The Biggest Winner from Hyperliquid’s USDH | Weekly Roundup

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. And we're back. Take 2. Roundup, baby. Rob, Santi, what's up?

Excited to be here.

How we doing, gents?

Traveling a little bit. So we're recording Friday, we usually record Thursday, and we, we try to move around because our schedules are hectic. And, uh, Rob was like, I can't, 10:30 PM, that's, that's rough. And, and, you know, I was like, welcome to my life, Rob.

I know Rob was— Rob's already bitching about the late night recordings. I'm like, Santi's been recording at midnight. Every, every week for 4 years.

Listen, I'm not made like Santi, okay? Just like, don't, don't make me have to do it.

I don't, Santi, I don't understand your sleep schedule.

It's, it's all, it's all screwed up. But I, I go to bed, uh, probably around 2, 3 in the morning and then I wake up on the later side. Like I, I do try to get my 7 hours of sleep.

So you're like a 3 to 10 guy?

Yeah, exactly. Well, pretty much everyone on the team is based in New York or West Coast and so I, it's good cuz I sort of wake up, have a couple hours to myself, work out and stuff, and then day really starts at like 1, 2 PM for me.

Nice. Nice.

I can't do that. I'm the opposite. I'm like, you know, try to be in bed at 10, 11, up at 5 AM, like, you know, hit the gym, get the day going. So like it, it's the late nights. I'm like trying to do work and it becomes like mush, to be honest.

I, I like the late nights cuz then no one's bothering you. That's why, or early mornings, early mornings are—

no one's bothering me at 5:30 in the morning either.

So, I'll make a note, Rob, to ping you at 5 in the morning.

Oh, hi.

New York time.

Yeah.

Just test Rob every morning.

Yeah, you should. Like, listen, when you wake up, it's like 11:00 AM in Monaco. You should just shoot me a note and like, I'll jump on the phone with you from bed.

To be fair, I had to, like, every time I ping Rob, it's like within 5 minutes we get on the phone. It's like, I don't know, a lot of people pride themselves on how quickly they respond. I think Rob and I just have PTSD from Like investment banking days where if you didn't respond in 5 minutes, that BlackBerry, the CrackBerry, you would get absolutely whipped by the MD. So you have a funny story. So when I left JP Morgan, like we still had the work phone thing. And so you give up the BlackBerry and I'm showing a little bit of my age. Like you had this like PTSD where you would constantly put your hand in your pocket and there was like a ghost phone and you would, that reflex just for after 2 years of banking will do it to you.

All right.

I think we should— I mean, look, when one person on the pod does something impressive, I think at some point we have to mention it. But when two people on the pod do something, we got to, we got to start by talking about it. So big week for the Inversion crew. Santi, you brought along Rob on this. But now you guys, I mean, hats off to you guys. I think this was maybe the public launch is what it seems like it was. You announced the Series A. You guys had an awesome Wall Street Journal article. Yeah, actually a great Wall Street Journal article. I'm going to share it on YouTube for anyone who's watching on YouTube. But if you're listening on Spotify or Apple, I can read the beginning of it. It says this startup thinks private equity style deals will kickstart crypto adoption. Inversion Labs plans to acquire low margin companies and outfit them with blockchain to turbocharge efficiency. Crypto diehards have long said that if only more legacy businesses adopted the technology, its benefits would become clear and adoption would spread. A new startup's private equity-style game plans to make that a reality. You guys got a nice Matt Levine shoutout, the always skeptical Matt Levine, which was, which was cool to see. And you got in bed with our friend Rob, so nicely done.

Yeah, thank you. Well, I don't know, Rob, you want to kick in? But yeah, it's—

look, it was great.

We wanted Mark, the author of the Wall Street Journal, really got it. We spent like an hour with him and it's rare to find like journalists who really get the story. What we're trying to do at Inversion is not super simple or straightforward, but I thought it was a great piece. Shout out to Mark. And then Matt Levine covered us and it was great because we didn't reach out to him. And I think he's, he skews skeptical of crypto. And I think the way he portrayed it, something along the lines of, I hadn't really thought about this. But this actually makes sense. And so it was, it was great. And then he copy-pasted one of my lines there and used it for money stuff. But no, more importantly, look, it's super exciting. We obviously closed a round earlier this year and brought on some phenomenal partners. But yeah, Dragonfly was a clear choice, you know, for a variety of reasons, not to pump up Rob too much. But, uh, it was, it was like, I remember it was, uh, early this year, reached out to, to these guys and within like, again, a couple of minutes they respond. That was like a Sunday. We're on the phone Monday, had a really good call. Uh, Wednesday had a follow-up and I think like, it's just the pace of, do you find an investor that really gets it and is very vested and you really get that from the very beginning. And so it's been a great journey. They've been incredibly helpful. I know there's a lot to say, but I'll pause there because Rob has something to say.

I actually remember, Santi, after you spoke with Dragonfly, you're like, you know, you were talking to all kind of the players and you're like, oh, that's the one, Dragonfly. They get it. They just, they really get it. They see the vision, they see the 10-year vision. So Rob, maybe like what clicked for you with Inversion?

Yeah. So I'm going to say one thing where, you know, you said, you know, we have to talk about this topic because two people did something great. I just want to make very clear, we didn't do anything and I didn't do anything. It is our pleasure to be at the service of our founders. Right. And so like when founders like Santi decide to work with us, like that's extremely exciting. But we, you know, we're providing capital. My job's easy. Santi's job is hard. He's the founder, right? And so, um, I, we didn't do anything yet. Um, we're just here and to be helpful and to be along for the ride. I, I think in terms of your second question, which is like, what, what did we see? You know, obviously known Santi for a little bit. I know you and I have known each other for a little bit. You know, we've talked about how should we bring crypto to the masses, right? That's been a topic of conversation or on the minds of, I think, all three of us. For a long time. The way of which we do that is, has been different, or the way of which we do that has been unclear at times. But when Santi started talking about, I believe there is this opportunity to take traditional businesses and have value creation through blockchain and crypto rails, especially utilizing things like stablecoins, especially utilizing things like DePIN, that was obvious to me from the get-go, just how ambitious it was, but how if it worked, what the opportunity could look like, and it's massive, right? And so I think he's the right person. I think it's the right time now that we're getting regulatory clarity, that we're getting kind of institutional buy-in. And I could not be more excited to be along for the ride and to be helping Santi, you know, kind of help build this thing in any way that I can.

Yep. And just to kind of add a little bit more storytelling and behind the scenes. Look, I wanted to work with people that I'd known for a while. And most of the folks, you included, Janno, like it's people that I've known for many years and, you know, I've known Dragonfly through Parafi days and then we've done a lot of investments together and we just share the same thesis. And it's really that, like it was hard to bring on anyone else that just, I think everyone that participated has this idea that enough is enough. Like, we don't want to wait another 10 years to get more users on chain. And it really comes from this, like, passion, which is we're doing all these investments in great teams across DeFi, stablecoin infrastructure, settlement layers, more consumer-facing stuff. And all of those founders, as I look through my portfolio, went under because there's just not enough users, active users on chain. And, you know, I come to the— I'm at a JP Morgan event here, and it's always the same kind of conversation with people. It's like, we get crypto, but it's all speculation, it's all Bitcoin and/or meme coins. And I think it's just a great disservice to a lot of the really good technology that's being built. And, you know, now is really the time to just bring more usage, more real users on chain. And I think the name of the company just really embodies how we think about doing that, of hacking our way to mainstream adoption. Because God, it would really suck if we're 5 years, you know, fast forward 5 years and we still don't have many users beyond just traders and all these teams just flop. And, you know, sometimes it's sort of like the best technology, you can build it, but if they don't come, it's, it's, it's, it's such a shame. And so I think the timing is very right and obviously the regulatory piece fits into that really, really nicely. And so it's kind of like now time to really, really accelerate.

Yeah, there were two, two tweets that really stood out to me. One was the VanEck. So VanEck invested. I always love VanEck does these one-page memos on their investments. I really, really like them. I think they're, I think they're great. I think other venture firms should think about doing these, but they said why we're investing. A, a founder worth breaking the rules for. B, Distribution first design. I thought this was really interesting. A lot of the other chains compete for developers and they wrote Inversion doesn't compete for developers in a world where block space is a commodity. Inversion acquires high-quality user bases that benefit from embedded finance applications where crypto can be most competitive. 3. On-chain GDP over speculative TVL by accruing value from cash-generating businesses. Inversion operates differentiated network activity from day one. And 4 is crypto is infrastructure, not ideology. So I thought this was interesting. I also thought, I don't know who this is. I don't know Firestreak VC or Walter, but yeah. Yeah.

