Unchained - Why Hyperliquid Should Cut Its Total Token Supply Nearly in Half - Ep. 909

Episode Date: September 24, 2025

Crypto investors love to throw around “FDV” as if it’s the ultimate measure of value. But what if that number is more misleading than helpful?  In this episode, DBA’s Jon Charbonneau explains his proposal to cut Hyperliquid’s supply by nearly half, why he believes FDV overstates real valuations, and how outdated tokenomics are holding projects back.  We also cover whether the Hyperliquid team should take smaller allocations if they cut the token supply and what Jon thinks of Arthur Hayes’ HYPE sale just weeks after saying the token would 10x. Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsor, ⁠Mantle⁠! Guest: Jon Charbonneau, Co-founder and General Partner of DBA Links: Proposal to Reduce HYPE Total Supply by 45% by Jon Charbonneau, Co-founder of DBA Maelstrom post: HYPE's Damocles Sword Unchained: Nearly $12 Billion in HYPE Token Unlocks Loom Ahead: Maelstrom  Timestamps: 🎬 0:00 Intro 📉 0:35 What Jon thinks people get wrong when they use FDV as a valuation metric 🧮 4:05 How Jon’s proposal would change Hyperliquid’s supply and valuation 🆘 12:20 If the Assistance Fund is removed, how can emergencies be handled? 📊 15:05 How token supplies should really be evaluated when valuing projects ⏳ 20:44 Why current tokenomics reflect an outdated model ✂️ 24:56 Should the Hyperliquid team be taking a smaller allocation too? 🤔 28:15 What Jon thinks of Arthur Hayes selling HYPE right after calling for the moon 🔮 31:351 How Hyperliquid should move forward with Jon’s proposal Learn more about your ad choices. Visit megaphone.fm/adchoices

The practical reality in crypto is that most people are just using this FDV number, which tells you the thing that's worth $50 billion, when in our mind, like, we think the most relevant metric is $30 billion. Hi, everyone. Welcome to Unchained, your no-hip resource for all things crypto. I'm your host, Laura Shin. Mantle is pioneering blockchain for banking of revolutionary new category at the intersection of Tradfi and Web3. Follow Mantle underscore official to learn more.

Today's guest is John Charbonneau, co-founder and general partner of DBA. Welcome, John. Great to be on. So, John and I just had a whole bunch of technical difficulties, and his Wi-Fi is not the best right now, so we are going to pray that, you know, this conversation goes smoothly. All right, so DBA published a proposal to reduce hyper-liquid supply by 45%. John, this was actually pretty well received from what I could gather. I did see some criticisms, but we can get into this later.

What problem or problems were you trying to resolve with this proposal? Yeah. So this is a, it's a broad problem across, I would say, a lot of the industry, which is why I've kind of thought about it for a while. And then in particular, for hype, have thought about it for a while, have been talking with it. Also with the Haseo who also wrote the proposal together. We've been talking about this a while.

there's a number of investors who are aware of this general issue across the industry. It's just that I think it's hype is probably one of the strongest cases, where the two main kind of metrics, I would say, at the high level that people use when evaluating those protocols today, and the two metrics that you'll see if you app or coin gecko or whatever is you'll usually see a market cap number and an FDV number. And in general, those metrics that you see there, they differ pretty widely from the way that like generally these metrics would be actually measured in tradfai like for equities. There's a lot of like very important parts of it that are like very, very different.

And the kind of end result of that is that in most cases, the number that you actually care about as an investor is not numbers. It is somewhere in the middle of those numbers, kind of unique supply dynamics of different times. Sometimes it's not a big deal because sometimes the delta is pretty small and you have like a pretty similar number. For something like hyperliquid tends to be one of the strongest examples where it just happens to be the way that they have this by allocated, there's a huge difference. I mean, it's something like 20 billion between their, uh, those kind of two numbers more or more than that rather. And really the really just the the gap in between is very wide of like the number that

you actually want is like kind of square in the middle really of the circulating market gap, which is something like, I don't know, 15 or 20 billion today. Um, and the FDV if you look at it, um, for hype is like usually around like 50 billion. Usually the most relevant number that a lot of people like myself will use is actually like right in the middle of that. And so this proposal is kind of a reflection of, Like, I think that we can make a lot of arguments that I think some of the metrics maybe should change in crypto. You know, what is the headline number that like most people report?

