Market Dynamics, Token Valuations, Eth vs Sol Scaling, and Crypto Politics | The Hivemind

inevitable that projects will want to, first of all, control their own block space. And second of all, be able to customize how their VM runs, gas tokens, like all sorts of stuff that people will want to customize. And so they'll want to move to L2s. And at that point, you end up with something pretty similar to what Ethereum has right now, which is maybe this thing is bad for ETH, the token, but it's good for developers. And if it's good for developers, it's good for users. Nothing said on The Hive Mind is a recommendation to buy or sell securities or tokens. This podcast is strictly for informational purposes only, and any views expressed by anyone on the show are solely our own opinions, not financial advice. Hi everyone, my name is Jose Macedo, and welcome to The Hive Mind podcast. Our first episode on Empire. Pretty excited to be here. We've actually been doing this for over a year, but excited to make it to the big leagues. So for those who don't know or haven't followed before, the goal of the podcast is to basically provide an inside look into what we like to call the Delphi hive mind, bringing together some of our brightest minds from each of the divisions to share insights, alpha, and shitposts. So today with us, we have Ceteris Paribus, who heads up our institutional research arm. We have Jan Lieberman, who is managing partner at Delphi Ventures. And we have venture partner Duncan, also known as Flood Capital, self-proclaimed gem hunter. I split my time between Delphi Ventures and Delphi Labs, our protocol R&D arm focused on incubating and accelerating new Web3 primitives. So To kick it off, we normally like to talk about markets. Just how's everyone feeling? Maybe Ceteris can start since the others are having a laughing fit.

Yeah, I don't know. I feel like this chop for the last 4 months is just kind of driving everyone insane, right? And so if you're like a trend trader or something, you're probably just like pulling your hair out at this point. Um, I don't know, it's hard to be like too bearish. I think so, like the dispersion, uh, has been pretty bad. And that's also another reason this is something like we've talked about a ton. And I had that thing on those like charts on Twitter the other day that kind of showed like how—

spaghetti chart table thing.

Yeah. I mean, it just shows how bad it's been.

Like, yeah, I mean, chopping Bitcoin down and mostly everything else.

It's like, it's like you have your, the three, right? Like BTC, SOL, all pretty good. And then you have entire sectors like down 50% plus. And it's like Modular and like Cosmos ECO are really just, it feels like there was like a big capitulation on Cosmos ECO like a week or two ago.

Modular is just code name for low float, high FDV launches.

Yeah, it's true. It's true. All of those. Well, because it's like a new sector, right?

It's a subset for sure of low float, high FDV.

Yeah, that is like, I guess, like an interesting point to make is that it's like they're all in the same sector. They all have the same kind of like low float, high FDV stuff just because they're all new.

Most sec— like most new coins are kind of— it's hard to get away from that unless you're doing a monstrous airdrop. Like structurally you're likely going to be high float or low float, high FTV.

Yeah, I'm just saying modular is like a new sector too. Right, exactly. So it's like, it's like what's actually driving that? Is it like bearishness on modularity or is it just that fact that they're all new?

Kind of probably the fact that they're all crazily valued. But I feel like it's, it's actually like pretty healthy because we've kind of seen Bitcoin bounce between like $70K to $60K, like $60K back to $70K, and it's done that a few times. So like Bitcoin's, you know, only 10-15% off all all-time highs, but you've had like a massive drawdown in these other sectors like memes and these low float high FDV, which is probably pretty healthy for the market because the market couldn't like keep on going up and support all those valuations. It was literally like, I forget when we counted it during like March, like January, February, March, April, there's probably hundreds of billions worth of like FDVs that had launched with these low floats. So, you know, bringing that forward in the future, if Bitcoin had kept going up to like $100K, that's like really heavy for the market to absorb. So this kind of chop that Bitcoin's in is a good digestion period for the market to kind of, you know, price these things down to where they should be and not have those really heavy unlocks like kind of dampen the run later on because it's just not sustainable, right? Like you can't have hundreds of billions of FDV on these infra projects that make no money. So I think it's healthy.

Yeah, I do think you'll probably see a period though where those all probably trend well as soon as, just 'cause they are like low CIRC, right? And so you could see—

This has been talked about kind of to death, right? Like I did a thread on it too. It's down probably 50% since then. And it was already like a lot talked about a lot then. At what point is this sort of like priced in?

Well, yeah, that's the point I was trying to— yeah.

And just markets generally as well, because I don't think you got to say your piece.

Yeah, I mean, I guess on Bitcoin, if you think about what kind of puts in a local bottom is just a lot of forced selling, right? Which is what we kind of saw in that nuke. You had a confluence of pain between the yen trade and soft macro data and then the jump fears. And, you know, all of that led to just a lot of selling, a lot of liquidations. And, you know, we were in the high 60s and all of a sudden we're touching 40s. And so I feel like that was a good place to put in a local bottom on BTC. Doesn't mean you get a V recovery bounce. You know, the same way we're talking about a lot of supply getting absorbed on the alts, there's been a lot of supply that did get absorbed on BTC from from Gox, from Germans, German selling, from, you know, you know, US moving coins and selling. And so, um, I do think, you know, like, part of the reason why despite all the inflows that BTC isn't higher is because there's been a lot of this absorption. I forgot that the total, it's like a couple hundred thousand BTC between all of them.