Walter's a legend. He's an advisor. He was a senior managing partner at Summit, done a lot of private equity deals and yeah, incredibly, incredibly hungry. I mean, he's worth a couple billion and just the guy responds in 2 minutes and he's been super helpful as well.

Yeah. So he said, over my 40 years of investing, it's rare to encounter a truly radical new approach to private equity. And this was a theme I think that came up over and over again from, I think, a lot of the people that backed you who are not in crypto, traditional capital allocators, is a new approach to private equity. And, um, actually someone reached out when they saw the Matt Levine piece, uh, the guy's probably 65. He's been running a private equity firm for 30 years. Um, he doesn't know you. He's never listened to the podcast, But he said, do you know this company? And he runs a private equity firm. And he said, look, private equity is at a— private equity is at a— it's a tough business to be in right now. It was a really amazing business for the last 40 years, 30 years. And now it's really, really tough. He said, it's never been tougher for me to run my private equity firm. And he said, this is— he said, I don't get crypto. I don't get the blockchain. But can you explain to me what this business is doing? Because I'm— me as the owner of this private equity firm, I'm in a really tricky position.

Yeah.

Yeah.

Look, again, I'm at this family office event at JP Morgan. They're talking about private equity and asset classes to invest in. And it's, to your point, the returns of private equity funds have not been great. And you know, they've relied too much on financial engineering. Rates are high. And the reality is there's very few private equity funds that have really developed technological expertise for value creation and You know, you have Silver Lakes of the world and Vista in my mind are some of the best because they've really gone deep in the technology side to create value. And that's really what we try to do here, which is there's this thing called blockchain that, you know, we believe that can really be adopted at scale for enterprises and cut costs and radically change unit economics. That's really the opportunity as we think about more businesses using this technology and creating a lot of value that way. And it really coincides with, as we think about investing over the next 5, 10 years, the opportunity set's really interesting. You have a lot of companies that have been bought by private equity funds that, you know, they haven't really made more efficient. I think there's a staggering number of companies in the private markets that that are looking for a buyer and we'll be there, we're looking at them. It's just a really exciting time to be thinking about this type of strategy. And I guess for crypto native people, a lot of times we get asked like, why is it about private equity? Like, why do you need this thing? Why can't you just, you know, just do it how the rest of the industry's doing, which is trying to convince businesses to adopt the technology. And it's like, even though you've had regulatory clarity, Rob, this is maybe something that you can comment on. The reality is at the board level, it still moves incredibly slow. And businesses just have, have always been slow to adopt technology. Like, look at the internet over the last 20 years. That was Silver Lake's really business model, which was tech-enabled. Let's like transform businesses with technology, with software. And they were phenomenally successful. They're still doing finding companies, family-owned businesses that have just been slow to adopt technology. Uh, from just standard CRM stuff to AI.

What I love about Silver Lake is Glenn Hutchins, Glenn Hutchins's son runs a crypto fund.

Yeah, yeah, yeah. Um, and so that's really very interesting, which is boards are going to be slow, management teams are going to be slow for a variety of reasons. When you acquire and have control of the business, you're not asking anyone for permission. And that's really kind of a necessary component here to, to to drive the, the transformation that we see for these businesses.

Yeah. Well, one of the things I think is important here though is you're right that boards, they're slow, right? And you also like the Silver Lake example's a great one, 'cause if you look at like the best private equity firms over the last, you know, decade or so, you know, we're talking about Thoma, we're talking about Silver Lake, we're talking about Vista, right? These are all guys who have been very, very focused on tech businesses and how to bring technology into you know, call it traditional types or traditional assets that could theoretically, um, have a lot of value creation on the top line, right? So there's been a, there's a lot of focus in private equity around, oh, well, like, let's do some financial engineering and let's rip out costs. Like, that'll increase the margin. Then we have the, maybe a little bit of multiple enhancement and like, that's how we get out, right? And these guys are doing that as well, but they're also very focused on how do we drive new revenue. And I actually think that's a very important thing about what you're doing that we really liked is it's not just like, okay, well, like, Hey, we can, you know, work out some of the, the offload and, you know, maybe there's, you know, some deep in, uh, savings with helium, um, and gross margin goes up. But it's also, hey, listen, there's this new product set that we can sell to people that is enabled by blockchain that will also increase revenue, right? And I think those are the, the private equity firms that have been the most, uh, interesting to me and have been the best performers. And I think that's a, a thing that is very exciting about, you know, the thing that you are trying to do. I think the other point that you said, which is the board's moving slowly, that's true. But I also think the inverse of that is that the boards today for the first time are saying, hey, one of our top 3 priorities needs to be crypto and blockchain. We need to understand what that is. And so you don't want to just say, hey, I can outrun the boards because if the boards don't care, then like it doesn't really matter. But if they're saying, I do actually care now, there is regulatory clarity, there there are people like Stripe and Robinhood who are using this technology and I want to compete there, so go figure it out, but you can do it better. That's the place where you want to be.

Yeah, totally. And look, it's been actually very surprising. Like we've submitted a couple of bids and my initial reaction was they're totally going to puke on it. Like they're just, because we were very upfront. It's like none of the, there's no hiding here. This is our value creation story. It relies on crypto. You have to be very upfront about it because they'll ask us, right? We're not a brand name when it comes to management teams. We're not Apollo or KKR yet. And so, you know, you got to work through, and when you show them the plan, I was actually very surprised because one of the larger banks doing the sell-side process that has historically been very against this industry had no problem with it. And the management team had no problem with it. And I was, that was like a big aha moment for me. It's like, okay, you're, you're seeing it in real time. And I think this is something that we've talked about over and over in the podcast, which is, I think sometimes people that have been long enough in crypto are a bit jaded and cynical because it's like, this time it's not going to be different. How many times have we been sitting here talking about enterprise pilots and Long Island Ice-T and it's death by a thousand pilots, but You know, it was a total 180 on the regulatory environment. And the nice thing about the state of the industry now is you go talk to traditional executives are probably sometimes more excited about this technology and genuinely want to implement it than crypto natives because they're all just kind of refreshing CoinGecko and it's, it's things move really, really quickly.

Right.

And so it's very exciting.

The last thing on inversion and then we'll try to make this not an entire inversion conversation is In the politest way, like, I guess, what have you guys done so far other than the raise? I know you've hired some people, but maybe talk about the bids that you've put out. Have you acquired any companies? Have you— it sounds like you've tried to acquire two of them. Maybe talk a little bit about the work that's been done so far.

Yeah, without obviously disclosing too much, because these are competitive processes, um, before going into the actual process, look, when I met Dragonfly, it was just an idea. It was a pitch deck and I really appreciate, they had great questions. I said, listen, I don't have the answers to most of these questions, but you have to believe that I'm going to be good at two things. One, raising capital and hiring better people. And that's been one of the most rewarding things. We're now a team of 8 and across, you know, private equity associates, a great legal counsel. We have—

You hired George. We were also, I was trying to hire George and then you said, is George good? And then—

Yeah. That's all we're trying to do. Like we've been very intentional with our hiring of finding really, really competent people that understand what we're doing across a couple of dimensions. And so that's been just obviously private equity skillset and investing skillset, but also a research component to that of really having very defined sectors that we want to go and look at companies such that when we look at an opportunity, we can very quickly determine if it's a good fit for what we're trying to do. And the objective is over the next 12 months, find and do one acquisition and do the pro forma, do the transformation. And so we like to think of the world of there's very specific sectors that we've developed a thesis on. We've talked about telco, we've talked about remittance operators, a couple other sectors that we like. And so now it's really just being intentional of reaching out, but also getting inbound. And we've looked at 25 different opportunities in a serious way. We've gone pretty deep with two. And so again, what we're not trying to do in the classical inverting sense is make a poor acquisition where we can't really drive value creation in a reasonably short to medium term. And so we're there, we're hunting. Alongside that, we've think about like the inversion sandwich, we like to think about it. So we're having a lot of conversations with providers like DeFi projects, deep-end projects like Helium. Like we've been active in the Helium community putting out certain proposals to be a deployer internationally. And so that's the kind of the nature of the conversations folks like George and the team are having, which is if we're going to go buy a company and we're going to layer financial services and we do that on-chain, Who should we work with? You know, it's really resisting the urge of building product. It's more so how do we stitch together a set of products in the middle layer, right? We'll own the execution layer through a version chain. We'll own the user aggregation with the companies that we acquire. And then we'll plug in Athena and Aave and, you know, maybe Maple and a couple of other DeFi and deep, deep-end projects. That have done really good stuff, have really good technology. And so that's kind of the nature of the conversation that we're having in parallel, which is as we look at opportunities and we're doing the modeling, we're doing the value creation story, we want to then go back and really understand how viable and how real is the transformation by talking to, you know, some of these projects to understand how they can plug in into the chain.

