Klarna Launches A Stablecoin, Hyperliquid Perps & The Prediction Market Wars | Weekly Roundup

We went through this period of time where all of the generalist investors were awful crypto investors because they didn't understand the technology. And now it's flipping on its head where the crypto investors need to be better generalists. They need to understand how AI is changing the world. They need to understand what is happening in fintech. And if you're not an investor that has that ability, then you're going to miss out.

This episode is brought to you by Zashi Wallet. 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.

All right. Happy Friday, folks. Welcome back. Rob, Santi, I missed you guys. How have the last two weeks been? The show's still going. I thought 50/50 shot that's— you guys were gonna kill this, man.

I, I started writing blog posts in your absence because we wanted to stir up the pod.

We weren't certain we were gonna let you back, actually. We were talking about it. We— the, the— all the listeners kind of said, hey, listen, like, it might be better without Yana.

I thought there's a high chance, Rob, you invited someone else on. You started to kick— you kicked me out, you got Santi moving out. Rob showed up running there.

He's running a hostile takeover of the Empire. Seriously, we'll have to run the engagement math, you know, and see kind of how the last two episodes performed.

But they did terribly. They did terribly.

Makes sense. I mean, not to say the court—

I don't know, I don't actually know that, but I would— my assumption, because I was not on it, obviously, you know.

You know, it's the end of the year, we got to do performance reviews here, Jason. So like, let's see, you know, how we're stacking up.

Decisions are being made, Rob.

You know, I also want to see, you know, what happened to the pod after I started joining regularly versus before. So like, what's that looked like?

Nothing will ever be—

not to— we don't need to boost Santi's ego, you know, at all here, but there is a fun chart, which is, you know, I did Empire for like a year solo. Nobody listened. And there's just this like, probably like a slope of like 0.1 or something on the chart. And then the week Santi joined, it was up only for like 2 and a half years. And then, and then it mellowed out. But yeah, we got to see what happened when Rob joined.

You know, not to mention, I mean, our, our engagement is directly correlated with like, like state of the market, uh, like your tweets, right? Like the engagement just falls off a cliff. Although there have been times like in the absolute craziness of the headlines, like Terra collapsing, FTX, like we're getting a lot of engagement. I remember an episode recording with you, Yana, you were like, dude, our chart is bumping.

Like, I mean, it's when numbers going really numbers going up or numbers going down, engagement is good. It's when numbers are flat that engagement stalls out. Yeah. Because, you know, money— market's going down, you want to know what's happening to your money. Market's going up, you want to know. Market's flat, you don't care. Santi, you've been writing more. What's— why are you— what's the thought that goes into that?

Dude, there's just so— the market's lazy. There's enough is enough. Like, I was reading an LP letter and I was like, this is so intellectually just not up to, like, just not right. And I took it upon myself to just kind of outpour. So, you know, even recorded a— so the first one was reading an LP letter and this idea of like value capture, how to value L1 systems we talked about in the last pod. Writing's always been a useful exercise for me to collect my thoughts and just publicly stake what I feel like. And then the second blog post I wrote was on the back of recording an episode with Raoul Pal and Again, it's like everyone talks about these things, network effects and value capture. It's like, all right, let's, let's put like, it's actually quantify that. And I think like a lot of times the crypto industry is just incredibly lazy because you sell the dream. Right. And I don't think we're, I don't think as a, as an industry, I think we've, we've grown up a bit. Uh, if the institutions are coming, like you just need to be a bit more professional in how you quantify these things. And so anyways, I really enjoyed it. I'm probably going to continue to do it.

Nice. Nice. Yeah, I think it's a good— I mean, how long does it take you to write one of those blog posts? Is that like sit down? Like, what's your writing style? Do you just sit down, hammer that out and rip it, or do you have a bunch of people edit it? Or do you—

my— no, no, I'm sure with anyone, my— I used to spend way more time doing it because I'm the type that I would start writing something and then I would quickly think about, okay, that's wrong. So I'll start editing while I write. Now I'm really comfortable because I tried out Like I'm going to bang out like my brain dump into a sheet and then input it into AI, like quite literally into ChatGPT and be like, organize my, collect my thoughts and it will deliver. It's just sort of amazing how, whereas it would take me 1 or 2 days to write, now it takes me like a couple hours.

Yeah. Have you done, do you, do you guys use voice with ChatGPT at all?

Yes.

So I, yeah, Rob, you should, it was actually Mike who showed me this, like Michael just go on these walks. And he'll just talk to ChatGPT for like 5 minutes, input a bunch of stuff, and then be like, clean, clean up my thoughts and take in all the content. You know, we've uploaded all this stuff like PDFs and documents and all this information. It's like, combine my thoughts that are like really kind of rough with like this information that you have, you know, in the context window, and it'll spit out some amazing stuff. So I've been doing that more.

I'll give it one.

I probably should do that. I have this like, I don't know, this like, Whenever people talk into things, that's like not a phone call. They're just like talking into like a voice message or whatever. I, my body like gets like tightened. I don't know. I like really dislike it. It's this, this idea. And I'm going to call it Santi here a little bit because when people send me voice notes, I like, I like right away just want to delete them and not listen to them. They have put so much extra work on me for sending me a voice note for their own selves.

No, but that's why you can do 2x speed on Telegram. What's annoying is voice memos on text. Cause you can't do it. It's horrible. And then it disappears.

It almost feels like, um, you know, there's this debate on Twitter a while back, like, you know, who sends the Calendly and like, that depends on like, like who has like the higher position, the leverage.

Yeah. It's the leverage.

The person who sends the voice note is telling you they think their time is more valuable than you. And so what happens? Santi sends me voice notes.

I would say it's a, it's a cultural thing too. Like in Latin America, you, you people use a lot of voice notes. I go back and forth, but I will say I had a candidate just apply now for a chief of staff role. The guy just sent me, we give him a very unstructured case. He sends me an onboarding manual where he like custom trained, he's called the Santi Brain. He said, these are all the, everything that exists in the public domain about Inversion and put it in a model and created a training guide, which is like pretty accurate. I'm like, goddamn, this could be like, our chief of staff did that.

She created like a Yano voice or something. She took all everything I've ever written in Slack and my emails and my public Twitter. And now anytime that she needs to write something for me, basically it sounds— I mean, it's exactly my language.

It's spot on.

Yeah.

All right.

There's too much news this week to, to not to keep talking about voice notes. So we've got Klarna launching a stablecoin on Tempo. We've got equity perps, we've got prediction markets, a bunch of updates across the prediction markets landscape. We've got Monad launched mainnet. We've got Coinbase acquired Vector/Tensor, I think it was. We've got this BearChain scoop from ex-reporter Blockworks Jack. We've got JP Morgan, I saw like 10 minutes ago, just launched a Bitcoin-backed bond backed by iBit, which is pretty interesting. So where do you— maybe we can start with Klarna, actually. So Klarna is a buy now, pay later startup. Very, very, very successful.

They would not agree with you talking about them that way.

They would call themselves a neobank. Klarna is a neo, right? Is that what you're getting?

An AI-powered neobank. That's right.

An AI-powered neobank. They started as a buy now, pay later. It was them versus Affirm.

Well, they were like Europe's Affirm. So Affirm was—

Affirm was ex-Ledger, ex-PayPal Mafia in the US competing against Klarna. This guy Sebastian in Europe. Klarna, Klarna had the European market. Affirm had the US market. And actually, Sebastian, their founder, is an interesting guy. I've been listening to him on podcast for the last couple of months. Pretty interesting. He's always been pretty anti-crypto, actually. This is why I thought this announcement was so interesting, is he's not some like tech guy who just has loved Bitcoin for a decade. He's been pretty anti-crypto, even as recent as about a year ago. He was saying some like kind of anti-crypto stuff. But anyways, Klarna just announced Klarna USD, which is their first stablecoin. The— here's the announcement. We're the first bank to launch on Tempo, the payments blockchain by Stripe and Paradigm. With stablecoin transactions already at $27 trillion a year, we're bringing faster, cheaper cross-border payments to our 114 million customers. Crypto is finally ready for scale. This is just the beginning. Excited to build with Tempo and Bridge. So Klarna is a— I think they IPO'd about maybe a couple of months ago. They're an $11 billion company, 114 million customers. I'll read Sebastian's who's the founder, his personal tweet too. And then Rob, I really want to hear your thoughts on this. He said, I said it then, February 2025, and I'll say it again, we were wrong on crypto and on Bitcoin. Must rethink your priors. Being last, I thought no one would care, but the reception was massive. So many have reached out. Nice to see first thing out there, more to come. Um, also, if people don't know, we're fully licensed bank in Europe. So Rob, give me your, um, give me your two cents on this.