But the practical reality is like most particles, like they need to work within the standards of what are the numbers that people are using and kind of work within that to try to really clarify their accounting. And so that's really what our proposal was trying to do, was trying to really just do some accounting cleanups to make what we consider to be. And what I think like most investors and certainly try to investors would consider to be the most relevant metric really in line with like what these data provides. are actually reporting so that, for example, you know, you don't end up going and checking this FDV number, which in our view is like very overstated. That's much higher than we think is like the actual valuation that can turn a lot of people away. Okay. Yeah. I mean, I think this even goes to really simple things like people saying, oh, well, you know, the 21 million cap on Bitcoin, like isn't real because like so many coins have been lost. And yeah, there's just ways where the numbers, yeah,

I understand you need to standardize these things. And at the same time, like standardization does not allow for nuance in the same way. So walk us through what it is that you're proposing. You know, you outlined a few different buckets of hype supply. So explain like which ones you're targeting and what you propose be done with those buckets. So concretely, the like the kind of explicit bucketing terminology of tokens that we're trying to address are tokens which are authorized to enter circulation, but are not actually. outstanding supply. And so there's generally two broad buckets of that for hype that are pretty large. One is the assistance fund, which is this is on an ongoing basis. The majority of revenues

that I believe, like what the protocol receives are paid in USC. They go to the assistance fund and the assistance fund uses that to buy hype and then they just continuously accumulate that. That's what they do with the majority of their revenue and seems to be the case going forward that that share the expectation. And so as of right now, they've already accumulated several percent of the hype supply is just sitting in there. And as of right now, there's no designated purpose for this funds. They're just like sitting and effectively a treasury reserve where in theory they could be used by like a validator vote in the future could decide to use them for special situations. But there's no plans or does many use for them. And then the other large bucket is the briefing at the FECR. It's the future remissions and community

rewards is currently, I think it's something like a little over 42% of the total and max supply of of hype, which at Genesis, they designated a max supply cap of $1 billion in the same way that Bitcoin has a max supply cap of $21 million. A lot of tokens have that. And so this bucket, these tokens are slightly different from the assistance fund in that they literally don't exist. They are not even minted. Like you can't go to it. You can go on the Block Explorer and find the assistance one. You can't find like the FECR allocation. They don't exist. They're just like theoretically approved to enter circulation. What we ended up proposing was basically just to change the accounting around the two of those, but not actually change really the controls around them. In particular, what we proposed doing was for

the assistance fund. All of the hype that is currently held in there, and that would be accumulated in the future, just burn all of it. And then for the FECR, what we said you should do, what we're proposing, is just remove the explicit authorization for those tokens to exist. And then you also remove the max supply cap, such that you can still use. You can still use. use both of the funds in those buckets equivalently to before. Just the difference from an accounting perspective is that they are now just new shares which are just increasing the total supply. So everything would work with the same where, you know, if the if a validator quorum

previously wanted to spend, agree to spend money out of the assistance fund, you would now just have a validator recorum agree to just mint new height and then spend it anyway. So it's the exact same process. It's really just a bookkeeping tweak. And same thing for the emissions of like currently the only designated use for that FECR bucket is staking emissions. And we're really just again, proposing an accounting change of that of currently the way that it looks is you are moving from one bucket of total supply from the FECR, you're moving from there into the circulating holder supply versus what we're proposing is just from an accounting perspective. You're just changing again.

