenders or Aave itself or people around the ecosystem. But they're the ones ultimately who, who end up having to be the drivers of that conversation. So it's a very complicated situation. It tells you a lot about, you know, kind of the interconnectedness of DeFi more broadly and what the risk is from just a, even if you aren't the ones being hacked, but just kind of the risk of these kind of autonomous systems. And so I, it, I'm not quite sure yet what the resolution will be or when we'll get it. Um, but people are working on it and it's, it's honestly, it's a, it's a very sad situation.

So I think markets always speak truth. Um, Aave's TVL is down a third in by 33% in 4 days. It's down 60% from its peak. So it's sitting at like $14, just shy of $15 billion. At the peak, it was $43 billion. Of course, AAVE was not as affected here, but that just tells you, you know, to Rob's last point, composability is, you know, a tricky thing. And I think the market— we should talk about what the implications are for vaults, for DeFi writ large. The second point, just so that's AAVE. AAVE's lost a third of its TVL in, in, in a matter of days and down 60% since a peak. In April, um, sorry, or last year. DeFi as a whole peaked, I think, at $99 billion. Uh, it's now at $85 billion. It's been— it's at its lowest level, um, you know, over the last like 12 months. Uh, and, and again, roughly 50% below its October 2025 peak. So that's something we should just keep in the back of our minds. To put things into context, uh, Tae is obviously a very vocal security expert. Um, I know Hasib has tweeted about this as well, your counterpart Rob. Uh, it is very adversarial. Like, I was trying to piece together how much does Lazarus pull in as a percentage of North Korea's GDP, and it's staggering. It's a professional full-time unit. Uh, you know, for over the last— I mean, this month alone, Lazarus has pulled in roughly $600 million. Um, that is—

well, we'll see what they can get off-chain.

But yeah, see, let's see what they can get off-chain. But every year they're pulling anywhere from $600 million to $1 billion in hacks. That's anywhere between 3 to 4% of North Korea's GDP. That is massive. You are working up against a very— like, for all intents and purposes, Lazarus is the most important unit of North Korea as a country.

That's wild. Yeah, I, I, Santi, I could not agree more. I actually tweeted this out. I said everyone needs an enemy, and crypto, it feels like we've been a little lost for the past year, like an industry without an, an industry without an enemy. And to contextualize that, it's like, you know, for years, like, the banks were our enemy. We're like, you know, down with the banks, let's debank the banks. And now the banks are our customers. And then the SEC and Gary Gensler became our enemy, but But now the SEC is our friend and they're supportive of us. And I think this made it abundantly clear if it wasn't clear already. And I do think Hasib has had some of the best posts on this, and I agree with nearly everything he said, which is the North Korean hackers, a.k.a. Lazarus, are now the enemy of the industry here. If we're not able to fight against them and push, you know, protect capital in the system from Lazarus, the industry will not grow. And even though there was this fighting between Tay and Gabriel Shapiro and that kind of stuff, like, I actually do find that I— my, my belief is that we'll move past some of that fighting and that having and having a common enemy tends to bond people together. And even though we're in— we will have weeks of turmoil here, but I actually think it will be net-net good for the industry to come together if we're able to come together and fight against Lazarus together.

One point there, Janno, I totally agree is, I mean, we've always known Lazarus existence and I unfortunately don't think that they're going to slow down by any stretch of the imagination, which it is at odds with the willingness of founders to experiment and create interesting protocols that fit in with DeFi's interesting properties. It's a, I worry and we should talk about it now or keep in the back of our minds, how much does the tension of permissionless, how much is that going to be constrained? What is the healthy middle ground? I don't— these are questions that I don't know the answer to, but I do think that there was— there comes a point where as an industry and interacting with regulators, like, we just have to be probably err on the side of being more practical. That doesn't mean that you can't interact with permissionless networks. It means time blocks, um, you know, uh, limits in terms of like Oracle, like slowing down a bit. I think we, when it comes to security, you should always trade. I think it's a good trade if we go a bit slower to protect the industry and put in some training wheels. Because right now I don't see a path to recovering from all-time highs in TVL. And we talk about stablecoins a lot, thankfully. Like, I think stablecoins can be frozen, and I think, um, Tether— both Tether and Circle have the ability to freeze, and they've been— I mean, everyone, everyone does. And I think that's okay. Like, let's not forget, like, DeFi and stablecoins are fitting in a huge unmet demand in most of the world that doesn't have access to very basic financial products. We cannot, we cannot open up the— in many ways, I'm glad that we don't have over $100 billion of TVL. It's a huge honeypot. Yeah.

Listen, I, I totally agree with you. I, you know, Gabe's obviously done a lot for, for, uh, the industry over time, but I mean, this idea that we're going to have a fully, completely permissionless ecosystem and all of these different protocols that are essentially just operate as businesses and that they're not going to be reactive to crime. Or to regulators is just, you know, it's sort of this panacea of— a lot of people are very ideological about this space, but it's just not going to— it's just not the reality, and it's just not going to be the reality if we want to get regulated, if we want this space to get as big as we think it will be, if we want it to be, you know, the future of finance as people talk about. And so you, you certainly have, you know, Ethereum will always exist as a completely permissionless L1, right? And, you know, Bitcoin will exist as, as it is today, but there, there is a duty to stop crime if you can. And basically every protocol that has been successful outside of Ethereum and Bitcoin has the ability to do these things, uh, because they operate like businesses. And they are going to— and they're going to— like, that is going— there's going to be pressure from the regulators from law enforcement. And at the end of the day, you know, there's— I care a lot more about, you know, building the new rails of a new future that is better for retail, that is better for customers, that allows access globally for new types of assets, right? Then I care about, you know, whether or not it's, you know, fully permissionless, that a 12-person security council can stop North Korea from taking our money. Right? It's a, it's a, uh, it's a discussion that in my mind does not matter, but I know I'm gonna get like tweeted at for that because some people, you know, obviously care a lot.