One thing I think is interesting here, Jano, is in traditional private equity sense, there's, you know, there's often the investor investing side of the business and then there's like an operating group, right? And the operating group does a lot of this transformation. And what I think is interesting with Santi is there's a value accrual. So normally the operating group is like a cost center and they just go and they like charge, you know, the portfolio company and like, that's actually a hit on EBITDA. And, you know, so, but it's good for, I guess, the PE fund because they're getting, you you know, extra revenue, etc. But, um, there's not necessarily— there's kind of a push-pull on value accrual there and a trade-off, um, because of what Santi's doing, which is maybe like, call it like full-stack private equity, uh, in a lot of ways. There's actually a lot of value accrual across everything he's doing— product to distribution to the, you know, the— maybe any sort of financial engineering to the acquisition itself, a potential exit, you know, um, multiple enhancement. But also because the activity itself within his ecosystem that he is building that can serve all of these different companies and all of these different acquisitions, that will also have value to them and to the ecosystem and to the broader, you know, kind of blockchain community that, um, that he's involved with. So I, I think it's actually really exciting because we're seeing a world where we're kind of flipping a little bit of the value accrual for private equity on its head as well.

Yeah, look, to comment on that, like people might be familiar with like KKR has a KKR Capstone, which is a large team of consultants and operators. Bain Capital has Bain Consulting. And in this case, we, you know, it's not a cost center as Rob said, which is we'll have the execution layer. We'll share some of the value with partners like Aave and stablecoin issuers. And we should comment on the hyper liquid dynamic because it's so in line with how I think about the world, which is I mean, do you, when you, when you have the users and when you have the distribution, you can really dictate the terms, right? And, and that's the position that I want to get to, which is if we acquire really good businesses where we have a lot of connectivity with the end user, we'll curate the experience. And then whichever partners want to be a part of that, it's a very different discussion as opposed to a ghost chain that has no users and you're trying to convince a stablecoin issuer to deploy on your chain and be charged $5 or $10 million, which I think that's been really interesting to observe. And that's exactly how we think about the world, which is we wanna be very intentional and curated. As a kind of an inside story, when I started, when I decided to launch the chain and figuring out kind of this inversion sandwich model, I called a couple of top founders in the space and I said, listen, if I launch a chain, And if I bring this type of user that has never existed on-chain, would you deploy in the chain? And the immediate response, like, absolutely. Like, you're telling me that you're going to acquire businesses with 10, 20, 30 million users, and those users are not just here because Bitcoin's at $100,000, but are going to stick around because you're serving them a core service? Like, this is the holy grail that we've been wanting for a really long time. And that's really what's most exciting, which is I think the reception, as you we kind of close out the discussion on inversion. I pay a lot of attention to, you know, how the industry's been perceiving inversion. And I think I even talked to some of the really skeptical people, um, the Mertz of the world, so to speak, of how they would perceive this, you know, coming from a position where I was very vocal about certain chains. They're like, no, this actually makes sense. Like, a world where we onboard a billion users is a world where pretty much the entire crypto ecosystem benefits, because if you've built a really good product and service we're just going to route to that application. And, you know, like Helium is an example, right? If we buy a telco and we plug in Helium and deploy that, it helps Helium. It might help Solana to some extent. And it helps something like LayerZero because there's connectivity between chains. And of course, it's going to help the Inversion chain and the Inversion kind of sandwich. And but that's really, that's really kind of the primary motivation here, which is Again, it really benefits the entire industry and I was glad to see kind of the reception of the industry so far.

Yeah. Well, hats off to you, man. Congrats. Let's talk— you mentioned Hyperliquid. Let's get into Hyperliquid and USDH. So, oh, I think most people— I mean, I think everyone will know Hyperliquid, so we can skip that. But if you look at Hyperliquid, there's about $5.5 billion in total stablecoin deposits and about 95% of the $5.5 billion is actually USDC. So, uh, this past week, I forget if it was over the— maybe it was last Thursday or Friday or over the— I forget when this originally got announced, but basically Hyperliquid said, uh, we're coming out with a, with a stablecoin and it's— the ticker is going to be USDH and it's going to be Hyperliquid-first, Hyperliquid-aligned, and compliant asset. And, um, uh, unlike a lot of stablecoins, when people announce their like kind of native stablecoin project, the, the backing mechanism, the governance structure, the revenue model, how they're doing it, that was not predetermined. So instead, what Hyperliquid did is they said, we're going to launch this competitive bidding process. And they invited a bunch of external teams and established stablecoin issuers to submit proposals for the right to basically build and manage USDH on their behalf. And I think the, the reason for doing this is pretty simple, right? You've got 5.5 billion of, uh, 5.5 billion of stablecoins on Hyperliquid. 95% are USDC. There's kind of 3 main challenges from that. One is you've got major value leakage, and Rob, you should correct me if you disagree with any of this, but you've got major, major value leakage, leakage, right? So this massive pool of USDC on Hyperliquid is invested by Circle into yield-bearing assets like treasuries, and the revenue there flows from the reserves into Circle. And there's no real economic benefit that goes back to Hyperliquid. So that's value leakage. The second would be just sovereignty and risk, right? So you're kind of building— like Circle has the determination of, you know, maybe it's freezing assets, right? They can do that at the issuer level. You kind of— Hyperliquid probably wants to have that control. And the third would be this kind of bridge stablecoin introduces just bridge security risks. So I think USD mitigates— USDC mitigates that by issuing native USDC on Hyperliquid and enabling CCTP. But I think that there's just probably— you just want to bring it more and more in-house and make it a little more native. So yeah, they launched this proposal. Actually, Galaxy had a pretty good overview of a bunch of them. I can try to share my screen here, but let's see, I can pull this up. So at a high level, you've got native markets. So that would be Native Markets. I think there's a partnership with Bridge there. Paxos, Athena, Agora, Sky, Frax, Curve, Open Eden, and BitGo all kind of vied for this USDH proposal. And yeah, we can pause there, but I mean, it looks, it looks like Native Markets has won it, which is— yeah, I don't know, Rob, you—

Yeah, maybe let me add some, add some context here. So I think A lot of what you said is correct. Uh, so USDC, about 8% of its supply is, uh, on Hyperliquid right now. It's about $5.5 billion. It's something like, call it 10 to 12% of the net revenue of Circle. So there's that side, which is that, you know, this is actually, um, potentially value destructive for Circle itself. Um, most of what you just said too around the USDH process, you're right. So they launched this governance, um, you know, kind of bidding process. They, uh, Native Markets was like kind of out right away with their proposal. And then, you know, you saw over the next few days that a number of other proposals came in. Uh, proposals were due on the 10th, so 2 days ago or so. Um, voting I believe is done on the 14th or the 15th. Um, so we'll have voting done pretty quickly here. Um, to your point, uh, there's kind of no doubt that Native Markets is going to win. A lot of the validators have already pledged that they're going to go and support Native Markets. There is this period of time where the, the stakers can actually still move their stake to different validators, since depending on who the validators, you know, said that they would vote for, if so, if they disagree with, you know, where they're, where they've been staked. But nobody expects it to be anything but Native Markets. I think there's a broader story here, which, um, I'm going to say this at the risk of, uh, having, you know, everyone on Twitter, um, try to berate me again, uh, like happened earlier this week. But there's a broader story here around, um, what, uh, kind of what—

here, the reason why they're going to berate you now is because you're not wearing a shirt underneath your sweater, man. Nothing to do with the proposal.

I am, I'm extraordinarily comfortable. So how soft is that?

How soft is that thing? What brand are you working with?