This is just an increase in the total supply that you're technically minting new shares. And the same thing would be true of if, you know, people decided, if Hyperloqu had decided to do future like air drops or incentive rewards. Same idea of instead of moving from one bucket to the other, you're just issuing new high. But the actual approval process and all of that is just like completely unchanged for it. The direct impact of that is where basically these headline metrics in particular, FBV, is the really big one that a lot of investors just use that as the headline valuation for these protocols. And we think that's like very, very overstated because those two really big buckets that we just described of authorized but non outstanding shares. If you looked at the equivalence to those for like an equity market gap, those would, never be counted in the number that you're actually using for valuing the protocol. But the practical

reality in crypto is that most people are just using this FDV number, which tells you the thing that's worth 50 billion, when in our mind, like, we think the most relevant metric is 30 billion. And so basically, these are accounting cleanup changes such that the FDV and really what we think is like is the correct adjusted market cap really just kind of brings those in line without actually changing how the protocol functions or anything else around that. It just makes it much more legible to outsiders and people in governance of like literally how many tokens are there, like who owns these tokens, how are they supposed to be used in the future. It really just kind of a better align to the financial accounting with like how these tokens are actually owned and been used. Yeah, I understand that,

but I did also want to ask about, you know, the removal of the cap and like, you know, and talking about the way that emissions and rewards are because so let's say that this were like much further in the future in, you know, in Hype's life. then let's say that we were at a moment where it was like near the cap. So then would the emissions just keep going because there was no cap? Is that what it would look like in the future? Yeah, basically. As of today, there's no designated like long term, you know, there isn't some strong

agreement of, you know, what the hyper liquid inflation curve is going to look like in, you know, 20, 30 years or whatever. But in theory, the way that it would work today is once you hit the max supply cap, like, there just wouldn't be more rewards to go out, which is like not reality. Like I think in practice, like something is going to change between now and then. I don't think it would be zero issuance. And that kind of gets to the point of why we think it just makes sense to remove the max supply cap is because it's not a real number. It's the same inequities and it's the same here of the max supply cap or inequities, you know,

the theoretical maximum amount of authorized chairs. It doesn't like actually matter because it can always be changed. You know, if everyone just decided tomorrow was the example we gave that like, hey, hype should have a two billion max supply. We all woke up and we agreed that the same way that. same way that I were to say and just get rid of it, then it would have a $2 billion max supply. Yeah, I don't think it would work in Bitcoin, but. Exactly.

But that is the core point is, and that's the other example I gave in the post, is this is why it makes sense for Bitcoin. It's because the only purpose of this max supply cap is it's just supposed to be reflective of what do you actually intend to do with these tokens and then just really trying to convey what is the social contract around this. In Bitcoin, it makes sense because there's a strong social contract and expectation that, hey, once we hit 21 million, it's done. And then like that's it. We're not watching more. If the protocol breaks because of that, then like too bad, the protocol breaks. If you do something else, it's not Bitcoin.

But the problem is, is that many projects in crypto have a just sort of, you know, baseline, just how we copy, paste the thing before us. And so there ends up being a lot of just copying over this idea of a max supply cap. When the problem is it made sense for Bitcoin, but it actually doesn't make sense for pretty much anyone else. Because that's like obviously not the reality. You know, if hype hit the one billion max supply cap, but we decided, hey, we need more emissions.

or there's value-accurative future incentives that we want to give out. You would do that in the same way to a new company would issue new shares if it was value-accreative. And so that ends up being the problem here. And we've already started to see this with some protocols actively migrate their tokens as a result of this, where they hit up against what was initially their max supply cap, and then they realized, well, this doesn't make sense. We need to issue new shares because we need to keep funding the protocol, and these are value-ocative things to do, and they end up migrating to a new token.

In hyperlegance case, it's much easier because it's an L1, you could do it. just fork it as opposed to a manual migration. But like, it's the same idea of we're already like seeing this in practice. Other protocols are having to migrate as well to this because the max supply cap isn't real for anything really beyond Bitcoin. Even the big assets like Ethan Sol actually don't have a max supply cap. They just like continuously increase. Right, right.

Yeah, I was going to say this is more Ethereum style. The other thing, which if so if anybody is a fan of comedy, then you will understand this. I don't know if you knew about the Emmys, how Nate Bargassi, who's this comedian, he basically had this thing where if you went over the time for speaking, then he was going to donate money to the Boys and Girls Club of America. And if he went over, then it would deduct $1,000 for every second you went over. And then as like when he's explaining this to the audience, you know, it kind of settles on them.