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No, no, I, I agree, and this industry is at an inflection point, clearly. So Santi and I recorded this great podcast which comes out on Monday with, um, talking about quantum and Bitcoin, we ended up talking a lot about Satoshi's coins. And it's— there's clearly to me a right answer of what to do with the Satoshi coins. And it goes against, I think, what the Gabe Shapiros would want to do, which like, I— yeah, I think you should. So, you know, you can listen, you know, maybe I'll force you to listen to that podcast. But like, it's the same thing that I think should happen here, which is we need to put protective measures in place. And I think be a little more pragmatic with the industry. And look, like, we're— industry is at this tipping point. You take the blue pill, we're going to get— I'll tell you, we're going to get 3 things: stablecoins, some institutional adoption, and perps. And that's a nice world, but it's not the world— we didn't spend the last decade of our lives building this niche, building a nice little, like, niche technology that applies to a few small corners of the internet, right? There's, there's this amazing world where all capital markets can move on-chain. right, where every asset in the world can have a liquid market, transparent price, 24/7 order book, where a retail investor in Kansas, you know, has the same access to deals, data, and disclosures that, you know, a hedge fund in Greenwich has. And, um, that won't happen if we don't fix some of this stuff. So I actually do believe it's the theme— the theme of this year is, do we get more pragmatic or do we not? I mean, the most—

I agree with all those takes. The most important thing in anything regulatory or building. I mean, crypto is really good at coordination because you have certain guarantees and transparency, but that should not— we shouldn't let ideology get in the way of implementing these systems, especially when most of the growth is going to come from things that inherently have way more connectivity with the real world, like RWAs and stablecoins. Like, you're effectively tokenizing stuff that exists and there's an SPV, there's a legal, it touches atoms in the meatspace and that's just messier. And that's okay because you still gain like a marginal improvement. It's still marginal improvement to your point, it's more transparent, but you still require coordination. Like the benefit of, so for instance, if you have an issue against Arbitrum Security Council, you have the option to leave the system. But I could tell you 80, 90% of the people that are interacting with Arbitrum see that and say, yeah, I like that actually, because there's a greater than, like, there's a definitely non-zero chance that something else continues to happen and there's a hack. And I feel actually way better interacting with Arbitrum than another system that's not going to act in protecting my funds. And you can look at who those 12 people are. If you trust them, great. If you don't, leave. You have many, many options. That's the beauty of crypto, right?

So can we talk— actually, let's go back to this KelpDAO situation because there's a really interesting thing that can happen. They can either socialize the losses or they don't have to socialize the losses, right? So the premise is that KelpDAO's rSETH were stolen, not minted. So it's kind of up to KelpDAO to decide whether to socialize the losses across all the holders or have a subset essentially, you know, take the short end of the stick and get a little screwed here.

So Wait, just to be clear, what happened with KelpDAO was that they, they minted unbacked rSETH, right?

So now the—

what, so that they minted and then that unbacked rSETH was put into AAVE, which means collateral to borrow ETH. Yeah.

Which means that the value— there's now more rSETH, which means the value of rSETH—

there's value of ETH underneath it. Yeah.

I think it's— I think the value of rSETH is like 18% lower than ETH, right? So, correct.

Um, So, but, but I don't, but I don't think that I actually don't think that decision is going to be up to CalPDA, right? So you think it's a legal decision that is, well, well, there's, I think people are trying to make it a legal decision. I think the person who's going to end up making that decision is going to be AAVE. I think that is what's going to happen because not to get too deep into this topic specifically, but they. There are incentive differences between Aave and LayerZero and KelpDAO, right? KelpDAO is, you know, a protocol that had done a good job on BD and has, you know, gotten their, um, their tokens, or tokens put, uh, in a number of different protocols as collateral and, you know, as a, a, something that could be used within DeFi. Um, but following this I, it's not clear to me that there is, um, a future for KelpDAO, uh, following this. Whereas in— definitely, I agree with that. Yeah. Okay. Just to say that, um, in a nice way where there's very clearly Aave, who is a, the one where the people are the most mad at right now, because those are the pools that are locked and that people cannot get their capital out of, who has a large business. And, you know, still to this day, even with all the drawdowns, I still think it's bigger than Morpho. So still the largest money market or lending protocol, uh, on-chain. And at the end of the day, they have the most to lose. And so they also have the most to gain from trying to get to a resolution that makes people happy. And so I, I, I, my, my perspective here, uh, and some of what I'm hearing in the background is more of the discussion is being driven by by Aave. Obviously though, you could— it could just be a legal point, but, um, nobody's getting— I don't think there's any incentive for, um, KelpDAO to decide to like to make a decision here. Like the incentives are—

that's a good call. So if you're Aave, Aave's in this weird like kind of prisoner's dilemma, right? Where they— they're, um, it's a very— yeah, it's a very interesting situation.

But they're the ones who have the most to lose. Yeah.

Hmm. On AAVE, double-clicking there, I— whatever ends up happening, TBD. I do think it probably is KelpDAO DAO, like KelpDAO and AAVE trying to, you know, but maybe both of them socialize partially some of the losses. The supply caps and the risk management parameters at Aave definitely need to change. And I think that that's something that I don't know if they've come out formally with more guidance, but that's something that, I mean, we should definitely change going forward as much as I know.

It was interesting timing, right? Because we talked a couple of weeks ago about Chaos leaving Aave and the risk stuff there.

Yeah. I mean, if you're, if you're a bank, traditional bank, you have like committee, then you have, you know, capital rules.

What would you do? So, okay, so let's say, um, all right, sorry, go ahead, go ahead.

No, no, ask the question, I'll answer.

Well, just to make— I want to really double-click on one thing Santi just said there, which is like, we're talking about Aave. He's like, oh, well, will it be CalpDAO or Aave? Like, we're not really talking about LayerZero, but LayerZero is the one that was hacked. So it's a kind of this weird thing that has happened.

And by the way, I think the most capitalized entity here that could socialize the loss is LayerZero. Yeah.