Yeah, and Grayscale, like Grayscale. Yeah, huge.

So I mean, it's, it's good to process this at not all-time highs, right? Because it's just eating into dry powder that, that would otherwise move the price less at higher prices. And so, um, yeah, I think you kind of expect some bullishness going into year-end, uh, into an election year where, you know, the incumbents will try and do whatever is possible to create a favorable environment to, you know, convince voters that this is because they're in office. And so I do think there's going to be more pandering to crypto and to broader markets. So I'm bullish going into year-end. It's funny, like, I think, you know, as it chops around, and I'm guilty of this too, you know, you overanalyze price and you're comparing it to what stocks are doing. It's like, oh, we're nuking stocks, so that's okay. And then stocks bounce and Bitcoin doesn't bounce, what's going on? And so I think it's just the nature of chop and it definitely just eats away at kind of mindshare and forces people to try and like overly focus on these like day-to-day moves.

Yeah, people are going crazy out there. To answer my own question on whether it's priced in, I think I agree with all of you that there's dispersions coming. Basically, there's definitely some— like, Majors, I think, are primed to do well. Um, I think a bunch of alts will, will do well. I think a lot of people will, will mid-curve and like obsess over unlocks, and I think a bunch of things will pump through their unlocks just like they did before, right? Like the Lidos and stuff.

Well, when the market's going up, it's easy. Yeah, everyone just diamond hands.

Every—

like, market's going up, everyone diamond hands, and then the market turns and it's just like everything nukes. And like those are the ones that sell off the hardest, but they can go up just as quick.

I, I do think there's like still a lot of pain in, in the long tail of alts just because there's— they're still up, they're still like billions of dollars, uh, or like tens of billions of dollars of, of unrealized gains that are going to unlock. And they're unlocking on much— and for a lot of these, the circulating market caps are kind of like fugazi, uh, like if you actually go look at what the real circulating supply is. It's sometimes like a fifth or a quarter, like definitely a fifth to half of what's reported because they managed to get like treasury tokens reported or they get— yeah, like there's a lot of different ways the teams game this. And so the real market cap is way lower than it seems. And the unlock in some cases, like that first Cliff unlock is like a few multiples of the current market cap, which is just like an absurd unlock. And I think you don't really need the narrative to shift for these things to go down just because you have like sellers that are up a ton that know that their thing, know better than anyone that their thing has no traction, right? And will be ready to sell in my view for a lot of these. For some of them, I really think unlocks are gonna be a buying opportunity. And a nothing burger and people are going to want to hold them through, through them.

We're starting it. We're about to start hitting the first wave of these unlocks. And I definitely agree you're going to get some bullish ones, particularly ones that had a lot of secondary market turnover. So I think TIA is probably going to be a bullish unlock.

I mean, TIA is probably—

that's a big $5 billion.

Yeah, but I mean, TIA is probably just going to set the narrative for everything. That's kind of like the poster child for like—

there was a lot of secondary volume on TIA above the current price.

So people that are—

that bought locked coins above the current price. Well, a lot is, a lot is relative though. I think it was right, but, but it's different.

The, the point being that it's, it's changing hands from someone who's got an insane amount of unrealized gain to someone who's now flat. So like that, you know, unrealized gain is, is naturally a seller.

Flat, yeah, potentially it's always bullish, but it's just there's a lot of unrealized gains and like secondary volumes are it's hard to make a huge dent in that. But you've definitely— it's nice also because you take it from the people that have the highest propensity to sell, right, and give it to people that are like flat. It definitely, that definitely dilutes a lot of it. I think TIA will, will be a— will set the tone for a lot of what comes after.

It really just depends on what's happening that week too, which is— yeah, like if it's a bullish week, it's gonna go up. If it's a shit week, there's no escaping gravity.

I guess I'm still just like not bullish on like DA tokens in general. And so that's like still what makes like the TIA thing. I mean, so the other thing I was going to say is like you're seeing some of these new projects come to market and they're not even that much higher off their last round. Like Avail's last round was $800 mil and they went public at like $1.4 or something like $1.4, $1.5 now. And that's before any unlocks even hit. Like, that thing is definitely trading secondaries below the last round, right? And so I think you're going to start to see that. I think you're going to start to see that like a lot.

I think the market's kind of catching on. I hope, I hope the market's catching on because we've seen just so many of these disastrous launches.

But anyway, we haven't though. We haven't. That's the thing, we haven't seen so many launches. From a price perspective on launch, for sure. But that's just like dynamics of launching. Like for the investors in those rounds, we haven't seen— that's why I don't think it's over yet is it's because you can still make money doing these like pre-launch rounds and then it launches above your valuation. And obviously it's going to be tough to get liquidity on it.