They all start laughing and like feeling a bit uneasy. And then he goes, and you know, those are the rules. And this is a game that I made up, but I cannot change those rules. And so I let like it's like, you know, he's making a joke about how, of course, he could change the rules, but you're calling it out in the same way. I did also want to ask about the assistance fund because currently the funds there, you know, have this like at least spoken purpose, which is that there's supposed to be this safety net in case, you know, something that goes wrong, somebody needs to be reimbursed or otherwise compensated. So how would you propose handling

those situations? Yeah, there's really two parts to that. One which we tried to touch on our proposal one, we intentionally left out just to keep the proposal clean and minimal and kind of separated. Basically, our proposal doesn't actually change anything in practice because we would recommend the exact same mechanism and decision process of if in the future, in a designated special situation, such as, you know, a protocol backstop or whatever of, you know, covering losses, something like that. In theory, you're supposed to in the future have a validator quorum vote to, you know, basically spend the height to cover those losses or whatever other situation there is. You would be doing the exact same thing here. Just the accounting is slightly different of instead of

moving money from the assistance fund, the validator forum approving that. You would just be having the exact same validator quorum doing the exact same decision process, but they would just be issuing new hype instead. There is a very separate conversation to this, which a lot of people bring up, which I think is a very reasonable conversation of I don't think that you're a native, I mean, like, not even I think, like, but it's objectively like your own native asset carries a certain degree of reflexivity to it where if you're using it in a like negative situation such as backstop, it's probably the time where it's actually going to be worth the least and like potentially at least on a relative basis like have less value. So you probably want to have a

stable asset, at least in the ideal case. And so there's a very separate reasonable conversation of, you know, should we have like USDC accumulated or USDT or USDA or like whatever in the Treasury Reserve such that we have a stable asset to cover these things. as opposed to buying back hype. And I think that's a very legitimate proposal. If someone else wants to put that forward and have that conversation, whatever, I think that's a very reasonable thing to do. It's just separate for...

Like, what they're calling out there is, like, if, you know, FtX is in trouble, like, you know, FtX redux, then you don't want FTT as, you know, your backstop. You want, yeah. Exactly. Okay. Or same with like UST and Luna. But anyway. Exactly.

And I mean, this is different in the sense that like there should be real value to this where there like wasn't really so much with Luna. But it's the same idea of like, you know, if the protocol is in a distressed state and there are losses that you need to cover, that is definitely going to be the time where presumably the price of hype is going to be going down and there's less trust in the asset. There's less willing buyers who are willing to step up versus if you have a bunch of USC reserves, you know, plug the whole pay for it and just like you move along. There's no problem. So it's a very reasonable conversation to have like should you have some level of stable asset, non-indogenous reserves. I want to dive a little bit more into, you know, how it is that people should look at token supplies for valuation purposes. So like in an ideal world, like how would you recommend most investors or traders look at token supplies? Yeah. So the really the two big metrics that are usually out there are the market cap of FDB figures.

So the problem with it ends up being that for like, I mean, another problem with it is it's calculated differently across different sites. Some use max supply, some use total supply. But generally, they're the most conservative overestimate of taking like all tokens that theoretically may exist in the future. And a number like that, I think that that is a useful number to use when you actually believe that that is the real number that you're going to get to and you like actually have a plan to get there in. particularly like Bitcoin. You know, like taking what is the max supply cap of Bitcoin makes sense, because we know that we're going to get to $21 million. There's a designated plan to account for that supply that is going to come on. Versus in the cases where you have an FTV that has a large component of that, which is either owned explicitly by the Treasury, something like the assistance

fund or doesn't have a designated plans, you should not count those in the valuation. Like those are effectively like protocol owned and you're just kind of like double counting it basically. So it doesn't make sense to count those. They should just be used in the future. If they are, they're used for value or creative purposes that should offset that. And then the problem with the circulating market cap is on the downside of circulating market cap is useful at times when you're just really trying to look at like a trading perspective of you may not even need to account, I mean, may not really need to account for a lot of shares that aren't going to hit the market soon. If you're not really worried about fundamental value and you're just looking at a trading

