Unchained - The Chopping Block: Robinhood’s Tokenized-Stock Gambit, Solana’s ETF Splash & the Proof-of-Stake Reality Check - Ep. 862

Episode Date: July 3, 2025

Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner chop it up about the latest in crypto. This week, we’re joined by Jon Charbonneau and Ryan Watkins to unpack the bombshell news of Robinhood Chain—an Arbitrum-based network debuting tokenized U.S. stocks, 3× crypto perps, and that head-scratching $500 K liquidity cap. From riffing on whether proof-of-stake yields are just “money in a box,” to debating Solana’s first U.S. staked ETF, to sizing up the looming perp wars between Robinhood and Coinbase, the crew maps a common thread: corporate chains and regulatory work-arounds are colliding with crypto’s decentralization ideals, forcing builders, traders, and even ETF hawks to rethink where real security, fairness, and opportunity will live next. Show highlights 🔹 Robinhood Chain Revealed – Why the trading-app giant paid up to launch an Arbitrum-based “Robinhood Chain,” starting with 24/5 perpetuals and tokenized U.S. stocks, plus a rumored $500 K–liquidity cap that has Crypto Twitter howling. 🔹 Tokenized-Stock Gold Rush – From Tesla and SpaceX pre-IPO shares to on-chain S&P stalwarts: does 24/7 trading finally make equity tokens stick, or is it just another CFD in disguise? 🔹 Perps Arms Race – Coinbase’s 5-year “quasi-perp” futures vs. Robinhood’s 3×-leverage launch vs. Hyperliquid’s 20× turbo deck—who wins the battle for retail flow? 🔹 Solana ETF First-Mover – RexShares files a staked-SOL C-Corp ETF, beating BlackRock to the punch and testing Wall Street’s appetite after ETH’s lukewarm debut. 🔹 Proof-of-Stake Reality Check – The crew dismantles the “economic security” myth, asks whether validator cartels make inflation rewards pointless, and floats proof-of-governance as the next model. 🔹 Hyperliquid vs. The World – Why a single Tokyo data center is eating CLOB volume, what zk-rollup challengers are planning, and how latency games redefine “decentralized exchange.” 🔹 $2 B Prediction-Market Beef – Paradigm-backed Kalshi clashes with PolyMarket after a viral “little rats” tweet; inside the influencer war and the CFTC license flex. 🔹 Conference FOMO No More – New-York-privileged hosts roast ETH CC in Cannes and declare the age of fly-to-France crypto tourism officially over. 🔹 Reg-Tech vs. Fin-Tech – From transfer agents to T+1 settlement: why outdated TradFi plumbing, not blockchains, still blocks global access to U.S. securities. 🔹 Super-App Skepticism – The panel pokes holes in “super-app” buzzwords and explains why sequencing—product-first, chain-later—matters more than catchy slogans. ⭐️Haseeb Qureshi, Managing Partner at Dragonfly ⭐️Tom Schmidt, General Partner at Dragonfly  Guests ⭐️ Ryan Watkins, Co-Founder of Syncracy Capital ⭐️ Jon Charbonneau, Co-founder & General Partner at DBA Timestamps 0:00 Intro 02:59 Robinhood Chain 15:05 Debate on Tokenized Stocks 27:18 Perpetuals (Perps) in the Crypto Market 37:15 Robinhood's New Crypto Traders 39:26 The Solana ETF Approval 41:17 Understanding Staking and ETFs 43:36 The Future of Proof of Stake 46:20 Governance in Ethereum and Other Chains 56:26 Corporate Chains and Validator Selection 01:04:31 Polymarket vs. Kalshi Learn more about your ad choices. Visit megaphone.fm/adchoices

You didn't invent any new technology. They just don't have this. And they're like, I don't know. They're poor. You know, we're not. I think there's a lot of people that still just have this old school ideology that, like, for some reason it's valuable for you to put your money in a box and, like, print more tokens and therefore you get more money.

Greg, if you had like a Tesla perp that you can go 20x long in a trace 24-7, that is actually a huge unlock. I think that people genuinely, like, just don't understand the economics of proof of stake to, to, like, a meaningful extent. Yeah, these people could have gone and opened an equity account and bought Bitcoin, but they didn't. Not a dividend. It's a tale of two pawn. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways.

I'm named to trading firms who are very involved. gdlet.eat is the ultimate pump. D5 protocols are the antidote to this problem. Hello, everybody. Welcome to the chopping block. Every couple weeks, the four of us get together and give the industry insight perspective on the current topics of the day.

So quick intro, it's first you got Tom, the defy maven and master of memes. Hello, everyone. Joining us, we've got some special guest. First, John Charbonneau, protocol provocateur at DBA. How's it going? In your mind, you will never not be the L2 nihilist. Great.

I wanted to try to work that in, but didn't quite alliterate. And Ryan Watkins, token tactician at Synchristy Capital. Topin tactician, there we go. Yeah, good to have you. And I'm a Cive, the head hype man at Dragonfly. We're early-stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see Chopin Block. at XYZ for more disclosures. So it turns out everybody is in France, which I keep arguing is a

failed state, and I think people should stop going there. But they're in France. Why did you guys decide not to go? It seems like where all the actions happening now. Everyone's here. Everyone's here? Yeah. Yeah. I mean, we were talking about it. Like, I'm pretty much have stopped traveling in the past year for conferences anymore. Completely. Yeah. Yeah. If you let them come to you. Yeah. I mean, if you live in New York at this point, it is just difficult for me to justify going to a when this feels like the exact same thing that I did last year of like everyone was just here for permissionless like why do I need to go to fly to France to go see everyone I remember I did the same thing last year was the last one I went to is DevCon in Thailand because it's like I like I wanted

to see a bunch of ETH people that I didn't see in a while and then I came home like two weeks later and like all the Heath people were here for like Columbia cryptocurrency and I was like why did I just fly to Thailand for this thing right right that's where I'm out New York privilege yeah I agree I think I've never been a big conference guy but I think especially post election now that people host more confidence in New York there's almost not really an incentive to leave because it's usually the same people are going to all the conferences. Do you agree with this? Yeah, agreed.

You agree? I'm not there. You travel? Not that much. Okay. I cut down. You're asking three New Yorkers, right? Yeah, no, it's true.

It's true. It's New York privilege, I guess. Yeah, everyone comes to New York. There you go. No, it used to be that New Yorkers had to travel because New York was like this wasteland with a pit license. There was nothing going on here. And now you guys are, you guys are eating nice. Yeah.

That's good. No, New York is nice. I am surprised how many people went on the same flight to France because they were literally all here and they all went to France. But of course, one of the big things that happened at Cannes, so the ECC is happening at Cannes. And it was well known in advance telegraph

that there was going to be a big Robin Hood event at Cannes. We finally got the announcement. There was a lot of leaks beforehand that maybe this was going to happen. But it came out that finally Robin Hood is launching their own chain called Robin Hood Chain, very creatively named. and Robin Hood chain, there's a bunch of stuff that they announced in concert with it. The first thing that they're going live with perps, so Coinbase also recently announced

that they're doing perps, although their perps are weird perps. Yeah, perp-style futures. We'll talk about that in a little bit. But Robin Hood, what they announced is, so first, they're doing perps. I think they're also launching in Europe. Then they're doing tokenized U.S. stocks on their own blockchain, which is Robin Hood chain, which is an arbitram-based chain. Originally, it's on arbitrage from mainnet, and then they're migrating eventually.

to their own orbit chain, which is arbitrams, like, you know, launch your own chain product. Initially, the way it's going to work is that they're going to have tokenized stocks, a lot of the stocks that you already know and love, but eventually they're also, they're also going to add SpaceX and OpenAI as pre-IPO stocks that you can trade, which I guess they have some broker who customers it and securitize it, such tokenize it. It's kind of dodgy. Like, I was trying to read the documentation as of why this was happening. First of all, there's, like, very little liquidity.

It's like 500K of each, yeah, to start. Period? Like total? To start, to start. Yeah, but I mean, very little. And they actually marketed or it's listed as like a derivatives contract. So it's more like a CFD actually versus like a swap or like a forward versus being like an actual tokenized version, which kind of makes sense, right? Otherwise, like how would you actually do like redemptions for this product? So yeah, it's a little wonky, I guess. I assume they just like bought a chunk like they were in the round.

They do. So they don't, there's no right to redeem. So it's not guaranteed you can actually like redeem. And so there's like some general exposure to the price of these assets, but it's a derivative contract that you're buying. It's a derivative. Okay, interesting. Well, if it's a derivative, they can't, why would you have a 500K limit? I don't know.

That's just what they're starting out with. That's what it's listed as. Okay, interesting. So we've got these two pre-IPO stocks. You've got a bunch of tokenized stocks. And they're also going to be doing, so right now it's like 24-5 that you can trade these tokenized stocks. they're eventually going to move to 24-7, where basically during market hours, you route it to

a traditional exchange on the back end, but you don't know that, you know, you're a Robin Hood user. But eventually, on off hours, like on weekends, they'll route it to BitStamp, and BitStamp will fill the liquidity when normal exchanges are not able to fill the liquidity. And then finally, in their phase three of this project, they're going to move where you can actually take your assets off of Robin Hood directly onto Robin Hood chain and go do, defy stuff with your tokenized securities or tokenized stocks or whatever. So that's what they're doing.