So it's interesting because Um, so to your point, like Sebastian's been pretty anti-crypto. I wouldn't say as anti as like others like Jack, uh, Jack Zhang at Airwallex and some others, but you know, he, I think famously put out a tweet, you know, right around when Bridge was acquired that was basically, I guess I need to pay attention to stablecoins now. And like, can somebody help me learn like what this is? Uh, and you know, everybody who was trying to sell to him, you know, tweeted at him and, um, clearly he, he's getting up to speed. I, I was interested in how he talked about this being about cross-border payments, because cross-border payments is not a Klarna business today, right? So the vast majority of their revenue comes from what they call merchant rebates. They have about 800,000 merchants on their platform, uh, over 110 million consumers on their platform. Most of what is being done here is, is to your point, BNPL for small dollar amounts. So where a firm really focuses on like, oh, that you, you know, finance your StubHub or your, your Peloton or whatever. They've been really focused on like, let's, you know, finance your, you know, Nike, your, you bought some shoes, right? Or they have Nike and Adidas and they have Tim Hortons and they have like, you know, all of these things, right? So finance your Chipotle through Klarna, right? That's actually their business today. And I've always thought about it as, and I, and I believe, you know, the market has thought about it. As a business that is really market— it's really more of a marketplace, and it's really more merchant-first. And that is the key to that flywheel that they have going. So when he says, okay, well, we want to be— and he's been saying this— that we want to be a neobank, we want to have a full-service payment stack, um, and then to say, come out and say, hey, this is going to be about cross-border payments, which of course is one of the main use cases of stablecoins today, that shows you that he sees a way to use stablecoins to expand his business. Spanned his addressable market. But when I first saw it, and I still think to this day, maybe the more interesting thing to me, because there's a lot of people doing cross-border payments in stablecoins. Clearly he's got a captive user base that he thinks he can sell these other— these, you know, 110 million consumers he thinks he can sell cross-border payments or remittance to, and maybe the merchants themselves. But I've really seen it as a really interesting play on how do we actually get stablecoins in the merchant hands, because one of the biggest one of the things that, you know, everybody always says about domestic use cases has been, well, why would they take a stablecoin? Is the infrastructure there for them to take a stablecoin? Like, there's probably not going to be a domestic use case because it's not better. But let's put us in a world where you have this wallet, this neobank, in your hand, and you have merchants who are actually willing to take rebates to get access to Klarna's customers. That is how the revenue model works today. Why would you not also be able to push on them a stablecoin that settles instantly, maybe opens up your aperture to just not people locally, domestically, but also international, uh, settlement real time. Also allows you to maybe earn some interest if you keep the stablecoin in your merchant account, right? Them doing this alongside Stripe, this is the type of unlock where I see, okay, potentially now we see incentive for merchants to take stablecoins now, and this is how we get stablecoins in the merchant hands. And so I actually think that is the really, the much more interesting part of this story, which is like maybe the second order effect than it is, call it, you know, the cross-border payment story. That said, and I tweeted this yesterday, uh, a bit lazily, but a lot of people engaged with it. I think this is like, you know, one of 50 or 100 of these types of announcements that we're going to have at fintechs and at banks over the next year and a half. Everybody is going to start doing this. Is clearly a better rail for them to capture more of the economics. And that is the incentive here. It's about how much economics they can capture. And so, um, this is, you know, not the first, but it's, you know, an early part of— an early ending of what is about to be a lot of this.

I'll say quick, I agree with all that. Sebastian saying that they're last, I think, is not going to go down as last. And by the way, first mover advantages in crypto are widely overstated. Widely overstated.

I actually— Santi, I want to bring this up. There's a friend who I was talking to who's thinking about getting into crypto. He's never, never been into crypto, and stablecoins are actually the thing that kind of got him. And he's like, but I feel like I'm so late. And actually, Mike and I, when we were getting into crypto in 2017, we launched Blockworks in December 2017. We're like, you know, the problem with this business is we're so late. We're just, we're just too late to this industry. There's already, there's already all these people who have launched, like, you know, we're kind of at the top of this 2017 market, like and we thought we were super late. And I would just say with like, these are, these are 20-year bull markets for these, you know, whether it's AI or crypto or robotics or there are 20, 30-year bull markets ahead of us. So yeah, you're definitely not late. So one of the things was it sounded like the first thing that they're going to be doing is using Klarna USD initially with internal treasury operations, building this like very native global neobank. Rob, can you or Santi, because I know you've been looking into this as well. Can one of you guys explain like how much you really— I see this as a thing on Twitter all the time. Oh, they're using stablecoins for internal treasury ops. How much you really make? Is it you're saving money because you don't have to pay the banks? Is it that you're making money because of the increased yield? Like, what do the economics actually look like there?

Yeah, I'm going to go again. I mean, listen, so For somebody like Klarna, right? Um, and I don't know exactly how much, if they actually talk about what their balance per customer is. I can look it up. Um, but a lot of people keep capital on Klarna, right? Or on a neobank. And for, you know, Klarna today, obviously they have a, um, a banking license, so they can theoretically, you know, take that balance and they can do something with it that is yield generating. Right, so the difference for— okay, well, I'll do, you know, call it cross, uh, like treasury management from a yield generation perspective shouldn't actually be that different. So I find the yield generation story a lot more interesting when it's a, call it, a neobank that is just basically just a middleman, right, who doesn't already have the ability to call it— they have to go and, you know, maybe buy treasuries through another, you know, counterparty, and they have to, um, you know, they get, you know, cut on fees there. And a stablecoin allows them to take kind of all of that interest potentially. So that's a— it's a little bit different, I think, for like a non-banking entity. And I just looked it up, I think they have about $14 billion of deposits as of their last filing. So, um, and they essentially operate like a bank because they do have this depositor side and they have this lending side, right, because they are a BNPL. So for them, it's, it's, it's— I don't think that is as interesting, but that is a story for other types of, uh, fintechs. Now there's— on the treasury management perspective, we're seeing this across a bunch of different companies, and I've used examples like Coca-Cola and others. I think for them, uh, it's even more obvious, which is that they have merchants across the world and in different localities. They have customers across the world, different localities. They have entities, they have bank accounts, they have people cross-border. The SWIFT— like, using SWIFT or using the correspondent banking system is slow, it's capital inefficient, It takes away, um, I mean, there's, there's fees and there's middlemen in the middle, right? And now they can do, you know, atomic settlement, moving capital between all of these different places, of which some of them they might not want to actually keep capital in because they are higher risk. They are— there is more counterparty risk on their banking partner there. Uh, there are maybe merchants there that they don't want to take as much counterparty risk with, uh, etc. So, um, there is just a— it's really a capital uplift piece. and fees on that. But it's a very obvious one that we're seeing like the biggest companies in the world talk about.

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Santi, maybe tied into your articles that are the— your pieces that you've been writing, one of the interesting things for me is this is, this is signal, I would say, that fintech is now, uh, that we're removing ideology from a lot of this stuff, right? It's, it's, um, you start to think about like, will the adoption come from consumer apps that never— they're not, they're not maybe on crypto Twitter, but they just desperately need cheaper rails. How do you think about this from like, I guess, both the operator issues doing what you're doing with Inversion, but also the investor issues?

I mean, it's like, would you rather own Klarna stock or a stablecoin issuer equity? And what's the price of that? Klarna is sitting at $12 billion. I mean, there's reasons why, like, their BNPL hasn't been like a great business for them for a variety of reasons, but it has 100 million plus users. That business becomes structurally more efficient and can offer an interesting, like, can enter into other wedges and expand the customer relationship. One that is very visible. So it helps their retention, it improves their LTV, and they can just do things faster, better. Like you basically like software as a service on-prem. A business like Klarna made more efficient with stablecoins. The end user feels the impact. They don't have to work through the whole gymnastics of like figuring out how to, how the fuck to interact with crypto. I haven't looked at the metrics specifically, but doesn't scream like it's totally overvalued. Compare that with equity in a lot of companies in crypto that are well above that number struggle. Like I struggle to justify the valuation and I struggle with this again, first mover. If you're Circle, well, has anyone checked on the stock price of Circle lately? It's back to the, you know, it's a business that is fragile. It's getting competed away. And so again, as a deployer, On the emergent side, I love it because it's just a race to the bottom, right? Yeah. Like you're seeing this, we talk about this Polymarket and Kalshi competing again on fees, stablecoin issuers with a hyper liquid RRP process competing. Now it's a race to the bottom in many ways. It's a hyper competitive industry. And so I, for this reason, just, I get more excited about a business like Klarna and I think it offers a probably more interesting return profile. Than your nth stablecoin issuer of choice.

Who is— I would say, but the one thing on that is the, the markets did like the announcement. So they did or did not, Rob? They did. It did. So the stock was up a couple points yesterday. The stock's up 3 points again today right now as we're chatting. So, um, outpacing the rest of the market. So people clearly are excited about, you know, what they think this can do for Klarna. I mean, probably reading into this, call it, you know, expansion of you know, their TAM and like other types of, you know, uh, business lines. But, um, the market—

yeah. Rob, who, um, who— which crypto infrastructure players do the best? When you see this kind of thing, it's like, you know, they're not using Agora, they're not using Rain, like they're not— you know, it's entirely— do you get worried that like Stripe, you know, this is entirely a Stripe operation here?