But it's again, it's, there's this really weird incentives in this thing that has happened here. Cause they are infrastructure. They don't have retail customers. The retail customers, the ones that are AAVE customers, the ones that are affected.

If I were LayerZero, I would give a loan over to Kelp and then get them in good footing and then get it paid back with fees. Over time so that KelpDAO survives, LayerZero maintains institutional, like their ability to win over more customers even though they're launching $0, but it's still going to hurt their brand a lot if they don't do anything here. And then Aave commits to, you know, increasing caps and maybe increasing their security spend or just somehow that also needs to change as part of this broker deal.

I mean, what also needs to change is that I think it's 50% of LayerZero's apps, the D or the, the app DVNs run a one-of-one DVN, right?

I did, I did hear, I mean, they haven't said this publicly, I don't think, but I did hear privately that they're, uh, telling everybody they have to change now. So yeah.

Okay. That's good.

I wonder. Yeah. I mean, I haven't talked to Brian. I think Brian. Pellegrino, the founder of, one of the founders of LayerZero, has been quiet during this period. So maybe next time we're recording, maybe we should bring him on. Also would be interesting to—

I'm sure he's being advised to be quiet.

Like he's not being quiet by choice. Correct. Or maybe they're just trying to fix stuff under the hood before they become more public about it. We should, I mean, you tweeted about guy from Athena. I was actually talking to him over the weekend, obviously pinged like Stani and a couple other folks just to see if there's anything they needed help on. But a guy I think has been public about this stuff because they, I mean, they're also working with LayerZero, right? And I think it would be interesting to have down the road a couple builders to see what changes from their perspective, right? But all this to say, Guy had one of the best tweets.

I think Guy had, Guy had a great tweet, which he basically said, you know, I'd encourage all asset issuers to consider, to consider rate limits at the min and redemption level, as well as custom rate limit configuration on top of LayerZero OFTs. In a disaster scenario where the LZ, where the LayerZero DVM is compromised, you can at least contain the damage to $10 million per chain per hour before stepping in to shut down transfers. Yes, it's This is the key part, I think, Santi, which is really what you're getting at, which is yes, it's a slightly annoying inconvenience for users 99% of the time, but a worthwhile trade-off to avoid going to zero, which is very similar to when you send a bank wire, right? You, you know, you got to double, you got to double-click that you confirm that you're sending to the right person, which is honestly pretty annoying, but 1 out of 100 times it saves you. Yeah.

Again, 2 observations really quick. The column. Jason Yanowitz, former, or I guess co-founder of Plaid, talked about this really well in Invest Like the Best. He said a lot of times what crypto is trying to solve is not a technology problem. The reason why fintechs or banks haven't really implemented this going faster is because we know that there are certain clients that just are going to get hacked, and it's important that we're slow, right, and make it harder for people. The other observation is like, let me put this in an analogy that anyone could understand. Just sometimes you got to make it a bit absurd to understand why rate limits are needed. Imagine that like all of a sudden you can go to the bank and tell them, hey, here's like a piece of paper that is like, I claim that I have like this real fictitious real estate somewhere that they haven't heard of. And then you can borrow against that. And no one is there to kind of like maybe double-check that that piece of paper or that parcel of land that magically appeared out of nowhere is real. Of course, that would never happen because a bank will like review it, approve it. In a similar manner, I think if you're Aave, like that is what Guy's talking about. Rate limits are important because if you see an abnormal spike, immediately there should be a review process, like a timeline. It's almost, um, and, and of course there's going to be people that say that breaks a whole features of DeFi, might as well go back to the real world, which I actually would disagree with. But that's what essentially happened here with KelpDAO.

And I would just make the point that like the, for a lot of the really serious founders in the space, the ones who have, you know, really understood the that this is a trust business and security is part of that. Like, this is not— you are running a finance protocol or a finance business. A finance business, security is at the core of what you do. Trust is at the core of what you do. And so people like Guy, and there are others, I think the Agora guys tweeted about this, I know there are others who did about it as well, who from day one with nobody telling them they should do this, put this in place. They put the rate limits in place. They made sure, despite the fact that, you know, maybe the Layer 0, um, documentation said something else, they put in, you know, 3 of 3 DVN versus, or 2 of 3 DVN or 3 of 5 DVN instead, right? People who are like very thoughtful around the, uh, ability to make sure that they had extra layers of security that nobody required them to do, but that they understood were important. And Guy was, was one of those. And to your point, Zonte, like there's a whole world of DeFi right now where I think we have like very— you have technologists who think they're building software and they don't realize they are building finance. And when you're building finance, the requirements, the obligations are different. And so I think we're going into a future of where there has to be consolidation around those founders who understand that. And understand the, just the pressure and the responsibility that they are taking on, in my mind.

I think, yeah, going forward, I would like to see— this is something that I spent quite a bit of time when like when Lend transitioned to AVV1. I still remember it was nerve-wracking. There was like a billion dollars that were migrating and I was, couldn't sleep that night. I mean, Stani has balls of steel. I'm sorry, man, but like like managing that, like there's a lot of money at risk. I was thinking about that today, how that guy sleeps. I respect it, but it's like the Swift messaging protocol, which is the equivalent of LayerZero here, does not have one verifier. They— it's a, it's a, it's a, it's a group that messages and coordinates. Like if there's a bank in Switzerland that is sending money to JP Morgan in New York, like it goes through multiple approval, like checkpoints. That's the same that should have happened here. Like, practically someone at AAVE should have called Kelp, like literally called someone, says, hey guys, are you doing all right over there? Because I just saw like $292 million come in here trying to borrow immediately. That what you could have done is slow down the borrow market. You could have probably frozen it and saying, until we are absolutely certain that these $292 million effectively receipts coming in are sound collateral, we will not open the gates. To borrow against the new collateral that came in. As simple as that, right? I'm not saying like you immediately freeze it, but if you see an abnormal spike, it most likely is going to be a hack or, or Justin Sun moving money around to yield farm. But there's like, you should still lock it. Yeah. It's, it's all of this could have been avoided with that.