Yeah, that's a paper gain though. I don't think it's that like that's really a winning formula to make money. Um, because you're— I mean, if, yeah, if you bought it at $800, it's trading at $1.4, you're going to be selling it at a 50 or 60% discount. So you're down if you're trying to sell OTC on a, on a price that's, you know, a little less than 2x.

But that's like taking the worst example, right? Like taking one of the— or one of the worst examples where investors are kind of up the least. I think for a lot of these, you still have like a big delta. Like they're still Somehow people on Binance and Bybit like buying these things on launch and holding them and pricing them above previous round.

Yeah, I think their rationale though is there's no unlock coming anytime soon, right? So this is just like a game I get to play until there's a new supply hitting the market.

That's the other thing for me. It's like if you want to express bullish view on crypto, last cycle there's only a few coins you can buy. Now there's like constantly new coins launching which have reset unlock schedule. So you can just like dump the old one and that's unlocking and get the new one or get a meme that doesn't even have any of these dynamics. So I just think there's so much more competition for capital plus like these billions of dollars of unlocks that's going to make, make it painful for some of these things to find.

Oh, there are definitely some like kingmaker pair trades too.

Yeah, 100%.

Yeah. But I think this is how I think we can all agree that this period, like even though Bitcoin's only 15% off the high, everyone's like feeling like this is a bear market because all the alts have gone down like 70%. But it is a healthy period of digestion in the market because that couldn't keep going. How, like, what we saw in March is just like not sustainable going forward. And we've had a lot of digestion. So I think overall it's healthy for the market.

Of course, like Jose, I mean, Jose made this point though in the last pod, how it was like in traditional venture, most things that go to zero never become liquid, right? And this, everything goes public here. And so there's going to be some massive— things are going to go from multi-billions to zero over the next few years.

Well, I think that's why you get— there's appetite to invest at these vals because that contributes to why the val— never in traditional venture would something with this level of revenue and profitability raise at this val, right? Series A's with no business model raising at mid-9 figs because, you know, you have a path to liquidity. So I can take a lot more risk on the valuation side because it's, it's not a binary outcome. There's like a spectrum of kind of exits I can get where I can at least recoup some money.

Yeah, that's a big— I think people still don't realize how good a venture, how good an asset class. So crypto venture gets a lot of hate. I still think people don't realize how good an asset class it is. And yeah, what you said is true. It's like in venture, you probably have like a fraction of a percent of companies that go public. I actually tried to find exact stats, but it's hard. And then in crypto, it's probably like a few orders of magnitude higher.

Everyone will launch.

Not everyone. Some things never— some things like founder has regulatory concerns or like there's a lot of things that don't launch a token. Trust us. Yeah. So there's things that don't launch a token, but most things do. And, and like a lot of these things launch a token before they launch a product, and sometimes they have derivatives for the token before they launch a product too. So there's just like these dynamics where people are going to be making a bunch of money on both sides of these trades for things that are like super early stage and sometimes don't even like launch a product, or launching a product is bullish— is bearish, right? Because now you have something to judge, whereas before it's just, just pure narrative. Kind of like EigenLayer doing this, like if they do slashing or whatever, like, you know, it just makes the calculus for supply side is way worse.

I think like we haven't really seen, because if you're actually to vest your entire like venture position in some of these, it's usually like a year cliff and then 2-year, 4-year vest. So I think it's kind of TBD on if you don't sell OTC, if you'll actually be up on, on some of these projects. But it's definitely like attractive versus regular venture investing. I also think it creates a lot of opportunities in like the liquid markets where, you know, these projects have launched either like a previous cycle and have drawn down a lot, or they didn't take VC capital, or they just like launched at a reasonable valuation to like get in at an early stage. But yeah, you kind of have to remember if you're going outside of like BTC, ETH, and SOL, like you're playing with basically like venture investments and you have to be really cognizant of the supply dynamics and also just like if the product's actually going to get traction and be around in a few years from now. If you're not just, just trading, if you actually want to like invest in this asset.

Gemcoin Hunter, a man of the people, looking out for the common man.

Well, it seems like a lot of people are trying to run with like the OG DeFi narrative over the last few weeks. I was going to say, I think that a big part of that just has to do with the fact that they are fully unlocked.

And like, even if they also have a business, like something.

Yeah, but it's like, I don't— I still think they're overvalued, like, personally. But I can still see them doing well because people want something. People are sick of the low float stuff. They're sick of like the meme coin stuff. They want something real to bid. And so I could maybe see a bit of that, but yeah, it's hard for me to get too excited personally.

I mean, you say that, like, what's Solana's, what's Solana's like actual earnings? Like if you take out inflation, like what's their total economic value minus?

It's a lot. It's like close to Ethereum now.

But that's like, that doesn't take a discount inflation, right? That's just their inflation.

I mean, inflation has nothing to do with that.

But it's a platform, so you can price in a lot more growth versus these, these like things that are clearly not platforms.