On the back of this, Arbitrum mooned. People got very excited about this. It's like, oh, this is good for Ethereum. This is good for Arbitrum. This is good for Arbitrum. This might happen on Salana. Didn't happen, apparently. Supposedly, I've heard that there was a bidding war

over this deal. Robin Hood. People might hear that and say like, oh, you know, how much did Arbitrum get paid? It's like, no, no, no. Arbitram did not get paid for this. They paid a lot of money. Everyone was bidding huge amounts of money

to try to win this. deal. Congrats to Arbitrum, I guess, on winning it because obviously the market's rewarding them. But it's an interesting moment seeing Robin Hood partner in such a big way with Arbitrum as opposed to go their own or completely forego associating themselves with anybody in crypto. What were your guys' thoughts, I guess, especially being on the liquid market side. Ryan, what was your take? Yeah. So I think there's been this big debate on what is like the right way to get exposure to all

these secular trends in the crypto economy. Is it just tokens or is it now equity? And, you know, Robin Hood now is very much building towards this superab vision that I think many people in our asset class really got excited about, like the idea that within one click through a single interface, you can access all these financial services in the world. But what we're seeing is that there's actually so many different ways to express the thesis. So, you know, Robin Hood already has, you know, trading, banking. I mean, they have like retirement products now.

I mean, they're literally doing everything. and now they're, I mean, really moving into crypto, like really in a big way. It's no longer just you can buy, you know, Bitcoin, Dogecoin on Robin Hood, but now going as far as to like do tokenization, some stuff with stable coins, building their own blockchain. But I think that the question I have with the Robin Hood announcement is there's still a lot of details that we don't know, not just architecturally how it work and like the performance you'll get from it and what you can actually do with the chain,

but actually how it'll integrate into the broader Robin Hood product suite because it's not enough to just say you have the distribution and that's a reason why, you know, this new chain is going to win because, I mean, as we see, the Coinbase and Base, Coinbase and Base are more or less like disconnected products. Like you can't access base through the Coinbase interface. So all they're doing is providing like branding and, of course, like investing in the ecosystem, developing tooling. But I think you don't really get the magic to happen until you actually have like a deeper integration and you can actually trade some of these. tokenized stocks through the RobinHen interface.

So that's probably the biggest thing that I'm thinking through now is... Well, so I think the... My understanding is that everything for the phase one and phase two is entirely through the Robinnet app. You will not know that anything's happening on Arbitrum. Arbitrum just has like a registry that these stocks are there and they're being minted and redeemed from the underlying brokers. Only at phase three is any Robin Hood user going to care that there's even a blockchain

because you can't access the blockchain, can't touch the blockchain. So my understanding is that like probably on chain, it will just look like Robin Hood is the owner of all of these tokenized stocks, and it might be sending messages to like, hey, mint and redeem. I'm speculating. In the presentation, Vlad was like using a chalkboard and like drawing some boxes and stuff, so I'm going off of that. Obviously, we don't have any details yet.

But from a user's perspective, like, this feels very different than base, where base, very clearly, the idea is you go direct to chain and the chain has a relationship with you. In this case, I don't know anybody is going to interact with Robin Hood chain for, who knows, maybe a year until they actually decide, hey, we're going to expose this. They did have a call for developers and say, hey, developers, you know, if you want to come build on Robin Hood chain, hit us up. But my assumption is that that's a long put right now. It's like, you know, building on Google Glass or something. It's like, well, someday maybe this will be worthwhile, but we're not making any promises about when this is going to actually be commercially relevant. Yeah. Well, I think if they have like

tighter integration, that's definitely direction, what you want to see so you can actually build towards this, this superavision. I will say I kind of hate the term super app. I don't know, I don't know how you guys feel about it, but like it's been so many years that people keep using the same term. And I'm kind of like,

I'm like, super app is a, I don't know why I hate it so much. I feel like it's a description of, okay, we have a bunch of products that all work and people live in your app, right? But it's like, it's not a strategy. It's more like an end result of like you crushing in a bunch of different domains.

Like what happened in China with like China having a giant super app is very path dependent. I don't think anybody has a super like Google doesn't have a super app. I use a bunch of different Google apps, but there's no Google super app and I wouldn't use one if they had one. I agree. I think the sequencing definitely matters. I mean,

this is even something, this even relates to me even more broadly, a little bit of tangent, just like the broader story of like smart contract platforms where in a way you can almost say that these are like positioning themselves to be these like global platforms or super apps where there's all these applications that you can access on this one single substrade.

But in reality, you know, I think what we've seen is that throughout history, the most change with the exception of Ethereum have started with a specific product and only then have started to go horizontal from there. Right. So even think about, you know, Bitcoin. Bitcoin is the product. It's quite simple.

You think about buying a smart chain or base or even hyper liquid or to an extent, even Salon. I mean, in many cases, either chain started off being application specific or had like a clear end goal of like, I want to build a decentralized NASDAQ or I want to build an exchange. or it was like an off-chain exchange that already was the product that is now going general purpose by directing people to that platform. Right. So I agree with you. I think it is like a loaded term.

And we've also seen so many people try to do this through history. Like in DFI, we had sushi swap. Yep. That, you know, they were like the number two, three AMM on Ethereum. And then all of a sudden they're like, all right, we're going to do lending and derivatives. It's like, dude, you guys haven't even figured out what your core product is. Yeah, yeah. So yeah, I think the sequencing definitely matters.

Okay. Speaking of sequencing, give me the L2 Nihilis take on Robin Hood chain. So the way that it is right now, I want to see, I'm curious where we're going to end up in, call it two, three years from now. If we look back and we say, was it the right move to do their own L2 versus just like throw this on some other chain, particularly in the starting stages, I don't think it is where this is like a very seemingly back end abstracted away from most of the users and like they're just kind of controlling what's going on in the back end. the more that people start to interact with the chain and they're able to possibly like curating an experience and monetize it a lot, I think that you start to get more of the value possibly of owning the whole stack yourself of whether it's just monetizing it more through sequencer fees or being able to control it in some way. I want to see where they take it in the product direction in general because the main difference that it seems like with base and Robin Hood is I do think that they're like taking a pretty reasonably meaningful different approach and like what they intend this thing to be in that clearly base is pushing very aggressively in this. They really care about the the crypto native, uh, kind of like application

sphere and going very general purpose and integrating, you know, social apps. Like, I mean, Jesse is obviously like the coin it and everything. Like they're trying to integrate like Zora and all like Farcaster and everything like really into the coin base app and getting this much more crypto native, like very on chain like Jesse's out there like getting everyone on, you know, bring all the general purpose app developers to us versus Robin Hood is like very clearly not doing that. Like when they talk about this, they're very clear that this is an RWA chain. Like, we're not interested in, you know, getting a bunch of people who are deploying these, you know, new crypto-native types of assets, getting a bunch of those types of application developers and use cases. It's like,

you're going to come here, you're going to trade equities. Like, you're going to do this through our app and like, this is what this for. We're not interested in social. We're not interested at like most of this web three kind of stuff. And so I think they're going to end up looking like actually pretty different and clearly where they go. And it's really just going to be driving. Like, what are the core products that they're shipping through the, Robin Hood app and just integrating this into the back end for them. Yeah. Yeah. Yeah. Interesting. Tom, do you agree with this take? Yeah. I mean, I think it's still very early in like the corp chain playbook. And it was really figured out. I was usually like BSC is like probably like the most

successful of these and in terms of like value, you know, accrual and it also just like overall traction. But there's nothing really people can sort of copy paste and and use for their own purposes. Which I think how this stuff actually takes off is, hey, here's the playbook that we run. And there's not really any glowing examples of success. Like this could honestly end up like the corporate NFT marketplace boom, if you guys remember that. Or this could be like the next, you know, sonium where it's like, I don't even know what's going on sonium.

So it didn't mean to disparage sonium, but it doesn't seem like anything's going on. The sonium team is going to write us. Yeah, yeah. I think, you know, people maybe underestimate like the, you know, exploratory experimental budget for a lot of these companies. Like, yeah, they'll try something. If it's not super expensive, that doesn't mean it's like a full commitment. into a full sort of strategy pivot.

I also thought the BitStamp thing was weird. Bitsdent doesn't have perps or didn't have perp before the acquisition. So I don't know how they're like using Bitstamp then to like. No, no, because these are not perps. These are spot tokenized stocks. But they're also. But they're also saying they're going to use Bitstamp to offer their perps product. Oh, yeah, which I didn't quite understand unless they're building it.