perspective, like literally how many shares are there for people to buy. And this is analogous to like float, you know, a floating market in Tradfai. But the number that you want in crypto, there are different proposals around this. There's been a number posted over the past year of like Defi Lama has a metric on this. The Artemis guys have something I think like Arka's posted a post on this. Some variation of like an adjusted market cap, which looks more like the Tradfai equivalent, where the main difference between that and the circulating market cap that you see on like coin market cap, coin getco, etc. usually is that you are including tokens, which have known ownership and plans to actually enter supply. So the simplest example would be,

you could have a token where the team owns a bunch of tokens and they're all going to 100% unlock tomorrow and they're going to become fully liquid. The circulating market cap if you go check coin market cap or coin geck or whatever, like won't include those, which is just very obviously like the wrong metric to kind of be thinking about. If you're owning this token, if like these tokens are owned and like they're going to hit supply immediately versus any kind of adjusted market cap would count those as those are outstanding shares. They have a known owner. They have an unplanned to be used. And so those are really important to keep in mind. And so that is the main difference of like circulating market cap versus the kind of adjusted market cap that I generally use for something like hyperliquid is the circulating supply is something in the $15 to $20 billion range, I think like 15. What I consider to be the most relevant number is generally around double that because I think you need to include the team supply and stuff like that and the foundation supply all of that.

Those are like known on tokens. The team has a communicated like this is how many tokens they own. This is the unlock schedule. We know that's coming. And so those really should be counted at the valuation. All right. So in a moment, we're going to dive a little bit more into this and hyperliquid because there's some other chatter about hyperliquid. But first, a quick for the smart suits make this show possible. Mantle leads the establishment of blockchain for banking as the next frontier.

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Back to my conversation with John. So we saw a lot of positive responses to what you proposed here. I think one of the funnier ones was from Hussi Qureshi of Dragonfly, where he said, the post-airdrop 50% of community allocation, which we all know means, quote, an amorphous slush fund that will decide what to do with later, is a cow whose time has come.

And he basically was talking about how investors like mentally cut the FDV by half. He said this whole 50% tokens must be labeled community is a holdover of performative 2021 token socialism, which is hilarious because, yeah, not that long ago. I don't remember when this was. I don't remember if it was like nine months ago or a year and nine months ago. but Olaf came on the show, Olaf Carlson, we, and he was talking about how if you want your token to see, do you actually want to give it away to as many people as possible? Maybe these are not equivalent. But anyway, point is, Haseeb concluded. He said, spending tokens on growth is fine.

Just do it transparently and justify it. Go to governance, argue for the supply expansion, and let holders decide. So I don't know if you have any reaction to that, because I did also see some other commentary about, like how hyperliquets should decide whether or not to do this, But go ahead and maybe just discuss what he said there. Yeah, and I very much agree with this tweet.

And there were also some replies to that. And I had a tweet a little earlier, which was really kind of a broader encapsulation of the point that he had there, including some of the replies of, I think the problem is just a lot of tokens today, including hyperliquid in my mind, are generally built on a precedent that is not actually the most relevant precedent for them today. And that's broadly a mix of things.

One is the point that I mentioned earlier, of a lot of people just kind of copy, paste it over, like, hey, this is what Bitcoin did, that a max supply cap without really digging into, hey, is this actually the most relevant thing for us? Another one is this kind of like, they're this socialism, social pressure type thing of we're supposed to give the community all the tokens, which like maybe that makes sense for certain things. Again, you know, particularly decentralized money like assets like Bitcoin, yeah, sure, like you want a project distribution, want a bunch of people to have it. If you're building something that look more just like a traditional business, that's not the case.

like, you know, the founders of big tech company should be giving away most of their shares, like, right, right? Like in the beginning, that's just like actually wouldn't make any sense. So that's, again, a precedent that I think was just, like, not really relevant. That, or maybe like was relevant in certain circumstances in the past is not the most relevant for a lot of these projects today. And then the third one, which was another comment to the, that people had on there, which I think is again correct, is a lot of this is similarly, it's not just a kind of this like socialistic tendency or whatever or like broad distribution. It was a lot of it was like regulatory kind of workarounds.