We can inconvenience Justin Sun, I think, to stop hacks. I think I'll be okay with that.

But that's as simple as that, right?

Yeah. Can we maybe round out this by talking about— so AAVE is down, like the token is down, you know, what is it, 14%, 15%? Uh, Morpho's up 10%. Spark is up 140%. So like, how much do you think this is a reshuffling of the crypto lenders? And is this a buying opportunity for any of those?

Um, yeah, I mean, it's certainly— again, I think that if Aave doesn't implement more safeguards, then it's an opportunity for someone else to come in. Um, I, uh, Rob or Jano, I'd actually be curious to get your takes on like isolated markets.

Well, yeah, I mean, that's where I was going to go next. I think the whole world's going isolated. So I think the— yeah, I mean, obviously they'll be part of the crypto ecosystem that will continue to do these, you know, kind of shared markets. Um, but also in the world of institutional adoption, the institutions want isolated markets, right? Every single one of them wants an isolated market. And so while there's been this period of time where the their, you know, the non-isolated or aggregated markets have, you know, grown really, really large because of the fact that, like, it made complete sense for, like, that period of DeFi. There, you know, all of the growth that— or all of the things that Aave and Morpho have been focused on recently have been winning these fintech deals, have been winning these, you know, institutional deals. And we've seen things like, you know, the Coinbase Bitcoin Morpho market through the CeFi app grow to a billion dollars very quickly. We're going to continue to see a lot of that. And basically every fintech in the world, like, if you, if you, you're talking to these people and having these conversations, all fintechs are looking at doing stuff like this. And not a single one of them is going to do anything but an isolated market. And so I think the reality was, is that was already true. And this only just only accelerates that future.

And to lend exact clarity to your question, Janno, siloed markets include Morpho, Euler. Aave v4 is this hub-and-spoke model. So I think they understand this and maybe that is the writing on the wall. Because to your point, Rob, I think if you're a traditional firm coming on-chain, You will not deposit into a pooled market with shitcoin. Well, they will see it as a shitcoin. Like everything crypto native would just be looked at and haircut a ton to a point where you have to go to isolated markets. And of course, the trade-off there, Rob, I mean, the trade-off has always been capital efficiency. But if you think about where, if we're sitting at, at least for Aave, like $14 billion, if you really want to break through the $100 billion mark, you, you go to isolated markets. And the, then the question, or the more interesting exercise, is like, which isolated markets get the most amount of liquidity? And it's like, you know, RWAs. And I mean, Figure essentially is like an isolated— well, it's an isolated market, right? But it's, um, just HELOCs, which topic for a separate day, but obviously has different quality attached to all these different mortgages, but still.

Let's shift gears. Anything else on the topic? Cool. Let's talk.

Well, maybe question, Rob, are you guys investing in DeFi these days?

We're always investing in DeFi. But what's like the biggest—

what's the latest? Athena, maybe?

But like DeFi infrastructure. We've done a bunch of DeFi since Athena. Yeah. I mean, Athena was summer of '23, so like We've done, um, a bunch of stuff. I mean, some of it public, some of it not, but like, you know, we're, we're big into Lighter, uh, which is the one that, um, people know, but we're in a bunch of stuff too that like, you know, hasn't launched yet or like, you know, is still in stealth. Um, I mean, DeFi continues to be like, we believe strongly in the future of DeFi. Now I think the world is changing and the way DeFi exists is changing, but, um, there, I've never lost faith in the fact that like there will be finance on-chain and DeFi will be a large part of that. Because I, I haven't as much, but yeah, well, you know, I, uh, you know, I'm more of a true believer than you, maybe.

What a weird—

what a weird— I, I believe a lot in DeFi, but what a weird—

all right, I'm moving us forward. Um, okay. I'm glad you got that. Those last comments in.

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Um, okay, Polymarket, Kalshi. Um, seemed like, uh, the Kalshi team was doing, doing their oppo research and decided to dump it all in one fell swoop this week. kind of taking some shots at, at Polymarket. Um, so anyway, the context here, there's a Polymarket— okay, so Polymarket and Kalshi both announced that they're doing perps. Um, I forget who beat one perp. One of them beat the other person to the punch by like a day or something like that. I, you know, I'm sure Rob will correct me. Rob, would you like to correct me?

Uh, what, one of them did beat the other. Yes. To, to the announcement. I mean, the, um, the announcement, it doesn't matter. I mean, they, they, they keep doing this thing where they announce things and they front run things with each other. So they both do it. Yeah, yeah.

So anyways, there's a Bloomberg article that said Polymarket loses prediction market lead after delays blow back. And there was this article and it said gaffes, delays in product rollouts, and Shane Copeland's unconventional management style are contributing to the strains on various fronts, said people. And then there was another article, or maybe it was the same article. Let's see. Yeah, it was the— I think it was the same article. It said while Copeland's quirks are in many respects standard fare for charismatic tech CEOs, Some business associates who declined to be named discussing private meetings expressed frustration with Copeland's focus and timing. He's regularly late to private meetings, has attended at least one of them barefoot— his best line— and is easily distracted texting and taking phone calls in the middle of the conversation. Very much like what Santi does on our podcast. Um, so yeah, I'd, uh, maybe a little context. And, you know, as someone who at one point owned a news business is that anytime you see stuff like this, it is typically from the main competitor feeding reporters. So and I'm not saying Kalshi is the only one who does this. I'm sure Polymarket also does this with Kalshi. But I would just take all of this stuff with a big— I also saw another article that said something along the lines of I think Kalshi suspended the accounts of 3 politicians from trading on their platform. It's very good week. There's, there's clearly a strategy internally to do a big PR push in one, in one week. So, um, anyways, I just love— yeah, I'd love to get your guys's thoughts.

Yeah, I think all kind of petty.