Tempo Bridge Yeah, I mean, there's, there's a question, right, about, about Stripe. So, um, I mean, Klarna has their own card product. They didn't announce a crypto card product, so they might still use Rain. Uh, so I don't know about that. But for the stablecoin issuance side, yeah, they're using Bridge and their, their open issuance platform. Um, listen, we know for a fact right now that— and this is obviously incredibly enticing for these businesses— is that Stripe is going to people, and the CRO is going to people, and he's saying, listen, like, we serve all of these merchants already. We have this unified offering of stablecoin issuance through Bridge. We have the, uh, kind of global connectivity on the orchestration side. We have the bank account connectivity. We do, um, we have Stripe Link. We have these virtual accounts. We have, um, the ability to offer consumer-embedded wallets through Privy. And we can give you— and I actually, I literally was talking to somebody yesterday where, uh, where I think Bridge was competing against BVNK for a deal, and, and Bridge came, uh, came in and said, if you take us, Stripe will give you, um, some amount of free, um, verification hits. Essentially, there's like, well, the, well, the Stripe verification product we'll give it to you for free for some amount of, uh, up to a certain limit, right? And obviously like BVNK doesn't offer even a verification product, right? That is not something that they do, um, neither does Bridge, but Stripe does it, right? And so they're winning these deals by saying, hey, listen, we can offer you this full-stack solution including like this verification product from Stripe, and we will give you some of it for free, and we'll make it economically worthwhile for us in the total, but maybe, you know, certain parts We'll be able to win against these other providers, right? And that's happening. We're seeing that right now. What we also know is that Tempo is essentially like lending out their engineers, like in an FTE model, the same way that, that Palantir is, and going directly to these companies and saying like, we'll build all of these integrations for you. We'll, we'll, we'll do the, basically the entire thing for you. Right. And so that's incredibly enticing. Like why, if you're Klarna, when you already trust Stripe, you already have a deep relationship with them, and then all of this other stuff is happening. Why wouldn't you want to use them? Now, um, this market is going to be humongous. There is a lot of people who are going to want to operate in this way, and a lot of people in the traditional fintech side are not going to want to push, or, you know, Tempo or Stripe, because they're also under pressure and competition, right? So I was talking to a card network who specifically told me like, yeah, we, we have a deep relationship here, but, um, we actively are going to try to push other chains than Tempo because we do not believe— we believe that this is, you know, hurts our relationship with it, right? This is going to continue to be a topic of conversation. But listen, Stripe is, you know, in the totality of what they're doing, is the behemoth in the room in every one of these conversations. They are trying to win every single deal with this, you know, kind of total operation. A lot of people who are, are not— even the sophisticated people do not want to have to take, you know, 4 or 5 or 6 vendors to, you know, recreate the same thing. And so all the startups— I mean, we're heavily invested in probably every part of the stack that, um, that Bridge or Stripe would compete against. Um, all of them are thinking through, you know, how— what is our reaction supposed to be to what— how deeply Stripe has leaned into, into the space. But listen, It's a big market. Like if you look at, you know, uh, you know, ISVs, you look at PSPs, like they're, they're, they're not, uh, it's not winner take all. There's multiple, you know, multi-10, 15, 20, 30, $40 billion businesses that are built around these in different markets. And so I expect that'll be the case here, but it's, it is the, you know, sort of the, the behemoth that everybody's looking at right now. Yeah. Yeah. Can I just say something?

Claro. Price to sales 3, 5 times, 3 times, 4 times, 5 times, depend. It's not profitable now. Um, and then you have like Ethereum at 200 times price to sales, Solana 80 times price to sales. Uh, how do you think about that? Like, like you could also look at like AAVE, for instance, it's going into kind of this segment. You could— I was looking at like, okay, Klarna has 100+ million active users in their platform. The entirety of crypto has 40 million active users. Uh, who's in a better position to monetize? Who's in a better position to expand LTV and actually monetize that captive user base? Um, again, like, would you rather own Klarna? Would you rather own Aave? Would you rather own Klarna? Would you rather own Solana or Monad? What do you think, Klarna?

Yeah, I mean, I mean, there's a, there's a real question here around like, uh, Santi always the, the fundamental value investor in the room. Um, and I'm not saying Klarna is a bad buy. I haven't, I haven't spent that much time looking at it, but I mean, it is down 30% since its IPO 2 months ago. Uh, that said, like, you know, the question that the market is asking itself is who is going to grow more, right? Like, that has always been the question. The market always prices growth better than they price, uh, price, you know, uh, EPI or, uh, cash flow, um, for anything that is tech related. And, you know, obviously a stablecoin product for Klarna is a tech conversation. And, you know, how much that he's been talking about AI replacing you know, a lot of their costs and for them being, um, be able to operate much more efficiently than a traditional bank. Like they are trying to sell a tech story, not a bank story.

Yeah. Uh, you go look at Affirm, bit more expensive. Um, you go to PayPal, kind of in a, in a tough spot, candidly. It's a stock that I constantly track. Uh, for what it's worth, like a lot of people saying, oh, you must have sold your entire crypto book and now you're going to like, I'm like, I'm really not. I'm excessively long, irresponsibly long crypto. But it's just like a common question, right? Like as an investor, you know, Monat for $4.5 billion. And then you also look at like, I get your point around like investors just like valuing growth at all costs and willing to overlook that. Revolut, no, what is it? Ramp is raising, I think like a $60 billion or something, or was it $30 billion? $40 billion?

$40 billion?

They just raised a $32.

$33 billion. Stripe's at $100. Ramp, clearly, like, so maybe like expanding that universe, would you rather own some like Ramp, Aave, or Stripe?

Ramp's a great business. Like, I mean, and also Ramp has raised 3 times this year, right? Like, they, they're on a rocket ship at the moment.

Yeah. And you best—

so yes, would I rather own Ramp at any time this year than anything in crypto? Uh, probably, you know, maybe not Bitcoin.

Then why, why, why, then why are you still investing in crypto?

Because Ramp is like a, a, a Ramp is like a one of end company, right? Like there is, uh, like, and, and to be fair, right? So I'm in crypto, I'm in Bitcoin, I'm in a bunch of alts, right? Uh, I still believe in the growth story broadly of what's happening. We've talked about this a bunch, right? Um, and, and I think there was a smack, uh, from Compound VC. Put out a, a, um, uh, a tweet yesterday maybe that talked a little bit about how we're now in this time of crypto where actually we're getting a lot of what we wanted. We're getting stablecoin adoption, we're getting tokenization, we're getting, you know, real market participants wanting to participate in a way that is not just as a proof of concept, but it's actually moving businesses on rails, right? But that doesn't necessarily accrue value to, uh, you know, the rest of the ecosystem. And there's now real dispersion around the winners and the losers, right? And so what he said in his post, which I do agree with— and Santi, you and I talked about this a little bit last week— is that the core crypto VC, or the core crypto investor, the core crypto trader, can no longer just be a core crypto trader, investor, you know, participant, right? You have to understand what's happening more broadly in the market. You have to understand how this is, what's happening in fintech. You have to understand what's happening in financial services. You have to understand the macroeconomic market. And you probably have to be— we, we went through this period of time where all of the generalist investors were awful crypto investors because they didn't understand the technology. And now it's flipping on its head where the crypto investors need to be better generalists. They need to understand how AI is changing the world. They need to understand what is happening in fintech. And if you're not an investor that has that ability, then you're going to miss out. But that doesn't mean there's not opportunities in crypto. It just means that you have to be broader. You have to have, um, a big purview, and you have to be able to make decisions like, should I buy Ramp or more Solana? Well, I'm allocated to both, but like, what should I be doing this time? Because I would definitely rather own— there's a couple of our portfolio companies that are growing faster than Ramp today that I would definitely rather own than any token, than any token that we're talking about, or that I would rather own than Bitcoin at the moment. But it is more of a holistic decision-making process today than ever.

Yeah. I mean, last thing, because again, I look at a business like PayPal, it's trading at 13 times PE, not growing as much. Analysts kind of have been very, very observant around the challenges that business has faced. They have PYUSD, they haven't pushed it as much. 13 times P/E. The broader market is trading at 30 times, and you could argue a lot of that is just driven by the Max 7. But at some point you mean to revert, and I am thinking constantly about that because we're in a later, like as much as people are so hyped up on this stuff, I just, I just for the sake of me can't, like my business historically has been investing in early stage stuff. And I think in crypto you've been incredibly successful if you picked any infrastructure bets, sub $100 million. You would've made money like, like, like almost blindly. And like, let's just, that's okay. Like if you're like, I just sort of came to terms with that, that it's like, I'm enjoying myself after ParaFi. I want to cycle the world and just chill for a bit. And I say, okay, if you bring me an infra deal and you're a smart team and a lead investor like Dragonfly has done the work on the docs to make sure that I don't get absolutely rocked. I'll put money if it's below $100 million, like systematically just kind of did that. I'm not like, I'm sitting there and I'm seeing Monav that I participated in the $600 million deal. It's trading at 4.5, 5. Okay, interesting. Will it be able to sustain that valuation? I just don't know because maybe to your point, like Tempo comes along and it's valued at what, $5 billion? And Stripe's going to use their entire muscle and it's limited, right? To your point, it's not credibly neutral. But they're doing the Palantir FDE model to win over Klarna. Like again, like I'm saying, you're raising it, you know, as you think about like investing here, like why wouldn't you again, just knock on the door of the founders of Ramp and say, hey gents, we're Dragonfly, we're a crypto native firm. I think we can really help you here. I think there's a part of your business that probably benefits, allow us to invest in this $30 $2 billion round and just compound the fuck out of that position.