You know, trying to minimize legal risk in general with token launches, particularly in the past. And it was generally seen as on the margin favorable fact pattern. If you could say, hey, the majority of the supply over 50% is not owned by insiders, whether that be the team or the investors. That is like generally seen as a favorable fact pattern for like, hey, this is a decentralized thing. In practice, like who really owns the shares, though, if, you know, let's say that, that, you know, 49% is owned by insiders. And then 51% is this like community bucket, which is like mostly actually unallocated and doesn't really exist. Well,

insiders obviously, they own the majority of the shares, which is completely fine. Like, you know, these stakeholders and people building it, like should, should own the majority of the projects that they build. Like this is the same inequity. Like there's nothing really fundamentally different there. Like if you're building that thing, you should have a meaningful ownership of it. And so a meaningful part of this in my mind is like, there's a lot of built up precedence that a lot of projects have in their tokenomics today that we're really just aren't the most applicable for them today. And so when you actually just reevaluate like, hey, what should this accounting and

tokenomics and nothing really look like today from first principles ignoring the bad precedent from the past, you end up stripping away a lot of this stuff like, oh, we just need to have an arbitrary gigantic bucket for just the community with like undesignated uses, which most people don't even expect them to use. And so it becomes problematic to that point where on the point where it is like less problematic is when investors do what Haseeb is doing in that tweet, saying that they should be doing it, and the lot of do is like,

oh, we kind of discount that. We adjust the valuation for that, which makes sense. And then the market can adjust. The very practical reality is not every investor does that. Like, very,

very many of them to do that, like arguably even most. And that includes the largest, most sophisticated funds who are doing this stuff. Like, very routinely will say, like, they're using the FDB for this.

Like, you don't have to look hard for it. I've had these conversations with large funds who, like, very explicitly, repeatedly, they, you know,

they cite the like, oh, it's at $50 billion, it's harder to say the upside. And then you have this conversation of like, oh, but do you realize how much of this isn't really issued or outstanding and like it's owned by, you know, and you need to adjust by 20 billion. And it's, it's not even like a sophistication or intelligence thing. It's just very literally, people have finite amounts of time and resources. And these are the reporting standards that the industry uses. And so like, that is what most people are going to gravitate towards using when you're trying to do an initial screening even of like, hey, you know, what is the valuation of this thing? Is it, you know, kind of in the wheelhouse of the stuff that I should be looking

at, you know, what is the earnings multiple and you're looking at a lot of projects. You know, not, not every person is like, oh, yeah, but I need 30% because this much is under the treasury. But like for that other token, you know, only 10% is under the treasury. So only justify this much. These just, um, so in practice, they do have like very real consequences when you just have these gigantic allocated buckets that end up really skewing a lot of the metrics that investors use. Yeah. I did want to talk a little bit about one other reaction that I saw, which is

Evan Van Ness said, any proposal that tacitly reduces community tokens should also probably do the same for the team. He said, I think if they, like meaning hyperliquid, implements this proposal or something like it, it should be alongside a second air drop slash incentives to strike a balance, plus a clearly defined framework for how future incentives and emissions will work. And like when they'll be changed or how they'll be changed. So what did you think of that? So I went back and forth with him a little bit on this. I like disagreed on part of it and then agreed slash intentionally remained neutral on much of it. And so going through that one, I literally very explicitly do not think the team should reduce their share at all.

I like, I'm sorry, you don't think why? I don't think the team should be like reducing their ownership share in, you know, in proportion with like, hey, if we get rid of the community share, the team should reduce their share. I don't think that I don't think that's accurate. I view all token holders as equivalent parts of the community, like very proportionally. They are a portion of that. I'm a portion of that. Anyone of the whole type is a portion of that.

And so removing the supply very intentionally or even just revoking the authorization of the supply, like very intentionally does not actually change any of the existing proportional ownership of the network by any token holders. The whole point is just to keep it flat of, hey, if we just, you know, ignore this authorization, everyone who owns a high token today has the same proportional share of real ownership of the protocol or of the protocol economics that are divvied up but among token holders. Like that should just remain completely unchanged. of my mind is no need to change.

So it's almost like you're saying the way that it was initially conceived, like parts of that were sort of fictional. And so you're just making it more realistic. And just by cutting out the fictional parts, like it doesn't actually change the pie. Exactly. It's just that like we're just acknowledging that this part of the pie never really existed in the first place.