Inflation is not a cost. Inflation is a cost to the amount. Okay. If you want to say inflation is a cost, you have to, there's like, you need to basically figure out what percent of the inflation is like a high propensity to be spent. And so, you know, you can kind of come up with like some average tax rate for the network. And so maybe you guess it's like 20%. right? And so you can say if inflation is like 6% on something, then maybe like the real selling pressure you'll get is like 1.2%, right? And then the other one is, is the thing that we talk about all the, all the time is like these locked tokens that people are allowed to stake. Those are basically all sold a lot of the time, but like in a vacuum inflation, I think people overanalyze inflation. It doesn't matter. It's just, It's like demerit for non-stakers, basically.

On the way up, it, it, it does. I guess on the way up, you know, there's, there's propensity to hold, right? Because you figure the, the validators or whoever are, are high conviction and they need to sell a certain amount to fund costs, and then the rest, they kind of want to hold and play for the upside. But eventually, you know, it's going to come due. It's basically like stock-based comp, right?

Exactly. I see the stock-based comp.

No, I agree with Cedrus. It's like if you're holding Solana and you stake it, yeah, you're losing. It's like 7% staking rate right now. You get charged a 10% fee. So like the dilution is just that 70 bips or whatever. Because if every— if you stake it, then you're not getting diluted.

Yeah, like sure, the price might go down by like— but the market cap is going to go up. You own the same percentage. It like doesn't matter.

I mean, if you're staking, yeah, you're just— you're just staying the same, staying, staying put.

But no, like, I mean, Solana— no, but like Solana validators make a lot of like real revenue now that it's like worth it for them even without the inflation. Now, I will say like Solana, the validator centralization has been like getting a bit worse over the past year.

How did we get onto that?

I don't know. We were talking about inflation.

Yeah, we don't have to go down this road.

We don't have to go down this road. We don't have to go down this road.

I mean, I did want to touch base on something. Yan said, maybe we can, maybe we don't have to go back here, but just on CryptoVenture, because it is the reason a lot more stuff gets funded in CryptoVenture and people FUD it a lot. But it's just the fact that it's such an attractive asset class because you have the liquidity and the liquidity enables you to both like take risk off the table much sooner, right? You don't have to wait for this binary outcome. Like you can sort of reassess at every incremental time period. You don't have to just wait for it to go public or something like this and, you know, face like a Theranos or something. Or even like FTX is a really good example, right? Equity holders got torched, but like token holders like Multicoin did— I think they said they sold most of it at $20 or something in their annual report. So like if you have the token, you can get out. It's just such a difference, right? And then the second thing is you can back things that don't, that can't IPO or get acquired, but are still really good businesses, right? And there's like a huge range of things like that in crypto, which would never be able to IPO or get acquired, but are still good businesses. And with a token, you're able to like, if like in, in crypto venture, there's like a, or like a normal venture, there's this probability distribution, let's say like an expected value distribution, all the different ways that you can generate like a high expected value, like some of them is like 1% of the time you do really fucking well and 99% of the time you get torched. And then there's businesses that are way safer, right? Where 60% of the time they do good, but not like insanely startup, like Google-like outcome, but they're way less risky and they succeed way more often. You can actually invest in the entire distribution as crypto venture, whereas as a normal venture investor, you just can't. So I think that's the reason that it's still like one of the most attractive places to be in my mind.

But, uh, for sure. And not only just for like VCs, even if you're just like a retail investor, if you put in a lot of work, you can find projects that don't have any VCs and like organically launch. Like two that come to mind, there's like GMX last cycle, didn't take any VC money, it did really well. Banana this cycle, didn't take any VC money, it did really well. They both launched at like very reasonable valuations. On-chain, and you can find those. They definitely exist. So it's not just for if you're like a VC. Like, you can find these as retail investors. You just have to be, you know, really brilliant.

Yeah.

Or following my Twitter.

All right, we want to move on. We want to go into the Solana ETH thing, or like, there was this ETH panel that I thought was worth discussing, uh, it was posted in Reads. It's like Justin Drake, Vitalik, uh, Sebastian, ex-Flashbots, now doing the thing whose name escapes me, and a few other people.

One Balance? And it was just—

who was it?

No, no, wait, are you talking about Stefan? Or—

yeah, Stefan from ex-Flashbots. And there was someone— there was the guy, there was Chris from Anoma there. There was a bunch— it was a star-studded, like, uh, sort of like nerd snipe panel for sure. And within it, like Vitalik basically says sort of verbatim, in an ideal world, there would be no DeFi. Like, I think he was referring to the L1. Like, in an ideal world, there would be no DeFi on the L1. And then later on, like, Justin Drake says something like, yeah, I thought the use cases would just be like sending tokens and stuff. But then I spoke to Paradigm and they were like, no, we need we need token swaps, you know, and to me it was just like shocking the disconnect between the ETH and, by the way, I'm bullish ETH. I actually hold more ETH than SOL right now. I don't quite know why, but I do. And yeah, but it was shocking to me to see the disconnect where these guys just don't use the chain and they're sort of dismissive of all the, I mean, to be fair, it's just like buying meme coins and DeFi and stuff, but they're very dismissive and ivory tower. And there's been a trend of this throughout the year, right? Like Vitalik's post about not being single-issue voters, like basically an anti-Trump post. His thing about how celebrity coins should give money to charity or whatever, rather than doing like— there's better things to do with the money. Like there's just been a trend of a bit of a disconnect. And I'm torn because I love Vitalik. Like he's one of the OGs, like been in the industry for so long, has always been uncorruptible in terms of like in an industry where it's so easy to get corrupted. The dude's been totally like uncorruptible, very balanced, etc. But also it kind of sucks that these people are so disconnected from what's actually happening on-chain and the degen culture, I guess. And yeah, I think I'll probably have to do the ETH bull case because I think I think you guys are— yeah, but we can do that later.