I would just say one thing to this, which is that like, we, I mean, we do everything right at Dragonfly, right? So we're, you know, uh, we, we led the seed round and the seed extension into Monad years ago. Right. And, uh, I'm very bullish Monad, by the way. Like we can talk a little bit about Monad, but you know, it's been live for 2 days. It's been. Performing incredibly well. I think TVL is now up over $200 million. It's, you know, traded down to, uh, right at the $2.5 mark, and now has continued to grind up. You know, launching in this market, I think, is actually a blessing in disguise, if I'm being honest, for them. And I— listen, if you— I personally do not believe that innovation at the block space level is done. And yes, some of it will be owned by the corporates, but most of the corporates are just doing other stuff out of the box, right? Um, and so like, I, I, I'm very bullish on what they're doing. And I think there is still a world in which that type of innovation needs a very crypto-native, tech-first understanding of what is happening. Like, I do not believe that a traditional mark— uh, investor could come in and truly understand the intricacies of DeFi to, to back the next novel product that gets made in DeFi. And I don't think we're done building novel products in DeFi, right? So I'm so bullish about what is happening in this market, right? That said, as you know, we're in these businesses like, like, uh, like Rain, you know, mentioned earlier, they started out like basically like a ramp competitor. Now they're, they're much more broad in terms of infrastructure for, uh, card issue, card issuance. And, uh, and issuer processing and also merchant acquiring, all running on blockchain rails though. And like, Rain is probably one of the single fastest growing companies in the world right now. Um, you know, they, they don't publicly talk about their numbers, but we see them and it's incredible, right? And that is a company that required, I think, some crypto-native understanding. It required foresight to look at, um, what is coming in the stablecoin space. But it also required a deep understanding of how traditional payments work. And that is where I think the market is going, is that you need to be able to cross the chasm, do both. That doesn't mean that there aren't enough opportunities anymore in the very crypto-native side. It just means that you have to have a holistic perspective today. And, and I, I, I mean, I talk about this with the LPs. The reason I think Dragonfly is so well situated is because we have this ability to do both, because of my background and his background, Tom's background are so differentiated. Among the three of us and that we do so many different things. And I think the VC funds that are not able to look at, you know, the whole broad set of opportunities through that lens are going to really struggle going forward. Right. Um, to your point about Ramp specifically, $32 billion is kind of out of my mandate with my LPs. Uh, but like, you know, could I have done it at a billion dollars? I probably would have.

Santi, you're, um, I get what you're getting at and you're ragging on this stuff a little bit, but, uh, just the counter would be you did Monad at $600. It's trading at 4.5x, you're up 7x on it. Why not just keep doing that?

So I did Monad at $600, it's trading at 4.5x, and I'm up like 6x on it. Why, why, why keep doing it?

No, why, why not keep doing it? Like, you're ragging on the system, but you did just make 7.5x on Monad in a year and a half.

On paper, on paper, on paper, on paper. That's like, we'll see what the unlocks like pretty— and by the way, I'm not, I'm not going to continue to do it. One, I just see more value in Who's going to capture the benefit of this technology? My thesis has shifted as I re-underwrite my thesis. I fundamentally think that deployers are going to capture more value. Companies that can cut costs, that can enhance a customer relationship. A lot of, so, so since I left Parafi, I think I invested in over 250 on paper. It was closer to 200 companies. I've seen some, most of them that have gone under are for the single reason that, you know, there's not enough users on chain and no one cared about the products that they built. And I am seeing an interesting dynamic of like this technology be, you know, it's open source and it can be forked and everyone talks about network effects. And I just think first mover advantages and network effects are overstated. I don't think we can support the valuation of most of these networks at where they are and they're valued on this crazy TV, like terminal value growth number, of everyone coming on. And, um, I have— so, so like, I am definitely re-underwriting my thesis. Now, will I do the occasional infra deal? Look, I'm not disagreeing with Rob Ron. I do think there's incremental marginal improvements that will continue to be made in the infra layer. We're never going to know until we onboard 100— like, we triple, 10x the user base. So like, I'm building on Avalanche, dude. Am I going to be in a tough spot if I onboard 100 million users through an acquisition? But we're never going to know until, until we do it. And I think that's normal. And it's a normal way. I just think like if you overlay the sequential waves of investment, like we've overinvested in infrastructure to the tune of $100 billion. And I think you now need to see less investment in infrastructure and more in the deployment of it. Um, and I think it's one of those things where as I've seen more and more corporates get into the mix. And their decisions of how to deploy and which providers and how competitive that those RFPs are. I do worry that if you're underwriting something around network effects and value capture and the moats of TVL and Lindy, I think, you know, it forces the question around is the value capture going to be there? Like Ethereum, there's no version of this world where that asset is worth $400 billion. Like, like, uh, I cannot, I don't own it. I haven't owned it since 2000, since basically when I moved to a tax-friendly jurisdiction. Um, and is, could Monad be the next Solana at like $100 billion? Because that's probably what, you know, you're thinking there and saying, could you displace Solana? Could it do a better thing? You would have to believe that Solana is accurately valued. At $75 billion, which I would argue, yeah, no. So no, I'm not doing that. I'm no longer investing as much through my family office because A, I don't have any time and B, I'd rather deploy. I'll probably be the largest LP in my fund in the private equity fund because I just see more value in buying a business and reaping the benefits of this technology. That's a better risk-adjusted strategy for me.

Can I, you know what I love about this pod is that I get to come on and, and hear Santi, uh, and one of my founders be like, yeah, I'm not investing anymore. I'm only working on the startup. The startup.

I, I don't think Rob, like, what is, I mean, I, I don't know.

Like there, there was a time where like I saw like really good teams. I think now I, I just haven't seen, I've seen some projects in Monad. I've seen some projects like the 100th million, like prediction market. Like I haven't been wowed and maybe it's because founders just haven't reached out that much, but I, we talk about like, what's the quality of the founder coming into the space? Electric Capital does a developer report, which I think is no longer going to be made. I think they changed the format, but Rob, from your standpoint, I get your strategy. Is the quality of the founder getting better or worse? Are you seeing super high quality deals right now?

It depends on the part of the market that you're in. Yeah, I mean, it really depends on the part of market. Listen, I— we've talked about this a bunch. I don't want to belabor the market points. I want to move off this soon. But I, um, what is— what was true in '21 was that the incremental smart kid at Stanford was working in crypto, right? What is true today is the incremental smart kid at Stanford is working in AI. Like, that is a fact, right? Now, I do believe, like, you know, earlier today I did a reference call on a founder on a seed deal that we're looking at. And these founders have really traditional— one of them comes from a big Fortune 500 and ran the digitization aspect of a, you know, a Fortune 500 that you've heard of before, uh, household name. And it was coming into crypto because they want to build something new on stablecoin rails, right? And we are starting to see, I think, in those parts of the markets, in certain verticals, that there are really good founders. We're seeing really good founders on the market infrastructure side. We're seeing really good founders on the stablecoin side. That is increasing. But you're right, you know, is the incremental, like, deep tech research engineer, like, coming into crypto today? Like, they're— it's less— it's less likely that it's happening. And so, you know, we've been— and I think I said this before, Santi— we've been quite slow this year in terms of investing. But that, I think, is the right thing to be doing at a time when the market seemed overly euphoric, right? Like, we try to be countercyclical. And my guess is, like, going into next year, Now that you are so bearish, I will probably start putting more money into the market. That is probably the way that's going to work.

All right, let me, I'm gonna pick a spot.

Can I just say one? Let me, let me tell you something. Um, I will, there, there's always going to be a place in, in my book, in my heart to back founders that are willing to do interesting things. Uh, Monad at $600 was above my initial valuation. I would have loved to have caught it at sub $100. I don't want it to come across as like totally discounting, like people as a founder, it's a fucking grind. I mean, I just know those guys are grinding. It's a stacked team. They're trying to do something against like kind of all odds when the market's telling them we don't need another infra. There's infra fatigue. So I'm super grateful of that. I'm not trying to be dismissive. I'm just sometimes I think, I think there's a world where you can objectively talk about prices without it demeriting the hard work and effort of founders that can't control where the stock goes or the price of the coin goes. That's market-driven. So, so like, I just want to make that clear because a lot of times when people hear me be critical of prices, they're like, dude, you're being, you're an asshole because what about the hard work of these teams? It's like, no, like, I'm just like, it's totally, totally different things. You can be very critical about the stock of Solana. That doesn't mean that I'm bearish the infrastructure. That doesn't mean I hate Toly and all the incredible builders in the space. It's just an objective, like an intellectual discussion about it. And it will serve us well as an industry be open-minded about having these discussions as opposed to being like, you're an idiot, your math is wrong. I'm like, okay, yeah, okay, Ethereum's going to trillion, fine, dude. Like, like, like, okay, good. Cheers.