Uh, it's, um, it's, it's Bloomingdale's for men. And I've got this sweater in like 7 colors and I wear this all the time. So, um, I will send you one, Santi. Don't worry. You can, you can go shirtless, but, uh, we can keep going. Um, no. So, so there was, there was a couple of, of posts out there that, you know, essentially suggested. That Native Markets was kind of pre-baked to win and that they were, you know, there had been a socialized, you know, kind of, you know, pre-discussion around who the validators would vote for and why they would vote for them and a business deal that had happened. I can say confidently that just about everyone I know who is in the know all agrees that that did happen. Right. And that's from all of the founders and across like basically every, every space that, That matters. Everyone in the stablecoin space, like that is sort of an accepted fact, even though everybody on Twitter was very kind of upset about that allegation. I think the people took it as, oh, this is like an anti-Hyperliquid conversation, or people are upset with Hyperliquid or FUDing Hyperliquid. I actually think that that has nothing, it has nothing to do with Hyperliquid. This is typical DAO governance. Drama, which is that when you have people trying to operate a business, which is if, if there had been a, call it, uh, a private deal with a potential provider of a stablecoin that they had said, hey, listen, like, we think that you guys are going to operate a great stablecoin for us. Like, we want them— yeah, we think Bridge is a great, you know, backend provider. Like, we think you— we want to help you kind of permeate the ecosystem. They went out and announced it. Everyone would have said thumbs up. Like, that's great. Like, you know, MC and Max and, and Anish, like, they're all like really talented people. They're talented people who have never operated a stablecoin issuer before. They've never operated this type of business before, right?

Um, and who, who, who, Rob, who has not? Hyperliquid, you're saying, or Native Markets?

Uh, sorry, the three people I mentioned— MC, Max, and Anish— are the three Native Markets.

Oh, of Native Markets. Yes, yes, yes.

Yep, correct. So, um, And so what happened over this period of days, and I expect nobody thought that this would pick up so much steam and that this would get as big as it did, because as you know, one person in the Hyperliquid ecosystem said to me, they said, hey, it's actually only a ticker. Like, this isn't really anything but a bid for a ticker. But what became really clear is the market did not believe that it was just a bid for a ticker. They believed it was a bid for the canonical stablecoin, which everyone would put their weight behind to try to displace USDC. And if that's true, then there's a lot of value to be made. And so every other stablecoin issuer is also going to want to make a bid and, and be part of that process. And so you saw a number of these, you know, kind of new proposals come out over the, the following few days. Native Markets' proposal dropped basically the second that the, that the proposal went live, so, or that the, the governance went live. So it was clear that they knew this was coming. And then you saw a proposal come from Paxos and from Athena and from Agora alongside, uh, Rain and Moonpay and EtherFi, uh, and a few others. Um, Sky put out theirs. And as you started to read through the proposals, I mean, Paxos literally was guaranteeing distribution on Venmo, guaranteeing distribution on PayPal.

You had, you had PayPal, you had pay the, the corporate PayPal account tweeting out about the bidding for USDH. It was remarkable to see.

Remarkable to see. This became such a big bidding war. And yet Athena talking about like how much— and FRAX, or not FRAX, sorry, SKY talking about sharing basically like all the, the revenue and maybe plus some because of their, you know, kind of ways to earn additional, additional yield. And when you started looking through the proposals, it became pretty clear that at least from an infrastructure perspective, from a technology perspective, from a distribution perspective, and also a potential future of Genius compliance that the native markets proposal from, from, from just product was probably not the best. And actually, I'll just, I'll say more definitively, even though I'll get dragged online for this, it was definitely not the best proposal. And it was probably, you know, the third or fourth best proposal from those perspectives. But then you saw these validators, they went out and they said, hey, actually, we are going to still vote for this thing. Um, and most of the conversation—

Rob, sorry, I didn't follow. I followed everything until you said that. Why is it What, say it again. Why is it not the best proposal from a product perspective?

So I think there's a, there's a bunch of different, like, moving parts here, right? So one is, okay, well, like, who is the actual issuer? Right. So in the Native Markets proposal, the issuer is Bridge and Paxos. It's Paxos, right? And Athena, it's Athena and Agora, it's Agora. There's a question around whether or not Bridge is, call it, the right issuer. For a stablecoin. And, and why is that, right? So one is simply that, like, Bridge is actually not a big issuer of stablecoins today. This is not something that is core to their business. Um, they have a, uh, they have their— all of their banking is done primarily at a bank called Lead Bank. Lead Bank is a bank with about, uh, $3 billion worth of assets. Um, you know, Circle has $5.5 billion worth of stablecoins already on, uh, uh, on Hyperliquid. Course, the reserves are not going to sit at, at LEAD, but the reserves will probably sit at, you know, BlackRock and, um, and, and, and a few other custodians. There's just sort of like a, a counterparty risk perspective that's inherent there that's actually not inherent in, in, you know, Paxos, and it's not inherent in Gora, who's straight using State Street and VanEck. Um, then there's a, um, a revenue split perspective. They were actually saying that they were going to put 50% in the Hyper Liquid Fund, 50% to Um, like ecosystem growth more broadly, kind of unclear exactly what that means. Um, when you look at, you know, something like an Athena, um, they were going to basically— and I think Agora as well— they're basically going to give all of their net revenue to the, to the assistant fund and, and maybe some hype buybacks. And so there was this economic point. Um, then there was a distribution point, which, you know, Paxos, I think, um, almost certainly wins when you have the corporate PayPal, uh, account deciding to, to tweet about it and guaranteeing listing there. You have a partnership perspective, which is that there's all of these partners around the table. People like Raincard, who is by far and away the biggest and best stablecoin card issuer, who would work with Paxos and Agora and probably Athena, but they're not going to work with Bridge because Bridge is kind of a competitor to them and they have their own card that doesn't— that nobody really uses, but is something that they decide to try to distribute. And so there's kind of little pieces and a bunch of different little places. um, that, you know, I think make it, you know, in the collective, probably, you know, yeah, not the best proposal. I think there's this other— there's been this debate right now around like Genius-ready or Genius Act-ready or Genius Act-compliant, right? So, um, Bridge is a, uh, they issue their stablecoin globally, including in the US, using a state MTL. Um, it is very clear that a state MTL is not going to be Genius Act compliant. Um, it is also probably true that a state MTL should today not be allowed them to actually issuing the stablecoin to, to US peoples. They're taking a lot of risk there, and, um, depending on who you ask, some people would say that's downright illegal, some people would say that's taking risk. But, you know, there's, there's a lot of, of, of conversation around that. They obviously have great legal counsel, so I'm sure they feel comfortable doing that. Um, but, you know, people like Paxos who already have their, you know, NYDFS charter, a like it's clear that they will be, you know, Genius, um, compliant in the future. And so there's a lot of these little points that I'm talking about, but when you bring it all together, um, and then you bring together a team who, um, I really like, and they're— and every time I've talked to all three of them, they're really good, but hasn't actually operated this type of business before. It's hard to see how in a, um, a traditional bidding process where it was entirely around product that they were likely to win. Unless there was something else that was, um, wanting or incentivizing people, or at least a little reason that people wanted to vote for them. Um, it seems like that story has primarily been around, hey, this is Hyperliquid aligned, and there we will be— we will only do this product on Hyperliquid. And that absolutely has value, that absolutely means something. And so, you know, maybe that was enough to get everybody over the table, over the table. But, um, because of the way the bidding process worked, it turned into a much more dramatic thing. And it highlighted a lot of, I think, the constraints of DAO governance itself. When people are making business decisions and ecosystems are making business decisions, but then going through this process of trying to have people vote and where maybe that business decision was already pretty far along before the voting happened. Right. And that's something that's not a Hyperliquid-specific point. It has just been the constraints of DAO governance for, you know, 5 years or, you know, ever since we started talking about this.

Yeah. I mean, that's a, that's a dynamic that exists in all businesses, right? Not, not just cryptos. Like, I don't know, someone internally has got to take, but they're like, oh, I got to do the whole RFP process. Also, Rob, I do have to smack the disclaimer on you that you guys are invested in RAIN and Agora and Athena. So there's some bias here. Absolutely. Yeah. Yeah. Santi, you have some—

Well, no, I was just really curious. I mean, I followed it obviously from the lens of something that now feels pretty obvious, right? Maybe the answer is, look, Hyperliquid has just been a protocol that has gotten so much traction, so much usage. But it does leave me wondering, and maybe jumping too far ahead, if we want to discuss some of the mechanics of this, like, stablecoin Super Bowl RFP. But like, why haven't— why hasn't Solana done this? Like, why could they do it? What does this then mean for other protocols or other type of services? Like, I do think it changes the game quite a lot.