I mean, I think it was Foobar had this good post yesterday and like the entirety of the scaling roadmap for Ethereum is based on this idea that like sending tokens is the use case. And when it's like the use case most people care about are swaps, right? And that's like a fundamentally different problem that you're solving. And it is why like the liquidity fragmentation that people talk to death now was never seen as like a massive issue because if you're just sending tokens, it actually doesn't matter that much. But when the entire use case revolves around like having liquidity and trading, then this is why you see integrated monolithic type architectures do well. It's why you're seeing a lot of excitement on these, you know, these paralyzed EVMs, the L2s that are coming out, right? These high performance L2s that are completely centralized, um, like one single beefy node, uh, but they can do a ton of transactions, right? And you're even seeing it with like 4844 when Ethereum reduced its DA costs a lot. You've seen like a big You've seen like the power laws get more extreme where like Base and Arbitrum have continued to like grow and everything else is either like flat or down, right?

It's like you need some sort of chain or something to connect all of these together.

Well, no, it's almost the opposite. It's like people showing that they really don't want to use multiple things. They want to use one thing, right?

One unified chain.

Yeah, I saw, I saw Chow from Alliance yesterday. He was like, it's Base versus Solana and That's like, I don't know, man. Like, I'm not—

well, let's talk about the stuff that Ethereum has going for it because I feel like right now it's pretty consensus that SOL is just the place where marginal buyers are going, marginal users are going. It's giving you these cheap swaps, all the meme coins are there. So yeah, maybe we could talk a bit about ETH. I don't know, Jose.

I think it's like fixable. I think a lot of their stuff is fixable. I think like Max Resnick from ConsenSys and SMG has really been pushing this like multiple concurrent proposers thing on the L1, right? And trying to get more.

Okay. What does that do in English, please?

It helps reduce MEV because most MEV is like you have, uh, but that's not the issue with the L1, right?

Yeah.

No, no, no. But no, but you can, that's the issue. Yeah. Yeah. But you also, he's also like, he's very against the whole Raspberry Pi. Philosophy, right? Getting rid of that.

He wants to scale. A lot of people want to scale the L1.

Yeah, because people want to use the L1.

I mean, I think the benefit of the L2s is that you now have— so the question is like, what you lose in fees, you need to make up in moneyness, right? Like the appetite to hold ETH and use it. Increases more than the fundamental value of ETH decreases because all the transactions are now on the L2. So, which I think is like a decent argument to make. I think in the grand scheme of things, the, you know, supply burning thing was more meme than anything, right? Because like, the degree to which the supply was burning is negligible. So it's more memetic than actual you know, like supply constraint, supply constraining. So I think, you know, the argument on the L2s is you now have different communities incentivized with their token. We're not saying those tokens are good investments, but they're going to be used to try and get people to come build and use their platform. And in all those scenarios, you're using ETH as gas. And so like you're gaining moneyness on that side.

No, but here's the thing. So the burn, first of all, yes, it's like memetic, but it's strong memetic. And I listen to these TradFi podcasts, and when they bring them up, they're like, oh yeah, I like that, it's like a stock buyback, I like that, I'm on board with that. And the thing is, before ETH had this, if you, if you look at ETH like pre-1559 proof of work, it was purely a recycled asset, right? Because miners would get all the fees and then they just sell it, and that's why ETH never did well. And then as soon as 1559 went into play, it pumped from like whatever, $100 to like $4K. And in the L2 roadmap, you kind of go back to the same architecture, right? It's like, yes, the L2s are using ETH as gas, but the L2s barely have to pay any money back to the L1. And so they're just like recycling it. And you go back to the same thing that it was in the past, that like nobody— Right.

But you have way more holders now, right? That's the trade-off. Is it increases the money in this?

So like, what is losing? It's better for users. I don't know.

Why is it better for developers?