Yeah. Probably. I don't know. Yeah, it's an interesting. It's an interesting take. Like my, there's this broader trend right now that a lot of, of people are talking about stock tokenization. There was this other project called X-Stox, which recently announced that they are taking their tokenized stocks, similar like top 50

stocks, and they're partnering with ByBit, Camino, like a bunch of different apps to offer their stocks on all these different platforms. People are very animated by this. And that being said, X-Stox is a platform. Right now, I believe their total TVL is like less than 10 million that in total issuance of these stocks. So I'm really curious what you guys think about this tokenizing stocks meta, because it's been around for a very long time. I remember in 2018, 2019, people were trying to tokenize stocks again in 2021. Obviously, FTCS did this very famously, was tokenizing stocks for trading on their platform. A lot of people have done this and tried this. It's never worked. It never really had a lot of demand. And yet it's one of these things that

people seem deeply convicted on, that obviously it's going to work. And it's just a matter of how, when, angle of attack, something or other, maybe the wrong customer was on chain and now they're finally here and they actually do want to trade stocks. Like, what is the matter of the end of the Like, what is your theory of the case for why stocks on chain has not worked, why it is now poised to work, or are you skeptical that stocks on chain is actually compelling? Yeah. So I think from the – I'll break it down from the user perspective and then maybe from the perspective of someone like Robin Hood.

So I think for Robin Hood, it's just really like, like John said, it's just back in infrastructure where all of a sudden now it can possibly capture some fees or even say that. some margin by getting rid of all this underlying stuff that's in the financial stack, right? And for that, you know, it's not like, like, what is actually the big deal? The big deal is that Robin Hood is just going to push some of their flow to either Robin a chain or arbitram, and that's pretty much it. But for that, like, you really do need someone that's like someone who owns the users to drive that flow there, because I don't think the users are going to do that themselves. For the users, I mean, this has also been the biggest question I've had with this is,

you know, what practical value do you get as, you know, let's say one of us buying Tesla on a blockchain? And there really isn't. I think if you are someone who is not in the United States and can't access stuff easily, then it actually makes a little bit more sense. Like you were actually doing something that you couldn't do before. But other than that, I really don't think there is for like these tokenized equities. Now, I think where it does get interesting is when you start to think about the composability of having some of these tokenized assets on chain. So if now all of a sudden it's very easy for you to go in borrow against that tokenized stock in a way that maybe wasn't as simple on your brokerage platform, then maybe that's an unlock, but even to me, that's still incremental. So I actually start to, one thing that's something to think about more recently is actually that the way that you'll get users excited about this is when you can do something that you can't do today. So I think perps are a good example. right if you had like a Tesla perp that you can go 20x long and it trades 24-7 that is actually a huge unlock

right because you can't get more than on a single stock in from your broker you can't get more than like two-x leverage so if all of a sudden you're getting 20x leverage and you can trade a 24-7 and you know cut risk on the weekends or get long at like you know 7 p.m. on a weekday that's actually like a big unlock and i even think that not even just retail users but even hedge ones would want to use that product because it actually is like a huge advantage. Do you agree with this take? Yeah, I definitely agree with that. I mean, just, I mean, particularly as a US user, I mean, that's the same thing that

I've always thought of. I don't have a use for this other than if you give me a new product. And fundamentally, the unique product like would be perks that a lot of people would use. The getting it to oversee users who don't have access currently to U.S. assets is the part that I think is meaningful, whether I think ERD exists to market today. The tough part is like these products are like quite janky today, where it's the same thing of like, really, this is just a kind of like weird derivative looking thing where like you

can redeem it for the cash value off chain if you're KYC, like after the fact. It's like it's kind of a weird thing. Like, yeah, it's not going to have great liquidity. It's just like generally a weird setup. I think a lot of the on-chain equity stuff is a more difficult example of like why stable coins were able to flourish early on where I think a lot of the benefits of on-chain equities mirror in many ways. It was something that I'd heard you talk about on a podcast where I think it was the one that you did with Joe Wisenthal where you're talking about stable coins. And it was a take that I very much agreed with that I thought of before of a lot of this like very possibly the reason that stable coins that were going to look back at like why they made sense was probably just a lot of the

regulations and laws that we have around like dollars in the way that all the set of month stuff works today. Like probably doesn't actually make sense and the easier way to do this is just kind of rebuild the whole system. I think we probably have a lot of that with equities where you just say to yourself, I mean, a lot of these problems with equities that we're talking about, they aren't actually, like, fixed by crypto in a fundamental sense. Like, you know, legacy tech canon theory just support 24-7 trading. Like legacy tech canon theory just give access to assets to people who are in Europe or whatever country who are like not in the U.S. There's nothing about legacy tech that stops you from being able to sell a stake in open AI. Realistically,

I think a lot of it is we're trying to come up with like these new fancy ways to like make on-chain equities and like, okay, how can we use that to kind of push the boundaries of what we're allowed to do in some ways? I think in practice, that's been much harder to do with equities as opposed to digital dollars or early on. It was a lot easier. It was a lot easier. Just be like, all right, we're going to have money in a bank account. We're going to put the dollars on chain and, like, go do what you want with the dollars. In practice, that's been, I think, a lot harder to do with equities. And there's a lot more like regulatory barriers that people are clearly pushing up against where that's why this is sort of like a janky product early on. They're not just, you know,

Robin Hood isn't saying like, hey, we're just going to put like Tesla stock on chain. go to whatever you want with it, because you'd be breaking some laws. Yeah. I mean, I like the analogy with stable coins because with stable coins, I think it's in a way even more severe than with stable coins. With stable coins, you can ask, okay, why can't I do this thing with dollars instantaneously and send it on a bank holiday or on a weekend or to somebody quickly? And somebody can explain to you why it works that way.

With stocks, what I find is that there's nobody who can explain to you why it works that way, right? Like, why does it take T plus two? Why can't I do this thing at 7 p.m? Plus one now. Yes, T. Oh, wow, amazing. Okay, 2 plus 1. Why is it all T plus 1?

And nobody can really explain the whole thing to you. They can kind of be like, well, that's just how it works because of this thing. And it was like, well, why that thing? And there's like, well, I ask that guy. And, like, everybody kind of has this sense that, like, they're sort of hemmed in by just the regulations and rules and laws and transfer agents and brokers and this thing. And it's just like, well, you can't, we're just stuck. Okay. Sorry.

That's just how the system works. And you look at, like, India. You're like, no, no, no, they don't have any of these problems in India. Like, this is a totally centralized system. in India. They didn't invent any new technology. They just don't have this. And they're like, I don't know. They're poor. We're not. And so we have it this way. So I think there's a path dependence to these things. And I think if your system is broken enough, sometimes you're just like, let's take that technology and use it to solve this problem just because it's a fig leaf for being able to

paper over the fact that we just have a broken system and we need to just start over. And if we can start over something else, we would do with that too. Right. Like there's nothing that stops. Like Robin Hood, phase one, phase two, there is nothing in phase one or phase two that needs a blockchain. All of this could just be basically securitization of just some intermediary that holds stocks on your behalf and Robin Hood trade some entries in a database. It is interesting that maybe once you take these stocks and bring them on chain, you can do stuff with them. And I think I give a little bit more credence to the idea that like, hey, if you think about the asset classes writ large that should be tokenized and brought on chain, okay, dollars first, which we already have, treasury second,

growing, you know, they're in the, you know, $5 billion range. RWA is, okay, we've got like 40 billion or something of R2A, 30 billion, something in that ballpark. Stocks are huge, U.S. stocks in particular, are huge, absolutely enormous, very large demand around the world. And it makes sense as you start to bring the people, so the people on chain, you know, you're sort of pointing like, oh, the people in this room, what the hell are we going to do with Tesla stock on chain?

Answer, obviously nothing because we can already buy Tesla stock. The whole idea is that the other people on chain, okay, but what is some, you know, guy from China who comes on chain. Is that guy going to buy Tesla stock? Well, no, he came on chain to gamble, right? He came on chain to buy meme coins just like you and I did. You know, he's not on chain to like make sound financial investments. But the idea is that over time, as more and more people who come in through the stable coin route, as opposed to the crypto casino route, they're coming in to save. They're not coming in to speculate, right? And if more and more of those users come on chain, they are going to want Tesla stock. They are going to want the

S&P. They are going to want bonds and all this other stuff that to us is kind of like, well, you know, I already have this. Like, yes, we do already have this. But most places around the world, they don't have this in the same way they don't have dollars, right? Because capital controls, otherwise, or just, you know, investment restrictions on these assets. So that's why I think the tokenized stock story makes sense only as stable coins bring more and more savers into the crypto economy. But that's still a slow-going process. I think it's going to take some time. So my guess is going to be that what we see from Robin Hood chain is that Robin Hood users are going use it and very few other people are going to be using it or using these tokenized stocks,

but it's more of a five, seven year growth story, I think, for these assets. But it's later in the process compared to cash and then, you know, just treasuries and like, you know, really safe investments. That's my, yeah, what do you think? What do you say? Yeah, I mean, I think the global access thing is very real. And I'm also always kind of reminded of the fact that people are very mobile international these days. And so it's like also the idea like you're like married like this one weird brokerage and this one weird play. And then sort of fragmenting like it just doesn't make any sense versus like, oh yeah, you have one account that like lives with you wherever you go. I think also makes more sense. I think I mean the big critique right now.