Yeah. Before getting in, that was the next— I want to get into that definitely, because this is it. I think a lot of teams, a lot of teams are looking at Hyperliquid to be like, just like teams looked at Solana to say, oh, you know, a year ago to say, oh, Solana did this, we should maybe do this. Now teams are looking at Hyperliquid. Before getting into that, who is, um, is Rob, is this final? Is this, is this like 100% done?

No, it's not 100% done. Um, you can still move your stake to different validators. I think all of the validators today, and someone will correct me if I'm wrong, have already pledged to somebody. Um, and if you pulled up the PolyMarket earlier and what is it right now for, for native markets?

97%. Yeah.

Yeah.

So, and all the validators, I think, have already pledged. But theoretically, like, all the stakers could still move their stake to somebody who had, you know, pledged to Paxos. It's, it's really became, at the end, it became a two-horse race between the two of them. Um, but like, that's, that's clearly not going to happen. So it's all but done.

Can, can you, can you pull some of the tweets? Like, legendary tweets. Like, Jan van Eyck, love him.

Jan, baby.

Totally going for the jugular. Uh, PayPal, who's been super like shy about PYUSD and I think the Solana team might have their opinion on that program. And now they're like publicly tweeting about Hyperliquid. Like again, the total 180 inversion of who's in the driver's seat now.

Yeah. I actually know Jan listens to this podcast every week, so we will give him some love by showing the tweet, but it was crazy to see. I mean, yeah, you know, VanEck's one of the largest ETF providers and ETP and just asset managers out there. And you know, got the CEO tweeting about just, we are bullish Hyperliquid, we are owners, we'd be thrilled to be part of the ecosystem. Yeah, it's amazing.

And right after this, they announced a potential Hyperliquid ETF.

Yes, yes, yes, yes.

Um, the other one I liked was, um, did you see Jeremy Allaire's, uh, tweet?

No.

And I think the, the top of the tweet was, don't believe the hype. And I, I just, I, I I don't know who wrote that, but I just couldn't believe that that was the top of the tweet. That was the first sentence.

Don't believe the hype. Okay. So this is, this gets me into your point about DAO governance, Rob. Oh yeah. Go, go Santi.

No, let's get to that. I want to talk about like Circle for a minute.

Punch on Circle for a sec. This to me was the most amazing. Who won? Who won this? Native Markets didn't win. Hyperliquid won this. This was a, even if you already had picked Native markets, even if let's, let's say they had already picked native markets. I still think this was so, so, by the way, I'm pretty sure they reading between the lines. I think they did pick native markets ahead of time. Like MC doesn't leave Uniswap, Anish doesn't leave Ritual, like to go, to go do these things. If they didn't know that there was at least a, at least a maybe 90% chance they were going to win this.

So yeah, I'm just going to say this completely. I was at dinner. 2 days ago with like founders of the biggest protocols in, in crypto, a bunch of really awesome people everyone respects. Not a single person there pushed back on the idea that this was, was pre-decided.

Everyone said, obviously, like, I'm pretty sure the process was like, um, to get better economics or terms, like a stalking horse kind of dynamic.

I don't think it was anything about that. I don't think it was about better economics or terms. It was a master class in marketing and attention from the Hyperliquid team. Hyperliquid token's been sitting at like $40 for a couple months, like just kind of like, I don't know, not people weren't forgetting about it, but it was like, you know, you got to, you got to do these mass, like massive attention things. And USDH and the bid for it was a masterclass in getting attention from the Hyperliquid team. And you saw it reflected in the token. And the token right now is just a, uh, almost just derived from how much attention on crypto Twitter you're getting, the price of the token these days. And you see it with Athena and you see it with Pump and things like that. And yeah, you saw, I mean, Hyperliquid's trading at like $55, $56 today, up from $40. So this was the, this is the, this was the biggest debate probably of the year in crypto native land. And yeah, people who have like probably never traded on Hyperliquid were even jumping in. Everyone's got bag bias and all that kind of stuff. But I think it was a brilliant business move. And I think other people should learn from it. Like Santi, as you think about, you know, who should be the, the lending platform, like, don't just go to Aave and say you should do it. Like, you put out an RFP and you say, hey, Morpho, hey, Euler, hey— I think it was a very smart move.

Yeah. Look, we'll own the execution layer, we'll own the user aggregation layer. That's a sandwich. Anything in the middle, it's an RFP.

Yeah.

I also think these teams If you're, if you're a chain that doesn't have users, that doesn't have traction, you can't, you can't really pull this off. Like no one cares. You need to have that.

I also think these teams, and Rob, I really want your take on this, is they'll, they'll still deploy. I still think Athena and let's, if Paxos doesn't win it, Paxos will deploy and Athena will deploy. It's like, yeah. Okay.

So did you, did you see Guy's tweet from yesterday?

I was going to say it was legendary. Yeah, yeah.

Guy's on a run. Guy's crushing it.

Guy is, um, I was talking to somebody else this morning and, you know, Guy has always been, I think, one of the best founders in the space. Um, I think he's on another level these last, you know, 6 months or so. He's really been doing an awesome job and, and he's always been really aligned with, uh, Hyperliquid. He loves Hyperliquid. I know he's personally a big fan. I know he's personally a holder. Um, you know, he's, um, he wants nothing but the best for the ecosystem. I think he would have loved to have the USDH ticker, but he said, um, you know, pretty, pretty clearly that, hey, listen, like, we're still going to do these things that we said we were going to do. We would have liked to have won this because of what it means symbolically and the support that the ecosystem has. But in short, I think he, he actually ends his, um, his, his Twitter or his tweet here with a, a sentence that says In short, we will do what we have done, or what we have always done since day one, outcompete everyone else on product regardless. And like, that is what all the best founders are thinking here anyways, right? We're going to come and try to outcompete. And so I love this post. I know he wants to be a big supporter of the ecosystem. I know he wants to continue. He wants Hyperliquid to do really well no matter who it is. But yeah, he wants USDE to be, you know, a canonical stablecoin that everybody wants to use on Hyperliquid, and he's going to push that. And compete for that as hard as you can.

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Well, this is what I said earlier, which is it begs the question, who are the biggest winners? Who are the biggest losers? The cat's out of the bag, right? So I just, again, Circle, I'm left wondering what their strategy really is with ARK first. Second, as a business, when rates go down, What does that do to the P&L of the business? And third, this idea of not sharing interest income is very challenging. And we can talk about Tether and Tether does this too, right? But you have Agora, which obviously, Rob, you guys are big investors there too. So I just maybe open up the discussion around like, who's the biggest winner? What does that mean for some of the— and is the public market actually going to really understand this nuance? Or not.

It'll show up in the numbers eventually, right? So like Circle's in a tough spot and I want— I just messaged Jeremy. I said you should come on the podcast because we— I feel like we keep talking about it and we should just ask him these tough questions. But right now, if you have huge distribution, you're hyper liquid or coin or maybe not Coinbase, Binance or OKX or anyone else, there's no reason to use USDC unless they share a huge part of the revenue, right? So you can spin up a stablecoin in no time with— I think Agora lets you do that. mZero lets you do that. You can also allocate— yeah, Paxos USD to products like Athena, right, and capture 100% of the revenue or 95% of the revenue. So Circle right now is sitting between a rock and a hard place. If they don't share revenue, they're going to lose market share. And if they do share revenue, their margins are going to suffer. So yeah, does Wall Street— it was funny. USDH was happening and then Circle stock pumped like 15%, which shows it's pretty removed. But eventually this stuff does start to show up in the numbers. So I do think the biggest loser from this whole dynamic, I think, will be Circle. The biggest winner is— I think Athena will do incredibly well here. I think people like Paxos, Agora, mZero will also do very well.

Well, for Agora, like, I mean, Rob, your proposal, like Nick Van Eyck had a good post about this, just it's a race to the bottom. And, and, and Sam, I think, from Frax also commented on that. Like, how do you think about that business model in this competitive dynamic?