The simple test of it is like, okay, let's say that, for example, in the future, in the future, the protocol decided to instead of doing like pie back and burn or something like that, they just decided distributing, you know, USDC or something. something like that to all of the stakeholders to make it like very direct. The FECR allocation and the assistance fund would not be receiving that USTC because those are protocol owned and do not exist. Like they wouldn't be receiving those.

It would be going to the people who actually own height. And those are the people who actually have a claim on the protocol economics, the outstanding holders. And so the whole point is like those, that proportional ownership is just just completely like leave it unchanged. This other bucket, we just like, we're just acknowledging that it literally doesn't exist today. So just like, you know, make the accounting kind of reflect that.

The part where I was sympathetic to what he was saying and why we tried to like intentionally remain neutral in the post is we're not trying to make any kind of value judgment on saying, you know, how much of this incentives should be used in the future. Like should the team do, you know, try to push forward an air drop in the near term. Should they do an incentive campaign after that? We were intentionally remaining agnostic of like whatever people thought was a good idea before this. You can continue to do the exact same thing after this.

it's really just making sure that you're not getting penalized in the accounting leading up to that when you're not actually using those. And so the part that he was saying of like, you know, I think it would be good, you know, if this got to put up like a formal proposal vote kind of thing, it should go up alongside like, hey, we're also going to do this air dropper incentive campaign or whatever. Okay. And then one last like new topic I wanted to ask about was this maelstrom post. You know, people were making fun of Arthur because he had been super bullish on hype. And then suddenly, you know, surprise, they sold a bunch of hype. And Mailstrom published an essay saying that, you know, starting in late November, 237.8 million hype is going to begin investing linearly over 24 months. And they said basically at the price of $50 a token, that's about $12 billion in team unlocks.

So 500 million notional hitting the market every month. And then they said the problem, buybacks at current levels can only absorb about 17%. which leaves $410 million a month in supply overhang per month. So I wondered what you thought of what they were saying there and also of like how your proposal would intersect with that. So I'll break the answer to two parts of one. Literally for the Malpastro Post, I think that was like a pretty just like kind of ad hoc rationalization of Arthur decided that he wanted to sell some hype.

And he had just said that hype was going to go up over 100x like a few weeks before. So like we need to make an answer. If you read the post, it seemed sort of like, uh, unlocks are coming like scary. It seemed like a little put together at the end. Like they obviously knew the unlocks were coming, you know, when he was talking about that a couple weeks ago. Surprise to no one. On the very literal side of like, okay, let's break down the actual unlocks and how do I

think about it type of analysis is I'd break it into two parts. One is there is a rational, you know, understanding of, you know, hey, if a lot of supply is going to hit the market, you know, just from a flow's perspective, like, what is this going to do to the price? my general gut is that I don't think that the team, if I'm guessing, is just going to go sell all of their unlocks exactly as they're happening. That would seem out of character and just like not what the team needs. If this team was super strapped for cash and like didn't believe in the project that much, they probably wouldn't have been putting everything into buybacks from like Project Genesis until now and like not raising from investors.

Like they probably wouldn't have done that if they like needed money and didn't believe in the project and just wanted to sell everything. So that's my general guess from like a just a general flow. perspective. And then the other really core point is that if you are looking at the asset on just a like very strict fundamental basis of what do I think this asset is actually worth, this gets back to that number before of this is why I already count, you know, all of this team supply tokens in the fundamental valuation of what I, you know, consider it's protocol to be of something like $30 billion today. I add the 15 or so billion of currently circulating in the 15 or so billion or whatever it is that like the team and, you know, like other insider allocation like the foundation,

whatever, like that is owned there. Like I already count that in the valuation when I'm saying, you know, hey, I think the protocol is worth it's valued at X today and I think that earnings are Y today. And so like what do I think is the right multiple to pay for this thing? I already count all of that. If you're buying this asset on a fundamental basis, like you just, you strictly need to account for that already. And so in my simple math of like, what do I think the fair price of hype is? I'm already counting for that in the valuation for exactly this reason. we know the team owns the shares. We know that they're going to come to market. They can sell them if they want to. And if they want to and the price goes down, all else equal, like, we're just