Yeah, well, my, like, you know, the meme of the guy standing up on his own or whatever. Like, I think it's like the L2 roadmap is actually good. Like, I think it actually makes sense. And I don't know, we published this report recently on the portal, Solana the Modular, which is a play on the Solana the Monolith report from a year ago. Which I'll give you your shout out, Ceteris. You put out a bull report pretty close to the bottom. It was a good one. And then Solana, the modular, it's sort of like, there's an interesting analysis there. It's very back of the envelope, but it just shows how Solana, even at a million TPS, which is sort of what Firedancer hopes to provide, can sustain maybe 20 million users, right? Especially in this like agent world that we're moving towards. And I think it's clear, like what kind of the ETH people realized very early on is that no amount of scaling on the L1 would make it good, would make it able to have everyone on it. And so you would always need to fragment. And the L2s, I think, provide really good UX benefits. And it's not just like scalability in terms of being able to scale horizontally. It's also customization. Like we're already seeing that on Solana, right? With these 5 Solana L2s, it's like, like Zeta and Code and Grass, they're all building L2s that are customized in their own ways, suit their own purposes. And because they're realizing that they can't get everything they want from Solana, right? Because when you use an L1, you inherit every design or a lot of design decisions. You have some obviously design space with smart contracts, but a lot of stuff you inherit from the L1. And to me, it's inevitable that projects will want to, first of all, control their own block space. And second of all, be able to customize, like how their VM runs, gas tokens, like all sorts of stuff that people will want to customize. And so they'll want to move to L2s. And at that point, you end up with something pretty similar to like what Ethereum has right now, which is maybe this thing is bad for ETH, the token, but it's good for developers. And if it's good for developers, it's good for users. And I don't think— and the Base versus Soul thing, I think it's very like right now, clearly it's Base versus Sol, but this is sort of assuming that the only thing people will ever do on these chains is trade tokens and trade meme coins. And like, these are the two things that have the most traction right now. And you're assuming these are the only things that will ever have traction. I think if you wanted— if we assume that more shit will be done on-chain, I do think the L2 roadmap and like app-specific L2s make a lot of sense. And then just last thing, I don't actually think this is bad for ETH because I don't think any— well, I agree with what you say that ETH lost out on fee revenue and stuff like this, but I don't think people buy these assets for their cash flow. You know, I don't think people are buying Solana for its cash flow.

Yeah, they are. Yeah, they are. 100%.

And look how much ETH, like every L2, the biggest asset that's bridged to these L2s is ETH. Like ETH is money. Bankless are right. ETH is money on these L2s.

Here's the thing, your whole L2, the best, the best L1 to have for an ecosystem of rollups is a performant L1 that has like short block times and a lot of DA capacity. And so this is also why you're seeing on Solana, Solana doesn't have these generalized rollups. They actually do have app-specific rollups, whereas on Ethereum, they're all these generalized ones because you still can't launch on the L1. So I think like the mental decision, if you're building an SVM, is also a lot cleaner because if you want shared state, you can just launch on the L1. And then if you want to have your own block space, then you just make this AppChain thing as an L2. So I do think that Solana is going to like back into having a lot of app rollups, which is actually kind of like Cosmos thesis. And I think if you go back, I think the biggest problem with the Cosmos go-to-market and what they missed is I still think they're— I actually agree, like a lot of these things will be appchains at the end of the day. I think that the transition period to get there though is what Cosmos messed up on. And you need like some central liquidity hub to get like a lot of developers, to get a lot of money where everybody just is. And then you make like the appchains after. And Cosmos went like straight appchains from day one. And then you could never build, you could never build liquidity. You can never get like enough developers. And that's why I think Solana now is like ironically going to start crushing the app chain game because they have this good place that they're like starting at.

So you think just Solana is better at hosting L2s than Ethereum will be? Or like app-specific chains?

It depends what you want. Like I do think there's going to be, yeah, way higher, way higher ratio of app chain to generalized. Like even all the generalized—

so that the argument you're making though is, is still one in favor of L2s on ETH. It's just, you're just right, like you're saying that the path to getting there on Solana is, is more favorable, but in the end, right, the consensus is that these are necessary.

Yeah, but like, I know everyone's going to end up in approximately the same spot, but how you get there matters.

This is where I'm like, shill one of our portfolio companies where I'm bullish Initia and these projects that are actually building for the rollup world. Because I think both Solana and ETH are optimized. I mean, ETH is obviously like a very old tech in the crypto space. There's a bunch of things they've inherited that don't make sense. Like Lido and LSTs kind of destroyed the whole solo staking thing and made it— and there was so much engineering effort that went into that. And I don't understand the Solana stack as deeply, but I'm sure there's things like that there too. And so if you accept that it's a rollup world, then you kind of want things that are built— like, what do you actually want from an L1? I think that's a really interesting question because all these rollups—

liquidity.

Exactly. I think it's like liquidity, canonical assets with liquidity, right? You want like all the USDC and WBTC, everything to be issued natively on the L1 and then to have an easy bridge to your rollup. You want that. You want users, you want like a decent wallet, make it very easy to deploy. Like it's these basic things and like none of that captures much value, right? You can't like capture much value for all that. There's definitely network effects to it because yeah, liquidity has network effects, but it's just like, it's, yeah, it's an interesting, like the L2 world is interesting because it does keep like everything ends up like ETH right now, right? Like SO ends up, like ETH right now too. The only things that will be on mainnet SOL are the things that need like shared state, which, you know, it doesn't seem like there's that many of them.