And I think also why this has not worked previously is people of this like, I think kind of very idealistic vision that you're going to get 24 seven trading like overnight, which is like probably it's not going to happen right away. No one's going to be willing to quote like a random hour on a Sunday or something. But I think. I think it's kind of like stable coins. You can hit this tipping point where you hit this critical mass. And, okay, actually, this is not two separate systems. There's not stable coins and the dollars.

And then you get like a USDC DPEGs that systems are not in sync. But eventually this becomes the system. And there is no deep pegs. It is the asset. And I don't know where that threshold lands. Maybe it's, you know, 10% or 20% or something that makes it robust enough where, hey, this can actually be the system in and of itself. And then I'm surely somebody will show up to, quote, off hours, right?

I kind of think of it. I mean, a little bit like Uber in some ways, right, where, oh, someone could have told you 20 years ago, oh, no, there's no demand for like a taxi, you know, deep in Brooklyn at like, you know, midnight. And like, okay, well, actually, we just build the market infrastructure and let both sides of the market sort of figure out if there is demand, what the price should be. And I can't you if you allow people to quote and trade on midnight on a Saturday, somebody will show up and quote you and it's like, let's let the market kind of figure out.

That's a great example. That's a great example. I was actually, I was listening to an odd lots podcast where they were talking about Iran and Iranian markets. And the Iranian stock market, which parents, it's like $150 billion market nominally, and the Iranian stock market has been closed for like weeks, right, because of just all the instability going on. And they close on religious holidays and they're closing this and close to that. But obviously if you're getting bombed, you fucking, you know, you close the stock market. And one can imagine that like, okay, well, so the prices, it's still a $150 billion market because it hasn't opened since

the bombing all started. But like, you know, to your point, okay, you know, the idea is like, well, who wants to trade when there's a war going on? And the answer is, of course, you know, anybody who wants to reallocate their money, because the one thing that is still trading is, I don't know what the Iranian currency is, but the local currency for tether. That currency, that pair is still trading. It's trading constantly, 24-7. And it is the only way that you can actually tell what is the price of the Iranian currency at any given time. And so there is this sort of elegance that, like, yeah, you might not think there's a market at, you know, 3 a.m. Like, who's going to wake up and drive at 3 a.m. and, you know, take some guy to the airport.

The answer is like, yeah, somebody will. And actually, they're willing to pay like a pretty normal fare because some crazy guys up at 3 a.m. Even if you can't imagine who they are. In the same way, there is somebody who wants to trade Iranian currency. Actually, probably a lot of people want to trade to running currency and potentially get out of the currency. So I guess switching gears a little bit to talking about perps because you were mentioning like, okay, I think Perps is maybe the big story, tokenized stocks, yeah, whatever. Maybe that's an interstitial thing, but like Perps is the big unlock. So Robin Hood obviously announced that they're doing Perps. We know that they were coming into the Perps game. The U.S. is not fully, the CFTC is not fully,

to anybody to do perps yet. But Coinbase offered this intermediate product, which is a perps-like dated future that expires in five years. So it's a five-year future, which in crypto world is basically forever. So by the time we have perps, like, you know, this thing is not expiring until you guys are retired. And this five-year perp, so they have a perp-like funding rate on the asset, but it does have technically an expiry date. And my guess is they're only going to issue one. They're probably not going to like, you know, one every month or something. So that's what they have for now until they get true perps. So I want you to elaborate on why you said that, hey, tokenized stocks, whatever, but tokenized perp or is there perps on stocks, amazing. What is it you think is the big

unlock with perps on stocks that's so substantially different? Yeah, I just think that when you don't need to worry about like the big physical delivery of the underlying asset, it just makes it. it's so much easier logistically to get that asset on chain. Because not to oversimplify, but in order to create like a perp, all you really need is like a price feed. Right. And then you have people who are willing to take both sides of the market. So it's just a little bit easier to go and, you know, represent whatever it is, right? You know, Tesla, Robin Hood, whatever, whatever you want. So that's one. It's just like easier logistically to get it on chain and actually have it trade in a way that is competitive with what already exists.

And then what actually makes it more exciting is, like I said, it a little bit, to an extent, is a little bit of regulatory arbitrage, but the idea that you can just get more leverage on assets than you could in your broker account. I mean, that is actually huge. I mean, not to be cynical about the current state of the crypto economy, but so much of the reason why people go to these exchanges or go to a blockchain, which in many cases is just an exchange as well, it's just so they can go and speculate, like on meme coins, on and it's leverage.

But that being said, Robin Hood and Coinbase are both only offering three-x leverage. Yes, yes. To start. To start. To start. I mean, well, how does that work? You just like be like, yeah, maybe they sell their customers who lose their money. So.

Yeah. No, but I mean, it's just like, it's just an incremental step. I mean, I'm sure they'll offer more once they can or once they get them. But yeah, I think just directionally that this is where it's going. You think, you think, okay, how high do you think leverage in the U.S. is going to be for regulated perps? I have no idea. I mean, you can't get much leverage as a retail trader. anywhere that's regulated, right? So I can't imagine it would go that high. No, I think the DCC caps out

like 4X or something like that right now for is that right. Yeah, it's like the sort of haircut that you apply to like different assets. So it's like not I guess this would be for like futes, but you know, same kind of thing. Right. I don't know. I mean, I think there's also like this like again, reg our kind of story for perps where maybe you actually have it offshore or maybe you know are sort of offering people access to like a perp deck somewhere. So you're not the one actually. building the product, but you have like an interface. And I mean, there's something people talking about it was like the Robin Hood fees are kind of crazy.

But, you know, I think that's kind of what the market's willing. I'm sorry. There were no fees, no fees. No, no, those fees. They have fees? Oh, yeah. The whole idea was that they just charge spread. I think it's 10 bibs.

Yeah. That's top tier. Yeah, yeah. If you're trading less than 50K, it's like, you know, 80 bibs or something like that. 80 bibs. Yeah. Wow. Okay.

Interesting. I didn't realize this. Yeah. Yeah. I mean, so this is why we've kind of ended up with, I mean, like, I feel like, most of the conversation around hyperliquid realistically over the past few months has been like, all right, this is great, but, you know, Coinbase and Robin Hood are going to show up, and then they're going to have perps, and then, like, you know, a lot of their customers are going to leave.

And then, I mean, the current state of it is like, all right, Robin Hood is going to offer it, but it's going to be three X max, and it's only going to be in Europe, it's not going to be in the U.S. And then Coinbase is going to do this, like, weird, longer dated product, which is also going to be more expensive. We'll see how liquid it is. We'll see how well it trades. And realistically, I mean, again, this is nothing fundamental about crypto versus, like, centralized infrastructure. it's just you're sort of not allowed to do that right now.

Right, right. And so there's the arbitrage to go to that and provide that to consumers because consumers obviously want that. Well, what is the average leverage that somebody actually takes, right? So people, like, there's obviously some people who are crazy and take 40x leverage. My understanding is that most people are below 10, right? Yeah, yeah. I think it's quite low.

I think it is like on the order of three or four. Yeah, yeah. So most people are not doing, like, so, you know, the marginal user is going to be like, well, three X leverage, fine, that's all I do anyway. The crazy, you know, like the James wins of the world, okay, they're, they're, they're, They obviously are going to stay in the fast lane. So I agree with the story directionally. Is that obviously, okay, a hyperliquid or some kind of decks is going to play faster,

going to play looser, is going to offer more products and is going to – it's the deep end of the pool for those of you who have too much brain damage to manage the just pure coin-based, you know, kitty pool. But that does sound like that's probably still a lot of users that would get siphoned away, right? I don't think it's wrong, even if it's not complete. I don't know how many are going to get siphoned away off of what we're saying is just clearly like a worse product. I think it is sufficient enough that you will onboard net new users. I don't know anyone who is using hyperliquid right now who is going to look at the coin base product and be like, oh yeah, I'm going to stop using hyperliquid and go use that. It's still just worse and it like actually takes you like some effort to go switch to the thing. I think it's good enough to get net new users. I am sure that there are people in Europe who just are normies who don't really go on chain a lot and they're like, cool, I can do 3x leverage on Bitcoin. Like this is fun. Yeah. My guess is it's more of that as opposed to picking off the like the current market of people who are like, I want to be on chain. I'm comfortable with doing that.

I want high leverage. I want new asset listings right away. I'm guessing you're just not going to pick off a lot of those consumers right now. Yeah. I think also the product is just still, like you said, is very limited. So the idea that I'm trade on hyperliquid and I want to go pay 10 to 80 bips per trade and I can only trade just like a couple assets and it can only get 3x leverage. and I can't even access it unless I'm in a certain country. It doesn't really make that much sense.

And I think it'll make even less sense as you start to, I think, maybe get an acceleration of new purpose markets being created on hyperlicked once you have like the hip three that comes out. And then people can access it through different interfaces and maybe prediction markets or maybe, you know, equity purposes as we, as we suggested. And then that is just like a, I mean, that point is just a totally different product than what Coinbase or Robin Hood is offering. So I hear you on that front. And again, I think I don't know what the marginal user of hyperliquid is even like, right? So obviously everybody in this room is on this podcast is a big boy.