Why? Uh, I mean, this is just, this is just business though. Like, I mean, you remember the Uber, Lyft, like, days, right? Like, people, the same stuff was happening. Um, I, I will say I do think there's I would separate the perps from the, uh, from the stuff that's happening on the news side because I think the perps is interesting and it's worth talking about, um, as like a business decision for both of them, uh, and they're both doing it differently, right? So Kalshi obviously is, is trying to launch their perps in the US exchange in a regulated— on their like DCO and DCM, which, you know, right now perps in the US are illegal. You, you know, Coinbase has their, you know, sort of synthetic perps, which is like a 5-year future that they— and they throttle risk overnight and like on the weekends. And that product has basically gotten zero uptake, uh, at the moment. And so there's been a conversation for a long time, you know, what will the US do from a regulatory perspective on allowing perps? Like, will there be a situation where The CFTC comes out and says, hey, listen, we want to bring perps as they exist internationally in crypto into the US. How do we want to think about appropriate leverage for retail versus institutions? Like, should that sit under like current futures frameworks? Um, because at the end of the day, perps are really good retail products, but they're not really institutional products. And the institutions mostly do prefer like a dated future. Or an option. And you can see that with the fact that IBIT options just like blow all other options, on-chain options, and also like, you know, CeFi options out of the water in terms of volume, and are doing probably almost all of the institutional derivatives volume in the space now at this point. And so I think that's super interesting. And I know the, um, Mike Selig, Chair Selig from the CFTC, has teased that there's going to be a perps guidance coming out sometime soon. And but we don't know exactly what that'll look like. And I think there's probably some back and forth with some of the current US exchanges on, you know, what they want to see. I'm guessing some of them don't want to see perps happen because they're— they think that'll lose some market share, especially on the retail side. And so I, I think that is, um, very interesting. And obviously there's a very big opportunity there, especially at the retail brokerages like Robinhood and in others. Um, and then the, the Polymarket Perps is, uh, it's like, it's an on-chain product, so it's much more competitive, I think, directly with, you know, the other on-chain Perps products that they're looking at, at least for, for the moment. Um, I'm sure they're, they'll be looking at their, you know, call it, you know, centralized exchange US business as well eventually. And so it's a little bit— they both announced it, but it's also a little bit of a different, you know, uh, business decision for both of them. Especially in the current, like, regulatory climate. So I think it's smart for both of them to do it. And like, clearly, you know, just anywhere where you have a captive audience and captive traders, trying to offer them more ways to trade is a good thing, not a bad thing. And never— I would never, um, you know, say that there's— adding a new product is bad. But there is a question around, like, whether or not purpose traders and prediction market traders are the same group of people. I think there's some analysis done by some Hyperliquid folks that said maybe it's like 12-15% of overlap between the two, which isn't that much, but it's enough to make it worthwhile to, to add the product.

So do you think Kalshi and Polymarket have any chance of having perps take off on the platform?

Uh, yeah, I think so. Um, I think they'll— I mean, they're, they're, they'll work. There was a good post by Ryan Watkins that was talking about just the conversation around like, will these folks eat Hyperliquids lunch? I think there's probably Polymarket is more well positioned here. I'm biased, of course. But yeah, I think they'll take off.

I, yeah.

Maybe we should reference that Ryan Watkins post, or we should have him on the pod. But there was a pretty good back and forth on that thread. He obviously is more in the camp of like Hyperliquid will win. That doesn't mean that like other folks can't like build their own successful, you know, perps. But yeah, I think it's— I mean, we know users like this type of product, right? Yeah. Let me ask, the question is Well, go ahead. Oh, good, Santi. I was gonna ask, uh, he made a comment in there that I haven't really explained myself. Like, um, why has— and I'm not sure this is actually true, but he said like, look, Coinbase perps haven't been very, um, like, quote, uh, you can't just list perps as if it were any other derivative. You have to reproduce the architecture. Coinbase has already demonstrated this empirically with their lackluster CFTC-regulated quote-unquote perps products, despite plenty of talent and dollars thrown at it. As currently designed, they're long-dated futures with 5-year expiries, 3 to 10x leverage depending on the contract and funding, that only settles twice daily. Compare that to unregulated offshore venues like Binance and hyper-liquid. Um, and he's making the comparison like that product has been very underwhelming. I don't know if that is directly translated or applicable to Polymarket or Kalshi. Maybe it's a Coinbase skill issue, uh, but I'm not equipped enough to have a perspective here, candidly.

Well, no, he's right. And then this is what I mentioned at the beginning of what I was saying, which is that Coinbase launched this long-dated futures product and called it a perp, and it hasn't done well. Um, and that is obviously directly relatable to what Kalshi is doing because Kalshi is going to also be CFTC regulated, and the product that they're launching, it's going to be through their US DCO and DCM. The difference is going to be or the, the, uh, I guess the variable is going to be what does the CFTC do with the future of perps in the US? Because we know that Chair Selig and his team are thinking about this fulsomely. We know that they're trying to figure out a way to bring actual perps onshore in regulated markets. We know that the IBIT options market has been done incredibly well. And so I do think this idea around, like, I think there's like a couple things. This idea around like Kalshi and Hyperliquid being directly competitive is probably wrong. They're probably just completely different markets and completely different user bases because Kalshi is going after, like, trying to distribute perps to, you know, Robinhood users, right? And like, my guess, and I've always thought this, is that Robinhood— Robinhood does so much volume on the options side. They do like 70% of it's like zero-day options. Like, these are retail traders looking for leverage. These are retail traders looking to just, you know, get long, not because they have, you know, a general, you know, well-thought-out fundamental expression of something, but because they just want to, you know, do something that allows them to do even cleaner, right? And so I think for that user base, like, depending on what the CFTC allows, like, I expect that to do well. and I don't think that's Hyperliquid's user base, right? And then the Polymarket and Hyperliquid products are probably more directly comparable because they are both DeFi protocols and they are both products that are going to be going after, um, you know, a large international user base. And also they're much more direct-to-consumer products. Kalshi is not much of a direct-to-consumer product, right? And so in that case, I think we'll— it'll be interesting to see how this happens. I think the reality will be is that there are a lot of traders who are perps traders who will be— who are hyper liquid first, who will sometimes look at a HIP4 market and say, oh, well, I can get— I can cross margin potentially eventually. Right now there's a lot of talk about like HIP4 markets, which are the hyper liquid, you know, binary option markets, being like, oh, cross margined with the perp side. But there's actually Nothing in the documentation about that, and I think that'll be quite hard to do, so I don't actually expect that to happen anytime soon. But I'm sure we'll get some hyper liquid traders who will trade those markets, especially probably mostly, if not entirely, on these like crypto up-down markets, uh, specifically not the other stuff that people talk about with prediction markets. And then on the Polymarket side, they have all of these, all of these traders who want to come and trade all of their prediction markets. Who will occasionally trade the perp side. But I think this is not zero-sum, despite the fact that Twitter wants you to think it is zero-sum, and everyone's like, oh, these people will eat each other's lunch. Prediction markets are going to get 10x bigger from here, and, uh, perps are going to continue to get way bigger as well. I don't know if 10x, but so I think both of them grow and they serve different users.