The thing is, I was talking to Dono from L2Beat just on like Twitter the other day, and he made the point— I talked about with like 444 how Base and Arbitrum have just seen massive increases at the expense of everyone else. And this is kind of the way interoperability will go too. And he was kind of saying how like all the liquidity might just go to Base over the next couple of years, and then that kind of like kills the Superchain thesis, and now Base just like owns all the liquidity. And so I think like, and that's in, in this instance, Base is like this L2 to Ethereum, but now it owns all the liquidity. Sure, it's paying the DA to ETH, It's basically an L1 at that point. And now it's just like run by Coinbase. I think that's like a, and like this, it kind of kills a lot of these other chains. I think that is like, when people think about the L2 future, they're thinking about all these like thousands of rollups that are like marginally equal in activity and all this, but you could still just come with the same power laws.

I don't know. I think there's a bunch of applications where it makes sense for you to have your own L2. I think one, one example is like Athena announced their chain, right? Still unclear whether that's going to be a chain or an L2 or whatever. But to me, that makes a lot of sense. Like you have your own stablecoin, having a chain that's built around that product where all the apps are built around that product. You have a uniform user experience. You can use USD as the gas token. Makes a lot of sense. And there's loads of examples like this. Ronin, right, is another app-specific L2. Like what Immutable has done with Polygon. I think there's just like endless examples where app-specific stuff makes sense. And I agree Base maybe wins the generalized rollup or like is very well positioned to win the generalized rollup. But there's still, I think there's still going to be app-specific stuff that kind of makes sense.

No, yeah, I think there'll be a lot of, I don't want to like misspeak. I think there'll be a lot of that.

Oh yeah, I feel like we talked about this a lot.

Yeah, agreed.

So maybe move on. But last, last thing, just to sum everything up, because I feel like we were getting into some technical stuff and in case people aren't following, like, I feel like why you would launch an L2 is for ETH's liquidity, right? And, you know, developer base, but realistically over time, something like Base, if they get enough users on there and have the distribution through Coinbase, You know, why does that necessarily need to be tied to ETH? So that's like something to think about.

Or SOL.

Yeah. Or SOL, right?

Yeah. All right. What do you want to hit next? You want to do Crypto for Harris politics stuff or do you want to do the EigenLayer drama that just dropped with their team members getting—

I don't know. A lot of people— I mean, so a lot of people are talking about how, like, as Kamala's odds have increased, price has like done worse. I feel like it's probably just random. I don't know how like people feel about that.

Well, I think like the current administration, I think if anyone hasn't listened to it, A16z has a really good podcast out. I think it's titled like A16z Little Tech Trump, something like that. But basically, yeah, Ben Horowitz and Marc Andreessen who are like lifelong Democrats go through how now like they're voting for Trump in this upcoming election because they feel like his policies are much better for innovation. And I think they touch upon crypto, AI, some capital gains tax stuff, but maybe there's one more topic, but it's really good to go listen to. I guess why, like Kamala, they're talking about this reset, but you know, she's in office right now and the Democrats have been pretty negative towards crypto. So I think Bitcoin and Ether are going to be fine because they have the ETFs, but probably the smaller stuff and like the DeFi regulation and that sort of thing, you know, is probably—

Yeah, it's also the people that she's mentioned she's bringing in are, have historically been incredibly anti-crypto. So it's, you know, follow what they're doing, not what they're saying. And the appointees she's bringing in have not been friendly towards it. So I think it'd be pretty naive to assume that what's happening now is anything other than kind of flimsy pandering after realizing that there's a decent amount of votes and donations from this voter base that they're missing out on. Yeah, it seemed like that, that Crypto for Harris, which, yeah, calling it Crypto for Harris and not Harris for Crypto seems like a pretty simple mistake to avoid. But, um, I, I didn't really listen to it, but, uh, just kind of tuning into a bunch of those who— or felt like, you know, getting feedback from a bunch of those who did, who are pretty objective, not really leaning one way or the other. It seemed, uh, like a loose effort, um, and a weak one at that, right? It was some live, some pre-recorded, but all of it was basically just kind of reading pre-made statements that were generic and not really saying much. And then at the end, asking for donations, of course.

Yeah. And on the other hand, Trump— and by the way, obviously I'm not American and I don't have like great political takes, I don't think. But listening to Trump's speech, at the Bitcoin conference, that was like an insane, you know, like everything you could have hoped for. I mean, maybe RFK's was even better, but Trump's is like everything you could have hoped for from a president, right? In terms of what he said, like, right, self-custody, Bitcoin in the strategic reserve. It's like insanely bullish crypto, like understands it, firing Gensler. And on the other hand, Harris, it's hard to figure out her policies on anything, but definitely on crypto, It's been— there's just been nothing. And I do think it's very bearish if— because it just makes it hard to build crypto projects in the US. And the US has most of the talent and most of the capital in the world. Like, realistically, most of the dev talent, most of the capital is there. And so if Gensler keeps going, and it's just going to be so bad for the I think it's very bad for innovation and for the, for the industry. I mean, all this stuff is pretty obvious.