Yeah. So this is absolutely true, right? So the, the yield on the T-bills is clearly not a way in which these stablecoin issuers will be able to grow over time. Right, so Tether famously still gives away basically zero yield. Everybody else now is giving away the majority of their yield, or the vast majority of their yield, right? So you look at, um, you know, even Circle, right? They paid a bunch of money to Binance to get on Binance, right? They've ran a bunch of— they obviously get 50% of all their revenue to Coinbase, right? They're, uh, they're striking deals with a bunch of the fintechs in the space who are using them to share a bunch of the yield as well. And so it's clear they're gonna get— that's gonna continue to happen. Agora is doing it, you know, M0 and Paxos and all these guys are going to be doing a ton of that. And so the question is then, how do these stablecoin issuers make a lot of money, right? How do they, uh, grow not just distribution but grow also like revenue? And what we're starting to see is that, you know, there's a kind of a wedge product. So everybody's saying like, listen, I have this product, I have this you know, thing that is, uh, valuable for my customer that I will get in with them. Maybe it is the stablecoin itself, maybe it's just call it the infrastructure that includes a wallet, that includes, you know, kind of really easy to use APIs. And then I'll try to sell them on other things. That's not just, you know, call it me being like a, essentially like a money market fund. That's where everyone's trying to, to figure out, and that's where they're trying to go. That's why I, I think you see, you know, Circle launching their own chain and ARK and launching CPN, because they're trying to look a little bit more monetized, like the payments company. So I think a lot of these guys will start looking like payments companies, and, and it's kind of like a, the Bridge from the opposite direction, right? Bridge was orchestration, but then eventually they ended up launching their own stablecoin, launching their own card product, launching their own wallets and accounts, right? And it starts to say, hey, like, we're going to sell you a holistic solution versus that we make money on some part of it, even if we don't make money on, you know, call it just the Yeah, just the yield itself. And that's, that's the focus at the moment. That's, that's probably how it ends up playing out. But it means you have to be a good product builder in payments. It means you have to be a good product builder and other types of financial services, which a lot of these guys I'm pretty dubious of that they're able to do that because they don't, they don't come from that world. They don't necessarily know money flows. And I think I want to put one very fine point on what you said, Yano, which is who is the biggest loser? Well, USDC is by far and away the biggest stablecoin in DeFi. By far and away. Tether dominates CeFi, USDC dominates DeFi. DeFi is the place, I think, right now, because CeFi, you've already seen that compression, right? And you've already seen those deals get done. You hadn't seen it in DeFi before. Hyperliquid is the start of that, you know, revenue share happening in DeFi, and that's going to, I think, significantly impact USDC and their, and the revenue they make from, from all those stables in DeFi.

Yeah. On this point, Rob, the pushback that perhaps a traditional analyst might say is look at Wealthfront and Robinhood and, and, and relative to like that dynamic, right? Where brokers, when Robinhood launched with zero commission trading, you could have sat there and said, wow, race to the bottom. Uh, they're going to win all of the business. And why would you keep your money? At a traditional brokerage firm that is charging you something, not zero. But that's not the reality, right? Like in financial services, like you've had like more younger generations, like putting aside the valuation, right? But like there, you would've expected more these businesses to go to zero. They haven't. My point here is users are fairly sticky. Like once you have a bank account, you rarely move that. Um, and you kind of observe that in crypto too. As much as it is more composable, you have like validator stake. Like a lot of the validators in some of these ecosystems just were there early and received the stake, and people are not necessarily moving them, even though you have validators that launched after with zero like commission. Um, I guess the counterargument to that would be like, um, Grayscale in the ETF land, which obviously their fees were order, you know, multiples higher than others. And I think they've seen a lot of their, they resisted kind of lowering their fees and they've, you know, the value is leaked. But I guess what I'm trying to get at is if you believe like stablecoin circulation grows up orders of magnitude, where's that going to come from? If it's strictly in DeFi, I think, Rihanna, your point is, yeah, definitely USDC, suffers. And I was trying to pull up the CoinGecko, like, market— like, um, share of USDC. Uh, but you could argue, hey, maybe Tron, which is more emerging markets in the kind of local economies, doesn't take as much of a hit. Or maybe Tether doesn't take as much of a hit, even though they're not sharing you yield. And it's one of those things where, like, look, financial literacy, or lack thereof, from the end user is not necessarily there, right? And, and sometimes distribution's all that matters. And if you already have really good distribution like Tether, maybe your business model doesn't get hit as much.

Yeah, I'm going to push back on one thing you said there, which is you— and I was intimately familiar with this in my pre-crypto days or when I was doing crypto on the side and not professionally. But there was, to your point, when Robinhood launched in the early 2010s, and started to get, you know, some traction, people started to get excited about it. There was a lot of conversation in all the analyst notes, you know, call it 2017, 2018, like, why isn't, you know, it a race to the bottom? When is Schwab and Ameritrade and, you know, E-Trade and all these guys, when are they going to cut commissions to zero? Are they worried about Robinhood? Right. And around, call it, you know, 2019-ish, I think everyone started to expect that maybe that just wasn't going to happen. And that, okay, well, it's too sticky. You know, people don't want to use Robinhood. It's a kid's app. It's not really for like real adults who have like real financial needs. And then the first domino fell when Schwab dropped equity commissions to zero. And when that happened, every single other broker did as well. And so equity commissions did go to zero eventually. It just took longer than people expected. And why did Schwab do that? I think in part they did that because they started to see what I think we've now seen with Robinhood. And I think everyone on this call is like huge Robinhood bag holders. So obviously very, um, very bullish, but they started to see that Robinhood was actually, um, they, I think Schwab had expected people to graduate from Robinhood to Schwab and they started to realize that wasn't happening. And so they did now have to compete because people were just going to, Robinhood was going to start offering new product that served those people as they got older, as they had more financial needs. And that Schwab now actually needed to compete on that product. And so I guess to all of that point, right, is there, yes, like an account in a bank account is sticky. Stablecoins are money, you know, especially stablecoins that are just, you know, call it, um, in money market or T-bill backed, right? Money is not sticky. Money is something that you have in your account. You can mint money, you can move money. Yeah. Like, like the account is sticky. That's why MetaMask and these wallets continue to do as well as they do. But I don't think USDC is. And so it might be true that like the stablecoin market is just going to get so big that everybody wins. And as you know, like I'm probably one of the, if not the most active investor in that theme and category. And so I believe that to be true, but on a relative basis, USDC is, you know, the DeFi token. And so I do, I am concerned for them. On that aspect. But, you know, these are competing things.

Yeah. Although to be fair, like MetaMask, you know, has, continues to rake in so many fees. And it's just that what I've learned is money does move faster clicks away here, and you can basically create a bank account in a second by spinning up a new wallet. But the convenience factor is something that time and time again people want to pay for. And so again, that's to your point around product, right? Product, I think Guy's point is we'll continue to build the best product. Convenience is a derivative of good product. MetaMask is a good product, has been there. Maybe people can argue like it's no longer a good product, but it was just early and sufficiently good product and it has that, you know, stickiness to it. But Yeah, we'll see. I think, I think, you know, we'd love to have Jeremy come on because we, we continue to talk about Circle and a lot of the decisions.

Yeah, he's coming. He's coming. They just responded.

It's hard to explain it, right? I can't explain why he launched ARK. I can't explain why they've been kind of the posture that they've taken. And to be fair, like, look, I'm biased too. I know Guy. I've known him for such a long time, but that model in and of itself is probably one of the few that they benefit from a— you could argue that they, they're the ones that benefit the most from a lower interest rate environment because they're— the way they generate fees is totally different than all the other kind of more traditional stablecoin issuers that just are clipping treasuries. Um, you know, obviously the Athena model is funding rates, and you know, that has— as rates come down, that has an implication. But I think Guy's one of those founders that is acutely aware of that dynamic and just built around a business that is more defensible in that regard.

Yeah. You guys want to pivot, talk about Figure?

Yeah.

Yeah. So Figure is a company that probably actually a lot of people listening will not know. Figure was started by a guy, Mike Cagney. If you guys know SoFi, Mike Cagney also is the founder, the co-founder, and I think ex-CEO, maybe current CEO of SoFi. So he started SoFi in 2011, ran the—

not the current CEO. He hasn't been there for a while.