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All right. Let me take— there's other news I want to cover, so let me take us away from market talk. One, you guys mentioned prediction markets a little bit. Santi mentioned Kalshi and Polymarket, race to the bottom with fees. There was actually very interesting Robinhood prediction market news this week. So I'm going to read the headline and then we can talk about the maybe second-order implications of this. Robinhood extends its prediction markets offering through new JV with Susquehanna to operate CFTC-licensed exchange and clearinghouse. So, so what does that, what does that mean? So Robinhood is partnering with, with SIG, who's one of the biggest market makers in the world, to purchase a clearinghouse and launch their own vertically integrated prediction market. So a little bit of context on this, right? So Robinhood's a broker. They're the front end. They own the customers, they get the deposits, they have the distribution. The clearinghouse is the back end. They have— they handle margin and risk and settlement and kind of the rails, right? This would be like a CBOE or CME. And Robin Santi, correct me if I get some of this stuff wrong, but I think I'll get— I think— I think I'll get the basic definitions right. So you've got the— what Robinhood did when they wanted to get into prediction markets was they partnered with Kalshi. I think over— I haven't looked at the numbers in the last couple of weeks, but at one point or at one point about a month ago, over 50% of Kalshi's volume was coming from Robinhood, and it's over 60%. Over 60% now. Okay, so what Robinhood is doing with this announcement, my understanding is they're bringing all that flow back in-house. So Robinhood said, look, we want to get into the prediction market space, let's, uh, let's be really quick to market, let's partner with one of the existing prediction markets. They partnered with Kalshi, they did something like a 50/50 revenue share, and boom, worked for both parties. The, uh, what this announcement is showing though is that whoever owns the distribution, distribution remains king. So Robinhood is— I don't know if they're officially ripping out Kalshi, but they're definitely bringing more and more of the stuff in-house and building their own DCM, the DCO, and the customer relationship instead of paying someone else, a.k.a. Kalshi, to do that. And yeah, it just— there's a— obviously this is one of the big battles this year is Polymarket versus Kalshi. PolyMarket has tried to take more and more of the users for themselves. I would say Kalshi is trying to do the kind of white label or embedded model a little bit more, it feels like. And yeah, this, this would probably be an argument for owning the customer relationship instead of selling your, your services. So I'd love to hear your guys' take on just, I don't know, this development, what you think.

Prediction markets is all at war right now. You can see it on Twitter. And you know how many people are spending on Astroturfing and marketing and, you know, the partnerships. Uh, to your point, like, you know, it's also become clear that everybody's— like, Kalshi has actually been giving rebates essentially, or paying people for their flow. Um, I think they public— Webull publicly announced that Kalshi was giving at least 50% of the revenue back to Webull to, to work with them. I'm sure there was a similar story with, uh, with Robinhood. Um, and then all of a sudden Robinhood says, okay, well, listen, Prediction Markets is the fastest growing part of our business now. Like sports— I mean, it's sports specifically, but sports event contracts clearing on Kalshi is the fastest growing part of our business. Why would we give up 50% of that revenue or more to another provider? By the way, another provider who, like, you know, is definitely much more of a startup than we are, and we have a history of, you know, they already run their own clearing broker, right? They already have their own separate entities to be able to do a lot of this infrastructure with Susquehanna. I mean, I don't— I think they use more Citadel and, and a couple others, not Susquehanna, on the equity side. But Susquehanna is the largest sports, uh, market maker in the world. Uh, they're behind basically all of the sports markets. And so like, why wouldn't they do that? Why wouldn't they increase their margin by 50% and be able to replace the infrastructure provider and And so, I mean, DraftKings is working on something as well. They announced it, they acquired a prediction, uh, really funnily, they, they, they tweeted out about how prediction markets were a fraud, 3 weeks later acquired a prediction market company, and now, and then announced like 2 weeks later that they're launching their own. Um, you know, FanDuel is working on their own, like there's a bunch of others. This is going to be an all-out dogfight, uh, and you have to have some level distribution because these, it's not that hard for these guys to stand up that business because it is just a— it's a financial market, right? It's not— there's not some sort of like, you know, real huge regulatory moat when these DCOs and DCMs are already owned by these companies, or when they, um, are able to, you know, acquire them for cheap. And, you know, building these contracts like Susquehanna and Jump and all of these guys, they're happy to do it for everybody involved. And it's not actually that tough of a business that doesn't have that much lock in. And so, um, you know, I tweeted it out that, you know, this is unsurprising. I think it was surprising to me how quickly Robinhood decided to, uh, displace, uh, Kalshi. And by the way, I'll just preface something here. We don't know for certain that Kalshi is not going to get any flow or is completely ripped out. There's been no discussion of Kalshi from Robinhood, and there's been no response from Kalshi, uh, or Tarek or anybody in the, you know, 24 hours since this came out. And so there could still be something to be, be worked out here, but, um, I don't know why they would give up any of, of, of their economics. And it reminds me that you have to have either some reason that you have really, really good lock-in, which is a regulatory moat, it's a coverage moat, it's a technical moat, or— and, and people almost always overrepresent what their lock-in is— or you have to own that distribu— some distribution yourself, and you have to have a brand yourself, right? And this is, you know, the polymarket calcium debate, you know, that we've been having for a long time. That is the place where Polymarket has really leaned in and won in a way that Kalshi has not, which is that when you hear people talk about prediction markets, it's— they talk about the Polymarket, right? They don't talk about, you know, whatever.

So Rob, um, would you rather own DraftKings at $15 billion— I think that's current enterprise value— or Polymarket equity at $15 billion?

Uh, Polymarket equity at $15 billion. As a current shareholder of Polymarket equity, I have a lot of Polymarket equity. Um, listen, I actually, I actually don't know. I haven't studied DraftKings business that closely. Um, I, I will, I'm actually, and I'm going to take a step back because I said that somewhat facetiously, right? But I actually want to make it very clear, I would actually rather own Polymarket's business. And the reason I, I will say this, right? And you're going to come at me and you're going to try to tell me some multiples, uh, and, uh, you know, some sort of like, I mean, let's not forget, uh, I have a very strong economic interest I've invested in the seed and Parify being a huge owner of Polymarkets, it's an objective discussion. Yeah, but, but let's not forget what has happened here, right? DraftKings and FanDuel have the businesses they have today because they spent years building a legal and regulatory moat with the state gambling commissions, right? They entered and they went state by state. They lobbied, they, they helped draft legislation. And they got approved in the states that they're in. And what happened is Kalsi came in and brought with Robinhood and Polymarket's coming in and they all of a sudden said, hey, this is a CFTC nationally regulated derivative that allows you exposure to the same market that DraftKings spent years trying to build up that moat in. And all of a sudden just started taking a ton of market share, right? So for DraftKings, What happened is they had a specific vertical that they were dominating, that they had built a regulatory moat around, and that got crushed overnight by just the form factor of how people were getting that exposure, right? Now, there's a long way to go in the legal fights around this. I think that Nevada just came out with a pretty bad— not a ruling, but a pretty bad conversation and early, um, and some early indications around how they might view a sports-related event contract relative to the Sports Gaming Commission and whether or not it should be locally regulated versus, uh, versus CFTC regulated. But all of that said, DraftKings is still a vertical business focused on people getting exposure to sports. That is not Polymarket's business. Polymarket's business is about 35% of their markets are sports. Their business is about the— be tokenizing the markets for literally everything. Like, I have talked to an— I talked to an insurance company last week that wants to sell insurance and hedge on Polymarket, right? Like, they want to be the oracle for truth and data for every single thing that you can put money on, right? And so that is a much bigger addressable market in my mind than sports gambling in the US, which is what really Kalshi was focused on and what— and has been focused on to date, and what, um, the, uh, and DraftKings is focused on.

There's a great episode, Jeff, from Suskihana, one of the founders. He talks about, they're investors in Polymarket and talks about the insurance use case, some other use cases around like pricing risk continuously. And obviously he made his, cut his teeth being a poker player and thinking constantly about probabilities and like just overlays his lens to what Polymarket has unlocked in prediction markets. And so it's just interesting to just go listen to that. It's a very neat, he doesn't typically do podcasts and interviews and I just found it to be someone that, that was familiar with prediction markets, his perspective was like pretty awesome to hear.

There's another topic. Anything else on prediction markets I want to get into?