Like, I think you can make the argument that, that Harris is like bullish Bitcoin's bullish memes, right? Because they're just going to keep spending, which should kind of continue the existing tailwinds for crypto, which is, you know, currency debasement, etc., etc. And so that, that's bullish Bitcoin. And then She's obviously going to be very stringent on the regulatory side, which is kind of bearish any L1s and a lot of the protocols, but bullish memes that are very clearly not securities and they're just other ways for people to cycle BTC gains or put in fresh powder. Whereas I think Trump is kind of ends up being a bit more bullish everything.

I mean, maybe just quick comments on the Eigenlayer thing and then we can end it. What do you think? This Eigenlayer? And by the way, where small investors in EigenLayer Ventures.

So, yeah. Yeah, I don't know. So the thing is, they gave team wallets to a bunch of projects that were building on top of EigenLayer so they could give them airdrops. Yeah, I don't— I mean, I don't think it's a good thing. I mean, I know that it happens a lot. I don't know how much there is to say about it. Like, I don't know.

Bad. Yeah, bad.

Unethical.

Yeah, I don't think it's good.

I mean, but like, you know, Celestia airdrop to contributors to the Cosmos SDK and like to GitHub handles, there was a lot of manual stuff. Like, airdrops always have a bunch of manual stuff. And like, realistically, these projects would not exist were it not for Eigenlayer. I can see why it would be like gesture to try to airdrop to the EigenLayer team, right? Like, you built the infrastructure on which my LRT exists. I want to reward you for that in the same way that people do with airdrops, try and reward people who contributed to the space overall. If there was any, and they mentioned there was, like, some teams felt pressured to do it, that's obviously not cool. But the thing itself, I think, is kind of like an offshoot of what already happens with—

yeah, I think you just have to disclose it, to be honest. The fact that it comes out through an article is not great, but if you're, if you're kind of upfront about it, then it's easy to rationalize, and it doesn't feel like you're doing something sneaky. Because I mean, you know, the same arguments directionally can be made about the whole, why is this NFT community getting this airdrop? It's like, all right, insiders doing insider things.

And then, I mean, restaking as a whole Yeah, maybe we don't have time to get into that.

I mean, we have, I don't know. I think we've yet to see anything truly interesting with restaking. Yeah, I think EigenDA mainnet just went live. And so thing is, I think they're starting off with like 10 ETH of rewards per month and that's shared across like everyone, right? So it's just like immaterial, like it's no money.

So yeah, I mean, my thing is I think restaking as a concept makes a lot of sense. Like, you want economic value securing people doing things on-chain that can't be secured trustlessly, so you can slash and stuff like this. I just think no one cares about it right now in crypto, and there's like ample evidence that economic security is just a meme, right? Everything from chains like with very low market caps not being attacked to chains being attacked and the price not reacting at all to the, you know, all these oracles that all of DeFi relies on that are sort of multisigs or admin keys. There's like, I think, a lot of evidence that it doesn't matter right now. Hopefully, if the industry matures at some point, it will matter. But even if it does matter, I don't think it warrants the amount of investment and attention and mindshare that has gone into the various clones and offshoots of like restaking for X, you know, I just think a lot of that has been a huge waste of capital and, and, uh, and like sort of time.

I would also say the biggest shift in restaking over the past few months is that like restaking when it was pitched was like, oh, this is bullish for ETH, right? It was pitched as like a solution for ETH, the asset. Right? It wasn't pitched as like, people want AVSs. It was, this will be good for ETH. And now you can just use any asset you want. Like, you can use Athena Stable, you can use— like, it's pretty generalizable. Um, you can use most things now because restaking is a primitive. Like, yeah, you can use whatever. You can use a Bored Ape, right? Like, it doesn't matter. Um, and so you're seeing that aspect open up a lot. And you're even seeing now like AVSs will be able to stake their own tokens. So we've kind of come like full circle in a little sense where it's like now you are reintroducing the native token of the protocol to be used as staking. And like, sure, you can have other assets backing it too. So it's not just based on the protocol's token, but like, I think that's the biggest change we've seen in just the overall restaking narrative.

Um, yeah, yeah, it feels kind of overhyped. Like, you're never going to get enough economic value. It seems like they have so much TVL now that— are they really going to be able to generate enough, like, a natural yield, not through inflation, to, to make it worth it taking on the extra risk or just, like, supporting these valuations? Probably not, but I guess we'll see.

Yeah, the mad size is always a tough thing, especially when for a lot of these projects, you're competing with their native token, right? Which they can use for securing stuff.

Entirely. It's all subsidized, right?

Yeah. All right, guys. Yeah. Good first episode. We suck at ending these things. Maybe we can all say bye this time, make it a bit less awkward. Thanks very much for tuning in to our first episode of the Hive Mind on Empire. Hope you enjoyed. Please subscribe. Is that a thing? Yes, please subscribe. Please tweet at us with what?

Get a new laptop.

Yeah, Duncan, please get a new laptop so we don't have storage issues anymore. And yeah, thanks very much for tuning in. Tweet at us with anything you want us to talk about next time.

We love you.

There is no time.

All right, goodbye.

Thank you.