He hasn't been there for a while. Okay. So I think he left in 2017. I think maybe he's just on the board or something like that. Maybe not even involved, but so he left, took some time off. He then started Figure in 2021 or 2022, something like that. Figure is now the one of the largest providers of, uh, HELOCs, um, in the world, or at least in the US, home equity line of credits. Um, the interesting thing about Figure is they have built their own chain called Provenance. And this is a very, uh, when I think about inversion and Santi, when you originally started bringing up inversion to me, it, uh, the, the company that first actually weirdly came to mind was Figure because I've had a couple of calls with Cagney now and got to know him over the years a little bit. And I spoken to Das before and he said, look, our cost structure is just so much lower than any of our competitors. Because we process every transaction on chain, uh, and it's on our own blockchain called Provenance. And, uh, yeah, so they, they just went public, um, 6 or 7—

$7.3 billion valuation. I think it listed at like 20-ish range. It popped to mid-30s, 35, 36.

Yeah, I think, I think it was 25, and it was— it closed yesterday at what, $30, $31 bucks?

Yeah. So I obviously have known Mike for, for a while at Parify, we were investors and owned HASH, the token. I would say, um, look, if you read the S-1, they're very— there's a lot of stuff that we could spend an entire segment talking about the S-1 and their business model. Um, but you're certainly right, when they have roughly $15 billion of RWAs, of home equity lines of credit, they're by far and away the largest, um, provider, issuer of RWAs. And it's just a really good business model. They found a very unique product and wedge to prove this ability to streamline origination of HELOCs. Most of their business comes from partners, and they want a couple of things to note that caught my eye. They're issuing HELOCs to ultra prime, like super high FICO scores. And so a lot of the faster processing comes as a result of just selecting a very narrow slice of the market, not subprime. Um, but you know, the, the settlement, the reconciliation, the ongoing monitoring, um, a lot of that cost savings is very real and material relative to traditional issuance. Um, I would say the blockchain kind of chain piece is much to be desired. Um, and they kind of allude to in the S-1, they have an interesting line, which is something to the effect of, quote unquote, we were misguided in our blockchain strategy. And I think, uh, it's been one of those companies that we followed for a long time, and it's just been— the, the HELOC business is super interesting, it works, it's, uh, and they use Provenance, but there's— it has felt disconnected, disjointed, um, and it's not as well-oiled machine in my mind. But Look, hats off to them. They are one of the few companies kind of silent that no one really talks about in crypto that have, you know, have a decent, nice business model and have proven that you can make a type of business more efficient, you know?

Yeah.

I mean, I mean, the, the Heloc business, incredible business. He's done an incredible job there. I mean, Mike Kavane founded SoFi and then founded Figure, you know, clearly one of the best, you know, call it, you know, tech-enabled financial services founders of, you know, call it the last, you know, few decades. Right.

So, so far he's got a $30 billion market cap. I think it's actually trading at an all-time high. Yeah.

I mean, the, the, a lot of the fintech has traded up also, obviously as the last, uh, last few quarters. Um, but he, and you know, it's clearly tech-enabled and he understood like early on that blockchain-enabled was a better form of tech-enabled in a lot of ways. Right. And so like, Um, that's been incredible to see. Um, to Santi's point, you know, they have launched a lot of these called like other called blockchain products, launch an exchange, launched a product called Yields, which is kind of an SEC regulated, um, I think it's, I think it's kind of firmed as like a, like a debt token, but it's trying to simulate something like a yield bearing stablecoin. Um, that's actually, you know, compliant. Um, and so they've been doing a lot of these things, which are, are, are awesome to see. I believe they, they originally, um, took those products out of the figure business, um, and kind of the hash token out of the figure business in preparation of this IPO. And then they decided to fold it back in actually right before the IPO, as I understand it. Um, and so that's probably a signal to you that they feel that they need, call it the corporate oversight, and they still need those resources to try to get this other stuff off the ground. But it's also pretty interesting in so much as there was at least a belief a year ago, or maybe more than a year ago, that, you know, the Hash Token and these other crypto products couldn't be in a, the shell of a public company. And now with how the world has changed the last 9 months, they feel comfortable doing that and they're able to go public with that and they're able to trade well because of that, which is just again, another point around where we are in the market and what is happening in global acceptance from regulators and institutions and investors. Of crypto-enabled business.

Yeah, there's a great blog post from Cagney on their website that he just published and he said, look, I couldn't, I couldn't put this in the S-1, but here's my personal take on blockchain. And yeah, like, like you guys mentioned, I mean, they had a couple of false starts with, with the chain. Is it the most robust blockchain out there? No, but the— it has brought down the cost structure of processing these HELOCs and processing these loans. So Yeah, we can link to this or you can just type in like probably Figure, a letter from Mike Cagney, figure.com or something like that.

So we should definitely have Mike on. I've had a couple conversations with him and we would definitely love to kind of get his inside view and how, because I think it was, they were gearing up for the IPO for a while and it was just, would be interesting to hear his perspective on how that whole process unfolded. Uh, yeah, look, another great example, more public companies benefits crypto. And this one in particular, because it, it, you know, it's so in line with, you know, just proving absent doubt, this is a real business showing real value. Anyone out there can read the S-1 and say, these guys are doing something well understood in finance in a more efficient manner. And you can't like, you can't argue against that. And it's so powerful as a case study for the industry.

Yeah.

And can we just, can we, uh, just put one point here too, not figure specific. but public markets, I'm telling you right now. So Gemini is listing, is going to start trading in a few hours, you know, Figure earlier this week, Bullish is still, I think, trading, trading okay. Klarna listed this week, right? Like the, the, just how excited investors are for growth right now. Like it, we're only seeing the beginning of the acceleration of new IPOs and it's going to feel, I think, pretty soon, maybe not this year, maybe into next year, but it's going to feel pretty soon. Like maybe we're in 2021 all over again.

Yeah, CoinShares is going to SPAC. So Rob, actually the team— someone on the team asked me the other day, said, hey, who's going to IPO like this year or next year? Let me tell you what I told them. And I'm curious what you— what you think. So I said, I said, okay, we've got Figure, Gemini, of course. I said BitGo. This is like by end of '26, let's call it. So I said BitGo, maybe Lubin tries to get ConsenSys public. Said maybe Blockchain.com, but they got crushed in the last cycle from being one of the biggest lenders to the miners. Uphold, maybe Anchorage, maybe Chainalysis, maybe Fireblocks, maybe Shalov will never IPO that thing. Who will?

The founder. I think he's very against—

No, no, I didn't hear what you said. Who?

Fireblocks.

Oh, Fireblocks. Shalov? I think he will. He just won't be the first one to do it. I think he'll wait for it to see what others do. I think Ripple tries to do it. I think Ripple tries to go public. I think the Asian exchanges—

I don't think Ripple tries to go public, actually.

Yeah. Okay. Because it's just too much.

You don't just do a debt. They'll go public through the debt.

Here's the thing, guys, like, no, but once they have Hidden Road and all these other businesses, you've got to— you actually have an IPO business.

I know you were intimately involved with Hidden Road, but one, One observation here is let's maybe as a companies that should not go public because, you know, I think this is something that people are going to realize, like sometimes it's better to stay in the private markets. And that is just, again, private equity. There's a reason why you take companies private to execute on a strategy. Like the market is a voting machine in the near term, and that is very distracting when you want to execute. On the long term. And look, go talk to Michael Dell and why he took Dell private. Go talk to a number of other operators that have decided to take their business private again, because it's just sometimes great to be quiet and in the background and doing and humming along. And so I think that's perhaps something that in 4 years' time or 3 years' time, maybe some of these DAOs can be like, yeah, maybe I shouldn't have like taking this, this, this thing public, and it's not easy running a public company.

Yeah. So Rob, who else, who, who did I miss here? Who, who do you think tries, who do you think goes public in the, maybe differently asked, in the next 12 months?

I think you miss a lot of the non-US exchanges. So, uh, all of the exchanges in Europe that are decently sized, you know, Kraken, um, the, um, oh, Kraken, of course. Yeah. Like even like Bitvavo, like That's a bigger business than half the ones you talked about. You know, hasn't really raised outside capital, but I think is doing like $400 million of top line. You've got even like Bitpanda, which is more of a brokerage, not an exchange, but they also have an institutional business sitting inside that. You've got people like maybe FalconX will try, you know, raised a big round before. You know, there's, you know, I think a lot of the other exchanges, you know, we'll see if they, if they want to. Look into tapping public markets, but you know, you've got businesses that are worth, you know, I mean, if you look at what's happening, right? So Gemini upsized their IPO. They're going to go public today at $3.3 billion, I think is the rumor now. I forget what bullish is trading at, but trading at a multi-billion dollar valuation. Gemini's doing, I think, $150 million of top line, right? Kraken's doing 10 times that.