Hmm. What do you guys think of, um, from the investor seat, what do you think of the I know it's a little petty, and Santi, I, you know, I think, I think you're right. And Rob, I do think you are right that this is just business. Like, if you, if you guys remember, like, Uber, Lyft— I don't know if you guys remember Operation Slog, where Uber was having all these brand ambassadors, they were giving them burner phones and signing up for Lyft, and then they would cancel the Lyft ride at the last minute to take Lyft drivers off the market, essentially. And they were trying to— they were giving them literal cash to just convince the Lyft drivers to come over. So I do think this stuff happens a lot, but maybe from the investor seat, because Santi, I think you guys seed— did you guys seed Polymarket or you invested in the A or something like that? And then Rob, you guys have a big check. So when you, when you see things like, you know, Shane is like these things against Shane, like from the investor seat, do you guys care about this at all?

So yeah, I did the seed when I was a Parafi. I think Parafi is among, if not second or third largest holder of Polymarket. And I know the team since I left have been doubling down and participating. Shane is that kind of guy. I don't think he's paying much attention. I, it was, it was, I'm skeptical when a founder pays too much attention to competition and is focusing too much of their time on that. Publicly or privately, it's like, dude, just own your product and you will crush, right? I don't think, again, I don't think it's zero sum. So again, I think it's a bad look to throw dirt. It is a bit of unfair because look, I mean, Kalshi, you could argue, has thrown a lot of dirt to Polymarket's way. Probably more than Polymarket. Seems I'm biased, Rob, you're not, but they have a whole apparatus around it. Yeah. Yeah. So to me, it's always a weak— it's Lyft. I don't know, Yano, you probably know this more, but who was more focused on the other? If you're truly winning, like you're in your lane, you're unbothered, moisturized, like you're just crushing, right? Like you don't necessarily— it obviously, it obviously like hurts when someone's like trying to go after you in a very like malicious, ill-intended way. Like, yeah, like you should respond to that for aggression, but I don't know, man. Like both of them have built nice businesses. Like stay in your lane, like win on fair grounds. Don't do like, be a good sportsman is all I'm trying to say.

Yeah, I think, I think what's really bothered me, and so Tiana, to clarify my point earlier, is like, I think generally like Oppo Research is like fine, right? Like it's business, right? And like generally Like they're, you know, continuing to highlight like why you think you are better than your competitors is like totally fine. I think where I've really struggled has been what seems like, uh, not what seems like, what is factually a lack of, um, or, or an extreme willingness to lie. And it's not just like, oh, like, hey, we, we talk about like how we're different. But there's been an extreme willingness to go and fabricate stories and to lie about the things that are happening between the two different parties, uh, from the Kelsey side. And there's an ethical standard in my mind that, uh, continues to be breached that is not okay. And so I've been very vocal about this on Twitter and X and other things because absolutely go and tell people like why you are. Think you are, you know, better than your competitor. Like, that's great, but don't send out your head of comms to go and lie about something that happened, uh, between the different platforms that, you know, is very clearly, easily verifiably different. Um, and like, there was a— this article yesterday about some of the volume between the two parties that was factually untrue, and this Barron's reporter didn't even check it. Like, he clearly got it from Kelsey and didn't even check the work because it was— it was obviously factually untrue. And We saw this yesterday too in the Bloomberg article, and I, I chatted with a few people about it where there was like, there was a, um, like a paragraph in it where it was, it said, oh, you know, Polymarket has basically zero volume. It was like de minimis volume in their US app, um, you know, and haven't been able to, you know, really grow that at a time when, you know, smaller competitors have been able to. And if you go look at the data they've done a billion dollars, over a billion dollars in the last, uh, 30 days on the US app, far more than any of the, any other competitor, right? And so like, there's like little things like that where it was clear that somebody like picked up a thing that was basically written for them and like didn't do the work to then go put it into, um, the, you know, a story. And so, so I didn't, I didn't care so much about the story itself. I cared about just what seemed like a lack of— like nobody did their job at Bloomberg.

I will say there's a— reporters are like feening to get content here and throw dirt. Like this is every other week. Like Rob, I'm sure you guys get hit up all the time and it is probably more of an— like unethical stuff is bad, obviously. Like don't do it. Like if you're going to criticize someone, like have backup your stuff. The problem is media doesn't care to check. But, you know, I don't need to tell you this, man. This is why block works exist. Um, but this goes back to like famous Napoleon line, which is, uh, you know, never interrupt your enemy when he's making a mistake. I think Kalsi, time and time again, just— it, it's a bad look, right? Because all these things are easily verifiable, and if they're not true, then like it's just a bad look.

Yeah, yeah. Go ahead, go.