And so you guys are trading size. You guys are more sophisticated. The marginal Dex user is obviously taking a bunch of leverage, has no inside information, is just kind of punting one way or another. And I have to imagine at some point, like, something. Okay, so purpose being regulated. in the U.S. is going to take a little bit of sting out of the perception of perps, right? Because I actually think the Coinbase five-year thing is a good idea.

Obviously, it was cute, and people were dunked on them. But I think it's actually a good idea because five years, like, obviously, perks are either going to get approved or banned in five years. So one way or another, you can move off of this product to, like, the main thing, and then you're fine. You know, five years is like as long as Solana has existed. So it's quite, it's quite a long time before we have to worry about the expiry of this, of the one Coinbase perp or, you know, future-like, perp-like future.

but it does seem like the growth story for dexes does get eaten into given the fact that there are a lot of people who are using a dex but they are probably like I don't know if I can trust this you know I still remember FTCS you know the mango markets like you know they've been around the block and they know that like look this is the best product but coinbase like if I lose money I don't know that hyperliquid is going to come in and like make me whole I know coinbase will make me whole you know this is a $60 billion company and hyperliquid as much as I love them like Like, you know, it's a wild west out there. Are there, how many people are there like that?

I don't know. Are there some people like that? Almost certainly, given that, like, I know enough people who have been wiped out in Defi or have gotten Rugbold or, you know, whatever. That kind of stuff happens. So if I had to guess, I think hyperliquid is likely to still grow, or, you know, the on-chain, perps market is likely to still grow. In some part, maybe galvanized by the increased understanding of Perps.

and like some people who onboard through Coinbase will likely go to Hyperliquid and say, oh, I got Perp-pilled. I was trading spot. Perps are way more fun, but I actually want to go more than 3x. Where can I do that? Or I go on Reddit or I go on Twitter.

Oh, there's this thing called Hyperliquit. I should go figure how to get there. And at the same time, there are probably some people in Hyperliquid who are like, you know, I really just want to trade perps in the U.S. I'm only using 3X leverage. I'm a little worried about all this on-chain, D-Fi stuff.

I might go to Coinbase. So I can see actually both growing at the same time. Yeah. I think it's a really good point. I think it's easy for us to get caught up in just a competitive dynamics. We're looking at this stuff every day. But I think for like a normal person, I just go back to the Salana example where once again, if you're a mental model of Solana is that it's basically an exchange, like why was it able to actually get volumes and were those like net new volumes or was it volumes that were stolen from the essential exchanges? Because, you know,

we saw, you know, at the peak in February, Dex volumes reached like 25, 30 percent of a centralized exchange volumes. And I was largely because of the Trump meme coin. And what is the reason why I think I was able to get those volumes? Well, it's because it's offering, one, it's anyone the world can access it, right? And then two, you can access assets that just aren't available on the centralized exchanges. Right. So that is, those are volumes that those exchanges would never get. And these are just like net new people coming into an asset class to go and buy those assets.

And I think it'll work similarly for this as well, where it's like, you know, I think as as John said before, people who are going to trade perps on Robin Hood, these are. probably people who have never touched the crypto economy at all before. Maybe there's people who are just trading Tesla options and all of a sudden they're like, all right, well, I'm going to try out this new instrument that Robinhood has put up to the front of top of my app. And they go and do that. And they're like, you know what? This is cool, but I don't want to go 3x long Bitcoin. I want to go 50x long FARC. And they go on chain and they go and do that. So I really do think it's probably going to be more. I think the expansionary potential of this outweighs whatever competitive

pressures that it might introduce your term. Yeah, I just tweeted earlier today, like the UX flow for the Robin Hood app. Do you guys see this? It was nice. It's really slick. I'm like, you know, seeing how perps get trade on other platforms or like you're staring at like, there's like seven different

tables in front of you or whatever that you're doing as you're like type it manually typing in like oh, here's my, like all of that stuff it's like just the beautiful sliders and up and it's like oh, this is what happens when Silicon Valley touches cryptos later, you know? Like this is just like another level of polish. Or the Rhone Valley even.

The Rhone Valley? Although everyone's like presenting was like European and it was a very awkward presentation. I don't know if you. It was. Yeah, yeah, I thought it was cute. I thought it was cute.

It was very scripted, I felt. It was, but I was, I don't know how they, I was like, do you think memorize all those lines? I thought it was very impressive.

Oh, yeah. That's a good point. Yeah. But yeah, I think there was like a silent majority in, I don't know, investing overall that we kind of forget about.

I mean, look at like the ETF success where it's like, yeah, these people could have gone and opened a Coinbase account and bought Bitcoin, but they didn't. And they didn't buy a very large amount. And I mean, I think the success of the ETFs sort of shows that. And even, you know, Robin Hood, like 30, 40% on their revenues from crypto trading, which is like insane. So there's like a huge body of people out there who don't want to go on Coinbase to go do this thing. They want to have and be, they want to be lazy and they want to be in their own existing, you know, brokerage. And great, now they can go and buy these things.

And so it feels like that's the audience that you're kind of tapping into. It's this big bottom of the iceberg versus these very, like, on-chain crypto people. Yeah. Well, so, okay, speaking of the ETF, the other big story this week is that on Wednesday, there's an approval for a new ETF for Solana. So this Solana ETF, it's a little bit weird. It's a Rex Osprey sole ETF, the first U.S. Salana ETF as well as the U.S. first U.S. staked ETF.

Now, it's a little bit weird because this ETF is actually a C-Corp. So I didn't totally understand all the details, so I'm going to muddle through it to the best extent I can. Do you know more of the details about this? You don't know something funky. Okay. So my understanding is that it's a company and the ETF owns shares in the company. And so when you subscribe in cash and they put the cash into the company and the company goes and buys soul and stakes it and then redeems, like the redemption is like shares of the company that you can go sell. So it's a little bit complicated, but technically the underlying gives you exposure to stake soul.

and because it's a C-Corp and it's not like raw soul, you don't have to deal with any of the, you know, like it's technically just a company. So that is how they kind of evaded the issues with staking and resolving like, okay, Solana, this or that, or blah, blah, blah. So this thing is going to start trading on Wednesday. And there's obviously been a lot of anticipation about the Salana ETF complex, a little bit weird that like Rex Osprey is the first one to get over the line,

but obviously they were very creative and they're structuring, so good for them. And despite that, Salada doesn't seem to be reacting, right? Like the asset was up like 2% today. Yesterday, they're down like 5% today. So it's kind of all over the place. And it seems like maybe we're in a different moment where people no longer believe the ETF story. Maybe the Ethereum ETF, which is largely underperformed expectations. You know, it's like $8 billion total compared to like, what is it, like $100 billion plus for the Bitcoin ETF complex. The sense might just be like, yeah, this is so marginal that it just doesn't really matter. What's your take on the sole ETF? Yeah. I'd say,

two things. I think one, I don't think staking is that big of deal for free TFs. And let's just go back to the Ethereum example. I remember there's a handful of people were speculating. Okay, if Ethereum had staking ETF, there'd be more at flows. It's like, would it really, like, is the person who has a ton of money in their brooch count? Would they really be more interested in buying ETH if they can get 2% more in ETH? And ETH is just going to go underperform anyways? Excuse me, 3%. 3%. 3%. 3%. Thank you. I don't think it makes a difference. So I don't think the statement matters that much. I mean, of course, it's obviously like a better product if you have taken so you're not getting diluted, but I don't think it's actually going to incrementally drive

like a ton of, ton of more flows. The second point is, while I do think the ETSs are still important, I don't know if they're as important as they were before we had all these treasury companies spin up because now you can get, I mean, once again, it's not perfect. But none of the trade companies are live yet. So you can't, like, there's no, there's no, there's no alternative right now to buying soul and. Yes and not. You can buy like, you know, defy development corp and you know all the like isn't that isn't that Canadian yeah but they trade at like huge premiums to NAF so they're not they're not perfect but you can get some exposure to soul in public markets if you if you if you want to right so I don't think it's like as big of unlock as

like there was no way to get exposure and now you can get exposure and then like I think maybe what you said as well maybe people do have a little bit of PTSD from the ethereum utopia because there's so much anticipation leading up to that like oh wow look at Bitcoin, everyone thought that this wasn't getting any flows when it came out. And all of a sudden, you know, it just rocketed. And it was like the most successful ETH launch ever. And it ETH comes out and there's just no interest. Yeah. So why would there be interest in Seoul if there's no interest in ETH? Right. It's kind of like the way that people are thinking, especially now, too, when, you know, I think this is something just more generally at Salinas to figure out,