Didn't Polymarket get officially approved in the US?

Oh yeah, they got CFTC approval, right?

Yeah. You may mention that, but I just want to make a note on that.

Yeah, another checkmark for their, their reentrance into the US.

What does that allow them to do? It allows you to trade Polymarket through brokerages, uh, Polymarket.

Yeah, they can be, they can be the infrastructure provider and the broker. They can also be the broker, uh, and you can collect ClearAll as well.

So you'll finally be able to use Polymarket in the US.

Yeah. So Polymarket in the US is coming. So, uh, very, very quickly.

Yeah.

Um, when does their app go mainstream or when does the app get off like beta? Do you know?

I mean, they haven't said anything publicly, uh, so not, not my place to say anything, but, um, I, You know, it's, they're definitely, you know, working towards that in haste.

So yeah, let's, uh, okay.

Can we just one minute? Um, Rob, um, Polymarket is deployed on Polygon. There's been rumors about the token. Do you think that they like, hey, will it stay in Polygon? Does it build its own chain? Ties into the whole infrastructure, like, uh, lock-in that we've talked about, or Do they go elsewhere?

Uh, listen, they're gonna do what works for them, right? And like, at the moment, uh, Polygon seems to be working incredibly well for them, and there's so much low-hanging fruit for them to continue to expand upon. And so, you know, they have this focus on the US app, and they're continuing to expand the types of markets and the core infrastructure, right? And so in my mind, yeah, okay, they raised, you know, over a billion dollars, uh, they clearly have the resources to go and, you know, to kind of do whatever they want at the moment. But if Polygon is working and for them, then that's not going to be the main focus. What will they do over time? You know, I can't tell you, right?

So I saw Ivan, ex-Dragonfly, Matter Labs, joined Polymarket. I talked to him during his journey about, you know, leaving Matter Labs and whatnot, found that quite interesting given his background, uh, with zero-knowledge proofs and stuff like that. Seems like they're beefing up their engineering teams, all I'm observing from the outside in.

Yeah, they're beefing up their engineering team both on the blockchain side and on the, uh, you know, call it the core, you know, traditional engineering side as well. Um, and yeah, that— Ivan joined and he seems very happy there.

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Let's talk, let's talk equity perps, guys. So Hyperliquid launched Stock Perps via HIP3, which basically lets you add contracts for traditional assets, traditional equities assets. So Nvidia and Google, Tesla, they've got an index called XYZ100. And I think the interesting thing that I want to talk about with you guys is they just There was, um, I had the data pulled up. Uh, HIP just pulled in $537 million in daily volume with NASDAQ leading, followed by Nvidia and Google. This was a tweet from Crypto McKenna. The markets are scaling much faster than I previously anticipated. So I just, um, Rob, I saw you guys back something. I think it was a project. I think it was called Trade XYZ on maybe Mega ETH.

Um, I think— HelloTrade.

HelloTrade. Thank you. Yeah. Trade XYZ created XYZ100.

Trade XYZ is the brand that's on top of that you're talking about right now through Unit that's on HLP-3.

Yeah. So yeah, I would just love to hear your guys' thoughts on these. Yeah. On-chain equities, basically. It seems like this is the early days of a big narrative. Feels like something where a lot of people are like, yeah, but how big could this really get? Eventually, I think it gets very, very big. And I'd love to just hear what you guys think about this.

This is interesting because, uh, we've obviously had equity perps earlier this year, like Osteum, uh, right, launched them. A few other people launched them, um, and some of the exchanges have launched them as well, uh, and they haven't done particularly well or a ton of volume. But Trade XYZ has been incredibly successful so far, right, in a very short period of time. I think maybe this is wrong, but I was looking at, uh, data earlier today that said the 24-hour volume on Trade XYZ was about 990 in the last 24 hours, which would make it like 12, 12.5% of all of hyper-liquid volume, which is actually incredible, uh, that it scaled that quickly. The, the infrastructure is still a little bit interesting to me because they have this The way they think about the oracle is that they do— there's been a lot of debate with Osteum versus Unit about how you think about the oracle here. But the way they do their oracle is they do, they do like kind of like an internal order book reference price during non-market hours. So they're still open during non-market hours, but they limit how far away or how much the price can move relative to the max leverage relative to its closing price when the market closed, when the reference market closed, right? And so to, to say that very clearly, and that probably— because that probably wasn't that clear— if a stock closes, uh, at after-hours trading at 8 PM on a Friday at $100 and you can get 10x leverage on that stock, then they don't allow it— the, the, the reference price to be more than $90 to $110. Over the weekend. Yeah, 10% because of the 10x leverage. It would be different if it was different leverage amounts, right?

Yeah.

And so the— so what it tells you is that, you know, they're still also very worried about the risk during these non-market hours. That is obviously the big unlock that— or the big concern that people have been focused on because the markets— and no more— the, the market makers haven't wanted to carry that amount of risk over, especially over the weekends, right? And so they're saying, okay, well, we'll let you bet on it, but not, you know, big moves. Which, you know, if you look at the way Bitcoin has moved on some of these, like, Trump tweets during tariffs on a Sunday, like, it still creates a lot of risk for the thing to just gap, you know, on a Sunday, right? And so I'm interested to see how it performs over that period of time because they've— Ostium was closing markets at market hours. They've decided— and, and the guys at HelloTrade who we backed, who are not live yet, they've been debating exactly how they want their, uh, market to work. And they're, they're kind of coming around to keeping it open but doing something similar to TradeXYZ. But there's still— there's a lot of— I, I see an opportunity or a lot of surface area for attack around those off hours. And I'll be interested to see how they perform during that time. Yeah, but congratulations to them. So far it's been incredibly, incredibly quick growth.

On this point, right, so like, it reminds me a lot of like after-hour trading. Like historically, probably is a problem that markets had to resolve, and it probably goes to, do you have a robust set of like market makers to, to, to create a market here after hours? Um, and if that's the case, then wouldn't it be economically solved? Like someone like Wintermute or Jump or someone can just, just make more money during these after hour, when the market's closed event, or how do you, as much as like, how much of it is like technological and, or how much of it is market structure?

And if it is like, so I think there was, um, maybe it was Tully or somebody said that, uh, that perps are the, uh, I, I forget exactly what, what, what he said, but I can paraphrase into like, perps are basically the hardest, single hardest smart contracts to write, which Most people will tell you that that is probably true. The single hardest application to build right now is perpetuals on-chain. And the attack vectors are, are very large economically. It's less like technical, it's like economically understanding how this works, right? And the, uh, the market makers, as you know, Santi, as well as anybody, uh, they're delta neutral, right? So like, they're not here, like, they're, they're trying, they need to hedge their risk. Somewhere else, right? And so on a Saturday, if you are exposed to large swings of a perpetual of NVIDIA, how do you hedge that? Like, what do you do? Like, overnight, Monday through Friday, you can probably do some sort of dirty hedging with the sun, right? Like, you can hedge in different markets as, like, you know, Asia opens and Europe opens and, you know, etc., right? So you don't have direct exposure, but you don't have— you have the correlated exposure. But I don't know how you do that on a Saturday, right? And so the weekends have always been the behemoth that everybody's been focused on, and you have to make sure you have the right amount of margin and collateral requirements. But I mean, we've seen what's happened in hyper liquid with Jelly Jelly, uh, and you and I talked about, um, I forget which token it was, but a similar type of, uh, economic attack a week or two ago that happened where they, they closed the bridge because they're Uh, they were able to change the oracle price very quickly, which caused a liquidation, which caused a loss on the, on the, the vault, right? And the same things can happen to the market makers when things gap because, uh, with all this leverage, right? And so that's the concern for the market makers over this, you know, period of time where it's hard for them to stay delta neutral.

Yeah. Historically, just the last point of observation on this, I remember when, um, Deepseek, I think came out over the weekend and like, how do you hedge to that? Right. It obviously has implications around Nvidia and some of these other players. And Bitcoin just took a hit. Historically, Bitcoin has absorbed that kind of a proxy, dirty proxy, or a point around hedging, especially over the weekend. Some like macro or geopolitical stuff, like people just go to Bitcoin and like short it or go long. We'll see how that continues to behave, but yeah. Pretty interesting developments.

I have another topic here, which is actually a small acquisition, but it's Coinbase acquired a company called Vector, which is built by the Tensor folks. And I think the acquisition is less interesting than what happens to a token at— during an acquisition. And there's both the before and the after. So before the acquisition came out, a couple days before, the token started running up. Token was up a couple hundred percent. And then after the acquisition, actually, I haven't looked, but I can assume what happened. Let's see. Yeah, token has— token has gone down. So here I can show— I can pull up the chart here so you guys can see it as well. So this is the chart of Tensor Token. And I think basically there's a couple conversations here. There's a conversation about yeah, this token running up from like $0.05 to $0.30 in the days leading up to an acquisition. There's also a conversation about as acquisitions, you know, it's kind of M&A season in crypto. They acquired the, the tech and the team. But what happens to the token? And does this token just go to zero over time? Should Coinbase buy out the token?