Well, just to give you one more point on this, I got hit by a reporter yesterday afternoon on another story that was like, you know, negative Polymarket story. And it was like, oh, hey, like I heard from, you know, a couple people that like, this is true. And I, it was so obviously untrue that like, I, like, I knew it was like, it was like, it was factually untrue and like the most obvious ways. And I asked the guy, I was like, did you. Am I the first person you're talking to who is like not aligned with, with Koushi? And he was like, yeah. Um, and I was like, oh, and you're telling me you're going to publish this tomorrow? Like, I, like, I didn't understand because it was, it was if he had asked like 3 people who were not like, and so there's some of this happening right now because it is a story and it is a rivalry that has so much interest in the public. You're getting people who are just willing to like pick up things that they're people are sending their way and, and, and, um, and put them into print. And I will say, and I, I was talking to some of the PolyMarket, uh, leadership about this yesterday, you know, they, they didn't staff up and they haven't really staffed up the comms department. Um, in fact, they don't, they don't have a head of internal head of comms still. They've, they've been trying to hire for one right now. Um, and they haven't— or Kalshi— PolyMarket does not have an internal head of comms yet. Because they, um, they put an offer out, uh, for somebody, but they, they've been using like outsourced, uh, you know, outsourced agencies for this stuff. But this was never— I don't— this was never what they expected to be spending their time thinking about it. And it's not what Shane thinks about. Like, it is not what, what he cares about. And on the Koushi side, this was a part of the strategy from the beginning. Like, they've been doing stuff like this for for, for a while. And so I think, um, one of the things I said to some, to some of the Polymarket folks yesterday is like, we probably just need to take this more seriously. So because of the fact that like it is, I can now tell there's a constant barrage of like oppo research coming, uh, and, and negative stories coming that are very clearly not, you know, they're coming from the other side.

Just to, you know, we should have someone like Matt or, you know, Paradigm guys or, you know, someone, someone who's in the Kalshi camp coming on here because I, you know, I know you guys are biased on this, but I will say there's a— there's a corporate rivalries often spill into the public eye through marketing and comms. And I think there's a right way to do it and a wrong way to do it. Right? Like, I don't know if you guys have— there's— I don't know how into the Acquired podcast you are, but these, these stories oftentimes come up on Acquired. Like, I was just listening to the Coca-Cola one. And right, one of the most famous rivalries, obviously Pepsi Coke. And there's the Pepsi Challenge. And like, I think it was 1975. Pepsi started airing these commercials showing blind taste tests where consumers preferred Pepsi, and that actually pressured Coke to launch New Coke, which was one of the most disastrous launches in the history of consumer goods. And it was only because of the Pepsi Challenge that they felt pressured to do this. And so there's a, there's a way to do it that can be very savvy and strategic, but you need to do it in a way that is like leads with integrity, I would say. And so I don't know if Kalshi is doing the wrong things. I would hope that they— I know some folks over there and they seem like great people, but I'd love to hear from them about their comms and marketing strategy. So maybe, maybe moving past them.

Yeah, good. Over time, just stuff comes out. So, you know, you just can rarely get away with it.

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Yeah, I'll say. Quick update on one of the listeners wanted to know about Clarity. I think Galaxy came out, Alex Thorn, and said 50/50. I'm not sure what Polymarket is showing, but it was sub, sub 50% chance that it passes last time I looked. I would say that we are above a 50% chance of passing. And Rob, I know you're pretty deep. Nope. You're shaking your head. You're not. We are now below 50%. I'm, I'm going with the over. I'm going with over 50% chance that this passes.

I mean, I think I've said that on the pod before, but I always thought we were like a third, so 33% chance. Um, and like when I talk to people in DC, uh, lobbyists, like people who are actually there every day or spending a lot of time on this, who are not what I would call like people who are paid to be hopeful about crypto, Uh, it's the number that I have been getting all the time. I think also Rebecca Reddick said this when Sandhya and I did a podcast with her, and maybe that was February, but all of those people have seemed to be very aligned that it's like maybe a 33% chance, right? And I, the story that I hear continues to be like, that's where we are today. And time is probably the more that this goes on, the longer this goes on. The lower chance it is. And I think there, there was an article that came out, maybe in CoinDesk, that was like, oh well, there's still time if we get this through July. I'll tell you, when I was in DC last month, every single person said to me that if this is not done before Memorial Day, it is dead. And so, you know, again, this is like a— it's an option, right? There's theta decay happening right now. And so the You know, 43% chance. I think this actually hit, um, on Polymarket, a 37% chance at one point yesterday, and then kind of popped back up and is now down to 43% chance. I, I expect this to probably settle somewhere like in the 30s for the next month, and we'll see what happens.

Oh, you expected to what, Rob?

To settle like in the, like, you know, call it like high 30s.

Yeah, it peaked at 65%, uh, a little over a month ago. Um, yeah, I, I can tell you I'm getting the same read from people that it is— every day that goes by is more unlikely that it gets passed.

Listen, I wanted to get past— like, I'm not, I'm not, um, I'm obviously not paid to be bearish here. Uh, but you know, I try to be a realist and like, it— I, I just, I get less confident every day. Uh, and so now it's down to 42% chance, probably because, you know, came down while we were recording. People probably heard us. It was Will on the other side trading it.

Uh, but like, I think, um, I think Will's like, I see an arb, I see an arb. Yeah.

We, we have a history of degen producers on the show.

Um, so Joseph's out here just retired in Alabama or Arkansas or something, just buying multifamily properties. No doubt. So, okay, well, Clarity, we will keep you guys posted as we hear more, and people should join the Empire Telegram chat. We will, uh, you know, drop some stuff if we hear more. Last but not least is, um, I don't know if you guys followed, but this USD, USD AI launched and I knew very little about it, only knew really about it because I remember the Framework guys who, you know, Michael and Vance, who, you know, we're good friends with at Blockworks, they— I think they invested in them after they had pivoted from being like an NFT protocol. And I was like, all right, let's, let's see how this thing does.

And we're in UCI as well.