what is kind of that next big story for it beyond own the casino? Yeah. Right? Because that is, I think, very clearly behind us at this point. I mean, if Salon ETI have one, you know, launched last year. It would have been insane. It would have been totally meteoric. Would have been a monster launch. Exactly. But now it feels like you've kind of a little bit missed the window, which is sort of always the regulatory story is that the approval comes a little bit too late for the party. It's kind of like, you know, Gensler going after OpenC, like two years after NFTs collapsed. Yeah. I guess Calci got approved, what, like a month before the election or something like that. Yeah. Yeah. Yeah. Yeah. Yeah. True. True. But the staking yield point is

an interesting one because, so I was, I was recording some clip by the roll-up talking about staking yields. And it got, it blew up and a lot of people got really, really animated a lot of people about the question of whether proof of stake, nominal yields, and this idea that, you know, these blockions are basically paying too much yield because the security models are a little bit overstated or a little bit fake compared to what we originally imagined they were going to be when everyone was writing their white papers and their inflation curves in 2019, that in the world of professional stakers, where it's the same 12 guys, and I got blasted for saying it's 12 guys, where the same 12 guys are validators on all these chains. Like, you're basically, it's not

the security model, like, if you had gone and rewritten these papers and you wrote the assumption of what, well, there's 12 guys and they're all professionals and they all like are basically the best service providers, you would have come up with a very different model for how proof of stake ought to be distributing emissions. Curious for your guys' take on the, story because I think it ties very much this is there really demand for staking thing yeah I mean I I strongly agree with it I mean I think this is kind of like the the top of the market in many ways for proof of steak or well I would say we're past the top of the market of like sentiment of you know economic security is this wildly important thing and we're going to have all these

big staking companies around it I actually when you say proof of stake do you mean like because some people were interpreting that is like oh proof of stake coins are cooked yeah the the the the mechanism and the importance of it where oh you know economic security is the super important thing and like this is how we can compare these chains like people are going to go to ethereum because it's the world war three you know resistant security because it's got way more dollars staked and we need to pay for a certain amount of security i think most people would just realize at this point like this just not how it works in the real world i i mean like it ties into i mean it was the post that i had written i think like two years ago at this point on like proof of governance whereas basically just

calling this out straight up where it was like, hey, I don't think this like actually makes any sense for like the vast majority of chains. Like if you just play this out, I mean, like literally all the funds are delegated to people. Like so, I mean, you just have that obvious inherent principal agent problem. So like it's literally not anyone's money that's being staked, which is why, I mean, people have toyed around with like, should we just get rid of slashing on a bunch of these chains? Like it doesn't actually make sense to slash someone when like the person. Well, it doesn't even have slashing. Exactly. And I mean, that's part of why there isn't really an urgency for chains like that to have that. I mean, there have been serious proposals in Ethereum

over the past year or two, like, should we get rid of slashing? Should we minimize slashing? Should we, like, segment it to certain portions of stake? There were serious conversations around, like, having these kind of like dueled staking models, because it was realizing this. Like, hey, pretty much all the funds are delegating. It was like a handful of people who are doing this mostly. So, okay, how does it really work then? Explain to us, like, the proof of governance concept. How does it, how does Ethereum, let's say, which people think of as like, okay, Ethereum's the most robust, the most secure, if I want to issue a bond or something, I should do it on Ethereum. How is Ethereum actually governed?

So Ethereum, I would say, is unique from the other chains. If you have a really strong design goal constraint on you actually really want to let anyone join your validator set, like you care about that validator number 1,000 who has like 32Eath and he's providing effectively no stake in the network, but like a little bit. And you don't want to have any opinionated governance that's like literally. just picking the validators, then you need proof of stake as just like, this is the way that you just let the market pick who the stakers are going to be. It's like the easiest way to do that. Versus, if you have an opinionated chain, which is how like any Cosmos chain works or hyperliquiter,

or any of these, where it's like, all right, we have like 100 or less validators. In practice, most of it is the top, like 20 or so. Like, we can literally point to them and handpick them like, hey, we like, we want P2P to be one. We want figment to be one. And then you can just have a direct economic relationship with them. And you can kind of bypass this idea of like, hey, why do we have 8% inflation where most of this goes back to the staker and then like the validator who's like actually providing the real security is getting this like a little bit of a sliver of a commission off of there why don't we just pay them if we agree that that's actually where the security is coming from and not from all of the dollars staked by that other people um because what

you're doing is just tax inefficient at that point and which is why there's a big push on a lot of these networks like hey what why do we need this on inflation rate you know if i'm getting 10% in it's staking rewards but i'm being 10% inflated i'm just paying taxes on like but I hold every year. Like, this doesn't make any sense. Right. You know, why don't we just take that 1% or whatever we needed to pay it directly to the operators that, you know, we handpick?

And so I think in practice, what we're seeing is we're seeing a move towards that, where there's more openness towards these kind of like POA style chains. Like, no one actually cared that hyperliquid realistically in the beginning was like a handful of people. Even now, I mean, it's 16 validators, I think. Oh, people care. Okay. People definitely care.

People care. But in practice, like, users are willing to use the system. even though the foundation itself controls, you know, the vast super majority of stake or Noble is a POA chain. And so, like, I think you're going to see a push more towards these POA type chains. I mean, like, this was the Celeste appraisal that they had like a week or so ago. Like, what if we just like get rid of stake and just like, we just say like, hey, here are the validators and we pay them directly instead of having this high inflation rate.

What was the response from the Celestia community? It was like a mix of, I would say people like me who have had a strong opinion on this. this for a while and like care about the economics of it. Like, yeah, this just like makes sense for what you're optimizing for. And then a bunch of crypto Twitter, I think that people genuinely like just don't understand the economics of proof of stake to like a meaningful extent. I think there's a lot of people that still just have this old school ideology that like for some reason is valuable for you to put your money in a box and like print more tokens and

therefore you get more money. And that's utility. People like think that that is like utility for the token. Yeah. So in that clip that people were roasting before, I, Although people thought I was saying, like, proof of steak is cooked and we should move away with proof of steak. What I said was that I think the inflation rate should be much lower, but probably not zero, right?

They should be like some nominal amount of inflation to just like make sure people aren't like, if it's literally zero, then, okay, you're just like paying people out of ban and whatever. I am very sympathetic to the people who are like, no, no, no, no, we shouldn't like totally rip off the band or like, you know, just take off the face mask and be like, no, no, it's all proof of authority. And basically it's like these 12 guys are running the blockchain. And why do I feel that very intuitively. and I want to try to justify the intuition.

And I hope it's not just that like I'm a hipster with respect to protocols, but I think it might be a little bit of that. I think in a way, I was, it almost seems analogous to me like, okay, we all know if you've been in the world for long enough that democracy is a little bit of an ideal, but it doesn't really describe reality that well.

The reality is that money talks, and the reality is that, you know, money to interests, lobbying groups, you know, people who can actually get organized and send their message out, they have a disproportionate voice in any democracy anywhere, right? And so you might say, like, well, why do we even have this fig leaf of a democracy?

Why don't we just directly use money-weighted voting? And, like, we can skip a lot of these steps and actually we get the same efficient outcomes. And you can argue that money is aligned with most people because of GDP and blah, blah, blah, blah. And I'm like, yeah, maybe, but, like, I kind of feel like you're losing something almost, like, spiritually about the system if you completely remove the deference to the ideal. So I think there's two parts to it. One is, so I don't think that most of these major chains like should get rid of proof steak.

Which is something that like I tried to put in the book. Why not? Why not? So for at minimum, it's if you want to, if you don't want to have an opinionated governance model, like you just need some market mechanism to go pick all the stakers. Like Ethereum is not going to have this mechanism where we just like revisit the governance every few months and we're like, hey, who do we think all the validators should be? And then we pick 20 of them.

This is not how Ethereum works. You need to have some sort of market mechanism, just go pick them. I think that there is a spectrum, though, where there are a lot more, if, you know, we call that like all the way on the right side and then there's all the way on the left side, I think there are more chains that are over here that are like doing this thing and they don't need to be. For a chain like hyperliquid, do we think that there would be any meaningful difference if the chain's governance just sort of picked like, hey, here are the 16 validators that we want and you have equal stake.

I would argue that would actually just be a better distribution because you would actually just have like equivalent stake throughout them. And I think it's the anti-democracy point to a meaningful extent there of like the point was like for democracy like, why don't we just rip off the band-aid, you know, it's money, weighted, whatever. Proof-of-the-stake is the dollar-weighted one. Yeah. Versus, this is the in this kind of like this proposal, I mean, like for Celeste, the way it will work is like you're just using your off-chain social consensus governance of like, who do we think the 50 or 100 or whatever validators should be? I mean, just like give them equal stake. Yeah.

As opposed to what do we see in practice is the vast majority of users, I don't actually care if the stake is decent. centralized, and I'm just going to pick Coinbase. And like, we all just give our money to Coinbase. We all just delegate to Coinbase. And, like, they end up with, like, a third of the stake. And then you end up with, like, five validators that usually have, like, two-thirds of the stake. So if you're on this, like, far end of the spectrum where, all right, we've got an

opinionated governance anywhere. We're going to have a pretty small validator set. Why don't we actually just, like, pick who they should be? And then just give an equivalent kind of voting weight throughout them and then skip, like, most of this staking stuff. Okay, let me give you another example that maybe tests intuition. So very often when a Dow is being set up, right? and I know these are all dirty words now,

but when a DAO is being set up, a team usually has two decisions. They can go down. One thing they can go down is say, okay, the DAO doesn't have the token is distributed. We can just force through the initial governance and basically say like,

okay, we're going to rubber stamp this, rubber stamp that. We have these committees. We have this thing. We have that thing. We have these fucking token emissions, blah, blah, blah. Right.