How?

Yeah, just, I don't know, it's kind of newfound territory. So I'd love to hear your guys' thoughts on this deal.

I think Santi should go. This is like the, the conversation here is like an anti-token conversation. It feels like a—

I thought we're getting into the precedent of you going first always, but, uh, look, uh, there's a couple of things to unpack. One, there was clear insider buying there, and I think that the Coinbase team addressed it quickly and they're looking into it. Um, I've known the Tensor guys for a bit. They bailed Tensor, which is a pretty good NFT marketplace in Solana. Then the Vector stuff. I don't know, honestly, is the simple answer. It has happened to one portfolio company of mine on a smaller scale, like Subsquid, I believe, went through this as well. And like they'd say the same things, which is the foundation will continue to operate. But yeah, look at that. Let's just double-click on that because to me that's sort of the most important thing. Like, ladies and gentlemen, no matter what you're doing, whether it's a— if you want to assume that these things are not securities and think that you're going to get away with this, clearly not. Um, so there was Omar. Shout out to Omar.

I think this is the thought. So just to walk listeners through it, if you're not watching on YouTube, it said— so Coinbase announcement: Coinbase is only acquiring Vector. The Tensor Foundation will remain independent from Coinbase and will steward the Tensor NFT marketplace and native token. Oh, see, that's interesting. So they— so Tensor was originally one of the big competitors of Magic Eden. I didn't realize that they're not buying the NFT marketplace. They're only acquiring Vector. Okay. So then due to—

I mean, their story here, I think, really is, listen, the, uh, the Tensor token and Tensor was originally started for the NFT marketplace, right? Like Magic Eden and Tensor, I think, were the largest NFT marketplaces on Solana. Yeah, they— as, you know, NFTs went away, they launched Vector. Vector was essentially a meme coin, uh, uh, DEX, uh, for— but, and, or trading platform. And the Tensor token, uh, because it was the same team, the Tensor token had exposure to the economics, uh, through, you know, potential buy and burn, etc., of both Vector and of Tensor itself, right? And so Coinbase comes on and they say, hey, listen, we want to buy a trading platform on Solana for— to sell to our users that's retail-focused because we are doing a lot more through the, you know, call it non-custodial app. And we think this will be interesting. I'm like, a bunch of these, you know, non-custodial trading platforms like FOMO, etc., have raised money recently. And Axiom is one of the biggest— for a time was one of the biggest businesses in crypto, was the biggest, the fastest growing business in YC last year, right? And Coinbase acquires them. The team goes over, presumably— and I have no information here— but presumably they get really big deals from Coinbase that, you know, make them relatively rich. They get a little bit of money up front, right? And they get the tech, and the Tensor token holders get nothing. The Tensor, you know, DAO, whoever the Tensor DAO is, you know, gets to continue to operate Tensor, right? And Coinbase, at a time, a period of time when Coinbase has been pushing, you know, quote-unquote, the tokenization of everything, right? Or this, this— so all of a sudden what we've seen is we've seen people all acted rationally, right? Which was that Coinbase only wanted the trading platform. They want— and they wanted the team. The The team is getting richer there and they're able to go and have better distribution in their Coinbase and everybody on the token side.

That's the key point. That's the key point. This, everyone acted rationally. This is, there's no crime. There's no bad actors here. Everyone acted how they should have acted, but there's clearly a loser, which is the holders.

Yeah. There's misaligned incentives with the token holders.

So that is the question. Can we, what, what are token rights? Like what, what, what is a token? What type of rights does a token confer to the holder? Again, I don't think there was a misrepresentation of that because we've danced around a regulatory environment.

I'm not saying there's a misrepresentation.

No, no.

I'm saying there's a misincentive and a misalignment.

Yeah. Yeah.

Which is bearish for other tokens. Right. And so this is the question, Santi, like in the, your point you can make it.

The, the interesting thing will be, I was not an investor in Tensor. I think at one point the Tensor token traded at like $1.5 billion. Now it's—

Do you remember your trade that you almost put on?

Oh yeah. Yeah. I would've crushed like like go long Tensorians. Um, nonetheless, uh, profitable trading strategy. Um, so, so I would want to— the only thing we haven't touched on is if you were an equity investor in Tensor, which I believe raised money at the, you know, when FTX collapsed, there was a bunch of angels that kind of gave him money. I think Dudas might have invested there. There's a lot of like diehard Solana guys. What happens to that equity? Because Historically, you do an equity investment, then they launch, then that maps out to some token supply that the team and the investors get. The Tensor token will continue to exist because the NFT still generates fees. And so if you had an NFT, well, that's different. But if you had the Tensor token, there's still a— like that protocol continues to operate, right? Now, the real question here is who exactly on the team And I think that's where I think, um, the Tensor team said, hey, we're— they're going into Coinbase, but there's like a staffed-up foundation that will continue to, uh, kind of operate the Tensor marketplace. Um, so the only thing that I haven't heard is if you invested in Tensor equity, what was the waterfall there?

Yeah, I mean, it's, it's a good question. In my experience in these things, like, you, you, they work out something where like the equity holders basically get nothing, right? Um, and I don't know, I don't know if the Tensor deals were SAFs or if it was like, you know, equity plus warrants, right? Um, uh, in a world where it's equity plus warrants, right, theoretically you own preferred equity if you're an investor, and then you sit on top of the waterfall, and then you also get the Token warrant. Um, you're, you're still on mute, Zonte.

Oh, and related entities. So like you would own, like if you as a founder and raise preferred equity from a sophisticated investor, if you start building other stuff, like the equity holder has a claim on that unless it's theoretically, yeah, I don't know the exact—

if you had a good, if you had a, if you had an investor put that into the—

it should have been that way. And, and, and to be fair, they did. And I'd have to go back and look at the, what the exact language was, but they did, uh, make it clear that the tensor token had economic exposure to Vector2, right? And so if the, if you, if you expected the, the token would have economic exposure, then you also expected the equity would have economic exposure, right? Like it was probably, uh, you know, structured that way. And so again, like it's not about misrepresentation, it's about like, what are we doing here? If, or when, what do we do going forward to make it so that tokens aren't just, you know, we're not just having a debate about, okay, well, what are their multiples? But in these types of situations, there's actual alignment from token holders and the economic outcomes. And if there's not, then are they just what, whatever loyalty points? And if they're just loyalty points, how do we value that? Because it's not valued on a price-to-sales multiple, right? And so like, there's just a— there's a— maybe we're not going to come to the answer on this podcast, but there is an existential question that is raised about our industry and about how much of it is structured and about the— some— the— where we are, and in part because of Gary Gensler and what the SEC did to tokens and where we do going forward, right? So there is a question being raised here, and maybe it's just Hey, like a new version of this SEC and CFTC, help us solve this. So we get a Clarity Act, or they go and do rulemaking, and we can, we can align more economic incentives and ownership. But it brings forth a question that we should all be thinking about, both as investors and as builders in this space, about what we do going forward. If we can sell a business that a token supposedly has economic, you know, exposure to without giving those people any money.

Yeah, it's a good case study along with Uniswap, uh, of how to structure, you know, legislation and policy going forward because yeah, it's, it doesn't seem fair for a token holder. But again, a SAFT, I hate to say it, but a SAFT is a receipt of sending someone money. Nothing else, nothing more. Simply thank you for your money. So you invested in all the ICOs. It was just that. And obviously that doesn't protect perhaps an unsuspecting investor that would've sat there and said, oh, I'm actually getting ownership into the work product of the, all these cryptographers and super stacked team.

Anything else from the week?

Happy Thanksgiving.

Happy Thanksgiving.

Should we talk about parachain? Should we talk about the parachain thing before?

Let's think about parachain. Yeah. Should we? I'm happy to go, Jano, if you don't want to give the, I mean, I'm one of your reporters, Jack, but I read through it, obviously.

No, Jack is great. I'm happy that he, you know, I'm happy that he had— what people didn't see is Jack had worked his ass off on the story and it was really just, you know, we, you know, shut down the news team, which, you know, we've already covered at length on Empire. But, you know, Jack had put a ton of work into the story. So I'm happy that he was able to get it out. But yeah, Santi, if you want to give context.