happy to hold that that price because like we think that is what the outset is worth. Okay. So last question. Now that you've put this proposal out and you've got pretty good response, how do you think this will be, you know, decided on or how do you think it should be decided on? No really strong opinions on that. We wanted to put this out as like a proposal, like make it clear that we think this is like clearly a serious idea that I think would be beneficial for the protocol. But I genuinely don't have like very strong opinions on, you know, what is exactly the right governance process for this. Governance is messy. I mean, part of the timing of we put this out was intentionally like, okay, Hyperliquot is starting to try their governance route of, you know, they did the USDA vote.

There was another proposal for hit four for event markets that went up recently. So frankly, the market is just like figuring out what is the right way to do this. To the extent that validator votes are done in the future. I think that's viable. In general, I think if you do that, there are probably ways around the margin to just get better prepared for this, even at like an app level. In particular, like, this was something that came up, I think, with like the Slauna vote, with the SIMD-228 with the inflation thing of, I think like the LSTs, you weren't really able to vote for that at the time. But like they wanted to fix that in the future, such the LST holders could vote. That was the same thing with this hyperposal of like if you're holding LSTs, you couldn't

vote. So really just trying to get a little more directed in the voting process there, such that like everyone can vote. The voting process feels a little bit cleaner. Like people had just a better understanding of how it works. I think validated voting is like a potentially like very viable way to go. Another thing is obviously like you could just try token holder voting if you wanted to put this up for a proposal in the future. I think is also reasonable. The other thing, which I think is interesting in which I intentionally didn't put, I almost, I initially had it in a draft of the article because that there was an interesting idea, but didn't want to distract from is I actually think Futurkey is a reasonable and like pretty interesting application here.

It remind me that's like prediction market, something, something. I forget what that is. Yeah, it's basically putting up a prediction market in this case, like a binary prediction market of what do you think the price would be if this proposal passes? And what do you think it would be if the proposal fails? So, you know, if the market can say that, okay, if this proposal passes, we think the price goes to, you know, X plus one or plus two or whatever. And if it fails, like it goes to minus one or maybe it's the other way around. Maybe the market says we think the price would be higher if this proposal fails and this would hurt the price. I generally think it would be the other way around, but that is the whole purpose of this. It's a fact-finding mission of like literally just let the market tell you what it thinks.

I think that like Futurkey is not a fit for a lot of things. Like really most decisions, you know, teams should just decide. Don't put this up to a big market thing. But this is actually an interesting application because the problems where usually futurearchy like doesn't work well is small markets are like easier to manipulate slash you don't get good information. then this would be a very large liquid market. I presume people would participate in this in size such that you would get good information. And really the whole intent of this proposal

really is just directed at, hey, we're trying to clarify like market understanding and want to know if we change this like financial accounting, how does the market perceive this? Like that is very literally a large, exactly what this proposal is intended at. And so just letting the market tell you like, hey, here's what we think would happen.

This is actually a very interesting application. Even aside from like a voting perspective of do you need to, follow through with it. I think it would be revealing information and even just thinking about, like, is this a proposal that we should consider of what do you think the market would tell you if this was passed or if it was failed or if it failed? And so I think this is like actually a pretty interesting application for it before. So I've been thinking a little bit about that. My assumption is that's what they will do. It's, you know, like, I don't know, it's something new

to think about. But I actually do think that is interesting. And you'll probably start to see more stuff like this in the future. Yeah, I think that is a really interesting way. I'm not going to lie. Like I, this is just my perception. I feel like the USDH thing, like, I think it loved a bad taste in people's mouths, honestly. And I'm just saying that from like some conversations. And not that like, I think people will let it go because it's hyperliquid.

But yeah, what you just described, the future. You think sounds really interesting. But I agree, it's like almost like too early or I don't know. So anyway, well, it's been so fun discussing your proposal. with you. Thanks so much for coming on Unchained. Thanks for having me on. Unchained is produced by Laura Shin with help from Matt Pilchard, Juan Oranavich, Margaret Curia and Pam Majumdard. Thanks for listening.