The second path is we can have this package of like initial proposals and we'll actually distribute the token and we'll actually let the community vote on this initial set. And if they might rebel, right, the way their arbitral, um, initially rebelled on the Dow boats.

But you like, look, put it all out in the field. And like, if the people come back at you, then you just have to negotiate with the people. And some projects do the former, but some projects do the latter. And they take a risk in doing so. And I think, what do they get for that risk?

The answer, I think is legitimacy. And legitimacy is a very hard thing to quantify. It's a very hard thing to measure. But I think it is something that, uh, you, you do kind of get, even if like, look, this on-chain straw pole thing with like tokens and blah, blah, blah.

Like, why don't we just, look, the team obviously makes the decisions. Like, they're the ones who writing the goddamn code. They decide who the fucking validators are. And if you said no, like, you know, go fork this thing. But you lose some legitimacy for it. And I don't quite know where it comes from or like how to quantify it. But that does feel true to me. Does that, does that not resonate?

I think a meaningful amount of the, what makes it feel special today is just the obscurity of the process where it just like feels like this decentralized process where like we're all you know free market and like we're all picking all these validators when in practice i mean it's just the token holders for picking them and like it's if you have a centralized amount of like token holders they're just going to pick a pretty centralized stake yeah i also don't think it has to be that different i mean like the simple way you could do this is you just have token holders vote on like who they're going to be as opposed to everyone just individually delegating to a staker and then having this inflation rate so i mean like instead of every hype holder delegating you know their stake to you

I pick one of the 16 validators because in practice, what do they pretty much all do is that just delegate to them to the hype foundation. I don't even know who most of these other 12 validators are. I know who they are. I'm going to give them my money. And then it was like super centralized stake versus what if you just like had all the token holders vote on, hey, who do we think should be the 12 validators? And they were just like equally distribute voting weight.

And then we just, we just skip the staking mechanism. Yeah. Because it basically comes down to that question of, do you think that you're getting this economic security from like locking your money in a box and delegating it to someone else? If you think the answer to that is no. you could probably just go about this a different way. And it could just be token holder voting as opposed to locking their money in the box

because if we basically just view economic security from this locking the money in the box and taking to someone as not really adding value and we view all of this extra inflation as just strictly tax inefficiency. Why don't we just get rid of that as pick of the validator should be? And then we send 100% of the staking rewards to them.

What I think we're going to see in practice is what teams like Hyperliquid are doing, which is just push the bounds on proof of stake, which is to say just drop the inflation rate really, really low. Like, they have, I think, like, one percent or inflation or something like that. Like, as a staker, you get, I think, like, 2 percent yield ballpark. And so there's not a lot of incentive. And the result of that is, I don't know, maybe 30, 40 percent of hype is staked, something like that. You don't get a lot of rewards. And so, I mean, you can just push it, you just push that

to the limit. And the lower that you go, basically, the higher percent of the rewards, the operators are going to take versus the stakers until you eventually push it all the way to the lower bound where the stakers are getting nothing and the operators are getting everything. And at the end of the day, what you have there is, I mean, the same thing. You just pick the validators and give them the money for providing the surface. Somehow that still feels better to me. It does feel worse. Yeah, yeah, yeah. My guess is that we're just going to see this because I think that, like, we're going to just see more chains in the future that are just very explicitly corporate. Robin Hood talked about decentralizing their validator already. Like, that was

the thing that they mentioned. Oh, I didn't realize that. Yeah, they talked about like, hey, we have an intention to, like, probably decentralize the sequence or later on. Someone like them, particularly, do you think they're really going to care about this sort of just like, like we're for the community and we want this like decentralized mechanism or do you think why would they say they want to decentralize it because i mean one may be a regulatory arbitrage it's like it's very i don't think robin has doing regulatory arbitrage is no but it's very possible in the future that i mean you could see a world where there's different treatment for hey are you like are you running a centralized sequencer is this does this just look like a money transmitter i mean this is this is certainly

the hope of many people in crypto is that they will they will look closely at your uh sequencer and decide how decentralized it is to see whether you can just let you can just let you can just let you can anything happened on your chain. My guess is that's not how Robin Hood and Coinbase will actually be But if chains like that are making chains in the future, do they need this like permissionless out of the community is deciding mechanism or do I think it's probably okay if we're just like, hey, you're the 12 validators for the Robin Hood chain and like we trust them all. Like Robin Hood runs one and P2P runs one and Figment runs one. Like we get it. So do you think it matters what the use case for a chain is whether like proof of governance would work? I think for example, you know

mentioned the Robin Hood chain. I didn't know that they were going to essentially the ballot set. But that was an example I was going to give. This was a thing that they like mentioned in the interviews. It wasn't like, we have a clear plan or how we're going to do this. But it was something that they explicitly mentioned that. Right. But like in theory, let's say that they're going to, I don't know, instead of one sequencer, there's now 10 and it's like a round robin, whatever the architecture is.

Like maybe for that it makes sense because it's like, all right, what is the purpose of this chain? Like your point, it's really just for RWA's. And it's just like back in infrastructure for Robinhood. So it doesn't need to have this, you know, World War III resistance or this is not supposed to be a blockchain that is going to store. all the world's wealth, right? But I think maybe for that use case, does the proof of governance process start to undermine that property of a blockchain that it can become this world ledger? And like, that's what I wonder with the proof of governance. And do you think it's important

for Ethereum to continue to. Yeah, like, I don't think Ethereum could do this. I think it just like, it absolutely doesn't work. I just think that directly we're moving more towards the world where more of these chains are going to be more corporate RWA looking. And we don't need to have this hangover of like, hey, circles making a chain. Do we need to apply the same principles of, you know, oh, we want this like permissionless economic security thing or like, it's totally fine that nobles a P.O.A chain because like nobody cares. I see. And I think that's like clearly where we're heading. And I think people are just starting to realize that as we get more and more chains. Because like, yeah, Ethereum like literally can't do this. It wouldn't make sense.

But if you're just this chain, like we're in RWA chain, this is a pretty corporate thing, we could just say who the validators are. Like, we're not trying to be this decentralized, neutral world ledger. Like, we could just pick a validator. Like, we know that. the good operators, you're going to run a validator and like, we're going to pay you 100k a year or whatever. And I see. I think usually we find, I think so many people come to crypto with like this very binary view of decentralization or centralization. And often cases, when we find new products that people like, it's when we explore this spectrum, like in between. So for example, like Ethereum, like what was like the core belief that everyone had is that you need to run a validator at home.

And then Salana is like, all right, no, you don't really need to do that. We can actually just run them in data centers and, you know, maybe you get more performance. You can design the system a different way. And then we get like a more performed system and we get new use cases in law. And then hyperlucid comes along as like, you know what, maybe we actually don't need to have globally distributed consensus. We can just have it all running in a data center in Tokyo. And for that, you get like way more performance. You get lower latency. And then all of a sudden you can build like a on-chain, you know, clop. Right. And maybe it's the same thing here where what we're figuring out is that, okay, you know what? This whole consensus process as well, like this process of choosing validators

to participate in consensus, there's also room for experimentation there. And we might find that, you know what, when we do sacrifice a little bit on this ideal of having in this totally permissionless process for a joint invalidator set, maybe we find out that, but you know what, that actually isn't worth it in many cases. And that's fine because we actually get good products because of it. Okay, well, I want to push back against that story because you're framing it as a, like, okay, we're experimenting and doing things that we, maybe were previously verboten or that we weren't doing. And my claim was that there were people who were saying, like, oh, why don't we

just run all the things out of a single data center? And we knew that we could. Everyone knew that. Of course, you can run a thing out of a data center. But you would have been laughed out of the room in 2020 of like, yeah, you shouldn't do that. That's like, what if the data center shuts you down because you're running an exchange and they don't like that? Or the data center goes offline and then now, okay, the whole thing is offline, which of course happens to data centers. They have advantages. And so I think, I think a different way of understanding this is not that, okay, we're stuck in our ways and now we're like experimenting,

but rather there's been an enormous erosion that has taken place within crypto. And maybe that's good from a UX perspective because obviously the UXs is of like, you think like Auger, like in 2017, was just an absolute abomination of a UX, but it was this pristine, you know, it didn't have to be that bad,

it just happened to be really terrible, but like it was a pristine embodiment of like this is what it would look like if you're a decentralization maxi. And people just chewed the glass back then. And they were like, look, yeah, but you have to, do you have to do it this way. You can't just do it all in one data center. And now people