You guys are in it. Okay, nice. So yeah, every now and again there's this a new coin that performs incredibly well after launch. Like oftentimes things are kind of down only after TGE And yeah, so USD AI launched the chip token and yeah, skyrocketed. I think it traded at over a billion dollar valuation and it's doing— I mean, it's kind of hit every narrative, right? The AI narrative, you know, they actually have real customers and revenue and a real business. And yeah, it seems— I mean, it's pretty cool what they're doing. So, and for people who don't know about it, it's There's— so my understanding, Rob, you're an investor, so correct me, but USD AI, there's the USD AI stablecoin and the sUSD AI yield product, and that's tied to something around AI compute and GPU lending. Yeah.

So it's collateralized loans against like compute. So, or, and against like the, the ASICs or sorry, not ASICs, but the, the GPUs themselves. Got it. Yeah, I mean, it's, it's essentially, it is, it is a proxy for compute demand, right? Like, that is what it is a proxy for. And there was clearly right now that is a very hot topic, uh, and it is very topical for people trying to get exposure to that. And, um, it is a, it is a problem. Like, we are compute constrained and people are also CapEx constrained, uh, especially if you're not, you know, one of these big foundational labs. And so, you know, all the credit to these guys. They're really good credit people. Their last protocol, you know, you said it was NFT related, which it was true, but it was credit specifically. And like, how do we do different types of credit around different types of, of NFTs? And, um, they're really smart, they're really good at, uh, at this part of the market. And they saw early that there was going to be demand around these lending for, you know, GPUs and hardware. And to wrap a, you know, kind of a token around it that gives people access to that and yield related to that. Um, makes complete sense. And is this David Choi's thing?

Yeah, yes, exactly. Yeah, I've met a couple times. Quick question, uh, who are they lending out to that does not have access to credit in the real world? Because this, of course, is a very hot investable category for most lenders in the real world. What gap in the market are they filling that is not unmet by traditional allocators?

I, I actually would, uh, push back a little bit on that. This is a, a, uh, an easy market for startups. So like there's a, there's obviously lending for against, you know, compute for relative to like one of the foundational models or a lot of the big companies you're seeing. A ton of demand there, but, um, for earlier stage AI-linked startups or compute, uh, linked startups, it's still a thing that a lot of people are trying to get their hands around. And these guys have a, um, a very attractive cost of capital. They're, they actually, they've done a very good job underwriting this part of the market. And so it's, um, I don't know if it's public who all of their customers are. Uh, but like it is sort of this, like, call it like earlier stage type companies who are adapting this market.

They process like a hundred change of loans, I think. And they have—

yeah, but they've got a— there's a lot more TVL, uh, today, but so they've got capacity. Uh, but they're, they're being thoughtful about who they roll it out to and how they underwrite.

So they have more capacity than they are extending loans. Is that a quality of the— because they have, I think, over a billion or so that I saw in pipeline, and they've extended 10% of that, um, but they have more deposits in of like idle stablecoins that is willing to lend against GPUs, H100s. Is that—

that's right, yeah. So they've, they've got, um, so they've got $61 million active loans out, they've got another $59 million of like basically has been Signed and they just haven't accepted loans. Yeah. Um, but, and they've got a pipeline of over 300 they're talking about right now. Um, and they've got about $350 million of capacity at the moment. Capacity.

Yeah. Um, I know we got to jump content of the week.

Project Hail Mary. That was, uh, did you guys see that movie?

You said that last time.

Did I say that last time? I think so.

Or maybe I said I wanted to watch it.

Oh, you said I want to watch it.

Oh no, you told me when we played Battle. That's what it was.

I told you? Yeah, like you're taking our offline conversations to our— I was like, I don't think I did. Uh, that was a great movie.

So Mike said it was awesome too. Yeah, I said they nailed it.

Santi, what's yours?

No, you go first. Um, I will give folks a non-finance, non-crypto podcast, which is a really good episode of Invest Like the Best with this guy Alex Karnal, um, talking about GLP-1s and, uh, yeah, just everything that's going on in health from the investor's lens. It's on Invest— it's the newest episode of Invest Like the Best. Uh, he runs a fund called Braidwell, um, life sciences investment firm. But guys have been investing in biotech for 25 years. Really, really interesting podcast.

You're on the peptide strain? Not yet, sir.

Not yet. But I mean, half the people I know, it's crazy. I remember whenever, you know, I feel like you have those like group chats of friends with friends who are like really early to things and like 5 years ago everyone's in, you know, started doing GLP-1s or GLP, what, you know, GLPs. And I was like, oh, this is crazy. Now everyone's doing them. And now that same group chat, literally 80% of them are doing peptides.

Yeah. Are you guys?

No, no, no, no peptides. Maybe I should though.

I'm like, you know, I haven't been working out as much recently, so dude, after my paddle game, Rob, oh my God, I need, I need every peptide I can get. Santi, I had the worst game of paddle I have ever played. Yeah.

So I, I did, I did beat Janno in paddle, 2 straight sets.

Um, put that out there. All right. God. My, my content, I'm continuing on this, um, like, uh, media cable train. Uh, obviously read like Born to Be Wired by Malone, then Ted Turner, uh, then Barry Diller. Now moving on to this book called The Gambler, uh, about story about Kirk Kerkorian. Very probably one of the wealthiest guys that is no one's ever heard of. But he at one point was like the largest player in Vegas. Like, not like he owned a bunch of real estate and media and studios, uh, like came from nothing essentially. So, um, yeah, if, if you think you're a— the book's called The Gambler by William Brembelle. If you think— MGM, yeah, MGM, that's right. If you think you're a degen and have a high-risk tolerance, go read the book. Yeah, epic.

Great recommendation. Great book. All right, folks, thanks for listening. Gotta jump. Enjoy the Friday. Enjoy the Saturday. We will see you next week and listen to the episode on Monday. Very good episode on quantum. Cheers, folks.

Cheers, guys. Take care.