Basically the TL;DR is Bear Chain raised a round where Brevin Howard, an affiliate of Brevin Howard called Nova Digital, I believe participated in the round to the tune of $25 million. Greenberg participated in the round as well and a couple other folks. And there was a clause in there that only applied to Brevin Howard affiliate that allowed them to get a re— like, I allowed them get a reimbursement where if, if Barra didn't trade above a certain level, I believe it was $3, after TGE, I think a year or two after TGE, they had this— a year after TGE, they had this ability to request their money back. And so there's a couple— I think that characterizes it well. Rob or Yano, I don't know if there's anything else that you guys want to go into, but that's sort of the TL;DR. Where it gets— where the controversy lies is that it seems like other investors were not made aware of this, so, and didn't have this kind of side letter, particularly Framework. And I think that might trigger like most favored nation to sort of basically this clause that if you're a lead investor, you typically don't allow the team to give a preferential treatment to someone else. In this case, it appears that Nova, like this Brevin Howard affiliate, got more preferential terms than Framework. So that of course is something that Framework will have to figure out. And the second piece was how they marketed the deal, which is just as a, like an equity raise. But with that term, of course, it just is very different, right? It's kind of like a free option, so to speak, of Barra trading really well after TGE. And if it doesn't, like, basically, Brevin Howard just doesn't put any risk really, other than the fact that assuming that they're not going to burn through all that money. There's a lot of controversy on the timeline. There was some folks that said, hey, this is like not real. I think the— I haven't read fully the the response from the Barra team, but I don't know if Rob or Yano, if you guys did. I skimmed through some of the responses, Gabe Shapiro, folks.

As an investor in Barra, does this make you, like, do you, are you frustrated reading this or you don't really care?

No, of course I care. I haven't reached out to the team, but I will to get their thoughts on it. There was an official response from Barra, so we could probably pull that up. I think it was Captain Jack Sparrow or Smokey, the put a response. Smokey wrote a response. Yeah, Smokey wrote a response. Uh, so I, I, I don't want to mischaracterize it, but I will say as an investor, it definitely, it, it is definitely something that I pay attention to and want to talk with the team about. Because even, even though I didn't participate in that round, yeah, it, it just, uh, yeah, it's, it's, yeah.

I mean, so, so, so Smokey put out a, a response that was essentially like, Listen, the framing of the story was inaccurate, and the whole reason that Brevin did it was because of the need for protecting themselves against, you know, whether or not there was no TGE. And, you know, they've continued to hold the token, and they, you know, haven't exercised this right. And in fact, they've been, you know, market making and doing, you know, like liquid type of TVL deals, etc., on-chain. Um, and you know, they, he, they also denied that any other investor had an MFN, where, uh, Jack is saying that other investors told them they have MFNs. I'd be— I don't know if this is true or not. I'd be shocked if Framework didn't have an MFN. You would never co-lead a deal— well, I would never co-lead a deal not have an MFN. That would be insane, right? And so, um you know, there are— I think there are a lot of questions here. And maybe the broader point here is around just the opacity of which these deals continue to get done. And even when the tokens are launched, there is no, you know, way to have any disclosure around them, right? Because if all of the investors— like, like, if this was an SEC disclosure requirement, you would have to put out there that a current large shareholder has the ability to get a refund at some price directly from the company. Like the SEC would require that deal.

But that's not necessary. That's only on the private market.

Even on the private markets.

Yeah. The private markets.

But remember this refund rate exists 12 months after TG. Right.

So you're basically saying it's a public market because retail investors can have access to the token. Yeah, correct.

Because this affects the public market investors who have exposure to Bearish. You have a thing that's usually never private.

Like if Blockworks raised around, we had a side letter or MFN or whatever the rights that we give people, we don't have to share any of that. Just like, like, you know, all private, all private rounds, like Santi with Inversion. Like, if you guys had some special letter with Dragonfly, like, that doesn't— you don't have to share that.

We definitely have an MFN with Inversion, as all leads should.

But you don't have—

no one has to know that. You could say it more nicely, man. We definitely have an— no, like, I haven't heard a response from Framework, but yeah, it poses an interesting idea of like, again, on rulemaking, if you know you're going to have TGE and the docs reference TGE, then like you have to think about like, again, this is where like you can't fit old regulatory framework into these, into these rounds that eventually will map out to a token. Like even at TGE, you maybe the thing is, you know, you and I've talked about like Blockworks and the opportunity here, but like, creating like an EDGAR SEC where like when TG happens, these things need to be disclosed. By the way, I've seen some exchanges like Binance require like, give me basically every piece of documentation of all the rounds, all the major holders, their wallets. It's a colonoscopy. I would want to like, if you're an exchange that listed Barra, you probably saw this document. Especially if you're like a large— if you're Binance, they probably saw this document. Question is, why, why is it surfacing now?

Well, and I will tell you, maybe this is a good point, the, um, the Monad sale on Coinbase, one of the best parts of that launchpad, uh, sale that they had was that they did so much disclosure around it. And I expect that if Coinbase knew about a deal like this and they put this on the launchpad, they would have, uh, disclosed it as well. And that is what we need. We need more disclosure. Now Maybe that wouldn't have changed anything. I mean, Barrow's been down only since it listed. It's like $500 million market cap now, or FDV now, and it would launch at $3 billion. But, um, I, I think this is for me very much a, uh, a disclosure point. Um, but you know, because, because I don't care, like, if the investor doesn't do his diligence and he gets— loses money because of it as a private investor or venture capitalist, that's going to happen. Like, That's on me, right? If I, if this was me and, and this deal, like, that's on me, right?

Yeah, it would have. Look, if it is, so just to round out the point here, the response from the Bear team was like refuting it, or there are some elements of truth here but not all of it? It's kind of mischaracterized.

They refuted a little bit of it. Um, they basically refused to respond to any of Jack's direct questions. Um, it, it didn't, from, from my vantage point, it did not look particularly nice or good from, from what they've said.

I'll reach out to the team. I would want to talk. It's one of those things where if it were true, you would have just wanted to disclose it then and there. At least your lead, other co-lead Framework, and then to other investors. But yeah, I will be reaching out to Smokey.

Let's get into the content of the week. Go ahead, Rob. What kind of—

I was just gonna say, I really like this like extra long, uh, Thanksgiving week episode. So people when they're, you know, home and they're like, you know, trying to deal with their families, they're like, just listen to us for an hour and a half.

I love the long Thanksgiving walk where you're like, I can't take the fam anymore, I'm going on a long walk listening to Roundup. Yeah, listen to the Roundup. Um, all right, I got one. Mike Green. Um, Mike Green, who's a— I don't actually know what he does. He's like a fund manager, macro guy, Bitcoin per— I don't know, I just feel like he's like does the podcast circuit. Um, he's spoken at our events for years, actually been on our podcast. But anyways, great, great, great person, Mike Green. He wrote this, uh, Substack called Part 1: My Life is a Lie: How a Broken Benchmark Quietly Broke America. And he talks about, uh, I, I'm gonna— I'll share it in the Empire Telegram channel, um, so people can read it there. But basically the main takeaway is like, we thought that you needed, I don't know, $30K or $35K a year for minimum wage in America. Really, that number should be more like $140,000. It's a good read. I'm not— I'm going to— I'm going to botch it if I— I won't do it justice if I try to summarize it, but I'll drop a note in the— I'll drop the link in the Empire Telegram channel. It's a good read. It's related to Santi, what we were talking about, like, I don't know, 3 or 4 weeks ago about America and is the dream still alive. And so it was a good read.

I'm gonna cheat 'cause I also had that in my bookmarks. I saw a bunch of people that I really respect retweet it and comment on it. I guess to add more like an additional piece of content, it was Pranav that forwarded me Peter Thiel's lecture, which is, I've seen before, but it was just such a good one that I listen to it constantly, which is Competition is for Losers. Putting up at Salt, Sam Altman, that gives the introduction.

It's not his lecture on the Antichrist. I haven't seen that one.

Um, but, uh, it's just kind of— if you read Zero to One, great, great book. It's just a seminal, uh, lecture, and it's like 40 minutes, an hour. So again, if you're starving for content while you're overstuffed on, uh, you know, you know, turkey and whatnot, it's a great one. We'll link it in the show notes.

For real, guys. This is the weekend race with their family. Okay. They need something lighthearted.

And my life is a lie. Why?

Why middle-class does not exist. And you guys are out here just like, you know, getting really heavy. Give it to us, Rob.

Dude, you're going to give us a horror. You're going to give us a horror movie.

So what kind of Thanksgiving scary movie do you have?

Yeah. No, not this week. This week is rivalry week in college football. It is the best weekend of college football every year.

Go blue, go blue, baby. Ohio State.

Is that the best rivalry in sports against Michigan? Gonna blow them out. Watch it noon on Saturday.

That hat look way too big for Rob.

That's definitely a dad hat right there. You know, we're gonna have to get Empire hats. But what's, what's the poly market on that while we, you know, while we're at it?

I mean, I think Ohio State's best team in the, in the nation, so Let's see, uh, repeat champions this year, book it.

Ohio State.

So can you bet on the game? Can you bet on the game on Polly Market?

Yeah, yeah, you got me now. Yeah, you should be. The odds, responsibly, I meant to say, Buckeyes are 11-0, 78%. God, there's only 12,000 bucks on the line. Rob, how much of you are that? Is that all you, man?

It is obviously all me. I mean, the entirety of that market.

It's just the way— interesting. All right, all right, so Buckeyes wins it, I guess.

Go Bucks! Noon on Saturday, watch it.

Go Blue! Thanks for listening, folks. Happy Thanksgiving, folks.