are saying like, oh, we're just doing it a data center. And like, you know, people who trade purpose, they don't, they don't care. And that's fine. But I think it, it does seem like the, the answer is that the norms in crypto are changing, not that the, not that we've discovered something that we didn't know before. You know what I mean? I think yes, but maybe, maybe like the nuanced, like in like the hyper liquid example. We're right. Like, early on there, I mean, there was all these kind of consortium. I remember like in 2016, I went to consensus and the craze was about these consortium blockchains like R3 and I mean I thought it was just super boring and I don't know maybe that's why I wasn't actually get in 2016 I got in like 2017 because

it didn't make sense to me totally I think maybe like the nuance that we're doing is your point we're just pushing against these boundaries that we imagined and we're finding out that we're doing this right wasn't ICP all in one data center and people dunked so voraciously on ICP of like this is a this is like a boomer idea that you do the whole thing in one data center and I think rightfully so, but I do wonder if the product was actually, well, rightfully so, maybe the wrong word, but I think the point with ICP is that the product wasn't good. So it's like, all right, you're doing this and you're claiming to be similar to Ethereum, but this is not actually what, but the product is not good. Yeah. The difference with hyperliquid now is like, all right, we go and do local consensus

in this data center and the product is great. And then, you know what? Maybe people think about it. It's like, I really like using this product. When I really think about it, how risky is it to have this all running in a data center? Like, practically speaking, if there's an earthquake or a typhoon and it takes down his data center, right? What actually happens? You just move the server somewhere else, right? I mean, it would be disruptive, of course, but it's not like the end of the world. Same thing with like, you know, if the hyperquid bridge would be hacked.

It's like, yeah, you know what? That would suck, but circle would just press pause and then people would get their money back. So when you start to think about this more practically and not in just theoretical sense of this needs to be resistant to authoritarian governments taking over the world and all this, then maybe what people are realizing is that, okay, it was good to actually push up against these boundaries. And the result is we get a product that couldn't previously exist if we were to restrict ourselves to those norms we once had. It feels a little bit to me like the HR guy meme, you know, of like ICB comes in.

He's like, hey, guys, I want to run a data center. It's like, your product is terrible. Fuck off. It was like, hyperliquid, good product. Yeah, go ahead, one data center. But I think your point is well made is that, like, hey, the risks are actually quite different. If you look at the microstructure of what are the actual risk and how do they apply to a user of this platform that maybe are quite different if you're a general purpose, layer one, although hyper EVM is trying to be a general purpose low one under the same architecture. So it's, you know, whatever, complicated.

One other story that I wanted to get to before we wrap is there was an announcement, speaking of centralization and norm erosion, about a prediction market called Kalshi. So there are two big prediction markets, a polymarket in which we are investors and Kalshi. And Kalshi, they recently announced that they closed a funding round led by paradigm. They raised 100-something million at a $2 billion valuation. So Kalshi is not a crypto prediction market, although they do accept U.S.D, but they're regulated in the U.S. and they're, I believe, the only CFTC licensed, or another's maybe one other? There's also ForecastX, which is actually what Robin Hood used for the election. So I believe Railbird as well.

Yeah, yeah. Okay, okay. So there are a few that are U.S. licensed. The Polymarket right now is the biggest. Bacolci is the second largest, and they're obviously very significant, back by originally by Sequoia. And so I think the main part of the story is that when the launch announcement came out last week, you had a very striking tweet that sent the Internet of blue.

You want to relay what your tweet was? Oh, I was just reposting this pirate wire story from November, or December, I guess, where Cali paid some influencers to repost this story about Shane Copland, the Polymarket founder, getting rated by the API, which is all fine. But, you know, I think it was just like a very bad look that they did this and then tried to be very coy about it. And I think a lot of people try to explain this way and say, oh, this is like friendly competition. And I'm like, I don't think this is friendly competition.

Your line was, never forget. This is a team of little rats. To be fair, this is one story. This is the public story of Kalshi. There's many other examples, which I'm not going to hear. Okay. Well, so after you tweeted that, I actually was at a dinner with the Kalshi founder. And everybody, I didn't, because I was busy.

It was the middle of permissionless. So I was just like running around, whatever. And then I show up to this dinner and the Kalshi founder is there, like sitting across the table for me. and I'm like, oh hi, I'm Aseeb from Dragonfly. And he's like, Dragonfly, like Tom Schmidt, Dragonfly. And I'm like, I'm not Tom Schmidt. I'm Haseeb. And he's like, yeah, do you not see the tweet that went viral Thursday?

He's like, no, I have no idea what tweet are you talking about. And so this tweet was like fucking making its way around the world at the time I was at this dinner. And everybody was like, why are you even here? You should leave. So I got, he was a nice guy, though. He was gracious about it. He was gracious about it, although he was a little upset that this tweet was going viral.

But I got some other polymarket investors, not sorry, Colchie investors reaching out to me who are like, are you guys going to keep doing this of like going after Colchie? And I was like, look, I didn't do it. This is Tom. Tom. Like I, but I was, people were sort of asking me in light of this. And I want to also get your guys take since you're also investors. Although do you do venture or just liquids?

Oh, just liquids. Just liquids. Okay. But you're obviously a venture investor. of like, how, what is your philosophy about fighting the fight for your portco? Like, what I told people, because I'm like, look, I, you know, I don't control Tom. Tom is his own man. You know, he was, it's his deal.

And love to do crazy things. So, look, I love Shane. I think he's great, but I'm like more of a neutral guy. I'm like, look, let the best prediction market win. But, like, how do you feel about that kind, like, getting involved on behalf of your portcos in, like, public fights? So for anyone who follows me on Twitter, it's probably not going to surprise them that I have no problem being like a little bit edgy and like pushing the bounds on Twitter. Okay, is you jump in the ring? Yeah, yeah, so I like, hats off. I'm good with it.

Oh, yeah. Oh, yeah. You're just going to know that. You're like, that was totally right move. Yeah, I mean, like you guys are investors in polymarket. What he said was true. It's like, all fair game. Okay.

Yeah. Clearly it resonated, you know. It's not, you know, the likes didn't come from nowhere. Yeah, no, I mean, I, I try. to be more diplomatic because I'm just like, look, there's always, there's always shit going both ways and it just like makes, I don't know, I like sleeping soundly at night, but like, I just get very soundly at night. Do you? Yeah, yeah. Okay, damn. Ryan, do you have a take? Yeah, I mean, it's a little bit different for me in public markets. I mean, like, for us,

I don't have to hold any positions that I don't want to. And I think when, so by doing that, I'm not only actively saying, not actively every day choosing to hold this asset, but also actively choosing to not be in other assets. So all to say, it's like, on one hand, I can be extremely long term and hold an asset for as long as the fund exists, but I also have no loyalty because the second something changes, I can just sell it, right? So maybe all to say is that, it can, it enables you to speak freely on whatever the topic is, because, if something goes awry in a project that you were in, then you can just sell it and, I don't know, say what you think, right?

Okay. Well, any positions that you are temporarily holding that you want to show before you dump them? Temporarily holding. I'm holding everything forever. Everything forever. Wait, I thought you just said that you're not married to anything. Yeah, we'll see. Do you have any forever positions?

You know, this is a good question because, you know, one thing that I've been reflecting on the past three years, I guess since we, you know, since we started the, uh, synchrancy. Okay. We started recording this is, uh, is like, how many assets have this, has this industry created that you could actually hold for like even just three to five years, like confidently. Like confidently, you know, you put your money in this. You don't look at prices for five years. You go into a coma and you wake up and you're totally fine.

Like you just sleep well at night. And for that, I'm actually not sure how many there are at this point. You know you say like Bitcoin, Ethereum, maybe, Solana, maybe. And after that, there's just a very steep drop-off where this, asset class changes so much. A lot of people do that with Ethereum did not have a good waking up. Yeah, I mean, that's the thing. It's like, you know, Ethereum was the consensus best asset to own in 2022. I remember when we started synchracy, this was what everyone wanted to own.

Yeah. Ethel's going to change the world. Like, defy was the greatest thing. NFTs were like this way of onboard consumers on the blockchains. And then you think about today and no one cares about the metaverse, NFTs are dead. Ethereum has dramatically underperformed. And, you know, like what actually was the one asset you could have held with confidence from, with the same thesis from that period and actually made money is just Bitcoin.

I mean, even Salon hasn't made new highs since the 2021 period. Yeah. So, yeah, I don't, all to say, I'm not actually, I mean, I was a joke that I'm willing to hold these things forever, but I'm not married to any of these things, right now. Fair enough. It's like, you know, being Pauline, it's like not having a legally binding contract. It makes the love stronger, you know. Every day you're waking up and you're choosing this asset.

Every day you wake up and you choose a new portfolio. So that's my investors. That's really beautiful. All right. Where can people find you guys? I like you find us on Synchristy.io or follow me on Twitter at Ryan Watkins underscore. You can copy trade whatever he's holding at the moment until he dumps on you. Where can people find you?

DBA.x.X.Z for website and John Charb on Twitter. Excellent. All right. That's it for this week. Thanks, everybody. See all next time.