And, and yeah, Kraken will definitely, I just forgot Kraken. Kraken definitely will. But Bitvavo, that's an interesting, Bitpanda, that's a good one.

Yeah. Yeah. So like, you know, so, and so, you know, Bitvavo is doing more than double the revenue of Gemini, right? And they're going to, and Gemini's got all this demand, right? They got this NASDAQ investment. And then like, what if, you know, Binance is able to enter the US again or the public markets? Like, what do you think, you know, Binance is able to, will, will be valued at? What do you think? Bybit would be valued at, an OKX would be valued at, right?

And so I think all those guys will get public, but maybe not '26. Maybe it's '27 is the year the Asian exchanges, but point taken.

Yeah, but, but I think the point is like, it's hard to, for all of these founders, and then I think for all founders, um, you know, uh, okay, I'll actually, I'll backtrack a little bit. Not all founders, but I think it's hard for most founders to look at what's happened in the public markets with the way Circle has traded, with the way the IPO, um, kind of investors have reacted to a Gemini and a Bullish and not say, I know my business is multiple times bigger than that one. I think my business is better than that one. Like, and I've got this, you know, mark in the, in the private market. I should just go public. Right. Because a lot of these guys we're talking about are, you know, uh, exponentially bigger than the people who are going public now and trading really well. Right. And so I do think there is a bit of a, um, of a forcing function in a lot of ways. And so I think we'll start to see, you know, a snowball pick up, um, because of what we've seen happen in the public markets right now.

What about, uh, Uniswap Labs? You know, certainly generating decent amount of revenue. Take that public, it's going to get comped against Coinbase on a per-employee headcount basis, vastly more profitable. Like, it's sort of— is there an opportunity for some of these teams to, to do that? Would they ever do it?

I listen, I, I think it is on people's minds. I have heard people mention it as potentially something that they could do. It is very unclear to me how that would work at the moment, but maybe we'll get there and maybe, and I will say that if anybody's able to do it, I actually think Uniswap is the one. Right. And I think there would be, they would be called the most forward-thinking about it. They obviously raised a big round into the equity a few years ago. You know, Andreessen is very close there and has obviously been quite involved in policy. So maybe they are the one if it's able to happen, or maybe one of these L1 foundations. So I think there's also a story here around, well, an application token versus an L1 token, and maybe that there's a different way the regulators will see those two things. So maybe a Solana Foundation or Solana Labs or one of the kind of alt L1s, et cetera. Like maybe those will be somebody that will think about this, but I don't think it's hard to unwind one, but just the scar tissue that everybody has from the last few years of their dealings with regulators. But also, you know, there are a lot of like tax and like legal implications of what they've set up. To date and trying to rip some of that out and do some sort of public listing, I think would be very involved and would be probably something that was being done for as much as ideological reasons as it had been actually like value accretive to them due to all of the friction costs.

Yeah.

Trent, anything else you guys want to talk through?

I'm just trying to know what fucking weird content Rob has lined up this week.

All right, content of the week, baby. Rob, what do you got for us?

All right, uh, Bougonia. It's, um, the new, uh, Yorgos Lanthimos film. Um, it's— I don't know if anybody, you know, knows Yorgos, but he's, uh, he's done a lot of like weird movies that have done really well at film festivals. It's kind of, um, uh, a black comedy. It's primarily about, um, a couple of like guys who kidnap a CEO because— or, and I think it may be a CEO's daughter as well— because they believe that she's an alien that's like trying to destroy the world. It's kind of like a satirist comedy. I'm a big Yorgos fan, I mean, and all of his movies. So a lot of great buzz coming out of the Venice Film Festival. So there's your fiction content of the week.

There you go. Rob, when do you— is this a like a weeknight movie night, or is this like Friday Friday night, when, when do you get these movies in?

Yeah, so Friday, Saturday nights, I, I'm, you know, like, I think as, uh, Asanti knows, I'm, as Rosie mentioned earlier in the pod, I, I do respond a lot to my founders. Um, and so I try to on those Friday and Saturday nights when I know they're out partying, like, you know, sit home at my, uh, on my couch and watch some film.

I'm gonna light you up on Friday at 9 PM, man. I'm gonna, I'm gonna do the auto send, like scheduled send at like, yeah. 9:05 PM on a Friday.

Gosh, Lori's not gonna like that, Santi. Oh no.

Okay. Maybe on that basis I won't. But so on the content stuff, I will say a shout out to People Pleaser. 'Cause she won an Emmy for her, I think it was White Rabbit is her company. She's been doing like some pretty funky stuff. And I saw on social that she won an Emmy Award for like creative, like young creative category. Maybe, Yanni, you can pull it up. But I mean, obviously I was one of the original like group that started PleaserDAO. We were bidding on People Pleasers like Uniswap NFT and, you know, got to know her through that work and pretty amazing to see it again. You know, it's, it's pretty cool.

Yeah. I mean, Pinned on the Instagram.

Yeah, yeah, yeah. Oh yeah.

Pretty crazy. Yeah.

Pretty honestly pretty crazy. I haven't seen it, so I kind of wanna go see it now. So yeah, it's been pretty cool. Cool to see. And shout out to People Pleaser for that.

Yeah, I gotta go watch it. Oh man, I have by far the lamest recommendation of all of you guys. Darn. That's, that's a bummer. But per usual, I went down a weird Novak Djokovic rabbit hole. So I've never— I knew very little about Novak, and I was watching the US Open, you know, a week or two ago, and so I was like, I don't really like this guy. And I was like, I don't really know much about Novak. Went down a Novak rabbit hole. He is— I listened to like 4 hours of podcasts with him. He is incredibly, like, spiritual and just like high vibration and just a very— he talks a lot about like how tennis at that level is not a physical game anymore. It's entirely a mental game. And yeah, I just have a lot, a lot of respect for the guy after listening to it. And it made me think about just running. I think there's a lot of similarities with running, running a business or being a founder and being a professional athlete. Sometimes I'm probably going to get shit for that comment, but yeah, there's a—

it's funny you say that because as you know, Mathilde loves tennis, but they— Djokovic is one of the players that he's 36 or 37. It's impressive that he's performing at that level. He is like Tom Brady, follows an incredibly regimented diet and cryo, like all of these things. But if you look at like Alcaraz or even Sinner, they look like they're 30, but they're 21. And tennis, I hadn't really appreciated this, but tennis is an, not only an incredibly physically degrading sport, you would've thought that like, you know, these guys like look fairly young, but they all look incredibly old for their age. But it's probably one of the most mentally challenging sports. Like, go— one of my favorite books is the autobiography, Andre Agassi. You guys haven't— like, the guy—

Djokovic had Agassi— I didn't know this— had Agassi become his coach in 2019 or 2020, I think it was.

Yeah, there's— so that one's really good, the autobiography. And then there's the commencement— I think it's the commencement speech that Roger Federer did 1 or 2 years ago. Where he talks about like his win rate, which is like 51%. He's like, you just gotta keep at it. And you would've thought that one of the greats had like an 86% win rate. And it's just remarkable to, to see that. Yeah. And so yeah, it's a fascinating sport to be honest. I, I didn't really know much about it, but I've like paid more attention to it over the, over the years.

Yeah. Cool. That's the pod. Thanks for listening folks. We will, actually we do, I, we might be taking Monday off from an episode. If we do, we'll see you next, next Friday for the roundup.

Should we do a crewneck like quarter zip, like Empire sweaters that we can send to folks? And we should have a gear like shop, you know, as opposed to— I did.

Oh, shoot. I actually forgot something. We got a few things wrong in the story. A few of the story dat people— we've got a few things wrong in the story from the story dat from our conversation last week. So I'm going to drop some notes in the show notes. So if people want to, I got to revise some of our comments from the DAT conversation from last week, last week, so people can see that in the show notes.

So petition, petition to less ads, more swag shop, and maybe we can use some of the proceeds to get Rob an undershirt or just a regular, like, you know, shirt for his— his quarter.

Don't take this shit, man. Don't take this shit. All right, we're going to the weekend.

This is incredibly comfortable. It looks great. Like, you know, you guys can't— you can't hurt me.

Can't hurt me.

All right, folks, have a nice weekend. Thanks for listening. We'll see you next week.

That's good.